New York Supplement, dated October 3, 1997
to
Prospectus, dated October 3, 1997
VARIABLE IMMEDIATE ANNUITY
Variable Immediate Annuity Contract
Funded Through the Investment Funds
of Separate Account A
Issued by:
The Equitable Life Assurance Society of the United States
For Contracts issued in New York only, the transfer provisions set forth in the
prospectus, dated October 3, 1997, are amended to provide that transfers among
the Investment Funds are available under the Contract once per month without tax
liability or charge.
The transfer will be made on the date the annuity payment for that month is due
if we receive your election for the transfer at least one Business Day in
advance of such date. Your election must be made in a form we accept according
to our rules which then apply.
44532
<PAGE>
VARIABLE IMMEDIATE ANNUITY
PROSPECTUS DATED OCTOBER 3, 1997
----------------------
VARIABLE IMMEDIATE ANNUITY CONTRACT FUNDED THROUGH THE
INVESTMENT FUNDS OF SEPARATE ACCOUNT A
Issued By:
The Equitable Life Assurance Society of the United States
This prospectus describes the single premium payment Variable Immediate Annuity
Contract (CONTRACT) offered by The Equitable Life Assurance Society of the
United States (EQUITABLE LIFE). The Contract is designed to implement the
payment of annuity benefits to be received as part of a retirement plan.
The Contract offers a Variable Income Annuity Option funded through one or more
of the fourteen variable investment funds (INVESTMENT FUNDS) of Separate Account
A (SEPARATE ACCOUNT) listed below. The Contract also offers a Fixed Income
Annuity Option funded by our general account and available in combination with
the Variable Income Annuity Option.
<TABLE>
<CAPTION>
INVESTMENT FUNDS
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
o Alliance Money Market o Alliance Growth & Income Alliance Asset Allocation Series:
o Alliance Intermediate Government o Alliance Equity Index o Alliance Conservative Investors
Securities o Alliance Common Stock o Alliance Balanced
o Alliance Quality Bond o Alliance Global o Alliance Growth Investors
o Alliance High Yield o Alliance International
o Alliance Aggressive Stock
o Alliance Small Cap Growth
</TABLE>
We invest each Investment Fund in shares of a corresponding portfolio
(PORTFOLIO) of The Hudson River Trust (TRUST), a mutual fund whose shares are
purchased by separate accounts of insurance companies. The prospectus for the
Trust, directly following this prospectus, describes the investment objectives,
policies and risks of the Portfolios.
Transfers among the Investment Funds are permitted. No transfers are permitted
between the Fixed Income Annuity Option and the Variable Income Annuity Option.
After a Contract has been issued, it may not be surrendered. The Contract has no
cash value. Monthly payments under the Variable Income Annuity Option will vary
in accordance with the investment performance of the Investment Funds.
This prospectus provides information about the Contract that prospective
investors should know before investing. You should read it carefully and retain
it for future reference. The prospectus is not valid unless it is attached to a
current prospectus for the Trust, which you should also read carefully.
A registration statement relating to the Separate Account has been filed with
the Securities and Exchange Commission (SEC). The statement of additional
information (SAI), dated October 3, 1997, which is part of the registration
statement for the Separate Account, is available free of charge upon request by
writing to the Processing Office at P.O. Box 2494, New York, New York 10116-2494
or calling 1-800-245-1230, our toll-free number. The SAI has been incorporated
by reference into this prospectus. The Table of Contents for the SAI appears at
the back of this prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
Copyright 1997
The Equitable Life Assurance Society
of the United States, New York, New York 10104.
All rights reserved.
888-1119 Cat. No. 127224
<PAGE>
- --------------------------------------------------------------------------------
PROSPECTUS TABLE OF CONTENTS
- --------------------------------------------------------------------------------
GENERAL TERMS PAGE 3
PART 1: SUMMARY PAGE 4
Equitable Life 4
Income Annuity Options 4
Premium Payments 4
Transfers 4
10-Day Free Look 5
Charges 5
Fee Table 6
Trust Annual Expenses 6
PART 2: SEPARATE ACCOUNT A AND
ITS INVESTMENT FUNDS PAGE 7
Separate Account A 7
The Trust 7
The Trust's Investment Adviser 8
Investment Policies and Objectives
of the Trust's Portfolios 9
PART 3: VARIABLE INCOME
ANNUITY OPTIONS PAGE 11
PART 4: FIXED INCOME
ANNUITY OPTION PAGE 12
PART 5: PROVISIONS OF THE
CONTRACTS PAGE 13
Selecting Annuity Options 13
Premium Payments under
the Contracts 13
Transfers 13
Annuity Distribution Options 14
How Payments Are Determined 14
Distribution of the Contract 14
PART 6: DEDUCTIONS AND
CHARGES PAGE 15
Trust Charges to Portfolios 15
Charges to Investment Funds 15
Administrative Expense Charge 15
Other Charges 15
Charge for Applicable Taxes 16
PART 7: VOTING RIGHTS PAGE 17
Trust Voting Rights 17
Separate Account Voting Rights 17
Voting Rights of Others 17
Changes in Applicable Law 17
PART 8: TAX ASPECTS OF THE
CONTRACT PAGE 18
Tax Changes 18
Taxation of Annuity Payments 18
Special Rules for Tax Favored
Retirement Programs 19
Qualified Plans and TSAs 19
IRAs 19
Federal and State Income Tax
Withholding 20
Special Rules for Contracts
Issued in Puerto Rico 21
Impact of Taxes to Equitable Life 21
PART 9: FINANCIAL STATEMENTS PAGE 22
APPENDIX PAGE 23
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS PAGE 24
2
<PAGE>
- --------------------------------------------------------------------------------
GENERAL TERMS
- --------------------------------------------------------------------------------
The Contract is designed as an annuity benefit payment vehicle for either
personal or employer-sponsored retirement programs. In this prospectus, the
terms "we," "our" and "us" mean The Equitable Life Assurance Society of the
United States (Equitable Life). The terms "you" and "your" refer to the Contract
Owner.
AIR--The assumed base rate of net investment return used in determining monthly
payments under the Contract.
ANNUITANT--The individual who is the measuring life for determining annuity
benefits. The Annuitant may, in certain cases, not be the Contract Owner. The
Annuitant is entitled to exercise rights under a Contract only if that person is
also the Contract Owner.
ANNUITY UNIT--Premiums allocated to an Investment Fund purchase annuity units in
that Investment Fund. The "Annuity Unit Value" is the dollar value of each
Annuity Unit in an Investment Fund on a given date.
BUSINESS DAY--Generally, our Business Day is any day on which Equitable Life is
open and the New York Stock Exchange is open for trading. We are closed on
national business holidays and also on Martin Luther King, Jr. Day and the
Friday after Thanksgiving. Additionally, we may choose to close on the day
immediately preceding or following a national business holiday or due to
emergency conditions. Our Business Day ends at 4:00 p.m. Eastern Time or the
closing of the New York Stock Exchange, if earlier.
CODE--The Internal Revenue Code of 1986, as amended.
CONTRACT--The Variable Immediate Annuity Contract.
CONTRACT DATE--This is the Business Day, and any anniversary thereof, we receive
at our Processing Office the properly completed and signed application form for
your Contract, any other required documentation and a premium payment.
CONTRACT OWNER--The person who owns the Contract. The person who is entitled to
exercise rights under the Contract and to receive the annuity benefits (unless
another payee is designated).
INCOME ANNUITY OPTIONS--The Variable Income Annuity funded by one or more of the
fourteen Investment Funds, and the Fixed Income Annuity funded by our general
account and available in combination with the Variable Income Annuity.
INVESTMENT FUNDS--These are the fourteen variable investment funds of the
Separate Account that are listed on the first page of this prospectus.
PORTFOLIOS--The portfolios of the Trust that correspond to the Investment Funds
of the Separate Account.
PROCESSING OFFICE--The office to which all premiums, written requests or other
written communications must be sent.
SAI--The Statement of Additional Information.
SEPARATE ACCOUNT--Our Separate Account A.
TRUST--The Hudson River Trust, a mutual fund in which the assets of Separate
Account A are invested.
3
<PAGE>
- --------------------------------------------------------------------------------
PART 1: SUMMARY
- --------------------------------------------------------------------------------
The following Summary is qualified in its entirety by the terms of the Contract
as issued and the more detailed information appearing elsewhere in the
prospectus. Please be sure to read the prospectus in its entirety.
EQUITABLE LIFE
EQUITABLE LIFE is a New York stock life insurance company that has been in
business since 1859. For more than 100 years we have been among the largest life
insurance companies in the United States. Equitable Life has been selling
annuities since the turn of the century. Our Home Office is located at 1290
Avenue of the Americas, New York, New York 10104. We are authorized to sell life
insurance and annuities in all fifty states, the District of Columbia, Puerto
Rico and the Virgin Islands. We maintain local offices throughout the United
States.
Equitable Life is a wholly owned subsidiary of The Equitable Companies
Incorporated (the HOLDING COMPANY). The largest stockholder of the Holding
Company is AXA-UAP S.A. (AXA), a French company. As of March 31, 1997, AXA
beneficially owned approximately 63.8% of the outstanding common stock of the
Holding Company (assuming conversion of convertible preferred stock held by
AXA). Under its investment arrangements with Equitable Life 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 Life. AXA is the holding company for an international group of
insurance and related financial service companies.
Equitable Life, the Holding Company and their subsidiaries managed approximately
$240.8 billion of assets as of March 31, 1997, including third-party assets of
approximately $184.1 billion. We are one of the nation's leading pension fund
managers. These assets are primarily managed for retirement and annuity programs
for businesses, tax-exempt organizations and individuals. This broad customer
base includes nearly half the Fortune 100, more than 42,000 small businesses,
state and local retirement funds in more than half the 50 states, approximately
250,000 employees of educational and non-profit institutions, as well as nearly
500,000 individuals. Millions of Americans are covered by Equitable Life's
annuity, life and pension contracts.
INCOME ANNUITY OPTIONS
The Contract offers the Variable Income Annuity Option, funded through one or
more of the fourteen Investment Funds (Alliance Money Market, Alliance
Intermediate Government Securities, Alliance Quality Bond, Alliance High Yield,
Alliance Growth & Income, Alliance Equity Index, Alliance Common Stock, Alliance
Global, Alliance International, Alliance Aggressive Stock, Alliance Small Cap
Growth and the Alliance Asset Allocation Series: Alliance Conservative
Investors, Alliance Balanced and Alliance Growth Investors) and a Fixed Income
Annuity Option funded by our general account and available in combination with
the Variable Income Annuity Option. The Fixed Income Annuity Option is not
available separately under this Contract.
Each Investment Fund invests in shares of a corresponding Portfolio of the
Trust. The attached Trust prospectus describes the investment objectives and
policies of the Portfolios available to Contract Owners. The Income Annuity
Options are available only in forms that provide for life contingencies. Once
issued, a Contract may not be surrendered. The Contract does not have a cash
surrender value.
PREMIUM PAYMENTS
The single premium payment for a Contract must be made by check, drawn on a bank
in the U.S., in U.S. dollars and made payable to Equitable Life. All checks are
accepted subject to collection.
You may instruct us to allocate your payment to one or more of the Investment
Funds under a Variable Income Annuity Option, whether or not purchased in
combination with a Fixed Income Annuity Option. Allocation percentages must be
in whole numbers and the sum of your allocations must equal 100%.
TRANSFERS
You may direct us to transfer funds among the Investment Funds available under
the Contract at
4
<PAGE>
least once per year, on the Contract Date, although Equitable Life may, in
accordance with its procedures, allow more frequent transfers without tax
liability or charge. The Fixed Income Annuity Option does not provide for
transfers.
10-DAY FREE LOOK
You have the right to examine your Contract for a period of 10 days after you
receive it, and to return it to us for a refund. You cancel it by sending it to
our Processing Office. The free look is extended if your state requires a refund
period of longer than 10 days. This right applies only to the initial Owner of a
Contract.
For premium payments allocated to Investment Funds, your refund will equal that
premium payment plus or minus any investment gain or loss through the date we
receive your Contract at our Processing Office less any annuity payments you may
have already received. Certain daily charges will also be automatically
deducted. For premium payments allocated to purchase the Fixed Income Annuity
Option, the refund will equal the amount allocated to the Fixed Income Annuity
Option, without interest, less any payments already received. Some states or
Federal income tax regulations may require that we calculate the refund
differently. We follow these same procedures if you change your mind before a
Contract has been issued, but after a premium payment has been made.
In certain cases, there may be tax implications to canceling your Contract
during the free look period. You should consult your own tax adviser prior to
investing.
CHARGES
Following is a summary of the charges which are applicable, directly or
indirectly, under your Contract.
O ADMINISTRATIVE EXPENSE CHARGE--A onetime charge of $350 is deducted from
the premium payment for administrative expenses of the Contract.
O OTHER CHARGES--A charge equal to 6% of the premium payment is deducted for
sales expenses when the premium payment is made. No other sales charge
applies.
O CHARGES TO INVESTMENT FUNDS--We make daily charges for certain expenses of
the Contract, including mortality and expense risks and administrative
expenses, including financial accounting. The charges are assessed against
the Separate Account assets at an annual rate not to exceed 1.25% for
mortality and expense risks and 0.30% for administrative expenses, including
financial accounting. The Annuity Unit Values reflect these charges.
O CHARGE FOR APPLICABLE TAXES--We deduct a charge for applicable taxes, such
as state or local premium taxes, that might be imposed in your state. The
current tax charge that might be imposed varies by state and ranges from 0%
to 3.50% of the premium payment made; the rate is 1% in Puerto Rico and 5%
in the Virgin Islands.
O TRUST CHARGES TO PORTFOLIOS--Investment advisory fees and other expenses of
the Trust are charged daily against the Trust's assets. These charges are
reflected in the daily share prices of the Portfolios and, indirectly, in
the Annuity Unit Values for the Investment Funds.
5
<PAGE>
FEE TABLE
The following table will assist you in understanding the various costs and
expenses you will bear directly or indirectly under your Contract so that you
may compare them with other products. The only expenses shown in the tables that
apply to the Fixed Income Annuity Option are the Administrative Expense Charge
and Front-End Sales Charge. The table reflects expenses of the Separate Account
as well as the Trust. A deduction of a charge for any applicable state or local
taxes may also apply. For more complete information, see "Part 6: Deductions and
Charges."
CONTRACT OWNER TRANSACTION EXPENSES
ADMINISTRATIVE EXPENSE CHARGE (DEDUCTED FROM PREMIUM PAYMENT).... $350
OTHER CHARGES (AS A PERCENTAGE OF PREMIUM PAYMENT)............... 6%
SEPARATE ACCOUNT ANNUAL EXPENSES (MAXIMUM)
Mortality and Expense Risk Charge................................ 1.25%
Asset-Based Administrative Charge................................ 0.30%
Total Separate Account Annual Expenses (1)....................... 1.55%
HUDSON RIVER TRUST ANNUAL EXPENSES
<TABLE>
<CAPTION>
ALLIANCE
ALLIANCE INTERMEDIATE ALLIANCE ALLIANCE
MONEY GOVERNMENT QUALITY ALLIANCE GROWTH & ALLIANCE
MARKET SECURITIES BOND HIGH YIELD INCOME EQUITY INDEX
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment Advisory Fees 0.35% 0.50% 0.53% 0.60% 0.55% 0.33%
Other Expenses 0.04% 0.09% 0.05% 0.06% 0.05% 0.05%
- ---------------------------------------------------------------------------------------------------------------------------
Total Trust Annual
Expenses (2) (3) 0.39% 0.59% 0.58% 0.66% 0.60% 0.38%
===========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
ALLIANCE ALLIANCE ALLIANCE ALLIANCE ALLIANCE
COMMON ALLIANCE ALLIANCE AGGRESSIVE SMALL CAP CONSERVATIVE ALLIANCE GROWTH
STOCK GLOBAL INTERNATIONAL STOCK GROWTH INVESTORS BALANCED INVESTORS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment Advisory Fees 0.38% 0.65% 0.90% 0.55% 0.90% 0.48% 0.42% 0.53%
Other Expenses 0.03% 0.08% 0.18% 0.03% 0.10% 0.07% 0.05% 0.06%
- ---------------------------------------------------------------------------------------------------------------------------
Total Trust Annual
Expenses (2) (3) 0.41% 0.73% 1.08% 0.58% 1.00% 0.55% 0.47% 0.59%
===========================================================================================================================
</TABLE>
- ---------
Notes:
(1) We are currently charging only 0.50% against the amounts held in the
Investment Funds. We reserve the right to impose a charge in the future of
up to 1.55% against the amounts held in the Investment Funds.
(2) Effective May 1, 1997, a new Investment Advisory Agreement was entered into
between the Trust and Alliance Capital Management L.P., the Trust's
Investment Adviser, which effected changes in the Trust's management fee
and expense structure. See the Trust prospectus for more information.
The table reflects the Trust's expenses and is based on average portfolio
net assets for the year ended December 31, 1996 and has been restated to
reflect (i) the fees that would have been paid to Alliance if the current
advisory agreement had been in effect as of January 1, 1996 and (ii)
estimated accounting expenses for the year ending December 31, 1997. The
amounts shown for the Alliance Small Cap Growth Portfolio, which commenced
operations on May 1, 1997, are estimates.
(3) The investment advisory fee for each Portfolio may vary from year to year
depending upon the average daily net assets of the respective Portfolio of
the Trust. The maximum investment advisory fees, however, cannot be
increased without a vote of that Portfolio's shareholders. The other direct
operating expenses will also fluctuate from year to year depending on
actual expenses. The Trust expenses are shown as a percentage of each
Portfolio's average net assets. See "Trust Charges to Portfolios" in Part
6.
6
<PAGE>
- --------------------------------------------------------------------------------
PART 2: SEPARATE ACCOUNT A AND
ITS INVESTMENT FUNDS
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT A
Separate Account A is organized as a unit investment trust, a type of investment
company, 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 has several Investment Funds, each of
which invests in shares of a corresponding Portfolio of the Trust. You may
allocate some or all of your premium among the Investment Funds.
The assets of the Separate Account are our property. As a separate account under
the New York Insurance Law, the portion of the Separate Account's assets equal
to the reserves and other liabilities relating to the Contract will not be
chargeable with liabilities arising out of any other business we may conduct.
Accordingly, income, gains or losses, whether or not realized, from assets of
the Separate Account are credited to or charged against the Separate Account
without regard to our other income, gains or losses. We are the issuer of the
Contract, and the obligations set forth in the Contract (other than those of
Annuitants or Contract Owners) are our obligations.
In addition to the premium payment made under your Contract, we may allocate to
the Separate Account monies received under other annuity contracts, certificates
or agreements. Owners of all such contracts, certificates or agreements will
participate in the Separate Account in proportion to the amounts they have in
the Investment Funds that relate to their contracts, certificates or agreements.
We may retain in the Separate Account assets that are in excess of the reserves
and other liabilities relating to the Contract or to other contracts,
certificates or agreements, or we may transfer them to our general account.
We reserve the right, subject to compliance with applicable law, including
approval of Contract Owners if required, (1) to add new Investment Funds (or
sub-divisions of Investment Funds) to, or remove Investment Funds (or
sub-divisions of Investment Funds) from, the Separate Account; or to add other
separate accounts in addition to or in place of the Separate Account, (2) to
combine any two or more Investment Funds or sub-divisions thereof, (3) to
transfer assets determined by us to be the share of the class to which the
Contracts belong from any of the Investment Funds to another Investment Fund by
withdrawing the same percentage of each investment in that Investment Fund with
appropriate adjustments to avoid odd lots and fractions, (4) to operate the
Separate Account or any Investment Fund as a management investment company under
the 1940 Act (which may be directed by a committee which may be composed of a
majority of persons who are "interested persons" of Equitable Life under the
1940 Act, which committee may be discharged by us at any time) or in any other
form permitted by law, including a form that allows us to make direct
investments, (5) to deregister the Separate Account under the 1940 Act, (6) to
cause one or more Investment Funds to invest in a mutual fund other than or in
addition to the Trust, (7) to discontinue the sale of Contracts, (8) to
terminate any employer or plan trustee agreement pursuant to its terms and (9)
to restrict or eliminate any voting rights of Contract Owners or other people
who have voting rights that affect the Separate Account.
If any changes are made that result in a material change in the underlying
investments of an Investment Fund, Contract Owners will be notified. We may make
other changes in the Contracts that do not reduce any annuity benefit, or other
accrued rights or benefits.
THE TRUST
The Trust is an open-end, diversified management investment company, more
commonly called a mutual fund. As a "series" type of mutual fund, it issues
several different series of stock, each of which relates to a different
Portfolio of the Trust. The Trust commenced operations in January 1976 with a
predecessor of its Common Stock Portfolio. The Trust does not impose a sales
charge or "load" for buying and selling its shares. All dividend distributions
to the Trust are reinvested in full and fractional shares of the Portfolio to
which they relate.
7
<PAGE>
More detailed information about the Trust, its investment objectives, policies,
restrictions, risks, expenses and all other aspects of its operations, appears
in its prospectus, or in its statement of additional information.
THE TRUST'S INVESTMENT ADVISER
The Trust is managed and advised by Alliance Capital Management LP (ALLIANCE),
which is registered with the SEC as an investment adviser under the Investment
Advisers Act of 1940. Alliance, an indirect, majority-owned subsidiary of
Equitable Life, is a publicly traded limited partnership. On March 31, 1997,
Alliance was managing approximately $182.8 billion in assets. Alliance acts as
investment adviser to various separate accounts and general accounts of
Equitable Life and other affiliated insurance companies. Alliance also provides
management and consulting services to mutual funds, endowments funds, insurance
companies, foreign entities, qualified and non-tax qualified corporate funds,
public and private pension and profit-sharing plans, foundations and tax-exempt
organizations.
Alliance's record as an investment manager is based, in part, on its ability to
provide a diversity of investment services to domestic, international and global
markets. Alliance prides itself on its ability to attract and retain a quality,
professional work force. Alliance employs 194 investment professionals,
including 83 research analysts. Portfolio managers have average investment
experience of more than 15 years.
Alliance's main office is located at 1345 Avenue of the Americas, New York, New
York 10105.
8
<PAGE>
INVESTMENT POLICIES AND OBJECTIVES OF THE TRUST'S PORTFOLIOS
Each Portfolio has a different investment objective which it tries to achieve by
following separate investment policies. The policies and objectives of each
Portfolio will affect its return and its risks. There is no guarantee that these
objectives will be achieved.
The policies and objectives of the Trust's Portfolios are as follows:
<TABLE>
<CAPTION>
PORTFOLIO INVESTMENT POLICY OBJECTIVE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Alliance Money Market........ Primarily high-quality short-term money market High level of current income while
instruments. preserving assets and maintaining
liquidity.
Alliance Intermediate Primarily debt securities issued or guaranteed High current income consistent with
Government by the U.S. Government, its agencies and relative stability of principal.
Securities................ instrumentalities. Each investment will have
a final maturity of not more than 10 years or
a duration not exceeding that of a 10-year
Treasury note.
Alliance Quality Bond........ Primarily investment grade fixed-income High current income consistent with
securities. preservation of capital.
Alliance High Yield.......... Primarily a diversified mix of high-yield, High return by maximizing current income
fixed-income securities involving greater and, to the extent consistent with that
volatility of price and risk of principal and objective, capital appreciation.
income than high-quality fixed-income
securities. The medium- and lower-quality
debt securities in which the Portfolio may
invest are known as "junk bonds."
Alliance Growth & Primarily income producing common stocks and High total return through a combination of
Income.................... securities convertible into common stocks. current income and capital appreciation.
Alliance Equity Index........ Selected securities in the S&P 500 Index (the Total return performance (before trust
"Index") which the adviser believes will, in expenses and Separate Account annual
the aggregate, approximate the performance expenses) that approximates the
results of the Index. investment performance of the Index
(including reinvestment of dividends) at
risk level consistent with that of the
Index.
Alliance Common Stock........ Primarily common stock and other equity-type Long-term growth of capital and increasing
instruments. income.
Alliance Global.............. Primarily equity securities of non-United Long-term growth of capital.
States as well as United States companies.
Alliance International....... Primarily equity securities selected principally Long-term growth of capital.
to permit participation in non-United States
companies with prospects for growth.
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO INVESTMENT POLICY OBJECTIVE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Alliance Aggressive Primarily common stocks and other equity-type Long-term growth of capital.
Stock..................... securities issued by medium- and other
smaller-sized companies with strong
growth potential.
Alliance Small Cap Primarily common stocks and other equity-type Long-term growth of capital.
Growth..................... securities issued by smaller-sized companies
with strong growth potential.
Alliance Asset Allocation Series:
Alliance Conservative Diversified mix of publicly traded, fixed-income High total return without, in the adviser's
Investors................. and equity securities; asset mix and security opinion, undue risk to principal.
selection are primarily based upon factors
expected to reduce risk. The Portfolio is
generally expected to hold approximately 70%
of its assets in fixed-income securities and
30% in equity securities.
Alliance Balanced............ Primarily common stocks, publicly traded debt High return through a combination of
securities and high-quality money market current income and capital
instruments. The Portfolio is generally appreciation.
expected to hold 50% of its assets in equity
securities and 50% in fixed-income securities.
Alliance Growth Diversified mix of publicly traded, fixed-income High total return consistent with the
Investors................. and equity securities; asset mix and security adviser's determination of reasonable
selection based upon factors expected to risk.
increase possibility of high long-term
return. The Portfolio is generally
expected to hold approximately 70% of its
assets in equity securities and 30% in
fixed-income securities.
</TABLE>
10
<PAGE>
- --------------------------------------------------------------------------------
PART 3: VARIABLE INCOME ANNUITY OPTIONS
- --------------------------------------------------------------------------------
FACTORS THAT AFFECT MONTHLY VARIABLE ANNUITY PAYMENTS
The amount of your first monthly variable annuity payment ("monthly payment")
will depend on the following factors:
1. the Variable Income Annuity Option that you select, your age and the age of
any joint Annuitant when you make your selection, and the gender of the
Annuitant(s);
2. the base rate of return ("base rate") or assumed investment return ("AIR")
shown on your Contract data page; and
3. the amount of premium that you allocate to the Investment Fund(s) under the
Variable Income Annuity Option that you select.
The amount of the first two monthly variable annuity payments is the same.
Thereafter, your monthly payments will vary according to the net investment
return (i.e., after deducting applicable charges) of the Investment Fund(s) you
selected.
This section describes how these factors can affect your monthly payments. Also,
see "How Payments Are Determined" in Part 5 of this prospectus.
VARIABLE INCOME ANNUITY OPTIONS
You can choose from four types of Variable Income Annuity Options. See "Annuity
Distribution Options" in Part 5 of this prospectus. Each Option involves a life
contingency, which means that Equitable Life guarantees that you will receive
annuity payments for the rest of your life and the life of any joint Annuitant.
Because each Variable Income Annuity Option involves a life contingency, the
amount of your first monthly payment will depend on your age, the age of any
joint Annuitant, and your gender and the gender of any joint Annuitant.
All other factors being equal, the older you are at the time of purchase,
generally the larger the amount of your monthly payments. The Variable Income
Annuity Options that do not involve a period certain or a joint Annuitant
generally will provide you with a higher monthly payment than Options that
involve those features. In addition, generally female Annuitants receive lower
monthly payments than male Annuitants of the same age.
ASSUMED INVESTMENT RETURN (AIR)
The AIR is the assumed base rate of investment return that we use to calculate
the amount of your initial monthly payment under your Contract. All Contracts
have an AIR of 5%, except for Contracts issued in states where a 3.5% AIR
(maximum) is used.
INVESTMENT FUNDS
You can allocate your premium dollars (net of initial charges) to one or more
Investment Funds. See "Investment Policies and Objectives of the Trust's
Portfolios" in Part 2 of this prospectus. Amounts allocated to the Investment
Funds purchase annuity units of the Funds. Each Investment Fund invests in
shares of a corresponding portfolio of the Trust, a mutual fund. The number of
annuity units purchased is calculated by dividing the first monthly payment by
the applicable annuity unit value as of the date the single premium amount is
received by us. The amount of the third and subsequent monthly payments is
calculated by multiplying the number of annuity units held in the Investment
Fund by the average annuity unit value for the selected Investment Fund. The
average annuity unit value is the average of the annuity unit values for the
second calendar month immediately preceding the due date of the payment. The
annuity unit values reflect the actual rate of net investment return (after
charges) of the applicable Investment Fund.
If an Investment Fund's net investment return equals the AIR, then the amount of
your monthly payment will not change. If the net investment return is greater
than the AIR, then the amount of your monthly payment will increase. Conversely,
if the net investment return is less than the AIR, then the amount of your
monthly payment will decrease.
Monthly payments under Contracts with AIRs of 3.5% will at first be smaller than
those under Contracts with AIRs of 5%. Monthly payments under Contracts with
AIRs of 3.5% also will generally rise more rapidly when annuity unit values are
rising, and will fall more slowly when annuity units are falling, than those
under Contracts with AIRs of 5%.
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PART 4: FIXED INCOME ANNUITY OPTION
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You may allocate a portion of your premium payment to the Fixed Income Annuity
Option which is part of our general account. The general account supports all of
our insurance policy and annuity contract guarantees, 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, the general account is not 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 Fixed Income Annuity
Option. 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.
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PART 5: PROVISIONS OF THE CONTRACTS
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The provisions of your Contract may be restricted by any plan or agreement
relating to it or by applicable laws or regulations.
SELECTING ANNUITY OPTIONS
You may select the Variable Income Annuity Option funded through one or more of
the Investment Funds, alone, or in combination with the Fixed Income Annuity
Option. The first two monthly payments are fixed. The third and subsequent
monthly annuity payments received under the Variable Income Annuity Option will
increase or decrease depending upon the investment performance of the Investment
Funds. The amount of the payment received under the Fixed Income Annuity Option
will be the same each month and will not fluctuate. If you choose a combination
of the Variable Income Annuity and Fixed Income Annuity Options, you will
receive a single monthly payment representing the sum of the Variable Income
Annuity and Fixed Income Annuity payments due.
Annuity payments under the Contract will commence one month following the date
we receive your premium payment. The annuity distribution options available
under such Contracts are Life Annuity (except in New York), Life Annuity with
Period Certain, Joint and Survivor Life Annuity and Joint and Survivor Life
Annuity with Period Certain. Once issued, a Contract may not be surrendered. THE
CONTRACT DOES NOT HAVE A CASH SURRENDER VALUE.
PREMIUM PAYMENTS UNDER THE CONTRACTS
Premium payments are made in a single sum amount. Your premium payment must be
accompanied by a completed application. All premium payments must be made by
check, drawn on a bank in the U.S., in U.S. dollars and made payable to
Equitable Life. All checks are accepted subject to collection. At our
discretion, and subject to such terms as we may require, we may also allow
premium payments to be made by wire transfers or other means. We allocate
premium payments to the annuity options you select according to your allocation
percentages.
This contract should not be used if the allocation to the Fixed Income Annuity
Option is 100%. Otherwise, there is no maximum amount of the premium payment
that you may allocate to the Fixed Income Annuity Option. The combination of
your allocations to the Fixed Income Annuity Option and the Variable Income
Annuity Option must equal 100%.
A premium payment allocated to an Investment Fund of the Variable Income Annuity
Option is converted to Annuity Units of that Investment Fund. The number of
Annuity Units credited equals the dollar amount of the initial annuity payment
divided by the Annuity Unit Value for that Investment Fund computed at the end
of the Valuation Period in which we receive the premium payment at our
Processing Office. A VALUATION PERIOD is each Business Day together with any
consecutive, preceding non-business days. The number of Annuity Units credited
upon the allocation of a premium payment, or any transfer to an Investment Fund,
will not vary because of any later change in the Annuity Unit Value, nor will
the number of Annuity Units credited under an Investment Fund change while
monthly annuity payments are being made based upon the Annuity Unit Value of the
Investment Fund. The Annuity Unit Value varies with the investment performance
(relative to the AIR) of the Investment Fund, which in turn reflects the
investment income and realized and unrealized capital gains and losses of the
corresponding Portfolio, as well as the Trust expenses. A description of the
computation of the Annuity Unit Value is found in the SAI.
TRANSFERS
You may transfer all or portions of the Annuity Units credited under your
Contract among the Investment Funds you have chosen at least once each year, on
the Contract Date although Equitable may, in accordance with its procedures,
allow more frequent transfers. The Contract does not permit transfers between
the Fixed Income Annuity Option and the Variable Income Annuity Option. Transfer
requests can be forwarded to the processing office up to 30 days prior to the
Contract Date. Any transfer request received after the Contract Date will be
returned. A transfer request will be effective on the next Contract Date after
receipt at
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our Processing Office. Transfers in or out of the Investment Funds will be at
the Annuity Unit Value computed as of such effective date. All transfers among
the Investment Funds will be confirmed in writing. Your signed request for a
transfer should specify your Contract number, the amount of your Annuity Unit
Value as of that date to be transferred and the Investment Funds to and from
which the amounts are to be transferred.
ANNUITY DISTRIBUTION OPTIONS
You may elect to receive your Variable Income Annuity Option payments, or your
combined Variable Income Annuity Option and your Fixed Income Annuity Option
payments, on any one of the forms listed below. If your annuity payments are the
sum of amounts received under both the Variable Income Annuity Option and the
Fixed Income Annuity Option, you must select the same form for both.
o LIFE ANNUITY: An annuity which guarantees payments for the rest of the
Annuitant's life. Payments end with the last monthly payment before the
Annuitant's death. Because there is no continuing benefit following the
Annuitant's death, this annuity form provides the highest monthly payment of
any of the life annuity distribution options.
o LIFE ANNUITY -- PERIOD CERTAIN: This annuity form guarantees payments for
the rest of the Annuitant's life. In addition, if the Annuitant dies before
the end of a selected period of time (the "certain period"), payments will
continue to the beneficiary for the balance of the certain period. The
certain period cannot exceed life expectancy.
o JOINT AND SURVIVOR LIFE ANNUITY: This annuity form guarantees payments for
the rest of the Annuitant's life and, after his or her death, continuation
of the payments to the survivor.
o JOINT AND SURVIVOR LIFE ANNUITY -- PERIOD CERTAIN: This annuity form
guarantees payments for the rest of the Annuitants' lives. In addition, if
both Annuitants die before the period certain, payments will continue to the
beneficiary for the balance of the period certain. The certain period cannot
exceed joint life expectancy.
HOW PAYMENTS ARE DETERMINED
The size of the initial variable annuity payment will depend on the amount
applied to purchase the annuity, the AIR, the form of distribution, the
Annuitant's age (and any joint annuitant's age) and in certain instances, the
sex of the Annuitant(s). The growth in value of your annuity payments is neither
guaranteed nor projected. Once an annuity distribution option is chosen and
payments have commenced, the distribution option cannot be changed.
Under a Variable Income Annuity Option, payments after the first two will vary
according to the investment performance of the Investment Fund(s) selected to
fund the variable payments. After the first two payments, each monthly payment
will be calculated by multiplying the number of Annuity Units credited by the
average Annuity Unit Value for the selected fund for the second calendar month
immediately preceding the due date of the payment. The number of units is
calculated by dividing the first monthly payment by the Annuity Unit Value on
the Business Day the premium is received. The average Annuity Unit Value is the
average of the Annuity Unit Values for the month. In the case of a transfer
between Investment Funds, the number of Annuity Units (if not specified) is
calculated by dividing the dollar value of the transfer by the Annuity Unit
Value of the Investment Fund(s) you are transferring into on the Contract Date
or such other date as Equitable may allow, in accordance with its procedures.
DISTRIBUTION OF THE CONTRACT
As the distributor of the Contract, EQ Financial Consultants, Inc. (EQF), an
indirect wholly-owned subsidiary of Equitable Life, has responsibility for sales
and marketing functions for the Contract. EQF also serves as the principal
underwriter of the Separate Account under the 1940 Act. EQF is registered with
the SEC as a broker-dealer under the Securities Exchange Act of 1934 and is a
member of the National Association of Securities Dealers, Inc. EQF's principal
business address is 1755 Broadway, New York, New York 10019.
The offering of the Contract is intended to be continuous.
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PART 6: DEDUCTIONS AND CHARGES
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The following deductions and charges described below apply under the Contract.
However, Trust charges to Portfolios and charges to Investment Funds do not
apply to the Fixed Income Annuity Option.
TRUST CHARGES TO PORTFOLIOS
Investment advisory fees charged daily against the Trust's assets, direct
operating expenses of the Trust (such as trustees' fees, expenses of independent
auditors and legal counsel, bank and custodian charges and liability insurance),
and certain investment-related expenses of the Trust (such as brokerage
commissions and other expenses related to the purchase and sale of securities),
are reflected in each Portfolio's daily share price. The maximum investment
advisory fees paid annually by the Portfolios cannot be increased without a vote
of that Portfolio's shareholders. The maximum fees are as follows:
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MAXIMUM INVESTMENT
TRUST PORTFOLIO ADVISORY FEE (ANNUAL RATE)
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Alliance Money Market 0.350%
Alliance Intermediate
Government Securities 0.500%
Alliance High Yield 0.600%
Alliance Quality Bond 0.525%
Alliance Growth and Income 0.550%
Alliance Equity Index 0.325%
Alliance Common Stock 0.475%
Alliance Global 0.675%
Alliance International 0.900%
Alliance Aggressive Stock 0.625%
Alliance Small Cap Growth 0.900%
Alliance Conservative 0.475%
Investors
Alliance Balanced 0.450%
Alliance Growth Investors 0.550%
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Investment advisory fees are established under investment advisory agreements
between the Trust and its investment adviser, Alliance. All of these fees and
expenses are described more fully in the Trust prospectus. Since Trust shares
are purchased at their net asset value, these fees and expenses are, in effect,
passed on to the Separate Account and are reflected in the Annuity Unit Values
for the Investment Funds.
CHARGES TO INVESTMENT FUNDS
We make a daily charge at an effective annual rate of 0.50% against the assets
held in each of the Investment Funds. This charge is reflected in the Annuity
Unit Values for the particular Investment Fund and is subject to a maximum of
1.55% in the future, which covers maximum mortality and expense risk charges of
1.25% and maximum expenses of 0.30%.
We assume a mortality risk by our obligation to make annuity payments for the
life of the Annuitant regardless of the Annuitant's longevity. The expense risk
we assume is the risk that, over time, our actual expense of administering the
Contracts may exceed the amounts realized from the asset-based expense charge
and the administrative expense charge. Part of the mortality and expense risk
charge may be considered to be an indirect reimbursement for certain sales and
promotional expenses relating to the Contract to the extent that the charge is
not needed to meet the actual expenses incurred.
The asset-based charge for expenses, together with the administrative expense
charge described above, are designed to reimburse us for our costs in providing
administrative services in connection with the Contract, and are not designed to
include an element of profit. The amount of the administrative expense charge
imposed on a given Contract will not necessarily bear any relationship to the
amount of expenses that may be attributable to the Contract.
ADMINISTRATIVE EXPENSE CHARGE
A onetime charge of $350 is deducted from the premium payment for
administrative expenses of the Contract.
OTHER CHARGES
A 6% sales charge is deducted from the premium payment, when received, for
commissions and other distribution expenses we incur in marketing the Contracts.
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CHARGE FOR APPLICABLE TAXES
We deduct a charge for applicable taxes, such as state or local premium taxes,
that might be imposed in your state. The current tax charge that might be
imposed varies by state and ranges from 0% to 3.50% of the premium payment made;
the rate is 1% in Puerto Rico and 5% in the Virgin Islands.
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PART 7: VOTING RIGHTS
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TRUST VOTING RIGHTS
Premium payments allocated to the Investment Funds are invested in shares of the
corresponding Portfolios of the Trust. Since we own the assets of the Separate
Account, we are the legal owner of the shares and, as such, have the right to
vote on certain matters. Among other things, we may vote:
o to elect the Trust's Board of Trustees,
o to ratify the selection of independent auditors for the Trust, and
o on any other matters described in the Trust's current prospectus or
requiring a vote by shareholders under the 1940 Act.
Because the Trust is a Massachusetts business trust, annual meetings are not
required. Whenever a shareholder vote is taken, we will give Contract Owners the
opportunity to instruct us how to vote the number of shares attributable to
their Contract. If we do not receive instructions in time from all Contract
Owners, we will vote the shares of a Portfolio for which no instructions have
been received in the same proportion as we vote shares of that Portfolio for
which we have received instructions. We will also vote any shares that we are
entitled to vote directly because of amounts we have in an Investment Fund in
the same proportions that Contract Owners vote.
Each Trust share is entitled to one vote. Fractional shares will be counted.
Voting generally is on a Portfolio-by-Portfolio basis except that shares will be
voted on an aggregate basis when universal matters, such as election of Trustees
and ratification of independent auditors, are voted upon. However, if the
Trustees determine that shareholders in a Portfolio are not affected by a
particular matter, then such shareholders generally would not be entitled to
vote on that matter.
SEPARATE ACCOUNT VOTING RIGHTS
If actions relating to the Separate Account require Contract Owner approval,
Contract Owners will be entitled to cast the number of votes equal to the dollar
amount of reserves we are holding in the respective Investment Funds for that
Contract divided by the Annuity Unit Value for that Investment Fund. We will
cast votes attributable to any amounts we have in the Investment Funds in the
same proportion as votes cast by Contract Owners.
VOTING RIGHTS OF OTHERS
Currently, we control the Trust. Trust shares are held by other separate
accounts of ours and by separate accounts of insurance companies affiliated and
unaffiliated with us. Shares held by these separate accounts will probably be
voted according to the instructions of the owners of insurance policies and
annuity contracts issued by those insurance companies. While this will dilute
the effect of the voting instructions of Contract Owners, we currently do not
foresee any disadvantages arising out of this. The Trust's Board of Trustees
intends to monitor events in order to identify any material irreconcilable
conflicts that possibly may arise and to determine what action, if any, should
be taken in response. If we believe that the Trust's response to any of those
events insufficiently protects our Contract Owners, we will see to it that
appropriate action is taken to protect our Contract Owners.
CHANGES IN APPLICABLE LAW
The voting rights we describe in this prospectus are created under applicable
Federal securities laws. To the extent that those laws or the regulations
promulgated under those laws eliminate the necessity to submit matters for
approval by persons having voting rights in separate accounts of insurance
companies, we reserve the right to proceed in accordance with those laws or
regulations.
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PART 8: TAX ASPECTS OF THE CONTRACT
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This prospectus generally covers our understanding of the current Federal income
tax rules that apply to an annuity purchased with after-tax dollars
(non-qualified annuity) and some of the special tax rules that apply to fund
payouts from tax-favored employer sponsored retirement plans (qualified
annuity). This prospectus does not provide detailed tax information and does not
address issues such as state income and other taxes or Federal gift and estate
taxes. Please consult a tax adviser when considering the tax aspects of the
Variable Immediate Annuity Contract.
TAX CHANGES
The United States Congress has in the past considered and may in the future
consider proposals for legislation that, if enacted, could change the tax
treatment of annuities. In addition, the Treasury Department may amend existing
regulations, issue new regulations, or adopt new interpretations of existing
laws. State tax laws or, if you are not a United States resident, foreign tax
laws, may also affect the tax consequences to you, your joint annuitant, if any,
or the beneficiary. These laws may change from time to time without notice and,
as a result, the tax consequences may be altered. There is no way of predicting
whether, when or in what form any such change would be adopted.
Any such change could have retroactive effects regardless of the date of
enactment. We suggest you consult your legal or tax adviser.
TAXATION OF ANNUITY PAYMENTS
Equitable Life has designed the Variable Immediate Annuity Contract to qualify
as an "annuity" for purposes of Federal income tax law. The taxable portion of
annuity payments is treated as ordinary income and is subject to income tax
withholding. See "Federal and State Income Tax Withholding" below.
The Variable Immediate Annuity Contract is a payout annuity -- that is, funds
are applied to a payment stream measured by the annuitant's (and any joint
annuitant's) life, which is at least as long as any period certain elected.
The Federal income tax treatment of your Variable Immediate Annuity Contract
payments will depend on whether you have a "tax basis" or "investment in the
contract," that is, whether you have purchased the Contract with after-tax
funds. Where contributions to fund a tax-favored retirement program annuity have
been made entirely with pre-tax funds, all amounts distributed from the Contract
are fully taxable for Federal income tax purposes. However, where a Contract has
been purchased wholly or partially with after-tax funds, the owner is entitled
to recover tax-free the portion of each payment attributable to these after-tax
funds. Special rules apply to IRA Contracts, as discussed in the next section
under "IRAs -- Taxation of Payments."
The formula for determining the tax-free portion of each payment varies slightly
depending whether the contract is a non-qualified annuity or a qualified plan or
TSA annuity. Generally, the tax-free portion of each payment is based on the
ratio of the after-tax investment in the Contract, adjusted for any guaranteed
period, divided by the expected number of payments, as determined in accordance
with Treasury Regulations. For a qualified plan or TSA annuity no adjustment for
a guaranteed period is required and the expected number of payments is generally
determined under a statutory table. In all cases, the remainder of each payment
will be taxable. Special rules apply if the variable annuity payments actually
received in a year are less than the amount permitted to be recovered tax-free.
After the total investment in the Contract has been recovered, subsequent
payments are fully taxable. If payments cease as a result of death, a deduction
for any unrecovered investment will be allowed.
Where payments are made to a Successor Owner, after the death of the Owner while
the Annuitant is alive, to a joint annuitant, if any, after the death of the
annuitant or to a beneficiary under a life income period certain Variable
Immediate Annuity Contract after the death of the Annuitant during the certain
period, the Successor Owner or Beneficiary, as the case may be, generally
receives the same income tax treatment as the Owner.
Penalty Tax
In addition to income tax, a penalty tax of 10% may apply to the taxable portion
of a distribution from
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an annuity contract unless the distribution is (1) made on or after the date you
attain age 59 1/2, (2) made on or after your death, (3) attributable to your
disability, (4) is part of a series of substantially equal installments as an
annuity for your life (or life expectancy) or the joint lives (or joint life
expectancies) of you and a beneficiary, or (5) payments under an immediate
annuity. Beginning in 1998, in certain cases an exception may also be available
for qualified education expenses or a first-time home purchase. An immediate
annuity is generally an annuity which commences payments within one year from
purchase and provides for a series of substantially equal periodic payments made
at least annually. We believe your annuity payments should not be subject to the
10% penalty under exception (4) or (5) above. Since the matter is not entirely
clear for variable annuity payments, you may wish to consult your tax adviser if
you expect to receive any distributions prior to age 59 1/2.
SPECIAL RULES FOR TAX FAVORED RETIREMENT PROGRAMS
QUALIFIED PLANS AND TSAS
Distribution Restrictions and Penalty Taxes
Certain retirement programs have restrictions on the ability to make
distributions from funds attributable to salary reduction contributions,
generally until the plan participant is age 59 1/2, has died, is disabled or
separated from service. Moreover, distribution from any unrestricted funds in
the form of a life-contingent annuity prior to age 59 1/2 may be subject to a
10% additional income tax penalty unless the individual has separated from
service. In addition, the Employee Retirement Income Security Act of 1974, as
amended (ERISA), may require that benefits under the program be paid in a
specified form or require spousal consent to elect another form. You should
discuss with your tax or legal adviser whether the Variable Immediate Annuity
Contract is an appropriate vehicle for you.
Minimum Distribution Rules
Generally a life-contingent annuity such as the Variable Immediate Annuity
Contract will meet the rules requiring minimum distributions to be made from
qualified plans, 403(b) arrangements, and individual retirement annuities
beginning in the year the individual is required to commence minimum
distributions. Minimum distributions generally must commence beginning for the
year the individual reaches age 70 1/2, but may be delayed for some individuals
who are not retired from the employer sponsoring the plan at age 70 1/2. If the
individual elects a period certain on the life-contingent contract, the period
certain cannot be longer than the individual's life expectancy (or joint life
expectancies of the individual and a beneficiary) according to IRS tables.
IRAS
The contract is designed to qualify as an individual retirement annuity ("IRA")
under Section 408(b) of the Internal Revenue Code. Your rights under the
contract cannot be forfeited.
This prospectus contains the information that the Internal Revenue Service
("IRS") requires to be disclosed to an individual before he or she purchases an
IRA. This section covers some of the special tax rules that apply to individual
retirement arrangements. You should be aware that an IRA is subject to certain
restrictions in order to qualify for its special treatment under the Federal tax
law.
Further information on IRA tax matters can be obtained from any IRS district
office. Additional information regarding IRAs can be found in Internal Revenue
Service Publication 590, entitled "Individual Retirement Arrangements (IRAs),"
which is generally updated annually.
We have not applied for an opinion letter from the IRS approving the form of the
contract as an IRA. Such IRS approval is a determination only as to form of the
annuity and does not represent a determination of the merits of the annuity as
an investment.
Part 6, "Deductions and Charges" of this prospectus describes the amount and
types of charges which may apply to your rollover/transfer contribution. Part 5
of this prospectus and Part 1 of the SAI describe the method of computing
payments. To the extent the individual allocates funds to the Variable Income
Annuity Option (as opposed to the Fixed Income Annuity Option discussed in Part
4), growth is neither guaranteed nor projected.
Cancellation
You can cancel a contract issued as an IRA by following the directions in Part 1
under "10-Day Free Look." Since there may be adverse tax consequences if a
contract is cancelled (and because we are required to report to the IRS certain
IRA distributions from cancelled IRAs), you should consult with a tax adviser
before making any such decision.
Funding
This IRA may be funded through rollover or transfer of funds only and not
through "regular" IRA contributions out of the individual's current earnings.
Direct transfers may be made only from
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another individual retirement arrangement. Amounts may be rolled over from
another individual retirement arrangement within 60 days of when the individual
receives the funds (unless such funds have already been subject to rollover from
one individual retirement arrangement to another at any time during the past
1-year period). Amounts may also be rolled over within 60 days of when the
individual receives the funds or as a direct rollover of an "eligible rollover
distribution" from a qualified plan or 403(b) arrangement. The owner of the
Variable Immediate Annuity IRA must also have been the owner of the individual
retirement arrangement which is the source of funds (or the qualified plan or
403(b) participant, as the case may be).
However, the Variable Immediate Annuity IRA may also be purchased through a
rollover by the surviving spouse beneficiary of a deceased owner's individual
retirement arrangement or qualified plan or 403(b) arrangement or by a
participant or a spouse or a former spouse in a qualified domestic relations
order or a transfer of an individual retirement arrangement incident to a
divorce or separation decree.
After-tax contributions and amounts which are required to be distributed under
the "required minimum distribution rules" discussed below applicable to
individuals after they reach age 70 1/2 may not be rolled over. If amounts which
are not eligible to be rolled over are in fact rolled over to the Variable
Immediate Annuity IRA, they may be subject to a 6% excise tax.
Required Minimum Distributions
April 1 following the calendar year in which the individual attains age 70 1/2
is the "Required Beginning Date" -- the date on which required minimum
distributions from an individual retirement arrangement are required to begin.
If the individual is past his/her required beginning date he/she may still
purchase a Variable Immediate Annuity IRA, through transfer or rollover of
funds; however, before the funds are transmitted to this contract, the
individual must have elected a life expectancy recalculation method of
calculating minimum distributions and the individual must have taken the minimum
distribution for the year.
As discussed above under "Qualified Plans and TSAs -- Minimum Distribution
Rules," payments from the Variable Immediate Annuity IRA should meet required
minimum distribution rules applicable to life contingent annuity payments,
provided that life expectancy table rules are met for any period certain
selected and the rules described in this section are met.
Taxation of Payments
All payments from the Variable Immediate Annuity IRA are reported as being fully
taxable. If the individual has established the annuity through a direct transfer
of individual retirement arrangement funds which include nondeductible
contributions, it is the individual's responsibility to calculate the amount of
each payment which is not subject to tax, based on filings he/she has made with
the IRS and records he/she has been required to retain.
Distributions from an IRA are not entitled to the special favorable five-year
averaging method (or, in certain cases, favorable ten-year averaging and
long-term capital gain treatment) available in certain cases to distributions
from qualified plans.
Prohibited Transaction
An IRA may not be borrowed against or used as collateral for a loan or other
obligation. If the IRA is borrowed against or used as collateral, its
tax-favored status will be lost as of the first day of the tax year in which the
event occurred. If this happens, the individual must include in Federal gross
income for that year an amount equal to the fair market value of the IRA
contract as of the first day of that tax year, less the amount of any
nondeductible contributions not previously paid out. Also, the early
distribution penalty tax of 10% will apply if the individual has not reached age
59 1/2 before the first day of that tax year.
FEDERAL AND STATE INCOME TAX WITHHOLDING
Equitable Life is required to withhold Federal income tax on the taxable portion
of periodic annuity payments as if the payments were wages, unless the recipient
elects not to be subject to income tax withholding. Special withholding rules
apply to foreign recipients and United States citizens residing outside the
United States. If a recipient does not have sufficient income tax withheld or
does not make sufficient estimated income tax payments, however, the recipient
may incur penalties under the estimated income tax rules. Recipients should
consult their tax advisers to determine whether they should elect out of
withholding. Requests not to withhold Federal income tax must be made in writing
prior to receiving benefits under the Variable Immediate Annuity Contract. Our
Processing Office will
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provide forms for this purpose. No election out of withholding is valid unless
the recipient provides us with the correct taxpayer identification number and a
United States residence address.
Certain states have indicated that annuity income tax withholding will apply to
payments from the Variable Immediate Annuity Contract made to residents. In some
states, a recipient may elect out of state withholding. Generally, an election
out of Federal withholding will also be considered an election out of state
withholding. If you need more information concerning a particular state or any
required forms, call our Processing Office at the toll-free number and consult
your tax adviser.
Periodic payments are generally subject to wage-bracket type withholding (as if
such payments were wages by an employer to an employee) unless the recipient
elects no withholding. If a recipient does not elect out of withholding or does
not specify the number of withholding exemptions, withholding will generally be
made as if the recipient is married and claiming three withholding exemptions.
There is an annual threshold of taxable income from periodic payments which is
exempt from withholding based on this assumption. For 1997, a recipient of
periodic payments (e.g., monthly or annual payments) which total less than
$14,400 taxable amount will generally be exempt from Federal income tax
withholding, unless the recipient specifies a different choice of withholding
exemption. A withholding election may be revoked at any time and remains
effective until revoked. If a recipient fails to provide a correct taxpayer
identification number, withholding is made as if the recipient is single with no
exemptions.
In certain cases, e.g., benefits passing to a grandchild instead of a spouse or
child, withholding may also be required because of potential application of
"generation skipping tax," which is a form of estate tax.
SPECIAL RULES FOR CONTRACTS ISSUED IN PUERTO RICO
Under current law Equitable Life treats income from the Variable Immediate
Annuity Contract as U.S.-source. A Puerto Rico resident is subject to U.S.
taxation on such U.S.-source income. Only Puerto Rico-source income of Puerto
Rico residents is excludable from U.S. taxation. Income from the Variable
Immediate Annuity Contract is also subject to Puerto Rico tax. The computation
of the taxable portion of amounts distributed from a Variable Immediate Annuity
Contract may differ in the two jurisdictions. Therefore, an individual might
have to file both U.S. and Puerto Rico tax returns, showing different amounts of
income for each. Puerto Rico generally provides a credit against Puerto Rico tax
for U.S. tax paid. Depending on an individual's personal situation and the
timing of the different tax liabilities, an individual may not be able to take
full advantage of this credit.
Please consult your tax adviser to determine the applicability of these rules to
your own tax situation.
IMPACT OF TAXES TO EQUITABLE LIFE
The Contract provides that we may charge the Separate Account for taxes. We can
also set up reserves for taxes.
21
<PAGE>
- --------------------------------------------------------------------------------
PART 9: FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The financial statements of the Separate Account as well as the Consolidated
Financial Statements of Equitable Life are contained in the SAI, which has been
incorporated by reference in this prospectus.
22
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX: EXAMPLES OF VARIABLE INCOME ANNUITY
PAYMENT DETERMINATIONS, INCLUDING INVESTMENT FUND TRANSFERS
- --------------------------------------------------------------------------------
The examples below show how we would determine the variable income annuity (VIA)
payments for a given Investment Fund choice at original issue, and upon transfer
from that Investment Fund to another after variable income annuity payments have
commenced.
We assume that $100,000, net of any fee deductions that apply, were used to
purchase a variable income annuity under the Alliance Common Stock Investment
Fund option on 12/23/96. Based on an assumed investment return (AIR) of 5%, let
us say that the resulting initial monthly payment of $800 commencing on that
date, is for a Female age 75 under a Life Annuity with 10 Year Period Certain
form. This payment represents, for purposes of this example, 80 Alliance Common
Stock Investment Fund variable annuity units purchased, and is fixed for the
first two payments and varies thereafter according to the Alliance Common Stock
Investment Fund performance relative to the AIR.
We further assume that on the first anniversary of the Contract Date, 12/23/97,
we receive a request for a 40% transfer of variable annuity units from the
Alliance Common Stock Investment Fund to the Alliance Global Investment Fund.
Note that since payments (after the initial two) are based on an average unit
value for two months prior, a change in the payments resulting from the transfer
does not occur until two months after the effective date of transfer.
<TABLE>
<CAPTION>
As of 12/23/96 (Original Issue)
- -------------------------------
<S> <C>
(1) Premium applied*......................................................................... $100,000
(2) Initial monthly payment on 1/23/97....................................................... $800
(3) Common Stock fund annuity unit value (12/23/96).......................................... $10.00
(4) Number of Common Stock variable annuity units: (2) / (3)................................. 80
As of 12/23/97 (Annuitant Election to Transfer 40% from Common Stock to Global Fund)
- ------------------------------------------------------------------------------------
(5) Common Stock fund annuity unit value (12/23/97).......................................... $11.25
(6) Global fund annuity unit value (12/23/97)................................................ 10.00
(7) Portion of annuity units transferred to Global fund: 40% x (4) x (5) / (6)............... 36
(8) Remaining annuity units in Common Stock fund: 60% x (4).................................. 48
As of 12/23/97 (Benefit Payment based on Annuity Units owned in October 1997)
- -----------------------------------------------------------------------------
(9) Average Common Stock fund annuity unit value (October 1997).............................. $10.50
(10) Monthly payment under Common Stock fund on 12/23/97: (4) x (9)........................... $840
As of 1/23/98 (Benefit Payment based on Annuity Units owned in November 1997)
- -----------------------------------------------------------------------------
(11) Average Common Stock fund annuity unit value (November 1997)............................. $11.25
(12) Monthly payment under Common Stock fund on 1/23/98: (4) x (11)........................... $900
As of 2/23/98 (Benefit Payment based on Annuity Units owned in December 1997)
- -----------------------------------------------------------------------------
(13) Average Common Stock fund annuity unit value (December 1997)............................. $11.50
(14) Average Global fund annuity unit value (December 1997)................................... 11.00
(15) Monthly payment under Common Stock fund on 2/23/98: (8) x (13)........................... $552
(16) Monthly payment under Global fund on 2/23/98: (7) x (14)................................. $396
(17) Total monthly payment on 2/23/98: (15) + (16)............................................ $948
</TABLE>
- ------------
* After deduction of 6% sales charge and $350 administrative expense charge.
Annuity Unit Values shown in the above example are hypothetical and used for
illustrative purposes only. The example is not a representation or projection of
the amount of annuity payments that would actually be received under the
Contract.
23
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
PAGE
Part 1: Determination of Monthly Annuity Payments........... 3
Part 2: Annuity Unit Values................................. 3
Part 3: Custodian and Independent Accountants............... 4
Part 4: Financial Statements................................ 4
24
<PAGE>
VARIABLE IMMEDIATE ANNUITY
STATEMENT OF ADDITIONAL INFORMATION
DATED OCTOBER 3, 1997
-----------------------
VARIABLE IMMEDIATE ANNUITY CONTRACT FUNDED THROUGH THE
INVESTMENT FUNDS OF SEPARATE ACCOUNT A
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
o Alliance Money Market o Alliance Growth & Income Asset Allocation Series:
o Alliance Intermediate Government o Alliance Equity Index o Alliance Conservative Investors
Securities o Alliance Common Stock o Alliance Balanced
o Alliance Quality Bond o Alliance Global o Alliance Growth Investors
o Alliance High Yield o Alliance International
o Alliance Aggressive Stock
o Alliance Small Cap Growth
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
ISSUED BY:
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
- --------------------------------------------------------------------------------
Home Office: 1290 Avenue of the Americas, New York, NY 10104
Processing Office: P.O. Box 2494, New York, NY 10116-2494
- --------------------------------------------------------------------------------
This statement of additional information (SAI) is not a prospectus. It should be
read in conjunction with the Separate Account A prospectus for the Variable
Immediate Annuity Contract, dated October 3, 1997. Definitions of special terms
used in the SAI are found in the prospectus.
A copy of the prospectus is available free of charge by writing the Processing
Office, by calling 1-800-245-1230, toll-free, or by contacting your Equitable
Life Representative.
- --------------------------------------------------------------------------------
Copyright 1997 The Equitable Life Assurance Society of the United States,
New York, New York 10104
All rights reserved.
888-1120
Cat. No.127225
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
PAGE
- --------------------------------------------------------------------------------
Part 1 Determination of Monthly Annuity Payments 3
- --------------------------------------------------------------------------------
Part 2 Annuity Unit Values 3
- --------------------------------------------------------------------------------
Part 3 Custodian and Independent Accountants 4
- --------------------------------------------------------------------------------
Part 4 Financial Statements 4
- --------------------------------------------------------------------------------
2
<PAGE>
- --------------------------------------------------------------------------------
PART 1 -- DETERMINATION OF MONTHLY ANNUITY PAYMENTS
Payments start one month following the date we receive your premium payment.
The amount of the first two monthly annuity payments is the same, as shown on
the Data Pages in your Contract, and is the sum of the initial Variable Income
Annuity Option payment amount and any Fixed Income Annuity Option payment
amount. Each subsequent monthly payment will be the sum of any Fixed Income
Annuity Option and the Variable Income Annuity Option payment, determined as
follows:
(a) Each Fixed Income Annuity Option payment will be made at the same amount, as
shown on the Data Pages.
(b) The amount of the third and each subsequent monthly Variable Income Annuity
Option payment will be (1) the number of Annuity Units held in each of the
selected Investment Funds as of the effective date of payment multiplied by
(2) the Average Annuity Unit Value (see below) for the selected Investment
Fund, for the second calendar month immediately preceding the due date of
the payment.
The amounts of Variable Income Annuity Option payments are determined as
follows:
The first two payments depend on the AIR and the form of annuity chosen (and
any fixed period). Since the annuity involves a life contingency, the risk
class and the age of the Annuitants will effect payments.
The third and subsequent monthly Variable Income Annuity Option payments may
increase or decrease in amount, depending on whether the actual rate of net
investment return (after charges) of the applicable Investment Fund is
higher or lower than the Assumed Base Rate of Net Investment Return, or AIR,
shown on the Data Pages. Payments will not be increased or decreased in
amount because of mortality or Contract expense.
The number of units is calculated by dividing the first monthly payment by
the annuity unit value on the Business Day the premium is received. The
average annuity unit value is the average of the annuity unit values for
that month.
- --------------------------------------------------------------------------------
PART 2 -- ANNUITY UNIT VALUES
The Annuity Unit Value for the Investment Funds of the Variable Immediate
Annuity Contract was fixed on October 1, 1997 for contracts with assumed base
rates of net investment return of 5% and 3 1/2% a year, respectively, as set
forth below (rounded to two decimal places). For each Valuation Period, it is
the Annuity Unit Value for the immediately preceding Valuation Period multiplied
by the Adjusted Net Investment Factor under the contract.
Alliance Money Market Fund 3 1/2% $1.03
5% $1.00
Alliance Intermediate 3 1/2% $1.04
Government Securities Fund 5% $1.01
Alliance Quality Bond Fund 3 1/2% $1.09
5% $1.06
Alliance High Yield Fund 3 1/2% $1.39
5% $1.35
Alliance Growth & Income Fund 3 1/2% $1.52
5% $1.47
Alliance Equity Index Fund 3 1/2% $1.62
5% $1.57
Alliance Common Stock Fund 3 1/2% $1.53
5% $1.48
Alliance Global Fund 3 1/2% $1.28
5% $1.24
Alliance International Fund 3 1/2% $1.15
5% $1.11
Alliance Aggressive Stock Fund 3 1/2% $1.52
5% $1.48
Alliance Small Cap Growth Fund 3 1/2% $1.31
5% $1.30
Alliance Conservative Investors 3 1/2% $1.16
Fund 5% $1.12
Alliance Balanced Fund 3 1/2% $1.27
5% $1.23
Alliance Growth Investors Fund 3 1/2% $1.33
5% $1.29
The Net Investment Factor is:
(a/b) - c
where:
(a) is the value of the Investment Fund's shares of the corresponding Portfolio
at the end of the Valuation Period before
3
<PAGE>
- --------------------------------------------------------------------------------
giving effect to any amounts allocated to or withdrawn from the Investment
Fund for the Valuation period. For this purpose, we use the share value
reported to us by The Hudson River Trust. This share value is after
deduction for investment advisory fees and direct expenses of The Hudson
River Trust.
(b) is the value of the Investment Fund's shares of the corresponding Portfolio
at the end of the preceding Valuation Period (after any amounts allocated or
withdrawn for that Valuation Period).
(c) is the daily Separate Account asset charges for the expenses and risks of
the Contract times the number of calendar days in the Valuation Period, plus
any charge for taxes or amounts set aside as a reserve for taxes.
For each Valuation Period, the Adjusted Net Investment Factor is equal to the
Net Investment Factor reduced for each day in the Valuation Period by:
o .00013366 of the Net Investment Factor for a contract with an assumed base
rate of net investment return of 5% a year; or
o .00009425 of the Net Investment Factor for a contract with an assumed base
rate of net investment return of 3 1/2%.
Because of this adjustment, the Annuity Unit Value rises and falls depending on
whether the actual rate of net investment return (after charges) is higher or
lower than the assumed base rate. The Average Annuity Unit Value for a calendar
month is equal to the average of the Annuity Unit Values for such month.
All Contracts have a 5% assumed base rate of net investment return, except in
states where that rate is not permitted and which use 3 1/2%. Annuity payments
under Contracts with an assumed base rate of 3 1/2% will at first be smaller
than those under Contracts with a 5% assumed base rate. Payments under the
3 1/2% Contracts, however, will rise more rapidly when unit values are rising,
and payments will fall more slowly when unit values are falling than those
under 5% Contracts.
ILLUSTRATION OF CHANGES IN ANNUITY UNIT VALUES. Assume that the net premium paid
for a Contract is enough to fund a Variable Immediate Annuity Contract with a
monthly payment of $100 and that the Annuity Unit Value of the Investment Fund
for the Valuation Period that includes the due date of the first annuity payment
is $3.74. The number of annuity units credited under the Contract would be 26.74
(100 divided by 3.74 = 26.74). Based on an average annuity unit value of $3.56
in October 1997, the annuity payment due in December 1997 would be $95.19 (the
number of units (26.74) times $3.56).
- --------------------------------------------------------------------------------
PART 3 -- CUSTODIAN AND INDEPENDENT ACCOUNTANTS
Equitable Life is the custodian for shares of the Trust owned by the Separate
Account.
The financial statements of the Separate Account and of Equitable Life included
in this SAI have been audited for the years ended December 31, 1996 and December
31, 1995 by Price Waterhouse LLP, as stated in their reports. The financial
statements of the Separate Account and of Equitable Life for the years ended
December 31, 1996 and December 31, 1995 included in this SAI have been so
included in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of such firm as experts in accounting and
auditing.
- --------------------------------------------------------------------------------
PART 4 -- FINANCIAL STATEMENTS
The consolidated financial statements of The Equitable Life Assurance Society of
the United States included herein should be considered only as bearing upon the
ability of Equitable Life to meet its obligations under the Contracts.
4
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
The Equitable Life Assurance Society of the United States
and Contractowners of Separate Account A
of The Equitable Life Assurance Society of the United States
In our opinion, the accompanying statements of assets and liabilities and the
related statements of operations and of changes in net assets present fairly, in
all material respects, the financial position of the Common Stock Fund,
Intermediate Government Securities Fund, Money Market Fund, Balanced Fund,
Aggressive Stock Fund, Growth Investors Fund, Conservative Investors Fund, High
Yield Fund, Global Fund, Growth & Income Fund, Quality Bond Fund, Equity Index
Fund and International Fund, separate investment funds of The Equitable Life
Assurance Society of the United States ("Equitable Life") Separate Account A at
December 31, 1996, the results of each of their operations and changes in each
of their net assets for the periods indicated in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of Equitable Life's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of shares in The Hudson River Trust at
December 31, 1996 with the transfer agent, provide a reasonable basis for the
opinion expressed above. The unit value information presented in Note 6 for the
year ended December 31, 1992 and for each of the periods indicated prior
thereto, were audited by other independent accountants whose report dated
February 16, 1993 expressed an unqualified opinion on the financial statements
containing such information.
Price Waterhouse LLP
New York, New York
February 10, 1997
FSA-1
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT A
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<CAPTION>
INTERMEDIATE
COMMON GOVERNMENT
STOCK SECURITIES
FUND FUND
----------------- -------------------
<S> <C> <C>
ASSETS:
Investments in shares of The Hudson River Trust, at market value (Note 2):
Cost: $3,561,855,207.................................................. $4,335,729,549
29,929,472.................................................. $29,956,488
94,721,024..................................................
1,095,836,659..................................................
2,874,726,262..................................................
508,888,790..................................................
82,715,248..................................................
77,333,927..................................................
447,059,909..................................................
145,853,361..................................................
26,450,265..................................................
251,489,348..................................................
96,579,363..................................................
Receivable for The Hudson River Trust shares sold....................... -- --
Due from Equitable Life's General Account (Note 3)...................... 10,481,008 728,944
-------------- -----------
Total assets................................................. 4,346,210,557 30,685,432
-------------- -----------
LIABILITIES:
Payable for The Hudson River Trust shares purchased..................... 9,509,685 726,896
Due to Equitable Life's General Account (Note 3)........................ -- --
Net accumulated amount of (i) mortality risk, death benefit, expense
and expense risk charges and (ii) mortality and other gains and
losses retained by Equitable Life (Note 3)........................... 4,002,772 530,344
-------------- -----------
Total liabilities............................................ 13,512,457 1,257,240
-------------- -----------
NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS (NOTE 5)..................... $4,332,698,100 $29,428,192
============== ===========
EQUI-VEST Contracts:
Unit Value........................................................... $ 199.05
==============
Units Outstanding.................................................... 16,933,077
==============
Old Contracts:
Unit Value........................................................... $ 246.57
==============
Units Outstanding.................................................... 345,375
==============
EQUIPLAN Contracts:
Unit Value........................................................... $ 267.08 $ 51.34
============== ===========
Units Outstanding.................................................... 95,900 54,504
============== ===========
Momentum Contracts:
Unit Value........................................................... $ 199.05 $ 112.40
============== ===========
Units Outstanding.................................................... 519,338 9,968
============== ===========
Momentum Plus Contracts: 135 B.P.
Unit Value........................................................... $ 162.39 $ 108.45
============== ===========
Units Outstanding.................................................... 1,038,789 81,035
============== ===========
Enhanced Momentum Plus Contracts: 100 B.P.
Unit Value........................................................... $ 125.89 $ 105.75
============== ===========
Units Outstanding.................................................... 140,022 2,456
============== ===========
EQUI-VEST Series 300 and 400 Contracts:
Unit Value........................................................... $ 155.42 $ 112.40
============== ===========
Units Outstanding.................................................... 3,457,482 146,433
============== ===========
<CAPTION>
MONEY
MARKET BALANCED
FUND FUND
------------------ ----------------
<S> <C> <C>
ASSETS:
Investments in shares of The Hudson River Trust, at market value (Note 2):
Cost: $3,561,855,207....................................................
29,929,472....................................................
94,721,024.................................................... $94,367,905
1,095,836,659.................................................... $1,122,444,797
2,874,726,262....................................................
508,888,790....................................................
82,715,248....................................................
77,333,927....................................................
447,059,909....................................................
145,853,361....................................................
26,450,265....................................................
251,489,348....................................................
96,579,363....................................................
Receivable for shares of The Hudson River Trust......................... -- --
Due from Equitable Life's General Account (Note 3)...................... 3,735,501 1,213,821
----------- --------------
Total assets................................................. 98,103,406 1,123,658,618
----------- --------------
LIABILITIES:
Payable for The Hudson River Trust shares purchased..................... 3,722,471 931,572
Due to Equitable Life's General Account (Note 3)........................ -- --
Net accumulated amount of (i) mortality risk, death benefit, expense
and expense risk charges and (ii) mortality and other gains and
losses retained by Equitable Life (Note 3)........................... 566,137 991,204
----------- --------------
Total liabilities............................................ 4,288,608 1,922,776
----------- --------------
NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS (NOTE 5)..................... $93,814,798 $1,121,735,842
=========== ==============
EQUI-VEST Contracts:
Unit Value........................................................... $ 28.28 $ 34.06
=========== ==============
Units Outstanding.................................................... 1,013,504 28,319,497
=========== ==============
Old Contracts:
Unit Value........................................................... $ 33.52
===========
Units Outstanding.................................................... 129,377
===========
EQUIPLAN Contracts:
Unit Value...........................................................
Units Outstanding....................................................
Momentum Contracts:
Unit Value........................................................... $ 28.28 $ 34.06
=========== ==============
Units Outstanding.................................................... 240,469 1,056,984
=========== ==============
Momentum Plus Contracts: 135 B.P.
Unit Value........................................................... $ 111.75 $ 120.01
=========== ==============
Units Outstanding.................................................... 307,236 417,374
=========== ==============
Enhanced Momentum Plus Contracts: 100 B.P.
Unit Value........................................................... $ 105.65 $ 114.16
=========== ==============
Units Outstanding.................................................... 13,091 48,342
=========== ==============
EQUI-VEST Series 300 and 400 Contracts:
Unit Value........................................................... $ 111.21 $ 119.26
=========== ==============
Units Outstanding.................................................... 164,510 547,899
=========== ==============
<FN>
See Notes to Financial Statements.
</FN>
</TABLE>
FSA-2
<PAGE>
<TABLE>
<CAPTION>
AGGRESSIVE GROWTH CONSERVATIVE HIGH GROWTH & QUALITY EQUITY
STOCK INVESTORS INVESTORS YIELD GLOBAL INCOME BOND INDEX INTERNATIONAL
FUND FUND FUND FUND FUND FUND FUND FUND FUND
------------- --------------- -------------- ----------- ------------ ------------ ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$2,978,162,769
$530,496,700
$85,864,836
$78,578,208
$496,558,219
$164,318,806
$26,718,392
$275,271,126
$97,814,272
$ 3,430,056 -- -- -- -- -- -- -- --
-- 3,672,772 202,365 883,577 2,467,309 187,056 39,620 2,469,315 1,345,033
-------------- ------------ ----------- ----------- ------------ ------------ ----------- ------------ -----------
2,981,592,825 534,169,472 86,067,201 79,461,785 499,025,528 164,505,862 26,758,012 277,740,441 99,159,305
-------------- ------------ ----------- ----------- ------------ ------------ ----------- ------------ -----------
-- 3,642,884 197,565 879,253 2,439,129 177,589 38,118 2,453,538 1,339,777
2,870,406 -- -- -- -- -- -- -- --
2,148,689 1,115,959 618,084 621,294 1,132,134 821,976 370,628 940,199 631,968
-------------- ------------ ----------- ----------- ------------ ------------ ----------- ------------ -----------
5,019,095 4,758,843 815,649 1,500,547 3,571,263 999,565 408,746 3,393,737 1,971,745
-------------- ------------ ----------- ----------- ------------ ------------ ----------- ------------ -----------
$2,976,573,730 $529,410,629 $85,251,552 $77,961,238 $495,454,265 $163,506,297 $26,349,266 $274,346,704 $97,187,560
============== ============ =========== =========== ============ ============ =========== ============ ===========
$ 82.91
==============
27,944,829
==============
$ 82.91 $ 133.40 $ 117.25 $ 137.53 $ 138.00 $ 143.37 $ 112.65 $ 164.12 $ 112.83
============== ============ =========== =========== ============ =========== =========== ============ ===========
1,280,795 110,156 18,037 17,693 116,291 $ 40,724 7,151 50,637 $ 19,243
============== ============ =========== =========== ============ =========== =========== ============ ===========
$ 157.31 $ 134.95 $ 114.99 $ 146.80 $ 140.51 $ 143.63 $ 118.87 $ 164.08 $ 112.81
============== ============ =========== =========== ============ =========== =========== ============ ===========
1,069,755 508,163 136,101 94,258 459,301 121,071 28,090 128,114 54,264
============== ============ =========== =========== ============ =========== =========== ============ ===========
$ 125.54 $ 116.95 $ 109.47 $ 127.46 $ 116.37 $ 123.61 $ 108.84 $ 129.70 $ 112.96
============== ============ =========== =========== ============ =========== =========== ============ ===========
108,967 14,660 4,631 5,119 12,859 3,028 1,346 4,356 20,736
============== ============ =========== =========== ============ =========== =========== ============ ===========
$ 149.41 $ 133.40 $ 117.25 $ 137.53 $ 138.00 $ 143.37 $ 112.65 $ 164.12 $ 112.83
============== ============ =========== =========== ============ =========== =========== ============ ===========
2,468,117 3,325,391 566,674 443,564 2,994,609 975,463 195,675 1,486,286 763,266
============== ============ =========== =========== ============ =========== =========== ============ ===========
</TABLE>
FSA-3
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT A
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
INTERMEDIATE
COMMON GOVERNMENT
STOCK SECURITIES
FUND FUND
------------------ --------------
<S> <C> <C>
INCOME AND EXPENSES:
Investment Income (Note 2):
Dividends from The Hudson River Trust...................................... $ 31,566,792 $1,519,758
------------ ----------
Expenses (Note 3):
Mortality risk, death benefit, expense
and expense risk charges................................................... 46,430,265 331,809
Financial accounting charges................................................. 7,403,072 2,282
------------ ----------
Total expenses........................................................... 53,833,337 334,091
Less: Reduction for expense limitation......................................... 3,610,439 6,759
------------ ----------
Net expenses............................................................. 50,222,898 327,332
------------ -----------
NET INVESTMENT INCOME (LOSS)................................................... (18,656,106) 1,192,426
------------ ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS (NOTE 2):
Realized gain (loss) on investments.......................................... 39,373,745 (84,183)
Realized gain distribution from The Hudson River Trust....................... 427,747,972 --
------------ ----------
Net realized gain (loss)................................................... 467,121,717 (84,183)
Change in unrealized appreciation / depreciation
of investments............................................................. 326,272,321 (386,046)
------------ ----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS............................................................... 793,394,038 (470,229)
------------ ----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS (NOTE 2)........................................... $774,737,932 $ 722,197
============ ==========
</TABLE>
<TABLE>
<CAPTION>
MONEY
MARKET BALANCED
FUND FUND
-------------- ---------------
<S> <C> <C>
INCOME AND EXPENSES:
Investment Income (Note 2):
Dividends from The Hudson River Trust...................................... $4,218,305 $ 34,404,660
---------- ------------
Expenses (Note 3):
Mortality risk, death benefit, expense
and expense risk charges................................................... 1,074,903 13,751,604
Financial accounting charges................................................. 81,875 2,377,664
---------- ------------
Total expenses............................................................. 1,156,778 16,129,268
Less: Reduction for expense limitation......................................... 61,777 1,391,968
---------- ------------
Net expenses............................................................... 1,095,001 14,737,300
---------- ------------
NET INVESTMENT INCOME (LOSS)................................................... 3,123,304 19,667,360
---------- ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS (NOTE 2):
Realized gain (loss) on investments.......................................... 137,830 10,957,701
Realized gain distribution from The Hudson River Trust....................... -- 89,931,643
---------- ------------
Net realized gain (loss)................................................... 137,830 100,889,344
Change in unrealized appreciation / depreciation
of investments............................................................. 15,587 (15,177,682)
---------- ------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS............................................................... 153,417 85,711,662
---------- ------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS (NOTE 2)........................................... $3,276,721 $105,379,022
========== ============
- -------------------------
<FN>
See Notes to Financial Statements.
</FN>
</TABLE>
FSA-4
<PAGE>
<TABLE>
<CAPTION>
AGGRESSIVE GROWTH CONSERVATIVE HIGH GROWTH & QUALITY EQUITY
STOCK INVESTORS INVESTORS YIELD GLOBAL INCOME BOND INDEX INTERNATIONAL
FUND FUND FUND FUND FUND FUND FUND FUND FUND
---------- ----------- ----------- ----------- ----------- ---------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 6,308,285 $10,897,241 $3,720,544 $5,697,177 $ 7,691,416 $ 2,196,949 $1,526,764 $ 3,410,663 $1,321,160
- ------------ ----------- ---------- ---------- ----------- ----------- ---------- ----------- ----------
30,066,070 5,764,371 1,085,516 713,632 5,512,550 1,513,551 298,999 2,395,042 833,724
5,350,128 26,080 4,022 3,821 28,760 8,736 1,522 11,293 2,203
- ------------ ----------- ---------- ---------- ----------- ----------- ---------- ----------- ----------
35,416,198 5,790,451 1,089,538 717,453 5,541,310 1,522,287 300,521 2,406,335 835,927
1,421,353 -- -- -- -- -- -- -- --
- ------------ ----------- ---------- ---------- ----------- ------------ ---------- ----------- ----------
33,994,845 5,790,451 1,089,538 717,453 5,541,310 1,522,287 300,521 2,406,335 835,927
- ------------ ----------- ---------- ----------- ----------- ----------- ---------- ----------- ----------
(27,686,560) 5,106,790 2,631,006 4,979,724 2,150,106 674,662 1,226,243 1,004,328 485,233
- ------------ ----------- ---------- ---------- ----------- ----------- ---------- ----------- ----------
71,385,003 662,873 107,618 145,474 1,492,445 1,338,928 280,060 3,349,216 1,250,399
507,021,043 51,790,058 2,134,857 4,152,172 20,816,121 8,336,410 -- 10,841,897 1,722,567
- ------------ ----------- ---------- ---------- ----------- ----------- ---------- ------------ ----------
578,406,046 52,452,931 2,242,475 4,297,646 22,308,566 9,675,338 280,060 14,191,113 2,972,966
(87,392,419) (9,867,072) (1,503,698) 721,266 26,407,595 10,940,166 (469,209) 19,487,539 1,086,851
- ------------ ----------- ---------- ---------- ----------- ----------- ---------- ----------- ----------
491,013,627 42,585,859 738,777 5,018,912 48,716,161 20,615,504 (189,149) 33,678,652 4,059,817
- ------------ ----------- ---------- ---------- ----------- ----------- ---------- ----------- ----------
$463,327,067 $47,692,649 $3,369,783 $9,998,636 $50,866,267 $21,290,166 $1,037,094 $34,682,980 $4,545,050
============ =========== ========== ========== =========== =========== ========== =========== ==========
</TABLE>
FSA-5
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
COMMON STOCK FUND
-----------------------------------------------
1996 1995
--------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income (loss)....................................... $ (18,656,106) $ 2,782,104
Net realized gain (loss) on investments............................ 467,121,717 206,999,733
Change in unrealized appreciation/
(depreciation) of investments.................................... 326,272,321 498,084,127
-------------- --------------
Net increase in net assets from operations........................... 774,737,932 707,865,964
-------------- --------------
FROM CONTRACT OWNERS TRANSACTIONS (NOTE 4):
Contributions and Transfers:
Contributions.................................................... 453,359,975 323,872,865
Transfers from other Funds and
Guaranteed Interest Account.................................... 762,624,599 563,350,890
-------------- --------------
Total........................................................ 1,215,984,574 887,223,755
-------------- --------------
Payments, Transfers and Charges:
Annuity payments, withdrawals and death benefits................... 220,362,060 159,386,173
Transfers to other Funds and
Guaranteed Interest Account...................................... 607,476,726 467,919,413
Withdrawal and administrative charges.............................. 5,572,073 4,834,457
-------------- --------------
Total........................................................ 833,410,859 632,140,043
-------------- ---------------
Net increase (decrease) in net assets
from Contract Owners transactions................................ 382,573,715 255,083,712
-------------- --------------
Net (increase) decrease in amount retained
by Equitable Life in Separate Account A (Note 3)................. (2,598,917) (202,590)
-------------- --------------
INCREASE (DECREASE) IN NET ASSETS
ATTRIBUTABLE TO CONTRACT OWNERS.................................... 1,154,712,730 962,747,086
NET ASSETS -- BEGINNING OF PERIOD
ATTRIBUTABLE TO CONTRACT OWNERS.................................... 3,177,985,370 2,215,238,284
-------------- --------------
NET ASSETS -- END OF PERIOD (NOTE 1)
ATTRIBUTABLE TO CONTRACT OWNERS.................................... $4,332,698,100 $3,177,985,370
============== ==============
</TABLE>
<TABLE>
<CAPTION>
INTERMEDIATE
GOVERNMENT SECURITIES
FUND
-----------------------------------------------
1996 1995
-------------- ---------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income (loss)....................................... $ 1,192,426 $ 860,197
Net realized gain (loss) on investments............................ (84,183) (262,021)
Change in unrealized appreciation/
(depreciation) of investments.................................... (386,046) 1,263,426
----------- -----------
Net increase in net assets from operations........................... 722,197 1,861,602
----------- -----------
FROM CONTRACT OWNERS TRANSACTIONS (NOTE 4):
Contributions and Transfers:
Contributions.................................................... 9,100,062 7,369,681
Transfers from other Funds and
Guaranteed Interest Account.................................... 7,049,068 6,382,251
----------- -----------
Total........................................................ 16,149,130 13,751,932
----------- -----------
Payments, Transfers and Charges:
Annuity payments, withdrawals and death benefits................... 3,753,601 1,010,469
Transfers to other Funds and
Guaranteed Interest Account...................................... 5,943,526 3,875,451
Withdrawal and administrative charges.............................. 45,485 13,622
----------- -----------
Total........................................................ 9,742,612 4,899,542
----------- -----------
Net increase (decrease) in net assets
from Contract Owners transactions................................ 6,406,518 8,852,390
----------- -----------
Net (increase) decrease in amount retained
by Equitable Life in Separate Account A (Note 3)................. (24,319) (29,531)
----------- -----------
INCREASE (DECREASE) IN NET ASSETS
ATTRIBUTABLE TO CONTRACT OWNERS.................................... 7,104,396 10,684,461
NET ASSETS -- BEGINNING OF PERIOD
ATTRIBUTABLE TO CONTRACT OWNERS.................................... 22,323,796 11,639,335
----------- -----------
NET ASSETS -- END OF PERIOD (NOTE 1)
ATTRIBUTABLE TO CONTRACT OWNERS.................................... $29,428,192 $22,323,796
=========== ===========
<FN>
See Notes to Financial Statements.
</FN>
</TABLE>
FSA-6
<PAGE>
<TABLE>
<CAPTION>
MONEY MARKET FUND BALANCED FUND
- ---------------------------------- ------------------------------------------
1996 1995 1996 1995
- --------------- ---------------- ------------------- -------------------
<S> <C> <C> <C>
$ 3,123,304 $ 2,822,581 $ 19,667,360 $ 19,159,882
137,830 111,769 100,889,344 36,369,212
15,587 244,984 (15,177,682) 107,611,597
------------ ------------ -------------- --------------
3,276,721 3,179,334 105,379,022 163,140,691
------------ ------------ -------------- --------------
119,080,405 96,460,995 102,324,455 100,845,169
28,258,231 11,693,688 107,478,067 72,926,145
------------ ------------ -------------- --------------
147,338,636 108,154,683 209,802,522 173,771,314
------------ ------------ -------------- --------------
15,180,565 9,756,910 78,989,041 70,581,767
119,609,249 112,024,444 154,003,205 140,405,721
206,649 141,480 2,085,995 2,326,794
------------ ------------ -------------- --------------
134,996,463 121,922,834 235,078,241 213,314,282
------------ ------------ -------------- --------------
12,342,173 (13,768,151) (25,275,719) (39,542,968)
------------ ------------ -------------- --------------
(61,393) (60,820) (481,189) (639,643)
------------ ------------ -------------- --------------
15,557,501 (10,649,637) 79,622,114 122,958,080
78,257,297 88,906,934 1,042,113,728 919,155,648
------------ ------------ -------------- --------------
$ 93,814,798 $ 78,257,297 $1,121,735,842 $1,042,113,728
============ ============ ============== ==============
</TABLE>
<TABLE>
<CAPTION>
GROWTH
INVESTORS
AGGRESSIVE STOCK FUND FUND
- --------------------------------------- -----------------------------------
1996 1995 1996 1995
- ---------------- ----------------- ---------------- ---------------
<S> <C> <C> <C>
$ (27,686,560) $ (17,076,859) $ 5,106,790 $ 4,630,881
578,406,046 274,491,290 52,452,931 4,190,451
(87,392,419) 201,133,502 (9,867,072) 35,365,665
-------------- -------------- ------------ ------------
463,327,067 458,547,933 47,692,649 44,186,997
-------------- -------------- ------------ ------------
390,313,679 255,277,523 130,147,052 88,478,478
1,303,527,875 937,308,527 121,414,460 96,710,983
-------------- -------------- ------------ ------------
1,693,841,554 1,192,586,050 251,561,512 185,189,461
-------------- -------------- ------------ ------------
154,410,598 101,140,511 25,722,728 8,656,331
1,118,235,181 890,032,461 49,453,027 31,783,310
4,762,116 4,012,965 776,045 329,796
-------------- -------------- ------------ ------------
1,277,407,895 995,185,937 75,951,800 40,769,437
-------------- -------------- ------------ ------------
416,433,659 197,400,113 175,609,712 144,420,024
-------------- -------------- ------------ ------------
(596,353) (703,992) (212,924) (69,190)
-------------- --------------- ------------ ------------
879,164,373 655,244,054 223,089,437 188,537,831
2,097,409,357 1,442,165,303 306,321,192 117,783,361
-------------- -------------- ------------ ------------
$2,976,573,730 $2,097,409,357 $529,410,629 $306,321,192
============== ============== ============ ============
</TABLE>
FSA-7
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS (CONCLUDED)
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
CONSERVATIVE
INVESTORS FUND HIGH YIELD FUND
------------------------------- ---------------------------------
1996 1995 1996 1995
--------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income (loss)........................ $ 2,631,006 $ 2,326,829 $ 4,979,724 $ 2,278,708
Net realized gain (loss) on investments............. 2,242,475 402,260 4,297,646 (142,069)
Change in unrealized appreciation /
depreciation of investments...................... (1,503,698) 6,622,303 721,266 1,530,565
----------- ------------ ----------- -----------
Net increase in net assets 3,369,783 9,351,392 9,998,636 3,667,204
from operations................................... ----------- ------------ ----------- -----------
FROM CONTRACT OWNER TRANSACTIONS
(NOTE 4):
Contributions and Transfers:
Contributions..................................... 22,119,111 17,614,456 23,155,861 10,927,641
Transfers from other Funds and
Guaranteed Interest Account..................... 8,707,223 12,235,331 30,143,138 10,118,081
----------- ------------ ----------- -----------
Total......................................... 30,826,334 29,849,787 53,298,999 21,045,722*
----------- ------------ ----------- -----------
Payments, Transfers and Charges:
Annuity payments, withdrawals and
death benefits................................. 5,546,973 2,534,266 4,361,957 1,942,685
Transfers to other Funds and
Guaranteed Interest Account.................... 14,201,772 5,239,849 13,868,715 3,213,614
Withdrawal and administrative charges........ 149,752 74,396 78,426 28,309
----------- ------------ ----------- -----------
Total......................................... 19,898,497 7,848,511 18,309,098 5,184,608
----------- ------------ ----------- -----------
Net increase in net assets
from Contract Owner transactions.................. 10,927,837 22,001,276 34,989,901 15,861,114
----------- ------------ ----------- -----------
Net (increase) decrease in accumulated
amount retained by Equitable Life in
Separate Account A (Note 3)....................... (72,280) (75,713) (78,617) (11,839)
----------- ------------ ----------- -----------
INCREASE IN NET ASSETS
ATTRIBUTABLE TO CONTRACT OWNERS .................... 14,225,340 31,276,955 44,909,920 19,516,479
NET ASSETS -- BEGINNING OF PERIOD
ATTRIBUTABLE TO CONTRACT OWNERS..................... 71,026,212 39,749,257 33,051,318 13,534,839
----------- ------------ ----------- -----------
NET ASSETS -- END OF PERIOD (NOTE 1)
ATTRIBUTABLE TO CONTRACT OWNERS..................... $85,251,552 $71,026,212 $77,961,238 $33,051,318
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
GLOBAL FUND
---------------------------------------
1996 1995
------------------ -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS: $ 2,150,106 $ 1,170,324
Net investment income (loss)........................ 22,308,566 10,274,241
Net realized gain (loss) on investments.............
Change in unrealized appreciation / 26,407,595 29,094,331
depreciation of investments...................... ------------ ------------
50,866,267 40,538,896
Net increase in net assets ------------ ------------
from operations...................................
FROM CONTRACT OWNERS TRANSACTIONS
(NOTE 4):
Contributions and Transfers: 104,951,106 81,368,082
Contributions.....................................
Transfers from other Funds and 115,437,667 137,660,677
Guaranteed Interest Account..................... ------------ ------------
220,388,773 219,028,759
Total......................................... ------------ ------------
Payments, Transfers and Charges:
Annuity payments, withdrawals and 28,738,527 11,743,890
death benefits..................................
Transfers to other Funds and 61,058,782 93,494,152
Guaranteed Interest Account....................... 724,468 394,438
Withdrawal and administrative charges............... ------------ ------------
90,521,777 105,632,480
Total........................................... ------------ ------------
Net increase in net assets 129,866,996 113,396,279
from Contract Owner transactions................. ------------ ------------
Net (increase) decrease in
amount retained by Equitable Life in (286,484) (136,682)
Separate Account A (Note 3)....................... ------------ ------------
INCREASE IN NET ASSETS 180,446,779 153,798,493
ATTRIBUTABLE TO CONTRACT OWNERS ....................
NET ASSETS -- BEGINNING OF PERIOD 315,007,486 161,208,993
ATTRIBUTABLE TO CONTRACT OWNERS...................... ------------ ------------
NET ASSETS -- END OF PERIOD (NOTE 1) $495,454,265 $315,007,486
ATTRIBUTABLE TO CONTRACT OWNERS...................... ============ ============
<FN>
- --------------------------
*Commencement of operations from September 1, 1995.
See Notes to Financial Statements.
</FN>
</TABLE>
FSA-8
<PAGE>
<TABLE>
<CAPTION>
GROWTH & INCOME QUALITY BOND
FUND FUND
- ----------------------------------- -------------------------------------
1996 1995 1996 1995
- ----------------- ---------------- ---------------- ---------------
<S> <C> <C> <C>
$ 674,662 $ 790,931 $ 1,226,243 $ 572,638
9,675,338 135,257 280,060 (14,461)
10,940,166 7,973,647 (469,209) 952,860
------------ ----------- ----------- -----------
21,290,166 8,899,835 1,037,094 1,511,037
------------ ----------- ----------- -----------
44,131,391 22,698,765 7,201,618 5,630,019
70,653,911 28,860,658 11,609,924 7,603,814
------------ ----------- ----------- -----------
114,785,302 51,559,423 18,811,542 13,233,833
------------ ----------- ----------- -----------
6,415,518 1,952,266 1,789,909 705,351
36,251,785 10,151,108 8,691,630 2,324,024
177,183 60,042 30,562 8,788
------------ ----------- ----------- -----------
42,844,486 12,163,416 10,512,101 3,038,163
------------ ----------- ----------- -----------
71,940,816 39,396,007 8,299,441 10,195,670
------------ ----------- ----------- -----------
(144,964) (20,535) (33,142) (326)
------------ ----------- ----------- -----------
93,086,018 48,275,307 9,303,393 11,706,381
70,420,279 22,144,972 17,045,873 5,339,492
------------ ----------- ----------- -----------
$163,506,297 $70,420,279 $26,349,266 $17,045,873
============ =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
EQUITY INDEX INTERNATIONAL
FUND FUND
- --------------------------------- --------------------------------------
1996 1995 1996 1995*
- ---------------- ----------------- ----------------- ---------------
<S> <C> <C> <C>
$ 1,004,328 $ 360,568 $ 485,233 $ 149,427
14,191,113 4,198,742 2,972,966 84,989
19,487,539 4,368,831 1,086,851 148,058
------------ ------------ ------------ -----------
34,682,980 8,928,141 4,545,050 382,474
------------ ------------ ------------ -----------
78,060,051 28,329,533 32,148,619 2,925,742
224,346,052 153,170,493 132,166,698 17,699,810
------------ ------------ ------------ -----------
302,406,103 181,500,026 164,315,317 20,625,552
------------ ------------ ------------ -----------
8,358,084 1,077,397 3,342,378 41,651
142,130,534 106,387,645 83,376,653 5,873,268
217,821 23,173 60,421 907
------------ ------------ ------------ -----------
150,706,439 107,488,215 86,779,452 5,915,826
------------ ------------ ------------ -----------
151,699,664 74,011,811 77,535,865 14,709,726
------------ ------------ ------------ -----------
(138,050) 59,424 5,549 8,896
------------ ------------ ------------ -----------
186,244,594 82,999,376 82,086,464 15,101,096
88,102,110 5,102,734 15,101,096 --
------------ ------------ ------------ -----------
$274,346,704 $ 88,102,110 $ 97,187,560 $15,101,096
============ ============ ============ ===========
</TABLE>
FSA-9
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. General
The Equitable Life Assurance Society of the United States (Equitable Life)
Separate Account A (the Account) is organized as a unit investment trust, a
type of investment company, and is registered with the Securities and
Exchange Commission under the Investment Company Act of 1940. The Account
consists of thirteen investment funds (Funds): the Common Stock Fund, the
Intermediate Government Securities Fund, the Money Market Fund, the
Balanced Fund, the Aggressive Stock Fund, the Growth Investors Fund, the
Conservative Investors Fund, the High Yield Fund, the Global Fund, the
Growth & Income Fund, the Quality Bond Fund, the Equity Index Fund and the
International Fund. The assets in each Fund are invested in Class IA shares
of a corresponding portfolio (Portfolio) of a mutual fund, The Hudson River
Trust (Trust). The Trust is an open-end, diversified, management investment
company that invests the assets of separate accounts of insurance
companies. Each Portfolio has separate investment objectives.
The Account is used to fund benefits under certain individual tax-favored
variable annuity contracts (Old Contracts), individual non-qualified
variable annuity contracts (EQUIPLAN Contracts), tax-favored and
non-qualified certificates issued under group deferred variable annuity
contracts and certain related individual contracts (EQUI-VEST Contracts),
group deferred variable annuity contracts used to fund tax-qualified
defined contribution plans (Momentum Contracts) and group variable annuity
contracts used as a funding vehicle for employers who sponsor qualified
defined contribution plans (Momentum Plus). All of these contracts and
certificates are collectively referred to as the Contracts.
The net assets of the Account are not chargeable with liabilities arising
out of any other business Equitable Life may conduct. The excess of assets
over reserves and other contract liabilities, if any, in the Account may be
transferred to Equitable Life's General Account.
2. Significant Accounting Policies
The accompanying financial statements are prepared in conformity with
generally accepted accounting principles (GAAP). The preparation of
financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
Investments are made in shares of the Trust and are valued at the net asset
values per share of the respective Portfolios. The net asset value is
determined by the Trust using the market or fair value of the underlying
assets of the Portfolio.
Investment transactions are recorded on the date. Realized gains and losses
include gains and losses on redemptions of the Trust's shares (determined
on the identified cost basis) and Trust distributions representing the net
realized gains on Trust investment transactions.
Dividends are recorded at the end of each quarter on the ex-dividend date.
Capital gains are distributed by the Trust at the end of each year.
No Federal income tax based on net income or realized and unrealized
capital gains is currently applicable to Contracts participating in the
Account by reason of applicable provisions of the Internal Revenue Code and
no Federal income tax payable by Equitable Life is expected to affect the
unit value of Contracts participating in the Account. Accordingly, no
provision for income taxes is required.
FSA-10
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
3. Asset Charges
The following charges are made directly against the assets of the Account
and are reflected daily in the computation of the accumulation unit values
of the Contracts:
<TABLE>
<CAPTION>
EQUI-VEST/MOMENTUM MOMENTUM PLUS OLD
CONTRACTS CONTRACTS CONTRACTS
--------------------------------------------------- ------------------------ -----------------
Common Stock, Money All Common Stock and
Market and Balanced Other Money Market
Funds Funds All Funds Funds
-------------------------------- ---------------- ---------------- ----------------------
<S> <C> <C> <C> <C>
Death Benefits................ 0.05 of 1% 0.05 of 1% -- 0.05 of 1%
Mortality Risks............... 0.30 of 1% 0.30 of 1% 0.50 of 1% 0.45 of 1%
Expenses...................... 0.60 of 1% 0.60 of 1% 0.25 of 1% 0.16 of 1%
Expense Risks................. 0.30 of 1% 0.15 of 1% 0.60 of 1% 0.08 of 1%
Financial Accounting.......... 0.24 of 1% 0.24 of 1% -- --
</TABLE>
<TABLE>
<CAPTION>
EQUI-VEST
SERIES 300
EQUIPLAN & 400
CONTRACTS CONTRACTS
-------------------------- -----------------
Common Stock and
Intermediate Government
Securities
Funds All Funds
-------------------------- ----------------
<S> <C> <C>
Death Benefits................ 0.05 of 1% --
Mortality Risks............... 0.45 of 1% 0.60 of 1%
Expenses...................... 0.16 of 1% 0.24/0.25 of 1%
Expense Risks................. 0.08 of 1% 0.50 of 1%
Financial Accounting.......... -- --
</TABLE>
During 1996, Equitable Life charged EQUI-VEST Series 300 and 400 Contracts
0.24 of 1% against the assets of the Intermediate Government Securities
Fund, the Growth Investors Fund, the Conservative Investors Fund, the High
Yield Fund,the Global Fund, the Growth & Income Fund, the Quality Bond
Fund, the Equity Index Fund and the International Fund for expenses. This
voluntary expense limitation (discounted from 0.25 of 1% to 0.24 of 1%) may
be discontinued by Equitable Life at its discretion.
The above charges may be retained in the Account by Equitable Life and, to
the extent retained, participate in the net investment results of the Trust
ratably with assets attributable to the Contracts.
Since the Trust shares are valued at their net asset value, investment
advisory fees and direct operating expenses of the Trust are, in effect,
passed on to the Account and are reflected in the computation of the
accumulation unit values of the Contracts.
Under the terms of the Contracts, the aggregate of these asset charges and
the charges of the Trust for advisory fees and for direct operating
expenses may not exceed a total effective annual rate of 1.75% for
EQUI-VEST and Momentum Contracts for the Money Market Fund, the Balanced
Fund, the Common Stock Fund, and the Aggressive Stock Fund and 1% for the
Old Contracts and EQUIPLAN Contracts.
Under the Contracts, the total charges may be reallocated among the various
expense categories. Equitable Life, however, intends to limit any possible
reallocation to include only the expense risks, mortality risks and death
benefit charges.
4. Contributions, Payments, Transfers and Charges
Contributions represent participant contributions under EQUI-VEST,
Momentum, Momentum Plus and EQUI-VEST Series 300 and 400 Contracts (except
amounts allocated to the Guaranteed Interest Account, which are reflected
in the General Account) and participant contributions under other Contracts
reduced by applicable deductions, charges and state premium taxes.
Contributions also include amounts applied to purchase variable annuities.
Transfers are amounts that participants have directed to be moved among the
Funds, including permitted transfers to and from the Guaranteed Interest
Account, which is part of Equitable Life's General Account.
Variable annuity payments and death benefits are payments to participants
and beneficiaries made under the terms of the Contracts. Withdrawals are
amounts that participants have requested to be withdrawn and paid to them
or applied to purchase annuities. Withdrawal charges, if applicable, are
the deferred contingent withdrawal charges that apply to certain
withdrawals under EQUI-VEST, Momentum, Momentum Plus and EQUI-VEST Series
300 and 400 Contracts. Administrative charges, if applicable, are deducted
annually under EQUI-VEST, EQUIPLAN and Old Contracts and quarterly under
Momentum, Momentum Plus and EQUI-VEST Series 300 and 400 Contracts.
FSA-11
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
Accumulation units issued and redeemed during the periods indicated were:
<TABLE>
<CAPTION>
Years Ended
December 31,
-------------------------------------------
1996 1995
-------------------- ----------------
<S> <C> <C>
COMMON STOCK FUND
- -----------------
Issued -- EQUI-VEST Contracts................................ 4,329,571 4,339,470
Momentum Contracts................................. 243,637 208,765
Momentum Plus Contracts............................ 597,453 470,567
Enhanced Momentum Plus Contracts................... 157,605 0
Old Contracts...................................... 728 837
EQUIPLAN Contracts................................. 303 268
EQUI-VEST Series 300 and 400 Contracts............. 2,233,005 1,432,603
Redeemed -- EQUI-VEST Contracts................................ 3,688,353 3,797,103
Momentum Contracts................................. 127,310 75,510
Momentum Plus Contracts............................ 264,968 94,575
Enhanced Momentum Plus Contracts................... 17,583 0
Old Contracts...................................... 42,438 51,405
EQUIPLAN Contracts................................. 12,375 11,184
EQUI-VEST Series 300 and 400 Contracts............. 764,368 391,658
INTERMEDIATE GOVERNMENT SECURITIES FUND
- ---------------------------------------
Issued -- Momentum Contracts................................. 5,037 7,133
Momentum Plus Contracts............................ 30,826 34,658
Enhanced Momentum Plus Contracts................... 2,792 0
EQUIPLAN Contracts................................. 13,023 68
EQUI-VEST Series 300 and 400 Contracts............. 103,536 90,918
Redeemed -- Momentum Contracts................................. 2,248 598
Momentum Plus Contracts............................ 37,473 11,347
Enhanced Momentum Plus Contracts................... 336 0
EQUIPLAN Contracts................................. 8,091 4,000
EQUI-VEST Series 300 and 400 Contracts............. 46,208 33,589
MONEY MARKET FUND
- -----------------
Issued -- EQUI-VEST Contracts................................ 471,698 366,971
Momentum Contracts................................. 508,189 447,257
Momentum Plus Contracts............................ 812,388 676,808
Enhanced Momentum Plus Contracts................... 40,920 0
Old Contracts...................................... 4,948 2,235
EQUI-VEST Series 300 and 400 Contracts............. 245,758 144,021
Redeemed -- EQUI-VEST Contracts................................ 479,069 345,636
Momentum Contracts................................. 456,078 374,993
Momentum Plus Contracts............................ 804,620 851,769
Enhanced Momentum Plus Contracts................... 27,829 0
Old Contracts...................................... 15,490 9,440
EQUI-VEST Series 300 and 400 Contracts............. 162,153 125,670
</TABLE>
FSA-12
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
Years Ended
December 31,
---------------------------------------------
1996 1995
-------------------- ----------------
<S> <C> <C>
BALANCED FUND
- -------------
Issued -- EQUI-VEST Contracts................................ 4,328,191 4,387,731
Momentum Contracts................................. 344,030 395,854
Momentum Plus Contracts............................ 200,165 204,147
Enhanced Momentum Plus Contracts................... 55,952 0
EQUI-VEST Series 300 and 400 Contracts............. 274,681 183,034
Redeemed -- EQUI-VEST Contracts................................ 6,220,763 6,839,622
Momentum Contracts................................. 243,591 215,312
Momentum Plus Contracts............................ 118,387 56,192
Enhanced Momentum Plus Contracts................... 7,610 0
EQUI-VEST Series 300 and 400 Contracts............. 112,296 86,454
AGGRESSIVE STOCK FUND
- ---------------------
Issued -- EQUI-VEST Contracts................................ 15,729,861 15,601,564
Momentum Contracts................................. 640,809 583,570
Momentum Plus Contracts............................ 611,656 465,017
Enhanced Momentum Plus Contracts................... 124,790 0
EQUI-VEST Series 300 and 400 Contracts............. 2,252,325 1,591,822
Redeemed -- EQUI-VEST Contracts................................ 13,605,973 14,567,533
Momentum Contracts................................. 329,415 234,646
Momentum Plus Contracts............................ 259,855 97,553
Enhanced Momentum Plus Contracts................... 15,823 0
EQUI-VEST Series 300 and 400 Contracts............. 1,094,154 945,741
GROWTH INVESTORS FUND
- ---------------------
Issued -- Momentum Contracts................................. 69,706 50,523
Momentum Plus Contracts............................ 277,255 243,492
Enhanced Momentum Plus Contracts................... 15,724 0
EQUI-VEST Series 300 and 400 Contracts............. 1,654,096 1,401,142
Redeemed -- Momentum Contracts................................. 16,841 3,545
Momentum Plus Contracts............................ 143,744 56,483
Enhanced Momentum Plus Contracts................... 1,072 0
EQUI-VEST Series 300 and 400 Contracts............. 441,519 311,129
CONSERVATIVE INVESTORS FUND
- ---------------------------
Issued -- Momentum Contracts................................. 10,705 8,347
Momentum Plus Contracts............................ 55,120 54,650
Enhanced Momentum Plus Contracts................... 5,947 0
EQUI-VEST Series 300 and 400 Contracts............. 200,840 223,974
Redeemed -- Momentum Contracts................................. 3,249 450
Momentum Plus Contracts............................ 47,599 18,295
Enhanced Momentum Plus Contracts................... 1,318 0
EQUI-VEST Series 300 and 400 Contracts............. 125,486 57,483
HIGH YIELD FUND
- ---------------
Issued -- Momentum Contracts................................. 12,054 6,324
Momentum Plus Contracts............................ 50,342 44,314
Enhanced Momentum Plus Contracts................... 5,597 0
EQUI-VEST Series 300 and 400 Contracts............. 347,167 145,638
Redeemed -- Momentum Contracts................................. 1,584 395
Momentum Plus Contracts............................ 26,154 12,085
Enhanced Momentum Plus Contracts................... 478 0
EQUI-VEST Series 300 and 400 Contracts............. 112,750 35,957
</TABLE>
FSA-13
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
Years Ended
December 31,
--------------------------------------
1996 1995
--------------- -------------
<S> <C> <C>
GLOBAL FUND
- -----------
Issued -- Momentum Contracts................................. 69,785 53,496
Momentum Plus Contracts............................ 226,890 251,525
Enhanced Momentum Plus Contracts................... 14,214 0
EQUI-VEST Series 300 and 400 Contracts............. 1,395,485 1,670,603
Redeemed -- Momentum Contracts................................. 15,804 7,044
Momentum Plus Contracts............................ 158,197 84,289
Enhanced Momentum Plus Contracts................... 1,356 0
EQUI-VEST Series 300 and 400 Contracts............. 521,429 854,945
GROWTH & INCOME FUND
- --------------------
Issued -- Momentum Contracts................................. 32,378 14,155
Momentum Plus Contracts............................ 80,062 66,279
Enhanced Momentum Plus Contracts................... 3,154 0
EQUI-VEST Series 300 and 400 Contracts............. 769,435 387,123
Redeemed -- Momentum Contracts................................. 8,397 1,570
Momentum Plus Contracts............................ 26,343 8,379
Enhanced Momentum Plus Contracts................... 126 0
EQUI-VEST Series 300 and 400 Contracts............. 291,623 99,840
QUALITY BOND FUND
- -----------------
Issued -- Momentum Contracts................................. 4,794 3,450
Momentum Plus Contracts............................ 21,227 16,825
Enhanced Momentum Plus Contracts................... 1,393 0
EQUI-VEST Series 300 and 400 Contracts............. 145,134 108,824
Redeemed -- Momentum Contracts................................. 1,778 523
Momentum Plus Contracts............................ 10,306 2,479
Enhanced Momentum Plus Contracts................... 47 0
EQUI-VEST Series 300 and 400 Contracts............. 84,488 26,494
EQUITY INDEX FUND
- -----------------
Issued -- Momentum Contracts................................. 45,208 13,555
Momentum Plus Contracts............................ 114,361 46,112
Enhanced Momentum Plus Contracts................... 4,998 0
EQUI-VEST Series 300 and 400 Contracts............. 1,866,091 1,413,313
Redeemed -- Momentum Contracts................................. 6,994 1,679
Momentum Plus Contracts............................ 30,367 5,016
Enhanced Momentum Plus Contracts................... 642 0
EQUI-VEST Series 300 and 400 Contracts............. 971,325 868,769
INTERNATIONAL FUND
- ------------------
Issued -- Momentum Contracts................................. 21,296 480
Momentum Plus Contracts............................ 61,499 3,464
Enhanced Momentum Plus Contracts................... 26,479 0
EQUI-VEST Series 300 and 400 Contracts............. 1,395,292 198,903
Redeemed -- Momentum Contracts................................. 2,534 0
Momentum Plus Contracts............................ 10,691 8
Enhanced Momentum Plus Contracts................... 5,744 0
EQUI-VEST Series 300 and 400 Contracts............. 772,701 58,228
</TABLE>
FSA-14
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
5. Net Assets
Net assets consist of: (i) net assets attributable to Contracts in the
accumulation period, which are represented by Contract accumulation units
outstanding and associated accumulation unit values and (ii) actuarial
reserves and other liabilities attributable to Contracts in the payout
period which are not represented by accumulation units or unit values.
Listed below are components of net assets.
<TABLE>
<CAPTION>
INTERMEDIATE
COMMON GOVERNMENT MONEY
STOCK SECURITIES MARKET BALANCED
FUND FUND FUND FUND
-------------------- ---------------- ---------------- ------------------
<S> <C> <C> <C> <C>
Net assets attributable
to EQUI-VEST
Contracts in
accumulation period.............. $3,370,457,812 $ -- $28,666,122 $ 964,675,157
Net assets attributable
to Old Contracts in
accumulation period.............. 85,158,183 -- 4,336,192 --
Net assets attributable
to EQUIPLAN
Contracts in
accumulation period.............. 25,613,227 2,798,061 -- --
Net assets attributable
to Momentum
Contracts in
accumulation period.............. 103,372,142 1,120,445 6,801,469 36,005,104
Net assets attributable
to Momentum Plus
Contracts in
accumulation period.............. 168,686,155 8,787,834 34,332,235 50,090,333
Net assets attributable
to Enhanced Momentum
Plus Contracts in
accumulation period.............. 17,626,753 259,695 1,383,018 5,518,846
Net assets attributable
to EQUI-VEST Series 300
& 400 Contracts in
accumulation period.............. 537,355,103 16,459,482 18,295,762 65,340,718
Actuarial reserves and
other contract
liabilities
attributable to
Contracts in payout.............. 24,428,725 2,675 -- 105,684
-------------- ----------- ----------- --------------
$4,332,698,100 $29,428,192 $93,814,798 $1,121,735,842
============== =========== =========== ==============
</TABLE>
<TABLE>
<CAPTION>
AGGRESSIVE GROWTH
STOCK INVESTORS
FUND FUND
-------------------- --------------
<S> <C> <C>
Net assets attributable
to EQUI-VEST
Contracts in
accumulation period.............. $2,316,874,460 $ --
Net assets attributable
to Old Contracts in
accumulation period.............. -- --
Net assets attributable
to EQUIPLAN
Contracts in
accumulation period.............. -- --
Net assets attributable
to Momentum
Contracts in
accumulation period.............. 106,189,250 14,694,449
Net assets attributable
to Momentum Plus
Contracts in
accumulation period.............. 168,280,410 68,574,772
Net assets attributable
to Enhanced Momentum
Plus Contracts in
accumulation period.............. 13,679,380 1,714,501
Net assets attributable
to EQUI-VEST Series 300
& 400 Contracts in
accumulation period.............. 368,768,780 443,596,795
Actuarial reserves and
other contract
liabilities
attributable to
Contracts in payout.............. 2,781,450 830,112
-------------- ------------
$2,976,573,730 $529,410,629
============== ============
</TABLE>
FSA-15
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
CONSERVATIVE HIGH GROWTH &
INVESTORS YIELD GLOBAL INCOME
FUND FUND FUND FUND
------------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net assets attributable
to EQUI-VEST
Contracts in
accumulation period............... $ -- $ -- $ -- $ --
Net assets attributable
to Old Contracts in
accumulation period.............. -- -- -- --
Net assets attributable
to EQUIPLAN
Contracts in
accumulation period.............. -- -- -- --
Net assets attributable
to Momentum
Contracts in
accumulation period.............. 2,114,842 2,433,263 16,048,232 5,838,772
Net assets attributable
to Momentum Plus
Contracts in
accumulation period.............. 15,650,595 13,836,870 64,536,142 17,388,863
Net assets attributable
to Enhanced Momentum Plus
Contracts in
accumulation period ............. 507,009 652,448 1,496,342 374,309
Net assets attributable
to EQUI-VEST Series 300 & 400
Contracts in
accumulation period.............. 66,443,641 61,001,720 413,259,009 139,856,174
Actuarial reserves and
other contract
liabilities
attributable to
Contracts in payout.............. 535,465 36,937 114,540 48,179
----------- ----------- ------------ ------------
$85,251,552 $77,961,238 $495,454,265 $163,506,297
=========== =========== ============ ============
</TABLE>
<TABLE>
<CAPTION>
QUALITY EQUITY
BOND INDEX INTERNATIONAL
FUND FUND FUND
---------------- ----------------- ---------------
<S> <C> <C> <C>
Net assets attributable
to EQUI-VEST
Contracts in
accumulation period.............. $ -- $ -- $ --
Net assets attributable
to Old Contracts in
accumulation period.............. -- -- --
Net assets attributable
to EQUIPLAN
Contracts in
accumulation period.............. -- -- --
Net assets attributable
to Momentum
Contracts in
accumulation period.............. 805,525 8,310,489 2,171,142
Net assets attributable
to Momentum Plus
Contracts in
accumulation period.............. 3,339,020 21,020,652 6,121,746
Net assets attributable
to Enhanced Momentum Plus
Contracts in
accumulation period ............. 146,541 564,940 2,342,303
Net assets attributable
to EQUI-VEST Series 300 & 400
Contracts in
accumulation period.............. 22,042,506 243,929,938 86,118,730
Actuarial reserves and
other contract
liabilities
attributable to
Contracts in payout.............. 15,674 520,685 433,639
----------- ------------ -----------
$26,349,266 $274,346,704 $97,187,560
=========== ============ ===========
</TABLE>
FSA-16
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
6. Accumulation Unit Values
Shown below is accumulation unit value information for a unit outstanding
throughout the periods shown.
<TABLE>
<CAPTION>
COMMON STOCK FUND--OLD CONTRACTS
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
------- ------- -------- ------- ------- ------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of period .. $199.66 $151.67 $155.96 $125.72 $122.56 $ 89.56 $97.97 $78.37 $63.99 $59.83
======= ======= ======= ======= ======= ======= ====== ====== ====== ======
Unit value, end of period ........ $246.57 $199.66 $151.67 $155.96 $125.72 $122.56 $89.56 $97.97 $78.37 $63.99
======= ======= ======= ======= ======= ======= ====== ====== ====== ======
Number of units outstanding,
end of period (000's) ........ 345 387 438 467 525 598 694 780 895 1,079
======= ======= ======= ======= ======= ======= ====== ====== ====== ======
<CAPTION>
COMMON STOCK FUND--EQUI-VEST/MOMENTUM** CONTRACTS
YEARS ENDED DECEMBER 31,
-------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
------- ------- ------- ------- ------- -------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of period ... $162.42 $124.32 $128.81 $104.63 $102.76 $ 75.67 $83.40 $67.22 $55.30 $52.10
======= ======= ======= ======= ======= ======= ====== ====== ====== ======
Unit value, end of period ......... $199.05 $162.42 $124.32 $128.81 $104.63 $102.76 $75.67 $83.40 $67.22 $55.30
======= ======= ======= ======= ======= ======== ====== ====== ====== ======
Number of EQUI-VEST units
outstanding, end of
period (000's) ................ 16,933 16,292 15,749 13,917 11,841 10,292 9,670 8,645 7,252 7,349
======= ======= ======= ======= ======= ======== ====== ====== ====== ======
Number of Momentum units
outstanding, end of
period (000's) ................ 519 403 270 120
======= ======= ======= =======
<CAPTION>
COMMON STOCK FUND--EQUIPLAN CONTRACTS
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
------- ------- ------- ------- ------- -------- -------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of period.... $216.27 $164.29 $168.93 $136.10 $132.67 $ 96.95 $106.05 $ 84.83 $69.26 $65.62
======= ======= ======= ======= ======= ======= ======= ======= ====== ======
Unit value, end of period ......... $267.08 $216.27 $164.29 $168.93 $136.10 $132.67 $ 96.95 $106.05 $84.83 $69.56
======= ======= ======= ======= ======= ======= ======= ======= ====== ======
Number of units
outstanding,
end of period (000's) ......... 96 108 119 124 135 144 157 177 196 235
======= ======= ======= ======= ======= ======== ======== ======= ====== ======
<CAPTION>
COMMON STOCK FUND--MOMENTUM PLUS CONTRACTS
YEARS ENDED DECEMBER 31,
------------------------------ SEPTEMBER 9, 1993*
1996 1995 1994 TO DECEMBER 31, 1993
------- ------- ------ --------------------
<S> <C> <C> <C> <C>
Unit value, beginning of period .................. $132.47 $101.38 $105.01 $100.00
======= ======= ======= =======
Unit value, end of period ........................ $162.39 $132.47 $101.38 $105.01
======= ======= ======= =======
Number of units outstanding, end of period (000's) 1,039 706 330 12
======= ======= ======= =======
<FN>
- -------------------
*Date on which units were made available for sale.
**The Momentum Contracts were first introduced for sale on February 15, 1993.
</FN>
</TABLE>
FSA-17
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
COMMON STOCK FUND--ENHANCED MOMENTUM PLUS CONTRACTS
SEPTEMBER 1, 1996
TO DECEMBER 31, 1996*
------------------------------
Unit value, beginning of period ....................... $100.00
=======
Unit value, end of period ............................. $125.89
=======
Number of units outstanding, end of period (000's)..... 140
=======
<TABLE>
<CAPTION>
COMMON STOCK FUND--EQUI-VEST SERIES 300 AND 400 CONTRACTS
YEARS ENDED DECEMBER 31,
--------------------------- JANUARY 3, 1994*
1996 1995 TO DECEMBER 31, 1994
------- -------- ---------------------
<S> <C> <C> <C>
Unit value, beginning of period ........................ $126.78 $ 97.03 $100.00
======= ======= =======
Unit value, end of period .............................. $155.42 $126.78 $ 97.03
======= ======= =======
Number of units outstanding, end of period (000's)...... 3,457 1,989 948
======= ======= =======
<CAPTION>
INTERMEDIATE GOVERNMENT SECURITIES FUND--EQUIPLAN CONTRACTS
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of period $49.69 $44.04 $46.25 $42.04 $40.00 $35.17 $33.12 $28.89 $27.31 $26.81
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Unit value, end of period ..... $51.34 $49.69 $44.04 $46.25 $42.04 $40.00 $35.17 $33.12 $28.89 $27.31
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Number of units period
outstanding,
end of period (000's) ..... 55 50 54 58 66 74 82 91 98 120
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
<CAPTION>
INTERMEDIATE GOVERNMENT SECURITIES FUND--MOMENTUM CONTRACTS
YEARS ENDED DECEMBER 31,
------------------------ JUNE 1, 1994*
1996 1995 TO DECEMBER 31, 1994
------- -------- ----------------------
<S> <C> <C> <C>
Unit value, beginning of period ........................... $109.80 $ 98.19 $100.00
======= ======= =======
Unit value, end of period ................................. $112.40 $109.80 $ 98.19
======= ======= =======
Number of units outstanding, end of period (000's)......... 10 7 1
======= ======= =======
<FN>
- -------------------
*Date on which units were made available for sale.
**The Momentum Contracts were first introduced for sale on February 15, 1993.
</FN>
</TABLE>
FSA-18
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
INTERMEDIATE GOVERNMENT SECURITIES FUND--MOMENTUM PLUS CONTRACTS
YEARS ENDED DECEMBER 31,
----------------------------- SEPTEMBER 9, 1993*
1996 1995 1994 TO DECEMBER 31, 1993
------- ------- ------- --------------------
<S> <C> <C> <C> <C>
Unit value, beginning of period ........................... $105.94 $ 94.76 $100.44 $100.00
======= ======= ======= =======
Unit value, end of period ................................. $108.45 $105.94 $ 94.76 $100.44
======= ======= ======= =======
Number of units outstanding, end of period (000's)......... 81 88 64 1
======= ======= ======= =======
<CAPTION>
INTERMEDIATE GOVERNMENT SECURITIES FUND--ENHANCED MOMENTUM PLUS CONTRACTS
SEPTEMBER 1, 1996
TO DECEMBER 31, 1996*
-------------------------
<S> <C>
Unit value, beginning of period...................... $100.00
=======
Unit value, end of period............................ $105.75
=======
Number of units outstanding, end of period (000's)... 2
=======
<CAPTION>
INTERMEDIATE GOVERNMENT SECURITIES FUND--EQUI-VEST SERIES 300 AND 400 CONTRACTS
YEARS ENDED DECEMBER 31,
------------------------ JUNE 1, 1994*
1996 1995 TO DECEMBER 31, 1994
------- ------- ------------------------
<S> <C> <C> <C>
Unit value, beginning of period ........................... $109.80 $ 98.19 $100.00
======= ======= =======
Unit value, end of period ................................. $112.40 $109.80 $ 98.19
======= ======= =======
Number of units outstanding, end of period (000's) ........ 146 89 32
======= ======= =======
<CAPTION>
MONEY MARKET FUND--OLD CONTRACTS
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
------ ------ ------ ------ ------ ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of period... $32.00 $30.44 $29.43 $28.75 $27.92 $26.47 $24.59 $22.66 $21.23 $20.01
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Unit value, end of period ........ $33.52 $32.00 $30.44 $29.43 $28.75 $27.92 $26.47 $24.59 $22.66 $21.23
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Number of units outstanding,
end of period (000's) ........ 129 140 147 168 204 246 289 310 339 419
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
<FN>
- -------------------
*Date on which units were made available for sale.
**The Momentum Contracts were first introduced for sale on February 15, 1993.
</FN>
</TABLE>
FSA-19
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
MONEY MARKET FUND--EQUI-VEST / MOMENTUM** CONTRACTS
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of period ... $27.22 $26.08 $25.41 $25.01 $24.48 $23.38 $21.89 $20.32 $19.18 $18.22
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Unit value, end of period ......... $28.28 $27.22 $26.08 $25.41 $25.01 $24.48 $23.38 $21.89 $20.32 $19.18
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Number of EQUI-VEST units
outstanding, end of
period (000's) ................ 1,013 1,021 1,000 1,065 1,201 1,325 1,307 1,045 656 581
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Number of Momentum units
outstanding, end of
period (000's) ................ 240 188 166 56
====== ====== ====== ======
<CAPTION>
MONEY MARKET FUND--MOMENTUM PLUS CONTRACTS
YEARS ENDED DECEMBER 31,
------------------------------- SEPTEMBER 9, 1993*
1996 1995 1994 TO DECEMBER 31, 1993
------- ------- ------- -----------------------
<S> <C> <C> <C> <C>
Unit value, beginning of period ........................... $107.55 $103.10 $100.47 $100.00
======= ======= ======= =======
Unit value, end of period ................................. $111.75 $107.55 $103.10 $100.47
======= ======= ======= =======
Number of units outstanding, end of period (000's)......... 307 299 474 62
======= ======= ======= =======
</TABLE>
MONEY MARKET FUND--ENHANCED MOMENTUM PLUS CONTRACTS
SEPTEMBER 1, 1996
TO DECEMBER 31, 1996*
---------------------
Unit value, beginning of period ......................... $100.00
=======
Unit value, end of period ............................... $105.65
=======
Number of units outstanding, end of period (000's)....... 13
=======
<TABLE>
<CAPTION>
MONEY MARKET FUND--EQUI-VEST SERIES 300 AND 400 CONTRACTS
YEARS ENDED DECEMBER 31,
----------------------- JANUARY 3, 1994*
1996 1995 TO DECEMBER 31, 1994
------- ------- ------------------------------
<S> <C> <C> <C>
Unit value, beginning of period ........................... $107.04 $102.61 $100.00
======= ======= =======
Unit value, end of period ................................. $111.21 $107.04 $102.61
======= ======= =======
Number of units outstanding, end of period (000's)......... 165 81 63
======= ======= =======
<FN>
- -------------------
*Date on which units were made available for sale.
**The Momentum Contracts were first introduced for sale on February 15, 1993.
</FN>
</TABLE>
FSA-20
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
BALANCED FUND--EQUI-VEST / MOMENTUM** CONTRACTS
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of period ... $30.92 $26.18 $28.85 $26.04 $27.17 $19.40 $19.69 $15.80 $13.95 $14.69
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Unit value, end of period ......... $34.06 $30.92 $26.18 $28.85 $26.04 $27.17 $19.40 $19.69 $15.80 $13.95
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Number of EQUI-VEST units
outstanding, end of
period (000's) ................ 28,319 30,212 32,664 31,259 25,975 21,100 19,423 16,810 15,335 17,370
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Number of Momentum units
outstanding, end of
period (000's)................. 1,057 957 776 348
====== ====== ====== ======
<CAPTION>
BALANCED FUND--MOMENTUM PLUS CONTRACTS
YEARS ENDED DECEMBER 31,
------------------------- SEPTEMBER 9, 1993*
1996 1995 1994 TO DECEMBER 31, 1993
------- ------ ------- ---------------------
<S> <C> <C> <C> <C>
Unit value, beginning of period ........................... $108.95 $92.22 $101.63 $100.00
======= ======= ======= =======
Unit value, end of period ................................. $120.01 $108.95 $ 92.22 $101.63
======= ======= ======= =======
Number of units outstanding, end of period (000's)......... 417 336 188 9
======= ======= ======= =======
</TABLE>
BALANCED FUND--ENHANCED MOMENTUM PLUS CONTRACTS
SEPTEMBER 1, 1996*
TO DECEMBER 31, 1996
--------------------
Unit value, beginning of period........................ $100.00
=======
Unit value, end of period.............................. $114.16
=======
Number of units outstanding, end of period (000's)..... 48
=======
<TABLE>
<CAPTION>
BALANCED FUND--EQUI-VEST SERIES 300 AND 400 CONTRACTS
YEARS ENDED DECEMBER 31,
----------------------- JANUARY 3, 1994*
1996 1995 TO DECEMBER 31, 1994
------- ------- ----------------------
<S> <C> <C> <C>
Unit value, beginning of period ........................... $108.26 $ 91.64 $100.00
======= ======= =======
Unit value, end of period ................................. $119.26 $108.26 $ 91.64
======= ======= =======
Number of units outstanding, end of period (000's)......... 548 386 289
======= ======= =======
<FN>
- -------------------
*Date on which units were made available for sale.
**The Momentum Contracts were first introduced for sale on February 15, 1993.
</FN>
</TABLE>
FSA-21
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
AGGRESSIVE STOCK FUND--EQUI-VEST / MOMENTUM** CONTRACTS
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of period ... $68.73 $52.88 $55.68 $48.30 $50.51 $27.36 $25.86 $18.09 $18.15 $18.33
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Unit value, end of period ......... $82.91 $68.73 $52.88 $55.68 $48.30 $50.51 $27.36 $25.86 $18.09 $18.15
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Number of EQUI-VEST units
outstanding, end of
period (000's) ................ 27,945 25,821 24,787 21,496 17,986 12,962 9,545 8,134 8,972 10,180
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Number of Momentum units
outstanding, end of
period (000's) ................ 1,281 969 620 258
====== ====== ====== ======
<CAPTION>
AGGRESSIVE STOCK FUND--MOMENTUM PLUS CONTRACTS
YEARS ENDED DECEMBER 31,
----------------------------- SEPTEMBER 9, 1993*
1996 1995 1994 TO DECEMBER 31, 1993
------- ------- ------- ---------------------
<S> <C> <C> <C> <C>
Unit value, beginning of period ...................... $130.50 $100.49 $105.90 $100.00
======= ======= ======= =======
Unit value, end of period ............................ $157.31 $130.50 $100.49 $105.90
======= ======= ======= =======
Number of units outstanding, end of period (000's).... 1,070 718 350 12
======= ======= ======= =======
</TABLE>
AGGRESSIVE STOCK FUND--ENHANCED MOMENTUM PLUS CONTRACTS
SEPTEMBER 1, 1996
TO DECEMBER 31, 1996*
-------------------------
Unit value, beginning of period........................ $100.00
=======
Unit value, end of period.............................. $125.54
=======
Number of units outstanding, end of period (000's)..... 109
=======
<TABLE>
<CAPTION>
AGGRESSIVE STOCK FUND--EQUI-VEST SERIES 300 AND 400 CONTRACTS
YEARS ENDED DECEMBER 31,
------------------------ JANUARY 3, 1994*
1996 1995 TO DECEMBER 31, 1994
------ ------- --------------------
<S> <C> <C> <C>
Unit value, beginning of period ...................... $123.95 $ 95.45 $100.00
======= ======= =======
Unit value, end of period ............................ $149.41 $123.95 $ 95.45
======= ======= =======
Number of units outstanding, end of period (000's).... 2,468 1,310 664
======= ======= =======
<FN>
- -------------------
*Date on which units were made available for sale.
**The Momentum Contracts were first introduced for sale on February 15, 1993.
</FN>
</TABLE>
FSA-22
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
GROWTH INVESTORS FUND--MOMENTUM CONTRACTS
YEARS ENDED DECEMBER 31,
-------------------------------------- JUNE 1, 1994*
1996 1995 TO DECEMBER 31, 1994
------------------ ----------------- --------------------------
<S> <C> <C> <C>
Unit value, beginning of period...................... $120.08 $ 96.31 $100.00
======= ======= =======
Unit value, end of period............................ $133.40 $120.08 $ 96.31
======= ======= =======
Number of units outstanding, end of period (000's)... 110 57 10
======= ======= =======
<CAPTION>
GROWTH INVESTORS FUND--MOMENTUM PLUS CONTRACTS
YEARS ENDED DECEMBER 31,
------------------------------------------ SEPTEMBER 9, 1993*
1996 1995 1994 TO DECEMBER 31, 1993
----------- ---------- ----------- -----------------------
<S> <C> <C> <C> <C>
Unit value, beginning of period...................... $121.49 $ 97.45 $101.99 $100.00
======= ======= ======= =======
Unit value, end of period............................ $134.95 $121.49 $ 97.45 $101.99
======= ======= ======= =======
Number of units outstanding, end of period (000's)... 508 375 188 13
======= ======= ======= =======
<CAPTION>
GROWTH INVESTORS FUND--ENHANCED MOMENTUM PLUS CONTRACTS
SEPTEMBER 1, 1996
TO DECEMBER 31, 1996*
---------------------
<S> <C>
Unit value, beginning of period...................... $100.00
=======
Unit value, end of period............................ $116.95
=======
Number of units outstanding, end of period (000's)... 15
=======
<CAPTION>
GROWTH INVESTORS FUND--EQUI-VEST SERIES 300 AND 400 CONTRACTS
YEARS ENDED DECEMBER 31,
------------------------------ JANUARY 3, 1994*
1996 1995 TO DECEMBER 31, 1994
----------- ----------- -----------------------
<S> <C> <C> <C>
Unit value, beginning of period...................... $120.08 $ 96.31 $100.00
======= ======= =======
Unit value, end of period............................ $133.40 $120.08 $ 96.31
======= ======= =======
Number of units outstanding, end of period (000's)... 3,325 2,113 1,023
======= ======= =======
<FN>
- -------------------
*Date on which units were made available for sale.
**The Momentum Contracts were first introduced for sale on February 15, 1993.
</FN>
</TABLE>
FSA-23
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
CONSERVATIVE INVESTORS FUND--MOMENTUM CONTRACTS
YEARS ENDED DECEMBER 31,
--------------------------------- JUNE 1, 1994*
1996 1995 TO DECEMBER 31, 1994
--------------- -------------- -------------------------
<S> <C> <C> <C>
Unit value, beginning of period...................... $112.97 $ 95.10 $100.00
======= ======= =======
Unit value, end of period............................ $117.25 $112.97 $ 95.10
======= ======= =======
Number of units outstanding, end of period (000's)... 18 11 3
======= ======= =======
<CAPTION>
CONSERVATIVE INVESTORS FUND--MOMENTUM PLUS CONTRACTS
YEARS ENDED DECEMBER 31,
---------------------------------- SEPTEMBER 9, 1993*
1996 1995 1994 TO DECEMBER 31, 1993
--------- --------- --------- -------------------------
<S> <C> <C> <C> <C>
Unit value, beginning of period...................... $110.81 $ 93.29 $98.60 $100.00
======= ======= ====== =======
Unit value, end of period............................ $114.99 $110.81 $93.29 $ 98.60
======= ======= ====== =======
Number of units outstanding, end of period (000's)... 136 129 92 10
======= ======= ====== =======
<CAPTION>
CONSERVATIVE INVESTORS FUND--ENHANCED MOMENTUM PLUS CONTRACTS
SEPTEMBER 1, 1996
TO DECEMBER 31, 1996*
---------------------------
<S> <C>
Unit value, beginning of period...................... $100.00
=======
Unit value, end of period............................ $109.47
=======
Number of units outstanding, end of period (000's)... 5
=======
<CAPTION>
CONSERVATIVE INVESTORS FUND--EQUI-VEST SERIES 300 AND 400 CONTRACTS
YEARS ENDED DECEMBER 31,
-------------------------------------------------------
1996 1995 1994
------------- ----------- -----------
<S> <C> <C> <C>
Unit value, beginning of period...................... $112.97 $ 95.10 $100.00
======= ======= =======
Unit value, end of period............................ $117.25 $112.97 $ 95.10
======= ======= =======
Number of units outstanding, end of period (000's)... 567 491 325
======= ======= =======
<FN>
- -------------------
*Date on which units were made available for sale.
**The Momentum Contracts were first introduced for sale on February 15, 1993.
</FN>
</TABLE>
FSA-24
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
HIGH YIELD FUND--MOMENTUM CONTRACTS
YEARS ENDED DECEMBER 31,
------------------------------ JUNE 1, 1994* TO
1996 1995 DECEMBER 31, 1994
----------- ---------- ------------------------
<S> <C> <C> <C>
Unit value, beginning of period ..................... $113.44 $ 95.88 $100.00
======= ======= =======
Unit value, end of period ........................... $137.53 $113.44 $ 95.88
======= ======= =======
Number of units outstanding, end of period (000's) .. 18 7 1
======= ======= =======
<CAPTION>
HIGH YIELD FUND--MOMENTUM PLUS CONTRACTS
YEARS ENDED DECEMBER 31,
------------------------------------------ SEPTEMBER 9, 1993*
1996 1995 1994 TO DECEMBER 31, 1993
-------------- ----------- ----------- -------------------------
<S> <C> <C> <C> <C>
Unit value, beginning of period...................... $121.10 $102.37 $106.74 $100.00
======= ======= ======= =======
Unit value, end of period............................ $146.80 $121.10 $102.37 $106.74
======= ======= ======= =======
Number of units outstanding, end of period (000's)... 94 70 38 1
======= ======= ======= =======
</TABLE>
HIGH YIELD FUND--ENHANCED MOMENTUM PLUS CONTRACTS
SEPTEMBER 1, 1996
TO DECEMBER 31, 1996*
--------------------------
Unit value, beginning of period...................... $100.00
=======
Unit value, end of period............................ $127.46
=======
Number of units outstanding, end of period (000's)... 5
=======
<TABLE>
<CAPTION>
HIGH YIELD FUND--EQUI-VEST SERIES 300 AND 400 CONTRACTS
YEARS ENDED DECEMBER 31,
---------------------------- JANUARY 3, 1994*
1996 1995 TO DECEMBER 31, 1994
------------ ------------ --------------------------
<S> <C> <C> <C>
Unit value, beginning of period...................... $113.44 $ 95.88 $100.00
======= ======= =======
Unit value, end of period............................ $137.53 $113.44 $ 95.88
======= ======= =======
Number of units outstanding, end of period (000's)... 444 209 99
======= ======= =======
<FN>
- -------------------
*Date on which units were made available for sale.
**The Momentum Contracts were first introduced for sale on February 15, 1993.
</FN>
</TABLE>
FSA-25
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
GLOBAL FUND--MOMENTUM CONTRACTS
YEARS ENDED DECEMBER 31,
------------------------------ JUNE 1, 1994*
1996 1995 TO DECEMBER 31, 1994
------------- ------------ -----------------------
<S> <C> <C> <C>
Unit value, beginning of period...................... $122.06 $104.12 $100.00
======= ======= =======
Unit value, end of period............................ $138.00 $122.06 $104.12
======= ======= =======
Number of units outstanding, end of period (000's)... 116 62 16
======= ======= =======
<CAPTION>
GLOBAL FUND--MOMENTUM PLUS CONTRACTS
YEARS ENDED DECEMBER 31,
---------------------------------------------- SEPTEMBER 9, 1993*
1996 1995 1994 TO DECEMBER 31, 1993
------------- ----------- ----------- ------------------------
<S> <C> <C> <C> <C>
Unit value, beginning of period...................... $124.30 $106.04 $102.14 $100.00
======= ======= ======= ========
Unit value, end of period............................ $140.51 $124.30 $106.04 $102.14
======= ======= ======= =======
Number of units outstanding, end of period (000's)... 459 391 223 8
======= ======= ======= =======
</TABLE>
GLOBAL FUND--ENHANCED MOMENTUM PLUS CONTRACTS
SEPTEMBER 1, 1996
TO DECEMBER 31, 1996*
-------------------------
Unit value, beginning of period...................... $100.00
=======
Unit value, end of period............................ $116.37
=======
Number of units outstanding, end of period (000's)... 13
=======
<TABLE>
<CAPTION>
GLOBAL FUND--EQUI-VEST SERIES 300 AND 400 CONTRACTS
YEARS ENDED DECEMBER 31,
--------------------------------- JANUARY 3, 1994*
1996 1995 TO DECEMBER 31, 1994
--------------- ------------- -------------------------
<S> <C> <C> <C>
Unit value, beginning of period...................... $122.06 $104.12 $100.00
======= ======= =======
Unit value, end of period............................ $138.00 $122.06 $104.12
======= ======= =======
Number of units outstanding, end of period (000's)... 2,995 2,121 1,305
======= ======= =======
<FN>
- -------------------
*Date on which units were made available for sale.
**The Momentum Contracts were first introduced for sale on February 15, 1993.
</FN>
</TABLE>
FSA-26
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
GROWTH & INCOME FUND--MOMENTUM CONTRACTS
YEARS ENDED DECEMBER 31,
------------------------------------- JUNE 1, 1994*
1996 1995 TO DECEMBER 31, 1994
--------------- --------------- --------------------------
<S> <C> <C> <C>
Unit value, beginning of period...................... $121.02 $ 98.86 $100.00
======= ======= =======
Unit value, end of period............................ $143.37 $121.02 $ 98.86
======= ======= =======
Number of units outstanding, end of period (000's)... 41 17 4
======= ======= =======
<CAPTION>
GROWTH & INCOME FUND--MOMENTUM PLUS CONTRACTS
YEARS ENDED DECEMBER 31,
------------------------------------- JUNE 1, 1994*
1996 1995 TO DECEMBER 31, 1994
--------------- --------------- --------------------------
<S> <C> <C> <C>
Unit value, beginning of period...................... $121.25 $ 99.06 $100.00
======= ======= =======
Unit value, end of period............................ $143.63 $121.25 $ 99.06
======= ======= =======
Number of units outstanding, end of period (000's)... 121 67 9
======= ======= =======
<CAPTION>
GROWTH & INCOME FUND--ENHANCED MOMENTUM PLUS CONTRACTS
SEPTEMBER 1, 1996
TO DECEMBER 31, 1996*
----------------------
<S> <C>
Unit value, beginning of period...................... $100.00
=======
Unit value, end of period............................ $123.61
=======
Number of units outstanding, end of period (000's)... 3
=======
<CAPTION>
GROWTH & INCOME FUND--EQUI-VEST SERIES 300 AND 400 CONTRACTS
YEARS ENDED DECEMBER 31,
------------------------------------- JANUARY 3, 1994*
1996 1995 TO DECEMBER 31, 1994
-------------- --------------- --------------------------
<S> <C> <C> <C>
Unit value, beginning of period...................... $121.02 $ 98.86 $100.00
======= ======= =======
Unit value, end of period............................ $143.37 $121.02 $ 98.86
======= ======= =======
Number of units outstanding, end of period (000's)... 975 498 210
======= ======= =======
<FN>
- -------------------
*Date on which units were made available for sale.
**The Momentum Contracts were first introduced for sale on February 15, 1993.
</FN>
</TABLE>
FSA-27
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
QUALITY BOND FUND--MOMENTUM CONTRACTS
YEARS ENDED DECEMBER 31,
--------------------------------- JUNE 1, 1994*
1996 1995 TO DECEMBER 31, 1994
------------- ------------- ------------------------
<S> <C> <C> <C>
Unit value, beginning of period...................... $108.38 $ 93.87 $100.00
======= ======= =======
Unit value, end of period............................ $112.65 $108.38 $ 93.87
======= ======= =======
Number of units outstanding, end of period (000's)... 7 4 1
======= ======= =======
<CAPTION>
QUALITY BOND FUND--MOMENTUM PLUS CONTRACTS
YEARS ENDED DECEMBER 31,
--------------------------------- JUNE 1, 1994*
1996 1995 TO DECEMBER 31, 1994
------------- ------------- ------------------------
<S> <C> <C> <C>
Unit value, beginning of period...................... $114.38 $ 99.07 $100.00
======= ======= =======
Unit value, end of period............................ $118.87 $114.38 $ 99.07
======= ======= =======
Number of units outstanding, end of period (000's)... 28 17 3
======= ======= =======
</TABLE>
QUALITY BOND FUND--ENHANCED MOMENTUM PLUS CONTRACTS
SEPTEMBER 1, 1996*
TO DECEMBER 31, 1996
-----------------------
Unit value, beginning of period...................... $100.00
========
Unit value, end of period............................ $108.84
=======
Number of units outstanding, end of period (000's)... 1
=======
<TABLE>
<CAPTION>
QUALITY BOND FUND--EQUI-VEST SERIES 300 AND 400 CONTRACTS
YEARS ENDED DECEMBER 31,
--------------------------------- JANUARY 3, 1994*
1996 1995 TO DECEMBER 31, 1994
------------- ------------- ------------------------
<S> <C> <C> <C>
Unit value, beginning of period...................... $108.38 $ 93.87 $100.00
======= ======= =======
Unit value, end of period............................ $112.65 $108.38 $ 93.87
======= ======= =======
Number of units outstanding, end of period (000's)... 196 135 53
======= ======= =======
<FN>
- -------------------
*Date on which units were made available for sale.
**The Momentum Contracts were first introduced for sale on February 15, 1993.
</FN>
</TABLE>
FSA-28
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
EQUITY INDEX FUND--MOMENTUM CONTRACTS
YEARS ENDED DECEMBER 31,
--------------------------------- JUNE 1, 1994*
1996 1995 TO DECEMBER 31, 1994
------------- ------------- ------------------------
<S> <C> <C> <C>
Unit value, beginning of period...................... $135.94 $100.95 $100.00
======= ======= =======
Unit value, end of period............................ $164.12 $135.94 $100.95
======= ======= =======
Number of units outstanding, end of period (000's)... 51 12 1
======= ======= =======
<CAPTION>
EQUITY INDEX FUND--MOMENTUM PLUS CONTRACTS
YEARS ENDED DECEMBER 31,
--------------------------------- JUNE 1, 1994*
1996 1995 TO DECEMBER 31, 1994
------------- ------------- ------------------------
<S> <C> <C> <C>
Unit value, beginning of period...................... $135.92 $100.94 $100.00
======= ======= =======
Unit value, end of period............................ $164.08 $135.92 $100.94
======= ======= =======
Number of units outstanding, end of period (000's)... 128 44 3
======= ======= =======
</TABLE>
EQUITY INDEX FUND--ENHANCED MOMENTUM PLUS CONTRACTS
SEPTEMBER 1, 1996*
TO DECEMBER 31, 1996
-----------------------
Unit value, beginning of period...................... $100.00
=======
Unit value, end of period............................ $139.70
=======
Number of units outstanding, end of period (000's)... 4
=======
<TABLE>
<CAPTION>
EQUITY INDEX FUND--EQUI-VEST SERIES 300 AND 400 CONTRACTS
YEARS ENDED DECEMBER 31,
--------------------------------- JUNE 1, 1994*
1996 1995 TO DECEMBER 31, 1994
------------- ------------- -------------------------
<S> <C> <C> <C>
Unit value, beginning of period...................... $135.94 $100.95 $100.00
======= ======= =======
Unit value, end of period............................ $164.12 $135.94 $100.95
======= ======= =======
Number of units outstanding, end of period (000's)... 1,486 592 47
======= ======= =======
<FN>
- -------------------
*Date on which units were made available for sale.
**The Momentum Contracts were first introduced for sale on February 15, 1993.
</FN>
</TABLE>
FSA-29
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS--(CONCLUDED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
INTERNATIONAL FUND--MOMENTUM CONTRACTS
YEAR ENDED
DECEMBER 31, SEPTEMBER 1, 1994*
1996 TO DECEMBER 31, 1995
--------------------------- -------------------------------
<S> <C> <C>
Unit value, beginning of period............................ $104.15 $100.00
======= =======
Unit value, end of period.................................. $112.82 $104.15
======= =======
Number of units outstanding, end of period (000's)......... 19 0
======= =======
<CAPTION>
INTERNATIONAL FUND--MOMENTUM PLUS CONTRACTS
YEAR ENDED
DECEMBER 31, SEPTEMBER 1, 1994* TO
1996 DECEMBER 31, 1995
----------------------------- -------------------------------
<S> <C> <C>
Unit value, beginning of period............................ $104.15 $100.00
======= =======
Unit value, end of period.................................. $112.81 $104.15
======= =======
Number of units outstanding, end of period (000's)......... 54 3
======= =======
</TABLE>
INTERNATIONAL FUND--ENHANCED MOMENTUM CONTRACTS
SEPTEMBER 1, 1996
TO DECEMBER 31, 1996*
------------------------
Unit value, beginning of period....................... $100.00
=======
Unit value, end of period............................. $112.96
=======
Number of units outstanding, end of period (000's).... 21
=======
<TABLE>
<CAPTION>
INTERNATIONAL FUND--EQUI-VEST SERIES 300 AND 400 CONTRACTS
YEAR ENDED
DECEMBER 31, SEPTEMBER 1, 1994*
1996 TO DECEMBER 31, 1995
----------------------------- -------------------------------
<S> <C> <C>
Unit value, beginning of period............................ $104.15 $100.00
======= =======
Unit value, end of period.................................. $112.83 $104.15
======= =======
Number of units outstanding, end of period (000's)......... 763 141
======= =======
<FN>
- -------------------
*Date on which units were made available for sale.
**The Momentum Contracts were first introduced for sale on February 15, 1993.
</FN>
</TABLE>
FSA-30
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholder of
The Equitable Life Assurance Society of the United States
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of earnings, of shareholder's equity and of cash flows
present fairly, in all material respects, the financial position of The
Equitable Life Assurance Society of the United States and its subsidiaries
("Equitable Life") at December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of Equitable Life's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
As discussed in Note 2 to the consolidated financial statements, Equitable Life
changed its methods of accounting for long-duration participating life insurance
contracts and long-lived assets in 1996, for loan impairments in 1995 and for
postemployment benefits in 1994.
Price Waterhouse LLP
New York, New York
February 10, 1997
F-1
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
----------------- -----------------
(IN MILLIONS)
<S> <C> <C>
ASSETS
Investments:
Fixed maturities:
Available for sale, at estimated fair value................. $ 18,077.0 $ 15,899.9
Mortgage loans on real estate................................. 3,133.0 3,638.3
Equity real estate............................................ 3,297.5 3,916.2
Policy loans.................................................. 2,196.1 1,976.4
Investment in and loans to affiliates......................... 685.0 636.6
Other equity investments...................................... 597.3 621.1
Other invested assets......................................... 288.7 706.1
----------------- -----------------
Total investments......................................... 28,274.6 27,394.6
Cash and cash equivalents....................................... 538.8 774.7
Deferred policy acquisition costs............................... 3,104.9 3,075.8
Amounts due from discontinued GIC Segment....................... 996.2 2,097.1
Other assets.................................................... 2,552.2 2,718.1
Closed Block assets............................................. 8,495.0 8,582.1
Separate Accounts assets........................................ 29,646.1 24,566.6
----------------- -----------------
TOTAL ASSETS.................................................... $ 73,607.8 $ 69,209.0
================= =================
LIABILITIES
Policyholders' account balances................................. $ 21,865.6 $ 21,911.2
Future policy benefits and other policyholders' liabilities..... 4,416.6 4,007.3
Short-term and long-term debt................................... 1,766.9 1,899.3
Other liabilities............................................... 2,785.1 3,380.7
Closed Block liabilities........................................ 9,091.3 9,221.4
Separate Accounts liabilities................................... 29,598.3 24,531.0
----------------- -----------------
Total liabilities......................................... 69,523.8 64,950.9
----------------- -----------------
Commitments and contingencies (Notes 10, 12, 13, 14 and 15)
SHAREHOLDER'S EQUITY
Common stock, $1.25 par value 2.0 million shares
authorized, issued and outstanding............................ 2.5 2.5
Capital in excess of par value.................................. 3,105.8 3,105.8
Retained earnings............................................... 798.7 788.4
Net unrealized investment gains................................. 189.9 396.5
Minimum pension liability....................................... (12.9) (35.1)
----------------- -----------------
Total shareholder's equity................................ 4,084.0 4,258.1
----------------- -----------------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY...................... $ 73,607.8 $ 69,209.0
================= =================
</TABLE>
See Notes to Consolidated Financial Statements.
F-2
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
CONSOLIDATED STATEMENTS OF EARNINGS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
----------------- ----------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
REVENUES
Universal life and investment-type product policy fee
income................................................ $ 874.0 $ 788.2 $ 715.0
Premiums................................................ 597.6 606.8 625.6
Net investment income................................... 2,175.9 2,088.2 1,998.6
Investment (losses) gains, net.......................... (9.8) 5.3 91.8
Commissions, fees and other income...................... 1,081.8 897.1 847.4
Contribution from the Closed Block...................... 125.0 143.2 137.0
----------------- ----------------- -----------------
Total revenues.................................... 4,844.5 4,528.8 4,415.4
----------------- ----------------- -----------------
BENEFITS AND OTHER DEDUCTIONS
Interest credited to policyholders' account balances.... 1,270.2 1,248.3 1,201.3
Policyholders' benefits................................. 1,317.7 1,008.6 914.9
Other operating costs and expenses...................... 2,048.0 1,775.8 1,857.7
----------------- ----------------- -----------------
Total benefits and other deductions............... 4,635.9 4,032.7 3,973.9
----------------- ----------------- -----------------
Earnings from continuing operations before Federal
income taxes, minority interest and cumulative
effect of accounting change........................... 208.6 496.1 441.5
Federal income taxes.................................... 9.7 120.5 100.2
Minority interest in net income of consolidated
subsidiaries.......................................... 81.7 62.8 50.4
----------------- ----------------- -----------------
Earnings from continuing operations before
cumulative effect of accounting change................ 117.2 312.8 290.9
Discontinued operations, net of Federal income taxes.... (83.8) - -
Cumulative effect of accounting change, net of Federal
income taxes.......................................... (23.1) - (27.1)
----------------- ----------------- -----------------
Net Earnings............................................ $ 10.3 $ 312.8 $ 263.8
================= ================= =================
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
----------------- ----------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Common stock, at par value, beginning and end of year......... $ 2.5 $ 2.5 $ 2.5
----------------- ----------------- -----------------
Capital in excess of par value, beginning of year as
previously reported......................................... 2,913.6 2,913.6 2,613.6
Cumulative effect on prior years of retroactive restatement
for accounting change....................................... 192.2 192.2 192.2
----------------- ----------------- -----------------
Capital in excess of par value, beginning of year as restated. 3,105.8 3,105.8 2,805.8
Additional capital in excess of par value..................... - - 300.0
----------------- ----------------- -----------------
Capital in excess of par value, end of year................... 3,105.8 3,105.8 3,105.8
----------------- ----------------- -----------------
Retained earnings, beginning of year as previously reported... 781.6 484.0 217.6
Cumulative effect on prior years of retroactive restatement
for accounting change....................................... 6.8 (8.4) (5.8)
----------------- ----------------- -----------------
Retained earnings, beginning of year as restated.............. 788.4 475.6 211.8
Net earnings.................................................. 10.3 312.8 263.8
----------------- ----------------- -----------------
Retained earnings, end of year................................ 798.7 788.4 475.6
----------------- ----------------- -----------------
Net unrealized investment gains (losses), beginning of year
as previously reported...................................... 338.2 (203.0) 131.9
Cumulative effect on prior years of retroactive restatement
for accounting change....................................... 58.3 (17.5) 12.7
----------------- ----------------- -----------------
Net unrealized investment gains (losses), beginning of
year as restated............................................ 396.5 (220.5) 144.6
Change in unrealized investment (losses) gains................ (206.6) 617.0 (365.1)
----------------- ----------------- -----------------
Net unrealized investment gains (losses), end of year......... 189.9 396.5 (220.5)
----------------- ----------------- -----------------
Minimum pension liability, beginning of year.................. (35.1) (2.7) (15.0)
Change in minimum pension liability........................... 22.2 (32.4) 12.3
----------------- ----------------- -----------------
Minimum pension liability, end of year........................ (12.9) (35.1) (2.7)
----------------- ----------------- -----------------
TOTAL SHAREHOLDER'S EQUITY, END OF YEAR....................... $ 4,084.0 $ 4,258.1 $ 3,360.7
================= ================= =================
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
----------------- ----------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Net earnings.................................................. $ 10.3 $ 312.8 $ 263.8
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Interest credited to policyholders' account balances........ 1,270.2 1,248.3 1,201.3
Universal life and investment-type policy fee income........ (874.0) (788.2) (715.0)
Investment losses (gains)................................... 9.8 (5.3) (91.8)
Change in Federal income taxes payable...................... (197.1) 221.6 38.3
Other, net.................................................. 364.4 127.3 (19.4)
----------------- ----------------- -----------------
Net cash provided by operating activities..................... 583.6 1,116.5 677.2
----------------- ----------------- -----------------
Cash flows from investing activities:
Maturities and repayments................................... 2,275.1 1,897.4 2,323.8
Sales....................................................... 8,964.3 8,867.1 5,816.6
Return of capital from joint ventures and limited
partnerships.............................................. 78.4 65.2 39.0
Purchases................................................... (12,559.6) (11,675.5) (7,564.7)
Decrease (increase) in loans to discontinued GIC Segment.... 1,017.0 1,226.9 (40.0)
Other, net.................................................. 56.7 (624.7) (478.1)
----------------- ----------------- -----------------
Net cash (used) provided by investing activities.............. (168.1) (243.6) 96.6
----------------- ----------------- -----------------
Cash flows from financing activities:
Policyholders' account balances:
Deposits.................................................. 1,925.4 2,586.5 2,082.5
Withdrawals............................................... (2,385.2) (2,657.1) (2,864.4)
Net decrease in short-term financings....................... (.3) (16.4) (173.0)
Additions to long-term debt................................. - 599.7 51.8
Repayments of long-term debt................................ (124.8) (40.7) (199.8)
Proceeds from issuance of Alliance units.................... - - 100.0
Payment of obligation to fund accumulated deficit of
discontinued GIC Segment.................................. - (1,215.4) -
Capital contribution from the Holding Company............... - - 300.0
Other, net.................................................. (66.5) (48.4) 26.5
----------------- ----------------- -----------------
Net cash (used) by financing activities....................... (651.4) (791.8) (676.4)
----------------- ----------------- -----------------
Change in cash and cash equivalents........................... (235.9) 81.1 97.4
Cash and cash equivalents, beginning of year.................. 774.7 693.6 596.2
----------------- ----------------- -----------------
Cash and Cash Equivalents, End of Year........................ $ 538.8 $ 774.7 $ 693.6
================= ================= =================
Supplemental cash flow information
Interest Paid............................................... $ 109.9 $ 89.6 $ 34.9
================= ================= =================
Income Taxes (Refunded) Paid................................ $ (10.0) $ (82.7) $ 49.2
================= ================= =================
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1) ORGANIZATION
The Equitable Life Assurance Society of the United States ("Equitable
Life") converted to a stock life insurance company on July 22, 1992 and
became a wholly owned subsidiary of The Equitable Companies Incorporated
(the "Holding Company"). Equitable Life's insurance business is
conducted principally by Equitable Life and its wholly owned life
insurance subsidiary, Equitable Variable Life Insurance Company
("EVLICO"). Effective January 1, 1997, EVLICO was merged into Equitable
Life, which will continue to conduct the Company's insurance business.
Equitable Life's investment management business, which comprises the
Investment Services segment, is conducted principally by Alliance
Capital Management L.P. ("Alliance"), Equitable Real Estate Investment
Management, Inc. ("EREIM") and Donaldson, Lufkin & Jenrette, Inc.
("DLJ"), an investment banking and brokerage affiliate. AXA-UAP ("AXA"),
a French holding company for an international group of insurance and
related financial services companies, is the Holding Company's largest
shareholder, owning approximately 60.8% at December 31, 1996 (63.6%
assuming conversion of Series E Convertible Preferred Stock held by AXA
and 54.4% if all securities convertible into, and options on, common
stock were to be converted or exercised).
2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
-----------------------------------------------------
The accompanying consolidated financial statements are prepared in
conformity with generally accepted accounting principles ("GAAP").
The accompanying consolidated financial statements include the accounts
of Equitable Life and its wholly owned life insurance subsidiaries
(collectively, the "Insurance Group"); non-insurance subsidiaries,
principally Alliance, an investment advisory subsidiary, and EREIM, a
real estate investment management subsidiary; and those partnerships and
joint ventures in which Equitable Life or its subsidiaries has control
and a majority economic interest (collectively, including its
consolidated subsidiaries, the "Company"). The Company's investment in
DLJ is reported on the equity basis of accounting. Closed Block assets
and liabilities and results of operations are presented in the
consolidated financial statements as single line items (see Note 6).
Unless specifically stated, all disclosures contained herein supporting
the consolidated financial statements exclude the Closed Block related
amounts.
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
All significant intercompany transactions and balances have been
eliminated in consolidation other than intercompany transactions and
balances with the Closed Block and the discontinued Guaranteed Interest
Contract ("GIC") Segment (see Note 7).
The years "1996," "1995" and "1994" refer to the years ended December
31, 1996, 1995 and 1994, respectively.
Certain reclassifications have been made in the amounts presented for
prior periods to conform these periods with the 1996 presentation.
F-6
<PAGE>
Closed Block
------------
As of July 22, 1992, Equitable Life established the Closed Block for the
benefit of certain classes of individual participating policies for
which Equitable Life had a dividend scale payable in 1991 and which were
in force on that date. Assets were allocated to the Closed Block in an
amount which, together with anticipated revenues from policies included
in the Closed Block, was reasonably expected to be sufficient to support
such business, including provision for payment of claims, certain
expenses and taxes, and for continuation of dividend scales payable in
1991, assuming the experience underlying such scales continues.
Assets allocated to the Closed Block inure solely to the benefit of the
holders of policies included in the Closed Block and will not revert to
the benefit of the Holding Company. The plan of demutualization
prohibits the reallocation, transfer, borrowing or lending of assets
between the Closed Block and other portions of Equitable Life's General
Account, any of its Separate Accounts or to any affiliate of Equitable
Life without the approval of the New York Superintendent of Insurance
(the "Superintendent"). Closed Block assets and liabilities are carried
on the same basis as similar assets and liabilities held in the General
Account. The excess of Closed Block liabilities over Closed Block assets
represents the expected future post-tax contribution from the Closed
Block which would be recognized in income over the period the policies
and contracts in the Closed Block remain in force.
Discontinued Operations
-----------------------
In 1991, the Company's management adopted a plan to discontinue the
business operations of the GIC Segment, consisting of the Group
Non-Participating Wind-Up Annuities ("Wind-Up Annuities") and Guaranteed
Interest Contract ("GIC") lines of business. The Company established a
pre-tax provision for the estimated future losses of the GIC line of
business and a premium deficiency reserve for the Wind-Up Annuities.
Subsequent losses incurred have been charged to the two loss provisions.
Management reviews the adequacy of the allowance and reserve each
quarter. During the fourth quarter 1996 review, management determined it
was necessary to increase the allowance for expected future losses of
the GIC Segment. Management believes the loss provisions for GIC
contracts and Wind-Up Annuities at December 31, 1996 are adequate to
provide for all future losses; however, the determination of loss
provisions continues to involve numerous estimates and subjective
judgments regarding the expected performance of discontinued operations
investment assets. There can be no assurance the losses provided for
will not differ from the losses ultimately realized (See Note 7).
Accounting Changes
------------------
In 1996, the Company changed its method of accounting for long-duration
participating life insurance contracts, primarily within the Closed
Block, in accordance with the provisions prescribed by Statement of
Financial Accounting Standards ("SFAS") No. 120, "Accounting and
Reporting by Mutual Life Insurance Enterprises and by Insurance
Enterprises for Certain Long-Duration Participating Contracts". The
effect of this change, including the impact on the Closed Block, was to
increase earnings from continuing operations before cumulative effect of
accounting change by $19.2 million, net of Federal income taxes of $10.3
million for 1996. The financial statements for 1995 and 1994 have been
retroactively restated for the change which resulted in an increase
(decrease) in earnings before cumulative effect of accounting change of
$15.2 million, net of Federal income taxes of $8.2 million, and $(2.6)
million, net of Federal income tax benefit of $1.0 million,
respectively. Shareholder's equity increased $199.1 million as of
January 1, 1994 for the effect of retroactive application of the new
method. (See "Deferred Policy Acquisition Costs," "Policyholders'
Account Balances and Future Policy Benefits" and Note 6.)
The Company implemented SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of," as of
January 1, 1996. The statement requires long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or
changes in circumstances
F-7
<PAGE>
indicate the carrying value of such assets may not be recoverable.
Effective with SFAS No. 121's adoption, impaired real estate is written
down to fair value with the impairment loss being included in investment
gains (losses), net. Before implementing SFAS No. 121, valuation
allowances on real estate held for the production of income were
computed using the forecasted cash flows of the respective properties
discounted at a rate equal to the Company's cost of funds. The adoption
of the statement resulted in the release of valuation allowances of
$152.4 million and recognition of impairment losses of $144.0 million on
real estate held and used. Real estate which management has committed to
disposing of by sale or abandonment is classified as real estate to be
disposed of. Valuation allowances on real estate to be disposed of
continue to be computed using the lower of estimated fair value or
depreciated cost, net of disposition costs. Implementation of the SFAS
No. 121 impairment requirements relative to other assets to be disposed
of resulted in a charge for the cumulative effect of an accounting
change of $23.1 million, net of a Federal income tax benefit of $12.4
million, due to the writedown to fair value of building improvements
relating to facilities being vacated beginning in 1996.
In the first quarter of 1995, the Company adopted SFAS No. 114,
"Accounting by Creditors for Impairment of a Loan". This statement
applies to all loans, including loans restructured in a troubled debt
restructuring involving a modification of terms. This statement
addresses the accounting for impairment of a loan by specifying how
allowances for credit losses should be determined. Impaired loans within
the scope of this statement are measured based on the present value of
expected future cash flows discounted at the loan's effective interest
rate, at the loan's observable market price or the fair value of the
collateral if the loan is collateral dependent. The Company provides for
impairment of loans through an allowance for possible losses. The
adoption of this statement did not have a material effect on the level
of these allowances or on the Company's consolidated statements of
earnings and shareholder's equity.
Beginning coincident with issuance of SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," implementation
guidance in November 1995, the Financial Accounting Standards Board
("FASB") permitted companies a one-time opportunity, through December
31, 1995, to reassess the appropriateness of the classification of all
securities held at that time. On December 1, 1995, the Company
transferred $4,794.9 million of securities classified as held to
maturity to the available for sale portfolio. As a result, consolidated
shareholder's equity increased by $149.4 million, net of deferred policy
acquisition costs ("DAC"), amounts attributable to participating group
annuity contracts and deferred Federal income taxes.
In the fourth quarter of 1994 (effective as of January 1, 1994), the
Company adopted SFAS No. 112, "Employers' Accounting for Postemployment
Benefits," which required employers to recognize the obligation to
provide postemployment benefits. Implementation of this statement
resulted in a charge for the cumulative effect of accounting change of
$27.1 million, net of a Federal income tax benefit of $14.6 million.
New Accounting Pronouncements
-----------------------------
The FASB issued SFAS No. 123, "Accounting for Stock-Based Compensation,"
which permits entities to recognize as expense over the vesting period
the fair value of all stock-based awards on the date of grant or,
alternatively, to continue to apply the provisions of Accounting
Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to
Employees," and related interpretations. Companies which elect to
continue to apply APB Opinion No. 25 must provide pro forma net income
disclosures for employee stock option grants made in 1995 and future
years as if the fair-value-based method defined in SFAS No. 123 had been
applied. The Company accounts for stock option plans sponsored by the
Holding Company, DLJ and Alliance in accordance with the provisions of
APB Opinion No. 25 (see Note 21).
F-8
<PAGE>
In June 1996, the FASB issued SFAS No. 125, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities".
SFAS No. 125 specifies the accounting and reporting requirements for
transfers of financial assets, the recognition and measurement of
servicing assets and liabilities and extinguishments of liabilities.
SFAS No. 125 is effective for transactions occurring after December 31,
1996 and is to be applied prospectively. In December 1996, the FASB
issued SFAS No. 127, "Deferral of the Effective Date of Certain
Provisions of FASB Statement No. 125," which defers for one year the
effective date of provisions relating to secured borrowings and
collateral and transfers of financial assets that are part of repurchase
agreements, dollar-roll, securities lending and similar transactions.
Management has not yet determined the effect of implementing SFAS No.
125.
Valuation of Investments
------------------------
Fixed maturities identified as available for sale are reported at
estimated fair value. The amortized cost of fixed maturities is adjusted
for impairments in value deemed to be other than temporary.
Mortgage loans on real estate are stated at unpaid principal balances,
net of unamortized discounts and valuation allowances. Effective with
the adoption of SFAS No. 114 on January 1, 1995, the valuation
allowances are based on the present value of expected future cash flows
discounted at the loan's original effective interest rate or the
collateral value if the loan is collateral dependent. However, if
foreclosure is or becomes probable, the measurement method used is
collateral value. Prior to the adoption of SFAS No. 114, the valuation
allowances were based on losses expected by management to be realized on
transfers of mortgage loans to real estate (upon foreclosure or
in-substance foreclosure), on the disposition or settlement of mortgage
loans and on mortgage loans management believed may not be collectible
in full. In establishing valuation allowances, management previously
considered, among other things the estimated fair value of the
underlying collateral.
Real estate, including real estate acquired in satisfaction of debt, is
stated at depreciated cost less valuation allowances. At the date of
foreclosure (including in-substance foreclosure), real estate acquired
in satisfaction of debt is valued at estimated fair value. Impaired real
estate is written down to fair value with the impairment loss being
included in investment gains (losses) net. Valuation allowances on real
estate available for sale are computed using the lower of current
estimated fair value or depreciated cost, net of disposition costs.
Prior to the adoption of SFAS No. 121, valuation allowances on real
estate held for the production of income were computed using the
forecasted cash flows of the respective properties discounted at a rate
equal to the Company's cost of funds.
Policy loans are stated at unpaid principal balances.
Partnerships and joint venture interests in which the Company does not
have control and a majority economic interest are reported on the equity
basis of accounting and are included either with equity real estate or
other equity investments, as appropriate.
Common stocks are carried at estimated fair value and are included in
other equity investments.
Short-term investments are stated at amortized cost which approximates
fair value and are included with other invested assets.
Cash and cash equivalents includes cash on hand, amounts due from banks
and highly liquid debt instruments purchased with an original maturity
of three months or less.
All securities are recorded in the consolidated financial statements on
a trade date basis.
Investment Results and Unrealized Investment Gains (Losses)
-----------------------------------------------------------
Net investment income and realized investment gains and losses
(collectively, "investment results") related to certain participating
group annuity contracts which are passed through to the contractholders
are reflected as interest credited to policyholders' account balances.
F-9
<PAGE>
Realized investment gains and losses are determined by specific
identification and are presented as a component of revenue. Valuation
allowances are netted against the asset categories to which they apply
and changes in the valuation allowances are included in investment gains
or losses.
Unrealized investment gains and losses on fixed maturities available for
sale and equity securities held by the Company are accounted for as a
separate component of shareholder's equity, net of related deferred
Federal income taxes, amounts attributable to the discontinued GIC
Segment, participating group annuity contracts, and DAC related to
universal life and investment-type products and participating
traditional life contracts.
Recognition of Insurance Income and Related Expenses
----------------------------------------------------
Premiums from universal life and investment-type contracts are reported
as deposits to policyholders' account balances. Revenues from these
contracts consist of amounts assessed during the period against
policyholders' account balances for mortality charges, policy
administration charges and surrender charges. Policy benefits and claims
that are charged to expense include benefit claims incurred in the
period in excess of related policyholders' account balances.
Premiums from participating and non-participating traditional life and
annuity policies with life contingencies generally are recognized as
income when due. Benefits and expenses are matched with such income so
as to result in the recognition of profits over the life of the
contracts. This match is accomplished by means of the provision for
liabilities for future policy benefits and the deferral and subsequent
amortization of policy acquisition costs.
For contracts with a single premium or a limited number of premium
payments due over a significantly shorter period than the total period
over which benefits are provided, premiums are recorded as income when
due with any excess profit deferred and recognized in income in a
constant relationship to insurance in force or, for annuities, the
amount of expected future benefit payments.
Premiums from individual health contracts are recognized as income over
the period to which the premiums relate in proportion to the amount of
insurance protection provided.
Deferred Policy Acquisition Costs
---------------------------------
The costs of acquiring new business, principally commissions,
underwriting, agency and policy issue expenses, all of which vary with
and are primarily related to the production of new business, are
deferred. DAC is subject to recoverability testing at the time of policy
issue and loss recognition testing at the end of each accounting period.
For universal life products and investment-type products, DAC is
amortized over the expected total life of the contract group (periods
ranging from 15 to 35 years and 5 to 17 years, respectively) as a
constant percentage of estimated gross profits arising principally from
investment results, mortality and expense margins and surrender charges
based on historical and anticipated future experience, updated at the
end of each accounting period. The effect on the amortization of DAC of
revisions to estimated gross profits is reflected in earnings in the
period such estimated gross profits are revised. The effect on the DAC
asset that would result from realization of unrealized gains (losses) is
recognized with an offset to unrealized gains (losses) in consolidated
shareholder's equity as of the balance sheet date.
For participating traditional life policies (substantially all of which
are in the Closed Block), DAC is amortized over the expected total life
of the contract group (40 years) as a constant percentage based on the
present value of the estimated gross margin amounts expected to be
realized over the life of the contracts using the expected investment
yield. At December 31, 1996, the expected investment yield ranged from
7.30% grading to 7.68% over 13 years. Estimated gross margin includes
anticipated premiums and investment results less claims and
administrative expenses, changes in the net level premium reserve and
expected annual policyholder dividends. Deviations of actual results
from estimated experience are reflected in earnings in the period such
deviations occur. The effect on the DAC asset that would result from
realization of unrealized gains (losses) is recognized with an offset to
unrealized gains (losses) in consolidated shareholder's equity as of the
balance sheet date.
F-10
<PAGE>
For non-participating traditional life and annuity policies with life
contingencies, DAC is amortized in proportion to anticipated premiums.
Assumptions as to anticipated premiums are estimated at the date of
policy issue and are consistently applied during the life of the
contracts. Deviations from estimated experience are reflected in
earnings in the period such deviations occur. For these contracts, the
amortization periods generally are for the total life of the policy.
For individual health benefit insurance, DAC is amortized over the
expected average life of the contracts (10 years for major medical
policies and 20 years for disability income ("DI") products) in
proportion to anticipated premium revenue at time of issue. In the
fourth quarter of 1996, the DAC related to DI contracts issued prior to
July 1993 was written off.
Policyholders' Account Balances and Future Policy Benefits
----------------------------------------------------------
Policyholders' account balances for universal life and investment-type
contracts are equal to the policy account values. The policy account
values represent an accumulation of gross premium payments plus credited
interest less expense and mortality charges and withdrawals.
For participating traditional life policies, future policy benefit
liabilities are calculated using a net level premium method on the basis
of actuarial assumptions equal to guaranteed mortality and dividend fund
interest rates. The liability for annual dividends represents the
accrual of annual dividends earned. Terminal dividends are accrued in
proportion to gross margins over the life of the contract.
For non-participating traditional life insurance policies, future policy
benefit liabilities are estimated using a net level premium method on
the basis of actuarial assumptions as to mortality, persistency and
interest established at policy issue. Assumptions established at policy
issue as to mortality and persistency are based on the Insurance Group's
experience which, together with interest and expense assumptions,
include a margin for adverse deviation. When the liabilities for future
policy benefits plus the present value of expected future gross premiums
for a product are insufficient to provide for expected future policy
benefits and expenses for that product, DAC is written off and
thereafter, if required, a premium deficiency reserve is established by
a charge to earnings. Benefit liabilities for traditional annuities
during the accumulation period are equal to accumulated contractholders'
fund balances and after annuitization are equal to the present value of
expected future payments. Interest rates used in establishing such
liabilities range from 2.25% to 11.5% for life insurance liabilities and
from 2.25% to 13.5% for annuity liabilities.
During the fourth quarter of 1996, a loss recognition study on
participating group annuity contracts and conversion annuities ("Pension
Par") was completed which included management's revised estimate of
assumptions, including expected mortality and future investment returns.
The study's results prompted management to establish a premium
deficiency reserve which decreased earnings from continuing operations
and net earnings by $47.5 million ($73.0 million pre-tax).
Individual health benefit liabilities for active lives are estimated
using the net level premium method, and assumptions as to future
morbidity, withdrawals and interest. Benefit liabilities for disabled
lives are estimated using the present value of benefits method and
experience assumptions as to claim terminations, expenses and interest.
During the fourth quarter of 1996, the Company completed a loss
recognition study of the DI business which incorporated management's
revised estimates of future experience with regard to morbidity,
investment returns, claims and administration expenses and other
factors. The study indicated DAC was not recoverable and the reserves
were not sufficient. Earnings from continuing operations and net
earnings decreased by $208.0 million ($320.0 million pre-tax) as a
result of strengthening DI reserves by $175.0 million and writing off
unamortized DAC of $145.0 million. The determination of DI reserves
requires making assumptions and estimates relating to a variety of
factors, including morbidity and interest rates, claims experience and
lapse
F-11
<PAGE>
rates based on then known facts and circumstances. Such factors as claim
incidence and termination rates can be affected by changes in the
economic, legal and regulatory environments and work ethic. While
management believes its DI reserves have been calculated on a reasonable
basis and are adequate, there can be no assurance reserves will be
sufficient to provide for future liabilities.
Claim reserves and associated liabilities for individual disability
income and major medical policies were $711.8 million and $639.6 million
at December 31, 1996 and 1995, respectively (excluding $175.0 million of
reserve strengthening in 1996). Incurred benefits (benefits paid plus
changes in claim reserves) and benefits paid for individual DI and major
medical policies (excluding $175.0 million of reserve strengthening in
1996) are summarized as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Incurred benefits related to current year.......... $ 189.0 $ 176.0 $ 188.6
Incurred benefits related to prior years........... 69.1 67.8 28.7
----------------- ---------------- -----------------
Total Incurred Benefits............................ $ 258.1 $ 243.8 $ 217.3
================= ================ =================
Benefits paid related to current year.............. $ 32.6 $ 37.0 $ 43.7
Benefits paid related to prior years............... 153.3 137.8 132.3
----------------- ---------------- -----------------
Total Benefits Paid................................ $ 185.9 $ 174.8 $ 176.0
================= ================ =================
</TABLE>
Policyholders' Dividends
------------------------
The amount of policyholders' dividends to be paid (including those on
policies included in the Closed Block) is determined annually by
Equitable Life's Board of Directors. The aggregate amount of
policyholders' dividends is related to actual interest, mortality,
morbidity and expense experience for the year and judgment as to the
appropriate level of statutory surplus to be retained by Equitable Life.
Equitable Life is subject to limitations on the amount of statutory
profits which can be retained with respect to certain classes of
individual participating policies that were in force on July 22, 1992
which are not included in the Closed Block and with respect to
participating policies issued subsequent to July 22, 1992. Excess
statutory profits, if any, will be distributed over time to such
policyholders and will not be available to Equitable Life's shareholder.
Earnings in excess of limitations, if any, would be accrued as
policyholders' dividends.
At December 31, 1996, participating policies, including those in the
Closed Block, represent approximately 24.2% ($52.3 billion) of directly
written life insurance in force, net of amounts ceded.
Federal Income Taxes
--------------------
The Company files a consolidated Federal income tax return with the
Holding Company and its non-life insurance subsidiaries. Current Federal
income taxes were charged or credited to operations based upon amounts
estimated to be payable or recoverable as a result of taxable operations
for the current year. Deferred income tax assets and liabilities were
recognized based on the difference between financial statement carrying
amounts and income tax bases of assets and liabilities using enacted
income tax rates and laws.
Separate Accounts
-----------------
Separate Accounts are established in conformity with the New York State
Insurance Law and generally are not chargeable with liabilities that
arise from any other business of the Insurance Group. Separate Accounts
assets are subject to General Account claims only to the extent the
value of such assets exceeds the Separate Accounts liabilities.
F-12
<PAGE>
Assets and liabilities of the Separate Accounts, representing net
deposits and accumulated net investment earnings less fees, held
primarily for the benefit of contractholders, and for which the
Insurance Group does not bear the investment risk, are shown as separate
captions in the consolidated balance sheets. The Insurance Group bears
the investment risk on assets held in one Separate Account, therefore,
such assets are carried on the same basis as similar assets held in the
General Account portfolio. Assets held in the other Separate Accounts
are carried at quoted market values or, where quoted values are not
available, at estimated fair values as determined by the Insurance
Group.
The investment results of Separate Accounts on which the Insurance Group
does not bear the investment risk are reflected directly in Separate
Accounts liabilities. For 1996, 1995 and 1994, investment results of
such Separate Accounts were $2,970.6 million, $1,963.2 million and
$665.2 million, respectively.
Deposits to Separate Accounts are reported as increases in Separate
Accounts liabilities and are not reported in revenues. Mortality, policy
administration and surrender charges on all Separate Accounts are
included in revenues.
F-13
<PAGE>
3) INVESTMENTS
The following tables provide additional information relating to fixed
maturities and equity securities:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
----------------- ----------------- ---------------- ---------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
DECEMBER 31, 1996
-----------------
Fixed Maturities:
Available for Sale:
Corporate.......................... $ 13,645.2 $ 451.5 $ 121.0 $ 13,975.7
Mortgage-backed.................... 2,015.9 11.2 20.3 2,006.8
U.S. Treasury securities and
U.S. government and
agency securities................ 1,539.4 39.2 19.3 1,559.3
States and political subdivisions.. 77.0 4.5 - 81.5
Foreign governments................ 302.6 18.0 2.2 318.4
Redeemable preferred stock......... 139.1 3.3 7.1 135.3
----------------- ----------------- ---------------- ---------------
Total Available for Sale............... $ 17,719.2 $ 527.7 $ 169.9 $ 18,077.0
================= ================= ================ ===============
Equity Securities:
Common stock......................... $ 98.7 $ 49.3 $ 17.7 $ 130.3
================= ================= ================ ===============
December 31, 1995
-----------------
Fixed Maturities:
Available for Sale:
Corporate.......................... $ 10,910.7 $ 617.6 $ 118.1 $ 11,410.2
Mortgage-backed.................... 1,838.0 31.2 1.2 1,868.0
U.S. Treasury securities and
U.S. government and
agency securities................ 2,257.0 77.8 4.1 2,330.7
States and political subdivisions.. 45.7 5.2 - 50.9
Foreign governments................ 124.5 11.0 .2 135.3
Redeemable preferred stock......... 108.1 5.3 8.6 104.8
----------------- ----------------- ---------------- ---------------
Total Available for Sale............... $ 15,284.0 $ 748.1 $ 132.2 $ 15,899.9
================= ================= ================ ===============
Equity Securities:
Common stock......................... $ 97.3 $ 49.1 $ 18.0 $ 128.4
================= ================= ================ ===============
</TABLE>
For publicly traded fixed maturities and equity securities, estimated
fair value is determined using quoted market prices. For fixed
maturities without a readily ascertainable market value, the Company has
determined an estimated fair value using a discounted cash flow
approach, including provisions for credit risk, generally based upon the
assumption such securities will be held to maturity. Estimated fair
value for equity securities, substantially all of which do not have a
readily ascertainable market value, has been determined by the Company.
Such estimated fair values do not necessarily represent the values for
which these securities could have been sold at the dates of the
consolidated balance sheets. At December 31, 1996 and 1995, securities
without a readily ascertainable market value having an amortized cost of
$3,915.7 million and $3,748.9 million, respectively, had estimated fair
values of $4,024.6 million and $3,981.8 million, respectively.
F-14
<PAGE>
The contractual maturity of bonds at December 31, 1996 is shown below:
AVAILABLE FOR SALE
------------------------------------
AMORTIZED ESTIMATED
COST FAIR VALUE
---------------- -----------------
(IN MILLIONS)
Due in one year or less........... $ 539.6 $ 542.5
Due in years two through five..... 2,776.2 2,804.0
Due in years six through ten...... 6,044.7 6,158.1
Due after ten years............... 6,203.7 6,430.3
Mortgage-backed securities........ 2,015.9 2,006.8
---------------- -----------------
Total............................. $ 17,580.1 $ 17,941.7
================ =================
Bonds not due at a single maturity date have been included in the above
table in the year of final maturity. Actual maturities will differ from
contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
The Insurance Group's fixed maturity investment portfolio includes
corporate high yield securities consisting of public high yield bonds,
redeemable preferred stocks and directly negotiated debt in leveraged
buyout transactions. The Insurance Group seeks to minimize the higher
than normal credit risks associated with such securities by monitoring
the total investments in any single issuer or total investment in a
particular industry group. Certain of these corporate high yield
securities are classified as other than investment grade by the various
rating agencies, i.e., a rating below Baa or National Association of
Insurance Commissioners ("NAIC") designation of 3 (medium grade), 4 or 5
(below investment grade) or 6 (in or near default). At December 31,
1996, approximately 14.20% of the $17,563.7 million aggregate amortized
cost of bonds held by the Insurance Group were considered to be other
than investment grade.
In addition to its holdings of corporate high yield securities, the
Insurance Group is an equity investor in limited partnership interests
which primarily invest in securities considered to be other than
investment grade.
The Company has restructured or modified the terms of certain fixed
maturity investments. The fixed maturity portfolio includes amortized
costs of $5.5 million and $15.9 million at December 31, 1996 and 1995,
respectively, of such restructured securities. These amounts include
fixed maturities which are in default as to principal and/or interest
payments, are to be restructured pursuant to commenced negotiations or
where the borrowers went into bankruptcy subsequent to acquisition
(collectively, "problem fixed maturities") of $2.2 million and $1.6
million as of December 31, 1996 and 1995, respectively. Gross interest
income that would have been recorded in accordance with the original
terms of restructured fixed maturities amounted to $1.4 million, $3.0
million and $7.5 million in 1996, 1995 and 1994, respectively. Gross
interest income on these fixed maturities included in net investment
income aggregated $1.3 million, $2.9 million and $6.8 million in 1996,
1995 and 1994, respectively.
F-15
<PAGE>
Investment valuation allowances and changes thereto are shown below:
<TABLE>
<CAPTION>
1996 1995 1994
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Balances, beginning of year........................ $ 325.3 $ 284.9 $ 355.6
SFAS No. 121 release............................... (152.4) - -
Additions charged to income........................ 125.0 136.0 51.0
Deductions for writedowns and
asset dispositions............................... (160.8) (95.6) (121.7)
----------------- ---------------- -----------------
Balances, End of Year.............................. $ 137.1 $ 325.3 $ 284.9
================= ================ =================
Balances, end of year comprise:
Mortgage loans on real estate.................... $ 50.4 $ 65.5 $ 64.2
Equity real estate............................... 86.7 259.8 220.7
----------------- ---------------- -----------------
Total.............................................. $ 137.1 $ 325.3 $ 284.9
================= ================ =================
</TABLE>
At December 31, 1996, the carrying values of investments held for the
production of income which were non-income producing for the twelve
months preceding the consolidated balance sheet date were $25.0 million
of fixed maturities and $2.6 million of mortgage loans on real estate.
At December 31, 1996 and 1995, mortgage loans on real estate with
scheduled payments 60 days (90 days for agricultural mortgages) or more
past due or in foreclosure (collectively, "problem mortgage loans on
real estate") had an amortized cost of $12.4 million (0.4% of total
mortgage loans on real estate) and $87.7 million (2.4% of total mortgage
loans on real estate), respectively.
The payment terms of mortgage loans on real estate may from time to time
be restructured or modified. The investment in restructured mortgage
loans on real estate, based on amortized cost, amounted to $388.3
million and $531.5 million at December 31, 1996 and 1995, respectively.
These amounts include $1.0 million and $3.8 million of problem mortgage
loans on real estate at December 31, 1996 and 1995, respectively. Gross
interest income on restructured mortgage loans on real estate that would
have been recorded in accordance with the original terms of such loans
amounted to $35.5 million, $52.1 million and $44.9 million in 1996, 1995
and 1994, respectively. Gross interest income on these loans included in
net investment income aggregated $28.2 million, $37.4 million and $32.8
million in 1996, 1995 and 1994, respectively.
Impaired mortgage loans (as defined under SFAS No. 114) along with the
related provision for losses were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------
1996 1995
------------------- -------------------
(IN MILLIONS)
<S> <C> <C>
Impaired mortgage loans with provision for losses.................. $ 340.0 $ 310.1
Impaired mortgage loans with no provision for losses............... 122.3 160.8
------------------- -------------------
Recorded investment in impaired mortgage loans..................... 462.3 470.9
Provision for losses............................................... 46.4 62.7
------------------- -------------------
Net Impaired Mortgage Loans........................................ $ 415.9 $ 408.2
=================== ===================
</TABLE>
Impaired mortgage loans with no provision for losses are loans where the
fair value of the collateral or the net present value of the expected
future cash flows related to the loan equals or exceeds the recorded
investment. Interest income earned on loans where the collateral value
is used to measure impairment is recorded on a
F-16
<PAGE>
cash basis. Interest income on loans where the present value method is
used to measure impairment is accrued on the net carrying value amount
of the loan at the interest rate used to discount the cash flows.
Changes in the present value attributable to changes in the amount or
timing of expected cash flows are reported as investment gains or
losses.
During 1996 and 1995, respectively, the Company's average recorded
investment in impaired mortgage loans was $552.1 million and $429.0
million. Interest income recognized on these impaired mortgage loans
totaled $38.8 million and $27.9 million for 1996 and 1995, respectively,
including $17.9 million and $13.4 million recognized on a cash basis.
The Insurance Group's investment in equity real estate is through direct
ownership and through investments in real estate joint ventures. At
December 31, 1996 and 1995, the carrying value of equity real estate
available for sale amounted to $345.6 million and $255.5 million,
respectively. For 1996, 1995 and 1994, respectively, real estate of
$58.7 million, $35.3 million and $189.8 million was acquired in
satisfaction of debt. At December 31, 1996 and 1995, the Company owned
$771.7 million and $862.7 million, respectively, of real estate acquired
in satisfaction of debt.
Depreciation of real estate is computed using the straight-line method
over the estimated useful lives of the properties, which generally range
from 40 to 50 years. Accumulated depreciation on real estate was $587.5
million and $662.4 million at December 31, 1996 and 1995, respectively.
Depreciation expense on real estate totaled $91.8 million, $121.7
million and $117.0 million for 1996, 1995 and 1994, respectively. As a
result of the implementation of SFAS No. 121, during 1996 no
depreciation expense has been recorded on real estate available for
sale.
F-17
<PAGE>
4) JOINT VENTURES AND PARTNERSHIPS
Summarized combined financial information of real estate joint ventures
(34 and 38 individual ventures as of December 31, 1996 and 1995,
respectively) and of limited partnership interests accounted for under
the equity method, in which the Company has an investment of $10.0
million or greater and an equity interest of 10% or greater is as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1996 1995
---------------- -----------------
(IN MILLIONS)
<S> <C> <C>
FINANCIAL POSITION
Investments in real estate, at depreciated cost........................ $ 1,883.7 $ 2,684.1
Investments in securities, generally at estimated fair value........... 2,430.6 2,459.8
Cash and cash equivalents.............................................. 98.0 489.1
Other assets........................................................... 427.0 270.8
---------------- -----------------
Total assets........................................................... 4,839.3 5,903.8
---------------- -----------------
Borrowed funds - third party........................................... 1,574.3 1,782.3
Borrowed funds - the Company........................................... 137.9 220.5
Other liabilities...................................................... 415.8 593.9
---------------- -----------------
Total liabilities...................................................... 2,128.0 2,596.7
---------------- -----------------
Partners' Capital...................................................... $ 2,711.3 $ 3,307.1
================ =================
Equity in partners' capital included above............................. $ 806.8 $ 902.2
Equity in limited partnership interests not included above............. 201.8 212.8
Other.................................................................. 9.8 8.9
---------------- -----------------
Carrying Value......................................................... $ 1,018.4 $ 1,123.9
================ =================
</TABLE>
<TABLE>
<CAPTION>
1996 1995 1994
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
STATEMENTS OF EARNINGS
Revenues of real estate joint ventures............. $ 348.9 $ 463.5 $ 537.7
Revenues of other limited partnership interests.... 386.1 242.3 103.4
Interest expense - third party..................... (111.0) (135.3) (114.9)
Interest expense - the Company..................... (30.0) (41.0) (36.9)
Other expenses..................................... (282.5) (397.7) (430.9)
----------------- ---------------- -----------------
Net Earnings....................................... $ 311.5 $ 131.8 $ 58.4
================= ================ =================
Equity in net earnings included above.............. $ 73.9 $ 49.1 $ 18.9
Equity in net earnings of limited partnerships
interests not included above..................... 35.8 44.8 25.3
Other.............................................. .9 1.0 1.8
----------------- ---------------- -----------------
Total Equity in Net Earnings....................... $ 110.6 $ 94.9 $ 46.0
================= ================ =================
</TABLE>
F-18
<PAGE>
5) NET INVESTMENT INCOME AND INVESTMENT GAINS (LOSSES)
The sources of net investment income are summarized as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Fixed maturities.................... $ 1,307.4 $ 1,151.1 $ 1,036.5
Mortgage loans on real estate....... 303.0 329.0 385.7
Equity real estate.................. 442.4 560.4 561.8
Other equity investments............ 94.3 76.9 36.1
Policy loans........................ 160.3 144.4 122.7
Other investment income............. 217.4 273.0 322.4
----------------- ---------------- -----------------
Gross investment income........... 2,524.8 2,534.8 2,465.2
----------------- ---------------- -----------------
Investment expenses............... 348.9 446.6 466.6
----------------- ---------------- -----------------
Net Investment Income............... $ 2,175.9 $ 2,088.2 $ 1,998.6
================= ================ =================
Investment gains (losses), net, including changes in the valuation
allowances, are summarized as follows:
</TABLE>
<TABLE>
<CAPTION>
1996 1995 1994
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Fixed maturities................................... $ 60.5 $ 119.9 $ (14.3)
Mortgage loans on real estate...................... (27.3) (40.2) (43.1)
Equity real estate................................. (79.7) (86.6) 20.6
Other equity investments........................... 18.9 12.8 75.9
Issuance and sales of Alliance Units............... 20.6 - 52.4
Other.............................................. (2.8) (.6) .3
----------------- ---------------- -----------------
Investment (Losses) Gains, Net..................... $ (9.8) $ 5.3 $ 91.8
================= ================ =================
</TABLE>
Writedowns of fixed maturities amounted to $29.9 million, $46.7 million
and $30.8 million for 1996, 1995 and 1994, respectively, and writedowns
of equity real estate subsequent to the adoption of SFAS No. 121
amounted to $23.7 million for the year ended December 31, 1996.
For 1996, 1995 and 1994, respectively, proceeds received on sales of
fixed maturities classified as available for sale amounted to $8,353.5
million, $8,206.0 million and $5,253.9 million. Gross gains of $154.2
million, $211.4 million and $65.2 million and gross losses of $92.7
million, $64.2 million and $50.8 million, respectively, were realized on
these sales. The change in unrealized investment (losses) gains related
to fixed maturities classified as available for sale for 1996, 1995 and
1994 amounted to $(258.0) million, $1,077.2 million and $(742.2)
million, respectively.
During each of 1995 and 1994, one security classified as held to
maturity was sold. During the eleven months ended November 30, 1995 and
the year ended December 31, 1994, respectively, twelve and six
securities so classified were transferred to the available for sale
portfolio. All actions were taken as a result of a significant
deterioration in creditworthiness. The aggregate amortized costs of the
securities sold were $1.0 million and $19.9 million with a related
investment gain of $-0- million and $.8 million recognized in 1995 and
1994, respectively; the aggregate amortized cost of the securities
transferred was $116.0 million and $42.8 million with gross unrealized
investment losses of $3.2 million and $3.1 million charged to
consolidated shareholder's equity for the eleven months ended November
30, 1995 and the year ended December 31,
F-19
<PAGE>
1994, respectively. On December 1, 1995, the Company transferred
$4,794.9 million of securities classified as held to maturity to the
available for sale portfolio. As a result, unrealized gains on fixed
maturities increased $395.6 million, offset by DAC of $126.5 million,
amounts attributable to participating group annuity contracts of $39.2
million and deferred Federal income taxes of $80.5 million.
For 1996, 1995 and 1994, investment results passed through to certain
participating group annuity contracts as interest credited to
policyholders' account balances amounted to $136.7 million, $131.2
million and $175.8 million, respectively.
In 1996, Alliance acquired the business of Cursitor-Eaton Asset
Management Company and Cursitor Holdings Limited (collectively,
"Cursitor") for approximately $159.0 million. The purchase price
consisted of $94.3 million in cash, 1.8 million of Alliance's publicly
traded units ("Alliance Units"), 6% notes aggregating $21.5 million
payable ratably over four years, and substantial additional
consideration which will be determined at a later date. The excess of
the purchase price, including acquisition costs and minority interest,
over the fair value of Cursitor's net assets acquired resulted in the
recognition of intangible assets consisting of costs assigned to
contracts acquired and goodwill of approximately $122.8 million and
$38.3 million, respectively, which are being amortized over the
estimated useful lives of 20 years. The Company recognized an investment
gain of $20.6 million as a result of the issuance of Alliance Units in
this transaction. At December 31, 1996, the Company's ownership of
Alliance Units was approximately 57.3%.
In 1994, Alliance sold 4.96 million newly issued Alliance Units to third
parties at prevailing market prices. The Company continues to hold its
1% general partnership interest in Alliance. The Company recognized an
investment gain of $52.4 million as a result of these transactions.
Net unrealized investment gains (losses), included in the consolidated
balance sheets as a component of equity and the changes for the
corresponding years, are summarized as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Balance, beginning of year as restated............. $ 396.5 $ (220.5) $ 144.6
Changes in unrealized investment (losses) gains.... (297.6) 1,198.9 (856.7)
Changes in unrealized investment losses
(gains) attributable to:
Participating group annuity contracts.......... - (78.1) 40.8
DAC............................................ 42.3 (216.8) 273.6
Deferred Federal income taxes.................. 48.7 (287.0) 177.2
----------------- ---------------- -----------------
Balance, End of Year............................... $ 189.9 $ 396.5 $ (220.5)
================= ================ =================
Balance, end of year comprises:
Unrealized investment gains (losses) on:
Fixed maturities............................... $ 357.8 $ 615.9 $ (461.3)
Other equity investments....................... 31.6 31.1 7.7
Other, principally Closed Block................ 53.1 93.1 (5.1)
----------------- ---------------- -----------------
Total........................................ 442.5 740.1 (458.7)
Amounts of unrealized investment (gains)
losses attributable to:
Participating group annuity contracts........ (72.2) (72.2) 5.9
DAC.......................................... (52.0) (94.3) 122.4
Deferred Federal income taxes................ (128.4) (177.1) 109.9
----------------- ---------------- -----------------
Total.............................................. $ 189.9 $ 396.5 $ (220.5)
================= ================ =================
</TABLE>
F-20
<PAGE>
6) CLOSED BLOCK
Summarized financial information of the Closed Block follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------
1996 1995
----------------- -----------------
(IN MILLIONS)
<S> <C> <C>
Assets
Fixed Maturities:
Available for sale, at estimated fair value (amortized cost,
$3,820.7 and $3,662.8)...................................... $ 3,889.5 $ 3,896.2
Mortgage loans on real estate................................... 1,380.7 1,368.8
Policy loans.................................................... 1,765.9 1,797.2
Cash and other invested assets.................................. 336.1 440.9
DAC............................................................. 876.5 792.6
Other assets.................................................... 246.3 286.4
----------------- -----------------
Total Assets.................................................... $ 8,495.0 $ 8,582.1
================= =================
Liabilities
Future policy benefits and policyholders' account balances...... $ 8,999.7 $ 8,923.5
Other liabilities............................................... 91.6 297.9
----------------- -----------------
Total Liabilities............................................... $ 9,091.3 $ 9,221.4
================= =================
</TABLE>
<TABLE>
<CAPTION>
1996 1995 1994
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Revenues
Premiums and other revenue......................... $ 724.8 $ 753.4 $ 798.1
Investment income (net of investment
expenses of $27.3, $26.7 and $19.0).............. 546.6 538.9 523.0
Investment losses, net............................. (5.5) (20.2) (24.0)
----------------- ---------------- -----------------
Total revenues............................... 1,265.9 1,272.1 1,297.1
----------------- ---------------- -----------------
Benefits and Other Deductions
Policyholders' benefits and dividends.............. 1,106.3 1,077.6 1,121.6
Other operating costs and expenses................. 34.6 51.3 38.5
----------------- ---------------- -----------------
Total benefits and other deductions.......... 1,140.9 1,128.9 1,160.1
----------------- ---------------- -----------------
Contribution from the Closed Block................. $ 125.0 $ 143.2 $ 137.0
================= ================ =================
</TABLE>
In the fourth quarter of 1996, the Company adopted SFAS No. 120, which
prescribes the accounting for individual participating life insurance
contracts, most of which are included in the Closed Block. The
implementation of SFAS No. 120 resulted in an increase (decrease) in the
contribution from the Closed Block of $27.5 million, $18.8 million and
$(14.0) million in 1996, 1995 and 1994, respectively.
The fixed maturity portfolio, based on amortized cost, includes $.4
million and $4.3 million at December 31, 1996 and 1995, respectively, of
restructured securities which includes problem fixed maturities of $.3
million and $1.9 million, respectively.
F-21
<PAGE>
During the eleven months ended November 30, 1995, one security
classified as held to maturity was sold and ten securities classified as
held to maturity were transferred to the available for sale portfolio.
All actions resulted from significant deterioration in creditworthiness.
The amortized cost of the security sold was $4.2 million. The aggregate
amortized cost of the securities transferred was $81.3 million with
gross unrealized investment losses of $.1 million transferred to equity.
At December 1, 1995, $1,750.7 million of securities classified as held
to maturity were transferred to the available for sale portfolio. As a
result, unrealized gains of $88.5 million on fixed maturities were
recognized, offset by DAC amortization of $52.6 million.
At December 31, 1996 and 1995, problem mortgage loans on real estate had
an amortized cost of $4.3 million and $36.5 million, respectively, and
mortgage loans on real estate for which the payment terms have been
restructured had an amortized cost of $114.2 million and $137.7 million,
respectively. At December 31, 1996 and 1995, the restructured mortgage
loans on real estate amount included $.7 million and $8.8 million,
respectively, of problem mortgage loans on real estate.
Impaired mortgage loans (as defined under SFAS No. 114) along with the
related provision for losses were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1996 1995
---------------- -----------------
(IN MILLIONS)
<S> <C> <C>
Impaired mortgage loans with provision for losses......... $ 128.1 $ 106.8
Impaired mortgage loans with no provision for losses...... .6 10.1
---------------- -----------------
Recorded investment in impaired mortgages................. 128.7 116.9
Provision for losses...................................... 12.9 17.9
---------------- -----------------
Net Impaired Mortgage Loans............................... $ 115.8 $ 99.0
================ =================
</TABLE>
During 1996 and 1995, respectively, the Closed Block's average recorded
investment in impaired mortgage loans was $153.8 million and $146.9
million, respectively. Interest income recognized on these impaired
mortgage loans totaled $10.9 million and $5.9 million for 1996 and 1995,
respectively, including $4.7 million and $1.3 million recognized on a
cash basis.
Valuation allowances amounted to $13.8 million and $18.4 million on
mortgage loans on real estate and $3.7 million and $4.3 million on
equity real estate at December 31, 1996 and 1995, respectively.
Writedowns of fixed maturities amounted to $12.8 million, $16.8 million
and $15.9 million for 1996, 1995 and 1994, respectively. As of January
1, 1996, the adoption of SFAS No. 121 resulted in the recognition of
impairment losses of $5.6 million on real estate held and used.
Many expenses related to Closed Block operations are charged to
operations outside of the Closed Block; accordingly, the contribution
from the Closed Block does not represent the actual profitability of the
Closed Block operations. Operating costs and expenses outside of the
Closed Block are, therefore, disproportionate to the business outside of
the Closed Block.
F-22
<PAGE>
7) DISCONTINUED OPERATIONS
Summarized financial information of the GIC Segment follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------
1996 1995
----------------- -----------------
(IN MILLIONS)
<S> <C> <C>
Assets
Mortgage loans on real estate........... $ 1,111.1 $ 1,485.8
Equity real estate...................... 925.6 1,122.1
Other invested assets................... 474.0 665.2
Other assets............................ 226.1 579.3
----------------- -----------------
Total Assets............................ $ 2,736.8 $ 3,852.4
================= =================
Liabilities
Policyholders' liabilities.............. $ 1,335.9 $ 1,399.8
Allowance for future losses............. 262.0 164.2
Amounts due to continuing operations.... 996.2 2,097.1
Other liabilities....................... 142.7 191.3
----------------- -----------------
Total Liabilities....................... $ 2,736.8 $ 3,852.4
================= =================
</TABLE>
<TABLE>
<CAPTION>
1996 1995 1994
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Revenues
Investment income (net of investment expenses
of $127.5, $153.1 and $183.3).................... $ 245.4 $ 323.6 $ 394.3
Investment (losses) gains, net..................... (18.9) (22.9) 26.8
Policy fees, premiums and other income............. .2 .7 .4
----------------- ---------------- -----------------
Total revenues..................................... 226.7 301.4 421.5
Benefits and other deductions...................... 250.4 326.5 443.2
Losses charged to allowance for future losses...... (23.7) (25.1) (21.7)
----------------- ---------------- -----------------
Pre-tax loss from operations....................... - - -
Pre-tax loss from strengthening of the
allowance for future losses...................... (129.0) - -
Federal income tax benefit......................... 45.2 - -
----------------- ---------------- -----------------
Loss from Discontinued Operations.................. $ (83.8) $ - $ -
================= ================ =================
</TABLE>
In 1991, management adopted a plan to discontinue the business
operations of the GIC Segment consisting of group non-participating
Wind-Up Annuities and the GIC lines of business. The loss allowance and
premium deficiency reserve of $569.6 million provided for in 1991 were
based on management's best judgment at that time.
The Company's quarterly process for evaluating the loss provisions
applies the current period's results of the discontinued operations
against the allowance, re-estimates future losses, and adjusts the
provisions, if appropriate. Additionally, as part of the Company's
annual planning process which takes place in the fourth quarter of each
year, investment and benefit cash flow projections are prepared. These
updated assumptions and estimates resulted in the need to strengthen the
loss provisions by $129.0 million, resulting in a post-tax charge of
$83.8 million to discontinued operations' results in the fourth quarter
of 1996.
F-23
<PAGE>
Management believes the loss provisions for Wind-Up Annuities and GIC
contracts at December 31, 1996 are adequate to provide for all future
losses; however, the determination of loss provisions continues to
involve numerous estimates and subjective judgments regarding the
expected performance of discontinued operations investment assets. There
can be no assurance the losses provided for will not differ from the
losses ultimately realized. To the extent actual results or future
projections of the discontinued operations differ from management's
current best estimates and assumptions underlying the loss provisions,
the difference would be reflected in the consolidated statements of
earnings in discontinued operations. In particular, to the extent
income, sales proceeds and holding periods for equity real estate differ
from management's previous assumptions, periodic adjustments to the loss
provisions are likely to result.
In January 1995, continuing operations transferred $1,215.4 million in
cash to the GIC Segment in settlement of its obligation to provide
assets to fund the accumulated deficit of the GIC Segment. Subsequently,
the GIC Segment remitted $1,155.4 million in cash to continuing
operations in partial repayment of borrowings by the GIC Segment. No
gains or losses were recognized on these transactions. Amounts due to
continuing operations at December 31, 1996, consisted of $1,080.0
million borrowed by the discontinued GIC Segment offset by $83.8 million
representing an obligation of continuing operations to provide assets to
fund the accumulated deficit of the GIC Segment.
Investment income included $88.2 million of interest income for 1994 on
amounts due from continuing operations. Benefits and other deductions
include $114.3 million, $154.6 million and $219.7 million of interest
expense related to amounts borrowed from continuing operations in 1996,
1995 and 1994, respectively.
Valuation allowances amounted to $9.0 million and $19.2 million on
mortgage loans on real estate and $20.4 million and $77.9 million on
equity real estate at December 31, 1996 and 1995, respectively. As of
January 1, 1996, the adoption of SFAS No. 121 resulted in a release of
existing valuation allowances of $71.9 million on equity real estate and
recognition of impairment losses of $69.8 million on real estate held
and used. Writedowns of fixed maturities amounted to $1.6 million, $8.1
million and $17.8 million for 1996, 1995 and 1994, respectively and
writedowns of equity real estate subsequent to the adoption of SFAS No.
121 amounted to $12.3 million for 1996.
The fixed maturity portfolio, based on amortized cost, includes $6.2
million and $15.1 million at December 31, 1996 and 1995, respectively,
of restructured securities. These amounts include problem fixed
maturities of $.5 million and $6.1 million at December 31, 1996 and
1995, respectively.
At December 31, 1996 and 1995, problem mortgage loans on real estate had
amortized costs of $7.9 million and $35.4 million, respectively, and
mortgage loans on real estate for which the payment terms have been
restructured had amortized costs of $208.1 million and $289.3 million,
respectively.
Impaired mortgage loans (as defined under SFAS No. 114) along with the
related provision for losses were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1996 1995
---------------- -----------------
(IN MILLIONS)
<S> <C> <C>
Impaired mortgage loans with provision for losses....... $ 83.5 $ 105.1
Impaired mortgage loans with no provision for losses.... 15.0 18.2
---------------- -----------------
Recorded investment in impaired mortgages............... 98.5 123.3
Provision for losses.................................... 8.8 17.7
---------------- -----------------
Net Impaired Mortgage Loans............................. $ 89.7 $ 105.6
================ =================
</TABLE>
F-24
<PAGE>
During 1996 and 1995, the GIC Segment's average recorded investment in
impaired mortgage loans was $134.8 million and $177.4 million,
respectively. Interest income recognized on these impaired mortgage
loans totaled $10.1 million and $4.5 million for 1996 and 1995,
respectively, including $7.5 million and $.4 million recognized on a
cash basis.
At December 31, 1996 and 1995, the GIC Segment had $263.0 million and
$310.9 million, respectively, of real estate acquired in satisfaction of
debt.
8) SHORT-TERM AND LONG-TERM DEBT
Short-term and long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------
1996 1995
----------------- -----------------
(IN MILLIONS)
<S> <C> <C>
Short-term debt.................................... $ 174.1 $ -
----------------- -----------------
Long-term debt:
Equitable Life:
6.95% surplus notes scheduled to mature 2005..... 399.4 399.3
7.70% surplus notes scheduled to mature 2015..... 199.6 199.6
Eurodollar notes, 10.5% due 1997................. - 76.2
Zero coupon note, 11.25% due 1997................ - 120.1
Other............................................ .5 16.3
----------------- -----------------
Total Equitable Life......................... 599.5 811.5
----------------- -----------------
Wholly Owned and Joint Venture Real Estate:
Mortgage notes, 4.92% - 12.50% due through 2006.. 968.6 1,084.4
----------------- -----------------
Alliance:
Other............................................ 24.7 3.4
----------------- -----------------
Total long-term debt............................... 1,592.8 1,899.3
----------------- -----------------
Total Short-term and Long-term Debt................ $ 1,766.9 $ 1,899.3
================= =================
</TABLE>
Short-term Debt
---------------
Equitable Life has a $350.0 million bank credit facility available to
fund short-term working capital needs and to facilitate the securities
settlement process. The credit facility consists of two types of
borrowing options with varying interest rates. The interest rates are
based on external indices dependent on the type of borrowing and at
December 31, 1996 range from 5.73% (the London Interbank Offering Rate
("LIBOR") plus 22.5 basis points) to 8.25% (the prime rate). There were
no borrowings outstanding under this bank credit facility at December
31, 1996.
F-25
<PAGE>
Equitable Life has a commercial paper program with an issue limit of
$500.0 million. This program is available for general corporate purposes
used to support Equitable Life's liquidity needs and is supported by
Equitable Life's existing $350.0 million five-year bank credit facility.
There were no borrowings outstanding under this program at December 31,
1996.
In February 1996, Alliance entered into a new $250.0 million five-year
revolving credit facility with a group of banks which replaced its
$100.0 million revolving credit facility and its $100.0 million
commercial paper back-up revolving credit facility. Under the new
revolving credit facility, the interest rate, at the option of Alliance,
is a floating rate generally based upon a defined prime rate, a rate
related to the LIBOR or the Federal Funds rate. A facility fee is
payable on the total facility. The revolving credit facility will be
used to provide back-up liquidity for commercial paper to be used under
Alliance's $100.0 million commercial paper program, to fund commission
payments to financial intermediaries for the sale of Class B and C
shares under Alliance's mutual fund distribution system, and for general
working capital purposes. As of December 31, 1996, Alliance had not
issued any commercial paper under its $100.0 million commercial paper
program and there were no borrowings outstanding under Alliance's
revolving credit facility.
At December 31, 1996, long-term debt expected to mature in 1997 totaling
$174.1 million was reclassified as short-term debt.
Long-term Debt
--------------
Several of the long-term debt agreements have restrictive covenants
related to the total amount of debt, net tangible assets and other
matters. The Company is in compliance with all debt covenants.
On December 18, 1995, Equitable Life issued, in accordance with Section
1307 of the New York Insurance Law, $400.0 million of surplus notes
having an interest rate of 6.95% scheduled to mature in 2005 and $200.0
million of surplus notes having an interest rate of 7.70% scheduled to
mature in 2015 (together, the "Surplus Notes"). Proceeds from the
issuance of the Surplus Notes were $596.6 million, net of related
issuance costs. The unamortized discount on the Surplus Notes was $1.0
million at December 31, 1996. Payments of interest on or principal of
the Surplus Notes are subject to prior approval by the Superintendent.
The Company has pledged real estate, mortgage loans, cash and securities
amounting to $1,406.4 million and $1,629.7 million at December 31, 1996
and 1995, respectively, as collateral for certain long-term debt.
At December 31, 1996, aggregate maturities of the long-term debt based
on required principal payments at maturity for 1997 and the succeeding
four years are $494.9 million, $316.7 million, $19.7 million, $5.4
million, $0 million, respectively, and $946.7 million thereafter.
9) FEDERAL INCOME TAXES
A summary of the Federal income tax expense (benefit) in the
consolidated statements of earnings is shown below:
<TABLE>
<CAPTION>
1996 1995 1994
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Federal income tax expense (benefit):
Current............................... $ 97.9 $ (11.7) $ 4.0
Deferred.............................. (88.2) 132.2 96.2
----------------- ---------------- -----------------
Total................................... $ 9.7 $ 120.5 $ 100.2
================= ================ =================
</TABLE>
F-26
<PAGE>
The Federal income taxes attributable to consolidated operations are
different from the amounts determined by multiplying the earnings before
Federal income taxes and minority interest by the expected Federal
income tax rate of 35%. The sources of the difference and the tax
effects of each are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Expected Federal income tax expense..... $ 73.0 $ 173.7 $ 154.5
Non-taxable minority interest........... (28.6) (22.0) (17.6)
Differential earnings amount............ - - (16.8)
Adjustment of tax audit reserves........ 6.9 4.1 (4.6)
Equity in unconsolidated subsidiaries... (32.3) (19.4) (12.5)
Other................................... (9.3) (15.9) (2.8)
----------------- ---------------- -----------------
Federal Income Tax Expense.............. $ 9.7 $ 120.5 $ 100.2
================= ================ =================
</TABLE>
Prior to the date of demutualization, Equitable Life reduced its
deduction for policyholder dividends by the differential earnings
amount. This amount was computed, for each tax year, by multiplying
Equitable Life's average equity base, as determined for tax purposes, by
an estimate of the excess of an imputed earnings rate for stock life
insurance companies over the average mutual life insurance companies'
earnings rate. The differential earnings amount for each tax year was
subsequently recomputed when actual earnings rates were published by the
Internal Revenue Service. As a stock life insurance company, Equitable
Life no longer is required to reduce its policyholder dividend deduction
by the differential earnings amount, but differential earnings amounts
for pre-demutualization years were still being recomputed in 1994.
The components of the net deferred Federal income tax account are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996 December 31, 1995
--------------------------------- ---------------------------------
ASSETS LIABILITIES Assets Liabilities
--------------- ---------------- --------------- ---------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
DAC, reserves and reinsurance.......... $ - $ 166.0 $ - $ 304.4
Investments............................ - 328.6 - 326.9
Compensation and related benefits...... 259.2 - 293.0 -
Other.................................. - 1.8 - 32.3
--------------- ---------------- --------------- ---------------
Total.................................. $ 259.2 $ 496.4 $ 293.0 $ 663.6
=============== ================ =============== ===============
</TABLE>
The deferred Federal income taxes impacting operations reflect the net
tax effects of temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts
used for income tax purposes. The sources of these temporary differences
and the tax effects of each are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
DAC, reserves and reinsurance......... $ (156.2) $ 63.3 $ 12.0
Investments........................... 78.6 13.0 89.3
Compensation and related benefits..... 22.3 30.8 10.0
Other................................. (32.9) 25.1 (15.1)
----------------- ---------------- -----------------
Deferred Federal Income Tax
(Benefit) Expense................... $ (88.2) $ 132.2 $ 96.2
================= ================ =================
</TABLE>
F-27
<PAGE>
The Internal Revenue Service is in the process of examining the Holding
Company's consolidated Federal income tax returns for the years 1989
through 1991. Management believes these audits will have no material
adverse effect on the Company's results of operations.
10) REINSURANCE AGREEMENTS
The Insurance Group assumes and cedes reinsurance with other insurance
companies. The Insurance Group evaluates the financial condition of its
reinsurers to minimize its exposure to significant losses from reinsurer
insolvencies. The effect of reinsurance (excluding group life and
health) is summarized as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Direct premiums.................................... $ 461.4 $ 474.2 $ 476.7
Reinsurance assumed................................ 177.5 171.3 180.5
Reinsurance ceded.................................. (41.3) (38.7) (31.6)
----------------- ---------------- -----------------
Premiums........................................... $ 597.6 $ 606.8 $ 625.6
================= ================ =================
Universal Life and Investment-type Product
Policy Fee Income Ceded.......................... $ 48.2 $ 44.0 $ 27.5
================= ================ =================
Policyholders' Benefits Ceded...................... $ 54.1 $ 48.9 $ 20.7
================= ================ =================
Interest Credited to Policyholders' Account
Balances Ceded................................... $ 32.3 $ 28.5 $ 25.4
================= ================ =================
</TABLE>
Effective January 1, 1994, all in force business above $5.0 million was
reinsured. During 1996, the Company's retention limit on joint
survivorship policies was increased to $15.0 million. The Insurance
Group also reinsures the entire risk on certain substandard underwriting
risks as well as in certain other cases.
The Insurance Group cedes 100% of its group life and health business to
a third party insurance company. Premiums ceded totaled $2.4 million,
$260.6 million and $241.0 million for 1996, 1995 and 1994, respectively.
Ceded death and disability benefits totaled $21.2 million, $188.1
million and $235.5 million for 1996, 1995 and 1994, respectively.
Insurance liabilities ceded totaled $652.4 million and $724.2 million at
December 31, 1996 and 1995, respectively.
11) EMPLOYEE BENEFIT PLANS
The Company sponsors qualified and non-qualified defined benefit plans
covering substantially all employees (including certain qualified
part-time employees), managers and certain agents. The pension plans are
non-contributory. Equitable Life's and EREIM's benefits are based on a
cash balance formula or years of service and final average earnings, if
greater, under certain grandfathering rules in the plans. Alliance's
benefits are based on years of credited service, average final base
salary and primary social security benefits. The Company's funding
policy is to make the minimum contribution required by the Employee
Retirement Income Security Act of 1974.
Components of net periodic pension cost (credit) for the qualified and
non-qualified plans are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Service cost....................................... $ 33.8 $ 30.0 $ 30.3
Interest cost on projected benefit obligations..... 120.8 122.0 111.0
Actual return on assets............................ (181.4) (309.2) 24.4
Net amortization and deferrals..................... 43.4 155.6 (142.5)
----------------- ---------------- -----------------
Net Periodic Pension Cost (Credit)................. $ 16.6 $ (1.6) $ 23.2
================= ================ =================
</TABLE>
F-28
<PAGE>
The funded status of the qualified and non-qualified pension plans is as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1996 1995
---------------- -----------------
(IN MILLIONS)
<S> <C> <C>
Actuarial present value of obligations:
Vested.................................................. $ 1,672.2 $ 1,642.4
Non-vested.............................................. 10.1 10.9
---------------- -----------------
Accumulated Benefit Obligation............................ $ 1,682.3 $ 1,653.3
================ =================
Plan assets at fair value................................. $ 1,626.0 $ 1,503.8
Projected benefit obligation.............................. 1,765.5 1,743.0
---------------- -----------------
Projected benefit obligation in excess of plan assets..... (139.5) (239.2)
Unrecognized prior service cost........................... (17.9) (25.5)
Unrecognized net loss from past experience different
from that assumed....................................... 280.0 368.2
Unrecognized net asset at transition...................... 4.7 (7.3)
Additional minimum liability.............................. (19.3) (51.9)
---------------- -----------------
Prepaid Pension Cost...................................... $ 108.0 $ 44.3
================ =================
</TABLE>
The discount rate and rate of increase in future compensation levels
used in determining the actuarial present value of projected benefit
obligations were 7.5% and 4.25%, respectively, at December 31, 1996 and
7.25% and 4.50%, respectively, at December 31, 1995. As of January 1,
1996 and 1995, the expected long-term rate of return on assets for the
retirement plan was 10.25% and 11%, respectively.
The Company recorded, as a reduction of shareholder's equity, an
additional minimum pension liability of $12.9 million and $35.1 million,
net of Federal income taxes, at December 31, 1996 and 1995,
respectively, representing the excess of the accumulated benefit
obligation over the fair value of plan assets and accrued pension
liability.
The pension plan's assets include corporate and government debt
securities, equity securities, equity real estate and shares of Group
Trusts managed by Alliance.
Prior to 1987, the qualified plan funded participants' benefits through
the purchase of non-participating annuity contracts from Equitable Life.
Benefit payments under these contracts were approximately $34.7 million,
$36.4 million and $38.1 million for 1996, 1995 and 1994, respectively.
The Company provides certain medical and life insurance benefits
(collectively, "postretirement benefits") for qualifying employees,
managers and agents retiring from the Company on or after attaining age
55 who have at least 10 years of service. The life insurance benefits
are related to age and salary at retirement. The costs of postretirement
benefits are recognized in accordance with the provisions of SFAS No.
106. The Company continues to fund postretirement benefits costs on a
pay-as-you-go basis and, for 1996, 1995 and 1994, the Company made
estimated postretirement benefits payments of $18.9 million, $31.1
million and $29.8 million, respectively.
F-29
<PAGE>
The following table sets forth the postretirement benefits plan's
status, reconciled to amounts recognized in the Company's consolidated
financial statements:
<TABLE>
<CAPTION>
1996 1995 1994
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Service cost....................................... $ 5.3 $ 4.0 $ 3.9
Interest cost on accumulated postretirement
benefits obligation.............................. 34.6 34.7 28.6
Net amortization and deferrals..................... 2.4 (2.3) (3.9)
----------------- ---------------- -----------------
Net Periodic Postretirement Benefits Costs......... $ 42.3 $ 36.4 $ 28.6
================= ================ =================
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1996 1995
---------------- -----------------
(IN MILLIONS)
<S> <C> <C>
Accumulated postretirement benefits obligation:
Retirees................................................ $ 381.8 $ 391.8
Fully eligible active plan participants................. 50.7 50.4
Other active plan participants.......................... 60.7 64.2
---------------- -----------------
493.2 506.4
Unrecognized prior service cost........................... 50.5 56.3
Unrecognized net loss from past experience different
from that assumed and from changes in assumptions....... (150.5) (181.3)
---------------- -----------------
Accrued Postretirement Benefits Cost...................... $ 393.2 $ 381.4
================ =================
</TABLE>
At January 1, 1994, medical benefits available to retirees under age 65
are the same as those offered to active employees and medical benefits
will be limited to 200% of 1993 costs for all participants.
The assumed health care cost trend rate used in measuring the
accumulated postretirement benefits obligation was 9.5% in 1996,
gradually declining to 3.5% in the year 2009 and in 1995 was 10%,
gradually declining to 3.5% in the year 2008. The discount rate used in
determining the accumulated postretirement benefits obligation was 7.50%
and 7.25% at December 31, 1996 and 1995, respectively.
If the health care cost trend rate assumptions were increased by 1%, the
accumulated postretirement benefits obligation as of December 31, 1996
would be increased 7%. The effect of this change on the sum of the
service cost and interest cost would be an increase of 8%.
12) DERIVATIVES AND FAIR VALUE OF FINANCIAL INSTRUMENTS
Derivatives
-----------
The Insurance Group primarily uses derivatives for asset/liability risk
management and for hedging individual securities. Derivatives mainly are
utilized to reduce the Insurance Group's exposure to interest rate
fluctuations. Accounting for interest rate swap transactions is on an
accrual basis. Gains and losses related to interest rate swap
transactions are amortized as yield adjustments over the remaining life
of the underlying hedged security. Income and expense resulting from
interest rate swap activities are reflected in net investment income.
The notional amount of matched interest rate swaps outstanding at
December 31, 1996 was $649.9 million. The average unexpired terms at
December 31, 1996 range from 2.2 to 2.7 years. At December 31, 1996, the
cost of terminating outstanding matched swaps in a loss position was
$8.3 million and the unrealized gain on outstanding matched swaps in a
gain position was $11.4 million. The Company has no intention of
terminating these contracts prior to maturity. During 1996, 1995 and
1994, net gains (losses) of $.2 million, $1.4 million and $(.2) million,
respectively, were recorded in connection with
F-30
<PAGE>
interest rate swap activity. Equitable Life has implemented an interest
rate cap program designed to hedge crediting rates on interest-sensitive
individual annuities contracts. The outstanding notional amounts at
December 31, 1996 of contracts purchased and sold were $5,050.0 million
and $500.0 million, respectively. The net premium paid by Equitable Life
on these contracts was $22.5 million and is being amortized ratably over
the contract periods ranging from 3 to 5 years. Income and expense
resulting from this program are reflected as an adjustment to interest
credited to policyholders' account balances.
Substantially all of DLJ's business related to derivatives is by its
nature trading activities which are primarily for the purpose of
customer accommodations. DLJ's derivative activities consist primarily
of option writing and trading in forward and futures contracts.
Derivative financial instruments have both on-and-off balance sheet
implications depending on the nature of the contracts. DLJ's involvement
in swap contracts is not significant.
Fair Value of Financial Instruments
-----------------------------------
The Company defines fair value as the quoted market prices for those
instruments that are actively traded in financial markets. In cases
where quoted market prices are not available, fair values are estimated
using present value or other valuation techniques. The fair value
estimates are made at a specific point in time, based on available
market information and judgments about the financial instrument,
including estimates of timing, amount of expected future cash flows and
the credit standing of counterparties. Such estimates do not reflect any
premium or discount that could result from offering for sale at one time
the Company's entire holdings of a particular financial instrument, nor
do they consider the tax impact of the realization of unrealized gains
or losses. In many cases, the fair value estimates cannot be
substantiated by comparison to independent markets, nor can the
disclosed value be realized in immediate settlement of the instrument.
Certain financial instruments are excluded, particularly insurance
liabilities other than financial guarantees and investment contracts.
Fair market value of off-balance-sheet financial instruments of the
Insurance Group was not material at December 31, 1996 and 1995.
Fair value for mortgage loans on real estate are estimated by
discounting future contractual cash flows using interest rates at which
loans with similar characteristics and credit quality would be made.
Fair values for foreclosed mortgage loans and problem mortgage loans are
limited to the estimated fair value of the underlying collateral if
lower.
The estimated fair values for the Company's liabilities under GIC and
association plan contracts are estimated using contractual cash flows
discounted based on the T. Rowe Price GIC Index Rate for the appropriate
duration. For durations in excess of the published index rate, the
appropriate Treasury rate is used plus a spread equal to the longest
duration GIC rate spread published.
The estimated fair values for those group annuity contracts which are
classified as universal life type contracts are measured at the
estimated fair value of the underlying assets. The estimated fair values
for single premium deferred annuities ("SPDA") are estimated using
projected cash flows discounted at current offering rates. The estimated
fair values for supplementary contracts not involving life contingencies
("SCNILC") and annuities certain are derived using discounted cash flows
based upon the estimated current offering rate.
Fair value for long-term debt is determined using published market
values, where available, or contractual cash flows discounted at market
interest rates. The estimated fair values for non-recourse mortgage debt
are determined by discounting contractual cash flows at a rate which
takes into account the level of current market interest rates and
collateral risk. The estimated fair values for recourse mortgage debt
are determined by discounting contractual cash flows at a rate based
upon current interest rates of other companies with credit ratings
similar to the Company. The Company's fair value of short-term
borrowings approximates their carrying value.
F-31
<PAGE>
The following table discloses carrying value and estimated fair value
for financial instruments not otherwise disclosed in Notes 3, 6 and 7:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------------------
1996 1995
--------------------------------- ---------------------------------
CARRYING ESTIMATED Carrying Estimated
VALUE FAIR VALUE Value Fair Value
--------------- ---------------- --------------- ---------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Consolidated Financial Instruments:
-----------------------------------
Mortgage loans on real estate.......... $ 3,133.0 $ 3,394.6 $ 3,638.3 $ 3,973.6
Other joint ventures................... 467.0 467.0 492.7 492.7
Policy loans........................... 2,196.1 2,221.6 1,976.4 2,057.5
Policyholders' account balances:
Association plans.................... 78.1 77.3 101.0 100.0
Group annuity contracts.............. 2,141.0 1,954.0 2,335.0 2,395.0
SPDA................................. 1,062.7 1,065.7 1,265.8 1,272.0
Annuities certain and SCNILC......... 654.9 736.2 646.4 716.7
Long-term debt......................... 1,592.8 1,557.7 1,899.3 1,962.9
Closed Block Financial Instruments:
-----------------------------------
Mortgage loans on real estate.......... 1,380.7 1,425.6 1,368.8 1,461.4
Other equity investments............... 105.0 105.0 151.6 151.6
Policy loans........................... 1,765.9 1,798.0 1,797.2 1,891.4
SCNILC liability....................... 30.6 34.9 34.8 39.6
GIC Segment Financial Instruments:
----------------------------------
Mortgage loans on real estate.......... 1,111.1 1,220.3 1,485.8 1,666.1
Fixed maturities....................... 42.5 42.5 107.4 107.4
Other equity investments............... 300.5 300.5 455.9 455.9
Guaranteed interest contracts.......... 290.7 300.5 329.0 352.0
Long-term debt......................... 102.1 102.2 135.1 136.0
</TABLE>
13) COMMITMENTS AND CONTINGENT LIABILITIES
The Company has provided, from time to time, certain guarantees or
commitments to affiliates, investors and others. These arrangements
include commitments by the Company, under certain conditions: to make
capital contributions of up to $244.9 million to affiliated real estate
joint ventures; to provide equity financing to certain limited
partnerships of $205.8 million at December 31, 1996, under existing loan
or loan commitment agreements; and to provide short-term financing loans
which at December 31, 1996 totaled $14.6 million. Management believes
the Company will not incur any material losses as a result of these
commitments.
Equitable Life is the obligor under certain structured settlement
agreements which it had entered into with unaffiliated insurance
companies and beneficiaries. To satisfy its obligations under these
agreements, Equitable Life owns single premium annuities issued by
previously wholly owned life insurance subsidiaries. Equitable Life has
directed payment under these annuities to be made directly to the
beneficiaries under the structured settlement agreements. A contingent
liability exists with respect to these agreements should the previously
wholly owned subsidiaries be unable to meet their obligations.
Management believes the satisfaction of those obligations by Equitable
Life is remote.
At December 31, 1996, the Insurance Group had $51.6 million of letters
of credit outstanding.
F-32
<PAGE>
14) LITIGATION
A number of lawsuits has been filed against life and health insurers in
the jurisdictions in which Equitable Life and its subsidiaries do
business involving insurers' sales practices, alleged agent misconduct,
failure to properly supervise agents, and other matters. Some of the
lawsuits have resulted in the award of substantial judgments against
other insurers, including material amounts of punitive damages, or in
substantial settlements. In some states, juries have substantial
discretion in awarding punitive damages. Equitable Life, EVLICO and The
Equitable of Colorado, Inc. ("EOC"), like other life and health
insurers, from time to time are involved in such litigation. To date, no
such lawsuit has resulted in an award or settlement of any material
amount against the Company. Among litigations pending against Equitable
Life, EVLICO and EOC of the type referred to in this paragraph are the
litigations described in the following eight paragraphs.
An action entitled Golomb et al. v. The Equitable Life Assurance Society
of the United States was filed on January 20, 1995 in New York County
Supreme Court. The action purports to be brought on behalf of a class of
persons insured after 1983 under Lifetime Guaranteed Renewable Major
Medical Insurance Policies issued by Equitable Life (the "policies").
The complaint alleges that premium increases for these policies after
1983, all of which were filed with and approved by the New York State
Insurance Department and certain other state insurance departments,
breached the terms of the policies, and that statements in the policies
and elsewhere concerning premium increases constituted fraudulent
concealment, misrepresentations in violation of New York Insurance Law
Section 4226 and deceptive practices under New York General Business Law
Section 349. The complaint seeks a declaratory judgment, injunctive
relief restricting the methods by which Equitable Life increases
premiums on the policies in the future, a refund of premiums, and
punitive damages. Plaintiffs also have indicated that they will seek
damages in an unspecified amount. Equitable Life moved to dismiss the
complaint in its entirety on the grounds that it fails to state a claim
and that uncontroverted documentary evidence establishes a complete
defense to the claims. On May 29, 1996, the New York County Supreme
Court entered a judgment dismissing the complaint with prejudice.
Plaintiffs have filed a notice of appeal of that judgment.
In January 1996, separate actions were filed in Pennsylvania and Texas
state courts (entitled, respectively, Malvin et al. v. The Equitable
Life Assurance Society of the United States and Bowler et al. v. The
Equitable Life Assurance Society of the United States), making claims
similar to those in the New York action described above. The Texas
action also claims that Equitable Life misrepresented to Texas
policyholders that the Texas Insurance Department had approved Equitable
Life's rate increases. These actions are asserted on behalf of proposed
classes of Pennsylvania issued or renewed policyholders and Texas issued
or renewed policyholders, insured under the policies. The Pennsylvania
and Texas actions seek compensatory and punitive damages and injunctive
relief restricting the methods by which Equitable Life increases
premiums in the future based on the common law and statutes of those
states. On February 9, 1996, Equitable Life removed the Pennsylvania
action, Malvin, to the United States District Court for the Middle
District of Pennsylvania. Following the decision granting Equitable
Life's motion to dismiss the New York action (Golomb), on the consent of
the parties the District Court ordered an indefinite stay of all
proceedings in the Pennsylvania action, pending either party's right to
reinstate the proceeding, and ordered that for administrative purposes
the case be deemed administratively closed. On February 2, 1996,
Equitable Life removed the Texas action, Bowler, to the United States
District Court for the Northern District of Texas. On May 20, 1996, the
plaintiffs in Bowler amended their complaint by adding allegations of
misrepresentation regarding premium increases on other types of
guaranteed renewable major medical insurance policies issued by
Equitable Life up to and including 1983. On July 1, 1996, Equitable Life
filed a motion for summary judgment dismissing the first amended
complaint in its entirety. In August, 1996, the court granted plaintiffs
leave to file a supplemental complaint on behalf of a proposed class of
Texas policyholders claiming unfair discrimination, breach of contract
and other claims arising out of alleged differences between premiums
charged to Texas policyholders and premiums charged to similarly
situated policyholders in New York and certain other states. Plaintiffs
seek refunds of alleged overcharges, exemplary or additional damages
citing
F-33
<PAGE>
Texas statutory provisions which among other things, permit two times
the amount of actual damage plus additional penalties if the acts
complained of are found to be knowingly committed, and injunctive
relief. Equitable Life has also filed a motion for summary judgment
dismissing the supplemental complaint in its entirety. Plaintiffs also
obtained permission to add another plaintiff to the first amended and
supplemental complaints. Plaintiffs have opposed both motions for
summary judgment and requested that certain issues be found in their
favor. Equitable Life is in the process of replying.
On May 22, 1996, a separate action entitled Bachman v. The Equitable
Life Assurance Society of the United States, was filed in Florida state
court making claims similar to those in the previously reported Golomb
action. The Florida action is asserted on behalf of a proposed class of
Florida issued or renewed policyholders insured after 1983 under
Lifetime Guaranteed Renewable Major Medical Insurance Policies issued by
Equitable Life. The Florida action seeks compensatory and punitive
damages and injunctive relief restricting the methods by which Equitable
Life increases premiums in the future based on various common law
claims. On June 20, 1996, Equitable Life removed the Florida action to
Federal court. Equitable Life has answered the complaint, denying the
material allegations and asserting certain affirmative defenses. On
December 6, 1996, Equitable Life filed a motion for summary judgment and
plaintiff is expected to file its response to that motion shortly.
On November 6, 1996, a proposed class action entitled Fletcher, et al.
v. The Equitable Life Assurance Society of the United States, was filed
in California Superior Court for Fresno County, making substantially the
same allegations concerning premium rates and premium rate increases on
guaranteed renewable policies made in the Bowler action. The complaint
alleges, among other things, that differentials between rates charged
California policyholders and policyholders in New York and certain other
states, and the methods used by Equitable Life to calculate premium
increases, breached the terms of its policies, that Equitable Life
misrepresented and concealed the facts pertaining to such differentials
and methods in violation of California law, and that Equitable Life also
misrepresented that its rate increases were approved by the California
Insurance Department. Plaintiffs seek compensatory damages in an
unspecified amount, rescission, injunctive relief and attorneys' fees.
Equitable Life removed the action to Federal court; plaintiff has moved
to remand the case to state court. Although the outcome of any
litigation cannot be predicted with certainty, particularly in the early
stages of an action, the Company's management believes that the ultimate
resolution of the Golomb, Malvin, Bowler, Bachman and Fletcher
litigations should not have a material adverse effect on the financial
position of the Company. Due to the early stage of such litigations, the
Company's management cannot make an estimate of loss, if any, or predict
whether or not such litigations will have a material adverse effect on
the Company's results of operations in any particular period.
An action was instituted on April 6, 1995 against Equitable Life and its
wholly owned subsidiary, EOC, in New York state court, entitled Sidney
C. Cole et al. v. The Equitable Life Assurance Society of the United
States and The Equitable of Colorado, Inc., No. 95/108611 (N. Y.
County). The action is brought by the holders of a joint survivorship
whole life policy issued by EOC. The action purports to be on behalf of
a class consisting of all persons who from January 1, 1984 purchased
life insurance policies sold by Equitable Life and EOC based upon their
allegedly uniform sales presentations and policy illustrations. The
complaint puts in issue various alleged sales practices that plaintiffs
assert, among other things, misrepresented the stated number of years
that the annual premium would need to be paid. Plaintiffs seek damages
in an unspecified amount, imposition of a constructive trust, and seek
to enjoin Equitable Life and EOC from engaging in the challenged sales
practices. On June 28, 1996, the court issued a decision and order
dismissing with prejudice plaintiff's causes of action for fraud,
constructive fraud, breach of fiduciary duty, negligence, and unjust
enrichment, and dismissing without prejudice plaintiff's cause of action
under the New York State consumer protection statute. The only remaining
causes of action are for breach of contract and negligent
misrepresentation. Plaintiffs made a motion for reargument with respect
to this order, which was submitted to the court in October 1996. This
motion was denied by the court on December 16, 1996.
F-34
<PAGE>
On May 21, 1996, an action entitled Elton F. Duncan, III v. The
Equitable Life Assurance Society of the United States, was commenced
against Equitable Life in the Civil District Court for the Parish of
Orleans, State of Louisiana. The action is brought by an individual who
purchased a whole life policy. Plaintiff alleges misrepresentations
concerning the extent to which the policy was a proper replacement
policy and the number of years that the annual premium would need to be
paid. Plaintiff purports to represent a class consisting of all persons
who purchased whole life or universal life insurance policies from
Equitable Life from January 1, 1982 to the present. Plaintiff seeks
damages, including punitive damages, in an unspecified amount. On July
26, 1996, an action entitled Michael Bradley v. Equitable Variable Life
Insurance Company, was commenced in New York state court. The action is
brought by the holder of a variable life insurance policy issued by
EVLICO. The plaintiff purports to represent a class consisting of all
persons or entities who purchased one or more life insurance policies
issued by EVLICO from January 1, 1980. The complaint puts at issue
various alleged sales practices and alleges misrepresentations
concerning the extent to which the policy was a proper replacement
policy and the number of years that the annual premium would need to be
paid. Plaintiff seeks damages, including punitive damages, in an
unspecified amount and also seeks injunctive relief prohibiting EVLICO
from canceling policies for failure to make premium payments beyond the
alleged stated number of years that the annual premium would need to be
paid. On September 21, 1996 Equitable Life, EVLICO and EOC made a motion
to have this proceeding moved from Kings County Supreme Court to New
York County for joint trial or consolidation with the Cole action. The
motion was denied by the court on January 9, 1997. On January 10, 1997,
plaintiffs moved for certification of a nationwide class consisting of
all persons or entities who were sold one or more life insurance
products on a "vanishing premium" basis and/or were allegedly induced to
purchase additional policies from EVLICO, using the cash value
accumulated in existing policies, from January 1, 1980 through and
including December 31, 1996. Plaintiffs further moved to have Michael
Bradley designated as the class representative. Discovery regarding
class certification is underway.
On December 12, 1996, an action entitled Robert E. Dillon v. The
Equitable Life Assurance Society of the United States and The Equitable
of Colorado, was commenced in the United States District Court for the
Southern District of Florida. The action is brought by an individual who
purchased a joint whole life policy from EOC. The complaint puts at
issue various alleged sales practices and alleges misrepresentations
concerning the alleged impropriety of replacement policies issued by
Equitable Life and EOC and alleged misrepresentations regarding the
number of years premiums would have to be paid on the defendants'
policies. Plaintiff brings claims for breach of contract, fraud,
negligent misrepresentation, money had and received, unjust enrichment
and imposition of a constructive trust. Plaintiff purports to represent
two classes of persons. The first is a "contract class," consisting of
all persons who purchased whole or universal life insurance policies
from Equitable Life and EOC and from whom Equitable Life and EOC have
sought additional payments beyond the number of years allegedly promised
by Equitable Life and EOC. The second is a "fraud class," consisting of
all persons with an interest in policies issued by Equitable Life and
EOC at any time since October 1, 1986. Plaintiff seeks damages in an
unspecified amount, and also seeks injunctive relief attaching Equitable
Life's and EOC's profits from their alleged sales practices. Equitable
Life's and EOC's time to answer or move with respect to the complaint
has been extended until February 24, 1997. Although the outcome of
litigation cannot be predicted with certainty, particularly in the early
stages of an action, the Company's management believes that the ultimate
resolution of the Cole, Duncan, Bradley and Dillon litigations should
not have a material adverse effect on the financial position of the
Company. Due to the early stages of such litigations, the Company's
management cannot make an estimate of loss, if any, or predict whether
or not any such litigation will have a material adverse effect on the
Company's results of operations in any particular period.
On January 3, 1996, an amended complaint was filed in an action entitled
Frank Franze Jr. and George Busher, individually and on behalf of all
others similarly situated v. The Equitable Life Assurance Society of the
United States, and Equitable Variable Life Insurance Company, No.
94-2036 in the United States District Court for the Southern District of
Florida. The action was brought by two individuals who purchased
variable life insurance policies. The plaintiffs purport to represent a
nationwide class consisting of all persons who purchased variable life
insurance policies from Equitable Life and EVLICO since September 30,
1991. The basic allegation of the amended complaint is that Equitable
Life's and EVLICO's agents were trained not to
F-35
<PAGE>
disclose fully that the product being sold was life insurance.
Plaintiffs allege violations of the Federal securities laws and seek
rescission of the contracts or compensatory damages and attorneys' fees
and expenses. The court denied Equitable Life and EVLICO's motion to
dismiss the amended complaint on September 24, 1996. Equitable Life and
EVLICO have answered the amended complaint, denying the material
allegations and asserting certain affirmative defenses. Currently, the
parties are conducting discovery in connection with plaintiffs' attempt
to certify a class. On January 9, 1997, an action entitled Rosemarie
Chaviano, individually and on behalf of all others similarly situated v.
The Equitable Life Assurance Society of the United States, and Equitable
Variable Life Insurance Company, was filed in Massachusetts state court
making claims similar to those in the Franze action and alleging
violations of the Massachusetts securities laws. The plaintiff purports
to represent all persons in Massachusetts who purchased variable life
insurance contracts from Equitable Life and EVLICO from January 9, 1993
to the present. The Massachusetts action seeks rescission of the
contracts or compensatory damages, attorneys' fees, expenses and
injunctive relief. Although the outcome of any litigation cannot be
predicted with certainty, particularly in the early stages of an action,
the Company's management believes that the ultimate resolution of the
litigations discussed in this paragraph should not have a material
adverse effect on the financial position of the Company. Due to the
early stages of such litigation, the Company's management cannot make an
estimate of loss, if any, or predict whether or not any such litigation
will have a material adverse effect on the Company's results of
operations in any particular period.
Equitable Life recently responded to a subpoena from the U.S. Department
of Labor ("DOL") requesting copies of any third-party appraisals in
Equitable Life's possession relating to the ten largest properties (by
value) in the Prime Property Fund ("PPF"). PPF is an open-end,
commingled real estate separate account of Equitable Life for pension
clients. Equitable Life serves as investment manager in PPF and has
retained EREIM as advisor. In early 1995, the DOL commenced a national
investigation of commingled real estate funds with pension investors,
including PPF. The investigation now appears to be focused principally
on appraisal and valuation procedures in respect of fund properties. The
most recent request from the DOL seems to reflect, at least in part, an
interest in the relationship between the valuations for those properties
reflected in appraisals prepared for local property tax proceedings and
the valuations used by PPF for other purposes. At no time has the DOL
made any specific allegation that Equitable Life or EREIM has acted
improperly and Equitable Life and EREIM believe that any such allegation
would be without foundation. While the outcome of this investigation
cannot be predicted with certainty, in the opinion of management, the
ultimate resolution of this matter should not have a material adverse
effect on the Company's consolidated financial position or results of
operations in any particular period.
Equitable Casualty Insurance Company ("Casualty"), an indirect wholly
owned subsidiary of Equitable Life, is party to an arbitration
proceeding that commenced in August 1995. The proceeding relates to a
dispute among Casualty, Houston General Insurance Company ("Houston
General") and GEICO General Insurance Company ("GEICO General")
regarding the interpretation of a reinsurance agreement. The arbitration
panel issued a final award in favor of Casualty and GEICO General on
June 17, 1996. Casualty and GEICO General moved in the pending Texas
state court action, with Houston General's consent, for an order
confirming the arbitration award and entering judgment dismissing the
action. The motion was granted on January 29, 1997. The parties have
also stipulated to the dismissal without prejudice of a related Texas
Federal court action brought by Houston General against GEICO General
and Equitable Life. In connection with confirmation of the arbitration
award, Houston General paid to Casualty approximately $839,600 in
settlement of certain reimbursement claims by Casualty against Houston
General.
On July 25, 1995, a Consolidated and Supplemental Class Action Complaint
("Complaint") was filed against the Alliance North American Government
Income Trust, Inc. (the "Fund"), Alliance and certain other defendants
affiliated with Alliance, including the Holding Company, alleging
violations of Federal securities laws, fraud and breach of fiduciary
duty in connection with the Fund's investments in Mexican and Argentine
securities. The Complaint, which seeks certification of a plaintiff
class of persons who purchased or owned Class A, B or C shares of the
Fund from March 27, 1992 through December 23, 1994, seeks an unspecified
amount of damages, costs, attorneys' fees and punitive damages. The
principal allegations of the Complaint are that the Fund purchased debt
securities issued by the Mexican and Argentine governments in amounts
that
F-36
<PAGE>
were not permitted by the Fund's investment objective, and that there
was no shareholder vote to change the investment objective to permit
purchases in such amounts. The Complaint further alleges that the
decline in the value of the Mexican and Argentine securities held by the
Fund caused the Fund's net asset value to decline to the detriment of
the Fund's shareholders. On September 26, 1996, the United States
District Court for the Southern District of New York granted the
defendants' motion to dismiss all counts of the complaint. On October
11, 1996, plaintiffs filed a motion for reconsideration of the court's
decision granting defendants' motion to dismiss the Complaint. On
November 25, 1996, the court denied plaintiffs' motion for
reconsideration. On October 29, 1996, plaintiffs filed a motion for
leave to file an amended complaint. The principal allegations of the
proposed amended complaint are that the Fund did not properly disclose
that it planned to invest in mortgage-backed derivative securities and
that two advertisements used by the Fund misrepresented the risks of
investing in the Fund. Plaintiffs also reiterated allegations in the
Complaint that the Fund failed to hedge against the risks of investing
in foreign securities despite representations that it would do so.
Alliance believes that the allegations in the Complaint are without
merit and intends to vigorously defend against these claims. While the
ultimate outcome of this matter cannot be determined at this time,
management of Alliance does not expect that it will have a material
adverse effect on Alliance's results of operations or financial
condition.
On January 26, 1996, a purported purchaser of certain notes and warrants
to purchase shares of common stock of Rickel Home Centers, Inc.
("Rickel") filed a class action complaint against Donaldson, Lufkin &
Jenrette Securities Corporation ("DLJSC") and certain other defendants
for unspecified compensatory and punitive damages in the United States
District Court for the Southern District of New York. The suit was
brought on behalf of the purchasers of 126,457 units consisting of
$126,457,000 aggregate principal amount of 13 1/2% senior notes due 2001
and 126,457 warrants to purchase shares of common stock of Rickel issued
by Rickel in October 1994. The complaint alleges violations of Federal
securities laws and common law fraud against DLJSC, as the underwriter
of the units and as an owner of 7.3% of the common stock of Rickel, Eos
Partners, L.P., and General Electric Capital Corporation, each as owners
of 44.2% of the common stock of Rickel, and members of the Board of
Directors of Rickel, including a DLJSC Managing Director. The complaint
seeks to hold DLJSC liable for alleged misstatements and omissions
contained in the prospectus and registration statement filed in
connection with the offering of the units, alleging that the defendants
knew of financial losses and a decline in value of Rickel in the months
prior to the offering and did not disclose such information. The
complaint also alleges that Rickel failed to pay its semi-annual
interest payment due on the units on December 15, 1995 and that Rickel
filed a voluntary petition for reorganization pursuant to Chapter 11 of
the United States Bankruptcy Code on January 10, 1996. DLJSC intends to
defend itself vigorously against all of the allegations contained in the
complaint. Although there can be no assurance, DLJ does not believe the
outcome of this litigation will have a material adverse effect on its
financial condition. Due to the early stage of this litigation, based on
the information currently available to it, DLJ's management cannot make
an estimate of loss, if any, or predict whether or not such litigation
will have a material adverse effect on DLJ's results of operations in
any particular period.
In October 1995, DLJSC was named as a defendant in a purported class
action filed in a Texas State Court on behalf of the holders of $550.0
million principal amount of subordinated redeemable discount debentures
of National Gypsum Corporation ("NGC") canceled in connection with a
Chapter 11 plan of reorganization for NGC consummated in July 1993. The
named plaintiff in the State Court action also filed an adversary
proceeding in the Bankruptcy Court for the Northern District of Texas
seeking a declaratory judgment that the confirmed NGC plan of
reorganization does not bar the class action claims. Subsequent to the
consummation of NGC's plan of reorganization, NGC's shares traded for
values substantially in excess of, and in 1995 NGC was acquired for a
value substantially in excess of, the values upon which NGC's plan of
reorganization was based. The two actions arise out of DLJSC's
activities as financial advisor to NGC in the course of NGC's Chapter 11
reorganization proceedings. The class action complaint alleges that the
plan of reorganization submitted by NGC was based upon projections by
NGC and DLJSC which intentionally understated forecasts, and provided
misleading and incorrect information in order to hide NGC's true value
and that defendants breached their fiduciary duties by, among other
things, providing false, misleading or incomplete information to
deliberately understate the value of NGC. The class action complaint
seeks compensatory and punitive damages purportedly sustained by the
class. The Texas State Court action, which
F-37
<PAGE>
had been removed to the Bankruptcy Court, has been remanded back to the
state court, which remand is being opposed by DLJSC. DLJSC intends to
defend itself vigorously against all of the allegations contained in the
complaint. Although there can be no assurance, DLJ does not believe that
the ultimate outcome of this litigation will have a material adverse
effect on its financial condition. Due to the early stage of such
litigation, based upon the information currently available to it, DLJ's
management cannot make an estimate of loss, if any, or predict whether
or not such litigation will have a material adverse effect on DLJ's
results of operations in any particular period.
In November and December 1995, DLJSC, along with various other parties,
was named as a defendant in a number of purported class actions filed in
the U.S. District Court for the Eastern District of Louisiana. The
complaints allege violations of the Federal securities laws arising out
of a public offering in 1994 of $435.0 million of first mortgage notes
of Harrah's Jazz Company and Harrah's Jazz Finance Corp. The complaints
seek to hold DLJSC liable for various alleged misstatements and
omissions contained in the prospectus dated November 9, 1994. DLJSC
intends to defend itself vigorously against all of the allegations
contained in the complaints. Although there can be no assurance, DLJ
does not believe that the ultimate outcome of this litigation will have
a material adverse effect on its financial condition. Due to the early
stage of this litigation, based upon the information currently available
to it, DLJ's management cannot make an estimate of loss, if any, or
predict whether or not such litigation will have a material adverse
effect on DLJ's results of operations in any particular period.
In addition to the matters described above, Equitable Life and its
subsidiaries and DLJ and its subsidiaries are involved in various legal
actions and proceedings in connection with their businesses. Some of the
actions and proceedings have been brought on behalf of various alleged
classes of claimants and certain of these claimants seek damages of
unspecified amounts. While the ultimate outcome of such matters cannot
be predicted with certainty, in the opinion of management no such matter
is likely to have a material adverse effect on the Company's
consolidated financial position or results of operations.
15) LEASES
The Company has entered into operating leases for office space and
certain other assets, principally data processing equipment and office
furniture and equipment. Future minimum payments under noncancelable
leases for 1997 and the succeeding four years are $113.7 million, $110.6
million, $100.3 million, $72.3 million, $59.3 million and $427.3 million
thereafter. Minimum future sublease rental income on these noncancelable
leases for 1997 and the succeeding four years are $9.8 million, $6.0
million, $4.5 million, $2.4 million, $.8 million and $.1 million
thereafter.
At December 31, 1996, the minimum future rental income on noncancelable
operating leases for wholly owned investments in real estate for 1997
and the succeeding four years are $263.0 million, $242.1 million, $219.8
million, $194.3 million, $174.6 million and $847.1 million thereafter.
F-38
<PAGE>
16) OTHER OPERATING COSTS AND EXPENSES
Other operating costs and expenses consisted of the following:
<TABLE>
<CAPTION>
1996 1995 1994
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Compensation costs................................. $ 647.3 $ 595.9 $ 687.5
Commissions........................................ 329.5 314.3 313.0
Short-term debt interest expense................... 8.0 11.4 19.0
Long-term debt interest expense.................... 137.3 108.1 98.3
Amortization of policy acquisition costs........... 405.2 317.8 313.4
Capitalization of policy acquisition costs......... (391.9) (391.0) (410.9)
Rent expense, net of sub-lease income.............. 113.7 109.3 116.0
Other.............................................. 798.9 710.0 721.4
----------------- ---------------- -----------------
Total.............................................. $ 2,048.0 $ 1,775.8 $ 1,857.7
================= ================ =================
</TABLE>
During 1996, 1995 and 1994, the Company restructured certain operations
in connection with cost reduction programs and recorded pre-tax
provisions of $24.4 million, $32.0 million and $20.4 million,
respectively. The amounts paid during 1996, associated with cost
reduction programs, totaled $17.7 million. At December 31, 1996, the
liabilities associated with cost reduction programs amounted to $44.5
million. The 1996 cost reduction program included restructuring costs
related to the consolidation of insurance operations' service centers.
The 1995 cost reduction program included relocation expenses, including
the accelerated amortization of building improvements associated with
the relocation of the home office. The 1994 cost reduction program
included costs associated with the termination of operating leases and
employee severance benefits in connection with the consolidation of 16
insurance agencies. Amortization of DAC included $145.0 million writeoff
of DAC related to DI contracts in the fourth quarter of 1996.
17) INSURANCE GROUP STATUTORY FINANCIAL INFORMATION
Equitable Life is restricted as to the amounts it may pay as dividends
to the Holding Company. Under the New York Insurance Law, the
Superintendent has broad discretion to determine whether the financia1
condition of a stock life insurance company would support the payment of
dividends to its shareholders. For 1996, 1995 and 1994, statutory net
(loss) earnings totaled $(351.1) million, $(352.4) million and $67.5
million, respectively. No amounts are expected to be available for
dividends from Equitable Life to the Holding Company in 1997.
At December 31, 1996, the Insurance Group, in accordance with various
government and state regulations, had $21.9 million of securities
deposited with such government or state agencies.
F-39
<PAGE>
Accounting practices used to prepare statutory financial statements for
regulatory filings of stock life insurance companies differ in certain
instances from GAAP. The New York Insurance Department (the
"Department") recognizes only statutory accounting practices for
determining and reporting the financial condition and results of
operations of an insurance company, for determining its solvency under
the New York Insurance Law, and for determining whether its financial
condition warrants the payment of a dividend to its stockholders. No
consideration is given by the Department to financial statements
prepared in accordance with GAAP in making such determinations. The
following reconciles the Company's statutory change in surplus and
capital stock and statutory surplus and capital stock determined in
accordance with accounting practices prescribed by the Department with
net earnings and equity on a GAAP basis.
<TABLE>
<CAPTION>
1996 1995 1994
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Net change in statutory surplus and capital stock.. $ 56.0 $ 78.1 $ 292.4
Change in asset valuation reserves................. (48.4) 365.7 (285.2)
----------------- ---------------- -----------------
Net change in statutory surplus, capital stock
and asset valuation reserves..................... 7.6 443.8 7.2
Adjustments:
Future policy benefits and policyholders'
account balances............................... (298.5) (66.0) (5.3)
DAC.............................................. (13.3) 73.2 97.5
Deferred Federal income taxes.................... 108.0 (158.1) (58.7)
Valuation of investments......................... 289.8 189.1 45.2
Valuation of investment subsidiary............... (117.7) (188.6) 396.6
Limited risk reinsurance......................... 92.5 416.9 74.9
Contribution from the Holding Company............ - - (300.0)
Issuance of surplus notes........................ - (538.9) -
Postretirement benefits.......................... 28.9 (26.7) 17.1
Other, net....................................... 12.4 115.1 (44.0)
GAAP adjustments of Closed Block................. (9.8) 15.7 (9.5)
GAAP adjustments of discontinued GIC
Segment........................................ (89.6) 37.3 42.8
----------------- ---------------- -----------------
Net Earnings of the Insurance Group................ $ 10.3 $ 312.8 $ 263.8
================= ================ =================
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------
1996 1995 1994
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Statutory surplus and capital stock................ $ 2,258.9 $ 2,202.9 $ 2,124.8
Asset valuation reserves........................... 1,297.5 1,345.9 980.2
----------------- ---------------- -----------------
Statutory surplus, capital stock and asset
valuation reserves............................... 3,556.4 3,548.8 3,105.0
Adjustments:
Future policy benefits and policyholders'
account balances............................... (1,305.0) (1,006.5) (940.5)
DAC.............................................. 3,104.9 3,075.8 3,219.4
Deferred Federal income taxes.................... (306.1) (452.0) (29.4)
Valuation of investments......................... 286.8 417.7 (794.1)
Valuation of investment subsidiary............... (782.8) (665.1) (476.5)
Limited risk reinsurance......................... (336.5) (429.0) (845.9)
Issuance of surplus notes........................ (539.0) (538.9) -
Postretirement benefits.......................... (314.4) (343.3) (316.6)
Other, net....................................... 126.3 4.4 (79.2)
GAAP adjustments of Closed Block................. 783.7 830.8 740.4
GAAP adjustments of discontinued GIC
Segment........................................ (190.3) (184.6) (221.9)
----------------- ---------------- -----------------
Equity of the Insurance Group...................... $ 4,084.0 $ 4,258.1 $ 3,360.7
================= ================ =================
</TABLE>
F-40
<PAGE>
18) BUSINESS SEGMENT INFORMATION
The Company has two major business segments: Insurance Operations and
Investment Services. Interest expense related to debt not specific to
either business segment is presented as Corporate interest expense.
Information for all periods is presented on a comparable basis.
The Insurance Operations segment offers a variety of traditional,
variable and interest-sensitive life insurance products, disability
income, annuity products, mutual fund and other investment products to
individuals and small groups and administers traditional participating
group annuity contracts with conversion features, generally for
corporate qualified pension plans, and association plans which provide
full service retirement programs for individuals affiliated with
professional and trade associations. This segment includes Separate
Accounts for individual insurance and annuity products.
The Investment Services segment provides investment fund management,
primarily to institutional clients. This segment includes the Company's
equity interest in DLJ and Separate Accounts which provide various
investment options for group clients through pooled or single group
accounts.
Intersegment investment advisory and other fees of approximately $127.5
million, $124.1 million and $135.3 million for 1996, 1995 and 1994,
respectively, are included in total revenues of the Investment Services
segment. These fees, excluding amounts related to the discontinued GIC
Segment of $15.7 million, $14.7 million and $27.4 million for 1996, 1995
and 1994, respectively, are eliminated in consolidation.
<TABLE>
<CAPTION>
1996 1995 1994
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Revenues
Insurance operations............................... $ 3,742.9 $ 3,614.6 $ 3,507.4
Investment services................................ 1,126.1 949.1 935.2
Consolidation/elimination.......................... (24.5) (34.9) (27.2)
----------------- ---------------- -----------------
Total.............................................. $ 4,844.5 $ 4,528.8 $ 4,415.4
================= ================ =================
Earnings (loss) from continuing operations
before Federal income taxes, minority interest
and cumulative effect of accounting change
Insurance operations............................... $ (36.6) $ 303.1 $ 327.5
Investment services................................ 311.9 224.0 227.9
Consolidation/elimination.......................... .2 (3.1) .3
----------------- ---------------- -----------------
Subtotal..................................... 275.5 524.0 555.7
Corporate interest expense......................... (66.9) (27.9) (114.2)
----------------- ---------------- -----------------
Total.............................................. $ 208.6 $ 496.1 $ 441.5
================= ================ =================
</TABLE>
DECEMBER 31,
------------------------------------
1996 1995
---------------- -----------------
(IN MILLIONS)
Assets
Insurance operations........... $ 60,464.9 $ 56,720.5
Investment services............ 13,542.5 12,842.9
Consolidation/elimination...... (399.6) (354.4)
---------------- -----------------
Total.......................... $ 73,607.8 $ 69,209.0
================ =================
F-41
<PAGE>
19) QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The quarterly results of operations for 1996 and 1995, are summarized
below:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
----------------- ----------------- ------------------ ------------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
1996
----
Total Revenues................ $ 1,169.7 $ 1,193.6 $ 1,193.6 $ 1,287.6
================= ================= ================== ==================
Earnings (Loss) from
Continuing Operations
before Cumulative Effect
of Accounting Change........ $ 94.8 $ 87.1 $ 93.2 $ (157.9)
================= ================= ================== ==================
Net Earnings (Loss)........... $ 71.7 $ 87.1 $ 93.2 $ (241.7)
================= ================= ================== ==================
1995
----
Total Revenues................ $ 1,079.1 $ 1,164.0 $ 1,138.8 $ 1,146.9
================= ================= ================== ==================
Net Earnings.................. $ 66.3 $ 101.7 $ 100.2 $ 44.6
================= ================= ================== ==================
</TABLE>
The quarterly results of operations for 1996 and 1995 have been restated
to reflect the Company's accounting change adopted in the fourth quarter
of 1996 for long-duration participating life contracts in accordance
with the provisions prescribed by SFAS No. 120. Net earnings for the
three months ended December 31, 1996 includes a charge of $339.3 million
related to writeoffs of DAC on DI contracts of $94.3 million, reserve
strengthening on DI business of $113.7 million, pension par of $47.5
million and the discontinued GIC Segment of $83.8 million.
20) INVESTMENT IN DLJ
On December 15, 1993, the Company sold a 61% interest in DLJ to the
Holding Company for $800.0 million in cash and securities. The excess of
the proceeds over the book value in DLJ at the date of sale of $340.2
million has been reflected as a capital contribution. In 1995, DLJ
completed the initial public offering ("IPO") of 10.58 million shares of
its common stock, which included 7.28 million of the Holding Company's
shares in DLJ, priced at $27 per share. Concurrent with the IPO, the
Company contributed equity securities to DLJ having a market value of
$21.2 million. Upon completion of the IPO, the Company's ownership
percentage was reduced to 36.1%. The Company's ownership interest will
be further reduced upon the issuance of common stock after the vesting
of forfeitable restricted stock units acquired by and/or the exercise of
options granted to certain DLJ employees. DLJ restricted stock units
represents forfeitable rights to receive approximately 5.2 million
shares of DLJ common stock through February 2000.
The results of operations of DLJ are accounted for on the equity basis
and are included in commissions, fees and other income in the
consolidated statements of earnings. The Company's carrying value of DLJ
is included in investment in and loans to affiliates in the consolidated
balance sheets.
F-42
<PAGE>
Summarized balance sheets information for DLJ, reconciled to the
Company's carrying value of DLJ, are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1996 1995
---------------- -----------------
(IN MILLIONS)
<S> <C> <C>
Assets:
Trading account securities, at market value............................ $ 15,728.1 $ 10,821.3
Securities purchased under resale agreements........................... 20,598.7 18,748.2
Broker-dealer related receivables...................................... 16,525.9 13,023.7
Other assets........................................................... 2,651.0 1,983.3
---------------- -----------------
Total Assets........................................................... $ 55,503.7 $ 44,576.5
================ =================
Liabilities:
Securities sold under repurchase agreements............................ $ 29,378.3 $ 26,744.8
Broker-dealer related payables......................................... 19,409.7 12,915.5
Short-term and long-term debt.......................................... 2,704.5 1,742.0
Other liabilities...................................................... 2,164.0 1,750.5
---------------- -----------------
Total liabilities...................................................... 53,656.5 43,152.8
Cumulative exchangeable preferred stock................................ - 225.0
DLJ's company-obligated mandatorily redeemed preferred
securities of subsidiary trust holding solely debentures of DLJ...... 200.0 -
Total shareholders' equity............................................. 1,647.2 1,198.7
---------------- -----------------
Total Liabilities, Cumulative Exchangeable Preferred Stock and
Shareholders' Equity................................................. $ 55,503.7 $ 44,576.5
================ =================
DLJ's equity as reported............................................... $ 1,647.2 $ 1,198.7
Unamortized cost in excess of net assets acquired in 1985
and other adjustments................................................ 23.9 40.5
The Holding Company's equity ownership in DLJ.......................... (590.2) (499.0)
Minority interest in DLJ............................................... (588.6) (324.3)
---------------- -----------------
The Company's Carrying Value of DLJ.................................... $ 492.3 $ 415.9
================ =================
</TABLE>
Summarized statements of earnings information for DLJ reconciled to the
Company's equity in earnings of DLJ is as follows:
<TABLE>
<CAPTION>
1996 1995
---------------- -----------------
(IN MILLIONS)
<S> <C> <C>
Commission, fees and other income...................................... $ 1,818.2 $ 1,325.9
Net investment income.................................................. 1,074.2 904.1
Dealer, trading and investment gains, net.............................. 598.4 528.6
---------------- -----------------
Total revenues......................................................... 3,490.8 2,758.6
Total expenses including income taxes.................................. 3,199.5 2,579.5
---------------- -----------------
Net earnings........................................................... 291.3 179.1
Dividends on preferred stock........................................... 18.7 19.9
---------------- -----------------
Earnings Applicable to Common Shares................................... $ 272.6 $ 159.2
================ =================
DLJ's earnings applicable to common shares as reported................. $ 272.6 $ 159.2
Amortization of cost in excess of net assets acquired in 1985.......... (3.1) (3.9)
The Holding Company's equity in DLJ's earnings......................... (107.8) (90.4)
Minority interest in DLJ............................................... (73.4) (6.5)
---------------- -----------------
The Company's Equity in DLJ's Earnings................................. $ 88.3 $ 58.4
================ =================
</TABLE>
F-43
<PAGE>
21) ACCOUNTING FOR STOCK-BASED COMPENSATION
The Holding Company sponsors a stock option plan for employees of
Equitable Life. DLJ and Alliance each sponsor their own stock option
plans for certain employees. The Company elected to continue to account
for stock-based compensation using the intrinsic value method prescribed
in APB Opinion No. 25. Had compensation expense of the Company's stock
option incentive plans for options granted after December 31, 1994 been
determined based on the estimated fair value at the grant dates for
awards under those plans, the Company's pro forma net earnings for 1996
and 1995 would have been as follows:
1996 1995
--------------- ---------------
(IN MILLIONS)
Net Earnings
As Reported......... $ 10.3 $ 312.8
Pro Forma........... $ 3.2 $ 311.3
The fair value of options and units granted after December 31, 1994,
used as a basis for the above pro forma disclosures, was estimated as of
the date of grants using Black-Scholes option pricing models. The option
and unit pricing assumptions for 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
HOLDING COMPANY DLJ ALLIANCE
------------------------- -------------------------- -----------------------------
1996 1995 1996 1995 1996 1995
----------- ----------- ----------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Dividend yield........... 0.80% 0.96% 1.54% 1.85% 8.0% 8.0%
Expected volatility...... 20.00% 20.00% 25.00% 25.00% 23.00% 23.00%
Risk-free interest rate.. 5.92% 6.83% 6.07% 5.86% 5.80% 6.00%
Expected Life............ 5 YEARS 5 years 5 YEARS 5 years 7.43 YEARS 7.43 years
Weighted fair value
per option granted..... $6.94 $5.90 $9.35 - $2.69 $2.24
</TABLE>
F-44
<PAGE>
A summary of the Holding Company and DLJ stock option plans and
Alliance's Unit option plans are as follows:
<TABLE>
<CAPTION>
HOLDING COMPANY DLJ ALLIANCE
----------------------------- ----------------------------- -----------------------------
Options Options Options
Outstanding Outstanding Outstanding
Weighted Weighted Weighted
Average Average Average
Shares Exercise Shares Exercise Units Exercise
(In Millions) Price (In Millions) Price (In Millions) Price
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance as of
January 1, 1994........ 6.1 - 3.2
Granted................ .7 - 1.2
Exercised.............. - - (.5)
Forfeited.............. - - (.1)
------------- ------------- -------------
Balance as of
December 31, 1994...... 6.8 - 3.8
Granted................ .4 9.2 1.8
Exercised.............. (.1) - (.5)
Expired................ (.1) - -
Forfeited.............. (.3) - (.3)
------------- ------------- -------------
Balance as of
December 31, 1995...... 6.7 $20.27 9.2 $27.00 4.8 $17.72
Granted................ .7 $24.94 2.1 $32.54 .7 $25.12
Exercised.............. (.1) $19.91 - - (.4) $13.64
Expired................ (.6) $20.21 - - - -
Forfeited.............. - - (.2) $27.00 (.1) $19.32
------------- ------------- -------------
Balance as of
December 31, 1996...... 6.7 $20.79 11.1 $28.06 5.0 $19.07
============= ============= ============= ============= ============= =============
</TABLE>
F-45
<PAGE>
Information with respect to stock and unit options outstanding and
exercisable at December 31, 1996 is as follows:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------------------------------------------- --------------------------------------
Weighted
Average Weighted Weighted
Range of Number Remaining Average Number Average
Exercise Outstanding Contractual Exercise Exercisable Exercise
Prices (In Millions) Life (Years) Price (In Millions) Price
--------------------- ----------------- --------------- ----------------- ------------------- ----------------
<S> <C> <C> <C> <C> <C>
Holding
Company
---------------------
$18.125 -$27.75 6.7 7.00 $20.79 3.4 $20.18
================= =============== ================= =================== ================
DLJ
---------------------
$27.00 -$33.50 11.1 9.00 $28.06 - -
================= =============== ================= =================== ================
Alliance
---------------------
$ 6.0625 -$15.9375 1.3 4.76 $12.97 1.2 $12.58
$16.3125 -$19.75 1.1 8.19 $19.13 .2 $18.69
$19.875 -$19.875 1.0 7.36 $19.88 .4 $19.88
$20.75 -$24.375 .9 8.46 $22.05 .3 $21.84
$24.375 -$25.125 .7 9.96 $25.13 - -
----------------- -------------------
$ 6.0625 -$25.125 5.0 7.43 $19.07 2.1 $15.84
================= =============== ================= =================== ================
</TABLE>
22) SUBSEQUENT EVENTS (UNAUDITED)
On June 10, 1997, Equitable Life sold EREIM (other than EQ Services,
Inc. and its interest in Column Financial, Inc.) to Lend Lease
Corporation Limited ("Lend Lease"), a publicly traded, international
property and financial services company based in Sydney, Australia. The
total purchase price was $400.0 million and consisted of $300.0 million
in cash and a $100.0 million note maturing in eight years and bearing
interest at the rate of 7.4%, subject to certain adjustments. The
Company recognized an investment gain of $162.4 million, net of Federal
income tax of $87.4 million as a result of this transaction. Equitable
Life entered into long-term advisory agreements pursuant to which EREIM
will continue to provide to Equitable Life's General Account and
Separate Accounts substantially the same services, for substantially the
same fees, as provided prior to the sale.
The businesses sold reported combined revenues of $226.1 million and
combined net earnings of $30.7 million in 1996. Total combined assets
and liabilities as reported at December 31, 1996 were $171.8 million and
$130.1 million, respectively.
On June 30, 1997, Alliance reduced the recorded value of goodwill and
contracts associated with Alliance's acquisition of Cursitor by $120.9
million. This charge reflected Alliance's view that Cursitor's
continuing decline in assets under management and its reduced
profitability, resulting from relative investment underperformance, no
longer supported the carrying value of its investment. As a result, the
Company's earnings from continuing operations before cumulative effect
of accounting change for the six months ended June 30, 1997 included a
charge of $59.5 million, net of a Federal income tax benefit of $10.0
million and minority interest of $51.4 million.
F-46
