File Nos. 33-79170
811-8524
=============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 6 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 7 [X]
(Check appropriate box or boxes.)
EQUITABLE LIFE INSURANCE COMPANY OF IOWA SEPARATE ACCOUNT A
___________________________________________________________
(Exact Name of Registrant)
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
________________________________________
(Name of Depositor)
604 Locust Street, Des Moines, Iowa 50309
____________________________________________________ __________
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code (800) 344-6860
NAME AND ADDRESS OF AGENT FOR SERVICE
John A. Merriman, Secretary & General Counsel
Equitable Life Insurance Company of Iowa
604 Locust Street
Des Moines, Iowa 50309
(515) 245-6911
COPIES TO:
Judith A. Hasenauer and G. Thomas Sullivan
Blazzard, Grodd & Hasenauer, P.C. Nyemaster, Goode,
P.O. Box 5108 McLaughlin, Voigts,
Westport, CT 06881 West, Hansell & O'Brien
(203) 226-7866 699 Walnut Street
Des Moines, Iowa 50309
It is proposed that this filing will become effective:
___ immediately upon filing pursuant to paragraph (b) of Rule 485
_X_ on May 1, 1997 pursuant to paragraph (b) of Rule 485
___ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
___ on (date) pursuant to paragraph (a)(1) of Rule 485
If appropriate, check the following:
___ This Post-Effective Amendment designates a new effective date for
a previously filed Post-Effective Amendment.
Registrant has declared that it has registered an indefinite number or
amount of securities in accordance with Rule 24f-2 under the Investment
Company Act of 1940. Registrant filed its Rule 24f-2 Notice for the fiscal
year ended December 31, 1996 on or about February 27, 1997.
<TABLE>
<CAPTION>
CROSS REFERENCE SHEET
(required by Rule 495)
Item No. Location
- -------- -------------------
PART A
<S> <C> <C>
Item 1. Cover Page................................. Cover Page
Item 2. Definitions................................ Definitions
Item 3. Synopsis................................... Highlights
Item 4. Condensed Financial Information............ Not Applicable
Item 5. General Description of Registrant,
Depositor, and Portfolio Companies......... The Company; The
Separate Account;
Equi-Select Series
Trust; Travelers
Series Fund Inc.;
Smith Barney Series
Fund; Warburg Pincus
Trust; The GCG Trust;
Smith Barney Concert
Series Inc.
Item 6. Deductions and Expenses.................... Charges and
Deductions
Item 7. General Description of Variable
Annuity Contracts.......................... The Contracts
Item 8. Annuity Period............................. Annuity Provisions
Item 9. Death Benefit.............................. The Contracts;
Annuity
Provisions
Item 10. Purchases and Contract Value............... Purchase Payments
and Contract Value
Item 11. Redemptions................................ Withdrawals
Item 12. Taxes...................................... Tax Status
Item 13. Legal Proceedings.......................... Legal Proceedings
Item 14. Table of Contents of the Statement
of Additional Information.................. Table of Contents
of the Statement
of Additional
Information
</TABLE>
<TABLE>
<CAPTION>
CROSS REFERENCE SHEET (CONT'D)
(required by Rule 495)
Item No. Location
- -------- --------------------
PART B
<S> <C> <C>
Item 15. Cover Page................................. Cover Page
Item 16. Table of Contents.......................... Table of Contents
Item 17. General Information and History............ The Company
Item 18. Services................................... Not Applicable
Item 19. Purchase of Securities Being Offered....... Not Applicable
Item 20. Underwriters............................... Distributor
Item 21. Calculation of Performance Data............ Performance
Information
Item 22. Annuity Payments........................... Annuity Provisions
Item 23. Financial Statements....................... Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate Item so numbered in Part C to this Registration Statement.
EXPLANATORY NOTE
=============================================================================
This Registration Statement contains two Prospectuses for the Contract. The
distribution system for each version of the Prospectus is different. These
Prospectuses will be filed with the Commission pursuant to Rule 497.
The Registrant undertakes to update this Explanatory Note each time a
Post-Effective Amendment is filed.
=============================================================================
<PAGE>
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
Home Office: Administered at: Mailing Address:
604 Locust Street Customer Service Center P.O. Box 9271
Des Moines, Iowa 50309 Wilmington, DE 19801 Des Moines, Iowa 50306-
(800) 344-6864 9271
INDIVIDUAL FLEXIBLE PURCHASE PAYMENT DEFERRED VARIABLE AND
FIXED ANNUITY CONTRACTS
ISSUED BY
EQUITABLE LIFE INSURANCE COMPANY OF IOWA SEPARATE ACCOUNT A
AND
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
The Individual Flexible Purchase Payment Deferred Variable and Fixed Annuity
Contracts (the "Contracts") described in this Prospectus provide for
accumulation of Contract Values on a fixed and variable basis and payment of
monthly annuity payments on a fixed basis. The Contracts are designed for use
by individuals in retirement plans on a Qualified or Non-Qualified basis. (See
"Definitions" on Page 1.)
At the Owner's direction, Purchase Payments for the Contracts will be
allocated to a segregated investment account of Equitable Life Insurance
Company of Iowa (the "Company") which account has been designated Equitable
Life Insurance Company of Iowa Separate Account A (the "Separate Account") or
to the Company's Fixed Account. Under certain circumstances, however, Purchase
Payments may initially be allocated to the Money Market Subaccount of the
Separate Account. (See "Highlights" on Page 3.) The Separate Account invests
in shares of Equi-Select Series Trust (see "Equi-Select Series Trust" on Page
10), Warburg Pincus Trust (see "Warburg Pincus Trust" on Page 11) and The GCG
Trust (see "The GCG Trust" on Page 12). The Separate Account may invest in
other Investment Options. Equi-Select Series Trust is a series fund with nine
Portfolios currently available: Advantage Portfolio, International Fixed
Income Portfolio, Money Market Portfolio, Mortgage-Backed Securities
Portfolio, OTC Portfolio, Research Portfolio, Total Return Portfolio, Growth &
Income Portfolio and Value + Growth Portfolio. Warburg Pincus Trust is a
series fund with four portfolios, one of which is currently available in
connection with the Contracts: International Equity Portfolio. The GCG Trust
is a series fund with sixteen operational series, three of which are currently
available in connection with the Contracts: Fully Managed Series, Rising
Dividends Series and Small Cap Series.
Shares of certain Portfolios of the Investment Options may not be available
for sale in all states. The Prospectuses of the Investment Options may contain
Portfolios not currently available in connection with the Contracts.
This Prospectus concisely sets forth the information a prospective investor
should know before investing. Additional information about the Contracts is
contained in the Statement of Additional Information (the "SAI") which is
available at no charge. The SAI has been filed with the Securities and
Exchange Commission and is incorporated herein by reference. The Table of
Contents of the SAI can be found on Page 33 of this Prospectus. For the SAI,
call (800) 344-6864 or write to the Company at the address listed above. The
Securities and Exchange Commission maintains a Web site (http://www.sec.gov)
that contains the SAI, material incorporated by reference, and other
information regarding the Contracts and the Separate Account.
THE CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY FINANCIAL INSTITUTION AND ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
INVESTMENT IN THE CONTRACTS IS SUBJECT TO RISK THAT MAY CAUSE THE VALUE OF THE
OWNER'S INVESTMENT TO FLUCTUATE, AND WHEN THE CONTRACTS ARE SURRENDERED THE
VALUE MAY BE HIGHER OR LOWER THAN THE PURCHASE PAYMENTS.
INQUIRIES:
Any inquiries can be made by telephone or in writing to Equitable Life
Insurance Company of Iowa at (800) 344-6864 or P.O. Box 9271, Des Moines, Iowa
50306-9271.
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.
This Prospectus and the SAI are dated May 1, 1997.
This Prospectus should be kept for future reference.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
DEFINITIONS................................................................ 1
HIGHLIGHTS................................................................. 3
FEE TABLE.................................................................. 5
CONDENSED FINANCIAL INFORMATION............................................ 8
THE COMPANY................................................................ 9
THE SEPARATE ACCOUNT....................................................... 9
INVESTMENT OPTIONS......................................................... 10
Equi-Select Series Trust.................................................. 10
Warburg Pincus Trust...................................................... 11
The GCG Trust............................................................. 12
Voting Rights............................................................. 12
Substitution of Securities................................................ 12
CHARGES AND DEDUCTIONS..................................................... 13
Deduction for Withdrawal Charge (Sales Load).............................. 13
Reduction or Elimination of the Withdrawal Charge......................... 14
Deduction for Mortality and Expense Risk Charge........................... 15
Deduction for Administrative Charge....................................... 15
Deduction for Annual Contract Maintenance Charge.......................... 15
Deduction for Premium Taxes............................................... 15
Deduction for Income Taxes................................................ 16
Deduction for Expenses of the Investment Options.......................... 16
Deduction for Transfer Fee................................................ 16
THE CONTRACTS.............................................................. 16
Ownership................................................................. 16
Annuitant................................................................. 17
Assignment................................................................ 17
Beneficiary............................................................... 17
PURCHASE PAYMENTS AND CONTRACT VALUE....................................... 17
Purchase Payments......................................................... 17
Allocation of Purchase Payments........................................... 18
Dollar Cost Averaging..................................................... 18
Automatic Portfolio Rebalancing........................................... 19
Contract Value............................................................ 19
Accumulation Unit......................................................... 19
TRANSFERS.................................................................. 20
WITHDRAWALS................................................................ 20
Automatic Withdrawals..................................................... 21
Texas Optional Retirement Program......................................... 21
Suspension of Payments or Transfers....................................... 22
CONTRACT PROCEEDS.......................................................... 22
Maturity Proceeds......................................................... 22
Death Proceeds............................................................ 22
Death of the Annuitant.................................................... 23
Death of Owner............................................................ 23
Fixed Payment Plans....................................................... 24
Plan A. Interest......................................................... 24
Plan B. Fixed Period..................................................... 24
Plan C. Life Income...................................................... 25
DISTRIBUTOR................................................................ 25
ADMINISTRATION............................................................. 25
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PERFORMANCE INFORMATION.................................................... 25
Money Market Portfolio.................................................... 25
Other Portfolios.......................................................... 25
TAX STATUS................................................................. 27
General................................................................... 27
Diversification........................................................... 27
Multiple Contracts........................................................ 28
Contracts Owned by Other than Natural Persons............................. 28
Tax Treatment of Assignments.............................................. 28
Income Tax Withholding.................................................... 29
Tax Treatment of Withdrawals--Non-Qualified Contracts..................... 29
Qualified Plans........................................................... 29
Tax Treatment of Withdrawals--Qualified Contracts......................... 31
Tax-Sheltered Annuities--Withdrawal Limitations........................... 32
FINANCIAL STATEMENTS....................................................... 32
LEGAL PROCEEDINGS.......................................................... 32
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION............... 33
</TABLE>
ii
<PAGE>
DEFINITIONS
ACCUMULATION PERIOD -- The period during which Purchase Payments may be made
prior to the Maturity Date.
ACCUMULATION UNIT -- A unit of measure used to calculate the Contract Value
in a Subaccount of the Separate Account prior to the Maturity Date.
AGE -- The Annuitant's age on his or her last birthday.
ANNUITANT -- The natural person on whose life Annuity Payments are based.
ANNUITY PAYMENTS -- The series of payments after the Maturity Date under the
Payment Plan selected.
BENEFICIARY -- The person the Owner has chosen to receive the Proceeds on
the Annuitant's death as shown on the Company's records. There may be
different classes of Beneficiaries, such as primary and contingent. These
classes set the order of payment. There may be more than one Beneficiary in a
class.
COMPANY -- Equitable Life Insurance Company of Iowa.
CONTRACT ANNIVERSARY -- An anniversary of the Issue Date of the Contract.
CONTRACT YEAR -- One year from the Issue Date and from each Contract
Anniversary.
FIXED ACCOUNT -- The Company's general investment account which contains all
the assets of the Company with the exception of the Separate Account and other
segregated asset accounts.
INVESTMENT OPTION -- An investment entity the Company may make available
from time to time.
ISSUE DATE/DATE OF ISSUE -- The effective date of the Contract.
MATURITY DATE -- The date on which Annuity Payments begin.
NON-QUALIFIED CONTRACTS -- Contracts issued under non-qualified plans which
do not receive favorable tax treatment under Sections 401, 403(b), 408 or 457
of the Internal Revenue Code of 1986, as amended (the "Code").
OWNER -- The person(s) who owns the Contract. The Owner may be someone other
than the Annuitant. There may be Joint Owners.
PORTFOLIO -- A segment of an Investment Option which constitutes a separate
and distinct class of shares, which may also be referred to as a Series.
PROCEEDS -- Proceeds are the amounts payable under the Contract.
PURCHASE PAYMENT -- An amount paid to the Company to provide benefits under
the Contract. A Purchase Payment does not include transfers between the
Separate Account and the Fixed Account or among Subaccounts.
PURCHASE PAYMENT ANNIVERSARY -- The anniversary of a Purchase Payment.
QUALIFIED CONTRACTS -- Contracts issued under qualified plans which receive
favorable tax treatment under Sections 401, 403(b), 408 or 457 of the Code.
SEPARATE ACCOUNT -- A separate investment account of the Company designated
as Equitable Life Insurance Company of Iowa Separate Account A, into which
Purchase Payments or Contract Values may be allocated.
SUBACCOUNT -- A segment of the Separate Account representing an investment
in an Investment Option.
1
<PAGE>
VALUATION DATE -- The Separate Account will be valued each day that the New
York Stock Exchange and the Company's Customer Service Center both are open for
business.
VALUATION PERIOD -- The period beginning at the close of business of the New
York Stock Exchange on each Valuation Date and ending at the close of business
for the next succeeding Valuation Date.
2
<PAGE>
HIGHLIGHTS
At the Owner's direction, Purchase Payments for the Contracts will be
allocated to a segregated investment account of Equitable Life Insurance
Company of Iowa (the "Company") which account has been designated Equitable
Life Insurance Company of Iowa Separate Account A (the "Separate Account") or
to the Company's Fixed Account. Under certain circumstances, however, Purchase
Payments may initially be allocated to the Money Market Subaccount of the
Separate Account (see below). The Separate Account invests in shares of Equi-
Select Series Trust (see "Equi-Select Series Trust" on Page 10), Warburg
Pincus Trust (see "Warburg Pincus Trust" on Page 11) and The GCG Trust (see
"The GCG Trust" on Page 12). The Separate Account may invest in other
Investment Options. Owners bear the investment risk for all amounts allocated
to the Separate Account.
Within twenty (20) days of the date of receipt of the Contract by the Owner
(or within ten (10) days of the date of receipt with respect to the
circumstances described in (a) and (b) below or in states where required or,
within thirty (30) days in the case of a Contract issued in the state of
California to an individual who is sixty (60) years of age or older), it may
be returned by delivering or mailing it to the Company at its Customer Service
Center. When the Contract is received at the Customer Service Center, the
Company will refund the Contract Value computed at the end of the Valuation
Period during which the Contract is received by the Company except in the
following circumstances: (a) where the Contract is purchased pursuant to an
Individual Retirement Annuity; (b) in those states which require the Company
to refund Purchase Payments, less withdrawals; or (c) in the case of Contracts
(including Contracts purchased pursuant to an Individual Retirement Annuity)
which are deemed by certain states to be replacing an existing annuity or
insurance contract and which require the Company to refund Purchase Payments,
less withdrawals. With respect to the circumstances described in (a), (b) and
(c) above, the Company will refund the greater of Purchase Payments, less any
withdrawals, or the Contract Value, and will allocate initial purchase
payments to the Money Market Subaccount until the expiration of fifteen days
from the Issue Date (or twenty-five days in the case of Contracts described
under (c) above). Upon the expiration of the fifteen day period (or twenty-
five day period with respect to Contracts described under (c)), the Subaccount
value of the Money Market Subaccount will be allocated to the Separate Account
or Fixed Account in accordance with the election made by the Owner in the
Application. In Pennsylvania, when the Contract is purchased pursuant to an
Individual Retirement Annuity and is not deemed to be replacing an existing
annuity or insurance contract, the Owner may return the Contract within twenty
(20) days of receipt. Further, in Pennsylvania when the Contract is received
at the Customer Service Center during the first seven days, the Company will
refund the greater of Purchase Payments, less withdrawals or the Contract
Value, thereafter (days 8-20), the Company will refund the Contract Value
computed at the end of the Valuation Period during which the Contract is
received by the Company. In Oregon, when the Contract is purchased pursuant to
an Individual Retirement Annuity, the Owner may return the Contract within
twenty (20) days of receipt. Further, when the Contract is received at the
Customer Service Center during the first ten days, the Company will refund the
greater of the initial Purchase Payment, less any withdrawals or the Contract
Value as of the date of cancellation. Thereafter (days 11-20), the Company
will refund the Contract Value as of the date of cancellation. The initial
Purchase Payment will be allocated to the Money Market Sub-Account as
described above.
A Withdrawal Charge (sales load) may be deducted in the event of a
withdrawal of all or a portion of the Contract Value. The Withdrawal Charge
percentages are based upon the number of Purchase Payment Anniversaries that
Purchase Payments have remained in the Contract before being withdrawn:
TABLE OF WITHDRAWAL CHARGES
<TABLE>
<CAPTION>
PURCHASE PAYMENT ANNIVERSARY WITHDRAWAL CHARGE
- ---------------------------- -----------------
<S> <C>
1......................................... 8% of the Purchase Payment withdrawn
2......................................... 7% of the Purchase Payment withdrawn
3......................................... 6% of the Purchase Payment withdrawn
4......................................... 5% of the Purchase Payment withdrawn
5......................................... 4% of the Purchase Payment withdrawn
6......................................... 3% of the Purchase Payment withdrawn
7......................................... 2% of the Purchase Payment withdrawn
8......................................... 1% of the Purchase Payment withdrawn
9 and after............................... 0% of the Purchase Payment withdrawn
</TABLE>
3
<PAGE>
At any time, the Owner may make a withdrawal, without the imposition of a
Withdrawal Charge, of an amount equal to the sum of: 1) earnings (Contract
Value less unliquidated Purchase Payments not withdrawn); 2) Purchase Payments
in the Contract for more than eight years and 3) an amount which is equal to
10% of the Purchase Payments in the Contract for less than eight years, fixed
at the time of the first withdrawal in the Contract Year, plus 10% of the
Purchase Payments made after the first withdrawal in the Contract Year but
before the next Contract Anniversary, less any withdrawals in the same
Contract Year of Purchase Payments less than eight years old.
There is a Mortality and Expense Risk Charge which is equal, on an annual
basis, to 1.25% of the average daily net asset value of the Separate Account.
This charge compensates the Company for assuming the mortality and expense
risks under the Contracts. (See "Charges and Deductions -- Deduction for
Mortality and Expense Risk Charge" on Page 15.)
There is an Administrative Charge which is equal, on an annual basis, to
.15% of the average daily net asset value of the Separate Account. This charge
compensates the Company for costs associated with the administration of the
Contracts and the Separate Account. (See "Charges and Deductions -- Deduction
for Administrative Charge" on Page 15.)
There is an Annual Contract Maintenance Charge of $30 each Contract Year
prior to the Maturity Date. (See "Charges and Deductions -- Deduction for
Annual Contract Maintenance Charge" on Page 15.)
Premium taxes or other taxes payable to a state or other governmental entity
will be charged against the Contract Values. Premium taxes generally range
from 0% to 4%. (See "Charges and Deductions -- Deduction for Premium Taxes" on
Page 15.)
Under certain circumstances, a Transfer Fee may be assessed when an Owner
transfers Contract Values from one Subaccount to another Subaccount or to or
from the Fixed Account. (See "Charges and Deductions -- Deduction for Transfer
Fee" on Page 16.)
There is a ten percent (10%) federal income tax penalty applied to the
income portion of any distribution from Non-Qualified Contracts. However, the
penalty is not imposed on amounts received: (a) after the taxpayer reaches age
59 1/2; (b) after the death of the Owner; (c) if the taxpayer is totally
disabled (for this purpose disability is as defined in Section 72(m)(7) of the
Code); (d) in a series of substantially equal periodic payments made not less
frequently than annually for the life (or life expectancy) of the taxpayer and
his or her Beneficiary; (e) under an immediate annuity; or (f) which are
allocable to purchase payments made prior to August 14, 1982. The Contract
provides that upon the death of the Annuitant prior to the Maturity Date, the
Death Proceeds will be paid to the named Beneficiary. Such payments made upon
the death of the Annuitant who is not the Owner of the Contract do not qualify
for the death of Owner exception described above, and will be subject to the
ten percent (10%) distribution penalty unless the Beneficiary is at least 59
1/2 or one of the other exceptions to the penalty applies. For federal income
tax purposes, withdrawals are deemed to be on a last-in, first-out basis.
Separate tax withdrawal penalties and restrictions apply to Qualified
Contracts. (See "Tax Status -- Tax Treatment of Withdrawals -- Qualified
Contracts" on Page 31.) For a further discussion of the taxation of the
Contracts, see "Tax Status" on Page 27.
For Contracts purchased in connection with 403(b) plans, withdrawals of
amounts attributable to contributions made pursuant to a salary reduction
agreement (as defined in Section 403(b)(11) of the Code) are limited to
circumstances only when the Owner attains age 59 1/2, separates from service,
dies, becomes disabled (within the meaning of Section 72(m)(7) of the Code) or
in the case of hardship. Withdrawals for hardship are restricted to the
portion of the Owner's Contract Value which represents contributions made by
the Owner and does not include any investment results. The limitations on
withdrawals became effective on January 1, 1989, and apply only to: (1) salary
reduction contributions made after December 31, 1988; (2) income attributable
to such contributions; and (3) income attributable to amounts held as of
December 31, 1988. The limitations on withdrawals do not affect rollovers or
transfers between certain Qualified Plans. Tax penalties may also apply. (See
"Tax Status -- Tax Treatment of Withdrawals -- Qualified Contracts" on Page
31.) Owners should consult their own tax counsel or other tax adviser
regarding any distributions. (See "Tax Status -- Tax Sheltered Annuities --
Withdrawal Limitations" on Page 32.)
4
<PAGE>
See "Tax Status -- Diversification" on Page 27 for a discussion of owner
control of the underlying investments in a variable annuity contract.
Because of certain exemptive and exclusionary provisions, interests in the
Fixed Account are not registered under the Securities Act of 1933 and the
Fixed Account is not registered as an investment company under the Investment
Company Act of 1940, as amended. Accordingly, neither the Fixed Account nor
any interests therein are subject to the provisions of these Acts and the
Company has been advised that the staff of the Securities and Exchange
Commission has not reviewed the disclosures in the Prospectus relating to the
Fixed Account. Disclosures regarding the Fixed Account may, however, be
subject to certain generally applicable provisions of the federal securities
laws relating to the accuracy and completeness of statements made in
prospectuses.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA SEPARATE ACCOUNT A
FEE TABLE
OWNER TRANSACTION EXPENSES
Withdrawal Charge (see Note 2 below)
(as a percentage of Purchase Payments withdrawn)
<TABLE>
<CAPTION>
PURCHASE PAYMENT ANNIVERSARY CHARGE
---------------------------- ------
<S> <C>
1................................................................. 8%
2................................................................. 7%
3................................................................. 6%
4................................................................. 5%
5................................................................. 4%
6................................................................. 3%
7................................................................. 2%
8................................................................. 1%
9+................................................................ 0%
</TABLE>
<TABLE>
<S> <C>
Transfer Fee (See Note 3 below)....... No charge for first 12 transfers in a
Contract Year; thereafter the fee is the
lesser of 2% of the Contract Value
transferred or $25.
Annual Contract Maintenance Charge.... $30 per Contract per year
</TABLE>
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of average account value)
<TABLE>
<S> <C>
Mortality and Expense Risk Charge.................................... 1.25%
Administrative Charge................................................ .15%
----
Total Separate Account Annual Expenses............................... 1.40%
</TABLE>
EQUI-SELECT SERIES TRUST'S ANNUAL EXPENSES
(as a percentage of the average daily net assets of a Portfolio)
<TABLE>
<CAPTION>
OTHER
EXPENSES (AFTER
MANAGEMENT EXPENSE TOTAL ANNUAL
FEES* REIMBURSEMENT)** EXPENSES
---------- ---------------- ------------
<S> <C> <C> <C>
Advantage Portfolio..... .50 % .30% .80 %
International Fixed In-
come Portfolio......... .85 % .75% 1.60 %
Money Market Portfolio.. .375% .30% .675%
Mortgage-Backed Securi-
ties Portfolio......... .75 % .50% 1.25 %
OTC Portfolio........... .80 % .40% 1.20 %
Research Portfolio...... .80 % .40% 1.20 %
Total Return Portfolio.. .80 % .40% 1.20 %
Growth & Income Portfo-
lio.................... .95 % .40% 1.35 %
Value + Growth Portfo-
lio.................... .95 % .40% 1.35 %
</TABLE>
5
<PAGE>
- ------------------
* PRIOR TO OCTOBER 6, 1995, EQUITABLE INVESTMENT SERVICES, INC. ("EISI"), THE
TRUST'S INVESTMENT ADVISER, WAIVED ITS MANAGEMENT FEES FOR EACH OF THE
PORTFOLIOS EXCEPT THE GROWTH & INCOME PORTFOLIO AND THE VALUE + GROWTH
PORTFOLIO WHICH COMMENCED INVESTMENT OPERATIONS ON APRIL 1, 1996.
** BEGINNING OCTOBER 6, 1995, EISI HAS UNDERTAKEN TO REIMBURSE EACH PORTFOLIO
FOR ALL OPERATING EXPENSES, EXCLUDING MANAGEMENT FEES, THAT EXCEED .30% OF
THE AVERAGE DAILY NET ASSETS OF THE ADVANTAGE AND MONEY MARKET PORTFOLIOS,
.50% OF THE AVERAGE DAILY NET ASSETS OF THE MORTGAGE-BACKED SECURITIES
PORTFOLIO AND .75% OF THE AVERAGE DAILY NET ASSETS OF THE INTERNATIONAL
FIXED INCOME PORTFOLIO. BEGINNING FEBRUARY 3, 1997, EISI HAS UNDERTAKEN TO
REIMBURSE THE OTC, TOTAL RETURN, RESEARCH, GROWTH & INCOME AND VALUE +
GROWTH PORTFOLIOS FOR ALL OPERATING EXPENSES, EXCLUDING MANAGEMENT FEES,
THAT EXCEED .40% OF THE AVERAGE DAILY NET ASSETS OF SUCH PORTFOLIOS. FROM
OCTOBER 6, 1995 TO FEBRUARY 3, 1997, EISI REIMBURSED THE OTC, TOTAL RETURN,
RESEARCH, GROWTH & INCOME AND VALUE + GROWTH PORTFOLIOS FOR ALL OPERATING
EXPENSES, EXCLUDING MANAGEMENT FEES, THAT EXCEEDED .75% OF THE AVERAGE
DAILY NET ASSETS OF SUCH PORTFOLIOS. THIS VOLUNTARY EXPENSE REIMBURSEMENT
CAN BE TERMINATED AT ANY TIME.
WARBURG PINCUS TRUST'S ANNUAL EXPENSES
(as a percentage of the average daily net assets of a Portfolio)
<TABLE>
<CAPTION>
OTHER
EXPENSES
(AFTER TOTAL
MANAGEMENT EXPENSE OPERATING
FEES REIMBURSEMENT) EXPENSES
---------- -------------- ---------
<S> <C> <C> <C>
International Equity Portfolio*............. .96% .40% 1.36 %
</TABLE>
- ------------------
* WARBURG, PINCUS COUNSELLORS, INC., THE TRUST'S INVESTMENT ADVISER, WAIVED
PART OF ITS MANAGEMENT FEE AND REIMBURSED CERTAIN EXPENSES FOR THE FISCAL
PERIOD ENDED DECEMBER 31, 1996 FOR THE INTERNATIONAL EQUITY PORTFOLIO.
WITHOUT SUCH WAIVER AND REIMBURSEMENT, MANAGEMENT FEES WOULD HAVE EQUALED
1.00%, OTHER EXPENSES WOULD HAVE EQUALED .40% AND TOTAL PORTFOLIO EXPENSES
WOULD HAVE EQUALED 1.40%. WARBURG, PINCUS COUNSELLORS, INC. HAS UNDERTAKEN
TO REDUCE OR OTHERWISE LIMIT TOTAL PORTFOLIO OPERATING EXPENSES TO THE
LIMITS SHOWN IN THE TABLE ABOVE THROUGH DECEMBER 31, 1997. THERE IS NO
ASSURANCE THAT THESE UNDERTAKINGS WILL CONTINUE.
THE GCG TRUST'S ANNUAL EXPENSES
(as a percentage of average combined net assets of a group of Series)
<TABLE>
<CAPTION>
TOTAL
MANAGEMENT OTHER ANNUAL
FEES* EXPENSES** EXPENSES
---------- ---------- --------
<S> <C> <C> <C>
Fully Managed Series............................. 0.99% 0.01% 1.00%
Rising Dividends Series.......................... 0.99% 0.01% 1.00%
Small Cap Series................................. 0.99% 0.01% 1.00%
</TABLE>
- ------------------
* Fees decline as combined assets increase (see The GCG Trust prospectus).
** Other expenses generally consist of independent trustees' fees and
expenses.
EXAMPLES
An Owner would pay the following expenses on a $1,000 investment, assuming a
5% annual return on assets:
(a) if the Contract is fully surrendered at the end of each time period
or if Payment Plan A -- Option 2 is elected;
6
<PAGE>
(b) if the Contract is not surrendered;
SUBACCOUNTS INVESTING IN:
<TABLE>
<CAPTION>
TIME PERIODS
-----------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
EQUI-SELECT SERIES TRUST
Advantage Portfolio........... a) $103.28 a) $125.65 a) $158.58 a) $262.02
b) $ 23.28 b) $ 71.65 b) $122.58 b) $262.02
International Fixed Income
Portfolio.................... a) $111.27 a) $149.54 a) $198.22 a) $340.06
b) $ 31.27 b) $ 95.54 b) $162.22 b) $340.06
Money Market Portfolio........ a) $102.02 a) $121.87 a) $152.24 a) $249.21
b) $ 22.02 b) $ 67.87 b) $116.24 b) $249.21
Mortgage-Backed Securities
Portfolio.................... a) $107.78 a) $139.16 a) $181.08 a) $306.75
b) $ 27.78 b) $ 85.16 b) $145.08 b) $306.75
OTC Portfolio................. a) $107.28 a) $137.67 a) $178.61 a) $301.89
b) $ 27.28 b) $ 83.67 b) $142.61 b) $301.89
Research Portfolio............ a) $107.28 a) $137.67 a) $178.61 a) $301.89
b) $ 27.28 b) $ 83.67 b) $142.61 b) $301.89
Total Return Portfolio........ a) $107.28 a) $137.67 a) $178.61 a) $301.89
b) $ 27.28 b) $ 83.67 b) $142.61 b) $301.89
Growth & Income Portfolio..... a) $108.78 a) $142.14 a) $186.01 a) $316.40
b) $ 28.78 b) $ 88.14 b) $150.01 b) $316.40
Value + Growth Portfolio...... a) $108.78 a) $142.14 a) $186.01 a) $316.40
b) $ 28.78 b) $ 88.14 b) $150.01 b) $316.40
WARBURG PINCUS TRUST
International Equity Portfo-
lio.......................... a) $108.88 a) $142.44 a) $186.50 a) $317.36
b) $ 28.88 b) $ 88.44 b) $150.50 b) $317.36
THE GCG TRUST
Fully Managed Series.......... a) $105.28 a) $131.68 a) $168.64 a) $282.17
b) $ 25.28 b) $ 77.68 b) $132.64 b) $282.17
Rising Dividends Series....... a) $105.28 a) $131.68 a) $168.64 a) $282.17
b) $ 25.28 b) $ 77.68 b) $132.64 b) $282.17
Small Cap Series.............. a) $105.28 a) $131.68 a) $168.64 a) $282.17
b) $ 25.28 b) $ 77.68 b) $132.64 b) $282.17
</TABLE>
NOTES TO FEE TABLE AND EXAMPLES
1. The purpose of the Fee Table is to assist the Owner in understanding the
various costs and expenses that an Owner will incur directly or
indirectly. For additional information, see "Charges and Deductions" in
this Prospectus and the Prospectuses for Equi-Select Series Trust,
Warburg Pincus Trust and The GCG Trust.
2. At any time, the Owner may make a withdrawal without the imposition of a
Withdrawal Charge, of an amount equal to the sum: 1) earnings (Contract
Value less unliquidated Purchase Payments not withdrawn); 2) Purchase
Payments in the Contract for more than eight years; and 3) an amount which
is equal to 10% of the Purchase Payments in the Contract for less than
eight years, fixed at the time of the first withdrawal in the Contract
Year, plus 10% of the Purchase Payment made after the first withdrawal in
the Contract Year but before the next Contract Anniversary, less any
withdrawals in the same Contract Year of Purchase Payments less than eight
years old.
7
<PAGE>
3. If the Owner is participating in the Automatic Portfolio Rebalancing
program or Dollar Cost Averaging program such transfers are currently not
taken into account in determining the number of transfers for the year or
in determining any Transfer Fee. (See "Charges and Deductions --
Deduction for Transfer Fee" on Page 16, "Purchase Payments and Contract
Value -- Dollar Cost Averaging" on Page 18 and "Purchase Payments and
Contract Value -- Automatic Portfolio Rebalancing" on Page 19.)
4. Premium taxes are not reflected. Premium taxes may apply. (See "Charges
and Deductions -- Deduction for Premium Taxes" on Page 15.)
5. The Examples assume an estimated $31,000 Contract Value so that the
Annual Contract Maintenance Charge per $1,000 of net asset value in the
Separate Account is $0.97. Such charge would be higher for smaller
Contract Values and lower for higher Contract Values.
6. THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
CONDENSED FINANCIAL INFORMATION
The financial statements of Equitable Life Insurance Company of Iowa and
Equitable Life Insurance Company of Iowa Separate Account A may be found in
the Statement of Additional Information.
The table below gives per unit information about the financial history of
the Advantage, International Fixed Income, Money Market, Mortgage-Backed
Securities, OTC, Research and Total Return Subaccounts invested in Equi-Select
Series Trust from commencement of operations (October 7, 1994) to December 31,
1996. The table below gives per unit information about the financial history
of the Growth & Income and Value + Growth Subaccounts invested in Equi-Select
Series Trust from commencement of operations (April 1, 1996) to December 31,
1996. The table below also gives per unit information about the financial
history of the International Equity Subaccount invested in Warburg Pincus
Trust from commencement of operations (April 1, 1996) to December 31, 1996.
This information should be read in conjunction with the financial statements
and related notes of the Separate Account included in the Statement of
Additional Information.
<TABLE>
<CAPTION>
PERIOD FROM
COMMENCEMENT
PERIOD ENDED YEAR ENDED OF OPERATIONS TO
DECEMBER 31, 1996 DECEMBER 31, 1995 DECEMBER 31, 1994
----------------- ----------------- -----------------
<S> <C> <C> <C>
EQUI-SELECT SERIES TRUST
ADVANTAGE SUBACCOUNT
Unit value at beginning
of period............. $10.86 $10.08 $10.00
Unit value at end of
period................ $11.36 $10.86 $10.08
No. of units
outstanding at end of
period................ 1,322,512 344,775 45,516
INTERNATIONAL FIXED
INCOME SUBACCOUNT
Unit value at beginning
of period............. $11.55 $10.06 $10.00
Unit value at end of
period................ $11.96 $11.55 $10.06
No. of units
outstanding at end of
period................ 705,870 311,689 5,098
MONEY MARKET SUBACCOUNT
Unit value at beginning
of period............. $10.45 $10.07 $10.00
Unit value at end of
period................ $10.80 $10.45 $10.07
No. of units
outstanding at end of
period................ 1,772,486 548,767 34,322
MORTGAGE-BACKED
SECURITIES SUBACCOUNT
Unit value at beginning
of period............. $11.42 $ 9.99 $10.00
Unit value at end of
period................ $11.64 $11.42 $ 9.99
No. of units
outstanding at end of
period................ 930,828 380,031 2,886
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
PERIOD FROM
COMMENCEMENT
PERIOD ENDED YEAR ENDED OF OPERATIONS TO
DECEMBER 31, 1996 DECEMBER 31, 1995 DECEMBER 31, 1994
----------------- ----------------- -----------------
<S> <C> <C> <C>
OTC SUBACCOUNT
Unit value at beginning
of period............. $13.21 $10.35 $10.00
Unit value at end of
period................ $15.70 $13.21 $10.35
No. of units
outstanding at end of
period................ 2,602,724 759,597 63,781
RESEARCH SUBACCOUNT
Unit value at beginning
of period............. $13.10 $ 9.72 $10.00
Unit value at end of
period................ $15.93 $13.10 $ 9.72
No. of units
outstanding at end of
period................ 4,845,240 1,255,752 69,177
TOTAL RETURN SUBACCOUNT
Unit value at beginning
of period............. $12.05 $ 9.81 $10.00
Unit value at end of
period................ $13.51 $12.05 $ 9.81
No. of units
outstanding at end of
period................ 4,354,338 1,312,565 33,106
GROWTH & INCOME
SUBACCOUNT
Unit value at beginning
of period............. $10.00
Unit value at end of
period................ $12.49
No. of units
outstanding at end of
period................ 2,228,888
VALUE + GROWTH SUBACCOUNT
Unit value at beginning
of period............. $10.00
Unit value at end of
period................ $11.42
No. of units
outstanding at end of
period................ 1,238,349
WARBURG PINCUS TRUST
INTERNATIONAL EQUITY
SUBACCOUNT
Unit value at beginning
of period............. $10.00
Unit value at end of
period................ $10.28
No. of units
outstanding at end of
period................ 2,026,704
</TABLE>
The Subaccounts investing in The GCG Trust are new in 1997.
THE COMPANY
Equitable Life Insurance Company of Iowa (the "Company") was founded in Iowa
in 1867 and is the oldest life insurance company west of the Mississippi. The
Company is currently licensed to do business in the District of Columbia and
all states except New Hampshire and New York. The Company is a wholly-owned
subsidiary of Equitable of Iowa Companies ("Equitable of Iowa"), an Iowa
corporation.
THE SEPARATE ACCOUNT
The Board of Directors of the Company adopted a resolution to establish a
segregated asset account pursuant to Iowa insurance law on January 24, 1994.
This segregated asset account has been designated Equitable Life Insurance
Company of Iowa Separate Account A (the "Separate Account"). The Company has
caused the Separate Account to be registered with the Securities and Exchange
Commission as a unit investment trust pursuant to the provisions of the
Investment Company Act of 1940.
The assets of the Separate Account are the property of the Company. However,
the assets of the Separate Account equal to the reserves and other contract
liabilities with respect to the Separate Account, are not chargeable with
liabilities arising out of any other business the Company may conduct. Income,
gains and losses, whether or not realized, are, in accordance with the
Contracts, credited to or charged against the Separate Account without regard
to other income, gains or losses of the Company. The Company's obligations
arising under the Contracts are general obligations.
9
<PAGE>
The Separate Account meets the definition of a "separate account" under
federal securities laws.
The Separate Account is divided into Subaccounts, with the assets of each
Subaccount invested in one Portfolio of Equi-Select Series Trust, Warburg
Pincus Trust or The GCG Trust. The Separate Account may invest in other
Investment Options. There is no assurance that the investment objectives of
any of the Portfolios will be met. Owners bear the complete investment risk
for Purchase Payments allocated to a Subaccount. Contract Values will
fluctuate in accordance with the investment performance of the Subaccounts to
which Purchase Payments are allocated, and in accordance with the imposition
of the fees and charges assessed under the Contracts.
INVESTMENT OPTIONS
EQUI-SELECT SERIES TRUST
Equi-Select Series Trust ("Trust") has been established to act as one of the
funding vehicles for the Contracts offered. The Trust is an open-end
management investment company. The Trust is managed by Equitable Investment
Services, Inc. ("EISI") which is a wholly-owned subsidiary of Equitable of
Iowa. EISI has retained Sub-Advisers for certain Portfolios to make investment
decisions and place orders. The Sub-Advisers for the Portfolios are: Credit
Suisse Asset Management Limited with respect to the International Fixed Income
Portfolio; Massachusetts Financial Services Company with respect to the OTC,
Research and Total Return Portfolios and Robertson, Stephens & Company
Investment Management, L.P. with respect to the Growth & Income and Value +
Growth Portfolios. See "Management of the Trust" in the Trust Prospectus,
which accompanies this Prospectus, for additional information concerning EISI
and the Sub-Advisers, including a description of advisory and sub-advisory
fees.
The Trust is intended to meet differing investment objectives with its
currently available separate Portfolios.
The investment objectives of the Portfolios are as follows:
ADVANTAGE PORTFOLIO. The Advantage Portfolio seeks current income with a
very low degree of share-price fluctuation. The Portfolio invests primarily in
ultra short-term investment grade debt obligations. The Portfolio is designed
for investors who seek higher yields than money market funds generally offer
and who are willing to accept some modest principal fluctuation in order to
achieve that objective. Because its share price will vary, the Portfolio is
not an appropriate investment for those whose primary objective is absolute
principal stability. The Portfolio's investments include a combination of
high-quality money market instruments, as well as securities with longer
maturities and securities of lower quality. Under normal market conditions, it
is anticipated that the Portfolio will maintain an average effective maturity
of one year or less.
INTERNATIONAL FIXED INCOME PORTFOLIO. The International Fixed Income
Portfolio seeks to provide high total return. The Portfolio will seek to
achieve its objective by investing in both domestic and foreign debt
securities and related foreign currency transactions. The total return will be
sought through a combination of current income, capital gains and gains in
currency positions. Under normal market conditions, the Portfolio will invest
primarily in: (i) obligations issued or guaranteed by foreign national
governments, their agencies, instrumentalities, or political subdivisions;
(ii) U.S. government securities; and (iii) debt securities issued or
guaranteed by supranational organizations, considered to be government
securities. Under normal conditions, the Portfolio's Sub-Adviser expects that
the Portfolio generally will be invested in at least six different countries,
including the U.S., although the Portfolio may at times invest all of its
assets in a single country. The Portfolio may invest a significant portion of
its assets in foreign securities. Investing in foreign securities generally
involves risks not ordinarily associated with investing in securities of
domestic issuers. Purchasers are cautioned to read the "Appendix -- Foreign
Investments" in the Trust Prospectus for a discussion of the risks involved in
foreign investing.
10
<PAGE>
MONEY MARKET PORTFOLIO. The Money Market Portfolio seeks to obtain maximum
current income, consistent with the preservation of capital and the
maintenance of liquidity. The Portfolio will seek to achieve this objective by
investing exclusively in certain U.S. dollar-denominated money market
instruments having remaining maturities of 397 days or less. An investment in
the Money Market Portfolio is neither insured nor guaranteed by the U.S.
Government.
MORTGAGE-BACKED SECURITIES PORTFOLIO. The Mortgage-Backed Securities
Portfolio seeks to obtain a high current return, consistent with safety of
principal, primarily through investments in mortgage-backed securities.
Mortgage-backed securities represent interests in, or are secured by and
payable from, pools of mortgage loans, including collateralized mortgage
obligations.
OTC PORTFOLIO. The primary investment objective of the OTC Portfolio is to
seek to obtain long-term growth of capital. The Portfolio seeks to achieve its
objective by investing at least 65% of its total assets, under normal
circumstances, in securities principally traded on the over-the-counter (OTC)
securities market.
RESEARCH PORTFOLIO. The Research Portfolio seeks to provide long-term growth
of capital and future income by investing a substantial portion of its assets
in the common stocks or securities convertible into common stocks of companies
believed to possess better than average prospects for long-term growth. A
smaller proportion of the assets may be invested in bonds, short-term
obligations, preferred stocks or common stocks whose principal characteristic
is income production rather than growth. The portfolio securities of the
Research Portfolio are selected by the investment research analysts in the
Equity Research Group of the Sub-Adviser. The Portfolio's assets are allocated
to industry groups (e.g. within the health care sector, the managed care, drug
and medical supply industries). The allocation by sector and industry is
determined by the analysts acting together as a group.
TOTAL RETURN PORTFOLIO. The Total Return Portfolio primarily seeks to obtain
above-average income (compared to a portfolio entirely invested in equity
securities) consistent with the prudent employment of capital. While current
income is the primary objective, the Portfolio believes that there should also
be a reasonable opportunity for growth of capital and income, since many
securities offering a better than average yield may also possess growth
potential. Generally, at least 40% of the Portfolio's assets are invested in
equity securities.
GROWTH & INCOME PORTFOLIO. The Growth & Income Portfolio seeks long-term
total return. The Portfolio will pursue this objective primarily by investing
in equity and debt securities, focusing on small- and mid-cap companies that
offer the potential for capital appreciation, current income or both. The
Portfolio will normally invest the majority of its assets in common and
preferred stocks, convertible securities, bonds and notes.
VALUE + GROWTH PORTFOLIO. The Value + Growth Portfolio seeks capital
appreciation. The Portfolio invests primarily in growth companies with
favorable relationships between price/earnings ratios and growth rates, in
sectors offering the potential for above-average returns.
WARBURG PINCUS TRUST
Warburg Pincus Trust is an open-end management investment company. Warburg,
Pincus Counsellors, Inc. ("Warburg") is the investment adviser to each of the
Trust's four Portfolios, one of which -- the International Equity Portfolio --
is being offered herein. Warburg is a wholly-owned subsidiary of Warburg,
Pincus Counsellors G.P., a New York general partnership, which itself is
controlled by Warburg, Pincus & Co. ("WP & Co."), also a New York general
partnership. Lionel I. Pincus, the managing partner of WP & Co., may be deemed
a controlling person of both WP & Co. and Warburg.
The investment objective of the International Equity Portfolio is as
follows:
INTERNATIONAL EQUITY PORTFOLIO. The investment objective of the
International Equity Portfolio is to seek long-term capital appreciation by
investing primarily in a broadly diversified portfolio of equity securities of
11
<PAGE>
companies, wherever organized, that in the judgment of Warburg have their
principal business activities and interests outside the United States. The
Portfolio will ordinarily invest substantially all of its assets -- but no
less than 65% of its total assets -- in common stocks, warrants and securities
convertible into or exchangeable for common stocks. Generally the Portfolio
will hold no less than 65% of its total assets in at least three countries
other than the United States.
THE GCG TRUST
The GCG Trust ("GCG") is an open-end management investment company, more
commonly referred to as a mutual fund. Directed Services, Inc. ("Manager")
serves as the manager to GCG. The Manager is an indirect wholly-owned
subsidiary of Equitable of Iowa and an affiliate of the Company. GCG and the
Manager have retained Portfolio Managers for each of the Series of GCG. The
Portfolio Manager to the Fully Managed Series is T. Rowe Price Associates,
Inc.; the Portfolio Manager to the Rising Dividends Series is Kayne, Anderson
Investment Management, L.P.; and the Portfolio Manager to the Small Cap Series
is Fred Alger Management, Inc.
The investment objectives of the available Series are as follows:
FULLY MANAGED SERIES. The Fully Managed Series seeks, over the long term, a
high total investment return, consistent with the preservation of capital and
prudent investment risk. The Series seeks to achieve this objective by
investing primarily in common stocks. The Series may also invest in fixed
income securities and money market instruments to preserve its principal value
during uncertain or declining market conditions.
RISING DIVIDENDS SERIES. The Rising Dividends Series seeks capital
appreciation. The Series seeks to achieve this objective by investing in
equity securities of high quality companies that meet the following four
criteria: consistent dividend increases; substantial dividend increases;
reinvested profits; and a balance sheet with low leverage.
SMALL CAP SERIES. The Small Cap Series seeks to achieve long-term capital
appreciation by investing in equity securities of companies that, at the time
of purchase, have total market capitalization within the range of companies
included in the Russell 2000 Growth Index or the S&P Small Cap 600 Index. Many
of the securities in which the Series invests may be those of new companies in
a developmental stage or more seasoned companies believed by the Portfolio
Manager to be entering a new stage of growth.
While a brief summary of the investment objectives of the Portfolios of
Equi-Select Series Trust and Warburg Pincus Trust and the Series of The GCG
Trust are set forth above, more comprehensive information, including a
discussion of potential risks, is found in the current Prospectuses for each
of the Investment Options, which are included with this Prospectus. Additional
Prospectuses and the Statements of Additional Information can be obtained by
calling the Customer Service Center or writing the Company's Home Office.
Purchasers should read the Prospectuses for the Investment Options carefully
before investing.
VOTING RIGHTS
In accordance with its view of present applicable law, the Company will vote
the shares of the Investment Options held in the Separate Account at special
meetings of the shareholders in accordance with instructions received from
persons having the voting interest in the Separate Account. The Company will
vote shares for which it has not received instructions, as well as shares
attributable to it, in the same proportion as it votes shares for which it has
received instructions. The Investment Options do not hold regular meetings of
shareholders.
The number of shares which a person has a right to vote will be determined
as of a date to be chosen by the Company prior to a shareholder meeting of an
Investment Option. Voting instructions will be solicited by written
communication prior to the meeting.
SUBSTITUTION OF SECURITIES
If the shares of the Investment Options (or any Portfolio within an
Investment Option or any other Investment Option), are no longer available for
investment by the Separate Account or, if in the judgment of the
12
<PAGE>
Company, further investment in the shares should become inappropriate in view
of the purpose of the Contracts, the Company may substitute shares of another
Investment Option (or Portfolio) for shares already purchased or to be
purchased in the future by Purchase Payments under the Contracts. No
substitution of securities may take place without prior approval of the
Securities and Exchange Commission and under the requirements it may impose.
Shares of the Investment Options are issued and redeemed in connection with
investments in and payments under certain variable annuity contracts and (with
respect to certain of the Investment Options) variable life insurance policies
of various life insurance companies which may or may not be affiliated. In
addition, Warburg Pincus Trust and GCG offer their shares to tax-qualified
pension and retirement plans ("Qualified Plans"). The Investment Options do
not foresee any disadvantage to Owners arising out of the fact that the
Investment Options offer their shares for products offered by life insurance
companies which are not affiliated (or with respect to Warburg Pincus Trust
and GCG, that they offer their shares to Qualified Plans). Nevertheless, the
Boards of Trustees of the Investment Options intend to monitor events in order
to identify any material irreconcilable conflicts which may possibly arise and
to determine what action, if any, should be taken in response thereto. If such
a conflict were to occur, one or more insurance company separate accounts (or
Qualified Plans) might withdraw its investments in an Investment Option. An
irreconcilable conflict might result in the withdrawal of a substantial amount
of a Portfolio's assets which could adversely affect such Portfolio's net
asset value per share.
CHARGES AND DEDUCTIONS
Various charges and deductions are made from the Contract Value and the
Separate Account. These charges and deductions are:
DEDUCTION FOR WITHDRAWAL CHARGE (SALES LOAD)
If all or a portion of the Contract Value (see "Withdrawals" on Page 20) is
withdrawn, a Withdrawal Charge (sales load) will be calculated at the time of
each withdrawal and will be deducted from the Contract Value. This charge
reimburses the Company for expenses incurred in connection with the promotion,
sale and distribution of the Contracts. The Withdrawal Charge percentages are
based upon the number of Purchase Payment Anniversaries that Purchase Payments
have remained in the Contract before being withdrawn as shown in the Table of
Withdrawal Charges below:
TABLE OF WITHDRAWAL CHARGES
<TABLE>
<CAPTION>
PURCHASE PAYMENT ANNIVERSARY WITHDRAWAL CHARGE
- ---------------------------- -----------------
<S> <C>
1......................................... 8% of the Purchase Payment withdrawn
2......................................... 7% of the Purchase Payment withdrawn
3......................................... 6% of the Purchase Payment withdrawn
4......................................... 5% of the Purchase Payment withdrawn
5......................................... 4% of the Purchase Payment withdrawn
6......................................... 3% of the Purchase Payment withdrawn
7......................................... 2% of the Purchase Payment withdrawn
8......................................... 1% of the Purchase Payment withdrawn
9 and after............................... 0% of the Purchase Payment withdrawn
</TABLE>
At any time, the Owner may make a withdrawal, without the imposition of a
Withdrawal Charge, of an amount equal to the sum of: 1) earnings (Contract
Value less unliquidated Purchase Payments not withdrawn); 2) Purchase Payments
in the Contract for more than eight years; and 3) an amount which is equal to
10% of the
13
<PAGE>
Purchase Payments in the Contract for less than eight years, fixed at the time
of the first withdrawal in the Contract Year, plus 10% of the Purchase
Payments made after the first withdrawal in the Contract Year but before the
next Contract Anniversary, less any withdrawals in the same Contract Year of
Purchase Payments less than eight years old. See "Withdrawals" for a
discussion of how Contract Value is deemed withdrawn for purposes of the
Withdrawal Charge.
Commissions will be paid to broker-dealers who sell the Contracts. Broker-
dealers will be paid commissions, up to an amount currently equal to 7.75% of
Purchase Payments, for promotional or distribution expenses associated with
the marketing of the Contracts. The Company may, by agreement with the broker-
dealer, pay commissions as a combination of a certain percentage amount at the
time of sale and a trail commission (which when combined could exceed 7.75% of
Purchase Payments). In addition, under certain circumstances, the Company may
pay certain sellers production bonuses which will take into account, among
other things, the total Purchase Payments which have been made under Contracts
associated with the broker-dealer. Additional payments or allowances may be
made for other services not directly related to the sale of the Contracts.
No Withdrawal Charge is deducted if Plan A -- Option 1; Plan B or Plan C is
elected. (See "Contract Proceeds -- Fixed Payment Plans" on Page 24.)
In addition, in certain states, an endorsement to the Contract is issued
which permits the Owner to make a total or partial withdrawal without the
imposition of a Withdrawal Charge if the Annuitant is hospitalized and/or
confined to an eligible nursing home for 30 consecutive days.
REDUCTION OR ELIMINATION OF THE WITHDRAWAL CHARGE
The amount of the Withdrawal Charge on the Contracts may be reduced or
eliminated when sales of the Contracts are made to individuals or to a group
of individuals in a manner that results in savings of sales expenses. The
entitlement to reduction of the Withdrawal Charge will be determined by the
Company after examination of all the relevant factors such as:
1. The size and type of group to which sales are to be made will be
considered. Generally, the sales expenses for a larger group are less
than for a smaller group because of the ability to implement large
numbers of Contracts with fewer sales contacts.
2. The total amount of Purchase Payments to be received will be considered.
Per Contract sales expenses are likely to be less on larger Purchase
Payments than on smaller ones.
3. Any prior or existing relationship with the Company will be considered.
Per Contract sales expenses are likely to be less when there is a prior
existing relationship because of the likelihood of implementing the
Contract with fewer sales contacts.
4. There may be other circumstances, of which the Company is not presently
aware, which could result in reduced sales expenses.
If, after consideration of the foregoing factors, the Company determines
that there will be a reduction in sales expenses, the Company may provide for
a reduction or elimination of the Withdrawal Charge.
The Company and its affiliates may offer an exchange program ("Exchange
Program") to their fixed annuity contract owners whereby a contract owner can
exchange his or her fixed annuity contract for a Contract offered by this
Prospectus. Pursuant to the Exchange Program, the Withdrawal Charge may be
reduced or eliminated so that a contract owner would not incur any additional
or higher Withdrawal Charge as a result of the exchange.
14
<PAGE>
The Withdrawal Charge may be eliminated when the Contracts are issued to an
officer, director or employee of the Company or any of its affiliates. In no
event will reductions or elimination of the Withdrawal Charge be permitted
where reductions or elimination will be unfairly discriminatory to any person.
DEDUCTION FOR MORTALITY AND EXPENSE RISK CHARGE
The Company deducts on each Valuation Date a Mortality and Expense Risk
Charge which is equal, on an annual basis, to 1.25% of the average daily net
asset value of the Separate Account. The mortality risks assumed by the
Company arise from its contractual obligation to make annuity payments after
the Annuity Date for the life of the Annuitant and to waive the Withdrawal
Charge in the event of the death of the Annuitant. Also, there is a mortality
risk borne by the Company with respect to the guaranteed death benefit (see
"Contract Proceeds -- Death Proceeds" on Page 22). The expense risk assumed by
the Company is that all actual expenses involved in administering the
Contracts, including Contract maintenance costs, administrative costs, mailing
costs, data processing costs, legal fees, accounting fees, filing fees and the
costs of other services may exceed the amount recovered from the Annual
Contract Maintenance Charge and the Administrative Charge.
If the Mortality and Expense Risk Charge is insufficient to cover the actual
costs, the loss will be borne by the Company. Conversely, if the amount
deducted proves more than sufficient, the excess will be a profit to the
Company. The Company expects a profit from this charge.
The Mortality and Expense Risk Charge is guaranteed by the Company and
cannot be increased.
DEDUCTION FOR ADMINISTRATIVE CHARGE
The Company deducts on each Valuation Date an Administrative Charge which is
equal, on an annual basis, to .15% of the average daily net asset value of the
Separate Account. This charge, together with the Annual Contract Maintenance
Charge (see below), is to reimburse the Company for the expenses it incurs in
the establishment and maintenance of the Contracts and the Separate Account.
These expenses include but are not limited to: preparation of the Contracts,
confirmations, annual reports and statements, maintenance of Owner records,
maintenance of Separate Account records, administrative personnel costs,
mailing costs, data processing costs, legal fees, accounting fees, filing
fees, the costs of other services necessary for Owner servicing and all
accounting, valuation, regulatory and reporting requirements. Since this
charge is an asset-based charge, the amount of the charge attributable to a
particular Contract may have no relationship to the administrative costs
actually incurred by that Contract. The Company does not intend to profit from
this charge. This charge will be reduced to the extent that the amount of this
charge is in excess of that necessary to reimburse the Company for its
administrative expenses. Should this charge prove to be insufficient, the
Company will not increase this charge and will incur the loss.
DEDUCTION FOR ANNUAL CONTRACT MAINTENANCE CHARGE
The Company deducts an Annual Contract Maintenance Charge of $30 from the
Contract Value on each Contract Anniversary prior to the Maturity Date. This
charge is to reimburse the Company for its administrative expenses (see
above). This charge is deducted by subtracting values from the Fixed Account
and/or cancelling Accumulation Units from each applicable Subaccount in the
ratio that the value of each account bears to the total Contract Value. If a
total withdrawal is made on other than a Contract Anniversary, the Annual
Contract Maintenance Charge will be deducted at the time of withdrawal. If the
Maturity Date is not a Contract Anniversary, the Annual Contract Maintenance
Charge will be deducted from the Maturity Proceeds. The Company has set this
charge at a level so that, when considered in conjunction with the
Administrative Charge (see above), it will not make a profit from the charges
assessed for administration.
DEDUCTION FOR PREMIUM TAXES
The Contract provides that any premium or other taxes paid to any government
entity relating to the Contract will be deducted from the Purchase Payment or
Contract Value when incurred. Some states assess
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premium taxes at the time Purchase Payments are made; others assess premium
taxes at the time Annuity Payments begin. Premium taxes generally range from
0% to 4%. The Contract also provides that the Company may, at its sole
discretion, pay taxes when due and deduct that amount from the Contract Value
at a later date. Payment at an earlier date does not waive any right the
Company may have to deduct amounts at a later date. The Company currently
intends to advance any premium taxes due at the time Purchase Payments are
made and then deduct such premium taxes from an Owner's Contract Value at the
time Annuity Payments begin or upon withdrawal if the Company is unable to
obtain a refund. The Company will, in its sole discretion, determine when
taxes have resulted from:
(1)the investment experience of the Separate Account;
(2)receipt by the Company of the Purchase Payments; or
(3)commencement of Annuity Payments.
DEDUCTION FOR INCOME TAXES
While the Company is not currently maintaining a provision for federal
income taxes with respect to the Separate Account, the Company has reserved
the right to establish a provision for income taxes if it determines, in its
sole discretion, that it will incur a tax as a result of the operation of the
Separate Account. The Company will deduct for any income taxes incurred by it
as a result of the operation of the Separate Account whether or not there was
a provision for taxes and whether or not it was sufficient. The Company will
deduct any withholding taxes required by applicable law.
DEDUCTION FOR EXPENSES OF THE INVESTMENT OPTIONS
There are other deductions from and expenses paid out of the assets of the
Investment Options, including operating expenses and amounts paid to the
investment advisers as Management Fees, which are described in the
accompanying Prospectuses for the Investment Options.
DEDUCTION FOR TRANSFER FEE
Prior to the Maturity Date, the Owner may transfer all or part of the
Owner's interest in a Subaccount or the Fixed Account (subject to Fixed
Account provisions) without the imposition of any fee or charge if there have
been no more than 12 transfers made in the Contract Year. If more than 12
transfers have been made in the Contract Year, the Company will deduct a
Transfer Fee which is equal to the lesser of 2% of the Contract Value
transferred or an amount not greater than $25. (The current amount is $25.)
Currently, all transfers made on any one day are considered a single transfer.
If the Owner is participating in the Automatic Portfolio Rebalancing program
or the Dollar Cost Averaging program such transfers currently are not counted
toward the number of transfers for the year and are not taken into account in
determining any Transfer Fee. However, the Company reserves the right to treat
multiple transfers in a single day, Automatic Portfolio Rebalancing transfers
and Dollar Cost Averaging transfers as standard transfers when determining
annual transfers and imposing the Transfer Fee. (See "Purchase Payments and
Contract Value -- Dollar Cost Averaging" on Page 18 and "Purchase Payments and
Contract Value -- Automatic Portfolio Rebalancing" on Page 19.)
THE CONTRACTS
OWNERSHIP
The Owner exercises all the rights under the Contract. The maximum issue Age
is 85 years old for Owners and Annuitants The Owner may name a new Owner. Any
change in Ownership must be sent to the Company's Customer Service Center on a
form acceptable to the Company. The change will go into effect when it is
signed, subject to any payments or actions taken by the Company before it
records it. The Company is not responsible for any tax consequences occurring
as a result of ownership changes. For Non-Qualified Contracts, in accordance
with Code Section 72(u), a deferred annuity contract held by a corporation or
other entity that is not a natural person is not treated as an annuity
contract for tax purposes. Income on the contract is treated as ordinary
income
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received by the owner during the taxable year. However, for purposes of Code
Section 72(u), an annuity contract held by a trust or other entity as agent for
a natural person is considered held by a natural person and treated as an
annuity contract for tax purposes. Tax advice should be sought prior to
purchasing a Contract which is to be owned by a trust or other non-natural
person.
ANNUITANT
The Annuitant is the natural person on whose life Annuity Payments are based.
The Annuitant is irrevocably named at the time the Contract is issued.
ASSIGNMENT
During the Annuitant's life, the Owner can assign some or all of the Owner's
rights under the Contract to someone else.
A signed copy of the assignment must be sent to the Company on a form
acceptable to the Company. An assignment of the Contract is not binding on the
Company until the assignment, or a copy, is recorded at the Customer Service
Center, subject to any payments or actions taken by the Company before the
recording. The Company is not responsible for the validity or effect of any
assignment, including any tax consequences.
The consent of any Irrevocable Beneficiaries is required before assignment of
Proceeds can happen.
If the Contract is issued pursuant to a retirement plan which receives
favorable tax treatment under the provisions of Sections 401, 403(b), 408 or
457 of the Code, it may not be assigned, pledged or otherwise transferred
except as may be allowed under applicable law.
BENEFICIARY
The Owner can name any Beneficiary to be an Irrevocable Beneficiary. The
interest of an Irrevocable Beneficiary cannot be changed without his or her
consent. Otherwise, the Owner can change Beneficiaries as explained below.
Unless the Owner states otherwise, all rights of a Beneficiary, including an
Irrevocable Beneficiary, will end if he or she dies before the Annuitant. If
any Beneficiary dies before the Annuitant, that Beneficiary's interest will
pass to any other Beneficiaries according to their respective interests. If all
Beneficiaries die before the Annuitant, upon the Annuitant's death the Company
will pay the Death Proceeds to the Owner, if living, otherwise to the Owner's
estate or legal successors.
The Owner can change the Beneficiary at any time during the Annuitant's life.
To do so, the Owner must send a written request to the Company's Customer
Service Center. The request must be on a form acceptable to the Company. The
change will go into effect when signed, subject to any payments or actions
taken by the Company before it records the change.
A change cancels all prior Beneficiary designations; except, however, a
change will not cancel any Irrevocable Beneficiary without his or her consent.
The interest of the Beneficiary will be subject to:
(1) any assignment of the Contract, accepted and recorded by the Company
prior to the Annuitant's death; and
(2) any Payment Plan in effect on the date of the Annuitant's death.
Death Proceeds will be paid as though the Beneficiary died before the
Annuitant if:
(1) the Beneficiary dies at the same time as the Annuitant; or
(2) the Beneficiary dies within 24 hours of the Annuitant's death.
PURCHASE PAYMENTS AND CONTRACT VALUE
PURCHASE PAYMENTS
The initial Purchase Payment is due on the Issue Date. There is no Contract
until the initial Purchase Payment is paid. If any check presented as payment
of any part of the initial Purchase Payment for a Contract is not honored, the
Contract is void.
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The minimum Purchase Payment for Non-Qualified Contracts is an aggregate of
$5,000 the first year and the minimum subsequent Purchase Payment is $100.
Under certain circumstances the Company may waive and/or modify the minimum
subsequent Purchase Payment requirement for Non-Qualified Contracts in the case
of large groups who submit Purchase Payments through Company approved billing
procedures. For Qualified Contracts, the minimum Purchase Payment is $100 per
month if payroll deduction is used; otherwise it is an aggregate of $2,000 per
year. Prior Company approval must be obtained for subsequent Purchase Payments
in excess of $500,000 or for total Purchase Payments in excess of $1 million.
The Company reserves the right to accept or decline any application or Purchase
Payment.
ALLOCATION OF PURCHASE PAYMENTS
The initial Purchase Payment is allocated to the Fixed Account or the
Subaccount(s) of the Separate Account as elected by the Owner. Unless otherwise
changed by the Owner, subsequent Purchase Payments are allocated in the same
manner as the initial Purchase Payment. (In Oregon, Washington and New Jersey,
after the second Contract Year, subsequent Purchase Payments may not be
allocated to the Fixed Account.) Under certain circumstances, the initial
Purchase Payment, which has been designated by prospective purchasers to be
allocated to the Fixed Account or Subaccounts other than the Money Market
Subaccount, may initially be allocated to the Money Market Subaccount during
the free look period. (See "Highlights" on Page 3.) For each Subaccount,
Purchase Payments are converted into Accumulation Units. The number of
Accumulation Units credited to the Contract is determined by dividing the
Purchase Payment allocated to the Subaccount by the value of the Accumulation
Unit for the Subaccount. Purchase Payments allocated to the Fixed Account are
credited in dollars.
If the application for a Contract is in good order, the Company will apply
the Purchase Payment to the Separate Account and credit the Contract with
Accumulation Units and/or to the Fixed Account and credit the Contract with
dollars within two business days of receipt. If the application for a Contract
is not in good order, the Company will attempt to get it in good order or the
Company will return the application and the Purchase Payment within five (5)
business days. The Company will not retain a Purchase Payment for more than
five (5) business days while processing an incomplete application unless it has
been so authorized by the purchaser.
DOLLAR COST AVERAGING
Dollar Cost Averaging is a program which, if elected, permits an Owner to
systematically transfer each month amounts from any one Subaccount or the Fixed
Account (subject to Fixed Account provisions) to any Subaccount(s). By
allocating amounts on a regularly scheduled basis as opposed to allocating the
total amount at one particular time, an Owner may be less susceptible to the
impact of market fluctuations. The minimum amount which may be transferred is
$100. The minimum duration of participation in any Dollar Cost Averaging
program is currently five (5) months. An Owner must have a minimum of the
amount required in the Subaccount or the Fixed Account to complete the Owner's
designated program in order to participate in the Dollar Cost Averaging
program.
All Dollar Cost Averaging transfers will be made on the 15th of each month or
another monthly date mutually agreed upon (or the next Valuation Date if the
15th of the month is not a Valuation Date). If the Owner is participating in
the Dollar Cost Averaging program, such transfers currently are not taken into
account in determining any Transfer Fee. The Company reserves the right to
treat Dollar Cost Averaging transfers as standard transfers when determining
the number of transfers in a year and imposing any applicable Transfer Fees. An
Owner participating in the Dollar Cost Averaging program may not make automatic
withdrawals of his or her Contract Value or participate in the Automatic
Portfolio Rebalancing program. (See "Withdrawals -- Automatic Withdrawals" on
Page 21 and "Purchase Payments and Contract Value -- Automatic Portfolio
Rebalancing" below.)
AUTOMATIC PORTFOLIO REBALANCING
Owners may participate in the Automatic Portfolio Rebalancing program
pursuant to which Owners authorize the Company to automatically transfer all or
a portion of their Contract Value on a periodic basis to
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maintain a particular percentage allocation among the Portfolios, as selected
by the Owner. The Contract Value allocated to each Portfolio will increase or
decrease at different rates depending on the investment experience of the
Portfolio and Automatic Portfolio Rebalancing automatically reallocates the
Contract Value in the Portfolios to the allocation chosen by the Owner. The
allocations must be in full percentage points.
An Owner may select that rebalancing occur on a quarterly, semiannual or
annual basis and currently all Portfolios are available investment options
under Automatic Portfolio Rebalancing. The Fixed Account is excluded from
rebalancing. Currently, the Company offers Automatic Portfolio Rebalancing to
Owners with a Contract Value of greater than $25,000, but reserves the right to
offer the program on Contracts with a lesser amount. The Company reserves the
right to modify, suspend or terminate this service at any time.
All Automatic Portfolio Rebalancing transfers will be made on the 15th of the
month that rebalancing is requested or another monthly date mutually agreed
upon (or the next Valuation Date, if the 15th of the month is not a Valuation
Date). If the Owner is participating in the Automatic Portfolio Rebalancing
program, such transfers currently are not taken into account in determining any
Transfer Fee. The Company reserves the right to treat Automatic Portfolio
Rebalancing transfers as standard transfers when determining the number of
transfers in a year and imposing any applicable Transfer Fees. An Owner
participating in the Automatic Portfolio Rebalancing program may not make
automatic withdrawals of his or her Contract Value or participate in the Dollar
Cost Averaging program. (See "Purchase Payments and Contract Value -- Dollar
Cost Averaging" above and "Withdrawals -- Automatic Withdrawals" on Page 21.)
CONTRACT VALUE
The Contract Value, at any time, is the sum of:
(1) the Fixed Account Value; and
(2) the Separate Account Value.
The Separate Account value on any Valuation Date means the sum of the Owner's
interests in the Subaccounts of the Separate Account. The value of the Owner's
interest in a Subaccount is determined by multiplying the number of
Accumulation Units attributable to that Subaccount by the Accumulation Unit
value for the Subaccount. Any withdrawals or transfers will result in the
cancellation of Accumulation Units in a Subaccount. The Separate Account values
will vary with the performance of the Subaccounts of the Separate Account, any
Purchase Payments paid, partial withdrawals and charges assessed.
ACCUMULATION UNIT
A Purchase Payment when allocated to the Separate Account is converted into
Accumulation Units for the selected Subaccount. The number of Accumulation
Units in a Subaccount credited to the Contract is determined by dividing the
Purchase Payment allocated to that Subaccount by the Accumulation Unit value
for that Subaccount as of the Valuation Period during which the Purchase
Payment is allocated to the Subaccount. The Accumulation Unit value for each
Subaccount was arbitrarily set initially at $10. Subsequent Accumulation Unit
values are determined by subtracting (2) from (1) and dividing the result by
(3) where:
(1) is the net result of:
(a)the assets of the Subaccount attributable to Accumulation Units;
plus or minus
(b) the cumulative charge or credit for taxes reserved, which resulted
from the operation or maintenance of the Subaccount.
(2) is the cumulative unpaid charge for the Mortality and Expense Risk
Charge and for the Administrative Charge; and
(3) is the number of Accumulation Units outstanding at the end of the
Valuation Period.
The Accumulation Unit value may increase or decrease from Valuation Period to
Valuation Period.
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TRANSFERS
Prior to the Maturity Date, the Owner may transfer all or part of the Owner's
interest in a Subaccount or the Fixed Account without the imposition of any fee
or charge if there have been no more than 12 transfers for the Contract Year.
All transfers are subject to the following:
(1) if more than 12 free transfers have been made in any Contract Year, the
Company will deduct a Transfer Fee for each subsequent transfer. (The
Transfer Fee is the lesser of 2% of the Contract Value transferred or
$25.) The Transfer Fee will be deducted from the amount which is
transferred. Transfers from a Dollar Cost Averaging program or
Automatic Portfolio Rebalancing program are currently not counted
toward the number of annual transfers and are not taken into account in
determining any applicable Transfer Fees. Currently, all transfers in a
single day are treated as a single transfer. The Company reserves the
right to treat Dollar Cost Averaging transfers, Automatic Portfolio
Rebalancing transfers and multiple transfers in a single day as
standard transfers in determining the number of annual transfers and
the imposition of any applicable Transfer Fees.
(2) the minimum amount which can be transferred is $100 or the Owner's
entire interest in the Subaccount or the Fixed Account, if less. The
minimum amount which must remain in a Subaccount or Fixed Account after
a transfer is $100 or the Subaccount or Fixed Account must be
liquidated.
(3) for any Contract Year, transfers of Purchase Payments and any
attributable earnings from the Fixed Account to a Subaccount are
limited to ten percent (10%) of the Purchase Payment and ten percent
(10%) of its attributable earnings. If a Purchase Payment was received
at least eight (8) years prior to the request for transfer, all of the
Purchase Payment and the earnings attributable to it may be transferred
to a Subaccount. (In New Jersey, no amounts may be transferred to the
Fixed Account after the second Contract Year.)
(4) any transfer direction must clearly specify:
(a)the amount which is to be transferred; and
(b)the Fixed Account or Subaccounts which are to be affected.
(5) transfers will be made as of the Valuation Period next following the
Valuation Period during which a written request for a transfer is
received by the Company.
(6) the Company reserves the right, at any time, and without prior notice
to any party, to terminate, suspend, or modify the transfer privilege
described above, subject to applicable state law and regulation.
An Owner may elect to make transfers by telephone. To elect this option the
Owner must do so in writing to the Company. If there are Joint Owners, unless
the Company is informed to the contrary, instructions will be accepted from
either one of the Joint Owners. The Company will use reasonable procedures to
confirm that instructions communicated by telephone are genuine. If it does
not, the Company may be liable for any losses due to unauthorized or fraudulent
instructions. The Company may tape record all telephone instructions.
WITHDRAWALS
Prior to the Maturity Date, the Owner may, upon written request received by
the Company, make a total or partial withdrawal of the Contract Withdrawal
Value. (For Contracts issued in Idaho, no partial withdrawal may be made for 30
days after the Issue Date.) The Contract terminates if a total withdrawal is
made. The Contract Withdrawal Value is:
(1) the Contract Value for the Valuation Period next following the
Valuation Period during which a written request for a withdrawal is
received by the Company; less
(2) any applicable taxes not previously deducted; less
(3) the Withdrawal Charge, if any (see "Charges and Deductions -- Deduction
for Withdrawal Charge (Sales Load)" on Page 13); less
(4) the Annual Contract Maintenance Charge, if any.
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A withdrawal will result in the cancellation of Accumulation Units for each
applicable Subaccount of the Separate Account or a reduction in the Fixed
Account Value. Unless otherwise instructed, a partial withdrawal will be
deducted pro rata among each Subaccount and the Fixed Account based on the
ratio of the value of each Subaccount or Fixed Account to the Contract Value.
The Company will pay the amount of any withdrawal from the Subaccounts within
seven (7) calendar days of receipt of a request, unless the "Suspension of
Payments or Transfers" provision is in effect (see "Suspension of Payments or
Transfers" below).
For purposes of determining any applicable Withdrawal Charges or any other
charges under the Contract, Contract Value is removed in the following order:
1) earnings (Contract Value less Purchase Payments not withdrawn); 2) Purchase
Payments in the Contract for more than eight years (these Purchase Payments
are liquidated on a first in, first out basis); 3) additional free amount
(which is equal to 10% of the Purchase Payments in the Contract for less than
eight years, fixed at the time of the first withdrawal in the Contract Year,
plus 10% of the Purchase Payments made after the first withdrawal in the
Contract Year but before the next Contract Anniversary, less any withdrawals
in the same Contract Year of Purchase Payments less than eight years old); and
4) Purchase Payments in the Contract for less than eight years (these Purchase
Payments are removed on a first in, first out basis).
Each partial withdrawal must be for an amount which is not less than $100 or
the Owner's entire interest in the Subaccount or the Fixed Account, if less.
The minimum Contract Value which must remain in a Subaccount or the Fixed
Account after a partial withdrawal is $100.
Certain tax withdrawal penalties and restrictions may apply to withdrawals
from the Contracts. (See "Tax Status" on Page 27.) For Contracts purchased in
connection with 403(b) plans, the Code limits the withdrawal of amounts
attributable to contributions made pursuant to a salary reduction agreement
(as defined in Section 403(b)(11) of the Code) to circumstances only when the
Owner: (1) attains age 59 1/2; (2) separates from service; (3) dies; (4)
becomes disabled (within the meaning of Section 72(m)(7) of the Code); or (5)
in the case of hardship. However, withdrawals for hardship are restricted to
the portion of the Owner's Contract Value which represents contributions made
by the Owner and does not include any investment results. The limitations on
withdrawals became effective on January 1, 1989 and apply only to salary
reduction contributions made after December 31, 1988, to income attributable
to such contributions and to income attributable to amounts held as of
December 31, 1988. The limitations on withdrawals do not affect rollovers or
transfers between certain Qualified Plans. Owners should consult their own tax
counsel or other tax adviser regarding any distributions.
AUTOMATIC WITHDRAWALS
Subject to any conditions and fees the Company may impose, an Owner may
elect to withdraw a designated amount in equal periodic installments
("automatic withdrawals"). The Company reserves the right to charge a fee for
automatic withdrawals. Currently, however, there are no charges for automatic
withdrawals.
Automatic withdrawals are made on the 15th of each month, or any other
monthly date mutually agreed upon (or the next following Valuation Date if the
monthly date is not a Valuation Date). Certain withdrawal penalties may apply
to withdrawals from the Contracts (see "Tax Status -- Tax Treatment of
Withdrawals -- Qualified Contracts" on Page 31 and "Tax Treatment of
Withdrawals -- Non-Qualified Contracts" on Page 29). Automatic withdrawals are
taken pro rata from Contract Value. Automatic withdrawals are not allowed
simultaneously with the Dollar Cost Averaging program or Automatic Portfolio
Rebalancing program. (See "Purchase Payments and Contract Value -- Dollar Cost
Averaging" on Page 18 and "Purchase Payments and Contract Value -- Automatic
Portfolio Rebalancing" on Page 19.)
TEXAS OPTIONAL RETIREMENT PROGRAM
A Contract issued to a participant in the Texas Optional Retirement Program
("ORP") will contain an ORP endorsement that will amend the Contract as
follows: A) If for any reason a second year of ORP participation is
not begun, the total amount of the State of Texas' first-year contribution
will be returned to the appropriate institute of higher education upon its
request. B) No benefits will be payable, through surrender of the Contract
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or otherwise, until the participant dies, accepts retirement, terminates
employment in all Texas institutions of higher education or attains the age of
70 1/2. The value of the Contract may, however, be transferred to other
contracts or carriers during the period of ORP participation. A participant in
the ORP is required to obtain a certificate of termination from the
participant's employer before the value of a Contract can be withdrawn.
SUSPENSION OF PAYMENTS OR TRANSFERS
The Company reserves the right to suspend or postpone payments (in Illinois,
for a period not exceeding six months) for withdrawals or transfers for any
period when:
(1) the New York Stock Exchange is closed (other than customary weekend and
holiday closings);
(2) trading on the New York Stock Exchange is restricted;
(3) an emergency exists as a result of which disposal of securities held in
the Separate Account is not reasonably practicable or it is not
reasonably practicable to determine the value of the Separate Account's
net assets;
(4) when the Company's Customer Service Center is closed; or
(5) during any other period when the Securities and Exchange Commission, by
order, so permits for the protection of Owners; provided that
applicable rules and regulations of the Securities and Exchange
Commission will govern as to whether the conditions described in (2)
and (3) exist.
The Company reserves the right to defer payment for a withdrawal or transfer
from the Fixed Account for the period permitted by law but not for more than
six months after written election is received by the Company.
CONTRACT PROCEEDS
MATURITY PROCEEDS
The Owner selects a Maturity Date at the Issue Date and may elect a new
Maturity Date at any time by making a written request to the Company at its
Customer Service Center at least seven days prior to the Maturity Date.
On the Maturity Date, the Company will pay the Maturity Proceeds of the
Contract to the Annuitant, if living, subject to the terms of the Contract. If
Payment Plan A, Option 1; Plan B; or Plan C are elected, the Maturity Proceeds
will be the Contract Value less any applicable taxes not previously deducted.
(See "Fixed Payment Plans" below.) If the Maturity Proceeds are paid in cash or
by any other method not listed above, the Maturity Proceeds equal the Contract
Value less:
(1) any applicable taxes not previously deducted; less
(2) the Withdrawal Charge, if any; less
(3) the Annual Contract Maintenance Charge, if any.
The election of a Payment Plan must be made in writing at least seven (7)
days prior to the Maturity Date. If no election is made, an automatic option of
monthly income for a minimum of 120 months and as long thereafter as the
Annuitant lives will be applied.
DEATH PROCEEDS
For issue ages less than 67, the death proceeds will be the greater of:
(1) Purchase Payments (less any withdrawals and taxes);
(2) Contract Value on the date of settlement (less taxes); or
(3) The highest Contract Value (adjusted for subsequent premium withdrawals
and taxes) on any Contract Anniversary beginning with the 8th Contract
Anniversary and continuing through to the last anniversary prior to
attained age 76.
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For issue ages 67 through 75, the death proceeds will be the greater of:
(1) Purchase Payments (less withdrawals and taxes);
(2) Contract Value on the date of settlement (less taxes); or
(3) The Contract Value (less subsequent withdrawals and taxes) on the 8th
Contract Anniversary.
For issue ages 76 and above, the death proceeds will be the Contract Value on
the date of settlement, less any applicable taxes not previously deducted.
The Death Proceeds will be determined and paid as of the Valuation Period
next following the Valuation Period during which both due proof of death
satisfactory to the Company and an election for the payment method from all
Beneficiaries are received at the Company.
The Beneficiary can elect to have a single lump sum payment or choose one of
the Payment Plans. If a single sum payment is requested, the amount will be
paid within seven (7) days, unless the Suspension of Payments or Transfers
provision is in effect.
Payment to the Beneficiary, other than in a single sum, may only be elected
during the 60-day period beginning with the date of receipt of due proof of
death on a form acceptable to the Company.
The entire Death Proceeds must be paid within five (5) years of the date of
death unless:
(1) the Beneficiary elects to have the Death Proceeds:
(a) payable under a Payment Plan over the life of the Beneficiary or
over a period not extending beyond the life expectancy of the
Beneficiary; and
(b) payable beginning within one year of the date of death; or
(2) if the Beneficiary is the Owner's Spouse, the Beneficiary may elect to
become the Owner of the Contract and the Contract will continue in
effect.
DEATH OF THE ANNUITANT
(1) If the Annuitant dies prior to the Maturity Date, the Company will pay
the Death Proceeds as provided above.
(2) If the Annuitant dies after the Maturity Date but before all of the
Proceeds payable under the Contract have been distributed, the Company
will pay the remaining Proceeds to the Beneficiary(ies) according to
the terms of the supplementary contract.
DEATH OF OWNER
(1) If the Owner dies before the Maturity Date, ownership of the Contract
will be transferred as follows:
(a) if the Owner is also the Annuitant, the Death of the Annuitant
provision described above applies; or
(b) if the Owner is not also the Annuitant and if the new Owner is the
spouse of the Owner, the Contract may be continued; or
(c) if the Owner is not also the Annuitant and if the new Owner is
someone other than the spouse of the Owner, the Contract Withdrawal
Value must be distributed pursuant to the Death Proceeds provision
above.
(2) If the Owner dies on or after the Maturity Date, but before all
Proceeds payable under the Contract have been distributed, the Company
will continue payments according to the terms of the supplementary
contract.
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The Owner's spouse is the Owner's surviving spouse at the time of the Owner's
death. If the Owner is not a natural person, the death of the Annuitant will be
treated as the death of the Owner. If there are Joint Owners, any references to
the death of the Owner shall mean the first death of an Owner.
FIXED PAYMENT PLANS
After the first Contract Year, the Proceeds may be applied under one or more
of the Payment Plans described below. Payment Plans not specified in the
Contract are available only if they are approved both by the Company and the
Owner. The Owner chooses a Payment Plan during the Annuitant's lifetime. This
choice can be changed during the life of the Annuitant prior to the Maturity
Date. If the Owner has not chosen a plan prior to the Annuitant's death, the
automatic option of monthly income for a minimum of 120 months and as long
thereafter as the Payee lives will be applied.
The Owner chooses a plan by sending a written request to the Customer Service
Center. The Company will send the Owner the proper forms to complete. The
request, when recorded at the Company's Customer Service Center, will be in
effect from the date it was signed, subject to any payments or actions taken by
the Company before the recording. Any change must be requested at least seven
(7) days prior to the Maturity Date. If, for any reason, the person named to
receive payments (the Payee) is changed, the change will go into effect when
the request is recorded at the Company's Customer Service Center, subject to
any payments or actions taken by the Company before the recording.
No Withdrawal Charge is deducted if Plan A-Option 1; Plan B or Plan C is
elected.
A plan is available only if the periodic payment is $100 or more. If the
Payee is other than a natural person (such as a corporation), a plan will be
available only with the Company's consent.
A supplementary contract will be issued in exchange for the Contract when
payment is made under a Payment Plan. The effective date of a Payment Plan
shall be a date upon which the Company and the Owner mutually agree.
The minimum interest rate for plans A and B is 3.0% a year, compounded
yearly. The minimum rates for Plan C were based on the 1983a Annuity Table at
3.0% interest, compounded yearly. The Company may pay a higher rate at its
discretion.
PLAN A. INTEREST
OPTION 1 -- The Contract Value less any applicable taxes not previously
deducted may be left on deposit with the Company for five (5) years. Fixed
payments will be made monthly, quarterly, semi-annually, or annually. The
Company does not allow a monthly payment if the Contract Value applied under
this option is less than $100,000. The Proceeds may not be withdrawn until the
end of the five (5) year period.
OPTION 2 -- The Contract Withdrawal Value may be left on deposit with the
Company for a specified period. Interest will be paid annually. All or part of
the Proceeds may be withdrawn at any time.
PLAN B. FIXED PERIOD
The Contract Value less any applicable taxes not previously deducted will be
paid until the Proceeds, plus interest, are paid in full. Payments may be paid
annually or monthly. The payment period cannot be more than thirty (30) years
nor less than five (5) years. The Contract provides for a table of minimum
annual payments. They are based on the Age of the Annuitant or the Beneficiary.
PLAN C. LIFE INCOME
The Contract Value less any applicable taxes not previously deducted will be
paid in monthly or annual payments for as long as the Annuitant or Beneficiary,
whichever is appropriate, lives. The Company has the right
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to require proof satisfactory to it of the Age and sex of such person and proof
of continuing survival of such person. A minimum number of payments may be
guaranteed, if desired. The Contract provides for a table of minimum annual
payments. They are based on the Age of the Annuitant or the Beneficiary.
DISTRIBUTOR
Equitable of Iowa Securities Network, Inc. ("Securities Network"), 604 Locust
Street, Des Moines, Iowa 50309, acts as the distributor of the Contracts.
Securities Network is also a wholly-owned subsidiary of Equitable of Iowa. The
Contracts are offered on a continuous basis.
ADMINISTRATION
While the Company has primary responsibility for all administration of the
Contracts, it has retained Golden American Life Insurance Company, P.O. Box
8794, Wilmington, Delaware to perform certain administrative services. Such
administrative services include issuance of the Contracts and maintenance of
Owners' records.
PERFORMANCE INFORMATION
MONEY MARKET PORTFOLIO
From time to time, the Company may advertise the "yield" and "effective
yield" of the Money Market Subaccount of the Separate Account. Both yield
figures are based on historical earnings and are not intended to indicate
future performance. The "yield" of the Money Market Subaccount refers to the
income generated by Contract Values in the Money Market Subaccount over a
seven-day period (which period will be stated in the advertisement). This
income is "annualized." That is, the amount of income generated by the
investment during that week is assumed to be generated each week over a 52-week
period and is shown as a percentage of the Contract Values in the Money Market
Subaccount. The "effective yield" is calculated similarly. However, when
annualized, the income earned by Contract Values is assumed to be reinvested.
This results in the "effective yield" being slightly higher than the "yield"
because of the compounding effect of the assumed reinvestment. The yield figure
will reflect the deduction of any asset-based charges and any applicable Annual
Contract Maintenance Charge, but will not reflect the deduction of any
Withdrawal Charge. The deduction of any Withdrawal Charge would reduce any
percentage increase or make greater any percentage decrease.
OTHER PORTFOLIOS
From time to time, the Company may advertise performance data for the various
other Portfolios under the Contract. Such data will show the percentage change
in the value of an Accumulation Unit based on the performance of an investment
medium over a period of time, usually a calendar year, determined by dividing
the increase (decrease) in value for that Unit by the Accumulation Unit value
at the beginning of the period. This percentage figure will reflect the
deduction of any asset-based charges, the fees and expenses of the Portfolio,
and any applicable Annual Contract Maintenance Charges under the Contracts, but
will not reflect the deduction of any Withdrawal Charge. The deduction of any
Withdrawal Charge would reduce any percentage increase or make greater any
percentage decrease.
Any advertisement will also include total return figures calculated as
described in the Statement of Additional Information. The total return figures
reflect the deduction of the asset-based charges, any applicable Annual
Contract Maintenance Charge and Withdrawal Charges, as well as the fees and
expenses of the Portfolio being advertised.
The Company may make available yield information with respect to some of the
Portfolios. Such yield information will be calculated as described in the
Statement of Additional Information. The yield information will reflect the
deduction of any applicable Annual Contract Maintenance Charge as well as any
asset-based charges.
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The Company may also show historical Accumulation Unit values in certain
advertisements containing illustrations. These illustrations will be based on
actual Accumulation Unit values.
In addition, the Company may distribute sales literature which compares the
percentage change in Accumulation Unit values for any of the Portfolios against
established market indices such as the Standard & Poor's 500 Composite Stock
Price Index, the Dow Jones Industrial Average or other management investment
companies which have investment objectives similar to the Portfolio being
compared. The Standard & Poor's 500 Composite Stock Price Index is an
unmanaged, unweighted average of 500 stocks, the majority of which are listed
on the New York Stock Exchange. The Dow Jones Industrial Average is an
unmanaged, weighted average of thirty blue chip industrial corporations listed
on the New York Stock Exchange. Both the Standard & Poor's 500 Composite Stock
Price Index and the Dow Jones Industrial Average assume quarterly reinvestment
of dividends.
The Company may, from time to time, include in its advertising and sales
materials, tax deferred compounding charts and other hypothetical
illustrations, which may include comparisons of currently taxable and tax
deferred investment programs, based on selected tax brackets.
In addition, the Company may, as appropriate, compare each Subaccount's
performance to that of other types of investments such as certificates of
deposit, savings accounts and U.S. Treasuries, or to certain interest rate and
inflation indices, such as the Consumer Price Index, which is published by the
U.S. Department of Labor and measures the average change in prices over time of
a fixed "market basket" of certain specified goods and services. Similar
comparisons of Subaccount performance may also be made with appropriate indices
measuring the performance of a defined group of securities widely recognized by
investors as representing a particular segment of the securities markets. For
example, Subaccount performance may be compared with IBC Money Market Fund
Report Averages (money market rates), Lehman Brothers Corporate Bond Index
(corporate bond interest rates) or Lehman Brothers Government Bond Index (long-
term U.S. Government obligation interest rates).
The Company may also distribute sales literature which compares the
performance of the Accumulation Unit values of the Contracts issued through the
Separate Account with the unit values of variable annuities issued through the
separate accounts of other insurance companies. Such information will be
derived from the Lipper Variable Insurance Products Performance Analysis
Service, the VARDS Report or from Morningstar.
The Lipper Variable Insurance Products Performance Analysis Service is
published by Lipper Analytical Services, Inc., a publisher of statistical data
which currently tracks the performance of almost 4,000 investment companies.
The rankings compiled by Lipper may or may not reflect the deduction of asset-
based insurance charges. The Company's sales literature utilizing these
rankings will indicate whether or not such charges have been deducted. Where
the charges have not been deducted, the sales literature will indicate that if
the charges had been deducted, the ranking might have been lower.
The VARDS Report is a monthly variable annuity industry analysis compiled by
Variable Annuity Research & Data Service of Roswell, Georgia and published by
Financial Planning Resources, Inc. The VARDS rankings may or may not reflect
the deduction of asset-based insurance charges. The Company's sales literature
utilizing these rankings will indicate whether or not such charges have been
deducted. Where the charges have not been deducted, the sales literature will
indicate that if the charges had been deducted, the ranking might have been
lower.
Morningstar rates a variable annuity subaccount against its peers with
similar investment objectives. Morningstar does not rate any subaccount that
has less than three years of performance data. The Company's sales literature
utilizing these rankings will indicate whether charges have been deducted.
Where the charges have not been deducted, the sales literature will indicate
that if the charges had been deducted, the ranking might have been lower.
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TAX STATUS
GENERAL
NOTE: THE FOLLOWING DESCRIPTION IS BASED UPON THE COMPANY'S UNDERSTANDING OF
CURRENT FEDERAL INCOME TAX LAW APPLICABLE TO ANNUITIES IN GENERAL. THE COMPANY
CANNOT PREDICT THE PROBABILITY THAT ANY CHANGES IN SUCH LAWS WILL BE MADE.
PURCHASERS ARE CAUTIONED TO SEEK COMPETENT TAX ADVICE REGARDING INVESTMENT IN
THE CONTRACTS. THE COMPANY DOES NOT GUARANTEE THE TAX STATUS OF THE CONTRACTS.
PURCHASERS BEAR THE COMPLETE RISK THAT THE CONTRACTS MAY NOT BE TREATED AS
"ANNUITY CONTRACTS" UNDER FEDERAL INCOME TAX LAWS. IT SHOULD BE FURTHER
UNDERSTOOD THAT THE FOLLOWING DISCUSSION IS NOT EXHAUSTIVE AND THAT SPECIAL
RULES NOT DESCRIBED IN THIS PROSPECTUS MAY BE APPLICABLE IN CERTAIN SITUATIONS.
MOREOVER, NO ATTEMPT HAS BEEN MADE TO CONSIDER ANY APPLICABLE STATE OR OTHER
TAX LAWS.
Section 72 of the Code governs taxation of annuities in general. An Owner is
not taxed on increases in the value of a Contract until distribution occurs,
either in the form of a lump sum payment or as annuity payments under the
Annuity Option selected. For a lump sum payment received as a total withdrawal
(total surrender), the recipient is taxed on the portion of the payment that
exceeds the cost basis of the Contract. For Non-Qualified Contracts, this cost
basis is generally the purchase payments, while for Qualified Contracts there
may be no cost basis. The taxable portion of the lump sum payment is taxed at
ordinary income tax rates.
For annuity payments, a portion of each payment in excess of an exclusion
amount is includible in taxable income. The exclusion amount for payments based
on a fixed annuity option is determined by multiplying the payment by the ratio
that the cost basis of the Contract (adjusted for any period certain or refund
feature) bears to the expected return under the Contract. Payments received
after the investment in the Contract has been recovered (i.e. when the total of
the excludible amounts equals the investment in the Contract) are fully
taxable. The taxable portion is taxed at ordinary income tax rates. For certain
types of Qualified Plans there may be no cost basis in the Contract within the
meaning of Section 72 of the Code. Owners, Annuitants and Beneficiaries under
the Contracts should seek competent financial advice about the tax consequences
of any distributions.
The Company is taxed as a life insurance company under the Code. For federal
income tax purposes, the Separate Account is not a separate entity from the
Company and its operations form a part of the Company.
DIVERSIFICATION
Section 817(h) of the Code imposes certain diversification standards on the
underlying assets of variable annuity contracts. The Code provides that a
variable annuity contract will not be treated as an annuity contract for any
period (and any subsequent period) for which the investments are not, in
accordance with regulations prescribed by the United States Treasury Department
("Treasury Department"), adequately diversified. Disqualification of the
Contract as an annuity contract would result in imposition of federal income
tax to the Owner with respect to earnings allocable to the Contract prior to
the receipt of payments under the Contract. The Code contains a safe harbor
provision which provides that annuity contracts such as the Contracts meet the
diversification requirements if, as of the end of each quarter, the underlying
assets meet the diversification standards for a regulated investment company
and no more than fifty-five percent (55%) of the total assets consist of cash,
cash items, U.S. Government securities and securities of other regulated
investment companies.
On March 2, 1989, the Treasury Department issued Regulations (Treas. Reg.
1.817-5), which established diversification requirements for the investment
portfolios underlying variable contracts such as the Contracts. The Regulations
amplify the diversification requirements for variable contracts set forth in
the Code and provide an alternative to the safe harbor provision described
above. Under the Regulations, an investment portfolio will be deemed adequately
diversified if: (1) no more than 55% of the value of the total assets of the
portfolio is represented by any one investment; (2) no more than 70% of the
value of the total assets of the portfolio is represented by any two
investments; (3) no more than 80% of the value of the total assets of the
portfolio is
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represented by any three investments; and (4) no more than 90% of the value of
the total assets of the portfolio is represented by any four investments.
The Code provides that, for purposes of determining whether or not the
diversification standards imposed on the underlying assets of variable
contracts by Section 817(h) of the Code have been met, "each United States
government agency or instrumentality shall be treated as a separate issuer."
The Company intends that all Portfolios of the Investment Options underlying
the Contracts will be managed by the investment advisers for the Investment
Options in such a manner as to comply with these diversification requirements.
OWNER CONTROL
The Treasury Department has indicated that the diversification Regulations do
not provide guidance regarding the circumstances in which Owner control of the
investments of the Separate Account will cause the Owner to be treated as the
owner of the assets of the Separate Account, thereby resulting in the loss of
favorable tax treatment for the Contract. At this time it cannot be determined
whether additional guidance will be provided and what standards may be
contained in such guidance.
The amount of Owner control which may be exercised under the Contract is
different in some respects from the situations addressed in published rulings
issued by the Internal Revenue Service in which it was held that the policy
owner was not the owner of the assets of the separate account. It is unknown
whether these differences, such as the Owner's ability to transfer among
investment choices or the number and type of investment choices available,
would cause the Owner to be considered as the owner of the assets of the
Separate Account resulting in the imposition of federal income tax to the Owner
with respect to earnings allocable to the Contract prior to receipt of payments
under the Contract.
In the event any forthcoming guidance or ruling is considered to set forth a
new position, such guidance or ruling will generally be applied only
prospectively. However, if such ruling or guidance was not considered to set
forth a new position, it may be applied retroactively resulting in the Owner
being retroactively determined to be the owner of the assets of the Separate
Account.
Due to the uncertainty in this area, the Company reserves the right to modify
the Contract in an attempt to maintain favorable tax treatment.
MULTIPLE CONTRACTS
The Code provides that multiple non-qualified annuity contracts which are
issued within a calendar year to the same contract owner by one company or its
affiliates are treated as one annuity contract for purposes of determining the
tax consequences of any distribution. Such treatment may result in adverse tax
consequences including more rapid taxation of the distributed amounts from such
combination of contracts. Owners should consult a tax adviser prior to
purchasing more than one non-qualified annuity contract in any calendar year.
CONTRACTS OWNED BY OTHER THAN NATURAL PERSONS
Under Section 72(u) of the Code, the investment earnings on premiums for the
Contracts will be taxed currently to the Owner if the Owner is a non-natural
person, e.g., a corporation, or certain other entities. Such Contracts
generally will not be treated as annuities for federal income tax purposes.
However, this treatment is not applied to Contracts held by a trust or other
entity as an agent for a natural person nor Contracts held by Qualified Plans.
Purchasers should consult their own tax counsel or other tax adviser before
purchasing a Contract to be owned by a non-natural person.
TAX TREATMENT OF ASSIGNMENTS
An assignment or pledge of a Contract may be a taxable event. Owners should
therefore consult competent tax advisers should they wish to assign or pledge
their Contracts.
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INCOME TAX WITHHOLDING
All distributions or the portion thereof which is includible in the gross
income of the Owner are subject to Federal income tax withholding. Generally,
amounts are withheld from periodic payments at the same rate as wages and at
the rate of 10% from non-periodic payments. However, the Owner, in most cases,
may elect not to have taxes withheld or to have withholding done at a different
rate.
Effective January 1, 1993, certain distributions from retirement plans
qualified under Section 401 or Section 403(b) of the Code, which are not
directly rolled over to another eligible retirement plan or individual
retirement account or individual retirement annuity, are subject to a mandatory
20% withholding for Federal income tax. The 20% withholding requirement
generally does not apply to: a) a series of substantially equal payments made
at least annually for the life or life expectancy of the participant or joint
and last survivor expectancy of the participant and a designated beneficiary,
or for a specified period of 10 years or more; b) distributions which are
required minimum distributions; or (c) the portion of the distributions not
includible in gross income (i.e. returns of after-tax contributions).
Participants should consult their own tax counsel or other tax adviser
regarding withholding requirements.
TAX TREATMENT OF WITHDRAWALS -- NON-QUALIFIED CONTRACTS
Section 72 of the Code governs treatment of distributions from annuity
contracts. It provides that if the Contract Value exceeds the aggregate
purchase payments made, any amount withdrawn will be treated as coming first
from the earnings and then, only after the income portion is exhausted, as
coming from the principal. Withdrawn earnings are includible in gross income.
It further provides that a ten percent (10%) penalty will apply to the income
portion of any distribution. However, the penalty is not imposed on amounts
received: (a) after the taxpayer reaches age 59 1/2; (b) after the death of the
Owner; (c) if the taxpayer is totally disabled (for this purpose disability is
as defined in Section 72(m)(7) of the Code); (d) in a series of substantially
equal periodic payments made not less frequently than annually for the life (or
life expectancy) of the taxpayer or for the joint lives (or joint life
expectancies) of the taxpayer and his or her Beneficiary; (e) under an
immediate annuity; or (f) which are allocable to purchase payments made prior
to August 14, 1982.
The Contract provides that upon the death of the Annuitant prior to the
Maturity Date, the Death Proceeds will be paid to the named Beneficiary. Such
payments made upon the death of the Annuitant who is not the Owner of the
Contract do not qualify for the death of Owner exception described above, and
will be subject to the ten (10%) percent distribution penalty unless the
Beneficiary is 59 1/2 years old or one of the other exceptions to the penalty
applies.
The above information does not apply to Qualified Contracts. However,
separate tax withdrawal penalties and restrictions may apply to such Qualified
Contracts. (See "Tax Treatment of Withdrawals -- Qualified Contracts," below.)
QUALIFIED PLANS
The Contracts offered by this Prospectus are designed to be suitable for use
under various types of qualified plans. Generally, participants in a qualified
plan are not taxed on increases to the value of the contributions to the plan
until distribution occurs, regardless of whether the plan assets are held under
an annuity contract. Taxation of participants in each qualified plan varies
with the type of plan and terms and conditions of each specific plan. Owners,
Annuitants and Beneficiaries are cautioned that benefits under a qualified plan
may be subject to the terms and conditions of the plan regardless of the terms
and conditions of the Contracts issued pursuant to the plan. Some retirement
plans are subject to distribution and other requirements that are not
incorporated into the Company's administrative procedures. Owners, participants
and Beneficiaries are responsible for determining that contributions,
distributions and other transactions with respect to the Contracts comply with
applicable law. Following are general descriptions of the types of qualified
plans with which the Contracts may be used. Such descriptions are not
exhaustive and are for general informational purposes only. The tax rules
regarding qualified plans are very complex and will have differing applications
depending on individual facts and circumstances. Each purchaser should obtain
competent tax advice prior to purchasing a Contract issued under a qualified
plan.
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Contracts issued pursuant to qualified plans include special provisions
restricting Contract provisions that may otherwise be available as described in
this Prospectus. Generally, Contracts issued pursuant to qualified plans are
not transferable except upon surrender or annuitization. Various penalty and
excise taxes may apply to contributions or distributions made in violation of
applicable limitations. Furthermore, certain withdrawal penalties and
restrictions may apply to surrenders from Qualified Contracts. (See "Tax
Treatment of Withdrawals -- Qualified Contracts," below.)
On July 6, 1983, the U.S. Supreme Court decided in ARIZONA GOVERNING
COMMITTEE v. NORRIS that optional annuity benefits provided under an employer's
deferred compensation plan could not, under Title VII of the Civil Rights Act
of 1964, vary between men and women. The Contracts sold by the Company in
connection with certain qualified plans will utilize annuity tables which do
not differentiate on the basis of sex. Such annuity tables will also be
available for use in connection with certain non-qualified deferred
compensation plans.
a. Tax-Sheltered Annuities
Section 403(b) of the Code permits the purchase of "tax-sheltered annuities"
by public schools and certain charitable, educational and scientific
organizations described in Section 501(c)(3) of the Code. These qualifying
employers may make contributions to the Contracts for the benefit of their
employees. Such contributions are not includible in the gross income of the
employees until the employees receive distributions from the Contracts. The
amount of contributions to the tax-sheltered annuity is limited to certain
maximums imposed by the Code. Furthermore, the Code sets forth additional
restrictions governing such items as transferability, distributions,
nondiscrimination and withdrawals. (See "Tax Treatment of Withdrawals --
Qualified Contracts" and "Tax-Sheltered Annuities -- Withdrawal Limitations"
below.) Any employee should obtain competent tax advice as to the tax treatment
and suitability of such an investment.
b. Individual Retirement Annuities
(1) Regular Individual Retirement Annuities
Section 408(b) of the Code permits eligible individuals to contribute to an
individual retirement program known as an "Individual Retirement Annuity"
("IRA"). Under applicable limitations, certain amounts may be contributed to an
IRA which will be deductible from the individual's gross income. These IRAs are
subject to limitations on eligibility, contributions, transferability and
distributions. (See "Tax Treatment of Withdrawals --Qualified Contracts"
below.) Under certain conditions, distributions from other IRAs and other
Qualified Plans may be rolled over or transferred on a tax-deferred basis into
an IRA. Sales of Contracts for use with IRAs are subject to special
requirements imposed by the Code, including the requirement that certain
informational disclosure be given to persons desiring to establish an IRA.
Purchasers of Contracts to be qualified as IRAs should obtain competent tax
advice as to the tax treatment and suitability of such an investment.
(2) SIMPLE IRAs
Section 408(p) of the Code permits certain employers (generally those with
less than 100 employees) to establish a retirement program for employees by
using Savings Incentive Match Plan Individual Retirement Annuities ("SIMPLE
IRA"). SIMPLE IRA programs can only be established with the approval of and
adoption by the employer of the Owner of the SIMPLE IRA. Contributions to
SIMPLE IRAs will be made pursuant to a salary reduction agreement in which an
Owner would authorize his/her employer to deduct a certain amount from his/her
pay and contribute it directly to the SIMPLE IRA. The Owner's employer will
also make contributions to the SIMPLE IRA in amounts based upon certain
elections of the employer. The only contributions that can be made to a SIMPLE
IRA are salary reduction contributions and employer contributions as described
above, and rollover contributions from other SIMPLE IRAs. Purchasers of
Contracts to be qualified as SIMPLE IRAs should obtain competent tax advice as
to the tax treatment and suitability of such an investment.
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c. Corporate and Self-Employed ("H.R. 10" and "Keogh") Pension and Profit-
Sharing Plans
Sections 401(a) and 401(k) of the Code permit corporate employers to
establish various types of retirement plans for employees. These sections of
the Code also permit self-employed individuals to establish such retirement
plans for themselves and their employees (sometimes referred to as "Keogh" or
"H.R. 10" Plans). These retirement plans may permit the purchase of the
Contracts to provide benefits under the Plan. Contributions to the Plan for the
benefit of employees will not be includible in the gross income of the
employees until distributed from the Plan. The tax consequences to participants
may vary depending upon the particular plan design. However, the Code places
limitations and restrictions on all plans including on such items as: amount of
allowable contributions; form, manner and timing of distributions;
transferability of benefits; vesting and nonforfeitability of interests;
nondiscrimination in eligibility and participation; and the tax treatment of
distributions, withdrawals and surrenders. (See "Tax Treatment of
Withdrawals -- Qualified Contracts" below.) Purchasers of Contracts for use
with pension or profit-sharing plans should obtain competent tax advice as to
the tax treatment and suitability of such an investment.
d. Section 457 Plans of State and Local Governments and Tax-Exempt Entities
Section 457 of the Code permits employees of state and local governments and
tax-exempt entities to defer a portion of their compensation without paying
current federal income tax if the employer establishes an "eligible deferred
compensation plan" as defined in Section 457 of the Code. For plans established
by tax-exempt entities, the employer is the Owner of the Contract and has the
sole right to the proceeds of the Contract, until paid or made available to the
participant, subject to the claims of the general creditors of the employer.
For plans established by state and local governments after August 20, 1996, the
assets of the 457 plan must be held in trust for the benefit of plan
participants and Contracts issued to these plans will be held in the name of
such trust, or in the name of the plan, for the benefit of plan participants,
and are not subject to the general creditors of the employer. Furthermore, this
requirement must be met for all plans no later than January 1, 1999. Purchasers
of Contracts with respect to 457 plans should obtain competent tax advice as to
the tax treatment and suitability of such an investment.
TAX TREATMENT OF WITHDRAWALS -- QUALIFIED CONTRACTS
In the case of a withdrawal under a Qualified Contract, a ratable portion of
the amount received is taxable, generally based on the ratio of the
individual's cost basis to the individual's total accrued benefit under the
retirement plan. Special tax rules may be available for certain distributions
from a Qualified Contract. Section 72(t) of the Code imposes a 10% penalty tax
on the taxable portion of any distribution from qualified retirement plans,
including Contracts issued and qualified under Code Sections 401 (H.R. 10 and
Corporate Pension and Profit-Sharing Plans), 403(b) (Tax-Sheltered Annuities)
and 408(b) (Individual Retirement Annuities). The penalty is increased to 25%
instead of 10% for SIMPLE IRAs if distribution occurs within the first two
years after the Owner first participated in the SIMPLE IRA. To the extent
amounts are not includible in gross income because they have been rolled over
to an IRA or to another eligible qualified plan, no tax penalty will be
imposed. The tax penalty will not apply to the following distributions: (a) if
distribution is made on or after the date on which the Owner or Annuitant (as
applicable) reaches age 59 1/2; (b) distributions following the death or
disability of the Owner or Annuitant (as applicable) (for this purpose
disability is as defined in Section 72(m)(7) of the Code); (c) after separation
from service, distributions that are part of substantially equal periodic
payments made not less frequently than annually for the life (or life
expectancy) of the Owner or Annuitant (as applicable) or the joint lives (or
joint life expectancies) of such Owner or Annuitant (as applicable) and his or
her designated Beneficiary; (d) distributions to an Owner or Annuitant (as
applicable) who has separated from service after he has attained age 55; (e)
distributions made to the Owner or Annuitant (as applicable) to the extent such
distributions do not exceed the amount allowable as a deduction under Code
Section 213 to the Owner or Annuitant (as applicable) for amounts paid during
the taxable year for medical care; (f) distributions made to an alternate payee
pursuant to a qualified domestic relations order; and (g) distributions from an
Individual Retirement Annuity for the purchase of medical insurance (as
described in Section 213(d)(1)(D) of the Code) for the Owner or Annuitant (as
applicable) and his or her spouse and dependents if the Owner or Annuitant (as
applicable) has received unemployment compensation for at least 12 weeks. This
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<PAGE>
exception will no longer apply after the Owner or Annuitant (as applicable) has
been re-employed for at least 60 days. The exceptions stated in (d) and (f)
above do not apply in the case of an Individual Retirement Annuity. The
exception stated in (c) above applies to an Individual Retirement Annuity
without the requirement that there be a separation from service.
Generally, distributions from a qualified plan (other than IRAs) must
commence no later than April 1 of the calendar year following the year in which
the employee attains age 70 1/2 or retires, whichever is later. For IRAs,
distributions must commence no later than April 1 of the calendar year
following the year in which the Owner attains age 70 1/2. Required
distributions must be over a period not exceeding the life expectancy of the
individual or the joint lives or life expectancies of the individual and his or
her designated beneficiary. If the required minimum distributions are not made,
a 50% penalty tax is imposed as to the amount not distributed.
TAX-SHELTERED ANNUITIES -- WITHDRAWAL LIMITATIONS
The Code limits the withdrawal of amounts attributable to contributions made
pursuant to a salary reduction agreement (as defined in Section 403(b)(11) of
the Code) to circumstances only when the Owner: (1) attains age 59 1/2; (2)
separates from service; (3) dies; (4) becomes disabled (within the meaning of
Section 72(m)(7) of the Code); or (5) in the case of hardship. However,
withdrawals for hardship are restricted to the portion of the Owner's Contract
Value which represents contributions made by the Owner and does not include any
investment results. The limitations on withdrawals became effective on January
1, 1989 and apply only to salary reduction contributions made after December
31, 1988, to income attributable to such contributions and to income
attributable to amounts held as of December 31, 1988. The limitations on
withdrawals do not affect rollovers or transfers between certain Qualified
Plans. Owners should consult their own tax counsel or other tax adviser
regarding any distributions.
FINANCIAL STATEMENTS
Financial statements of the Company and the Separate Account have been
included in the Statement of Additional Information.
LEGAL PROCEEDINGS
There are no pending legal proceedings to which the Separate Account, the
Distributor or the Company is a party which are likely to have a material
adverse effect on the Separate Account or upon the ability of the Company to
meet its obligations under the Contracts. In the ordinary course of business,
the Company and its subsidiaries are also engaged in certain other litigation
none of which management believes is material.
32
<PAGE>
TABLE OF CONTENTS OF THE
STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
ITEM PAGE
- ---- ----
<S> <C>
Company.................................................................... 3
Experts.................................................................... 3
Legal Opinions............................................................. 3
Distributor................................................................ 3
Yield Calculation for Money Market Subaccount.............................. 3
Performance Information.................................................... 4
Annuity Provisions......................................................... 5
Financial Statements....................................................... 5
</TABLE>
33
<PAGE>
-------------
PrimElite(TM)
Variable
Annuity
Prospectus
May 1, 1997
Equitable Life Insurance Company
of Iowa Separate Account A
May 1, 1997
Equi-Select Series Trust
February 28, 1997
Travelers Series Fund Inc.
April 29, 1997
Smith Barney Series Fund
October 31, 1996
Smith Barney Concert Allocation Series Inc.
-------------
<PAGE>
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
Home Office: Administered at: Mailing Address:
604 Locust Street Customer Service Center P.O. Box 9271
Des Moines, Iowa 50309 Wilmington, DE 19801 Des Moines, Iowa 50306-
(800) 648-6810 9271
INDIVIDUAL FLEXIBLE PURCHASE PAYMENT DEFERRED VARIABLE AND
FIXED ANNUITY CONTRACTS
ISSUED BY
EQUITABLE LIFE INSURANCE COMPANY OF IOWA SEPARATE ACCOUNT A
AND
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
The Individual Flexible Purchase Payment Deferred Variable and Fixed Annuity
Contracts (the "Contracts") described in this Prospectus provide for
accumulation of Contract Values on a fixed and variable basis and payment of
monthly annuity payments on a fixed basis. The Contracts are designed for use
by individuals in retirement plans on a Qualified or Non-Qualified basis. (See
"Definitions" on Page 1.)
At the Owner's direction, Purchase Payments for the Contracts will be
allocated to a segregated investment account of Equitable Life Insurance
Company of Iowa (the "Company") which account has been designated Equitable
Life Insurance Company of Iowa Separate Account A (the "Separate Account") or
to the Company's Fixed Account. Under certain circumstances, however, Purchase
Payments may initially be allocated to the Smith Barney Money Market
Subaccount of the Separate Account. (See "Highlights" on Page 3.) The Separate
Account invests in shares of the following Investment Options: Equi-Select
Series Trust (see "Equi-Select Series Trust" on Page 10), Travelers Series
Fund Inc. (see "Travelers Series Fund Inc." on Page 10), Smith Barney Series
Fund (see "Smith Barney Series Fund" on Page 11), and Smith Barney Concert
Allocation Series Inc. (see "Smith Barney Concert Allocation Series Inc." on
Page 12). Equi-Select Series Trust is a series fund with nine Portfolios,
three of which are currently available in connection with the Contracts
offered herein -- the OTC Portfolio, the Research Portfolio and the Total
Return Portfolio. Travelers Series Fund Inc. is a series fund with twelve
Portfolios, four of which are currently available in connection with the
Contracts: Smith Barney Income and Growth Portfolio, Smith Barney
International Equity Portfolio, Smith Barney High Income Portfolio and Smith
Barney Money Market Portfolio. Smith Barney Series Fund is a series fund with
ten Portfolios, one of which is currently available in connection with the
Contracts -- the Appreciation Portfolio. Smith Barney Concert Allocation
Series Inc. is a series fund with ten Portfolios, five of which are currently
available in connection with the Contracts: Select High Growth Portfolio,
Select Growth Portfolio, Select Balanced Portfolio, Select Conservative
Portfolio and Select Income Portfolio.
Shares of certain Portfolios of the Investment Options may not be available
in all states. The Prospectuses of the Investment Options may contain
Portfolios not currently available in connection with the Contracts.
THE CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY FINANCIAL INSTITUTION AND ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
INVESTMENT IN THE CONTRACTS IS SUBJECT TO RISK THAT MAY CAUSE THE VALUE OF THE
OWNER'S INVESTMENT TO FLUCTUATE, AND WHEN THE CONTRACTS ARE SURRENDERED, THE
VALUE MAY BE HIGHER OR LOWER THAN THE PURCHASE PAYMENTS.
This Prospectus concisely sets forth the information a prospective investor
should know before investing. Additional information about the Contracts is
contained in the Statement of Additional Information (the "SAI") which is
available at no charge. The SAI has been filed with the Securities and
Exchange Commission and is incorporated herein by reference. The Table of
Contents of the SAI information can be found on Page 33 of this Prospectus.
For the SAI, call (800) 648-6810 or write to the Company at the address listed
above. The Securities and Exchange Commission maintains a Web site
(http://www.sec.gov.) that contains the SAI, material incorporated by
reference and other information regarding the Contracts and the Separate
Account.
INQUIRIES:
Any inquiries can be made by telephone or in writing to Equitable Life
Insurance Company of Iowa at (800) 648-6810 or P.O. Box 9271, Des Moines, Iowa
50306-9271.
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.
This Prospectus and the SAI are dated May 1, 1997.
This Prospectus should be kept for future reference.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
DEFINITIONS................................................................ 1
HIGHLIGHTS................................................................. 3
FEE TABLE.................................................................. 5
CONDENSED FINANCIAL INFORMATION............................................ 8
THE COMPANY................................................................ 9
THE SEPARATE ACCOUNT....................................................... 9
INVESTMENT OPTIONS......................................................... 10
Equi-Select Series Trust.................................................. 10
Travelers Series Fund Inc................................................. 10
Smith Barney Series Fund.................................................. 11
Smith Barney Concert Allocation Series Inc................................ 12
Voting Rights............................................................. 12
Substitution of Securities................................................ 12
CHARGES AND DEDUCTIONS..................................................... 13
Deduction for Withdrawal Charge (Sales Load).............................. 13
Reduction or Elimination of the Withdrawal Charge......................... 14
Deduction for Mortality and Expense Risk Charge........................... 14
Deduction for Administrative Charge....................................... 15
Deduction for Annual Contract Maintenance Charge.......................... 15
Deduction for Premium Taxes............................................... 15
Deduction for Income Taxes................................................ 16
Deduction for Expenses of the Investment Options.......................... 16
Deduction for Transfer Fee................................................ 16
THE CONTRACTS.............................................................. 16
Ownership................................................................. 16
Annuitant................................................................. 16
Assignment................................................................ 16
Beneficiary............................................................... 17
PURCHASE PAYMENTS AND CONTRACT VALUE....................................... 17
Purchase Payments......................................................... 17
Allocation of Purchase Payments........................................... 18
Dollar Cost Averaging..................................................... 18
Automatic Portfolio Rebalancing........................................... 18
Contract Value............................................................ 19
Accumulation Unit......................................................... 19
TRANSFERS.................................................................. 20
WITHDRAWALS................................................................ 20
Automatic Withdrawals..................................................... 21
Texas Optional Retirement Program......................................... 21
Suspension of Payments or Transfers....................................... 22
CONTRACT PROCEEDS.......................................................... 22
Maturity Proceeds......................................................... 22
Death Proceeds............................................................ 22
Death of the Annuitant.................................................... 23
Death of Owner............................................................ 23
Fixed Payment Plans....................................................... 24
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Plan A. Interest......................................................... 24
Plan B. Fixed Period..................................................... 24
Plan C. Life Income...................................................... 24
DISTRIBUTOR................................................................ 25
ADMINISTRATION............................................................. 25
PERFORMANCE INFORMATION.................................................... 25
Money Market Portfolio.................................................... 25
Other Portfolios.......................................................... 25
TAX STATUS................................................................. 26
General................................................................... 26
Diversification........................................................... 27
Owner Control............................................................. 28
Multiple Contracts........................................................ 28
Contracts Owned by Other than Natural Persons............................. 28
Tax Treatment of Assignments.............................................. 29
Income Tax Withholding.................................................... 29
Tax Treatment of Withdrawals -- Non-Qualified Contracts................... 29
Qualified Plans........................................................... 29
Tax Treatment of Withdrawals -- Qualified Contracts....................... 31
Tax-Sheltered Annuities -- Withdrawal Limitations......................... 32
FINANCIAL STATEMENTS....................................................... 32
LEGAL PROCEEDINGS.......................................................... 32
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION............... 33
</TABLE>
ii
<PAGE>
DEFINITIONS
ACCUMULATION PERIOD -- The period during which Purchase Payments may be made
prior to the Maturity Date.
ACCUMULATION UNIT -- A unit of measure used to calculate the Contract Value
in a Subaccount of the Separate Account prior to the Maturity Date.
AGE -- The Annuitant's age on his or her last birthday.
ANNUITANT -- The natural person on whose life Annuity Payments are based.
ANNUITY PAYMENTS -- The series of payments after the Maturity Date under the
Payment Plan selected.
BENEFICIARY -- The person the Owner has chosen to receive the Proceeds on
the Annuitant's death as shown on the Company's records. There may be
different classes of Beneficiaries, such as primary and contingent. These
classes set the order of payment. There may be more than one Beneficiary in a
class.
COMPANY -- Equitable Life Insurance Company of Iowa.
CONTRACT ANNIVERSARY -- An anniversary of the Issue Date of the Contract.
CONTRACT YEAR -- One year from the Issue Date and from each Contract
Anniversary.
FIXED ACCOUNT -- The Company's general investment account which contains all
the assets of the Company with the exception of the Separate Account and other
segregated asset accounts.
INVESTMENT OPTION -- An investment entity the Company may make available
from time to time.
ISSUE DATE/DATE OF ISSUE -- The effective date of the Contract.
MATURITY DATE -- The date on which Annuity Payments begin.
NON-QUALIFIED CONTRACTS -- Contracts issued under non-qualified plans which
do not receive favorable tax treatment under Sections 401, 403(b), 408 or 457
of the Internal Revenue Code of 1986, as amended (the "Code").
OWNER -- The person(s) who owns the Contract. The Owner may be someone other
than the Annuitant. There may be Joint Owners.
PORTFOLIO -- A segment of an Investment Option which constitutes a separate
and distinct class of shares, which may also be referred to as a Select
Portfolio or a Series.
PROCEEDS -- Proceeds are the amounts payable under the Contract.
PURCHASE PAYMENT -- An amount paid to the Company to provide benefits under
the Contract. A Purchase Payment does not include transfers between the
Separate Account and the Fixed Account or among Subaccounts.
PURCHASE PAYMENT ANNIVERSARY -- The anniversary of a Purchase Payment.
QUALIFIED CONTRACTS -- Contracts issued under qualified plans which receive
favorable tax treatment under Sections 401, 403(b), 408 or 457 of the Code.
SEPARATE ACCOUNT -- A separate investment account of the Company designated
as Equitable Life Insurance Company of Iowa Separate Account A, into which
Purchase Payments or Contract Values may be allocated.
1
<PAGE>
SUBACCOUNT -- A segment of the Separate Account representing an investment in
an Investment Option.
VALUATION DATE -- The Separate Account will be valued each day that the New
York Stock Exchange and the Company's Customer Service Center both are open for
business.
VALUATION PERIOD -- The period beginning at the close of business of the New
York Stock Exchange on each Valuation Date and ending at the close of business
for the next succeeding Valuation Date.
2
<PAGE>
HIGHLIGHTS
At the Owner's direction, Purchase Payments for the Contracts will be
allocated to a segregated investment account of Equitable Life Insurance
Company of Iowa (the "Company") which account has been designated Equitable
Life Insurance Company of Iowa Separate Account A (the "Separate Account") or
to the Company's Fixed Account. Under certain circumstances, however, Purchase
Payments may initially be allocated to the Smith Barney Money Market
Subaccount of the Separate Account (see below). The Separate Account invests
in shares of Equi-Select Series Trust (see "Equi-Select Series Trust" on Page
10), Travelers Series Fund Inc. (see "Travelers Series Fund Inc." on Page 10),
Smith Barney Series Fund (see "Smith Barney Series Fund" on Page 12), and
Smith Barney Concert Allocation Series Inc. (see "Smith Barney Concert
Allocation Series Inc." on Page 12). The Separate Account may invest in other
Investment Options. Owners bear the investment risk for all amounts allocated
to the Separate Account.
Within twenty (20) days of the date of receipt of the Contract by the Owner
(or within ten (10) days of the date of receipt with respect to the
circumstances described in (a) below or in states where required or, within
thirty (30) days in the case of a Contract issued in the state of California
to an individual who is sixty (60) years of age or older), it may be returned
by delivering or mailing it to the Company at its Customer Service Center.
When the Contract is received at the Customer Service Center, the Company will
refund the Contract Value computed at the end of the Valuation Period during
which the Contract is received by the Company except in the following
circumstances: (a) where the contract is purchased pursuant to an Individual
Retirement Annuity; (b) in those states which require the Company to refund
Purchase Payments, less withdrawals; or (c) in the case of Contracts which are
deemed by certain states to be replacing an existing annuity or insurance
contract and which require the Company to refund Purchase Payments, less
withdrawals. With respect to the circumstances described in (a), (b) and (c)
above, the Company will refund the greater of Purchase Payments, less any
withdrawals, or the Contract Value, and will allocate initial purchase
payments to the Money Market Subaccount until the expiration of fifteen days
from the Issue Date (or twenty-five days in the case of Contracts described
under (c) above). Upon the expiration of the fifteen day period (or twenty-
five day period with respect to Contracts described under (c)), the Subaccount
value of the Money Market Subaccount will be allocated to the Separate Account
or Fixed Account in accordance with the election made by the Owner in the
Application. In Pennsylvania, when the Contract is purchased pursuant to an
Individual Retirement Annuity and is not deemed to be replacing an existing
annuity or insurance contract, the Owner may return the Contract within twenty
(20) days of receipt. Further, in Pennsylvania when the Contract is received
at the Customer Service Center during the first seven days, the Company will
refund the greater of Purchase Payments, less withdrawals or the Contract
Value, thereafter (days 8-20), the Company will refund the Contract Value
computed at the end of the Valuation Period during which the Contract is
received by the Company. In Oregon, when the Contract is purchased pursuant to
an Individual Retirement Annuity, the Owner may return the Contract within
twenty (20) days of receipt. Further, when the Contract is received at the
Customer Service Center during the first ten days, the Company will refund the
greater of the initial Purchase Payment, less any withdrawals or the Contract
Value as of the date of cancellation. Thereafter (days 11-20), the Company
will refund the Contract Value as of the date of cancellation. The initial
Purchase Payment will be allocated to the Money Market Sub-Account as
described above.
3
<PAGE>
A Withdrawal Charge (sales load) may be deducted in the event of a
withdrawal of all or a portion of the Contract Value. The Withdrawal Charge
percentages are based upon the number of Purchase Payment Anniversaries that
Purchase Payments have remained in the Contract before being withdrawn:
TABLE OF WITHDRAWAL CHARGES
<TABLE>
<CAPTION>
PURCHASE PAYMENT ANNIVERSARY WITHDRAWAL CHARGE
- ---------------------------- -----------------
<S> <C>
1......................................... 8% of the Purchase Payment withdrawn
2......................................... 7% of the Purchase Payment withdrawn
3......................................... 6% of the Purchase Payment withdrawn
4......................................... 5% of the Purchase Payment withdrawn
5......................................... 4% of the Purchase Payment withdrawn
6......................................... 3% of the Purchase Payment withdrawn
7......................................... 2% of the Purchase Payment withdrawn
8......................................... 1% of the Purchase Payment withdrawn
9 and after............................... 0% of the Purchase Payment withdrawn
</TABLE>
At any time, the Owner may make a withdrawal, without the imposition of a
Withdrawal Charge, of an amount equal to the sum of: 1) earnings (Contract
Value less unliquidated Purchase Payments not withdrawn); 2) Purchase Payments
in the Contract for more than eight years; and 3) an amount which is equal to
10% of the Purchase Payments in the Contract for less than eight years, fixed
at the time of the first withdrawal in the Contract Year, plus 10% of the
Purchase Payment made after the first withdrawal in the Contract Year but
before the next Contract Anniversary, less any withdrawals in the same
Contract Year of Purchase Payments less than eight years old.
There is a Mortality and Expense Risk Charge which is equal, on an annual
basis, to 1.25% of the average daily net asset value of the Separate Account.
This charge compensates the Company for assuming the mortality and expense
risks under the Contracts. (See "Charges and Deductions -- Deduction for
Mortality and Expense Risk Charge" on Page 14.)
There is an Administrative Charge which is equal, on an annual basis, to
.15% of the average daily net asset value of the Separate Account. This charge
compensates the Company for costs associated with the administration of the
Contracts and the Separate Account. (See "Charges and Deductions -- Deduction
for Administrative Charge" on Page 15.)
There is an Annual Contract Maintenance Charge of $30 each Contract Year
prior to the Maturity Date. (See "Charges and Deductions -- Deduction for
Annual Contract Maintenance Charge" on Page .)
Premium taxes or other taxes payable to a state or other governmental entity
will be charged against the Contract Values. Premium taxes generally range
from 0% to 4%. (See "Charges and Deductions -- Deduction for Premium Taxes" on
Page 15.)
Under certain circumstances, a Transfer Fee may be assessed when an Owner
transfers Contract Values from one Subaccount to another Subaccount or to or
from the Fixed Account. (See "Charges and Deductions --Deduction for Transfer
Fee" on Page 16.)
There is a ten percent (10%) federal income tax penalty applied to the
income portion of any distribution from Non-Qualified Contracts. However, the
penalty is not imposed on amounts received: (a) after the taxpayer reaches age
59 1/2; (b) after the death of the Owner; (c) if the taxpayer is totally
disabled (for this purpose disability is as defined in Section 72(m)(7) of the
Code); (d) in a series of substantially equal periodic payments made not less
frequently than annually for the life (or life expectancy) of the taxpayer and
his or her Beneficiary; (e) under an immediate annuity; or (f) which are
allocable to purchase payments made prior to August 14, 1982. The Contract
provides that upon the death of the Annuitant prior to the Maturity Date, the
Death Proceeds will be paid to the
4
<PAGE>
named Beneficiary. Such payments made upon the death of the Annuitant who is
not the Owner of the Contract do not qualify for the death of Owner exception
described above, and will be subject to the ten percent (10%) distribution
penalty unless the Beneficiary is at least 59 1/2 or one of the other
exceptions to the penalty applies. For federal income tax purposes,
withdrawals are deemed to be on a last-in, first-out basis. Separate tax
withdrawal penalties and restrictions apply to Qualified Contracts (see "Tax
Status -- Tax Treatment of Withdrawals -- Qualified Contracts" on Page 31).
For a further discussion of the taxation of the Contracts, see "Tax Status" on
Page 26.
For Contracts purchased in connection with 403(b) plans, withdrawals of
amounts attributable to contributions made pursuant to a salary reduction
agreement (as defined in Section 403(b)(11) of the Code) are limited to
circumstances only when the Owner attains age 59 1/2, separates from service,
dies, becomes disabled (within the meaning of Section 72(m)(7) of the Code) or
in the case of hardship. Withdrawals for hardship are restricted to the
portion of the Owner's Contract Value which represents contributions made by
the Owner and does not include any investment results. The limitations on
withdrawals became effective on January 1, 1989, and apply only to: (1) salary
reduction contributions made after December 31, 1988; (2) income attributable
to such contributions; and (3) income attributable to amounts held as of
December 31, 1988. The limitations on withdrawals do not affect rollovers or
transfers between certain Qualified Plans. Tax penalties may also apply. (See
"Tax Status -- Tax Treatment of Withdrawals -- Qualified Contracts" on Page
31.) Owners should consult their own tax counsel or other tax adviser
regarding any distributions. (See "Tax Status -- Tax Sheltered Annuities --
Withdrawal Limitations" on Page 32.)
See "Tax Status -- Owner Control" for a discussion of owner control of the
underlying investments in a variable annuity contract and the tax
considerations related thereto.
Because of certain exemptive and exclusionary provisions, interests in the
Fixed Account are not registered under the Securities Act of 1933 and the
Fixed Account is not registered as an investment company under the Investment
Company Act of 1940, as amended. Accordingly, neither the Fixed Account nor
any interests therein are subject to the provisions of these Acts and the
Company has been advised that the staff of the Securities and Exchange
Commission has not reviewed the disclosures in the Prospectus relating to the
Fixed Account. Disclosures regarding the Fixed Account may, however, be
subject to certain generally applicable provisions of the federal securities
laws relating to the accuracy and completeness of statements made in
prospectuses.
5
<PAGE>
EQUITABLE LIFE INSURANCE COMPANY OF IOWA SEPARATE ACCOUNT A
FEE TABLE
OWNER TRANSACTION EXPENSES
Withdrawal Charge (see Note 2 below)
(as a percentage of Purchase Payments withdrawn)
<TABLE>
<CAPTION>
PURCHASE PAYMENT ANNIVERSARY CHARGE
---------------------------- ------
<S> <C>
1................................................................. 8%
2................................................................. 7%
3................................................................. 6%
4................................................................. 5%
5................................................................. 4%
6................................................................. 3%
7................................................................. 2%
8................................................................. 1%
9+................................................................ 0%
</TABLE>
<TABLE>
<S> <C>
Transfer Fee (see Note 3 below)....... No charge for first 12 transfers in a
Contract Year; thereafter the fee is the
lesser of 2% of the Contract Value
transferred or $25.
Annual Contract Maintenance Charge.... $30 per Contract per year
</TABLE>
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of average account value)
<TABLE>
<S> <C>
Mortality and Expense Risk Charge.................................... 1.25%
Administrative Charge................................................ .15%
----
Total Separate Account Annual Expenses............................... 1.40%
</TABLE>
EQUI-SELECT SERIES TRUST'S ANNUAL EXPENSES
(as a percentage of the average daily net assets of the Portfolio)
<TABLE>
<CAPTION>
OTHER
EXPENSES
MANAGEMENT (AFTER EXPENSE TOTAL ANNUAL
FEES* REIMBURSEMENT)** EXPENSES
---------- ---------------- ------------
<S> <C> <C> <C>
OTC Portfolio......................... .80% .40% 1.20%
Research Portfolio.................... .80% .40% 1.20%
Total Return Portfolio................ .80% .40% 1.20%
</TABLE>
- ------------------
* PRIOR TO OCTOBER 6, 1995, EQUITABLE INVESTMENT SERVICES, INC. ("EISI"), THE
TRUST'S INVESTMENT ADVISER, WAIVED ITS MANAGEMENT FEES FOR EACH OF THE
PORTFOLIOS.
** BEGINNING FEBRUARY 3, 1997, EISI HAS UNDERTAKEN TO REIMBURSE EACH PORTFOLIO
FOR ALL OPERATING EXPENSES, EXCLUDING MANAGEMENT FEES, THAT EXCEED .40% OF
THE AVERAGE DAILY NET ASSETS OF THE OTC, TOTAL RETURN AND RESEARCH
PORTFOLIOS. THIS VOLUNTARY EXPENSE REIMBURSEMENT CAN BE TERMINATED AT ANY
TIME. FROM OCTOBER 6, 1995 TO FEBRUARY 3, 1997, EISI REIMBURSED EACH
PORTFOLIO FOR ALL OPERATING EXPENSES, EXCLUDING MANAGEMENT FEES, THAT
EXCEEDED .75% OF THE AVERAGE DAILY NET ASSETS OF EACH PORTFOLIO.
6
<PAGE>
TRAVELERS SERIES FUND INC.'S ANNUAL EXPENSES
(as a percentage of the average daily net assets of a Portfolio)
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL ANNUAL
FEES EXPENSES EXPENSES
---------- -------- ------------
<S> <C> <C> <C>
Smith Barney Income and Growth Portfolio...... 0.65% 0.08% 0.73%
Smith Barney International Equity Portfolio... 0.90% 0.20% 1.10%
Smith Barney High Income Portfolio............ 0.60% 0.24% 0.84%
Smith Barney Money Market Portfolio*.......... 0.60% 0.14% 0.74%
</TABLE>
- ------------------
* SMITH BARNEY MUTUAL FUNDS MANAGEMENT INC., THE FUND'S INVESTMENT MANAGER,
WAIVED PART OF ITS MANAGEMENT FEES FOR THE YEAR ENDED OCTOBER 31, 1996 FOR
THE SMITH BARNEY MONEY MARKET PORTFOLIO SUCH THAT THE ACTUAL TOTAL ANNUAL
EXPENSES CHARGED IN 1996 WAS 0.65%. THIS VOLUNTARY FEE WAIVER CAN BE
TERMINATED AT ANY TIME.
SMITH BARNEY SERIES FUND'S ANNUAL EXPENSES
(as a percentage of the average daily net assets of the Portfolio)
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL OPERATING
FEES EXPENSES EXPENSES
---------- -------- ---------------
<S> <C> <C> <C>
Appreciation Portfolio..................... 0.75% 0.10% 0.85%
</TABLE>
SMITH BARNEY CONCERT ALLOCATION SERIES INC.'S ANNUAL EXPENSES
(as a percentage of the average daily net assets of a Select Portfolio)
<TABLE>
<CAPTION>
OTHER EXPENSES
MANAGEMENT (AFTER EXPENSE TOTAL ANNUAL
FEES* REIMBURSEMENTS)** EXPENSES**
---------- ----------------- ------------
<S> <C> <C> <C>
Select High Growth Portfolio......... .35% 0% .35%
Select Growth Portfolio.............. .35% 0% .35%
Select Balanced Portfolio............ .35% 0% .35%
Select Conservative Portfolio........ .35% 0% .35%
Select Income Portfolio.............. .35% 0% .35%
</TABLE>
- ------------------
* Each Select Portfolio of Smith Barney Concert Allocation Series Inc., as a
shareholder of the Underlying Smith Barney Funds (see "Smith Barney Concert
Allocation Series Inc." on Page 12), also will indirectly bear its
proportionate share of any investment management fees and other expenses
paid by the Underlying Smith Barney Funds.
** Travelers Investment Adviser, Inc., the manager of each Select Portfolio,
has agreed to bear all expenses of these Select Portfolios of Smith Barney
Concert Allocation Series Inc. other than the management fee and
extraordinary expenses.
7
<PAGE>
EXAMPLES
An Owner would pay the following expenses on a $1,000 investment, assuming a
5% annual return on assets:
(a) if the Contract is fully surrendered at the end of each time period
or if Payment Plan A--Option 2 is elected;
(b) if the Contract is not surrendered;
<TABLE>
<CAPTION>
SUBACCOUNTS INVESTING IN:
- -------------------------
TIME PERIODS
-----------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
EQUI-SELECT SERIES TRUST
OTC Portfolio.................. a) $107.22 a) $137.50 a) $178.33 a) $301.38
b) $ 27.22 b) $ 83.50 b) $142.33 b) $301.38
Research Portfolio............. a) $107.22 a) $137.50 a) $178.33 a) $301.38
b) $ 27.22 b) $ 83.50 b) $142.33 b) $301.38
Total Return Portfolio......... a) $107.22 a) $137.50 a) $178.33 a) $301.38
b) $ 27.22 b) $ 83.50 b) $142.33 b) $301.38
TRAVELERS SERIES FUND INC.
Smith Barney Income and Growth
Portfolio..................... a) $102.51 a) $123.36 a) $154.75 a) $254.34
b) $ 22.51 b) $ 69.36 b) $118.75 b) $254.34
Smith Barney International
Equity
Portfolio...................... a) $106.22 a) $134.51 a) $173.36 a) $291.57
b) $ 26.22 b) $ 80.51 b) $137.36 b) $291.57
Smith Barney High Income
Portfolio..................... a) $103.62 a) $126.69 a) $160.32 a) $265.57
b) $ 23.62 b) $ 72.69 b) $124.32 b) $265.57
Smith Barney Money Market
Portfolio..................... a) $102.62 a) $123.67 a) $155.26 a) $255.37
b) $ 22.62 b) $ 69.67 b) $119.26 b) $255.37
SMITH BARNEY SERIES FUND
Appreciation Portfolio......... a) $103.72 a) $126.99 a) $160.83 a) $266.58
b) $ 23.72 b) $ 72.99 b) $124.83 b) $266.58
SMITH BARNEY CONCERT SERIES
INC.
Select High Growth Portfolio... a) $ 98.69 a) $111.78 a) $135.27 a) $214.54
b) $ 18.69 b) $ 57.78 b) $ 99.27 b) $214.54
Select Growth Portfolio........ a) $ 98.69 a) $111.78 a) $135.27 a) $214.54
b) $ 18.69 b) $ 57.78 b) $ 99.27 b) $214.54
Select Balanced Portfolio...... a) $ 98.69 a) $111.78 a) $135.27 a) $214.54
b) $ 18.69 b) $ 57.78 b) $ 99.27 b) $214.54
Select Conservative Portfolio.. a) $ 98.69 a) $111.78 a) $135.27 a) $214.54
b) $ 18.69 b) $ 57.78 b) $ 99.27 b) $214.54
Select Income Portfolio........ a) $ 98.69 a) $111.78 a) $135.27 a) $214.54
b) $ 18.69 b) $ 57.78 b) $ 99.27 b) $214.54
</TABLE>
NOTES TO FEE TABLE AND EXAMPLES
1. The purpose of the Fee Table is to assist the Owner in understanding the
various costs and expenses that an Owner will incur directly or
indirectly. For additional information, see "Charges and Deductions" in
this Prospectus and the Prospectuses for Equi-Select Series Trust,
Travelers Series Fund Inc., Smith Barney Series Fund and Smith Barney
Concert Allocation Series Inc.
2. At any time, the Owner may make a withdrawal without the imposition of a
Withdrawal Charge, of an amount equal to the sum of: 1) earnings
(Contract Value less unliquidated Purchase Payments not withdrawn); 2)
Purchase Payments in the Contract for more than eight years; and 3) an
amount which is equal to 10% of the Purchase Payments in the Contract for
less than eight years, fixed at the time of the
8
<PAGE>
first withdrawal in the Contract Year, plus 10% of the Purchase Payment
made after the first withdrawal in the Contract Year but before the next
Contract Anniversary, less any withdrawals in the same Contract Year of
Purchase Payments less than eight years old.
3. If the Owner is participating in the Automatic Portfolio Rebalancing
program or the Dollar Cost Averaging program providing for the automatic
transfer of funds from a Subaccount or the Fixed Account to any other
Subaccount, such transfers are currently not taken into account in
determining the number of transfers for the year or in determining any
Transfer Fee. (See "Charges and Deductions -- Deduction for Transfer Fee"
on Page 16, "Purchase Payments and Contract Value -- Dollar Cost
Averaging" on Page 18 and "Purchase Payments and Contract Value --
Automatic Portfolio Rebalancing" on Page 18.)
4. Premium taxes are not reflected. Premium taxes may apply. (See "Charges
and Deductions -- Deduction for Premium Taxes" on Page 15.)
5. The Examples assume an estimated $33,000 Contract Value so that the
Annual Contract Maintenance Charge per $1,000 of net asset value in the
Separate Account is $0.91. Such charge would be higher for smaller
Contract Values and lower for higher Contract Values.
6. THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
CONDENSED FINANCIAL INFORMATION
The financial statements of Equitable Life Insurance Company of Iowa and
Equitable Life Insurance Company of Iowa Separate Account A may be found in the
Statement of Additional Information.
The table below gives per unit information about the financial history of the
OTC Subaccount, Research Subaccount and Total Return Subaccount of Equi-Select
Series Trust from commencement of operations (October 7, 1994) to December 31,
1996 and of the available Subaccounts invested in Travelers Series Fund Inc.
from commencement of operations of the Subaccounts (April 5, 1995 for the Smith
Barney Income and Growth Subaccount; March 27, 1995 for the Smith Barney
International Equity Subaccount; April 28, 1995 for the Smith Barney High
Income Subaccount; and May 24, 1995 for the Smith Barney Money Market
Subaccount) to December 31, 1996 and of the Appreciation Subaccount invested in
Smith Barney Series Fund from commencement of operations (March 25, 1996) to
December 31, 1996. This information should be read in conjunction with the
financial statements and related notes of the Separate Account included in the
Statement of Additional Information.
<TABLE>
<CAPTION>
PERIOD FROM
COMMENCEMENT OF
PERIOD ENDED YEAR ENDED OPERATIONS TO
DECEMBER 31, 1996 DECEMBER 31, 1995 DECEMBER 31, 1994
----------------- ----------------- -----------------
<S> <C> <C> <C>
EQUI-SELECT SERIES TRUST
OTC SUBACCOUNT
Unit value at beginning
of period.............. $13.21 $10.35 $10.00
Unit value at end of
period................. $15.70 $13.21 $10.35
No. of units outstanding
at end of period....... 2,602,784 759,597 63,781
RESEARCH SUBACCOUNT
Unit value at beginning
of period.............. $13.10 $ 9.72 $10.00
Unit value at end of
period................. $15.93 $13.10 $ 9.72
No. of units outstanding
at end of period....... 4,845,240 1,255,752 69,177
TOTAL RETURN SUBACCOUNT
Unit value at beginning
of period.............. $12.05 $ 9.81 $10.00
Unit value at end of
period................. $13.51 $12.05 $ 9.81
No. of units outstanding
at end of period....... 4,354,328 1,312,565 33,106
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
PERIOD FROM
COMMENCEMENT OF
PERIOD ENDED OPERATIONS TO
DECEMBER 31, 1996 DECEMBER 31, 1995
----------------- -----------------
<S> <C> <C>
TRAVELERS SERIES FUND INC.
SMITH BARNEY INCOME AND GROWTH SUBACCOUNT
Unit value at beginning of period........ $12.05 $10.00
Unit value at end of period.............. $14.23 $12.05
No. of units outstanding at end of
period.................................. 1,579,649 295,134
SMITH BARNEY INTERNATIONAL EQUITY
SUBACCOUNT
Unit value at beginning of period........ $11.56 $10.00
Unit value at end of period.............. $13.42 $11.56
No. of units outstanding at end of
period.................................. 804,975 154,388
SMITH BARNEY HIGH INCOME SUBACCOUNT
Unit value at beginning of period........ $10.94 $10.00
Unit value at end of period.............. $12.22 $10.94
No. of units outstanding at end of
period.................................. 670,736 72,283
SMITH BARNEY MONEY MARKET SUBACCOUNT
Unit value at beginning of period........ $10.23 $10.00
Unit value at end of period.............. $10.59 $10.23
No. of units outstanding at end of
period.................................. 348,906 125,048
SMITH BARNEY SERIES FUND
SMITH BARNEY APPRECIATION SUBACCOUNT
Unit value at beginning of period........ $10.00
Unit value at end of period.............. $11.24
No. of Units outstanding at end of
period.................................. 497,034
</TABLE>
The Subaccounts investing in Smith Barney Concert Allocation Series Inc. are
new in 1997.
THE COMPANY
Equitable Life Insurance Company of Iowa (the "Company") was founded in Iowa
in 1867 and is the oldest life insurance company west of the Mississippi. The
Company is currently licensed to do business in the District of Columbia and
all states except New Hampshire and New York. The Company is a wholly-owned
subsidiary of Equitable of Iowa Companies ("Equitable of Iowa"), an Iowa
corporation.
THE SEPARATE ACCOUNT
The Board of Directors of the Company adopted a resolution to establish a
segregated asset account pursuant to Iowa insurance law on January 24, 1994.
This segregated asset account has been designated Equitable Life Insurance
Company of Iowa Separate Account A (the "Separate Account"). The Company has
caused the Separate Account to be registered with the Securities and Exchange
Commission as a unit investment trust pursuant to the provisions of the
Investment Company Act of 1940.
The assets of the Separate Account are the property of the Company. However,
the assets of the Separate Account equal to the reserves and other contract
liabilities with respect to the Separate Account, are not chargeable with
liabilities arising out of any other business the Company may conduct. Income,
gains and losses, whether or not realized, are, in accordance with the
Contracts, credited to or charged against the Separate Account without regard
to other income, gains or losses of the Company. The Company's obligations
arising under the Contracts are general obligations.
10
<PAGE>
The Separate Account meets the definition of a "separate account" under
federal securities laws.
The Separate Account is divided into Subaccounts, with the assets of each
Subaccount invested in one Portfolio of Equi-Select Series Trust, Travelers
Series Fund Inc., Smith Barney Series Fund or Smith Barney Concert Allocation
Series Inc. The Separate Account may invest in other Investment Options. There
is no assurance that the investment objectives of any of the Portfolios will
be met. Owners bear the complete investment risk for Purchase Payments
allocated to a Subaccount. Contract Values will fluctuate in accordance with
the investment performance of the Subaccounts to which Purchase Payments are
allocated, and in accordance with the imposition of the fees and charges
assessed under the Contracts.
INVESTMENT OPTIONS
EQUI-SELECT SERIES TRUST
Equi-Select Series Trust ("Trust") has been established to act as one of the
funding vehicles for the Contracts offered. The Trust is an open-end
management investment company. The Trust is managed by Equitable Investment
Services, Inc. ("EISI") which is a wholly-owned subsidiary of Equitable of
Iowa. EISI has retained a Sub-Adviser for the OTC, Research and Total Return
Portfolios to make investment decisions and place orders. The Sub-Adviser for
the Portfolios is Massachusetts Financial Services Company. See "Management of
the Trust" in the Trust Prospectus, which accompanies this Prospectus, for
additional information concerning EISI and the Sub-Adviser, including a
description of advisory and sub-advisory fees.
The Trust is intended to meet differing investment objectives with its
currently available separate Portfolios.
The investment objectives of the Portfolios are as follows:
OTC PORTFOLIO. The investment objective of the OTC Portfolio is to seek to
obtain long-term growth of capital. The Portfolio seeks to achieve its
objective by investing at least 65% of its total assets, under normal
circumstances, in securities principally traded on the over-the-counter (OTC)
securities market.
RESEARCH PORTFOLIO. The Research Portfolio seeks to provide long-term growth
of capital and future income by investing a substantial portion of its assets
in the common stocks or securities convertible into common stocks of companies
believed to possess better than average prospects for long-term growth. A
smaller proportion of the assets may be invested in bonds, short-term
obligations, preferred stocks or common stocks whose principal characteristic
is income production rather than growth. The portfolio securities of the
Research Portfolio are selected by the investment research analysts in the
Equity Research Group of the Sub-Adviser. The Portfolio's assets are allocated
to industry groups (e.g. within the health care sector, the managed care, drug
and medical supply industries). The allocation by sector and industry is
determined by the analysts acting together as a group.
TOTAL RETURN PORTFOLIO. The Total Return Portfolio primarily seeks to obtain
above-average income (compared to a portfolio entirely invested in equity
securities) consistent with the prudent employment of capital. While current
income is the primary objective, the Portfolio believes that there should also
be a reasonable opportunity for growth of capital and income since many
securities offering a better than average yield may also possess growth
potential. Generally, at least 40% of the Portfolio's assets will be invested
in equity securities.
TRAVELERS SERIES FUND INC.
Travelers Series Fund Inc. ("Fund") is an investment company underlying
certain variable annuity and variable life insurance contracts. Prior to
September 3, 1996, the Fund was known as Smith Barney/Travelers Series Fund
Inc. The Fund is an open-end management investment company. The Fund is
managed by Smith Barney Mutual Funds Management Inc. ("SBMFM" or "Manager").
SBMFM is a wholly-owned subsidiary of Smith Barney Holdings Inc. ("SBH"). SBH
is a wholly-owned subsidiary of Travelers Group Inc. which is a financial
services holding company engaged, through its subsidiaries, principally in
four business segments: investment services, consumer finance services, life
insurance services and property & casualty insurance services.
The Fund is intended to meet differing investment objectives with its
currently available separate Portfolios.
11
<PAGE>
The investment objectives of the Portfolios are as follows:
SMITH BARNEY INCOME AND GROWTH PORTFOLIO. The Smith Barney Income and Growth
Portfolio seeks current income and long-term growth of income and capital by
investing primarily, but not exclusively, in common stocks. The Portfolio
invests primarily in common stocks offering a current return from dividends
and in interest-paying debt obligations (such as U.S. Government Securities,
investment grade bonds and debentures) and high quality short-term debt
obligations (such as commercial paper and repurchase agreements collateralized
by U.S. Government Securities with broker/dealers or other financial
institutions.)
SMITH BARNEY INTERNATIONAL EQUITY PORTFOLIO. The Smith Barney International
Equity Portfolio seeks total return on its assets from growth of capital and
income. The Portfolio seeks to achieve its objective by investing at least 65%
of its assets in a diversified portfolio of equity securities of established
non-U.S. issuers. Investing in foreign securities generally involves risks not
ordinarily associated with investing in securities of domestic issuers.
Purchasers are cautioned to read "Special Investment Techniques and Risk
Considerations -- Foreign Securities" in the Fund Prospectus.
SMITH BARNEY HIGH INCOME PORTFOLIO. The Smith Barney High Income Portfolio
seeks high current income. Capital appreciation is a secondary objective. The
Portfolio seeks to achieve its investment objectives by investing, under
normal circumstances, at least 65% of its assets in high-yielding corporate
debt obligations and preferred stock. The Portfolio invests significantly in
lower rated and unrated corporate debt securities, which are commonly known as
"junk bonds" and involve a significant degree of risk. (See "The Fund's
Investment Program -- Smith Barney High Income Portfolio" in the Fund
Prospectus.) Prior to investing in this Portfolio, purchasers are cautioned to
read the section entitled "Special Investment Techniques and Risk
Considerations -- Lower-Quality and Non-Rated Securities" in the Fund
Prospectus. The Portfolio may invest up to 20% of its assets in the securities
of foreign issuers that are denominated in currencies other than the U.S.
dollar and may invest without limitation in securities of foreign issuers that
are denominated in U.S. dollars. Investing in foreign securities generally
involves risks not ordinarily associated with investing in securities of
domestic issuers. Purchasers are cautioned to read "Special Investment
Techniques and Risk Considerations -- Foreign Securities" in the Fund
Prospectus.
SMITH BARNEY MONEY MARKET PORTFOLIO. The Smith Barney Money Market Portfolio
seeks maximum current income and preservation of capital. The Portfolio seeks
to achieve its objectives by investing in bank obligations and high quality
commercial paper, corporate obligations and municipal obligations, in addition
to U.S. Government Securities and related repurchase agreements. An investment
in this Portfolio is neither insured nor guaranteed by the U.S. Government. In
addition, there is no assurance that the Portfolio will be able to maintain a
stable net asset value of $1.00 per share.
SMITH BARNEY SERIES FUND
Smith Barney Series Fund is a diversified, open-end management investment
company. Smith Barney Mutual Funds Management Inc. ("SBMFM") is the investment
adviser to the Appreciation Portfolio (see "Travelers Series Fund Inc." above
for information pertaining to SBMFM).
Smith Barney Series Fund has ten Portfolios, one of which, the Appreciation
Portfolio, is currently available in connection with the Contracts. While a
brief summary of the investment objective is set forth below, more
comprehensive information, including a discussion of potential risks, is found
in the current Prospectus for Smith Barney Series Fund--Appreciation
Portfolio, which is included with this Prospectus. Additional Prospectuses and
the Statement of Additional Information can be obtained by calling or writing
the Company's Home Office.
The investment objective of the Portfolio is as follows:
APPRECIATION PORTFOLIO. The Appreciation Portfolio's goal is long-term
appreciation of capital. The Portfolio will attempt to achieve its goal by
investing primarily in equity and equity-related securities that are believed
to afford attractive opportunities for appreciation. Under normal market
conditions, substantially all -- but not less than 65% -- of the Portfolio's
assets will consist of common stocks, but the Portfolio also may hold
securities convertible into common stocks and warrants.
12
<PAGE>
SMITH BARNEY CONCERT ALLOCATION SERIES INC.
Smith Barney Concert Allocation Series Inc. (formerly, Smith Barney Concert
Series Inc.) ("Concert Series") is an open-end, non-diversified management
investment company. Travelers Investment Adviser, Inc. ("TIA") serves as each
Select Portfolio's investment manager. TIA is an indirect wholly-owned
subsidiary of Travelers Group Inc. Each Select Portfolio of Concert Series
seeks to achieve its investment objective by investing in a diverse mix of
"Underlying Smith Barney Funds" ("fund of funds" structure), which consist of
open-end management investment companies or series thereof for which Smith
Barney Inc. ("Smith Barney") now or in the future acts as principal
underwriter or for which Smith Barney, SBMFM or Smith Barney Strategy Advisers
Inc. now or in the future acts as investment adviser. See the Prospectus for
the Select Portfolios of Concert Series for more information concerning the
fund of funds structure. The fund of funds structure is different from the
investment structure of most investment options available for a variable
annuity contract. Such a structure involves additional income tax risks (see
"Tax Status -- Owner Control" on Page 28).
The investment objectives of the Select Portfolios are as follows:
SELECT HIGH GROWTH PORTFOLIO. The Select High Growth Portfolio's investment
objective is to seek capital appreciation.
SELECT GROWTH PORTFOLIO. The Select Growth Portfolio's investment objective
is to seek long-term growth of capital.
SELECT BALANCED PORTFOLIO. The Select Balanced Portfolio's investment
objective is to seek a balance of growth of capital and income.
SELECT CONSERVATIVE PORTFOLIO. The Select Conservative Portfolio's
investment objective is to seek income and, secondarily, long-term growth of
capital.
SELECT INCOME PORTFOLIO. The Select Income Portfolio's investment objective
is to seek high current income.
While a brief summary of the investment objectives of the Portfolios of
Equi-Select Series Trust, Travelers Series Fund Inc., Smith Barney Series Fund
and Smith Barney Concert Allocation Series Inc. are set forth above, more
comprehensive information, including a discussion of potential risks, is found
in the current Prospectuses for each of the Investment Options, which are
included with this Prospectus. Additional Prospectuses and the Statements of
Additional Information can be obtained by calling the Company's Customer
Service Center or writing the Company's Home Office. Purchasers should read
the Prospectuses for the Investment Options carefully before investing.
VOTING RIGHTS
In accordance with its view of present applicable law, the Company will vote
the shares of the Investment Options held in the Separate Account at special
meetings of the shareholders in accordance with instructions received from
persons having the voting interest in the Separate Account. The Company will
vote shares for which it has not received instructions, as well as shares
attributable to it, in the same proportion as it votes shares for which it has
received instructions. The Investment Options do not hold regular meetings of
shareholders.
The number of shares which a person has a right to vote will be determined
as of a date to be chosen by the Company prior to a shareholder meeting of an
Investment Option. Voting instructions will be solicited by written
communication prior to the meeting.
SUBSTITUTION OF SECURITIES
If the shares of the Investment Options (or any Portfolio within an
Investment Option or any other Investment Option), are no longer available for
investment by the Separate Account or, if in the judgment of the Company,
further investment in the shares should become inappropriate in view of the
purpose of the Contracts, the Company may substitute shares of another
Investment Option (or Portfolio) for shares already purchased or
13
<PAGE>
to be purchased in the future by Purchase Payments under the Contracts. No
substitution of securities may take place without prior approval of the
Securities and Exchange Commission and under the requirements it may impose.
Shares of the Investment Options are issued and redeemed in connection with
investments in and payments under certain variable annuity contracts and (with
respect to certain of the Investment Options) variable life insurance policies
of various life insurance companies which may or may not be affiliated. In
addition, Concert Series offers its shares to tax-qualified pension and
retirement plans ("Qualified Plans"). The Investment Options do not foresee
any disadvantage to Owners arising out of the fact that the Investment Options
offer their shares for products offered by life insurance companies which are
not affiliated (or with respect to Concert Series, that it offers its shares
to Qualified Plans). Nevertheless, the Boards of Trustees of the Investment
Options intend to monitor events in order to identify any material
irreconcilable conflicts which may possibly arise and to determine what
action, if any, should be taken in response thereto. If such a conflict were
to occur, one or more insurance company separate accounts (or Qualified Plans)
might withdraw its investments in an Investment Option. An irreconcilable
conflict might result in the withdrawal of a substantial amount of a
Portfolio's assets which could adversely affect such Portfolio's net asset
value per share.
CHARGES AND DEDUCTIONS
Various charges and deductions are made from the Contract Value and the
Separate Account. These charges and deductions are:
DEDUCTION FOR WITHDRAWAL CHARGE (SALES LOAD)
If all or a portion of the Contract Value (see "Withdrawals" on Page 20) is
withdrawn, a Withdrawal Charge (sales load) will be calculated at the time of
each withdrawal and will be deducted from the Contract Value. This charge
reimburses the Company for expenses incurred in connection with the promotion,
sale and distribution of the Contracts. The Withdrawal Charge percentages are
based upon the number of Purchase Payment Anniversaries that Purchase Payments
have remained in the Contract before being withdrawn as shown in the Table of
Withdrawal Charges below:
TABLE OF WITHDRAWAL CHARGES
<TABLE>
<CAPTION>
PURCHASE PAYMENT ANNIVERSARY WITHDRAWAL CHARGE
- ---------------------------- -----------------
<S> <C>
1......................................... 8% of the Purchase Payment withdrawn
2......................................... 7% of the Purchase Payment withdrawn
3......................................... 6% of the Purchase Payment withdrawn
4......................................... 5% of the Purchase Payment withdrawn
5......................................... 4% of the Purchase Payment withdrawn
6......................................... 3% of the Purchase Payment withdrawn
7......................................... 2% of the Purchase Payment withdrawn
8......................................... 1% of the Purchase Payment withdrawn
9 and after............................... 0% of the Purchase Payment withdrawn
</TABLE>
At any time, the Owner may make a withdrawal, without the imposition of a
Withdrawal Charge, of an amount equal to the sum of: 1) earnings (Contract
Value less unliquidated Purchase Payments not withdrawn); 2) Purchase Payments
in the Contract for more than eight years; and 3) an amount which is equal to
10% of the Purchase Payments in the Contract for less than eight years, fixed
at the time of the first withdrawal in the Contract Year, plus 10% of the
Purchase Payments made after the first withdrawal in the Contract Year but
before the next Contract Anniversary, less any withdrawals in the same
Contract Year of Purchase Payments less than eight years old. See
"Withdrawals" for a discussion of how Contract Value is deemed withdrawn for
purposes of the Withdrawal Charge.
14
<PAGE>
Commissions will be paid to broker-dealers who sell the Contracts. Broker-
dealers will be paid commissions, up to an amount currently equal to 7.75% of
Purchase Payments, for promotional or distribution expenses associated with
the marketing of the Contracts. The Company may, by agreement with the broker-
dealer, pay commissions as a combination of a certain percentage amount at the
time of sale and a trail commission (which when combined could exceed 7.75% of
Purchase Payments). In addition, under certain circumstances, the Company may
pay certain sellers production bonuses which will take into account, among
other things, the total Purchase Payments which have been made under Contracts
associated with the broker-dealer. Additional payments or allowances may be
made for other services not directly related to the sale of the Contracts.
No Withdrawal Charge is deducted if Plan A -- Option 1; Plan B or Plan C is
elected. (See "Contract Proceeds -- Fixed Payment Plans" on Page 24.)
In addition, in certain states, an endorsement to the Contract is issued
which permits the Owner to make a total or partial withdrawal without the
imposition of a Withdrawal Charge if the Annuitant is hospitalized and/or
confined to an eligible nursing home for 30 consecutive days.
REDUCTION OR ELIMINATION OF THE WITHDRAWAL CHARGE
The amount of the Withdrawal Charge on the Contracts may be reduced or
eliminated when sales of the Contracts are made to individuals or to a group
of individuals in a manner that results in savings of sales expenses. The
entitlement to reduction of the Withdrawal Charge will be determined by the
Company after examination of all the relevant factors such as:
1. The size and type of group to which sales are to be made will be
considered. Generally, the sales expenses for a larger group are less
than for a smaller group because of the ability to implement large
numbers of Contracts with fewer sales contacts.
2. The total amount of Purchase Payments to be received will be considered.
Per Contract sales expenses are likely to be less on larger Purchase
Payments than on smaller ones.
3. Any prior or existing relationship with the Company will be considered.
Per Contract sales expenses are likely to be less when there is a prior
existing relationship because of the likelihood of implementing the
Contract with fewer sales contacts.
4. There may be other circumstances, of which the Company is not presently
aware, which could result in reduced sales expenses.
If, after consideration of the foregoing factors, the Company determines
that there will be a reduction in sales expenses, the Company may provide for
a reduction or elimination of the Withdrawal Charge.
The Company and its affiliates may offer an exchange program ("Exchange
Program") to their fixed annuity contract owners whereby a contract owner can
exchange his or her fixed annuity contract for a Contract offered by this
Prospectus. Pursuant to the Exchange Program, the Withdrawal Charge may be
reduced or eliminated so that a contract owner would not incur any additional
or higher Withdrawal Charge as a result of the exchange.
The Withdrawal Charge may be eliminated when the Contracts are issued to an
officer, director or employee of the Company or any of its affiliates. In no
event will reductions or elimination of the Withdrawal Charge be permitted
where reductions or elimination will be unfairly discriminatory to any person.
DEDUCTION FOR MORTALITY AND EXPENSE RISK CHARGE
The Company deducts on each Valuation Date a Mortality and Expense Risk
Charge which is equal, on an annual basis, to 1.25% of the average daily net
asset value of the Separate Account. The mortality risks assumed by the
Company arise from its contractual obligation to make annuity payments after
the Annuity Date for the life of the Annuitant and to waive the Withdrawal
Charge in the event of the death of the Annuitant. Also, there is a mortality
risk borne by the Company with respect to the guaranteed death benefit (see
"Contract Proceeds --
15
<PAGE>
Death Proceeds" on Page 22). The expense risk assumed by the Company is that
all actual expenses involved in administering the Contracts, including
Contract maintenance costs, administrative costs, mailing costs, data
processing costs, legal fees, accounting fees, filing fees and the costs of
other services may exceed the amount recovered from the Annual Contract
Maintenance Charge and the Administrative Charge.
If the Mortality and Expense Risk Charge is insufficient to cover the actual
costs, the loss will be borne by the Company. Conversely, if the amount
deducted proves more than sufficient, the excess will be a profit to the
Company. The Company expects a profit from this charge.
The Mortality and Expense Risk Charge is guaranteed by the Company and
cannot be increased.
DEDUCTION FOR ADMINISTRATIVE CHARGE
The Company deducts on each Valuation Date an Administrative Charge which is
equal, on an annual basis, to .15% of the average daily net asset value of the
Separate Account. This charge, together with the Annual Contract Maintenance
Charge (see below), is to reimburse the Company for the expenses it incurs in
the establishment and maintenance of the Contracts and the Separate Account.
These expenses include but are not limited to: preparation of the Contracts,
confirmations, annual reports and statements, maintenance of Owner records,
maintenance of Separate Account records, administrative personnel costs,
mailing costs, data processing costs, legal fees, accounting fees, filing
fees, the costs of other services necessary for Owner servicing and all
accounting, valuation, regulatory and reporting requirements. Since this
charge is an asset-based charge, the amount of the charge attributable to a
particular Contract may have no relationship to the administrative costs
actually incurred by that Contract. The Company does not intend to profit from
this charge. This charge will be reduced to the extent that the amount of this
charge is in excess of that necessary to reimburse the Company for its
administrative expenses. Should this charge prove to be insufficient, the
Company will not increase this charge and will incur the loss.
DEDUCTION FOR ANNUAL CONTRACT MAINTENANCE CHARGE
The Company deducts an Annual Contract Maintenance Charge of $30 from the
Contract Value on each Contract Anniversary prior to the Maturity Date. This
charge is to reimburse the Company for its administrative expenses (see
above). This charge is deducted by subtracting values from the Fixed Account
and/or cancelling Accumulation Units from each applicable Subaccount in the
ratio that the value of each account bears to the total Contract Value. If a
total withdrawal is made on other than a Contract Anniversary, the Annual
Contract Maintenance Charge will be deducted at the time of withdrawal. If the
Maturity Date is not a Contract Anniversary, the Annual Contract Maintenance
Charge will be deducted from the Maturity Proceeds. The Company has set this
charge at a level so that, when considered in conjunction with the
Administrative Charge (see above), it will not make a profit from the charges
assessed for administration.
DEDUCTION FOR PREMIUM TAXES
The Contract provides that any premium or other taxes paid to any government
entity relating to the Contract will be deducted from the Purchase Payment or
Contract Value when incurred. Some states assess premium taxes at the time
Purchase Payments are made; others assess premium taxes at the time Annuity
Payments begin. Premium taxes generally range from 0% to 4%. The Contract also
provides that the Company may, at its sole discretion, pay taxes when due and
deduct that amount from the Contract Value at a later date. Payment at an
earlier date does not waive any right the Company may have to deduct amounts
at a later date. The Company currently intends to advance any premium taxes
due at the time Purchase Payments are made and then deduct such premium taxes
from an Owner's Contract Value at the time Annuity Payments begin or upon
withdrawal if the Company is unable to obtain a refund. The Company will, in
its sole discretion, determine when taxes have resulted from:
(1) the investment experience of the Separate Account;
(2) receipt by the Company of the Purchase Payments; or
(3) commencement of Annuity Payments.
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DEDUCTION FOR INCOME TAXES
While the Company is not currently maintaining a provision for federal
income taxes with respect to the Separate Account, the Company has reserved
the right to establish a provision for income taxes if it determines, in its
sole discretion, that it will incur a tax as a result of the operation of the
Separate Account. The Company will deduct for any income taxes incurred by it
as a result of the operation of the Separate Account whether or not there was
a provision for taxes and whether or not it was sufficient. The Company will
deduct any withholding taxes required by applicable law.
DEDUCTION FOR EXPENSES OF THE INVESTMENT OPTIONS
There are other deductions from and expenses paid out of the assets of the
Investment Options, including operating expenses and amounts paid to the
investment advisers as Management Fees, which are described in the
accompanying Prospectuses for the Investment Options.
DEDUCTION FOR TRANSFER FEE
Prior to the Maturity Date, the Owner may transfer all or part of the
Owner's interest in a Subaccount or the Fixed Account (subject to Fixed
Account provisions) without the imposition of any fee or charge if there have
been no more than 12 transfers made in the Contract Year. If more than 12
transfers have been made in the Contract Year, the Company will deduct a
Transfer Fee which is equal to the lesser of 2% of the Contract Value
transferred or an amount not greater than $25. (The current amount is $25.)
Currently, all transfers made on any one day are considered a single transfer.
If the Owner is participating in the Automatic Portfolio Rebalancing program
or Dollar Cost Averaging program, such transfers currently are not counted
toward the number of transfers for the year and are not taken into account in
determining any Transfer Fee. However, the Company reserves the right to treat
multiple transfers in a single day, Automatic Portfolio Rebalancing transfers
and Dollar Cost Averaging transfers as standard transfers when determining
annual transfers and imposing the Transfer Fee. (See "Purchase Payments and
Contract Value -- Dollar Cost Averaging" on Page 18 and "Purchase Payments and
Contract Value -- Automatic Portfolio Rebalancing" on Page 18.)
THE CONTRACTS
OWNERSHIP
The Owner exercises all the rights under the Contract. The maximum issue Age
is 85 years old for Owners and Annuitants. The Owner may name a new Owner. Any
change in Ownership must be sent to the Company's Customer Service Center on a
form acceptable to the Company. The change will go into effect when it is
signed, subject to any payments or actions taken by the Company before it
records it. The Company is not responsible for any tax consequences occurring
as a result of ownership changes. For Non-Qualified Contracts, in accordance
with Code Section 72(u), a deferred annuity contract held by a corporation or
other entity that is not a natural person is not treated as an annuity
contract for tax purposes. Income on the contract is treated as ordinary
income received by the owner during the taxable year. However, for purposes of
Code Section 72(u), an annuity contract held by a trust or other entity as
agent for a natural person is considered held by a natural person and treated
as an annuity contract for tax purposes. Tax advice should be sought prior to
purchasing a Contract which is to be owned by a trust or other non-natural
person.
ANNUITANT
The Annuitant is the natural person on whose life Annuity Payments are
based. The Annuitant is irrevocably named at the time the Contract is issued.
ASSIGNMENT
During the Annuitant's life, the Owner can assign some or all of the Owner's
rights under the Contract to someone else.
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A signed copy of the assignment must be sent to the Company on a form
acceptable to the Company. An assignment of the Contract is not binding on the
Company until the assignment, or a copy, is recorded at the Customer Service
Center, subject to any payments or actions taken by the Company before the
recording. The Company is not responsible for the validity or effect of any
assignment, including any tax consequences.
The consent of any Irrevocable Beneficiaries is required before assignment
of Proceeds can happen.
If the Contract is issued pursuant to a retirement plan which receives
favorable tax treatment under the provisions of Sections 401, 403(b), 408 or
457 of the Code, it may not be assigned, pledged or otherwise transferred
except as may be allowed under applicable law.
BENEFICIARY
The Owner can name any Beneficiary to be an Irrevocable Beneficiary. The
interest of an Irrevocable Beneficiary cannot be changed without his or her
consent. Otherwise, the Owner can change Beneficiaries as explained below.
Unless the Owner states otherwise, all rights of a Beneficiary, including an
Irrevocable Beneficiary, will end if he or she dies before the Annuitant. If
any Beneficiary dies before the Annuitant, that Beneficiary's interest will
pass to any other Beneficiaries according to their respective interests. If
all Beneficiaries die before the Annuitant, upon the Annuitant's death the
Company will pay the Death Proceeds to the Owner, if living, otherwise to the
Owner's estate or legal successors.
The Owner can change the Beneficiary at any time during the Annuitant's
life. To do so, the Owner must send a written request to the Company's
Customer Service Center. The request must be on a form acceptable to the
Company. The change will go into effect when signed, subject to any payments
or actions taken by the Company before it records the change.
A change cancels all prior Beneficiary designations; except, however, a
change will not cancel any Irrevocable Beneficiary without his or her consent.
The interest of the Beneficiary will be subject to:
(1) any assignment of the Contract, accepted and recorded by the Company
prior to the Annuitant's death; and
(2) any Payment Plan in effect on the date of the Annuitant's death.
Death Proceeds will be paid as though the Beneficiary died before the
Annuitant if:
(1) the Beneficiary dies at the same time as the Annuitant; or
(2) the Beneficiary dies within 24 hours of the Annuitant's death.
PURCHASE PAYMENTS AND CONTRACT VALUE
PURCHASE PAYMENTS
The initial Purchase Payment is due on the Issue Date. There is no Contract
until the initial Purchase Payment is paid. If any check presented as payment
of any part of the initial Purchase Payment for a Contract is not honored, the
Contract is void.
The minimum Purchase Payment is an aggregate of $5,000 the first year and
the minimum subsequent Purchase Payment is $100. Under certain circumstances,
the Company may waive and/or modify the minimum subsequent Purchase Payment
requirement in the case of large groups who submit Purchase Payments through
Company approved billing procedures. For Qualified Contracts, the minimum
Purchase Payment is $100 per month if payroll deduction is used; otherwise it
is an aggregate of $2,000 per year. Prior Company approval must be obtained
for subsequent Purchase Payments in excess of $500,000 or for total Purchase
Payments in excess of $1 million. The Company reserves the right to accept or
decline any application or Purchase Payment.
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ALLOCATION OF PURCHASE PAYMENTS
The initial Purchase Payment is allocated to the Fixed Account or the
Subaccount(s) of the Separate Account as elected by the Owner. Unless
otherwise changed by the Owner, subsequent Purchase Payments are allocated in
the same manner as the initial Purchase Payment. (In Oregon, Washington and
New Jersey, after the second Contract Year, subsequent Purchase Payments may
not be allocated to the Fixed Account.) Under certain circumstances, the
initial Purchase Payment, which has been designated by prospective purchasers
to be allocated to the Fixed Account or Subaccounts other than the Smith
Barney Money Market Subaccount, may initially be allocated to the Smith Barney
Money Market Subaccount during the free look period. (See "Highlights" on Page
3.) For each Subaccount, Purchase Payments are converted into Accumulation
Units. The number of Accumulation Units credited to the Contract is determined
by dividing the Purchase Payment allocated to the Subaccount by the value of
the Accumulation Unit for the Subaccount. Purchase Payments allocated to the
Fixed Account are credited in dollars.
If the application for a Contract is in good order, the Company will apply
the Purchase Payment to the Separate Account and credit the Contract with
Accumulation Units and/or to the Fixed Account and credit the Contract with
dollars within two business days of receipt. If the application for a Contract
is not in good order, the Company will attempt to get it in good order or the
Company will return the application and the Purchase Payment within five (5)
business days. The Company will not retain a Purchase Payment for more than
five (5) business days while processing an incomplete application unless it
has been so authorized by the purchaser.
DOLLAR COST AVERAGING
Dollar Cost Averaging is a program which, if elected, permits an Owner to
systematically transfer each month amounts from any one Subaccount or the
Fixed Account (subject to Fixed Account provisions) to any Subaccount(s). By
allocating amounts on a regularly scheduled basis as opposed to allocating the
total amount at one particular time, an Owner may be less susceptible to the
impact of market fluctuations. The minimum amount which may be transferred is
$100. The minimum duration of participation in any Dollar Cost Averaging
program is currently five (5) months. An Owner must have a minimum of the
amount required in the Subaccount or the Fixed Account to complete the Owner's
designated program in order to participate in the Dollar Cost Averaging
program.
All Dollar Cost Averaging transfers will be made on the 15th of each month
or another monthly date mutually agreed upon (or the next Valuation Date if
the 15th of the month is not a Valuation Date). If the Owner is participating
in the Dollar Cost Averaging program, such transfers currently are not taken
into account in determining any Transfer Fee. The Company reserves the right
to treat Dollar Cost Averaging transfers as standard transfers when
determining the number of transfers in a year and imposing any applicable
Transfer Fees. An Owner participating in the Dollar Cost Averaging program may
not make automatic withdrawals of his or her Contract Value or participate in
the Automatic Portfolio Rebalancing program. (See "Purchase Payments and
Contract Value -- Automatic Portfolio Rebalancing" below and "Withdrawals --
Automatic Withdrawals" on Page 21.)
AUTOMATIC PORTFOLIO REBALANCING
Owners may participate in the Automatic Portfolio Rebalancing program
pursuant to which Owners authorize the Company to automatically transfer all
or a portion of their Contract Value on a periodic basis to maintain a
particular percentage allocation among the Portfolios, as selected by the
Owner. The Contract Value allocated to each Portfolio will increase or
decrease at different rates depending on the investment experience of the
Portfolio and Automatic Portfolio Rebalancing automatically reallocates the
Contract Value in the Portfolios to the allocation chosen by the Owner. The
allocations must be in full percentage points.
An Owner may select that rebalancing occur on a quarterly, semiannual or
annual basis and currently all Portfolios are available investment options
under Automatic Portfolio Rebalancing. The Fixed Account is excluded from
rebalancing. Currently, the Company offers Automatic Portfolio Rebalancing to
Owners with a Contract Value of greater than $25,000, but reserves the right
to offer the program on Contracts with a lesser amount. The Company reserves
the right to modify, suspend or terminate this service at any time.
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All Automatic Portfolio Rebalancing transfers will be made on the 15th of
the month that rebalancing is requested or another monthly date mutually
agreed upon (or the next Valuation Date, if the 15th of the month is not a
Valuation Date). If the Owner is participating in the Automatic Portfolio
Rebalancing program, such transfers currently are not taken into account in
determining any Transfer Fee. The Company reserves the right to treat
Automatic Portfolio Rebalancing transfers as standard transfers when
determining the number of transfers in a year and imposing any applicable
Transfer Fees. An Owner participating in the Automatic Portfolio Rebalancing
program may not make automatic withdrawals of his or her Contract Value or
participate in the Dollar Cost Averaging program. (See "Purchase Payments and
Contract Value -- Dollar Cost Averaging" above and "Withdrawals -- Automatic
Withdrawals" on Page 21.)
CONTRACT VALUE
The Contract Value, at any time, is the sum of:
(1) the Fixed Account Value; and
(2) the Separate Account Value.
The Separate Account value on any Valuation Date means the sum of the
Owner's interests in the Subaccounts of the Separate Account. The value of the
Owner's interest in a Subaccount is determined by multiplying the number of
Accumulation Units attributable to that Subaccount by the Accumulation Unit
value for the Subaccount. Any withdrawals or transfers will result in the
cancellation of Accumulation Units in a Subaccount. The Separate Account
values will vary with the performance of the Subaccounts of the Separate
Account, any Purchase Payments paid, partial withdrawals and charges assessed.
ACCUMULATION UNIT
A Purchase Payment when allocated to the Separate Account is converted into
Accumulation Units for the selected Subaccount. The number of Accumulation
Units in a Subaccount credited to the Contract is determined by dividing the
Purchase Payment allocated to that Subaccount by the Accumulation Unit value
for that Subaccount as of the Valuation Period during which the Purchase
Payment is allocated to the Subaccount. The Accumulation Unit value for each
Subaccount was arbitrarily set initially at $10. Subsequent Accumulation Unit
values are determined by subtracting (2) from (1) and dividing the result by
(3) where:
(1) is the net result of:
(a) the assets of the Subaccount attributable to Accumulation Units; plus
or minus
(b) the cumulative charge or credit for taxes reserved, which resulted
from the operation or maintenance of the Subaccount.
(2) is the cumulative unpaid charge for the Mortality and Expense Risk
Charge and for the Administrative Charge; and
(3) is the number of Accumulation Units outstanding at the end of the
Valuation Period.
The Accumulation Unit value may increase or decrease from Valuation Period
to Valuation Period.
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TRANSFERS
Prior to the Maturity Date, the Owner may transfer all or part of the
Owner's interest in a Subaccount or the Fixed Account without the imposition
of any fee or charge if there have been no more than 12 transfers for the
Contract Year. All transfers are subject to the following:
(1) if more than 12 free transfers have been made in any Contract Year, the
Company will deduct a Transfer Fee for each subsequent transfer. (The
Transfer Fee is the lesser of 2% of Contract Value transferred or $25.)
The Transfer Fee will be deducted from the amount which is transferred.
Transfers from a Dollar Cost Averaging program or Automatic Portfolio
Rebalancing program are currently not counted toward the number of
annual transfers and are not taken into account in determining any
applicable Transfer Fees. Currently, all transfers in a single day are
treated as a single transfer. The Company reserves the right to treat
Dollar Cost Averaging transfers, Automatic Portfolio Rebalancing
transfers and multiple transfers in a single day as standard transfers
in determining the number of annual transfers and the imposition of any
applicable Transfer Fees.
(2) the minimum amount which can be transferred is $100 or the Owner's
entire interest in the Subaccount or the Fixed Account, if less. The
minimum amount which must remain in a Subaccount or Fixed Account after
a transfer is $100 or the Subaccount or Fixed Account must be
liquidated.
(3) for any Contract Year, transfers of Purchase Payments and any
attributable earnings from the Fixed Account to a Subaccount are
limited to ten percent (10%) of the Purchase Payment and ten percent
(10%) of its attributable earnings. If a Purchase Payment was received
at least eight (8) years prior to the request for transfer, all of the
Purchase Payment and the earnings attributable to it may be transferred
to a Subaccount. (In New Jersey, no amounts may be transferred to the
Fixed Account after the second Contract Year).
(4) any transfer direction must clearly specify:
(a)the amount which is to be transferred; and
(b)the Fixed Account or Subaccounts which are to be affected.
(5) transfers will be made as of the Valuation Period next following the
Valuation Period during which a written request for a transfer is
received by the Company.
(6) the Company reserves the right, at any time, and without prior notice
to any party, to terminate, suspend, or modify the transfer privilege
described above, subject to applicable state law and regulation.
An Owner may elect to make transfers by telephone. To elect this option the
Owner must do so in writing to the Company. If there are Joint Owners, unless
the Company is informed to the contrary, instructions will be accepted from
either one of the Joint Owners. The Company will use reasonable procedures to
confirm that instructions communicated by telephone are genuine. If it does
not, the Company may be liable for any losses due to unauthorized or
fraudulent instructions. The Company may tape record all telephone
instructions.
WITHDRAWALS
Prior to the Maturity Date, the Owner may, upon written request received by
the Company, make a total or partial withdrawal of the Contract Withdrawal
Value. (For Contracts issued in Idaho, no partial withdrawal may be made for
30 days after the Issue Date). The Contract terminates if a total withdrawal
is made. The Contract Withdrawal Value is:
(1) the Contract Value for the Valuation Period next following the
Valuation Period during which a written request for a withdrawal is
received by the Company; less
(2) any applicable taxes not previously deducted; less
(3) the Withdrawal Charge, if any (see "Charges and Deductions -- Deduction
for Withdrawal Charge (Sales Load)" on Page 13); less
(4) the Annual Contract Maintenance Charge, if any.
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A withdrawal will result in the cancellation of Accumulation Units for each
applicable Subaccount of the Separate Account or a reduction in the Fixed
Account Value. Unless otherwise instructed, a partial withdrawal will be
applied pro rata among each Subaccount and the Fixed Account based on the
ratio of the value of each Subaccount or Fixed Account to the Contract Value.
The Company will pay the amount of any withdrawal from the Subaccounts within
seven (7) calendar days of receipt of a request, unless the "Suspension of
Payments or Transfers" provision is in effect (see "Suspension of Payments or
Transfers" on Page 22).
For purposes of determining any applicable Withdrawal Charges or any other
charges under the Contract, Contract Value is removed in the following order:
1) earnings (Contract Value less Purchase Payments not withdrawn); 2) Purchase
Payments in the Contract for more than eight years (these Purchase Payments
are liquidated on a first in, first out basis); 3) additional free amount
(which is equal to 10% of the Purchase Payments in the Contract for less than
eight years, fixed at the time of the first withdrawal in the Contract Year,
plus 10% of the Purchase Payments made after the first withdrawal in the
Contract Year but before the next Contract Anniversary, less any withdrawals
in the same Contract Year of Purchase Payments less than eight years old); and
4) Purchase Payments in the Contract for less than eight years (these Purchase
Payments are removed on a first in, first out basis).
Each partial withdrawal must be for an amount which is not less than $100 or
the Owner's entire interest in the Subaccount or the Fixed Account, if less.
The minimum Contract Value which must remain in a Subaccount or the Fixed
Account after a partial withdrawal is $100.
Certain tax withdrawal penalties and restrictions may apply to withdrawals
from the Contracts. (See "Tax Status" on Page 26.) For Contracts purchased in
connection with 403(b) plans, the Code limits the withdrawal of amounts
attributable to contributions made pursuant to a salary reduction agreement
(as defined in Section 403(b)(11) of the Code) to circumstances only when the
Owner: (1) attains age 59 1/2; (2) separates from service; (3) dies; (4)
becomes disabled (within the meaning of Section 72(m)(7) of the Code); or (5)
in the case of hardship. However, withdrawals for hardship are restricted to
the portion of the Owner's Contract Value which represents contributions made
by the Owner and does not include any investment results. The limitations on
withdrawals became effective on January 1, 1989 and apply only to salary
reduction contributions made after December 31, 1988, to income attributable
to such contributions and to income attributable to amounts held as of
December 31, 1988. The limitations on withdrawals do not affect rollovers or
transfers between certain Qualified Plans. Owners should consult their own tax
counsel or other tax adviser regarding any distributions.
AUTOMATIC WITHDRAWALS
Subject to any conditions and fees the Company may impose, an Owner may
elect to withdraw a designated amount in equal periodic installments
("automatic withdrawals"). The Company reserves the right to charge a fee for
automatic withdrawals. Currently, however, there are no charges for automatic
withdrawals.
Automatic withdrawals are made on the 15th of each month, or any other
monthly date mutually agreed upon (or the next following Valuation Date if the
monthly date is not a Valuation Date). Certain withdrawal penalties may apply
to withdrawals from the Contracts (see "Tax Status -- Tax Treatment of
Withdrawals -- Qualified Contracts" on Page 31 and "Tax Treatment of
Withdrawals -- Non-Qualified Contracts" on Page 29). Automatic withdrawals are
taken pro rata from Contract Value. Automatic withdrawals are not allowed
simultaneously with the Dollar Cost Averaging program or Automatic Portfolio
Rebalancing program. (See "Purchase Payments and Contract Value -- Dollar Cost
Averaging" on Page 18 and "Purchase Payments and Contract Value -- Automatic
Portfolio Rebalancing" on Page 18.)
TEXAS OPTIONAL RETIREMENT PROGRAM
A Contract issued to a participant in the Texas Optional Retirement Program
("ORP") will contain an ORP endorsement that will amend the Contract as
follows: A) If for any reason a second year of ORP participation is not begun,
the total amount of the State of Texas' first-year contribution will be
returned to the appropriate institute of higher education upon its request. B)
No benefits will be payable, through surrender of the Contract or otherwise,
until the participant dies, accepts retirement, terminates employment in all
Texas institutions of
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higher education or attains the age of 70 1/2. The value of the Contract may,
however, be transferred to other contracts or carriers during the period of
ORP participation. A participant in the ORP is required to obtain a
certificate of termination from the participant's employer before the value of
a Contract can be withdrawn.
SUSPENSION OF PAYMENTS OR TRANSFERS
The Company reserves the right to suspend or postpone payments (in Illinois,
for a period not exceeding six months) for withdrawals or transfers for any
period when:
(1) the New York Stock Exchange is closed (other than customary weekend and
holiday closings);
(2) trading on the New York Stock Exchange is restricted;
(3) an emergency exists as a result of which disposal of securities held in
the Separate Account is not reasonably practicable or it is not
reasonably practicable to determine the value of the Separate Account's
net assets;
(4) when the Company's Customer Service Center is closed; or
(5) during any other period when the Securities and Exchange Commission, by
order, so permits for the protection of Owners; provided that
applicable rules and regulations of the Securities and Exchange
Commission will govern as to whether the conditions described in (2)
and (3) exist.
The Company reserves the right to defer payment for a withdrawal or transfer
from the Fixed Account for the period permitted by law but not for more than
six months after written election is received by the Company.
CONTRACT PROCEEDS
MATURITY PROCEEDS
The Owner selects a Maturity Date at the Issue Date and may elect a new
Maturity Date at any time by making a written request to the Company at its
Customer Service Center at least seven days prior to the Maturity Date.
On the Maturity Date, the Company will pay the Maturity Proceeds of the
Contract to the Annuitant, if living, subject to the terms of the Contract. If
Payment Plan A, Option 1; Plan B; or Plan C are elected, the Maturity Proceeds
will be the Contract Value less any applicable taxes not previously deducted.
(See "Fixed Payment Plans" on Page 24.) If the Maturity Proceeds are paid in
cash or by any other method not listed above, the Maturity Proceeds equal the
Contract Value less:
(1) any applicable taxes not previously deducted; less
(2) the Withdrawal Charge, if any; less
(3) the Annual Contract Maintenance Charge, if any.
The election of a Payment Plan must be made in writing at least seven (7)
days prior to the Maturity Date. If no election is made, an automatic option
of monthly income for a minimum of 120 months and as long thereafter as the
Annuitant lives will be applied.
DEATH PROCEEDS
For issue ages less than 67, the death proceeds will be the greater of:
(1) Purchase Payments (less any withdrawals and taxes);
(2) Contract Value on the date of settlement (less taxes); or
(3) The highest Contract Value (adjusted for subsequent premium withdrawals
and taxes) on any Contract Anniversary beginning with the 8th Contract
Anniversary and continuing through to the last anniversary prior to
attained age 76.
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For issue ages 67 through 75, the death proceeds will be the greater of:
(1) Purchase Payments (less withdrawals and taxes);
(2) Contract Value on the date of settlement (less taxes); or
(3) The Contract Value (less subsequent withdrawals and taxes) on the 8th
Contract Anniversary.
For issue ages 76 and above, the death proceeds will be the Contract Value
on the date of settlement, less any applicable taxes not previously deducted.
The Death Proceeds will be determined and paid as of the Valuation Period
next following the Valuation Period during which both due proof of death
satisfactory to the Company and an election for the payment method from all
Beneficiaries are received at the Company.
The Beneficiary can elect to have a single lump sum payment or choose one of
the Payment Plans. If a single sum payment is requested, the amount will be
paid within seven (7) days, unless the Suspension of Payments or Transfers
provision is in effect.
Payment to the Beneficiary, other than in a single sum, may only be elected
during the 60-day period beginning with the date of receipt of due proof of
death on a form acceptable to the Company.
The entire Death Proceeds must be paid within five (5) years of the date of
death unless:
(1) the Beneficiary elects to have the Death Proceeds:
(a) payable under a Payment Plan over the life of the Beneficiary or
over a period not extending beyond the life expectancy of the
Beneficiary; and
(b) payable beginning within one year of the date of death; or
(2) if the Beneficiary is the Owner's Spouse, the Beneficiary may elect to
become the Owner of the Contract and the Contract will continue in
effect.
DEATH OF THE ANNUITANT
(1) If the Annuitant dies prior to the Maturity Date, the Company will pay
the Death Proceeds as provided above.
(2) If the Annuitant dies after the Maturity Date but before all of the
Proceeds payable under the Contract have been distributed, the Company
will pay the remaining Proceeds to the Beneficiary(ies) according to
the terms of the supplementary contract.
DEATH OF OWNER
(1) If the Owner dies before the Maturity Date, ownership of the Contract
will be transferred as follows:
(a) if the Owner is also the Annuitant, the Death of the Annuitant
provision described above applies; or
(b) if the Owner is not also the Annuitant and if the new Owner is the
spouse of the Owner, the Contract may be continued; or
(c) if the Owner is not also the Annuitant and if the new Owner is
someone other than the spouse of the Owner, the Contract Withdrawal
Value must be distributed pursuant to the Death Proceeds provision
above.
(2) If the Owner dies on or after the Maturity Date, but before all
Proceeds payable under the Contract have been distributed, the Company
will continue payments according to the terms of the supplementary
contract.
The Owner's spouse is the Owner's surviving spouse at the time of the
Owner's death. If the Owner is not a natural person, the death of the
Annuitant will be treated as the death of the Owner. If there are Joint
Owners, any references to the death of the Owner shall mean the first death of
an Owner.
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FIXED PAYMENT PLANS
After the first Contract Year, the Proceeds may be applied under one or more
of the Payment Plans described below. Payment Plans not specified in the
Contract are available only if they are approved both by the Company and the
Owner. The Owner chooses a Payment Plan during the Annuitant's lifetime. This
choice can be changed during the life of the Annuitant prior to the Maturity
Date. If the Owner has not chosen a plan prior to the Annuitant's death, the
automatic option of monthly income for a minimum of 120 months and as long
thereafter as the Payee lives will be applied.
The Owner chooses a plan by sending a written request to the Customer
Service Center. The Company will send the Owner the proper forms to complete.
The request, when recorded at the Company's Customer Service Center, will be
in effect from the date it was signed, subject to any payments or actions
taken by the Company before the recording. Any change must be requested at
least seven (7) days prior to the Maturity Date. If, for any reason, the
person named to receive payments (the Payee) is changed, the change will go
into effect when the request is recorded at the Company's Customer Service
Center, subject to any payments or actions taken by the Company before the
recording.
No Withdrawal Charge is deducted if Plan A-Option 1; Plan B or Plan C is
elected.
A plan is available only if the periodic payment is $100 or more. If the
Payee is other than a natural person (such as a corporation), a plan will be
available only with the Company's consent.
A supplementary contract will be issued in exchange for the Contract when
payment is made under a Payment Plan. The effective date of a Payment Plan
shall be a date upon which the Company and the Owner mutually agree.
The minimum interest rate for plans A and B is 3.0% a year, compounded
yearly. The minimum rates for Plan C were based on the 1983a Annuity Table at
3.0% interest, compounded yearly. The Company may pay a higher rate at its
discretion.
PLAN A. INTEREST
OPTION 1 -- The Contract Value less any applicable taxes not previously
deducted may be left on deposit with the Company for five (5) years. Fixed
payments will be made monthly, quarterly, semi-annually, or annually. The
Company does not allow a monthly payment if the Contract Value applied under
this option is less than $100,000. The Proceeds may not be withdrawn until the
end of the five (5) year period.
OPTION 2 -- The Contract Withdrawal Value may be left on deposit with the
Company for a specified period. Interest will be paid annually. All or part of
the Proceeds may be withdrawn at any time.
PLAN B. FIXED PERIOD
The Contract Value less any applicable taxes not previously deducted will be
paid until the Proceeds, plus interest, are paid in full. Payments may be paid
annually or monthly. The payment period cannot be more than thirty (30) years
nor less than five (5) years. The Contract provides for a table of minimum
annual payments. They are based on the Age of the Annuitant or the
Beneficiary.
PLAN C. LIFE INCOME
The Contract Value less any applicable taxes not previously deducted will be
paid in monthly or annual payments for as long as the Annuitant or
Beneficiary, whichever is appropriate, lives. The Company has the right to
require proof satisfactory to it of the Age and sex of such person and proof
of continuing survival of such person. A minimum number of payments may be
guaranteed, if desired. The Contract provides for a table of minimum annual
payments. They are based on the Age of the Annuitant or the Beneficiary.
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DISTRIBUTOR
Equitable of Iowa Securities Network, Inc. ("Securities Network"), 604
Locust Street, Des Moines, Iowa 50309, acts as the distributor of the
Contracts. Securities Network is also a wholly-owned subsidiary of Equitable
of Iowa Companies. The Contracts are offered on a continuous basis.
ADMINISTRATION
While the Company has primary responsibility for all administration of the
Contracts, it has retained Golden American Life Insurance Company, P.O. Box
8794, Wilmington, Delaware to perform certain administrative services. Such
administrative services include issuance of the Contracts and maintenance of
Owners' records.
PERFORMANCE INFORMATION
MONEY MARKET PORTFOLIO
From time to time, the Company may advertise the "yield" and "effective
yield" of the Smith Barney Money Market Subaccount of the Separate Account.
Both yield figures are based on historical earnings and are not intended to
indicate future performance. The "yield" of the Money Market Subaccount refers
to the income generated by Contract Values in the Money Market Subaccount over
a seven-day period (which period will be stated in the advertisement). This
income is "annualized." That is, the amount of income generated by the
investment during that week is assumed to be generated each week over a 52-
week period and is shown as a percentage of the Contract Values in the Money
Market Subaccount. The "effective yield" is calculated similarly. However,
when annualized, the income earned by Contract Values is assumed to be
reinvested. This results in the "effective yield" being slightly higher than
the "yield" because of the compounding effect of the assumed reinvestment. The
yield figure will reflect the deduction of any asset-based charges and any
applicable Annual Contract Maintenance Charge, but will not reflect the
deduction of any Withdrawal Charge. The deduction of any Withdrawal Charge
would reduce any percentage increase or make greater any percentage decrease.
OTHER PORTFOLIOS
From time to time, the Company may advertise performance data for the
various other Portfolios under the Contract. Such data will show the
percentage change in the value of an Accumulation Unit based on the
performance of an investment medium over a period of time, usually a calendar
year, determined by dividing the increase (decrease) in value for that Unit by
the Accumulation Unit value at the beginning of the period. This percentage
figure will reflect the deduction of any asset-based charges, the fees and
expenses of the Portfolio, and any applicable Annual Contract Maintenance
Charges under the Contracts, but will not reflect the deduction of any
Withdrawal Charge. The deduction of any Withdrawal Charge would reduce any
percentage increase or make greater any percentage decrease.
Any advertisement will also include total return figures calculated as
described in the Statement of Additional Information. The total return figures
reflect the deduction of the asset-based charges, any applicable Annual
Contract Maintenance Charge and Withdrawal Charges, as well as the fees and
expenses of the Portfolio being advertised.
The Company may make available yield information with respect to some of the
Portfolios. Such yield information will be calculated as described in the
Statement of Additional Information. The yield information will reflect the
deduction of any applicable Annual Contract Maintenance Charge as well as any
asset-based charges.
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The Company may also show historical Accumulation Unit values in certain
advertisements containing illustrations. These illustrations will be based on
actual Accumulation Unit values.
In addition, the Company may distribute sales literature which compares the
percentage change in Accumulation Unit values for any of the Portfolios
against established market indices such as the Standard & Poor's 500 Composite
Stock Price Index, the Dow Jones Industrial Average or other management
investment companies which have investment objectives similar to the Portfolio
being compared. The Standard & Poor's 500 Composite Stock Price Index is an
unmanaged, unweighted average of 500 stocks, the majority of which are listed
on the New York Stock Exchange. The Dow Jones Industrial Average is an
unmanaged, weighted average of thirty blue chip industrial corporations listed
on the New York Stock Exchange. Both the Standard & Poor's 500 Composite Stock
Price Index and the Dow Jones Industrial Average assume quarterly reinvestment
of dividends.
The Company may, from time to time, include in its advertising and sales
materials, tax deferred compounding charts and other hypothetical
illustrations, which may include comparisons of currently taxable and tax
deferred investment programs, based on selected tax brackets.
In addition, the Company may, as appropriate, compare each Subaccount's
performance to that of other types of investments such as certificates of
deposit, savings accounts and U.S. Treasuries, or to certain interest rate and
inflation indices, such as the Consumer Price Index, which is published by the
U.S. Department of Labor and measures the average change in prices over time
of a fixed "market basket" of certain specified goods and services. Similar
comparisons of Subaccount performance may also be made with appropriate
indices measuring the performance of a defined group of securities widely
recognized by investors as representing a particular segment of the securities
markets. For example, Subaccount performance may be compared with Donoghue
Money Market Institutional Averages (money market rates), Lehman Brothers
Corporate Bond Index (corporate bond interest rates) or Lehman Brothers
Government Bond Index (long-term U.S. Government obligation interest rates).
The Company may also distribute sales literature which compares the
performance of the Accumulation Unit values of the Contracts issued through
the Separate Account with the unit values of variable annuities issued through
the separate accounts of other insurance companies. Such information will be
derived from the Lipper Variable Insurance Products Performance Analysis
Service, the VARDS Report or from Morningstar.
The Lipper Variable Insurance Products Performance Analysis Service is
published by Lipper Analytical Services, Inc., a publisher of statistical data
which currently tracks the performance of almost 4,000 investment companies.
The rankings compiled by Lipper may or may not reflect the deduction of asset-
based insurance charges. The Company's sales literature utilizing these
rankings will indicate whether or not such charges have been deducted. Where
the charges have not been deducted, the sales literature will indicate that if
the charges had been deducted, the ranking might have been lower.
The VARDS Report is a monthly variable annuity industry analysis compiled by
Variable Annuity Research & Data Service of Roswell, Georgia and published by
Financial Planning Resources, Inc. The VARDS rankings may or may not reflect
the deduction of asset-based insurance charges. The Company's sales literature
utilizing these rankings will indicate whether or not such charges have been
deducted. Where the charges have not been deducted, the sales literature will
indicate that if the charges had been deducted, the ranking might have been
lower.
Morningstar rates a variable annuity subaccount against its peers with
similar investment objectives. Morningstar does not rate any subaccount that
has less than three years of performance data. The Company's sales literature
utilizing these rankings will indicate whether charges have been deducted.
Where the charges have not been deducted, the sales literature will indicate
that if the charges had been deducted, the ranking might have been lower.
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TAX STATUS
GENERAL
NOTE: THE FOLLOWING DESCRIPTION IS BASED UPON THE COMPANY'S UNDERSTANDING OF
CURRENT FEDERAL INCOME TAX LAW APPLICABLE TO ANNUITIES IN GENERAL. THE COMPANY
CANNOT PREDICT THE PROBABILITY THAT ANY CHANGES IN SUCH LAWS WILL BE MADE.
PURCHASERS ARE CAUTIONED TO SEEK COMPETENT TAX ADVICE REGARDING INVESTMENT IN
THE CONTRACTS. THE COMPANY DOES NOT GUARANTEE THE TAX STATUS OF THE CONTRACTS.
PURCHASERS BEAR THE COMPLETE RISK THAT THE CONTRACTS MAY NOT BE TREATED AS
"ANNUITY CONTRACTS" UNDER FEDERAL INCOME TAX LAWS. IT SHOULD BE FURTHER
UNDERSTOOD THAT THE FOLLOWING DISCUSSION IS NOT EXHAUSTIVE AND THAT SPECIAL
RULES NOT DESCRIBED IN THIS PROSPECTUS MAY BE APPLICABLE IN CERTAIN
SITUATIONS. MOREOVER, NO ATTEMPT HAS BEEN MADE TO CONSIDER ANY APPLICABLE
STATE OR OTHER TAX LAWS.
Section 72 of the Code governs taxation of annuities in general. An Owner is
not taxed on increases in the value of a Contract until distribution occurs,
either in the form of a lump sum payment or as annuity payments under the
Annuity Option selected. For a lump sum payment received as a total withdrawal
(total surrender), the recipient is taxed on the portion of the payment that
exceeds the cost basis of the Contract. For Non-Qualified Contracts, this cost
basis is generally the purchase payments, while for Qualified Contracts there
may be no cost basis. The taxable portion of the lump sum payment is taxed at
ordinary income tax rates.
For annuity payments, a portion of each payment in excess of an exclusion
amount is includible in taxable income. The exclusion amount for payments
based on a fixed annuity option is determined by multiplying the payment by
the ratio that the cost basis of the Contract (adjusted for any period certain
or refund feature) bears to the expected return under the Contract. Payments
received after the investment in the Contract has been recovered (i.e. when
the total of the excludible amounts equals the investment in the Contract) are
fully taxable. The taxable portion is taxed at ordinary income tax rates. For
certain types of Qualified Plans there may be no cost basis in the Contract
within the meaning of Section 72 of the Code. Owners, Annuitants and
Beneficiaries under the Contracts should seek competent financial advice about
the tax consequences of any distributions.
The Company is taxed as a life insurance company under the Code. For federal
income tax purposes, the Separate Account is not a separate entity from the
Company and its operations form a part of the Company.
DIVERSIFICATION
Section 817(h) of the Code imposes certain diversification standards on the
underlying assets of variable annuity contracts. The Code provides that a
variable annuity contract will not be treated as an annuity contract for any
period (and any subsequent period) for which the investments are not, in
accordance with regulations prescribed by the United States Treasury
Department ("Treasury Department"), adequately diversified. Disqualification
of the Contract as an annuity contract would result in imposition of federal
income tax to the Owner with respect to earnings allocable to the Contract
prior to the receipt of payments under the Contract. The Code contains a safe
harbor provision which provides that annuity contracts such as the Contracts
meet the diversification requirements if, as of the end of each quarter, the
underlying assets meet the diversification standards for a regulated
investment company and no more than fifty-five percent (55%) of the total
assets consist of cash, cash items, U.S. Government securities and securities
of other regulated investment companies.
On March 2, 1989, the Treasury Department issued Regulations (Treas. Reg.
1.817-5), which established diversification requirements for the investment
portfolios underlying variable contracts such as the Contracts. The
Regulations amplify the diversification requirements for variable contracts
set forth in the Code and provide an alternative to the safe harbor provision
described above. Under the Regulations, an investment portfolio will be deemed
adequately diversified if: (1) no more than 55% of the value of the total
assets of the portfolio is represented by any one investment; (2) no more than
70% of the value of the total assets of the portfolio is represented by any
two investments; (3) no more than 80% of the value of the total assets of the
portfolio is represented by any three investments; and (4) no more than 90% of
the value of the total assets of the portfolio is represented by any four
investments.
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The Code provides that, for purposes of determining whether or not the
diversification standards imposed on the underlying assets of variable
contracts by Section 817(h) of the Code have been met, "each United States
government agency or instrumentality shall be treated as a separate issuer."
The Company intends that all Portfolios of the Investment Options underlying
the Contracts will be managed by the investment advisers for the Investment
Options in such a manner as to comply with these diversification requirements.
The Treasury Department has indicated that the diversification Regulations
do not provide guidance regarding the circumstances in which Owner control of
the investments of the Separate Account will cause the Owner to be treated as
the owner of the assets of the Separate Account, thereby resulting in the loss
of favorable tax treatment for the Contract. At this time it cannot be
determined whether additional guidance will be provided and what standards may
be contained in such guidance.
OWNER CONTROL
The amount of Owner control which may be exercised under the Contract is
different in some respects from the situations addressed in published rulings
issued by the Internal Revenue Service in which it was held that the policy
owner was not the owner of the assets of the separate account. It is unknown
whether these differences, such as the Owner's ability to transfer among
investment choices or the number and type of investment choices available,
would cause the Owner to be considered as the owner of the assets of the
Separate Account resulting in the imposition of federal income tax to the
Owner with respect to earnings allocable to the Contract prior to receipt of
payments under the Contract.
Furthermore, under the Contract, the Owner may choose to invest in the
Select Portfolios of Concert Series, which in turn invest in regulated
investment companies which are available for investment to the general public
("fund of funds structure"). Section 817 of the Code and the Treasury
Regulations thereunder do not currently address variable contract
diversification in the context of such a fund of funds structure. Furthermore,
in consideration of this structure, it is unknown what level of investment
management must be exercised by the managers of the Select Portfolios of the
Concert Series and what amount of investment diversification of these
portfolios is required in order to preclude the existence of an unacceptable
level of owner control. As discussed above, if the Owner is deemed to possess
too much control over the assets of the Separate Account, the Contract would
not be given tax-deferred treatment and therefore the earnings allocable to
the Contract would be subject to federal income tax prior to receipt by the
Owner.
In the event any forthcoming guidance or ruling is considered to set forth a
new position, such guidance or ruling will generally be applied only
prospectively. However, if such ruling or guidance was not considered to set
forth a new position, it may be applied retroactively resulting in the Owner
being retroactively determined to be the owner of the assets of the Separate
Account.
Due to the uncertainty in this area, the Company reserves the right to
modify the Contract in an attempt to maintain favorable tax treatment.
MULTIPLE CONTRACTS
The Code provides that multiple non-qualified annuity contracts which are
issued within a calendar year to the same contract owner by one company or its
affiliates are treated as one annuity contract for purposes of determining the
tax consequences of any distribution. Such treatment may result in adverse tax
consequences including more rapid taxation of the distributed amounts from
such combination of contracts. Owners should consult a tax adviser prior to
purchasing more than one non-qualified annuity contract in any calendar year.
CONTRACTS OWNED BY OTHER THAN NATURAL PERSONS
Under Section 72(u) of the Code, the investment earnings on premiums for the
Contracts will be taxed currently to the Owner if the Owner is a non-natural
person, e.g., a corporation, or certain other entities. Such
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Contracts generally will not be treated as annuities for federal income tax
purposes. However, this treatment is not applied to Contracts held by a trust
or other entity as an agent for a natural person nor to Contracts held by
Qualified Plans. Purchasers should consult their own tax counsel or other
adviser before purchasing a Contract to be owned by a non-natural person.
TAX TREATMENT OF ASSIGNMENTS
An assignment or pledge of a Contract may be a taxable event. Owners should
therefore consult competent tax advisers should they wish to assign or pledge
their Contracts.
INCOME TAX WITHHOLDING
All distributions or the portion thereof which is includible in the gross
income of the Owner are subject to Federal income tax withholding. Generally,
amounts are withheld from periodic payments at the same rate as wages and at
the rate of 10% from non-periodic payments. However, the Owner, in most cases,
may elect not to have taxes withheld or to have withholding done at a
different rate.
Effective January 1, 1993, certain distributions from retirement plans
qualified under Section 401 or Section 403(b) of the Code, which are not
directly rolled over to another eligible retirement plan or individual
retirement account or individual retirement annuity, are subject to a
mandatory 20% withholding for Federal income tax. The 20% withholding
requirement generally does not apply to: a) a series of substantially equal
payments made at least annually for the life or life expectancy of the
participant or joint and last survivor expectancy of the participant and a
designated beneficiary, or for a specified period of 10 years or more; b)
distributions which are required minimum distributions; or (c) the portion of
the distributions not includible in gross income (i.e. returns of after-tax
contributions). Participants should consult their own tax counsel or other tax
adviser regarding withholding requirements.
TAX TREATMENT OF WITHDRAWALS -- NON-QUALIFIED CONTRACTS
Section 72 of the Code governs treatment of distributions from annuity
contracts. It provides that if the Contract Value exceeds the aggregate
purchase payments made, any amount withdrawn will be treated as coming first
from the earnings and then, only after the income portion is exhausted, as
coming from the principal. Withdrawn earnings are includible in gross income.
It further provides that a ten percent (10%) penalty will apply to the income
portion of any distribution. However, the penalty is not imposed on amounts
received: (a) after the taxpayer reaches age 59 1/2; (b) after the death of
the Owner; (c) if the taxpayer is totally disabled (for this purpose
disability is as defined in Section 72(m)(7) of the Code); (d) in a series of
substantially equal periodic payments made not less frequently than annually
for the life (or life expectancy) of the taxpayer or for the joint lives (or
joint life expectancies) of the taxpayer and his or her Beneficiary; (e) under
an immediate annuity; or (f) which are allocable to purchase payments made
prior to August 14, 1982.
The Contract provides that upon the death of the Annuitant prior to the
Maturity Date, the death proceeds will be paid to the named Beneficiary. Such
payments made upon the death of the Annuitant who is not the Owner of the
Contract do not qualify for the death of Owner exception described above, and
will be subject to the ten (10%) percent distribution penalty unless the
Beneficiary is 59 1/2 years old or one of the other exceptions to the penalty
applies.
The above information does not apply to Qualified Contracts. However,
separate tax withdrawal penalties and restrictions may apply to such Qualified
Contracts. (See "Tax Treatment of Withdrawals -- Qualified Contracts" below.)
QUALIFIED PLANS
The Contracts offered by this Prospectus are designed to be suitable for use
under various types of qualified plans. Generally, participants in a qualified
plan are not taxed on increases to the value of the contributions to the plan
until distribution occurs, regardless of whether the plan assets are held
under an annuity contract.
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Taxation of participants in each qualified plan varies with the type of plan
and terms and conditions of each specific plan. Owners, Annuitants and
Beneficiaries are cautioned that benefits under a qualified plan may be
subject to the terms and conditions of the plan regardless of the terms and
conditions of the Contracts issued pursuant to the plan. Some retirement plans
are subject to distribution and other requirements that are not incorporated
into the Company's administrative procedures. Owners, participants and
Beneficiaries are responsible for determining that contributions,
distributions and other transactions with respect to the Contracts comply with
applicable law. Following are general descriptions of the types of qualified
plans with which the Contracts may be used. Such descriptions are not
exhaustive and are for general informational purposes only. The tax rules
regarding qualified plans are very complex and will have differing
applications depending on individual facts and circumstances. Each purchaser
should obtain competent tax advice prior to purchasing a Contract issued under
a qualified plan.
Contracts issued pursuant to qualified plans include special provisions
restricting Contract provisions that may otherwise be available as described
in this Prospectus. Generally, Contracts issued pursuant to qualified plans
are not transferable except upon surrender or annuitization. Various penalty
and excise taxes may apply to contributions or distributions made in violation
of applicable limitations. Furthermore, certain withdrawal penalties and
restrictions may apply to surrenders from Qualified Contracts. (See "Tax
Treatment of Withdrawals -- Qualified Contracts" below.)
On July 6, 1983, the U.S. Supreme Court decided in ARIZONA GOVERNING
COMMITTEE v. NORRIS that optional annuity benefits provided under an
employer's deferred compensation plan could not, under Title VII of the Civil
Rights Act of 1964, vary between men and women. The Contracts sold by the
Company in connection with certain qualified plans will utilize annuity tables
which do not differentiate on the basis of sex. Such annuity tables will also
be available for use in connection with certain non-qualified deferred
compensation plans.
a. Tax-Sheltered Annuities
Section 403(b) of the Code permits the purchase of "tax-sheltered annuities"
by public schools and certain charitable, educational and scientific
organizations described in Section 501(c)(3) of the Code. These qualifying
employers may make contributions to the Contracts for the benefit of their
employees. Such contributions are not includible in the gross income of the
employees until the employees receive distributions from the Contracts. The
amount of contributions to the tax-sheltered annuity is limited to certain
maximums imposed by the Code. Furthermore, the Code sets forth additional
restrictions governing such items as transferability, distributions,
nondiscrimination and withdrawals. (See "Tax Treatment of Withdrawals --
Qualified Contracts" and "Tax-Sheltered Annuities -- Withdrawal Limitations"
below.) Any employee should obtain competent tax advice as to the tax
treatment and suitability of such an investment.
b. Individual Retirement Annuities
(1) Regular Individual Retirement Annuities
Section 408(b) of the Code permits eligible individuals to contribute to an
individual retirement program known as an "Individual Retirement Annuity"
("IRA"). Under applicable limitations, certain amounts may be contributed to
an IRA which will be deductible from the individual's gross income. These IRAs
are subject to limitations on eligibility, contributions, transferability and
distributions. (See "Tax Treatment of Withdrawals -- Qualified Contracts"
below.) Under certain conditions, distributions from other IRAs and other
Qualified Plans may be rolled over or transferred on a tax-deferred basis into
an IRA. Sales of Contracts for use with IRAs are subject to special
requirements imposed by the Code, including the requirement that certain
informational disclosure be given to persons desiring to establish an IRA.
Purchasers of Contracts to be qualified as IRAs should obtain competent tax
advice as to the tax treatment and suitability of such an investment.
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(2) SIMPLE IRAs
Section 408(p) of the Code permits certain employers (generally those with
less than 100 employees) to establish a retirement program for employees by
using Savings Incentive Match Plan Individual Retirement Annuities ("SIMPLE
IRA"). SIMPLE IRA programs can only be established with the approval of and
adoption by the employer of the Owner of the SIMPLE IRA. Contributions to
SIMPLE IRAs will be made pursuant to a salary reduction agreement in which an
Owner would authorize his/her employer to deduct a certain amount from his/her
pay and contribute it directly to the SIMPLE IRA. The Owner's employer will
also make contributions to the SIMPLE IRA in amounts based upon certain
elections of the employer. The only contributions that can be made to a SIMPLE
IRA are salary reduction contributions and employer contributions as described
above, and rollover contributions from other SIMPLE IRAs. Purchasers of
Contracts to be qualified as SIMPLE IRAs should obtain competent tax advice as
to the tax treatment and suitability of such an investment.
c. Corporate and Self-Employed ("H.R. 10" and "Keogh") Pension and Profit-
Sharing Plans
Sections 401(a) and 401(k) of the Code permit corporate employers to
establish various types of retirement plans for employees. These sections of
the Code also permit self-employed individuals to establish such retirement
plans for themselves and their employees (sometimes referred to as "Keogh" or
"H.R. 10" Plans). These retirement plans may permit the purchase of the
Contracts to provide benefits under the Plan. Contributions to the Plan for
the benefit of employees will not be includible in the gross income of the
employees until distributed from the Plan. The tax consequences to
participants may vary depending upon the particular plan design. However, the
Code places limitations and restrictions on all plans including on such items
as: amount of allowable contributions; form, manner and timing of
distributions; transferability of benefits; vesting and nonforfeitability of
interests; nondiscrimination in eligibility and participation; and the tax
treatment of distributions, withdrawals and surrenders. (See "Tax Treatment of
Withdrawals -- Qualified Contracts" below.) Purchasers of Contracts for use
with pension or profit-sharing plans should obtain competent tax advice as to
the tax treatment and suitability of such an investment.
d. Section 457 Plans of State and Local Governments and Tax-Exempt Entities
Section 457 of the Code permits employees of state and local governments and
tax-exempt entities to defer a portion of their compensation without paying
current federal income tax if the employer establishes an "eligible deferred
compensation plan" as defined in Section 457 of the Code. For plans
established by tax-exempt entities, the employer is the Owner of the Contract
and has the sole right to the proceeds of the Contract, until paid or made
available to the participant, subject to the claims of the general creditors
of the employer. For plans established by state and local governments after
August 20, 1996, the assets of the 457 plan must be held in trust for the
benefit of plan participants and Contracts issued to these plans will be held
in the name of such trust, or in the name of the plan, for the benefit of plan
participants, and are not subject to the general creditors of the employer.
Furthermore, this requirement must be met for all plans no later than January
1, 1999. Purchasers of Contracts with respect to 457 plans should obtain
competent tax advice as to the tax treatment and suitability of such an
investment.
TAX TREATMENT OF WITHDRAWALS -- QUALIFIED CONTRACTS
In the case of a withdrawal under a Qualified Contract, a ratable portion of
the amount received is taxable, generally based on the ratio of the
individual's cost basis to the individual's total accrued benefit under the
retirement plan. Special tax rules may be available for certain distributions
from a Qualified Contract. Section 72(t) of the Code imposes a 10% penalty tax
on the taxable portion of any distribution from qualified retirement plans,
including Contracts issued and qualified under Code Sections 401 (H.R. 10 and
Corporate Pension and Profit-Sharing Plans), 403(b) (Tax-Sheltered Annuities)
and 408(b) (Individual Retirement Annuities). The penalty is increased to 25%
instead of 10% for SIMPLE IRAs if distribution occurs within the first two
years after the Owner first participated in the SIMPLE IRA. To the extent
amounts are not includible in gross income because they have been rolled over
to an IRA or to another eligible qualified plan, no tax penalty will be
imposed. The tax penalty will not apply to the following distributions: (a) if
distribution is made on or after the date on which the Owner or Annuitant (as
applicable) reaches age 59 1/2; (b) distributions following the
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death or disability of the Owner or Annuitant (as applicable) (for this
purpose disability is as defined in Section 72(m)(7) of the Code); (c) after
separation from service, distributions that are part of substantially equal
periodic payments made not less frequently than annually for the life (or life
expectancy) of the Owner or Annuitant (as applicable) or the joint lives (or
joint life expectancies) of such Owner or Annuitant (as applicable) and his or
her designated Beneficiary; (d) distributions to an Owner or Annuitant (as
applicable) who has separated from service after he has attained age 55; (e)
distributions made to the Owner or Annuitant (as applicable) to the extent
such distributions do not exceed the amount allowable as a deduction under
Code Section 213 to the Owner or Annuitant (as applicable) for amounts paid
during the taxable year for medical care; (f) distributions made to an
alternate payee pursuant to a qualified domestic relations order; and (g)
distributions from an Individual Retirement Annuity for the purchase of
medical insurance (as described in Section 213(d)(1)(D) of the Code) for the
Owner and his or her spouse and dependents if the Owner or Annuitant (as
applicable) has received unemployment compensation for at least 12 weeks. This
exception will no longer apply after the Owner or Annuitant (as applicable)
has been re-employed for at least 60 days. The exceptions stated in (d) and
(f) above do not apply in the case of an Individual Retirement Annuity. The
exception stated in (c) above applies to an Individual Retirement Annuity
without the requirement that there be a separation from service.
Generally, distributions from a qualified plan (other than IRAs) must
commence no later than April 1 of the calendar year following the year in
which the employee attains age 70 1/2 or retires, whichever is later. For
IRAs, distributions must commence no later than April 1 of the calendar year
following the year in which the Owner attains age 70 1/2. Required
distributions must be over a period not exceeding the life expectancy of the
individual or the joint lives or life expectancies of the individual and his
or her designated beneficiary. If the required minimum distributions are not
made, a 50% penalty tax is imposed as to the amount not distributed.
TAX-SHELTERED ANNUITIES -- WITHDRAWAL LIMITATIONS
The Code limits the withdrawal of amounts attributable to contributions made
pursuant to a salary reduction agreement (as defined in Section 403(b)(11) of
the Code) to circumstances only when the Owner: (1) attains age 59 1/2; (2)
separates from service; (3) dies; (4) becomes disabled (within the meaning of
Section 72(m)(7) of the Code); or (5) in the case of hardship. However,
withdrawals for hardship are restricted to the portion of the Owner's Contract
Value which represents contributions made by the Owner and does not include
any investment results. The limitations on withdrawals became effective on
January 1, 1989 and apply only to salary reduction contributions made after
December 31, 1988, to income attributable to such contributions and to income
attributable to amounts held as of December 31, 1988. The limitations on
withdrawals do not affect rollovers or transfers between certain Qualified
Plans. Owners should consult their own tax counsel or other tax adviser
regarding any distributions.
FINANCIAL STATEMENTS
Financial statements of the Company and the Separate Account have been
included in the Statement of Additional Information.
LEGAL PROCEEDINGS
There are no pending legal proceedings to which the Separate Account, the
Distributor or the Company is a party which are likely to have a material
adverse effect on the Separate Account or upon the ability of the Company to
meet its obligations under the Contracts. In the ordinary course of business,
the Company and its subsidiaries are also engaged in certain other litigation
none of which management believes is material.
33
<PAGE>
TABLE OF CONTENTS OF THE
STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
ITEM PAGE
- ---- ----
<S> <C>
Company.................................................................... 3
Experts.................................................................... 3
Legal Opinions............................................................. 3
Distributor................................................................ 3
Yield Calculation for Money Market Subaccount.............................. 3
Performance Information.................................................... 4
Annuity Provisions......................................................... 5
Financial Statements....................................................... 5
</TABLE>
34
________________________________________________________________________
__________________
__________________
__________________
FRONT
- -----
Equitable Life Insurance Company of Iowa
Variable Annuity Administration
P.O. Box 9271
Des Moines, Iowa 50306-9271
________________________________________________________________________
________________________________________________________________________
Please send me, at no charge, the Statement of Additional Information
dated May 1, 1997, for the Individual Flexible Purchase Payment
Deferred Variable and Fixed Annuity Contracts issued by Equitable Life
Insurance Company of Iowa Separate Account A and Equitable Life
Insurance Company of Iowa.
(Please print or type and fill in all information)
BACK
________________________________________________________________________
- -----
Name
________________________________________________________________________
Address
________________________________________________________________________
City State Zip Code
________________________________________________________________________
Form #PE-1
1/97
PART B
STATEMENT OF ADDITIONAL INFORMATION
INDIVIDUAL FLEXIBLE PURCHASE PAYMENT DEFERRED
VARIABLE AND FIXED ANNUITY CONTRACTS
issued by
EQUITABLE LIFE INSURANCE COMPANY OF IOWA SEPARATE ACCOUNT A
AND
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
THIS IS NOT A PROSPECTUS. THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD
BE READ IN CONJUNCTION WITH THE PROSPECTUS DATED MAY 1, 1997, FOR THE
INDIVIDUAL FLEXIBLE PURCHASE PAYMENT DEFERRED VARIABLE AND FIXED ANNUITY
CONTRACTS WHICH ARE REFERRED TO HEREIN.
THE PROSPECTUS CONCISELY SETS FORTH INFORMATION THAT A PROSPECTIVE INVESTOR
OUGHT TO KNOW BEFORE INVESTING. FOR A COPY OF THE PROSPECTUS CALL OR WRITE
THE COMPANY AT: P.O. BOX 8794, WILMINGTON, DELAWARE 19899-8794,
(800) 344-6864.
THIS STATEMENT OF ADDITIONAL INFORMATION IS DATED MAY 1, 1997.
TABLE OF CONTENTS
PAGE
Company
Experts
Legal Opinions
Distributor
Yield Calculation For Money Market Subaccounts
Performance Information
Annuity Provisions
Financial Statements
COMPANY
Information regarding Equitable Life Insurance Company of Iowa (the "Company")
and its ownership is contained in the Prospectus.
EXPERTS
The consolidated financial statements and schedules of the Company as of
December 31, 1996 and 1995 and for each of the three years in the period
ended December 31, 1996, and the Statement of Assets and Liabilities
of the Separate Account A as of December 31, 1996, and the related statements
of operations and changes in net assets for each of the periods indicated
therein have been audited by Ernst & Young LLP, independent auditors, as set
forth in their reports appearing elsewhere herein, and are included in
reliance upon such reports given upon the authority of such firm as experts in
accounting and auditing.
LEGAL OPINIONS
Legal matters in connection with the Contracts described herein are being
passed upon by the law firm of Blazzard, Grodd & Hasenauer, P.C., Westport,
Connecticut.
DISTRIBUTOR
Equitable of Iowa Securities Network, Inc. ("Securities Network") acts as the
distributor. Securities Network is an affiliate of the Company and is
registered as a broker-dealer. The offering is on a continuous basis.
YIELD CALCULATION FOR MONEY MARKET SUBACCOUNTS
The Money Market Subaccounts of the Separate Account will calculate their
current yield based upon the seven days ended on the date of calculation.
For the seven calendar days ended March 31, 1997, the annualized yield
and effective yield for the Money Market Subaccount were 3.27% and
3.32%, respectively. For the seven calendar days ended March 31, 1997,
the annualized yield and effective yield for the Smith Barney Money
Market Subaccount were 3.48% and 3.54%, respectively.
The current yields of the Money Market Subaccounts are computed by determining
the net change (exclusive of capital changes) in the value of a hypothetical
pre-existing Owner account having a balance of one Accumulation Unit of the
Subaccount at the beginning of the period, subtracting the Mortality and
Expense Risk Charge, the Administrative Charge and the Annual Contract
Maintenance Charge, dividing the difference by the value of the account at the
beginning of the same period to obtain the base period return and multiplying
the result by (365/7).
The Money Market Subaccounts compute their effective compound yield according
to the method prescribed by the Securities and Exchange Commission. The
effective yield reflects the reinvestment of net income earned daily on Money
Market Subaccounts assets.
Net investment income for yield quotation purposes will not include either
realized capital gains and losses or unrealized appreciation and depreciation,
whether reinvested or not.
The yields quoted should not be considered a representation of the yield of
the Money Market Subaccounts in the future since the yield is not fixed.
Actual yields will depend not only on the type, quality and maturities of the
investments held by the Money Market Subaccounts and changes in the interest
rates on such investments, but also on changes in the Money Market
Subaccounts' expenses during the period.
Yield information may be useful in reviewing the performance of the Money
Market Subaccounts and for providing a basis for comparison with other
investment alternatives. However, the Money Market Subaccounts' yield
fluctuates, unlike bank deposits or other investments which typically pay a
fixed yield for a stated period of time. The yield information does not
reflect the deduction of any applicable Withdrawal Charge at the time of the
surrender. (See "Charges and Deductions - Deduction for Withdrawal Charge
(Sales Load)" in the Prospectus.)
PERFORMANCE INFORMATION
From time to time, the Company may advertise performance data as described in
the Prospectus. Any such advertisement will include total return figures for
the time periods indicated in the advertisement. Such total return figures
will reflect the deduction of a 1.25% Mortality and Expense Risk Charge, a
.15% Administrative Charge, the expenses for the underlying Portfolio
being advertised and any applicable Annual Contract Maintenance Charge and
Withdrawal Charges.
SEC Standard Average Annual Total Return
The hypothetical value of a Contract purchased for the time periods described
in the advertisement will be determined by using the actual Accumulation Unit
values for an initial $1,000 purchase payment, and deducting any applicable
Annual Contract Maintenance Charge and any applicable Withdrawal Charge to
arrive at the ending hypothetical value. The average annual total return is
then determined by computing the fixed interest rate that a $1,000 purchase
payment would have to earn annually, compounded annually, to grow to the
hypothetical value at the end of the time periods described. The formula used
in these calculations is
n
P (1 + T ) = ERV
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of the time periods used
(or fractional portion thereof) of a hypothetical $1,000
payment made at the beginning of the time periods used.
SEC Standard 30-Day Yield for Non-Money Market SubAccounts
In addition to total return data, the Company may include yield information in
its advertisements. For each Subaccount (other than the Money Market
Subaccounts) for which the Company will advertise yield, it will show a yield
quotation based on a 30 day (or one month) period ended on the date of the
most recent balance sheet of the Separate Account included in the registration
statement, computed by dividing the net investment income per Accumulation
Unit earned during the period by the maximum offering price per Unit on the
last day of the period, according to the following formula:
Yield = a-b 6
[2(_____ + 1) - 1]
cd
Where:
a = Net investment income earned during the period by the Trust
attributable to shares owned by the Subaccount.
b = Expenses accrued for the period (net of reimbursements).
c = The average daily number of Accumulation Units outstanding
during the period.
d = The maximum offering price per Accumulation Unit on the last
day of the period.
Hypothetical Average Annualized Total Return for the SubAccounts presented on
a standarized basis for the period ending December 31, 1996 were as follows:
<TABLE>
<CAPTION>
Returns for Equi-Select Product:
Subaccounts Investing in:
One Year Period Inception to Subaccount
Ended 12/31/96 12/31/96 Inception Date
____________________________________________
<S> <C> <C> <C>
EQUI-SELECT SERIES TRUST
Advantage Portfolio (3.78)% 2.86% 10/07/94
International Fixed Income
Portfolio (4.63)% 5.66% 10/07/94
Mortgage-Backed Securities
Portfolio (6.28)% 4.26% 10/07/94
OTC Portfolio 10.63% 20.05% 10/07/94
Research Portfolio 13.40% 20.82% 10/07/94
Total Return Portfolio 3.84% 11.82% 10/07/94
Value + Growth Portfolio N/A 5.98% 04/01/96
Growth & Income Portfolio N/A 16.63% 04/01/96
WARBURG PINCUS TRUST
International Equity Portfolio N/A (5.39)% 04/01/96
</TABLE>
<TABLE>
<CAPTION>
Returns for PrimElite Product:
Subaccounts Investing in:
One Year Period Inception to Subaccount
Ended 12/31/96 12/31/96 Inception Date
____________________________________________
<S> <C> <C> <C>
TRAVELERS SERIES FUND INC.
Smith Barney Income and Growth
Portfolio 9.74% 18.55% 04/05/95
Smith Barney International Equity
Portfolio 7.87% 14.39% 03/27/95
Smith Barney High Income Portfolio 3.33% 8.41% 04/28/95
SMITH BARNEY SERIES FUND
Appreciation Portfolio N/A 4.21% 03/22/96
EQUI-SELECT SERIES TRUST
OTC Portfolio 10.59% 20.01% 10/07/94
Research Portfolio 13.26% 20.68% 10/07/94
Total Return Portfolio 3.86% 11.84% 10/07/94
</TABLE>
Nonstandard Average Annualized Total Return
The Company may also advertise performance data which will be calculated in
the same manner as described above but which will not reflect the deduction of
any Withdrawal Charge or Annual Contract Maintenance Charge.
Owners should note that the investment results of each Subaccount will
fluctuate over time, and any presentation of the Subaccount's total return or
yield for any period should not be considered as a representation of what an
investment may earn or whatan Owner's total return or yield may be in any
future period.
ANNUITY PROVISIONS
Currently, the Company makes available payment plans on a fixed basis only.
(See the Prospectus - "Contract Proceeds - Fixed Payment Plans" for a
description of the Payment Plans.)
FINANCIAL STATEMENTS
The consolidated financial statements of the Company included herein should be
considered only as bearing upon the ability of the Company to meet its
obligations under the Contracts.
Financial Statements
Equitable Life Insurance Company of Iowa
Years ended December 31, 1996, 1995 and 1994
with Report of Independent Auditors
Equitable Life Insurance Company of Iowa
Financial Statements
Years ended December 31, 1996, 1995 and 1994
Contents
Report of Independent Auditors
Audited Financial Statements
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Changes in Stockholder's Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Report of Independent Auditors
The Board of Directors and Stockholder
Equitable Life Insurance Company of Iowa
We have audited the accompanying consolidated balance sheets of Equitable
Life Insurance Company of Iowa (wholly owned by Equitable of Iowa Companies)
as of December 31, 1996 and 1995, and the related consolidated statements of
income, changes in stockholder's equity, and cash flows for each of the three
years in the period ended December 31, 1996. Our audits also included the
financial statement schedules in the Index at Item 24. These financial
statements and schedules are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements and
schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Equitable Life Insurance Company of Iowa at December 31, 1996 and 1995,
and the consolidated 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. Also, in our opinion, the
related financial statement schedules, when considered in relation to the
basic financial statements taken as a whole, present fairly in all material
respects the information set forth therein.
As discussed in Note 3 to the consolidated financial statements, in 1994 the
Company changed its method of accounting for certain investments in debt
securities.
/S/ Ernst & Young LLP
Des Moines, Iowa
February 11, 1997
Equitable Life Insurance Company of Iowa
Consolidated Balance Sheets
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
December 31
1996 1995
__________________________
<S> <C> <C>
Assets
Investments
Fixed maturities,
available for sale, at fair value
(cost: 1996 - $7,282,582; 1995 - $6,884,837) $7,456,401 $7,352,211
Equity securities of unaffiliated companies, at
fair value (cost: 1996 - $48,821; 1995 - $49,789) 77,148 50,595
Equity security of affiliated company, at fair
value (cost: 1996 and 1995 - $618) 5,138 3,599
Mortgage loans on real estate 1,689,088 1,169,456
Real estate, less allowance for depreciation
of $4,588 in 1996 and $4,804 in 1995 8,613 13,960
Policy loans 185,853 182,423
Short-term investments 15,852 35,282
__________________________
Total investments 9,438,093 8,807,526
Cash and cash equivalents 11,741 10,390
Securities and indebtedness of related parties 7,872 13,755
Accrued investment income 131,152 122,834
Notes and other receivables 21,062 32,395
Deferred policy acquisition costs 721,690 554,179
Property and equipment, less allowance for
depreciation of $13,105 in 1996 and $9,628 in 1995 9,620 8,026
Intangible assets, less accumulated amortization
of $632 in 1996 and $558 in 1995 2,343 2,417
Other assets 82,031 47,991
Due from affiliates 5,039 1,995
Separate account assets 450,632 171,881
__________________________
Total assets $10,881,275 $9,773,389
==========================
</TABLE>
See accompanying notes.
Equitable Life Insurance Company of Iowa
Consolidated Balance Sheets (continued)
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
December 31
1996 1995
__________________________
<S> <C> <C>
Liabilities and stockholder's equity
Policy liabilities and accruals:
Future policy benefits:
Annuity and interest sensitive life products $8,389,888 $7,500,494
Traditional life insurance products 712,296 718,110
Unearned revenue reserve 18,398 14,326
Other policy claims and benefits 7,481 8,980
__________________________
9,128,063 8,241,910
Other policyholders' funds:
Advance premiums and other deposits 597 691
Accrued dividends 12,807 12,715
__________________________
13,404 13,406
Deferred income taxes 43,201 113,171
Due to affiliates 8,518 5,175
Other liabilities 188,493 180,452
Separate account liabilities 450,632 171,881
__________________________
Total liabilities 9,832,311 8,725,995
Commitments and contingencies
Stockholder's equity:
Common stock, par value $1.00 per share -
authorized 7,500,000 shares, issued and
outstanding 5,000,300 shares 5,000 5,000
Additional paid-in capital 274,009 274,009
Unrealized appreciation (depreciation) of
securities at fair value 108,968 212,719
Retained earnings 660,987 555,666
__________________________
Total stockholder's equity 1,048,964 1,047,394
__________________________
Total liabilities and stockholder's equity $10,881,275 $9,773,389
==========================
</TABLE>
See accompanying notes.
Equitable Life Insurance Company of Iowa
Consolidated Statements of Income
(Dollars in thousands)
<TABLE>
<CAPTION>
Year ended December 31
1996 1995 1994
_______________________________________
<S> <C> <C> <C>
Revenues:
Annuity and interest sensitive life
product charges $62,638 $51,466 $43,767
Traditional life insurance premiums 39,566 43,425 46,265
Net investment income 705,074 638,056 521,646
Realized gains on investments 16,213 9,524 19,697
Other income 730 8,883 8,297
_______________________________________
824,221 751,354 639,672
Benefits and expenses:
Annuity and interest sensitive life
benefits:
Interest credited to account balances 437,702 390,039 320,312
Benefit claims incurred in excess of
account balances 7,892 10,396 8,877
Traditional life insurance benefits 44,316 68,338 56,923
Increase (decrease) in future
traditional policy benefits (1,243) (6,867) 3,350
Distributions to participating
policyholders 25,209 25,125 24,988
Underwriting, acquisition and
insurance expenses:
Commissions 130,379 146,224 157,028
General Expenses 48,461 40,867 43,328
Insurance Taxes 7,391 45,472 9,961
Policy acquisition costs deferred (156,041) (178,133) (193,263)
Amortization:
Deferred policy acquisition costs 79,306 72,537 50,921
Goodwill 74 74 74
_______________________________________
623,446 614,072 482,499
Interest expense 1,880 2,565 2,069
Other expenses 1 (9) 1,880
_______________________________________
625,327 616,628 486,448
_______________________________________
198,894 134,726 153,224
Income taxes 69,486 47,233 53,262
_______________________________________
129,408 87,493 99,962
Equity income (loss), net of related
income taxes (87) 17 (39)
_______________________________________
Net income $129,321 $87,510 $99,923
=======================================
</TABLE>
See accompanying notes.
Equitable Life Insurance Company of Iowa
Consolidated Statements of Changes in Stockholder's Equity
(Dollars in thousands)
<TABLE>
<CAPTION>
Unreal-
ized
Appre
ciation
(Depre
ciation)
Addi- of Total
tional Securities Stock-
Common Paid-In at Fair Retained holder's
Stock Capital Value Earnings Equity
___________________________________________________
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1994 $5,000 $224,009 $3,009 $368,233 $600,251
Cumulative effect of change
in accounting principle
regarding fixed maturity
securities -- -- 22,516 -- 22,516
Net income for 1994 -- -- -- 99,923 99,923
Unrealized depreciation
of securities at fair
value -- -- (49,845) -- (49,845)
___________________________________________________
Balance at December 31, 1994 5,000 224,009 (24,320) 468,156 672,845
Net income for 1995 -- -- -- 87,510 87,510
Unrealized appreciation
of securities at fair
value -- -- 237,039 -- 237,039
Contributions from parent -- 50,000 -- -- 50,000
___________________________________________________
Balance at December 31, 1995 5,000 274,009 212,719 555,666 1,047,394
Net income for 1996 -- -- -- 129,321 129,321
Dividends paid to parent -- -- -- (24,000) (24,000)
Unrealized depreciation
of securities at fair
value -- -- (103,751) -- (103,751)
___________________________________________________
Balance at December 31, 1996 $5,000 $274,009 $108,968 $660,987 $1,048,964
===================================================
</TABLE>
See accompanying notes.
Equitable Life Insurance Company of Iowa
Consolidated Statements of Cash Flows
(Dollars in thousands)
<TABLE>
<CAPTION>
Year ended December 31
1996 1995 1994
_______________________________________
<S> <C> <C> <C>
Operating activities
Net income $129,321 $87,510 $99,923
Adjustments to reconcile net income to
net cash provided by operations:
Adjustments related to annuity and
interest sensitive life products:
Interest credited to account balances 434,621 390,039 320,312
Charges for mortality and
administration (63,398) (54,308) (46,280)
Change in unearned revenues 1,226 (293) (449)
Increase (decrease) in traditional life
policy liabilities and accruals (3,582) 2,758 3,750
Decrease in other policyholders' funds (2) (756) (130)
Increase in accrued investment income (8,318) (16,875) (13,486)
Policy acquisition costs deferred (156,041) (178,133) (193,263)
Amortization of deferred policy
acquisition costs 79,306 72,537 50,921
Change in other assets, other
liabilities, and accrued income taxes (13,270) 42,496 27,372
Provision for depreciation and
amortization 982 (8,449) (1,089)
Provision for deferred income taxes -- 1,117 9,958
Share of losses (equity in earnings)
of related parties 133 (27) 51
Realized gains on investments (16,213) (9,524) (19,697)
_______________________________________
Net cash provided by operating
activities 384,765 328,092 237,893
Investing activities
Sale, maturity or repayment of investments:
Fixed maturities - available for sale 525,164 145,173 204,847
Fixed maturities - held for investment -- 203,395 286,844
Equity securities 16,358 6,572 --
Mortgage loans on real estate 80,257 53,544 47,886
Real estate 7,414 2,030 5,662
Policy loans 32,417 28,436 30,397
Short-term investments - net 19,431 10,514 12,294
_______________________________________
681,041 449,664 587,930
Acquisition of investments:
Fixed maturities - available for sale (902,978) (943,285) (181,303)
Fixed maturities - held for investment -- (59,759) (1,422,409)
Equity securities (14,523) (32,097) (23,101)
Mortgage loans on real estate (599,802) (612,449) (314,255)
Real estate (710) (1,018) (876)
Policy loans (35,847) (34,411) (29,996)
_______________________________________
(1,553,860) (1,683,019) (1,971,940)
</TABLE>
See accompanying notes.
Equitable Life Insurance Company of Iowa
Consolidated Statements of Cash Flows (continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Year ended December 31
1996 1995 1994
_______________________________________
<S> <C> <C> <C>
Investing activities (continued)
Disposal of investments accounted for
by the equity method $790 $498 $489
Additions to investments accounted for
by the equity method (2,500) -- (1,376)
Repayments of notes receivable 200 1,317 221
Issuance of notes receivable -- -- (2,438)
Sales of property and equipment 177 109 281
Purchases of property and equipment (5,592) (3,397) (3,052)
_______________________________________
Net cash used in investing activities (879,744) (1,234,828) (1,389,885)
Financing activities
Proceeds from line of credit borrowing 592,289 754,104 1,053,746
Repayment of line of credit borrowing (592,289) (754,104) (1,053,746)
_______________________________________
-- -- --
Receipts from annuity and interest
sensitive life policies credited to
policyholder account balances 1,498,885 1,691,189 1,746,108
Return of policyholder account balances
on annuity policies and interest
sensitive life policies (978,555) (835,893) (586,762)
Contributions from parent -- 50,000 --
Dividends paid to parent (24,000) -- --
_______________________________________
Net cash provided by financing
activities 496,330 905,296 1,159,346
_______________________________________
Increase (decrease) in cash and cash
equivalents 1,351 (1,440) 7,354
Cash and cash equivalents at beginning
of year 10,390 11,830 4,476
_______________________________________
Cash and cash equivalents at end of year $11,741 $10,390 $11,830
=======================================
Supplemental disclosures of cash flow
information
Cash paid during the year for:
Interest $1,876 $2,567 $2,070
Income taxes 69,171 33,490 60,610
Noncash investing and financing
activities:
Foreclosure of mortgage loans,
including taxes and costs
capitalized ($15) in 1996 690 -- 250
</TABLE>
See accompanying notes.
Equitable Life Insurance Company of Iowa
Notes to Consolidated Financial Statements
December 31, 1996
1. SIGNIFICANT ACCOUNTING POLICIES
Organization
Equitable Life Insurance Company of Iowa ("the Company") is a wholly-owned
subsidiary of Equitable of Iowa Companies ("parent"). The Company and USG
Annuity & Life Company ("USG") offer various insurance products including
deferred and immediate fixed annuities, variable annuities and interest
sensitive and traditional life insurance. These products are marketed by the
Company's career agency force, independent insurance agents, broker/dealers
and financial institutions. The Company's primary customers are individuals.
Consolidation
The consolidated financial statements include the Company and its subsidiaries.
The Company's principal subsidiaries are USG, Equitable American Insurance
Company ("EAIC") and Equitable Companies. At December 31, 1996 and 1995, all
subsidiaries are wholly owned. All significant intercompany accounts and
transactions have been eliminated.
Investments
Fixed maturities: Effective January 1, 1994, the Company adopted Statement
of Financial Accounting Standards ("SFAS") No. 115, Accounting for Certain
Investments in Debt and Equity Securities. Pursuant to SFAS No. 115, fixed
maturity securities are designated as either "available for sale", "held for
investment" or "trading". Sales of fixed maturities designated as "available
for sale" are not restricted by SFAS No. 115. Available for sale securities
are reported at fair value and unrealized gains and losses on these securities
are included directly in stockholder's equity, after adjustment for related
changes in deferred policy acquisition costs, policy reserves and deferred
income taxes. At December 31, 1996 and 1995, all of the Company's fixed
maturity securities are designated as available for sale although the Company
is not precluded from designating fixed maturity securities as held for
investment or trading at some future date. Securities the Company has the
positive intent and ability to hold to maturity are designated as "held for
investment". Held for investment securities are reported at cost adjusted for
amortization of premiums and discounts. Changes in the fair value of these
securities, except for declines that are other than temporary, are not
reflected in the Company's financial statements. Sales of securities
designated as held for investment are severely restricted by SFAS No. 115.
Securities bought and held principally for the purpose of selling them in the
near term are designated as trading securities. Unrealized gains and losses
on trading securities are included in current earnings. Transfers of
securities between categories are restricted and are recorded at fair value at
the time of the transfer. Securities determined to have a decline in value
that is other than temporary are written down to estimated fair value which
becomes the security's new cost basis by a charge to realized losses in the
Company's Statement of Income. Premiums and discounts are amortized/accrued
utilizing the scientific interest method which results in a constant yield over
the security's expected life. Amortization/accrual of premiums and discounts
on mortgage-backed securities incorporates a prepayment assumption to estimate
1. SIGNIFICANT ACCOUNTING POLICIES (continued)
Investments (continued)
the securities' expected lives.
Equity securities: Equity securities (common and non-redeemable preferred
stocks) are reported at estimated fair value if readily marketable or
conversion value, if applicable, or at cost if not readily marketable. The
change in unrealized appreciation and depreciation of marketable equity
securities (net of related deferred income taxes, if any) is included directly
in stockholder's equity. Equity securities determined to have a decline in
value that is other than temporary are written down to estimated fair value
which becomes the security's new cost basis by a charge to realized losses in
the Company's Statement of Income.
Mortgage loans: Mortgage loans on real estate are reported at cost adjusted
for amortization of premiums and accrual of discounts. If the value of any
mortgage loan is determined to be impaired (i.e., when it is probable the
Company will be unable to collect all amounts due according to the contractual
terms of the loan agreement), the carrying value of the mortgage loan is
reduced to the present value of expected future cash flows from the loan,
discounted at the loan's effective interest rate, or to the loan's observable
market price, or the fair value of the underlying collateral. The carrying
value of impaired loans is reduced by the establishment of a valuation
allowance which is adjusted at each reporting date for significant changes in
the calculated value of the loan. Changes in this valuation allowance are
charged or credited to income.
Real estate: Real estate, which includes real estate acquired through
foreclosure, is reported at cost less allowances for depreciation. Real estate
acquired through foreclosure, or in-substance foreclosure, is recorded at the
lower of cost (which includes the balance of the mortgage loan, any accrued
interest and any costs incurred to obtain title to the property) or fair value
at or before the foreclosure date. The carrying value of these assets is
subject to review when events or circumstances indicate an impairment might
exist. If the estimated undiscounted cash flows is less than the carrying
amount of the assets, an impairment in value is deemed to exist and an
impairment loss is recognized. The carrying value of the asset is written
down to an amount representing the sum of the estimated undiscounted cash flows
which becomes the asset's new cost basis.
Other investments: Policy loans are reported at unpaid principal. Short-
term investments are reported at cost adjusted for amortization of premiums
and accrual of discounts. Investments accounted for by the equity method
include investments in, and advances to, various joint ventures and
partnerships.
Fair values: Estimated fair values, as reported herein, of publicly traded
fixed maturity securities are as reported by an independent pricing service.
Fair values of conventional mortgage-backed securities not actively traded in
a liquid market are estimated using a third party pricing system. This pricing
system uses a matrix calculation assuming a spread over U.S. Treasury bonds
based upon the expected average lives of the securities. Fair values of
private placement bonds are estimated using a matrix that assumes a spread
(based on interest rates and a risk assessment of the bonds) over U.S. Treasury
bonds. Estimated fair values of redeemable preferred stocks are as reported
by the National Association of Insurance Commissioners ("NAIC"). Estimated
fair values of equity securities are based on the latest quoted market prices
1. SIGNIFICANT ACCOUNTING POLICIES (continued)
Investments (continued)
or conversion value, if applicable. Estimated fair values of the Company's
investment in its registered separate accounts are based upon the quoted fair
value of the securities comprising the individual portfolios underlying the
separate accounts. Fair values of equity securities which are not readily
marketable, are estimated based upon values which are representative of the
fair values of issues of comparable yield and quality. Realized gains and
losses are determined on the basis of specific identification and average cost
methods for manager initiated and issuer initiated disposals, respectively.
Financial Instruments
Interest rate caps and cash settled put swaptions ("instruments") are reported
at amortized cost and included in other assets. These instruments were
purchased to reduce the negative effects of potential increases in withdrawal
activity related to the Company's annuity liabilities which may result from
extreme increases in interest rates. All outstanding instruments are
designated as hedges and, therefore, are not reported at fair value. Premiums
paid to purchase these instruments are deferred and amortized over the term of
the instruments on a straight-line basis. The instruments do not require any
additional payments by the Company. Any payments received in accordance with
the terms of the instruments are recorded as an adjustment to interest
credited. Unrealized gains and losses on these instruments and related assets
or liabilities will not be recorded in income until realized.
Cash and Cash Equivalents
For purposes of the consolidated statement of cash flows, the Company considers
all demand deposits and interest-bearing accounts not related to the investment
function to be cash equivalents. All interest-bearing accounts classified as
cash equivalents have original maturities of three months or less.
Deferred Policy Acquisition Costs
Certain costs of acquiring new insurance business, principally commissions and
other expenses related to the production of new business, have been deferred.
For annuity and interest sensitive life products, such costs are being
amortized generally in proportion to the present value (using the assumed
crediting rate) of expected gross profits. This amortization is adjusted
retrospectively, or "unlocked", when the Company revises its estimate of
current or future gross profits to be realized from a group of products. For
traditional life insurance products, such costs are being amortized over the
premium-paying period of the related policies in proportion to premium revenues
recognized, using principally the same assumptions for interest, mortality and
withdrawals that are used for computing liabilities for future policy benefits
subject to traditional "lock-in" concepts. Deferred policy acquisition costs
are adjusted to reflect the pro-forma impact of unrealized gains and losses on
fixed maturity securities the Company has designated as "available for sale"
under SFAS No. 115.
Property and Equipment
Property and equipment primarily represent leasehold improvements at the
Company's headquarters and at various agency offices, office furniture and
equipment and capitalized computer software and are not considered to be
significant to the Company's overall operations. Property and equipment are
1. SIGNIFICANT ACCOUNTING POLICIES (continued)
Property and Equipment (continued)
reported at cost less allowances for depreciation. Depreciation expense is
computed primarily on the basis of the straight-line method over the estimated
useful lives of the assets.
Intangible Assets
Intangible assets include the value of various licenses acquired in conjunction
with the purchase of USG which are being amortized over forty years using the
straight-line method.
Future Policy Benefits
Future policy benefits for fixed annuity and interest sensitive life products,
are established utilizing the retrospective deposit accounting method. Policy
reserves represent the premiums received plus accumulated interest, less
mortality and administration charges. Interest credited to these policies
ranged from 3.00% to 11.00% during 1996, 3.35% to 11.35% during 1995 and 3.50%
to 11.35% during 1994.
The unearned revenue reserve primarily reflects the unamortized balance of the
excess of first year administration charges over renewal period administration
charges (policy initiation fees) on fixed annuity and interest sensitive life
products. These excess charges have been deferred and are being recognized in
income over the period benefited using the same assumptions and factors used to
amortize deferred policy acquisition costs.
The liability for future policy benefits for traditional life insurance
products has been calculated on a net-level premium basis. Interest
assumptions range from 2.75% for 1956 and prior issues to a 9.00% level, graded
to 6.00% after twenty years for current issues. Mortality, morbidity and
withdrawal assumptions generally are based on actual experience. These
assumptions have been modified to provide for possible adverse deviation from
the assumptions. Future dividends for participating business (which accounted
for 1.71% of premiums and 8.59% of life insurance in force in 1996) are
provided for in the liability for future policy benefits.
Separate Accounts
Assets and liabilities of the separate accounts reported in the accompanying
balance sheets represent funds that are separately administered principally
for variable annuity contracts, as well as, the Company's defined pension
benefit plan assets and liabilities. Contractholders, rather than the Company,
bear the investment risk for variable products. At the direction of the
contractholders, the separate accounts invest the premiums from the sale of
variable annuity products in shares of specified mutual funds. The assets and
liabilities of the separate accounts are clearly identified and segregated from
other assets and liabilities of the Company. The portion of the separate
account assets applicable to variable annuity contracts cannot be charged with
liabilities arising out of any other business the Company may conduct.
Variable separate account assets carried at fair value of the underlying
investments generally represent contractholder investment values maintained
in the accounts. Variable separate account liabilities represent account
balances for the variable annuity contracts invested in the separate accounts.
The Company's separate account assets and liabilities for its pension plan
1. SIGNIFICANT ACCOUNTING POLICIES (continued)
Separate Accounts (continued)
represent the estimated fair values of the pension plan assets and associated
liabilities. Net investment income and realized and unrealized capital gains
and losses related to separate account assets are not reflected in the
accompanying Statements of Income.
Product charges recorded by the Company from variable annuity products consist
of charges applicable to each contract for mortality and expense risk, contract
administration and surrender charges. The Company also receives investment
advisory and investment management fees from the mutual funds underlying its
variable products which is recorded in other income.
Recognition of Premium Revenues and Costs
Revenues for fixed annuity and interest sensitive life products consist of
policy charges for the cost of insurance, policy administration charges,
amortization of policy initiation fees and surrender charges assessed against
policyholder account balances during the period. Expenses related to these
products include interest credited to policyholder account balances and benefit
claims incurred in excess of policyholder account balances.
Traditional life insurance premiums are recognized as revenues over the
premium-paying period. Future policy benefits and policy acquisition costs are
associated with the premiums as earned by means of the provision for future
policy benefits and amortization of deferred policy acquisition costs.
Deferred Income Taxes
Deferred tax assets or liabilities are computed based on the difference
between the financial statement and income tax bases of assets and liabilities
using the enacted marginal tax rate. Deferred tax assets or liabilities are
adjusted to reflect the pro forma impact of unrealized gains and losses on
equity securities and fixed maturity securities the Company has designated as
available for sale under SFAS No. 115. Changes in deferred tax assets or
liabilities resulting from this SFAS No. 115 adjustment are charged or credited
directly to stockholder's equity. Deferred income tax expenses or credits
reflected in the Company's Statements of Income are based on the changes in the
deferred tax asset or liability from period to period (excluding the SFAS
No. 115 adjustment).
Dividend Restrictions
The Company's ability to pay dividends to its parent company is restricted
because prior approval of insurance regulatory authorities is required for
payment of dividends to the stockholder which exceed an annual limitation. On
August 12, 1996, the Company paid a dividend to its parent of $24,000,000.
During 1997, the Company could pay dividends to the parent company of
approximately $95,363,000 without prior approval of statutory authorities.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenue and expenses during the preparation period. Actual results
1. SIGNIFICANT ACCOUNTING POLICIES (continued)
Use of Estimates (continued)
could differ from those estimates.
Management is required to utilize historical experience and assumptions about
future events and circumstances in order to develop estimates of material
reported amounts and disclosures. Included among the material (or potentially
material) reported amounts and disclosures that require extensive use of
estimates and assumptions are (1) estimates of fair values of investments in
securities and other financial instruments, as well as fair values of
policyholder liabilities, (2) policyholder liabilities, (3) deferred policy
acquisition costs, (4) net assets for pension and liabilities for
postretirement benefits, (5) asset valuation allowances, (6) guaranty fund
assessment accruals, (7) deferred tax benefits (liabilities) and (8) estimates
for commitments and contingencies including legal matters, if a liability is
anticipated and can be reasonably estimated. Estimates and assumptions
regarding all of the preceding are inherently subject to change and are
reassessed periodically. Changes in estimates and assumptions could materially
impact the financial statements.
Reclassification
Certain amounts in the 1995 and 1994 financial statements have been
reclassified to conform to the 1996 financial statement presentation.
2. BASIS OF FINANCIAL REPORTING
The financial statements of the Company differ from related statutory financial
statements principally as follows: (1) acquisition costs of acquiring new
business are deferred and amortized over the life of the policies rather than
charged to operations as incurred; (2) future policy benefit reserves for
annuity and interest sensitive life products are based on full account values,
rather than the greater of cash surrender value or amounts derived from
discounting methodologies utilizing statutory interest rates; (3) future
policy benefit reserves on traditional life insurance products are based on
reasonable assumptions of expected mortality, interest and withdrawals which
include a provision for possible unfavorable deviation from such assumptions,
which may differ from reserves based upon statutory mortality rates and
interest; (4) reserves are reported before reduction for reserve credits
related to reinsurance ceded and a receivable is established, net of an
allowance for uncollectible amounts, for these credits rather than presented
net of these credits; (5) fixed maturity investments are designated as
"available for sale" and valued at fair value with unrealized appreciation/
depreciation, net of adjustments to deferred income taxes (if applicable) and
deferred policy acquisition costs, credited/charged directly to stockholder's
equity rather than valued at amortized cost; (6) the carrying value of fixed
maturity securities is reduced to fair value by a charge to realized losses in
the statements of income when declines in carrying value are judged to be other
than temporary, rather than through the establishment of a formula-determined
statutory investment reserve (carried as a liability), changes in which are
charged directly to surplus; (7) deferred income taxes are provided for the
difference between the financial statement and income tax bases of assets and
liabilities; (8) net realized gains or losses attributed to changes in the
level of interest rates in the market are recognized when the sale is completed
rather than deferred and amortized over the remaining life of the fixed
maturity security or mortgage loan; (9) gains arising from sale lease-back
transactions are deferred and amortized over the life of the lease rather than
2. BASIS OF FINANCIAL REPORTING (continued)
recognized in the period of sale; (10) a liability is established for
anticipated guaranty fund assessments, net of related anticipated premium tax
credits, rather than capitalized when assessed and amortized in accordance with
procedures permitted by insurance regulatory authorities; (11) a prepaid
pension cost asset established in accordance with SFAS No. 87, Employers'
Accounting for Pensions, agents' balances and certain other assets designated
as "non-admitted assets" for statutory purposes are reported as assets rather
than being charged to surplus; (12) revenues for annuity and interest sensitive
life products consist of policy charges for the cost of insurance, policy
administration charges, amortization of policy initiation fees and surrender
charges assessed rather than premiums received; (13) expenses for
postretirement benefits other than pensions are recognized for all qualified
employees rather than for only vested and fully-eligible employees, and the
accumulated postretirement benefit obligation for years prior to adoption of
SFAS No. 106, Employers' Accounting for Postretirement Benefits Other than
Pensions, was recognized as a cumulative effect of change in accounting method
rather than deferred and amortized over twenty years, (14) assets and
liabilities are restated to fair values when a change in ownership occurs,
with provisions for goodwill and other intangible assets, rather than
continuing to be presented at historical cost; and (15) amortization of the
cost of financial instruments purchased in conjunction with the Company's
hedging program are recorded in interest credited rather than as a deduction
from net investment income.
Net income for the Company, USG and EAIC as determined in accordance with
statutory accounting practices was $96,841,000 in 1996, $87,179,000 in 1995,
and $61,421,000 in 1994. Total statutory capital and surplus was $567,316,000
at December 31, 1996 and $532,817,000 at December 31, 1995.
3. INVESTMENT OPERATIONS
Investment Results
Major categories of net investment income are summarized below:
<TABLE>
<CAPTION>
Year ended December 31
1996 1995 1994
_______________________________________
(Dollars in thousands)
<S> <C> <C> <C>
Fixed maturities $576,781 $558,903 $478,436
Equity securities 3,080 1,255 303
Mortgage loans on real estate 125,144 76,382 39,117
Real estate 2,588 2,747 3,696
Policy loans 10,414 10,049 9,788
Short-term investments 1,397 1,275 886
Other - net 1,007 996 801
_______________________________________
720,411 651,607 533,027
Less investment expenses (15,337) (13,551) (11,381)
_______________________________________
Net investment income $705,074 $638,056 $521,646
=======================================
</TABLE>
3. INVESTMENT OPERATIONS (continued)
Investment Results (continued)
Realized gains (losses) on investments are as follows:
<TABLE>
<CAPTION>
Realized*
_______________________________________
Year ended December 31
1996 1995 1994
_______________________________________
(Dollars in thousands)
<S> <C> <C> <C>
Fixed maturities:
Available for sale $13,557 ($3,401) $7,417
Held for investment -- 9,330 11,364
Equity securities 869 912 --
Mortgage loans on real estate -- -- (62)
Real estate 1,218 (161) 7
Equity investments 569 2,844 971
_______________________________________
Realized gains on investments $16,213 $9,524 $19,697
=======================================
<FN>
* See Note 6 for the income tax effects attributable to realized gains and
losses on investments.
</TABLE>
The change in unrealized appreciation (depreciation) on securities at fair
value is as follows:
<TABLE>
<CAPTION>
Unrealized
_______________________________________
Year ended December 31
1996 1995 1994
_______________________________________
(Dollars in thousands)
<S> <C> <C> <C>
Fixed maturities:
Available for sale ($293,555) $507,971 ($40,597)
Held for investment -- 334,708 (663,840)
Equity securities 29,060 1,614 (836)
_______________________________________
Unrealized appreciation (depre-
ciation) of investments ($264,495) $844,293 ($705,273)
=======================================
</TABLE>
Fixed Maturity and Equity Securities
Effective January 1, 1994, the Company adopted SFAS No. 115, Accounting for
Certain Investments in Debt and Equity Securities. SFAS No. 115 requires
companies to classify their securities as "held to maturity", "available for
sale" or "trading".
On November 15, 1995, the Financial Accounting Standards Board ("FASB") issued
a special report allowing companies an opportunity to reassess the
3. INVESTMENT OPERATIONS (continued)
Fixed Maturity and Equity Securities (continued)
classification of their securities holdings pursuant to SFAS No. 115. In
response to this opportunity, the Company reclassified 100% of the securities
in its "held to maturity" category to "available for sale" on December 1, 1995
to maximize investment flexibility. As a result of this reclassification,
securities with combined cost totaling $5,250,921,000 and estimated fair value
of $5,560,519,000 were transferred from the Company's held for investment
portfolio to its available for sale portfolio. This transfer caused the net
unrealized investment gain component of stockholder's equity to increase by
$138,795,000 (net of deferred income taxes of $74,735,000 and an adjustment of
$96,068,000 to deferred policy acquisition costs). The Company is not,
however, precluded from classifying securities as held to maturity in the
future.
SFAS No. 115 requires the carrying value of fixed maturity securities
classified as available for sale to be adjusted for changes in market value,
primarily caused by interest rates. While other related accounts are
adjusted as discussed above, the insurance liabilities supported by these
securities are not adjusted under SFAS No. 115, thereby creating volatility
in stockholder's equity as interest rates change. As a result, the company
expects that its stockholder's equity will be exposed to incremental
volatility due to changes in market interest rates and the accompanying
changes in the reported value of securities classified as available for sale,
with equity increasing as market interest rates decline and, conversely,
decreasing as market interest rates rise. Due to this potential for
distortion in stockholder's equity, fair value disclosure is provided in Note
5. SFAS No. 107, Disclosures about Fair Value of Financial Instruments
requires disclosure of fair values for selected financial instruments but does
not require disclosure of fair value of life insurance liabilities. Although
the Company's life insurance liabilities are specifically exempted from this
disclosure requirement, estimated fair value disclosure of these liabilities
is provided in an effort to more properly reflect changes in stockholder's
equity from fluctuations in interest rates.
3. INVESTMENT OPERATIONS (continued)
Fixed Maturity and Equity Securities (continued)
At December 31, 1996 and 1995, amortized cost, gross unrealized gains and
losses and estimated fair value of the Company's fixed maturity, all of which
are designated as available for sale, are as follows:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
_____________________________________________________
(Dollars in thousands)
<S> <C> <C> <C> <C>
December 31, 1996
U.S. Government and
governmental agencies
and authorities:
Mortgage-backed
securities $251,342 $9,674 ($755) $260,261
Other 87,374 2,125 (1,420) 88,079
States, municipalities
and political
subdivisions 15,131 1,134 -- 16,265
Foreign governments 10,572 2,706 -- 13,278
Public utilities 1,205,377 41,076 (15,757) 1,230,696
Investment grade
corporate 2,654,742 156,968 (16,290) 2,795,420
Below investment grade
corporate 707,260 13,981 (15,992) 705,249
Mortgage-backed
securities 2,350,168 41,857 (45,259) 2,346,766
Redeemable preferred
stocks 616 -- (229) 387
_____________________________________________________
Total $7,282,582 $269,521 ($95,702) $7,456,401
=====================================================
</TABLE>
3. INVESTMENT OPERATIONS (continued)
Fixed Maturity and Equity Securities (continued)
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
_____________________________________________________
(Dollars in thousands)
<S> <C> <C> <C> <C>
December 31, 1995
U.S. Government and
governmental agencies
and authorities:
Mortgage-backed
securities $289,422 $16,738 $306,160
Other 60,567 4,163 ($2) 64,728
States, municipalities
and political
subdivisions 15,485 1,639 -- 17,124
Foreign governments 10,573 3,426 -- 13,999
Public utilities 1,271,641 92,546 (2,077) 1,362,110
Investment grade
corporate 2,322,036 277,981 (1,303) 2,598,714
Below investment grade
corporate 574,284 19,428 (12,492) 581,220
Mortgage-backed
securities 2,340,194 75,704 (8,142) 2,407,756
Redeemable preferred
stocks 635 -- (235) 400
_____________________________________________________
Total $6,884,837 $491,625 ($24,251) $7,352,211
=====================================================
</TABLE>
At December 31, 1996, net unrealized investment gains on fixed maturity
securities designated as available for sale totaled $173,819,000. This
appreciation caused an increase in stockholder's equity of $76,121,000 at
December 31, 1996 (net of deferred income taxes of $43,533,000 and an
adjustment of $54,165,000 to deferred policy acquisition costs). At December
31, 1995, net unrealized investment gains on fixed maturity securities
designated as available for sale totaled $467,375,000. This appreciation
caused an increase in stockholder's equity of $208,932,000 at December 31,
1995 (net of deferred income taxes of $113,503,000 and an adjustment of
$144,940,000 to deferred policy acquisition costs). No fixed maturity
securities were designated as held for investment or trading at December 31,
1996 or 1995. Short-term investments, all with maturities of 30 days or less,
have been excluded from the above schedules. Amortized cost approximates fair
value for these securities.
At December 31, 1996, net unrealized appreciation of equity securities of
$32,847,000 was comprised of gross unrealized appreciation of $6,765,000 on
the Company's investment in affiliated common stock and its registered separate
account, gross unrealized appreciation of $26,315,000 on an investment in a
real estate investment trust and gross unrealized depreciation of $233,000 on
other equity securities. The Company's investment in the real estate
investment trust had an estimated fair value of $61,339,000 and a cost basis
of $35,024,000 at December 31, 1996. The estimated fair value of the Company's
3. INVESTMENT OPERATIONS (continued)
Fixed Maturity and Equity Securities (continued)
investment is based upon conversion value. Conversion value is derived from
the quoted market value of the publicly traded security into which the
Company's investment can be converted and the issuer's cash flow from
operations. As such, changes in operating cash flows or the quoted market
price of the issuer may result in significant volatility in the estimated fair
value of the Company's investment.
The amortized cost and estimated fair value of fixed maturity securities, by
contractual maturity, at December 31, 1996, are shown below. Expected
maturities will differ from contractual maturities because borrowers may have
the right to call or prepay obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
Estimated
Amortized Fair
Cost Value
_________________________
(Dollars in thousands)
<S> <C> <C>
December 31, 1996
Due within one year $11,894 $12,101
Due after one year through five years 200,094 206,230
Due after five years through ten years 1,961,325 2,016,564
Due after ten years 2,507,759 2,614,479
_________________________
4,681,072 4,849,374
Mortgage-backed securities 2,601,510 2,607,027
_________________________
Total $7,282,582 $7,456,401
=========================
</TABLE>
3. INVESTMENT OPERATIONS (continued)
Fixed Maturity and Equity Securities (continued)
An analysis of sales, maturities and principal repayments of the Company's
fixed maturities portfolio for the years ended December 31, 1996, 1995 and
1994 is as follows:
<TABLE>
<CAPTION>
Gross Gross Proceeds
Amortized Realized Realized from
Cost Gains Losses Sale
_______________________________________________________________________________
(Dollars in thousands)
<S> <C> <C> <C> <C>
Year ended December 31, 1996
Scheduled principal repayments,
calls and tenders $289,645 $11,866 ($315) $301,196
Sales 221,962 3,461 (1,455) 223,968
______________________________________________
Total $511,607 $15,327 ($1,770) $525,164
==============================================
Year ended December 31, 1995
Scheduled principal repayments,
calls and tenders (available
for sale only):
Available for sale $59,935 $319 ($19) $60,235
Held for investment 172,082 5,279 (274) 177,087
Sales:
Available for sale 82,837 2,104 (3) 84,938
Held for investment 21,983 4,325 -- 26,308
______________________________________________
Total $336,837 $12,027 ($296) $348,568
==============================================
Year ended December 31, 1994
Scheduled principal repayments,
calls and tenders (available
for sale only):
Available for sale $167,285 $4,877 ($11) $172,151
Held for investment 275,480 11,389 (25) 286,844
Sales:
Available for sale 29,526 3,184 (14) 32,696
______________________________________________
Total $472,291 $19,450 ($50) $491,691
==============================================
</TABLE>
3. INVESTMENT OPERATIONS (continued)
Mortgage-backed Securities
The amortized cost and estimated fair value of mortgage-backed securities,
which comprise 35% of the Company's investment in fixed maturity securities
at December 31, 1996, by type, are as follows:
<TABLE>
<CAPTION>
Estimated
Amortized Fair
Cost Value
_________________________
(Dollars in thousands)
<S> <C> <C>
December 31, 1996
Mortgage-backed securities:
Government and agency guaranteed pools:
Very accurately defined maturities $17,344 $17,987
Planned amortization class 70,308 74,081
Targeted amortization class 29,336 29,051
Sequential pay 62,453 62,634
Pass through 71,901 76,508
Private label CMOs and REMICs:
Very accurately defined maturities 30,654 31,439
Planned amortization class 25,569 26,889
Targeted amortization class 435,801 426,698
Sequential pay 1,796,138 1,798,645
Mezzanines 37,685 37,835
Private placements and subordinate issues 24,321 25,260
_________________________
Total mortgage-backed securities $2,601,510 $2,607,027
=========================
</TABLE>
During periods of significant interest rate volatility, the mortgages
underlying mortgage-backed securities may prepay more quickly or more slowly
than anticipated. If the principal amount of such mortgages are prepaid
earlier than anticipated during periods of declining interest rates,
investment income may decline due to reinvestment of these funds at lower
current market rates. If principal repayments are slower than anticipated
during periods of rising interest rates, increases in investment yield may
lag behind increases in interest rates because funds will remain invested at
lower historical rates rather than reinvested at higher current rates. To
mitigate this prepayment volatility, the Company invests primarily in
intermediate tranche collateralized mortgage obligations ("CMOs"). CMOs are
pools of mortgages that are segregated into sections, or tranches, which
provide sequential retirement of bonds rather than a pro-rata share of
principal return in the pass-through structure. The Company owns no "interest
only" or "principal only" mortgage-backed securities. Further, the Company
has not purchased obligations at significant premiums, thereby limiting
exposure to loss during periods of accelerated prepayments. At December 31,
1996, unamortized premiums on mortgage-backed securities totaled $4,253,000
and unaccrued discounts on mortgage-backed securities totaled $52,817,000.
3. INVESTMENT OPERATIONS (continued)
Other Investment Information
Investment Valuation Analysis: The Company analyzes its investment portfolio
at least quarterly in order to determine if the carrying value of its
investments has been impaired. The carrying value of debt and equity
securities is written down to fair value by a charge to realized losses when
an impairment in value appears to be other than temporary. During 1996, no
investments were identified as having an impairment other than temporary.
During 1995, the Company identified two below investment grade securities as
having impairments in value that were other than temporary. As a result of
those determinations, the Company recognized pre-tax losses of $5,802,000 to
reduce the carrying value of the securities to their estimated fair value.
These securities were subsequently sold resulting in realized gains totaling
$1,200,000 during 1995. During 1994, the Company recognized a pre-tax loss
of $619,000 to reduce the carrying value of one fixed maturity security to
its estimated fair value.
At December 31, 1996, one mortgage loan with a carrying value of $41,000 was
delinquent by 90 days or more.
The carrying value of investments which have been non-income producing for
the years ending December 31, 1996 and 1995 totaled $239,000 related to a
real estate property.
Investments on Deposit: At December 31, 1996, affidavits of deposits covering
bonds with a par value of $1,780,482,000 (1995 - $1,693,573,000), mortgage
loans with an unpaid principal balance of $402,911,000 (1995 - $304,729,000)
and policy loans with an unpaid balance of $164,659,000 (1995 - $167,844,000)
were on deposit with state agencies to meet regulatory requirements. In
addition, at December 31, 1996, pursuant to a reinsurance agreement, the
Company had investments with a carrying value of $56,314,000 (1995 -
$63,664,000) and estimated market values of $53,833,000 (1995 -
$64,350,000) deposited in a trust for the benefit of the ceding company.
Investment Diversifications: The Company's investment policies related to
its investment portfolio require diversification by asset type, company and
industry and set limits on the amounts which can be invested in an individual
issuer. Such policies are at least as restrictive as those set forth by
regulatory authorities. Fixed maturity investments included investments in
various non-governmental mortgage-backed securities (24% in 1996 and 33% in
1995), public utilities (19% in 1996 and 1995), basic industrials (26% in
1996 and 21% in 1995), and consumer products (14% in 1996 and 12% in
1995). Mortgage loans on real estate have been analyzed by geographical
locations and there are no concentrations of mortgage loans in any state
exceeding ten percent in 1996 and 1995. Mortgage loans on real estate have also
been analyzed by collateral type with significant concentrations identified in
retail facilities (28% in 1996 and 32% in 1995), industrial buildings (29% in
1996 and 26% in 1995), multi-family residential buildings (20% in 1996 and
24% in 1995), and office buildings (22% in 1996 and 17% in 1995). Equity
securities (which represents 0.9% of the Company's investments) consist
primarily of investments in the Company's registered separate accounts and an
investment of $61,339,000 in a real estate investment trust. Real estate and
investments accounted for by the equity method are not significant to the
Company's overall investment portfolio.
No investment in any person or its affiliates (other than bonds issued by
agencies of the United States government) exceeded ten percent of stockholder's
equity at December 31, 1996.
4. FINANCIAL INSTRUMENTS - RISK MANAGEMENT
Hedging Program: During the second quarter of 1996, the Company implemented
a hedging program under which certain derivative financial instruments,
interest rate caps and cash settled put swaptions ("instruments"), were
purchased to reduce the negative effects of potential increases in withdrawal
activity related to the Company's annuity liabilities which may result from
extreme increases in interest rates. The Company purchased instruments, all
during the second quarter, with notional amounts totaling approximately
$600,000,000 in interest rate caps and $1,300,000,000 in cash settled put
swaptions all of which were outstanding at December 31, 1996. The Company
paid approximately $21,100,000 in premiums for these instruments. The cost of
this program has been incorporated into the Company's product pricing. The
instruments do not require any additional payments by the Company.
The agreements for these instruments entitle the Company to receive payments
from the instruments' counterparties on future reset dates if interest rates,
as specified in the agreements, rise above a specified fixed rate (9.0% and
9.5%). The amount of such payments to be received by the Company for the
interest rate caps, if any, will be calculated by taking the excess of the
current applicable rate over the specified fixed rate, and multiplying this
excess by the notional amount of the caps. Payments on cash settled put
swaptions are also calculated based upon the excess of the current applicable
rate over the specified fixed rate multiplied by the notional amount. The
product of this rate differential times the notional amount is assumed to
continue for a series of defined future semi-annual payment dates and the
resulting hypothetical payments are discounted to the current payment date
using the discount rate defined in the agreement. Any payments received from
the counterparties will be recorded as an adjustment to interest credited.
The following table summarizes the contractual maturities of notional
amounts by type of instrument at December 31, 1996:
<TABLE>
<CAPTION>
1998 1999 2000 2001 2002 Total
_______________________________________________________________________________
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest rate
caps $400,000 $200,000 $600,000
Cash settled
put swaptions $100,000 $400,000 $400,000 350,000 50,000 1,300,000
_____________________________________________________________
Total notional
amount $100,000 $400,000 $400,000 $750,000 $250,000 $1,900,000
=============================================================
</TABLE>
4. FINANCIAL INSTRUMENTS - RISK MANAGEMENT (continued)
Accounting Treatment: Premiums paid to purchase these instruments are deferred
and included in other assets. Premiums are amortized and included in interest
credited to account balances over the term of the instruments on a straight-
line basis. The Company has recorded amortization of $3,081,000 for 1996.
Unrealized gains and losses on these instruments and related assets or
liabilities will not be recorded in income until realized. The Financial
Accounting Standards Board ("FASB") and the Securities and Exchange Commission
are evaluating the accounting and disclosure requirements for these
instruments. The SEC amended its derivative disclosures rules in January of
1997 requiring additional qualitative and quantitative disclosures by December
31, 1997. FASB has issued an exposure draft titled "Accounting for Derivative
and Similar Financial Instruments and for Hedging Activities" which, if adopted
as a Statement of Financial Accounting Standards in its current form, would
require the Company to change its accounting treatment for these instruments.
The requirements of any final standard which may result from this exposure
process are not known at this time and, therefore, the impact of such a
standard on the Company's financial statements cannot be determined at this
time.
Any unrealized gain or loss on the instruments is off-balance sheet and
therefore, is not reflected in the financial statements. The following table
summarizes the amortized cost, gross unrealized gains and losses and estimated
fair value on these instruments as of December 31, 1996:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
December 31, 1996 Cost Gains Losses Value
______________________________________________________________________________
(Dollars in thousands)
<S> <C> <C> <C> <C>
Interest rate caps $5,164 ($1,456) $3,708
Cash settled put swaptions 12,877 $65 (2,570) 10,372
__________________________________________________
Total $18,041 $65 ($4,026) $14,080
==================================================
</TABLE>
The decline in fair value from amortized cost reflects changes in interest
rates and market conditions since time of purchase.
Exposure to Loss - Counterparty Nonperformance: The Company is exposed to
the risk of losses in the event of nonperformance by the
counterparties of these instruments. Losses recorded in the Company's
financial statements in the event of nonperformance will be limited to the
unamortized premium (remaining amortized cost) paid to purchase the instrument
because no additional payments are required by the Company on these instruments
after the initial premium. Counterparty nonperformance would result in an
economic loss if interest rates exceeded the specified fixed rate. Economic
losses would be measured by the net replacement cost, or estimated fair value,
for such instruments. The estimated fair value is the average of quotes
obtained from related and unrelated counterparties. The Company limits its
exposure to such losses by: diversification among counterparties, limiting
exposure to any individual counterparty based upon that counterparty's credit
rating, and limiting its exposure by instrument type to only those instruments
that do not require future payments. For purposes of determining risk exposure
4. FINANCIAL INSTRUMENTS - RISK MANAGEMENT (continued)
to any individual counterparty, the Company evaluates the combined exposure to
that counterparty on both a derivative financial instruments' level and on
the total investment portfolio credit risk and reports its exposure to senior
management at least monthly. The maximum potential economic loss (the cost
of replacing an instrument or the net replacement value) due to nonperformance
of the counterparties will increase or decrease during the life of the
instruments as a function of maturity and market conditions.
The Company determines counterparty credit quality by reference to ratings
from independent rating agencies. As of December 31, 1996, the ratings
assigned by Standard & Poor's Corporation by instrument with respect to the
net replacement value (fair value) of the Company's instruments was as follows:
<TABLE>
<CAPTION>
December 31, 1996 Net Replacement Value
_______________________________________________________________________________
(Dollars in thousands) Interest Rate Cash Settled
Caps Put Swaptions Total
_______________________________________________
<S> <C> <C> <C>
Counterparties credit quality:
AAA $2,447 $5,363 $7,810
AA- 1,261 2,828 4,089
A+ -- 2,181 2,181
_______________________________________________
Total $3,708 $10,372 $14,080
===============================================
</TABLE>
5. FAIR VALUES OF FINANCIAL INSTRUMENTS
SFAS No. 107, Disclosures about Fair Value of Financial Instruments, requires
disclosure of estimated fair value of all financial instruments, including
both assets and liabilities recognized and not recognized in a Company's
balance sheet, unless specifically exempted. SFAS No. 119, Disclosure about
Derivative Financial Instruments and Fair Value of Financial Instruments,
requires additional disclosures about derivative financial instruments. Most
of the Company's investments, insurance liabilities and debt, as well as off-
balance-sheet items such as loan guarantees, fall within the standards'
definition of a financial instrument. Although the Company's life insurance
liabilities are specifically exempted from this disclosure requirement,
estimated fair value disclosure of these liabilities is also provided in order
to make the disclosures more meaningful. Accounting, actuarial and regulatory
bodies are continuing to study the methodologies to be used in developing fair
value information, particularly as it relates to liabilities for insurance
contracts. Accordingly, care should be exercised in deriving conclusions about
the Company's business or financial condition based on the information
presented herein.
The Company closely monitors the level of its insurance liabilities, the
level of interest rates credited to its interest-sensitive products and the
assumed interest margin provided for within the pricing structure of its
other products. These amounts are taken into consideration in the Company's
overall management of interest rate risk, which attempts to minimize exposure
to changing interest rates through the matching of investment cash flows with
5. FAIR VALUES OF FINANCIAL INSTRUMENTS (continued)
amounts expected to be due under insurance contracts. As discussed below,
the Company has used discount rates in its determination of fair values for
its liabilities which are consistent with market yields for related assets.
The use of the asset market yield is consistent with management's opinion that
the risks inherent in its asset and liability portfolios are similar. This
assumption, however, might not result in values that are consistent with
those obtained through an actuarial appraisal of the Company's business or
values that might arise in a negotiated transaction.
The following compares carrying values as shown for financial reporting
purposes with estimated fair values:
<TABLE>
<CAPTION>
December 31 1996 1995
_______________________________________________________________________________
(Dollars in thousands) Estimated Estimated
Carrying Fair Carrying Fair
Value Value Value Value
___________________________________________________
<S> <C> <C> <C> <C>
ASSETS
Balance sheet financial
assets:
Fixed maturities
available for sale $7,456,401 $7,456,401 $7,352,211 $7,352,211
Equity securities of
unaffiliated companies 77,148 77,148 50,595 50,595
Equity security of
affiliated company 5,138 5,138 3,599 3,599
Mortgage loans on real
estate 1,689,088 1,708,464 1,169,456 1,245,128
Short-term investments 15,852 15,852 35,282 35,282
Cash and cash equivalents 11,741 11,741 10,390 10,390
Notes and other
receivables 137,949 137,949 137,126 137,126
Separate account assets 450,632 450,632 171,881 171,881
___________________________________________________
9,843,949 9,863,325 8,930,540 9,006,212
Deferred policy acquisition
costs and intangible
assets 724,033 -- 556,596 --
Prepaid pension and other
postretirement benefits 26,579 27,143 24,547 22,737
Derivative financial
instruments 18,041 14,080 -- --
Non-financial assets 59,588 60,021 45,209 45,209
___________________________________________________
Total assets $10,672,190 $9,964,569 $9,556,892 $9,074,158
===================================================
</TABLE>
<TABLE>
<CAPTION>
December 31 1996 1995
_______________________________________________________________________________
(Dollars in thousands) Estimated Estimated
Carrying Fair Carrying Fair
Value Value Value Value
___________________________________________________
<S> <C> <C> <C> <C>
LIABILITIES AND
STOCKHOLDER'S EQUITY
Liabilities:
Balance sheet financial
liabilities:
Future policy benefits (net
of related policy loans):
Annuity products $7,741,524 $6,473,411 $6,846,030 $5,905,241
Universal life and
current interest
products 490,780 307,252 441,726 309,142
Participating insurance
and non-participaiting
traditional life
insurance 688,758 515,706 745,339 558,445
___________________________________________________
8,921,062 7,296,369 8,033,095 6,772,828
Separate account
liabilities 450,632 405,083 171,881 171,881
___________________________________________________
9,371,694 7,701,452 8,204,976 6,944,709
Deferred income taxes on
fair value adjustments -- 336,917 -- 272,137
Non-financial liabilities 251,532 251,532 304,522 304,522
___________________________________________________
Total liabilities 9,623,226 8,289,901 8,509,498 7,521,368
Stockholder's equity 1,048,964 1,674,668 1,047,394 1,552,790
___________________________________________________
Total liabilities and
stockholder's equity $10,672,190 $9,964,569 $9,556,892 $9,074,158
===================================================
</TABLE>
The following methods and assumptions were used by the Company in estimating
fair values:
Fixed maturities: Estimated fair values of publicly traded securities are
as reported by an independent pricing service. Estimated fair values of
conventional mortgage-backed securities not actively traded in a liquid market
are estimated using a third-party pricing system. This pricing system uses a
matrix calculation assuming a spread over U. S. Treasury bonds based upon the
expected average lives of the securities. Fair values of private placement
bonds are estimated using a matrix that assumes a spread (based on interest
rates and a risk assessment of the bonds) over U.S. Treasury bonds.
Estimated fair values of redeemable preferred stocks are as reported by the
NAIC.
5. FAIR VALUES OF FINANCIAL INSTRUMENTS (continued)
Equity securities: Estimated fair values are based upon the latest quoted
market prices, where available. For equity securities not actively traded,
estimated fair values are based upon values of issues of comparable yield and
quality or conversion value.
Mortgage loans on real estate: Fair values are estimated by discounting
expected cash flows, using interest rates currently being offered for similar
loans.
Short-term investments, cash and cash equivalents and notes and other
receivables: Carrying values reported in the Company's historical cost basis
balance sheet approximate estimated fair value for these instruments, due to
their short-term nature.
Deferred policy acquisition costs and intangible assets: For historical cost
purposes, the recovery of policy acquisition costs is based on the
realization, among other things, of future interest spreads and gross premiums
on in-force business. Because these cash flows are considered in the
computation of the future policy benefit cash flows, the balances of deferred
policy acquisition cost does not appear on the estimated fair value balance
sheet. Intangible assets do not appear in the estimated fair value balance
sheet because there are no cash flows related to these assets.
Prepaid pension and other postretirement benefits: Estimated fair value of
the prepaid pension costs asset and other postretirement benefits obligations
represents the fair value of plan assets less accumulated benefit obligations
(pension) and accumulated postretirement benefit obligations. Differences in
estimated fair value and carrying value are the result of deferral of
recognition of: prior service costs, unrecognized gains and losses and the
remaining balance of the unrecognized transition asset for pensions.
Derivative financial instruments: SFAS No. 119 requires disclosures about
derivative financial instruments such as futures, forward, swap or option
contracts, or other financial instruments with similar characteristics.
During 1996, with the implementation of the Company's hedging program, the
Company purchased interest rate caps and cash settled put swaptions. The
estimated fair values are the average of quotes obtained from related and
unrelated counterparties. The Company was not a party to such derivative
financial instruments at any time during 1995. Estimated fair values for
these instruments reflect changes in interest rates and market conditions
since time of purchase.
Separate account assets: Separate account assets represent the estimated
fair values of the underlying securities in the Company's historical cost
and estimated fair value basis balance sheets.
Future policy benefits: Estimated fair values of the Company's liabilities
for future policy benefits for interest sensitive life products, annuity
products and participating insurance and non-participating traditional life
insurance products are based upon discounted cash flow calculations. Cash
flows of future policy benefits are discounted using the market yield rate of
the assets supporting these liabilities. Estimated fair values are
presented net of the estimated fair value of corresponding policy loans due to
the interdependent nature of the cash flows associated with these items.
5. FAIR VALUES OF FINANCIAL INSTRUMENTS (continued)
Separate account liabilities: Separate account liabilities are reported
at full account value in the Company's historical cost balance sheet.
Estimated fair values of separate account liabilities are based upon
assumptions using an estimated long-term average market rate of return to
discount future cash flows. The reduction in fair values for separate
account liabilities reflect the present value of future revenues from product
charges or surrender charges.
Deferred income taxes on fair value adjustments: Deferred income taxes
have been reported at the statutory rate for the differences (except for
those attributed to permanent differences) between the carrying value and
estimated fair value of assets and liabilities set forth herein.
Non-financial assets and liabilities: Values are presented at historical
cost. Non-financial assets consist primarily of real estate, securities
and indebtedness of related parties, property and equipment, current income
taxes recoverable and guaranty fund premium tax offset. Non-financial
liabilities consist primarily of other policy claims and benefits, accrued
dividends, deferred income taxes payable, guaranty fund assessments payable,
outstanding checks, suspense accounts, draft accounts payable and amounts
payable to reinsurers.
SFAS No. 107 and SFAS No. 119 require disclosure of estimated fair value
information about financial instruments, whether or not recognized in the
consolidated balance sheets, for which it is practicable to estimate that
value. In cases where quoted market prices are not available, estimated fair
values are based on estimates using present value or other valuation
techniques. Those techniques are significantly affected by the assumptions
used, including the discount rate and estimates of future cash flows. In
that regard, the derived fair value estimates cannot be substantiated by
comparison to independent markets and, in many cases, could not be realized
in immediate settlement of the instrument. The above presentation should not
be viewed as an appraisal as there are several factors, such as the fair
value associated with customer or agent relationships and other intangible
items, which have not been considered. In addition, interest rates and other
assumptions might be modified if an actual appraisal were to be performed.
ACCORDINGLY, THE AGGREGATE ESTIMATED FAIR VALUE AMOUNTS PRESENTED HEREIN ARE
LIMITED BY EACH OF THESE FACTORS AND DO NOT PURPORT TO REPRESENT THE
UNDERLYING VALUE OF THE COMPANY.
6. INCOME TAXES
The Company and all of its subsidiaries file a consolidated federal income
tax return with its parent company. The parent company and its subsidiaries
each report current income tax expense as allocated under a consolidated tax
allocation agreement. Taxes payable to the parent under this agreement were
$3,417,000 and $3,149,000 at December 31, 1996 and 1995, respectively.
Generally, this allocation results in profitable companies recognizing a tax
provision as if the individual company filed a separate return and loss
companies recognizing benefits to the extent their losses contribute to reduce
consolidated taxes. Deferred income taxes have been established by each
member of the consolidated group based upon the temporary differences, the
reversal of which will result in taxable or deductible amounts in future years
when the related asset or liability is recovered or settled, within each
entity.
6. INCOME TAXES (continued)
Income tax expenses (credits) are included in the consolidated financial
statements as follows:
<TABLE>
<CAPTION>
Year ended December 31 1996 1995 1994
_______________________________________________________________________________
(Dollars in thousands)
<S> <C> <C> <C>
Taxes provided in consolidated statements
of income on:
Income before equity income (loss):
Current $69,538 $46,168 $43,357
Deferred (52) 1,065 9,905
________________________________________
69,486 47,233 53,262
Equity income (loss):
Current (99) (43) (65)
Deferred 52 52 52
________________________________________
(47) 9 (13)
Taxes provided in consolidated
statement changes in stockholder's
equity on unrealized gains and
losses, less valuation allowance
of $9,403 in 1994 - deferred (69,970) 113,503 --
________________________________________
($531) $160,745 $53,249
</TABLE> ========================================
Income tax expense attributed to realized gains and losses on investments
amounted to $5,675,000, $3,333,000 and $6,744,000 for the years ended
December 31, 1996, 1995 and 1994, respectively. The effective tax rate on
income before income taxes and equity income (loss) is different from the
prevailing federal income tax rate as follows:
<TABLE>
<CAPTION>
Year ended December 31 1996 1995 1994
_______________________________________________________________________________
(Dollars in thousands)
<S> <C> <C> <C>
Income before income taxes and
equity income (loss) $198,894 $134,726 $153,224
Income tax at federal statutory rate 69,613 47,154 53,628
Tax effect (decrease) of other items (127) 79 (366)
________________________________________
Income tax expense $69,486 $47,233 $53,262
========================================
</TABLE>
6. INCOME TAXES (continued)
The Internal Revenue Service ("IRS") is currently examining, or has examined,
the parent company's consolidated income tax returns through 1992. The 1993,
1994 and 1995 consolidated income tax returns remain open to examination.
Management believes amounts provided for income taxes are adequate to settle
any adjustments raised by the IRS.
The tax effect of temporary differences giving rise to the Company's deferred
income tax assets and liabilities at December 31, 1996 and 1995, is as
follows:
<TABLE>
<CAPTION>
December 31 1996 1995
_______________________________________________________________________________
(Dollars in thousands)
<S> <C> <C>
Deferred tax assets:
Future policy benefits $231,465 $208,431
Accrued dividends 4,393 4,375
Guaranty fund assessment accruals 16,103 17,030
Other 10,154 9,194
__________________________
262,115 239,030
Deferred tax liabilities:
Net unrealized appreciation of securities at
fair value (60,992) (163,581)
Deferred policy acquisition costs (221,889) (168,753)
Prepaid pension costs (12,441) (11,532)
Other (9,994) (8,335)
__________________________
(305,316) (352,201)
__________________________
Deferred income tax liability ($43,201) ($113,171)
==========================
</TABLE>
Prior to 1984, a portion of the Company's current income was not subject to
current income taxation, but was accumulated, for tax purposes, in a
memorandum account designated as "policyholders' surplus account". The
aggregate accumulation in this account at December 31, 1996 was $14,388,000.
Should the policyholders' surplus account of the Company exceed the
limitation prescribed by federal income tax law, or should distributions be
made by the Company to the parent company in excess of $385,006,000, such
excess would be subject to federal income taxes at rates then effective.
Deferred income taxes of $5,036,000 have not been provided on amounts included
in this memorandum account since the Company contemplates no action and can
foresee no events that would create such a tax.
Deferred income taxes (credits) were also reported on equity income during
these periods. These taxes arise from the recognition of income and losses
differently for purposes of filing federal income tax returns than for
financial reporting purposes.
7. EMPLOYEE STOCK COMPENSATION PLANS
Certain key employees of the Company participate in stock incentive plans
sponsored by Equitable of Iowa Companies, which provide for the award of
stock options or shares of stock of Equitable of Iowa Companies through three
means: qualified incentive stock options (as defined in the Internal Revenue
Code), non-qualified stock options and restricted shares. The non-qualified
stock options are compensatory, and require the accrual of compensation
expense over the period of service from the date the options are granted
until they become fully exercisable if market values exceed the option price
on the measurement date. No expense was recognized in 1996. During the
years ended December 31, 1995 and 1994, compensation (income)/expense of
$(4,000) and $15,000, respectively, was recognized related to these options.
The Company also awards restricted common stock of Equitable of Iowa Companies
to certain key employees. These shares are subject to forfeiture to Equitable
of Iowa Companies should the individuals terminate their relationship with the
Company for reasons other than death, permanent disability or change in
Company control prior to full vesting. Shares granted to key employees
generally vest over three to five years from the date of grant. The Company
amortizes as compensation expense the market value on date of grant of
restricted stock using the straight-line method over the vesting periods.
Compensation expense recognized during the years ended December 31, 1996, 1995
and 1994 aggregated $953,000, $533,000 and $696,000, respectively.
The Company also participates in a discretionary stock award plan under which
employees and agents are awarded shares of Equitable of Iowa Companies' stock
for superior performance. During the years ended December 31, 1996, 1995 and
1994, awards of 620, 1,370 and 495 shares of stock resulted in charges to
income of $22,000, $42,000 and $16,000, respectively.
The Company sponsors a long-term incentive compensation plan which allows
certain agents to earn units equal to shares of Equitable of Iowa Companies'
common stock based on personal production and the maintenance of specific
levels of assets under management. At December 31, 1996 and 1995, the Company
held 112,000 shares of common stock of Equitable of Iowa Companies, with a
market value of $5,138,000 and $3,599,000, respectively (cost - $618,000), to
provide for projected distributions based on current performance levels, under
this plan. This program resulted in expense/(income) of $1,195,000, $736,000
and $(129,000) in the years ended December 31, 1996, 1995 and 1994,
respectively.
8. RETIREMENT PLANS
Defined Benefit Plans
Substantially all full-time employees of the Company are covered by a non-
contributory self-insured defined benefit pension plan. The benefits are
based on years of service and the employee's compensation during the last
five years of employment. Further, the parent sponsors a supplemental defined
benefit plan to provide benefits in excess of amounts allowed pursuant to
Internal Revenue Code Section 401(a)(17) and those allowed due to integration
rules. The Company's funding policy with respect to the plan is consistent
with the funding requirements of federal law and regulations.
8. RETIREMENT PLANS (continued)
Defined Benefit Plans (continued)
The following table sets forth the plan's funded status and amounts recognized
in the Company's consolidated balance sheet:
<TABLE>
<CAPTION>
December 31
1996 1995
________________________
(Dollars in thousands)
<S> <C> <C>
Accumulated benefit obligation, including vested
benefits of $56,470 in 1996 and $53,522 in 1995 $57,401 $54,441
========================
Plan assets at fair value, primarily bonds, common
stocks (including 400,000 shares of the Equitable
of Iowa Companies' common stock), mortgage loans
and short-term investments $101,025 $92,827
Projected benefit obligation for service rendered
to date 64,454 61,332
________________________
Plan assets in excess of projected benefit
obligation 36,571 31,495
Unrecognized net (gain) loss from past experience
different from that assumed and effects of changes
in assumptions (899) 2,793
Prior service cost not yet recognized 477 619
Unrecognized net liability (asset) at the transition
date, net of amortization 82 (1,109)
________________________
Prepaid pension cost $36,231 $33,798
========================
</TABLE>
Net periodic pension benefit included the following components:
<TABLE>
<CAPTION>
Year ended December 31
1996 1995 1994
_____________________________________
(Dollars in thousands)
<S> <C> <C> <C>
Actual return on plan assets $11,801 $18,201 ($7,681)
Service cost-benefits earned during
the period (1,402) (1,052) (1,221)
Interest cost on projected benefit
obligation (4,233) (4,096) (3,867)
Net amortization and deferral (3,619) (9,979) 16,761
_____________________________________
Net periodic pension benefit $2,547 $3,074 $3,992
=====================================
</TABLE>
8. RETIREMENT PLANS (continued)
Defined Benefit Plans (continued)
The discount rate and rate of increase in future compensation levels used in
determining the actuarial present value of the projected benefit obligation
were 7.0% and 5.0%, respectively, at December 31, 1996 and 1995. The average
expected long term rate of return on plan assets was 8.0% in 1996, 1995 and
1994.
Postretirement Benefit Plans
The Company sponsors plans that provide postretirement medical and group term
life insurance benefits to full-time employees and agents who have worked for
the Company for five years or had been hired, had attained age 50 and had a
combined age and years of service of 60 or more before January 1, 1992. The
medical plans are contributory, with retiree contributions adjusted annually,
and contain other cost-sharing features such as deductibles and coinsurance.
The accounting for these plans anticipates that the Company's contributions
will increase annually by the lesser of the health care inflation rate or 3%,
with increases in excess of these amounts borne by the employee or agent.
All payments of the liability for group-term life insurance are funded by the
Company on a pay-as-you-go (cash) basis.
The Company has chosen not to fund any amounts in excess of current benefits.
The following table sets forth the amounts recognized in the Company's
consolidated balance sheet:
<TABLE>
<CAPTION>
December 31, 1996
_____________________________
Life
Medical Insurance
Plans Plans Total
_____________________________
(Dollars in thousands)
<S> <C> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $3,978 $2,232 $6,210
Fully eligible active plan participants 1,037 155 1,192
Other active plan participants 1,669 54 1,723
_____________________________
Accumulated postretirement benefit obligation
in excess of plan assets 6,684 2,441 9,125
Prior service cost not yet recognized in net
postretirement benefit cost 327 75 402
Unrecognized net loss (226) (335) (561)
_____________________________
Accrued postretirement benefit cost $6,785 $2,181 $8,966
=============================
</TABLE>
8. RETIREMENT PLANS (continued)
Postretirement Benefit Plans (continued)
<TABLE>
<CAPTION>
December 31, 1995
_____________________________
Life
Medical Insurance
Plans Plans Total
_____________________________
(Dollars in thousands)
<S> <C> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $4,033 $1,981 $6,014
Fully eligible active plan participants 969 140 1,109
Other active plan participants 1,236 73 1,309
_____________________________
Accumulated postretirement benefit obligation
in excess of plan assets 6,238 2,194 8,432
Prior service cost not yet recognized in net
postretirement benefit cost 360 83 443
Unrecognized net loss (358) (116) (474)
_____________________________
Accrued postretirement benefit cost $6,240 $2,161 $8,401
=============================
</TABLE>
Net periodic postretirement benefit costs include the following components:
<TABLE>
<CAPTION>
December 31, 1996
_____________________________
Life
Medical Insurance
Plans Plans Total
_____________________________
(Dollars in thousands)
<S> <C> <C> <C>
Service cost $511 $12 $523
Interest cost 415 164 579
Net amortization of prior service cost (33) (8) (41)
_____________________________
Net periodic postretirement benefit cost $893 $168 $1,061
=============================
</TABLE>
8. RETIREMENT PLANS (continued)
Postretirement Benefit Plans (continued)
<TABLE>
<CAPTION>
December 31, 1995
_____________________________
Life
Medical Insurance
Plans Plans Total
_____________________________
(Dollars in thousands)
<S> <C> <C> <C>
Service cost $250 $10 $260
Interest cost 409 153 562
Net amortization of prior service cost (33) (7) (40)
_____________________________
Net periodic postretirement benefit cost $626 $156 $782
=============================
</TABLE>
<TABLE>
<CAPTION>
December 31, 1994
_____________________________
Life
Medical Insurance
Plans Plans Total
_____________________________
(Dollars in thousands)
<S> <C> <C> <C>
Service cost $279 $13 $292
Interest cost 405 159 564
Net amortization of prior service cost and
amortization of unrecognized loss (26) (6) (32)
_____________________________
Net periodic postretirement benefit cost $658 $166 $824
=============================
</TABLE>
The weighted-average annual assumed rate of increase in the per capita cost
of health care benefits (i.e., health care cost trend rate) used in
determining the actuarial present value of the accumulated postretirement
benefit obligation was 11.5% at December 31, 1996 and 12.5% at December 31,
1995 for employees under 65 and 8.0% at December 31, 1996 and 8.5% at
December 31, 1995 for employees over 65, with the rates for both groups to be
graded down to 5.5% for 2005 and thereafter. The health care cost trend rate
assumption has a significant effect on the amounts reported. For example,
increasing the assumed health care trend rates by one percent would increase
the accumulated postretirement benefit obligation as of December 31, 1996 by
$854,000 and net periodic postretirement benefit costs for the year ended
December 31, 1996 by $165,000. The discount rate used in determining the
accumulated postretirement benefit obligation was 7.0% at December 31, 1996
and 1995.
8. RETIREMENT PLANS (continued)
Other Benefit Plans
The Company also sponsors an unfunded deferred compensation plan providing
benefits to certain former employees. The Company did not recognize any
benefits during 1996. During the years ended December 31, 1995 and 1994, the
Company recognized benefits of $20,000 and $38,000, respectively, in connection
with this plan.
The Company sponsors pension plans for its employees which are qualified
under Internal Revenue Code Section 401(k). Employees may contribute a
portion of their annual salary, subject to limitation, to the plans. The
Company contributes an additional amount, subject to limitation, based on the
voluntary contribution of the employee. Company contributions charged to
expense with respect to these plans during the years ended December 31, 1996,
1995 and 1994 were $372,000, $292,000 and $289,000, respectively.
The Company has non-contributory defined contribution pension plans, tax
qualified and non-qualified, for its agents. Combined contributions charged
to expense under the career, general and corporate agent pension plans during
the years ended December 31, 1996, 1995 and 1994 amounted to $710,000, $729,000
and $507,000, respectively.
Certain of the assets related to the plans discused above are on deposit with
the Company and amounts relating to these plans are included in these
consolidated financial statements.
9. COMMITMENTS AND CONTINGENCIES
Reinsurance
In the normal course of business, the Company seeks to limit its exposure to
loss on any single insured and to recover a portion of benefits paid by
ceding reinsurance to other insurance enterprises or reinsurers. Reinsurance
coverages for life insurance vary according to the age and risk classification
of the insured with retention limits ranging up to $500,000 of coverage per
individual life. The Company does not use financial or surplus relief
reinsurance. At December31, 1996, life insurance in force ceded on a
consolidated basis amounted to $1,482,900,000, or approximately 12.9% of total
life insurance in force.
Reinsurance contracts do not relieve the Company of its obligations to its
policyholders. To the extent that reinsuring companies are later unable to
meet obligations under reinsurance agreements, the Company would be liable
for these obligations, and payment of these obligations could result in losses
to the Company. To limit the possibility of such losses, the Company evaluates
the financial condition of its reinsurers, monitors concentrations of credit
risk arising from factors such as similar geographic regions, and limits its
exposure to any one reinsurer. At December 31, 1996, the Company had
reinsurance treaties with 14 reinsurers, all of which are deemed to be long-
duration, retroactive contracts, and has established a receivable totaling
$14,885,000 for reserve credits ($19,298,000 in 1995), reinsurance claims and
other receivables from these reinsurers. No allowance for uncollectible
amounts has been established since none of the receivables are deemed to be
uncollectible, and because such receivables, either individually or in the
aggregate, are not material to the Company's operations. The Company's
liability for future policy benefits and notes and other receivables have been
increased by $14,265,000 at December 31, 1996 ($18,103,000 in 1995) for reserve
9. COMMITMENTS AND CONTINGENCIES (continued)
Reinsurance (continued)
credits on reinsured policies. This "gross-up" of assets and liabilities for
reserve credits on reinsurance had no impact on the Company's net income.
Insurance premiums and product charges have been reduced by $6,850,000,
$6,271,000 and $5,916,000 and insurance benefits have been reduced by
$5,916,000, $8,281,000 and $5,310,000 in 1996, 1995 and 1994, respectively, as
a result of the cession agreements. The amount of reinsurance assumed is not
significant.
Guaranty Fund Assessments
Assessments are levied on the Company by life and health guaranty associations
in most states in which the Company is licensed to cover losses of
policyholders of insolvent or rehabilitated insurers. In some states, these
assessments can be partially recovered through a reduction in future premium
taxes. The Company cannot predict whether and to what extent legislative
initiatives may affect the right to offset. Based upon information currently
available from the National Organization of Life and Health Guaranty
Association (NOLHGA), the Company believes that it is probable that these
insolvencies will result in future assessments which could be material to the
Company's financial statements if the Company's reserve is not sufficient. The
Company regularly reviews its reserve for these insolvencies and updates its
reserve based upon the Company's interpretation of the NOLGHA annual report
recently received. The associated cost for a particular insurance company can
vary significantly based upon its premium volume by line of business and state
premium levels as well as its potential for premium tax offset. Accordingly,
the Company accrued and charged to expense an additional $13,000, $36,492,000
and $1,763,000 during 1996, 1995 and 1994, respectively. At December 31, 1996,
the Company has an undiscounted reserve of $45,947,000 to cover estimated
future assessments (net of related anticipated premium tax credits) and has
established an asset totaling $16,809,000 for assessments paid which may be
recoverable through future premium tax offsets. The Company believes this
reserve is sufficient to cover expected future guaranty fund assessments, based
upon previous premium levels, and known insolvencies at this time.
Litigation
As previously reported, the Company and certain of its subsidiaries are
defendants in class action lawsuits filed in the United States District Court
for the Middle District of Florida, Tampa Division in February 1996 and in
the Court of Common Pleas of Allegheny County, Pennsylvania in June 1996.
The suits claim unspecified damages as a result of alleged improper life
insurance sales practices. The Company believes the allegations are without
merit. The suits are in the discovery and procedural stages and have not yet
been certified as class actions. The Company intends to defend the suits
vigorously. The amount of any liability which may arise as a result of these
suits, if any, cannot be reasonably estimated and no provision for loss has
been made in the Company's financial statements. The Company had also been a
party to a similar previously reported class action lawsuit filed in Iowa which
has now been dismissed.
As previously reported, on December 15, 1995, USG received a Notice of
Intention to Arbitrate a dispute with one of its insurance brokerage agencies
before the American Arbitration Association regarding the payment of certain
commissions. The matter was submitted to arbitration and the determination
of the arbitration panel was that the Company must pay, over time, commissions
9. COMMITMENTS AND CONTINGENCIES (continued)
Litigation (continued)
in amounts that are not material.
In the ordinary course of business, the Company and its subsidiaries are also
engaged in certain other litigation, none of which management believes is
material.
Vulnerability from Concentrations
The Company has various concentrations in its investment portfolio (see Note
3 for further information). The Company's asset growth, net investment income
and cash flow are primarily generated from the sale of individual fixed
annuity policies, variable products and associated future policy benefits and
separate account liabilities. Substantial changes in tax laws that would make
these products less attractive to consumers, extreme fluctuations in interest
rates or stock market returns which may result in higher lapse experience than
assumed, could cause a severe impact to the Company's financial condition. The
Company has purchased interest rate caps and swaptions for its hedging program
(see Note 4) to mitigate the financial statement impact of significant
increases in interest rates.
Leases and Other Commitments
The Company leases its home office space and certain other equipment under
operating leases which expire through 2017. During the years ended December
31, 1996, 1995 and 1994, rent expense totaled $2,570,000, $2,001,000 and
$1,995,000, respectively. At December 31, 1996, minimum rental payments due
under all non-cancelable operating leases with initial terms of one year or
more are: 1997 - $3,425,000; 1998 - $4,210,000; 1999 - $2,832,000; 2000 -
$2,562,000 and 2001 - $2,562,000.
At December 31, 1996, outstanding commitments to fund mortgage loans on real
estate and equity investments totaled $49,050,000 and $10,915,000,
respectively.
10. RELATED PARTY TRANSACTIONS
The Company purchases investment management services from an affiliate.
Payments for these services aggregated $9,257,000, $8,143,000 and $6,734,000
during the years ended December 31, 1996, 1995 and 1994, respectively.
Additionally, the Company maintains a line of credit agreement with Equitable
of Iowa Companies to facilitate the handling of unusual and/or unanticipated
short-term cash requirements. Under the current agreement which expires on
December 31, 1997, the Company can borrow up to $130 million. Interest on
any outstanding borrowings is charged at a rate of Equitable of Iowa
Companies' monthly average aggregate cost of short-term funds plus 1.00%. At
December 31, 1996, no amounts were outstanding under the line of credit.
Equitable Life Insurance Company of Iowa
SCHEDULE I
SUMMARY OF INVESTMENTS
OTHER THAN INVESTMENTS IN RELATED PARTIES
(Dollars in thousands)
<TABLE>
<CAPTION>
Balance
Sheet
December 31, 1996 Cost 1 Value Amount
_______________________________________________________________________________
<S> <C> <C> <C>
TYPE OF INVESTMENT
Fixed maturities, available for sale:
Bonds:
United States Government and governmental
agencies and authorities $338,716 $348,340 $348,340
States, municipalities and
political subdivisions 15,131 16,265 16,265
Foreign governments 10,572 13,278 13,278
Public utilities 1,205,377 1,230,696 1,230,696
Investment grade corporate 2,654,742 2,795,420 2,795,420
Below investment grade corporate 707,260 705,249 705,249
Mortgage-backed securities 2,350,168 2,346,766 2,346,766
Redeemable preferred stocks 616 387 387
___________ ___________ ___________
Total fixed maturities, available
for sale 7,282,582 7,456,401 7,456,401
Equity securities:
Common stocks:
Affiliates 618 5,138 5,138
Industrial, miscellaneous and
all other 48,821 77,148 77,148
___________ ___________ ___________
Total equity securities 49,439 82,286 82,286
Mortgage loans on real estate 1,689,088 1,689,088
Real estate:
Investment properties 3,291 3,291
Acquired in satisfaction of debt 5,322 5,322
___________ ___________
Total real estate 8,613 8,613
Policy loans 185,853 185,853
Short-term investments 15,852 15,852
___________ ___________
Total investments $9,231,427 $9,438,093
=========== ===========
<FN>
Note 1: Cost is defined as original cost for stocks and other invested assets,
amortized cost for bonds and unpaid principal for policy loans and
mortgage loans on real estate, adjusted for amortization of premiums,
accrual of discounts and cost less allowances for depreciation for
real estate.
Note 2: Original cost and amortized cost of investments have been adjusted
to reflect other than temporary declines in value by charges to
income on real estate of $392,000.
</TABLE>
Equitable Life Insurance Company of Iowa
SCHEDULE III
SUPPLEMENTARY INSURANCE INFORMATION
(Dollars in thousands)
<TABLE>
<CAPTION>
Column Column Column Column Column Column
A B C D E F
_______________________________________________________________________________
Future
Policy Other
De- Benefits, Policy
ferred Losses, Claims Insur-
Policy Claims Un- and ance
Acqui- and earned Bene- Premiums
sition Loss Revenue fits and
Segment Costs Expenses Reserve Payable Charges
_______________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1996:
Life insurance $721,690 $9,102,184 $18,398 $7,481 $102,204
Year ended December 31, 1995:
Life insurance 554,179 8,218,604 14,326 8,980 94,891
Year ended December 31, 1994:
Life insurance 607,626 7,014,207 14,317 7,785 90,032
</TABLE>
<TABLE>
<CAPTION>
Column Column Column Column Column Column
A G H I J K
_______________________________________________________________________________
Amorti-
Benefits zation
Claims, of
Losses Deferred
Net and Policy Other
Invest- Settle- Acqui- Opera-
ment ment sitions ting Premiums
Segment Income Expenses Costs Expenses Written
_______________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1996:
Life insurance $705,074 $513,876 $79,306 $30,264 --
Year ended December 31, 1995:
Life insurance 638,056 487,031 72,537 54,504 --
Year ended December 31, 1994:
Life insurance 521,646 414,450 50,921 17,128 --
</TABLE>
Equitable Life Insurance Company of Iowa
SCHEDULE IV
REINSURANCE
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F
________________________________________________________________________________
Percentage
Ceded to Assumed of Amount
Gross Other from Other Net Assumed
Amount Companies Companies Amount to Net
________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1996:
Life insurance in
force $11,507,009 $1,482,900 $ -- $10,024,109 --
============ =========== ========= ============ ==========
Insurance premiums
and charges $109,015 $6,850 $39 $102,204 --
============ =========== ========= ============ ==========
Year ended December 31, 1995:
Life insurance in
force $10,927,445 $1,459,523 $ -- $9,467,922 --
============ =========== ========= ============ ==========
Insurance premiums
and charges $101,095 $6,271 $67 $94,891 --
============ =========== ========= ============ ==========
Year ended December 31, 1994:
Life insurance in
force $10,146,940 $1,421,608 $ -- $8,725,332 --
============ =========== ========= ============ ==========
Insurance premiums
and charges $95,821 $5,916 $127 $90,032 --
============ =========== ========= ============ ==========
</TABLE>
Financial Statements
Equitable Life Insurance Company of Iowa
Separate Account A
Equi-Select Product
Periods ended December 31, 1996, and 1995
with Report of Independent Auditors
Equitable Life Insurance Company of Iowa
Separate Account A
Equi-Select Product
Financial Statements
Periods ended December 31, 1996 and 1995
Contents
Report of Independent Auditors
Audited Financial Statements
Statements of Net Assets
Statements of Operations
Statements of Changes in Net Assets
Notes to Financial Statements
Report of Independent Auditors
The Board of Directors
Equitable Life Insurance Company of Iowa
We have audited the accompanying statements of net assets of certain accounts
of Equitable Life Insurance Company of Iowa Separate Account A (comprising,
respectively, the Money Market, Mortgage-Backed Securities, International
Fixed Income, OTC, Research, Total Return, Advantage, Value + Growth, Growth
& Income, and Warburg Pincus International Equity Accounts) as of December 31,
1996, and the related statements of operations and changes in net assets for
each of the periods indicated therein. These financial statements are the
responsibility of the Account's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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.
Our procedures included confirmation of securities owned as of December 31,
1996, by correspondence with the transfer agent. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of certain accounts of the
Equitable Life Insurance Company of Iowa Separate Account A at December 31,
1996, and the results of their operations and changes in their net assets for
each of the periods indicated therein, in conformity with generally accepted
accounting principles.
/S/ Ernst & Young LLP
Des Moines, Iowa
February 11, 1997
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF NET ASSETS
EQUI-SELECT PRODUCT
December 31, 1996
<TABLE>
<CAPTION>
Money
Market
Account
____________
<S> <C>
ASSETS
Investments at net asset value:
Equi-Select Series Trust Money Market Portfolio,
19,056,850 shares (cost - $19,056,850) $19,056,850
Equi-Select Series Trust Mortgage-Backed Securities Portfolio,
967,973 shares (cost - $10,569,586)
Equi-Select Series Trust International Fixed Income Portfolio,
728,503 shares (cost - $8,130,969)
Equi-Select Series Trust OTC Portfolio,
2,812,183 shares (cost - $37,637,315)
Equi-Select Series Trust Research Portfolio,
4,870,814 shares (cost - $68,215,717)
Equi-Select Series Trust Total Return Portfolio,
4,356,245 shares (cost - $53,111,757)
Equi-Select Series Trust Advantage Portfolio,
1,390,566 shares (cost - $14,686,564)
Equi-Select Series Trust Value + Growth Portfolio,
1,225,402 shares (cost - $13,017,842)
Equi-Select Series Trust Growth & Income Portfolio,
2,205,517 shares (cost - $25,290,065)
Warburg Pincus Trust International Equity Portfolio,
1,813,960 shares (cost - $20,715,484)
____________
TOTAL INVESTMENTS 19,056,850
Accrued investment income 81,522
____________
TOTAL NET ASSETS $19,138,372
============
NET ASSETS REPRESENTED BY:
Units 1,772,486
Unit Value 10.80
____________
Net Assets $19,138,372
============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF NET ASSETS
EQUI-SELECT PRODUCT
December 31, 1996
<TABLE>
<CAPTION>
Mortgage-
Backed
Securities
Account
____________
<S> <C>
ASSETS
Investments at net asset value:
Equi-Select Series Trust Money Market Portfolio,
19,056,850 shares (cost - $19,056,850)
Equi-Select Series Trust Mortgage-Backed Securities Portfolio,
967,973 shares (cost - $10,569,586) $10,254,354
Equi-Select Series Trust International Fixed Income Portfolio,
728,503 shares (cost - $8,130,969)
Equi-Select Series Trust OTC Portfolio,
2,812,183 shares (cost - $37,637,315)
Equi-Select Series Trust Research Portfolio,
4,870,814 shares (cost - $68,215,717)
Equi-Select Series Trust Total Return Portfolio,
4,356,245 shares (cost - $53,111,757)
Equi-Select Series Trust Advantage Portfolio,
1,390,566 shares (cost - $14,686,564)
Equi-Select Series Trust Value + Growth Portfolio,
1,225,402 shares (cost - $13,017,842)
Equi-Select Series Trust Growth & Income Portfolio,
2,205,517 shares (cost - $25,290,065)
Warburg Pincus Trust International Equity Portfolio,
1,813,960 shares (cost - $20,715,484)
____________
TOTAL INVESTMENTS 10,254,354
Accrued investment income 578,893
____________
TOTAL NET ASSETS $10,833,247
============
NET ASSETS REPRESENTED BY:
Units 930,828
Unit Value 11.64
____________
Net Assets $10,833,247
============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF NET ASSETS
EQUI-SELECT PRODUCT
December 31, 1996
<TABLE>
<CAPTION>
International
Fixed
Income
Account
______________
<S> <C>
ASSETS
Investments at net asset value:
Equi-Select Series Trust Money Market Portfolio,
19,056,850 shares (cost - $19,056,850)
Equi-Select Series Trust Mortgage-Backed Securities Portfolio,
967,973 shares (cost - $10,569,586)
Equi-Select Series Trust International Fixed Income Portfolio,
728,503 shares (cost - $8,130,969) $7,925,804
Equi-Select Series Trust OTC Portfolio,
2,812,183 shares (cost - $37,637,315)
Equi-Select Series Trust Research Portfolio,
4,870,814 shares (cost - $68,215,717)
Equi-Select Series Trust Total Return Portfolio,
4,356,245 shares (cost - $53,111,757)
Equi-Select Series Trust Advantage Portfolio,
1,390,566 shares (cost - $14,686,564)
Equi-Select Series Trust Value + Growth Portfolio,
1,225,402 shares (cost - $13,017,842)
Equi-Select Series Trust Growth & Income Portfolio,
2,205,517 shares (cost - $25,290,065)
Warburg Pincus Trust International Equity Portfolio,
1,813,960 shares (cost - $20,715,484)
______________
TOTAL INVESTMENTS 7,925,804
Accrued investment income 513,844
______________
TOTAL NET ASSETS $8,439,648
==============
NET ASSETS REPRESENTED BY:
Units 705,870
Unit Value 11.96
______________
Net Assets $8,439,648
==============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF NET ASSETS
EQUI-SELECT PRODUCT
December 31, 1996
<TABLE>
<CAPTION>
OTC
Account
____________
<S> <C>
ASSETS
Investments at net asset value:
Equi-Select Series Trust Money Market Portfolio,
19,056,850 shares (cost - $19,056,850)
Equi-Select Series Trust Mortgage-Backed Securities Portfolio,
967,973 shares (cost - $10,569,586)
Equi-Select Series Trust International Fixed Income Portfolio,
728,503 shares (cost - $8,130,969)
Equi-Select Series Trust OTC Portfolio,
2,812,183 shares (cost - $37,637,315) $38,868,650
Equi-Select Series Trust Research Portfolio,
4,870,814 shares (cost - $68,215,717)
Equi-Select Series Trust Total Return Portfolio,
4,356,245 shares (cost - $53,111,757)
Equi-Select Series Trust Advantage Portfolio,
1,390,566 shares (cost - $14,686,564)
Equi-Select Series Trust Value + Growth Portfolio,
1,225,402 shares (cost - $13,017,842)
Equi-Select Series Trust Growth & Income Portfolio,
2,205,517 shares (cost - $25,290,065)
Warburg Pincus Trust International Equity Portfolio,
1,813,960 shares (cost - $20,715,484)
____________
TOTAL INVESTMENTS 38,868,650
Accrued investment income 1,984,172
____________
TOTAL NET ASSETS $40,852,822
============
NET ASSETS REPRESENTED BY:
Units 2,602,724
Unit Value 15.70
____________
Net Assets $40,852,822
============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF NET ASSETS
EQUI-SELECT PRODUCT
December 31, 1996
<TABLE>
<CAPTION>
Research
Account
____________
<S> <C>
ASSETS
Investments at net asset value:
Equi-Select Series Trust Money Market Portfolio,
19,056,850 shares (cost - $19,056,850)
Equi-Select Series Trust Mortgage-Backed Securities Portfolio,
967,973 shares (cost - $10,569,586)
Equi-Select Series Trust International Fixed Income Portfolio,
728,503 shares (cost - $8,130,969)
Equi-Select Series Trust OTC Portfolio,
2,812,183 shares (cost - $37,637,315)
Equi-Select Series Trust Research Portfolio,
4,870,814 shares (cost - $68,215,717) $75,163,868
Equi-Select Series Trust Total Return Portfolio,
4,356,245 shares (cost - $53,111,757)
Equi-Select Series Trust Advantage Portfolio,
1,390,566 shares (cost - $14,686,564)
Equi-Select Series Trust Value + Growth Portfolio,
1,225,402 shares (cost - $13,017,842)
Equi-Select Series Trust Growth & Income Portfolio,
2,205,517 shares (cost - $25,290,065)
Warburg Pincus Trust International Equity Portfolio,
1,813,960 shares (cost - $20,715,484)
____________
TOTAL INVESTMENTS 75,163,868
Accrued investment income 2,011,415
____________
TOTAL NET ASSETS $77,175,283
============
NET ASSETS REPRESENTED BY:
Units 4,845,240
Unit Value 15.93
____________
Net Assets $77,175,283
============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF NET ASSETS
EQUI-SELECT PRODUCT
December 31, 1996
<TABLE>
<CAPTION>
Total
Return
Account
____________
<S> <C>
ASSETS
Investments at net asset value:
Equi-Select Series Trust Money Market Portfolio,
19,056,850 shares (cost - $19,056,850)
Equi-Select Series Trust Mortgage-Backed Securities Portfolio,
967,973 shares (cost - $10,569,586)
Equi-Select Series Trust International Fixed Income Portfolio,
728,503 shares (cost - $8,130,969)
Equi-Select Series Trust OTC Portfolio,
2,812,183 shares (cost - $37,637,315)
Equi-Select Series Trust Research Portfolio,
4,870,814 shares (cost - $68,215,717)
Equi-Select Series Trust Total Return Portfolio,
4,356,245 shares (cost - $53,111,757) $57,291,505
Equi-Select Series Trust Advantage Portfolio,
1,390,566 shares (cost - $14,686,564)
Equi-Select Series Trust Value + Growth Portfolio,
1,225,402 shares (cost - $13,017,842)
Equi-Select Series Trust Growth & Income Portfolio,
2,205,517 shares (cost - $25,290,065)
Warburg Pincus Trust International Equity Portfolio,
1,813,960 shares (cost - $20,715,484)
____________
TOTAL INVESTMENTS 57,291,505
Accrued investment income 1,543,660
____________
TOTAL NET ASSETS $58,835,165
============
NET ASSETS REPRESENTED BY:
Units 4,354,338
Unit Value 13.51
____________
Net Assets $58,835,165
============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF NET ASSETS
EQUI-SELECT PRODUCT
December 31, 1996
<TABLE>
<CAPTION>
Advantage
Account
____________
<S> <C>
ASSETS
Investments at net asset value:
Equi-Select Series Trust Money Market Portfolio,
19,056,850 shares (cost - $19,056,850)
Equi-Select Series Trust Mortgage-Backed Securities Portfolio,
967,973 shares (cost - $10,569,586)
Equi-Select Series Trust International Fixed Income Portfolio,
728,503 shares (cost - $8,130,969)
Equi-Select Series Trust OTC Portfolio,
2,812,183 shares (cost - $37,637,315)
Equi-Select Series Trust Research Portfolio,
4,870,814 shares (cost - $68,215,717)
Equi-Select Series Trust Total Return Portfolio,
4,356,245 shares (cost - $53,111,757)
Equi-Select Series Trust Advantage Portfolio,
1,390,566 shares (cost - $14,686,564) $14,474,318
Equi-Select Series Trust Value + Growth Portfolio,
1,225,402 shares (cost - $13,017,842)
Equi-Select Series Trust Growth & Income Portfolio,
2,205,517 shares (cost - $25,290,065)
Warburg Pincus Trust International Equity Portfolio,
1,813,960 shares (cost - $20,715,484)
____________
TOTAL INVESTMENTS 14,474,318
Accrued investment income 544,631
____________
TOTAL NET ASSETS $15,018,949
============
NET ASSETS REPRESENTED BY:
Units 1,322,512
Unit Value 11.36
____________
Net Assets $15,018,949
============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF NET ASSETS
EQUI-SELECT PRODUCT
December 31, 1996
<TABLE>
<CAPTION>
Value +
Growth
Account
____________
<S> <C>
ASSETS
Investments at net asset value:
Equi-Select Series Trust Money Market Portfolio,
19,056,850 shares (cost - $19,056,850)
Equi-Select Series Trust Mortgage-Backed Securities Portfolio,
967,973 shares (cost - $10,569,586)
Equi-Select Series Trust International Fixed Income Portfolio,
728,503 shares (cost - $8,130,969)
Equi-Select Series Trust OTC Portfolio,
2,812,183 shares (cost - $37,637,315)
Equi-Select Series Trust Research Portfolio,
4,870,814 shares (cost - $68,215,717)
Equi-Select Series Trust Total Return Portfolio,
4,356,245 shares (cost - $53,111,757)
Equi-Select Series Trust Advantage Portfolio,
1,390,566 shares (cost - $14,686,564)
Equi-Select Series Trust Value + Growth Portfolio,
1,225,402 shares (cost - $13,017,842) $13,993,422
Equi-Select Series Trust Growth & Income Portfolio,
2,205,517 shares (cost - $25,290,065)
Warburg Pincus Trust International Equity Portfolio,
1,813,960 shares (cost - $20,715,484)
____________
TOTAL INVESTMENTS 13,993,422
Accrued investment income 142,543
____________
TOTAL NET ASSETS $14,135,965
============
NET ASSETS REPRESENTED BY:
Units 1,238,349
Unit Value 11.42
____________
Net Assets $14,135,965
============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF NET ASSETS
EQUI-SELECT PRODUCT
December 31, 1996
<TABLE>
<CAPTION>
Growth &
Income
Account
______________
<S> <C>
ASSETS
Investments at net asset value:
Equi-Select Series Trust Money Market Portfolio,
19,056,850 shares (cost - $19,056,850)
Equi-Select Series Trust Mortgage-Backed Securities Portfolio,
967,973 shares (cost - $10,569,586)
Equi-Select Series Trust International Fixed Income Portfolio,
728,503 shares (cost - $8,130,969)
Equi-Select Series Trust OTC Portfolio,
2,812,183 shares (cost - $37,637,315)
Equi-Select Series Trust Research Portfolio,
4,870,814 shares (cost - $68,215,717)
Equi-Select Series Trust Total Return Portfolio,
4,356,245 shares (cost - $53,111,757)
Equi-Select Series Trust Advantage Portfolio,
1,390,566 shares (cost - $14,686,564)
Equi-Select Series Trust Value + Growth Portfolio,
1,225,402 shares (cost - $13,017,842)
Equi-Select Series Trust Growth & Income Portfolio,
2,205,517 shares (cost - $25,290,065) $27,761,968
Warburg Pincus Trust International Equity Portfolio,
1,813,960 shares (cost - $20,715,484)
______________
TOTAL INVESTMENTS 27,761,968
Accrued investment income 67,604
______________
TOTAL NET ASSETS $27,829,572
==============
NET ASSETS REPRESENTED BY:
Units 2,228,888
Unit Value 12.49
______________
Net Assets $27,829,572
==============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF NET ASSETS
EQUI-SELECT PRODUCT
December 31, 1996
<TABLE>
<CAPTION>
International
Equity
Account
_____________
<S> <C>
ASSETS
Investments at net asset value:
Equi-Select Series Trust Money Market Portfolio,
19,056,850 shares (cost - $19,056,850)
Equi-Select Series Trust Mortgage-Backed Securities Portfolio,
967,973 shares (cost - $10,569,586)
Equi-Select Series Trust International Fixed Income Portfolio,
728,503 shares (cost - $8,130,969)
Equi-Select Series Trust OTC Portfolio,
2,812,183 shares (cost - $37,637,315)
Equi-Select Series Trust Research Portfolio,
4,870,814 shares (cost - $68,215,717)
Equi-Select Series Trust Total Return Portfolio,
4,356,245 shares (cost - $53,111,757)
Equi-Select Series Trust Advantage Portfolio,
1,390,566 shares (cost - $14,686,564)
Equi-Select Series Trust Value + Growth Portfolio,
1,225,402 shares (cost - $13,017,842)
Equi-Select Series Trust Growth & Income Portfolio,
2,205,517 shares (cost - $25,290,065)
Warburg Pincus Trust International Equity Portfolio,
1,813,960 shares (cost - $20,715,484) $20,824,258
_____________
TOTAL INVESTMENTS 20,824,258
Accrued investment income --
_____________
TOTAL NET ASSETS $20,824,258
=============
NET ASSETS REPRESENTED BY:
Units 2,026,704
Unit Value 10.28
_____________
Net Assets $20,824,258
=============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF OPERATIONS
EQUI-SELECT PRODUCT
For the year ended December 31, 1996, Except as Noted
<TABLE>
<CAPTION>
Mortgage-
Money Backed International
Market Securities Fixed Income
Account Account Account
______________ ______________ ______________
<S> <C> <C> <C>
INVESTMENT INCOME (LOSS)
Income:
Dividends $614,911 $549,723 $411,937
Capital gains distributions -- 29,342 127,829
Expenses:
Annual contract charges (2,200) (3,370) (3,042)
Transfer charges (130) -- (44)
Administrative charges (19,533) (12,090) (8,720)
Mortality and expense
risk charges (162,805) (100,677) (72,630)
______________ ______________ ______________
Net investment income (loss) 430,243 462,928 455,330
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net realized gain (loss) on
investments -- 3,182 48,607
Net unrealized appreciation
(depreciation) of
investments -- (236,988) (239,063)
______________ ______________ ______________
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $430,243 $229,122 $264,874
============== ============== ==============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF OPERATIONS
EQUI-SELECT PRODUCT
For the year ended December 31, 1996, Except as Noted
<TABLE>
<CAPTION>
Total
OTC Research Return
Account Account Account
______________ ______________ ______________
<S> <C> <C> <C>
INVESTMENT INCOME (LOSS)
Income:
Dividends -- $12,455 $1,110,366
Capital gains distributions $2,075,049 2,116,798 500,681
Expenses:
Annual contract charges (13,074) (19,646) (19,076)
Transfer charges (50) (38) (100)
Administrative charges (34,124) (61,564) (51,077)
Mortality and expense
risk charges (284,479) (513,268) (425,691)
______________ ______________ ______________
Net investment income (loss) 1,743,322 1,534,737 1,115,103
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net realized gain (loss) on
investments 61,629 662,781 120,266
Net unrealized appreciation
(depreciation) of
investments 1,203,795 5,420,258 3,147,975
______________ ______________ ______________
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $3,008,746 $7,617,776 $4,383,344
============== ============== ==============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF OPERATIONS
EQUI-SELECT PRODUCT
For the year ended December 31, 1996, Except as Noted
<TABLE>
<CAPTION>
Value +
Advantage Growth
Account Account*
______________ ______________
<S> <C> <C>
INVESTMENT INCOME (LOSS)
Income:
Dividends $527,678 --
Capital gains distributions 16,953 $142,543
Expenses:
Annual contract charges (2,311) (471)
Transfer charges (213) (25)
Administrative charges (12,814) (6,775)
Mortality and expense
risk charges (106,821) (56,664)
______________ ______________
Net investment income (loss) 422,472 78,608
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net realized gain (loss) on
investments 57,513 4,559
Net unrealized appreciation
(depreciation) of
investments (111,913) 975,580
______________ ______________
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $368,072 $1,058,747
============== ==============
<FN>
* Commencement of operations, April 1, 1996
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF OPERATIONS
EQUI-SELECT PRODUCT
For the year ended December 31, 1996, Except as Noted
<TABLE>
<CAPTION>
Growth & International
Income Equity
Account* Account*
______________ ______________
<S> <C> <C>
INVESTMENT INCOME (LOSS)
Income:
Dividends $33,036 $273,307
Capital gains distributions 34,568 121,604
Expenses:
Annual contract charges (795) (1,985)
Transfer charges -- (22)
Administrative charges (12,429) (8,219)
Mortality and expense
risk charges (103,970) (68,801)
______________ ______________
Net investment income (loss) (49,590) 315,884
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net realized gain (loss) on
investments 30,064 (10,354)
Net unrealized appreciation
(depreciation) of
investments 2,471,903 108,774
______________ ______________
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $2,452,377 $414,304
============== ==============
<FN>
* Commencement of operations, April 1, 1996
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
EQUI-SELECT PRODUCT
For the years ended December 31, 1995 and 1996, Except as Noted
<TABLE>
<CAPTION>
Money
Market
Account
______________
<S> <C>
NET ASSETS AT JANUARY 1, 1995 $345,499
INCREASE IN NET ASSETS
Operations:
Net investment income 125,935
Net realized gain on investments --
Net unrealized appreciation (depreciation) of investments --
______________
Net increase in net assets resulting from operations 125,935
Changes from principal transactions:
Purchase payments 30,141,356
Contract distributions and terminations (18,210)
Transfer payments from (to) other Accounts and Fixed Account (24,862,359)
______________
Increase in net assets derived from principal transactions 5,260,787
______________
Total increase 5,386,722
______________
NET ASSETS AT DECEMBER 31, 1995 5,732,221
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) 430,243
Net realized gain (loss) on investments --
Net unrealized appreciation (depreciation) of investments --
______________
Net increase in net assets resulting from operations 430,243
Changes from principal transactions:
Purchase payments 97,297,490
Contract distributions and terminations (409,078)
Transfer payments from (to) other Accounts and Fixed Account (83,912,504)
______________
Increase in net assets derived from principal transactions 12,975,908
______________
Total increase 13,406,151
______________
NET ASSETS AT DECEMBER 31, 1996 $19,138,372
==============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
EQUI-SELECT PRODUCT
For the years ended December 31, 1995 and 1996, Except as Noted
<TABLE>
<CAPTION>
Mortgage-
Backed
Securities
Account
______________
<S> <C>
NET ASSETS AT JANUARY 1, 1995 $28,822
INCREASE IN NET ASSETS
Operations:
Net investment income 216,981
Net realized gain on investments 994
Net unrealized appreciation (depreciation) of investments (77,915)
______________
Net increase in net assets resulting from operations 140,060
Changes from principal transactions:
Purchase payments 1,764,376
Contract distributions and terminations (7,691)
Transfer payments from (to) other Accounts and Fixed Account 2,413,953
______________
Increase in net assets derived from principal transactions 4,170,638
______________
Total increase 4,310,698
______________
NET ASSETS AT DECEMBER 31, 1995 4,339,520
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) 462,928
Net realized gain (loss) on investments 3,182
Net unrealized appreciation (depreciation) of investments (236,988)
______________
Net increase in net assets resulting from operations 229,122
Changes from principal transactions:
Purchase payments 3,866,835
Contract distributions and terminations (272,503)
Transfer payments from (to) other Accounts and Fixed Account 2,670,273
______________
Increase in net assets derived from principal transactions 6,264,605
______________
Total increase 6,493,727
______________
NET ASSETS AT DECEMBER 31, 1996 $10,833,247
==============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
EQUI-SELECT PRODUCT
For the years ended December 31, 1995 and 1996, Except as Noted
<TABLE>
<CAPTION>
International
Fixed
Income
Account
______________
<S> <C>
NET ASSETS AT JANUARY 1, 1995 $51,288
INCREASE IN NET ASSETS
Operations:
Net investment income 149,959
Net realized gain on investments 4,271
Net unrealized appreciation (depreciation) of investments 34,190
______________
Net increase in net assets resulting from operations 188,420
Changes from principal transactions:
Purchase payments 1,703,537
Contract distributions and terminations (6,355)
Transfer payments from (to) other Accounts and Fixed Account 1,662,677
______________
Increase in net assets derived from principal transactions 3,359,859
______________
Total increase 3,548,279
______________
NET ASSETS AT DECEMBER 31, 1995 3,599,567
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) 455,330
Net realized gain (loss) on investments 48,607
Net unrealized appreciation (depreciation) of investments (239,063)
______________
Net increase in net assets resulting from operations 264,874
Changes from principal transactions:
Purchase payments 2,509,049
Contract distributions and terminations (213,335)
Transfer payments from (to) other Accounts and Fixed Account 2,279,493
______________
Increase in net assets derived from principal transactions 4,575,207
______________
Total increase 4,840,081
______________
NET ASSETS AT DECEMBER 31, 1996 $8,439,648
==============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
EQUI-SELECT PRODUCT
For the years ended December 31, 1995 and 1996, Except as Noted
<TABLE>
<CAPTION>
OTC
Account
______________
<S> <C>
NET ASSETS AT JANUARY 1, 1995 $660,106
INCREASE IN NET ASSETS
Operations:
Net investment income 933,058
Net realized gain on investments 36,066
Net unrealized appreciation (depreciation) of investments 20,313
______________
Net increase in net assets resulting from operations 989,437
Changes from principal transactions:
Purchase payments 4,028,128
Contract distributions and terminations (33,765)
Transfer payments from (to) other Accounts and Fixed Account 4,392,791
______________
Increase in net assets derived from principal transactions 8,387,154
______________
Total increase 9,376,591
______________
NET ASSETS AT DECEMBER 31, 1995 10,036,697
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) 1,743,322
Net realized gain (loss) on investments 61,629
Net unrealized appreciation (depreciation) of investments 1,203,795
______________
Net increase in net assets resulting from operations 3,008,746
Changes from principal transactions:
Purchase payments 16,302,789
Contract distributions and terminations (628,676)
Transfer payments from (to) other Accounts and Fixed Account 12,133,266
______________
Increase in net assets derived from principal transactions 27,807,379
______________
Total increase 30,816,125
______________
NET ASSETS AT DECEMBER 31, 1996 $40,852,822
==============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
EQUI-SELECT PRODUCT
For the years ended December 31, 1995 and 1996, Except as Noted
<TABLE>
<CAPTION>
Research
Account
______________
<S> <C>
NET ASSETS AT JANUARY 1, 1995 $672,603
INCREASE IN NET ASSETS
Operations:
Net investment income 190,119
Net realized gain on investments 19,662
Net unrealized appreciation (depreciation) of investments 1,548,017
______________
Net increase in net assets resulting from operations 1,757,798
Changes from principal transactions:
Purchase payments 8,333,228
Contract distributions and terminations (32,130)
Transfer payments from (to) other Accounts and Fixed Account 5,715,449
______________
Increase in net assets derived from principal transactions 14,016,547
______________
Total increase 15,774,345
______________
NET ASSETS AT DECEMBER 31, 1995 16,446,948
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) 1,534,737
Net realized gain (loss) on investments 662,781
Net unrealized appreciation (depreciation) of investments 5,420,258
______________
Net increase in net assets resulting from operations 7,617,776
Changes from principal transactions:
Purchase payments 32,407,473
Contract distributions and terminations (1,057,801)
Transfer payments from (to) other Accounts and Fixed Account 21,760,887
______________
Increase in net assets derived from principal transactions 53,110,559
______________
Total increase 60,728,335
______________
NET ASSETS AT DECEMBER 31, 1996 $77,175,283
==============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
EQUI-SELECT PRODUCT
For the years ended December 31, 1995 and 1996, Except as Noted
<TABLE>
<CAPTION>
Total
Return
Account
______________
<S> <C>
NET ASSETS AT JANUARY 1, 1995 $324,925
INCREASE IN NET ASSETS
Operations:
Net investment income 246,476
Net realized gain on investments 6,083
Net unrealized appreciation (depreciation) of investments 1,034,214
______________
Net increase in net assets resulting from operations 1,286,773
Changes from principal transactions:
Purchase payments 7,285,539
Contract distributions and terminations (72,501)
Transfer payments from (to) other Accounts and Fixed Account 6,997,106
______________
Increase in net assets derived from principal transactions 14,210,144
______________
Total increase 15,496,917
______________
NET ASSETS AT DECEMBER 31, 1995 15,821,842
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) 1,115,103
Net realized gain (loss) on investments 120,266
Net unrealized appreciation (depreciation) of investments 3,147,975
______________
Net increase in net assets resulting from operations 4,383,344
Changes from principal transactions:
Purchase payments 23,245,480
Contract distributions and terminations (1,235,631)
Transfer payments from (to) other Accounts and Fixed Account 16,620,130
______________
Increase in net assets derived from principal transactions 38,629,979
______________
Total increase 43,013,323
______________
NET ASSETS AT DECEMBER 31, 1996 $58,835,165
==============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
EQUI-SELECT PRODUCT
For the years ended December 31, 1995 and 1996, Except as Noted
<TABLE>
<CAPTION>
Advantage
Account
______________
<S> <C>
NET ASSETS AT JANUARY 1, 1995 $459,024
INCREASE IN NET ASSETS
Operations:
Net investment income 219,723
Net realized gain on investments 15,065
Net unrealized appreciation (depreciation) of investments (96,273)
______________
Net increase in net assets resulting from operations 138,515
Changes from principal transactions:
Purchase payments 1,956,116
Contract distributions and terminations (15,339)
Transfer payments from (to) other Accounts and Fixed Account 1,205,921
______________
Increase in net assets derived from principal transactions 3,146,698
______________
Total increase 3,285,213
______________
NET ASSETS AT DECEMBER 31, 1995 3,744,237
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) 422,472
Net realized gain (loss) on investments 57,513
Net unrealized appreciation (depreciation) of investments (111,913)
______________
Net increase in net assets resulting from operations 368,072
Changes from principal transactions:
Purchase payments 7,649,569
Contract distributions and terminations (381,407)
Transfer payments from (to) other Accounts and Fixed Account 3,638,478
______________
Increase in net assets derived from principal transactions 10,906,640
______________
Total increase 11,274,712
______________
NET ASSETS AT DECEMBER 31, 1996 $15,018,949
==============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
EQUI-SELECT PRODUCT
For the years ended December 31, 1995 and 1996, Except as Noted
<TABLE>
<CAPTION>
Value +
Growth
Account*
______________
<S> <C>
NET ASSETS AT JANUARY 1, 1995 --
INCREASE IN NET ASSETS
Operations:
Net investment income --
Net realized gain on investments --
Net unrealized appreciation (depreciation) of investments --
______________
Net increase in net assets resulting from operations --
Changes from principal transactions:
Purchase payments --
Contract distributions and terminations --
Transfer payments from (to) other Accounts and Fixed Account --
______________
Increase in net assets derived from principal transactions --
______________
Total increase --
______________
NET ASSETS AT DECEMBER 31, 1995 --
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) $78,608
Net realized gain (loss) on investments 4,559
Net unrealized appreciation (depreciation) of investments 975,580
______________
Net increase in net assets resulting from operations 1,058,747
Changes from principal transactions:
Purchase payments 5,855,390
Contract distributions and terminations (86,176)
Transfer payments from (to) other Accounts and Fixed Account 7,308,004
______________
Increase in net assets derived from principal transactions 13,077,218
______________
Total increase 14,135,965
______________
NET ASSETS AT DECEMBER 31, 1996 $14,135,965
==============
<FN>
* Commencement of operations, April 1, 1996
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
EQUI-SELECT PRODUCT
For the years ended December 31, 1995 and 1996, Except as Noted
<TABLE>
<CAPTION>
Growth +
Income
Account*
______________
<S> <C>
NET ASSETS AT JANUARY 1, 1995 --
INCREASE IN NET ASSETS
Operations:
Net investment income --
Net realized gain on investments --
Net unrealized appreciation (depreciation) of investments --
______________
Net increase in net assets resulting from operations --
Changes from principal transactions:
Purchase payments --
Contract distributions and terminations --
Transfer payments from (to) other Accounts and Fixed Account --
______________
Increase in net assets derived from principal transactions --
______________
Total increase --
______________
NET ASSETS AT DECEMBER 31, 1995 --
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) ($49,590)
Net realized gain (loss) on investments 30,064
Net unrealized appreciation (depreciation) of investments 2,471,903
______________
Net increase in net assets resulting from operations 2,452,377
Changes from principal transactions:
Purchase payments 12,034,879
Contract distributions and terminations (227,921)
Transfer payments from (to) other Accounts and Fixed Account 13,570,237
______________
Increase in net assets derived from principal transactions 25,377,195
______________
Total increase 27,829,572
______________
NET ASSETS AT DECEMBER 31, 1996 $27,829,572
==============
<FN>
* Commencement of operations, April 1, 1996
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
EQUI-SELECT PRODUCT
For the years ended December 31, 1995 and 1996, Except as Noted
<TABLE>
<CAPTION>
International
Equity
Account*
______________
<S> <C>
NET ASSETS AT JANUARY 1, 1995 --
INCREASE IN NET ASSETS
Operations:
Net investment income --
Net realized gain on investments --
Net unrealized appreciation (depreciation) of investments --
______________
Net increase in net assets resulting from operations --
Changes from principal transactions:
Purchase payments --
Contract distributions and terminations --
Transfer payments from (to) other Accounts and Fixed Account --
______________
Increase in net assets derived from principal transactions --
______________
Total increase --
______________
NET ASSETS AT DECEMBER 31, 1995 --
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) $315,884
Net realized gain (loss) on investments (10,354)
Net unrealized appreciation (depreciation) of investments 108,774
______________
Net increase in net assets resulting from operations 414,304
Changes from principal transactions:
Purchase payments 4,679,176
Contract distributions and terminations (172,244)
Transfer payments from (to) other Accounts and Fixed Account 15,903,022
______________
Increase in net assets derived from principal transactions 20,409,954
______________
Total increase 20,824,258
______________
NET ASSETS AT DECEMBER 31, 1996 $20,824,258
==============
<FN>
* Commencement of operations, April 1, 1996
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS
EQUI-SELECT PRODUCT
December 31, 1996
NOTE 1 - INVESTMENT AND ACCOUNTING POLICIES
Equitable Life Insurance Company of Iowa Separate Account A (the "Account") was
established by Equitable Life Insurance Company of Iowa (the "Company") in
accordance with the provisions of Iowa Insurance laws and is a part of the
total operations of the Company. The assets and liabilities of the Account
are clearly identified and distinguished from the other assets and liabilities
of the Company. Commencement of operations is defined as the date of initial
sale of contract units to contract owners. Investments are stated at the
closing net asset values per share on December 31, 1996.
The Account is a unit investment trust, registered with the Securities and
Exchange Commission under the Investment Company Act of 1940, as amended, and
as of December 31, 1996, consisted of fifteen investment accounts, nine of
which (the Money Market, Mortgage-Backed Securities, International Fixed
Income, OTC, Research, Total Return, Advantage, Value + Growth and Growth &
Income) are invested in specified portfolios of the Equi-Select Series Trust,
and one of which (the International Equity Account) is invested in the
International Equity Portfolio of the Warburg Pincus Trust, as directed by
eligible contract owners. Activity in these ten investment accounts is
available to contract owners of the Equi-Select Variable Annuity product.
The Equi-Select Series Trust and Warburg Pincus Trust are open-end management
companies.
The remaining five investment accounts are invested in specified portfolios
of the Travelers Series Fund Inc. and Smith Barney Series Fund. These five
investment accounts and the Research, OTC and Total Return Accounts, which
invest in the Equi-Select Series Trust, are available to contract owners of
the PrimElite Variable Annuity product.
On May 16, 1996, the Government Securities and Short-Term Bond Accounts were
closed. On December 12, 1996, the International Stock Account was closed.
The net assets were transferred to other accounts. Accordingly, the accounts
have not been included in these financial statements.
In 1997, the Account began offering certain accounts in The GCG Trust. These
accounts include the Fully Managed and Small Cap Series which commenced
operations in the Account on February 5, 1997 and the Rising Dividends on
February 10, 1997.
The financial statements included herein present only those investment accounts
available to contract owners of the Equi-Select Variable Annuity product as of
December 31, 1996. The financial statements of the remaining investment
accounts as well as the Research, OTC and Total Return Accounts, which are also
available to contract owners of the PrimElite Variable Annuity product are
presented separately.
Realized gains and losses are determined on the basis of specific
identification. Dividends are taken into income on an accrual basis as of the
ex-dividend date.
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
NOTE 2 - EXPENSES
The Company is compensated for mortality and expense risks and administrative
costs by a charge equivalent to an annual rate of 1.25% and 0.15%,
respectively, of the total net assets of each Account. These charges amounted
to $1,895,806 and $227,345, respectively, for the period ended December 31,
1996 ($348,739 and $42,078, respectively, for the year ended December 31,
1995).
An annual contract charge of $30 is deducted on each contract anniversary prior
to the maturity date, upon full withdrawal of a contract's value or upon
commencement of annuity payments if such withdrawal is made or annuity payments
commence on a date other than the contract anniversary. For the period ended
December 31, 1996, annual contract charges amounted to $65,970, and for the
year ended December 31, 1995, these charges amounted to $2,806.
A transfer charge computed as the lesser of 2% of the contract value
transferred or $25 will be imposed on each transfer between Accounts in excess
of twelve in any one calendar year. For the year ended December 31, 1996,
transfer charges amounted to $622. No transfer charges were assessed in 1995.
A withdrawal charge may be imposed in the event of withdrawal of any portion
of the contract value or upon annuitization. The withdrawal charge is 8% of
the amount withdrawn prior to the first anniversary of any purchase payment and
reduces by 1% at each subsequent purchase payment anniversary.
NOTE 3 - FEDERAL INCOME TAXES
Operations of the Account form a part of the operations of the Company which
is taxed as a life insurance company under the Internal Revenue Code. Under
current law, no federal income taxes are payable with respect to operations
of the Account.
NOTE 4 - PURCHASES AND SALES OF INVESTMENT SECURITIES
The aggregate cost of purchases and proceeds from sales of investments were
as follows:
<TABLE>
<CAPTION>
Period From January 1,
1996 or Commencement of
Operations to Year Ended
December 31, 1996 December 31, 1995
_________________________ _________________________
Purchases Sales Purchases Sales
____________ ____________ ____________ ____________
<S> <C> <C> <C> <C>
Money Market Portfolio $43,852,637 $30,504,481 $18,116,828 $12,751,952
Mortgage-Backed Securities
Portfolio 8,065,695 1,682,068 4,186,979 33,921
International Fixed
Income Portfolio 5,234,780 557,676 3,461,113 111,334
OTC Portfolio 28,902,017 341,386 8,736,489 410,391
Research Portfolio 54,653,079 1,744,943 14,168,762 230,594
Total Return Portfolio 39,063,198 532,334 14,267,685 137,651
Advantage Portfolio 13,475,395 2,445,892 3,718,744 592,976
Value + Growth Portfolio 13,221,408 208,125 -- --
Growth & Income Portfolio 25,439,201 179,200 -- --
International Equity
Portfolio 21,093,357 367,519 -- --
</TABLE>
NOTE 5 - SUMMARY OF CHANGES FROM UNIT TRANSACTIONS
Transactions in units were as follows:
<TABLE>
<CAPTION>
Period From January 1,
1996 or Commencement of
Operations to Year Ended
December 31, 1996 December 31, 1995
_________________________ _________________________
Purchases Sales Purchases Sales
____________ ____________ ____________ ____________
<S> <C> <C> <C> <C>
Money Market Account 9,656,473 8,432,754 2,969,444 2,454,999
Mortgage-Backed Securities
Account 806,213 255,416 380,372 3,227
International Fixed
Income Account 502,939 108,758 309,796 3,205
OTC Account 2,002,398 159,271 705,565 9,749
Research Account 3,947,429 357,941 1,196,506 9,931
Total Return Account 3,298,269 256,496 1,315,204 35,745
Advantage Account 1,374,019 396,282 359,214 59,955
Value + Growth Account 1,294,691 56,342 -- --
Growth & Income Account 2,280,154 51,266 -- --
International Equity
Account 2,094,800 68,096 -- --
</TABLE>
NOTE 6 - NET ASSETS
Net assets at December 31, 1996 consisted of the following:
<TABLE>
<CAPTION>
Mortgage- International
Money Backed Fixed
Market Securities Income OTC
Account Account Account Account
____________ _____________ ____________ _____________
<S> <C> <C> <C> <C>
Unit transactions $19,055,599 $10,484,591 $8,050,647 $36,983,620
Accumulated net
investment income (loss) 82,773 663,888 594,166 2,637,867
Net unrealized appreciation
(depreciation) of
investments -- (315,232) (205,165) 1,231,335
____________ _____________ ____________ _____________
$19,138,372 $10,833,247 $8,439,648 $40,852,822
============ ============= ============ =============
</TABLE>
<TABLE>
<CAPTION>
Total
Research Return Advantage
Account Account Account
____________ _____________ ____________
<S> <C> <C> <C>
Unit transactions $68,507,383 $53,320,057 $14,598,213
Accumulated net
investment income (loss) 1,719,749 1,335,360 632,982
Net unrealized appreciation
(depreciation) of
investments 6,948,151 4,179,748 (212,246)
____________ _____________ ____________
$77,175,283 $58,835,165 $15,018,949
============ ============= ============
</TABLE>
<TABLE>
<CAPTION>
Value + Growth & International
Growth Income Equity
Account Account Account
____________ _____________ ____________
<S> <C> <C> <C>
Unit transactions $13,081,777 $25,407,259 $20,399,600
Accumulated net
investment income (loss) 78,608 (49,590) 315,884
Net unrealized appreciation
(depreciation) of
investments 975,580 2,471,903 108,774
____________ _____________ ____________
$14,135,965 $27,829,572 $20,824,258
============ ============= ============
</TABLE>
Financial Statements
Equitable Life Insurance Company of Iowa
Separate Account A
PrimElite Product
Periods ended December 31, 1996, and 1995
with Report of Independent Auditors
Equitable Life Insurance Company of Iowa
Separate Account A
PrimElite
Financial Statements
Periods ended December 31, 1996 and 1995
Contents
Report of Independent Auditors
Audited Financial Statements
Statements of Net Assets
Statements of Operations
Statements of Changes in Net Assets
Notes to Financial Statements
Report of Independent Auditors
The Board of Directors
Equitable Life Insurance Company of Iowa
We have audited the accompanying statements of net assets of certain accounts
of Equitable Life Insurance Company of Iowa Separate Account A (comprising,
respectively, the Research, OTC, Total Return, International Equity, Income and
Growth, High Income, Money Market and Appreciation Accounts) as of December 31,
1996, and the related statements of operations and changes in net assets for
each of the periods indicated therein. These financial statements are the
responsibility of the Account's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. Our
procedures included confirmation of securities owned as of December 31, 1996,
by correspondence with the transfer agent. An audit also includes assessing
the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of certain accounts of the
Equitable Life Insurance Company of Iowa Separate Account A at December 31,
1996, and the results of their operations and changes in their net assets for
each of the periods indicated therein, in conformity with generally accepted
accounting principles.
/S/ Ernst & Young LLP
Des Moines, Iowa
February 11, 1997
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF NET ASSETS
PRIMELITE PRODUCT
December 31, 1996
<TABLE>
<CAPTION>
Research
Account
____________
<S> <C>
ASSETS
Investments at net asset value:
Equi-Select Series Trust Research Portfolio,
4,870,814 shares (cost - $68,215,717) $75,163,868
Equi-Select Series Trust OTC Portfolio,
2,812,183 shares (cost - $37,637,315)
Equi-Select Series Trust Total Return Portfolio,
4,356,245 shares (cost - $53,111,757)
Travelers Series Fund Inc.
Smith Barney International Equity Portfolio,
860,276 shares (cost - $10,042,334)
Travelers Series Fund Inc.
Smith Barney Income and Growth Portfolio,
1,492,090 shares (cost - $20,664,534)
Travelers Series Fund Inc.
Smith Barney High Income Portfolio,
692,114 shares (cost - $8,099,774)
Travelers Series Fund Inc.
Smith Barney Money Market Portfolio,
3,687,775 shares (cost - $3,687,775)
Smith Barney Series Fund Appreciation Portfolio,
352,217 shares (cost - $5,627,698)
____________
TOTAL INVESTMENTS 75,163,868
Accrued investment income 2,011,415
____________
TOTAL NET ASSETS $77,175,283
============
NET ASSETS REPRESENTED BY:
Units 4,845,240
Unit Value 15.93
____________
Net Assets $77,175,283
============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF NET ASSETS
PRIMELITE PRODUCT
December 31, 1996
<TABLE>
<CAPTION>
OTC
Account
____________
<S> <C>
ASSETS
Investments at net asset value:
Equi-Select Series Trust Research Portfolio,
4,870,814 shares (cost - $68,215,717)
Equi-Select Series Trust OTC Portfolio,
2,812,183 shares (cost - $37,637,315) $38,868,650
Equi-Select Series Trust Total Return Portfolio,
4,356,245 shares (cost - $53,111,757)
Travelers Series Fund Inc.
Smith Barney International Equity Portfolio,
860,276 shares (cost - $10,042,334)
Travelers Series Fund Inc.
Smith Barney Income and Growth Portfolio,
1,492,090 shares (cost - $20,664,534)
Travelers Series Fund Inc.
Smith Barney High Income Portfolio,
692,114 shares (cost - $8,099,774)
Travelers Series Fund Inc.
Smith Barney Money Market Portfolio,
3,687,775 shares (cost - $3,687,775)
Smith Barney Series Fund Appreciation Portfolio,
352,217 shares (cost - $5,627,698)
____________
TOTAL INVESTMENTS 38,868,650
Accrued investment income 1,984,172
____________
TOTAL NET ASSETS $40,852,822
============
NET ASSETS REPRESENTED BY:
Units 2,602,724
Unit Value 15.70
____________
Net Assets $40,852,822
============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF NET ASSETS
PRIMELITE PRODUCT
December 31, 1996
<TABLE>
<CAPTION>
Total
Return
Account
____________
<S> <C>
ASSETS
Investments at net asset value:
Equi-Select Series Trust Research Portfolio,
4,870,814 shares (cost - $68,215,717)
Equi-Select Series Trust OTC Portfolio,
2,812,183 shares (cost - $37,637,315)
Equi-Select Series Trust Total Return Portfolio,
4,356,245 shares (cost - $53,111,757) $57,291,505
Travelers Series Fund Inc.
Smith Barney International Equity Portfolio,
860,276 shares (cost - $10,042,334)
Travelers Series Fund Inc.
Smith Barney Income and Growth Portfolio,
1,492,090 shares (cost - $20,664,534)
Travelers Series Fund Inc.
Smith Barney High Income Portfolio,
692,114 shares (cost - $8,099,774)
Travelers Series Fund Inc.
Smith Barney Money Market Portfolio,
3,687,775 shares (cost - $3,687,775)
Smith Barney Series Fund Appreciation Portfolio,
352,217 shares (cost - $5,627,698)
____________
TOTAL INVESTMENTS 57,291,505
Accrued investment income 1,543,660
____________
TOTAL NET ASSETS $58,835,165
============
NET ASSETS REPRESENTED BY:
Units 4,354,338
Unit Value 13.51
____________
Net Assets $58,835,165
============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF NET ASSETS
PRIMELITE PRODUCT
December 31, 1996
<TABLE>
<CAPTION>
International
Equity
Account
______________
<S> <C>
ASSETS
Investments at net asset value:
Equi-Select Series Trust Research Portfolio,
4,870,814 shares (cost - $68,215,717)
Equi-Select Series Trust OTC Portfolio,
2,812,183 shares (cost - $37,637,315)
Equi-Select Series Trust Total Return Portfolio,
4,356,245 shares (cost - $53,111,757)
Travelers Series Fund Inc.
Smith Barney International Equity Portfolio,
860,276 shares (cost - $10,042,334) $10,805,062
Travelers Series Fund Inc.
Smith Barney Income and Growth Portfolio,
1,492,090 shares (cost - $20,664,534)
Travelers Series Fund Inc.
Smith Barney High Income Portfolio,
692,114 shares (cost - $8,099,774)
Travelers Series Fund Inc.
Smith Barney Money Market Portfolio,
3,687,775 shares (cost - $3,687,775)
Smith Barney Series Fund Appreciation Portfolio,
352,217 shares (cost - $5,627,698)
______________
TOTAL INVESTMENTS 10,805,062
Accrued investment income --
______________
TOTAL NET ASSETS $10,805,062
==============
NET ASSETS REPRESENTED BY:
Units 804,975
Unit Value 13.42
______________
Net Assets $10,805,062
==============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF NET ASSETS
PRIMELITE PRODUCT
December 31, 1996
<TABLE>
<CAPTION> Income and
Growth
Account
______________
<S> <C>
ASSETS
Investments at net asset value:
Equi-Select Series Trust Research Portfolio,
4,870,814 shares (cost - $68,215,717)
Equi-Select Series Trust OTC Portfolio,
2,812,183 shares (cost - $37,637,315)
Equi-Select Series Trust Total Return Portfolio,
4,356,245 shares (cost - $53,111,757)
Travelers Series Fund Inc.
Smith Barney International Equity Portfolio,
860,276 shares (cost - $10,042,334)
Travelers Series Fund Inc.
Smith Barney Income and Growth Portfolio,
1,492,090 shares (cost - $20,664,534) $22,470,880
Travelers Series Fund Inc.
Smith Barney High Income Portfolio,
692,114 shares (cost - $8,099,774)
Travelers Series Fund Inc.
Smith Barney Money Market Portfolio,
3,687,775 shares (cost - $3,687,775)
Smith Barney Series Fund Appreciation Portfolio,
352,217 shares (cost - $5,627,698)
______________
TOTAL INVESTMENTS 22,470,880
Accrued investment income --
______________
TOTAL NET ASSETS $22,470,880
==============
NET ASSETS REPRESENTED BY:
Units 1,579,649
Unit Value 14.23
______________
Net Assets $22,470,880
==============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF NET ASSETS
PRIMELITE PRODUCT
December 31, 1996
<TABLE>
<CAPTION> High
Income
Account
______________
<S> <C>
ASSETS
Investments at net asset value:
Equi-Select Series Trust Research Portfolio,
4,870,814 shares (cost - $68,215,717)
Equi-Select Series Trust OTC Portfolio,
2,812,183 shares (cost - $37,637,315)
Equi-Select Series Trust Total Return Portfolio,
4,356,245 shares (cost - $53,111,757)
Travelers Series Fund Inc.
Smith Barney International Equity Portfolio,
860,276 shares (cost - $10,042,334)
Travelers Series Fund Inc.
Smith Barney Income and Growth Portfolio,
1,492,090 shares (cost - $20,664,534)
Travelers Series Fund Inc.
Smith Barney High Income Portfolio,
692,114 shares (cost - $8,099,774) $8,194,631
Travelers Series Fund Inc.
Smith Barney Money Market Portfolio,
3,687,775 shares (cost - $3,687,775)
Smith Barney Series Fund Appreciation Portfolio,
352,217 shares (cost - $5,627,698)
______________
TOTAL INVESTMENTS 8,194,631
Accrued investment income --
______________
TOTAL NET ASSETS $8,194,631
==============
NET ASSETS REPRESENTED BY:
Units 670,736
Unit Value 12.22
______________
Net Assets $8,194,631
==============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF NET ASSETS
PRIMELITE PRODUCT
December 31, 1996
<TABLE>
<CAPTION> Money
Market
Account
______________
<S> <C>
ASSETS
Investments at net asset value:
Equi-Select Series Trust Research Portfolio,
4,870,814 shares (cost - $68,215,717)
Equi-Select Series Trust OTC Portfolio,
2,812,183 shares (cost - $37,637,315)
Equi-Select Series Trust Total Return Portfolio,
4,356,245 shares (cost - $53,111,757)
Travelers Series Fund Inc.
Smith Barney International Equity Portfolio,
860,276 shares (cost - $10,042,334)
Travelers Series Fund Inc.
Smith Barney Income and Growth Portfolio,
1,492,090 shares (cost - $20,664,534)
Travelers Series Fund Inc.
Smith Barney High Income Portfolio,
692,114 shares (cost - $8,099,774)
Travelers Series Fund Inc.
Smith Barney Money Market Portfolio,
3,687,775 shares (cost - $3,687,775) $3,687,775
Smith Barney Series Fund Appreciation Portfolio,
352,217 shares (cost - $5,627,698)
______________
TOTAL INVESTMENTS 3,687,775
Accrued investment income 6,215
______________
TOTAL NET ASSETS $3,693,990
==============
NET ASSETS REPRESENTED BY:
Units 348,906
Unit Value 10.59
______________
Net Assets $3,693,990
==============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF NET ASSETS
PRIMELITE PRODUCT
December 31, 1996
<TABLE>
<CAPTION>
Appreciation
Account
______________
<S> <C>
ASSETS
Investments at net asset value:
Equi-Select Series Trust Research Portfolio,
4,870,814 shares (cost - $68,215,717)
Equi-Select Series Trust OTC Portfolio,
2,812,183 shares (cost - $37,637,315)
Equi-Select Series Trust Total Return Portfolio,
4,356,245 shares (cost - $53,111,757)
Travelers Series Fund Inc.
Smith Barney International Equity Portfolio,
860,276 shares (cost - $10,042,334)
Travelers Series Fund Inc.
Smith Barney Income and Growth Portfolio,
1,492,090 shares (cost - $20,664,534)
Travelers Series Fund Inc.
Smith Barney High Income Portfolio,
692,114 shares (cost - $8,099,774)
Travelers Series Fund Inc.
Smith Barney Money Market Portfolio,
3,687,775 shares (cost - $3,687,775)
Smith Barney Series Fund Appreciation Portfolio,
352,217 shares (cost - $5,627,698) $5,586,164
______________
TOTAL INVESTMENTS 5,586,164
Accrued investment income --
______________
TOTAL NET ASSETS $5,586,164
==============
NET ASSETS REPRESENTED BY:
Units 497,034
Unit Value 11.24
______________
Net Assets $5,586,164
==============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF OPERATIONS
PRIMELITE PRODUCT
For the year ended December 31, 1996, Except as Noted
<TABLE>
<CAPTION>
Total
Research OTC Return
Account Account Account
______________ ______________ ______________
<S> <C> <C> <C>
INVESTMENT INCOME (LOSS)
Income:
Dividends $12,455 -- $1,110,366
Capital gains distributions 2,116,798 $2,075,049 500,681
Expenses:
Annual contract charges (19,646) (13,074) (19,076)
Transfer charges (38) (50) (100)
Administrative charges (61,564) (34,124) (51,077)
Mortality and expense
risk charges (513,268) (284,479) (425,691)
______________ ______________ ______________
Net investment income (loss) 1,534,737 1,743,322 1,115,103
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net realized gain on
investments 662,781 61,629 120,266
Net unrealized appreciation
(depreciation) of
investments 5,420,258 1,203,795 3,147,975
______________ ______________ ______________
NET INCREASE IN
NET ASSETS RESULTING FROM
OPERATIONS $7,617,776 $3,008,746 $4,383,344
============== ============== ==============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF OPERATIONS
PRIMELITE PRODUCT
For the year ended December 31, 1996, Except as Noted
<TABLE>
<CAPTION>
International Income High
Equity and Growth Income
Account Account Account
______________ ______________ ______________
<S> <C> <C> <C>
INVESTMENT INCOME (LOSS)
Income:
Dividends $10,897 $252,108 $419,511
Capital gains distributions -- 247,811 34,959
Expenses:
Annual contract charges (1,788) (3,084) (629)
Transfer charges -- -- --
Administrative charges (8,674) (17,746) (5,796)
Mortality and expense
risk charges (72,323) (147,965) (48,347)
______________ ______________ ______________
Net investment income (loss) (71,888) 331,124 399,698
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net realized gain on
investments 17,392 113,961 22,650
Net unrealized appreciation
(depreciation) of
investments 731,168 1,617,928 94,928
______________ ______________ ______________
NET INCREASE IN
NET ASSETS RESULTING FROM
OPERATIONS $676,672 $2,063,013 $517,276
============== ============== ==============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF OPERATIONS
PRIMELITE PRODUCT
For the year ended December 31, 1996, Except as Noted
<TABLE>
<CAPTION>
Money
Market Appreciation
Account Account*
______________ ______________
<S> <C> <C>
INVESTMENT INCOME (LOSS)
Income:
Dividends $122,144 $77,590
Capital gains distributions -- 355,982
Expenses:
Annual contract charges (114) (36)
Transfer charges -- --
Administrative charges (3,801) (2,734)
Mortality and expense
risk charges (31,672) (22,856)
______________ ______________
Net investment income (loss) 86,557 407,946
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net realized gain on
investments -- 8,262
Net unrealized appreciation
(depreciation) of
investments -- (41,534)
______________ ______________
NET INCREASE IN
NET ASSETS RESULTING FROM
OPERATIONS $86,557 $374,674
============== ==============
<FN>
*Commencement of operations, March 25, 1996
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
PRIMELITE PRODUCT
For the years ended December 31, 1995 and 1996, Except as Noted
<TABLE>
<CAPTION>
Research
Account
______________
<S> <C>
NET ASSETS AT JANUARY 1, 1995 $672,603
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) 190,119
Net realized gain (loss) on investments 19,662
Net unrealized appreciation (depreciation) of investments 1,548,017
______________
Net increase in net assets resulting from operations 1,757,798
Changes from principal transactions:
Purchase payments 8,333,228
Contract distributions and terminations (32,130)
Transfer payments from (to) other Accounts and Fixed Account 5,715,449
______________
Increase in net assets derived from principal transactions 14,016,547
______________
Total increase 15,774,345
______________
NET ASSETS AT DECEMBER 31, 1995 16,446,948
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) 1,534,737
Net realized gain on investments 662,781
Net unrealized appreciation (depreciation) of investments 5,420,258
______________
Net increase in net assets resulting from operations 7,617,776
Changes from principal transactions:
Purchase payments 32,407,473
Contract distributions and terminations (1,057,801)
Transfer payments from (to) other Accounts and Fixed Account 21,760,887
______________
Increase in net assets derived from principal transactions 53,110,559
______________
Total increase 60,728,335
______________
NET ASSETS AT DECEMBER 31, 1996 $77,175,283
==============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
PRIMELITE PRODUCT
For the years ended December 31, 1995 and 1996, Except as Noted
<TABLE>
<CAPTION>
OTC
Account
______________
<S> <C>
NET ASSETS AT JANUARY 1, 1995 $660,106
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) 933,058
Net realized gain (loss) on investments 36,066
Net unrealized appreciation (depreciation) of investments 20,313
______________
Net increase in net assets resulting from operations 989,437
Changes from principal transactions:
Purchase payments 4,028,128
Contract distributions and terminations (33,765)
Transfer payments from (to) other Accounts and Fixed Account 4,392,791
______________
Increase in net assets derived from principal transactions 8,387,154
______________
Total increase 9,376,591
______________
NET ASSETS AT DECEMBER 31, 1995 10,036,697
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) 1,743,322
Net realized gain on investments 61,629
Net unrealized appreciation (depreciation) of investments 1,203,795
______________
Net increase in net assets resulting from operations 3,008,746
Changes from principal transactions:
Purchase payments 16,302,789
Contract distributions and terminations (628,676)
Transfer payments from (to) other Accounts and Fixed Account 12,133,266
______________
Increase in net assets derived from principal transactions 27,807,379
______________
Total increase 30,816,125
______________
NET ASSETS AT DECEMBER 31, 1996 $40,852,822
==============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
PRIMELITE PRODUCT
For the years ended December 31, 1995 and 1996, Except as Noted
<TABLE>
<CAPTION>
Total Return
Account
______________
<S> <C>
NET ASSETS AT JANUARY 1, 1995 $324,925
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) 246,476
Net realized gain (loss) on investments 6,083
Net unrealized appreciation (depreciation) of investments 1,034,214
______________
Net increase in net assets resulting from operations 1,286,773
Changes from principal transactions:
Purchase payments 7,285,539
Contract distributions and terminations (72,501)
Transfer payments from (to) other Accounts and Fixed Account 6,997,106
______________
Increase in net assets derived from principal transactions 14,210,144
______________
Total increase 15,496,917
______________
NET ASSETS AT DECEMBER 31, 1995 15,821,842
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) 1,115,103
Net realized gain on investments 120,266
Net unrealized appreciation (depreciation) of investments 3,147,975
______________
Net increase in net assets resulting from operations 4,383,344
Changes from principal transactions:
Purchase payments 23,245,480
Contract distributions and terminations (1,235,631)
Transfer payments from (to) other Accounts and Fixed Account 16,620,130
______________
Increase in net assets derived from principal transactions 38,629,979
______________
Total increase 43,013,323
______________
NET ASSETS AT DECEMBER 31, 1996 $58,835,165
==============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
PRIMELITE PRODUCT
For the years ended December 31, 1995 and 1996, Except as Noted
<TABLE>
<CAPTION>
International
Equity
Account (a)
______________
<S> <C>
NET ASSETS AT JANUARY 1, 1995 --
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) ($3,744)
Net realized gain (loss) on investments (4)
Net unrealized appreciation (depreciation) of investments 31,560
______________
Net increase in net assets resulting from operations 27,812
Changes from principal transactions:
Purchase payments 1,444,691
Contract distributions and terminations --
Transfer payments from (to) other Accounts and Fixed Account 312,731
______________
Increase in net assets derived from principal transactions 1,757,422
______________
Total increase 1,785,234
______________
NET ASSETS AT DECEMBER 31, 1995 1,785,234
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) (71,888)
Net realized gain on investments 17,392
Net unrealized appreciation (depreciation) of investments 731,168
______________
Net increase in net assets resulting from operations 676,672
Changes from principal transactions:
Purchase payments 6,290,530
Contract distributions and terminations (32,636)
Transfer payments from (to) other Accounts and Fixed Account 2,085,262
______________
Increase in net assets derived from principal transactions 8,343,156
______________
Total increase 9,019,828
______________
NET ASSETS AT DECEMBER 31, 1996 $10,805,062
==============
<FN>
(a) Commencement of operations, March 27, 1995
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
PRIMELITE PRODUCT
For the years ended December 31, 1995 and 1996, Except as Noted
<TABLE>
<CAPTION>
Income
and Growth
Account (b)
______________
<S> <C>
NET ASSETS AT JANUARY 1, 1995 --
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) $46,665
Net realized gain (loss) on investments 106
Net unrealized appreciation (depreciation) of investments 188,418
______________
Net increase in net assets resulting from operations 235,189
Changes from principal transactions:
Purchase payments 2,609,690
Contract distributions and terminations (77)
Transfer payments from (to) other Accounts and Fixed Account 710,152
______________
Increase in net assets derived from principal transactions 3,319,765
______________
Total increase 3,554,954
______________
NET ASSETS AT DECEMBER 31, 1995 3,554,954
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) 331,124
Net realized gain on investments 113,961
Net unrealized appreciation (depreciation) of investments 1,617,928
______________
Net increase in net assets resulting from operations 2,063,013
Changes from principal transactions:
Purchase payments 12,391,247
Contract distributions and terminations (313,379)
Transfer payments from (to) other Accounts and Fixed Account 4,775,045
______________
Increase in net assets derived from principal transactions 16,852,913
______________
Total increase 18,915,926
______________
NET ASSETS AT DECEMBER 31, 1996 $22,470,880
==============
<FN>
(b) Commencement of operations, April 5, 1995
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
PRIMELITE PRODUCT
For the years ended December 31, 1995 and 1996, Except as Noted
<TABLE>
<CAPTION>
High Income
Account (c)
______________
<S> <C>
NET ASSETS AT JANUARY 1, 1995 --
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) $30,883
Net realized gain (loss) on investments 20
Net unrealized appreciation (depreciation) of investments (71)
______________
Net increase in net assets resulting from operations 30,832
Changes from principal transactions:
Purchase payments 672,913
Contract distributions and terminations (1,611)
Transfer payments from (to) other Accounts and Fixed Account 88,806
______________
Increase in net assets derived from principal transactions 760,108
______________
Total increase 790,940
______________
NET ASSETS AT DECEMBER 31, 1995 790,940
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) 399,698
Net realized gain on investments 22,650
Net unrealized appreciation (depreciation) of investments 94,928
______________
Net increase in net assets resulting from operations 517,276
Changes from principal transactions:
Purchase payments 5,464,065
Contract distributions and terminations (30,888)
Transfer payments from (to) other Accounts and Fixed Account 1,453,238
______________
Increase in net assets derived from principal transactions 6,886,415
______________
Total increase 7,403,691
______________
NET ASSETS AT DECEMBER 31, 1996 $8,194,631
==============
<FN>
(c) Commencement of operations, April 28, 1995
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
PRIMELITE PRODUCT
For the years ended December 31, 1995 and 1996, Except as Noted
<TABLE>
<CAPTION>
Money Market
Account (d)
______________
<S> <C>
NET ASSETS AT JANUARY 1, 1995 --
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) $9,600
Net realized gain (loss) on investments --
Net unrealized appreciation (depreciation) of investments --
______________
Net increase in net assets resulting from operations 9,600
Changes from principal transactions:
Purchase payments 3,007,403
Contract distributions and terminations (13,913)
Transfer payments from (to) other Accounts and Fixed Account (1,723,565)
______________
Increase in net assets derived from principal transactions 1,269,925
______________
Total increase 1,279,525
______________
NET ASSETS AT DECEMBER 31, 1995 1,279,525
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) 86,557
Net realized gain on investments --
Net unrealized appreciation (depreciation) of investments --
______________
Net increase in net assets resulting from operations 86,557
Changes from principal transactions:
Purchase payments 16,828,214
Contract distributions and terminations (12,087)
Transfer payments from (to) other Accounts and Fixed Account (14,488,219)
______________
Increase in net assets derived from principal transactions 2,327,908
______________
Total increase 2,414,465
______________
NET ASSETS AT DECEMBER 31, 1996 $3,693,990
==============
<FN>
(d) Commencement of operations, May 24, 1995
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
PRIMELITE PRODUCT
For the years ended December 31, 1995 and 1996, Except as Noted
<TABLE>
<CAPTION>
Appreciation
Account (e)
______________
<S> <C>
NET ASSETS AT JANUARY 1, 1995 --
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) --
Net realized gain (loss) on investments --
Net unrealized appreciation (depreciation) of investments --
______________
Net increase in net assets resulting from operations --
Changes from principal transactions:
Purchase payments --
Contract distributions and terminations --
Transfer payments from (to) other Accounts and Fixed Account --
______________
Increase in net assets derived from principal transactions --
______________
Total increase --
______________
NET ASSETS AT DECEMBER 31, 1995 --
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) $407,946
Net realized gain on investments 8,262
Net unrealized appreciation (depreciation) of investments (41,534)
______________
Net increase in net assets resulting from operations 374,674
Changes from principal transactions:
Purchase payments 4,266,029
Contract distributions and terminations (3,440)
Transfer payments from (to) other Accounts and Fixed Account 948,901
______________
Increase in net assets derived from principal transactions 5,211,490
______________
Total increase 5,586,164
______________
NET ASSETS AT DECEMBER 31, 1996 $5,586,164
==============
<FN>
(e) Commencement of operations, March 25, 1996
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS
PRIMELITE PRODUCT
December 31, 1996
NOTE 1 - INVESTMENT AND ACCOUNTING POLICIES
Equitable Life Insurance Company of Iowa Separate Account A (the "Account") was
established by Equitable Life Insurance Company of Iowa (the "Company") in
accordance with the provisions of Iowa Insurance laws and is a part of the
total operations of the Company. The assets and liabilities of the Account are
clearly identified and distinguished from the other assets and liabilities of
the Company. Commencement of operations is defined as the date of initial
sale of contract units to contract owners. Investments are stated at the
closing net asset values per share on December 31, 1996.
The Account is a unit investment trust, registered with the Securities and
Exchange Commission under the Investment Company Act of 1940, as amended, and
as of December 31, 1996, consisted of fifteen investment accounts, eight of
which are available to contract owners of the PrimElite Variable Annuity
product. Four of the Accounts (International Equity, Income and Growth, High
Income, and Money Market), are invested in specified portfolios of the
Travelers Series Fund Inc., which commenced operations on June 16, 1994.
The Appreciation Account invests in the Appreciation Portfolio of the Smith
Barney Series Fund. Activity in these five investment accounts, as well as the
Research Account, OTC Account, and Total Return Account, which invest in the
Equi-Select Series Trust, are available to contract owners of the PrimElite
Variable Annuity Product. The Travelers Series Fund Inc., Smith Barney Series
Fund and Equi-Select Series Trust are open-end management companies.
The remaining seven investment accounts (as well as the Research Account, OTC
Account and Total Return Account) are invested in specified portfolios of the
Equi-Select Series Trust and The International Equity Account. These
investment accounts are available to contract owners of the Equi-Select
Variable Annuity product.
In 1997, the Account began offering certain accounts in the Smith Barney
Concert Allocation Series, Inc. These include the Select High Growth and
Select Balanced which commenced operations on February 21, 1997, Select Growth
on March 6, 1997, Select Income on March 19, 1997 and the Select Conservative
on March 26, 1997.
The financial statements included herein present only those investment accounts
available to contract owners of the PrimElite Variable Annuity product as of
December 31, 1996. The financial statements of the remaining investment
accounts as well as the Research, OTC and Total Return Accounts, which are also
available to contract owners of the Equi-Select Variable Annuity product are
presented separately.
Realized gains and losses are determined on the basis of specific
identification. Dividends are taken into income on an accrual basis as of the
ex-dividend date.
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
NOTE 2 - EXPENSES
The Company is compensated for mortality and expense risks and administrative
costs by a charge equivalent to an annual rate of 1.25% and 0.15%,
respectively, of the total net assets of each Account. These charges amounted
to $1,546,601 and $185,516, respectively, for the period ended December 31,
1996 ($223,978 and $27,025, respectively for 1995).
An annual contract charge of $30 is deducted on each contract anniversary prior
to the maturity date, upon full withdrawal of a contract's value or upon
commencement of annuity payments if such withdrawal is made or annuity payments
commence on a date other than the contract anniversary. For the period ended
December 31, 1996, annual contract charges amounted to $57,447 ($1,874 for
December 31, 1995).
A transfer charge computed as the lesser of 2% of the contract value
transferred or $25 will be imposed on each transfer between Accounts in excess
of twelve in any one calendar year. For the period ended December 31, 1996,
transfer charges amounted to $188. No transfer charges were assessed in 1995.
A withdrawal charge may be imposed in the event of withdrawal of any portion of
the contract value or upon annuitization. The withdrawal charge is 8% of the
amount withdrawn prior to the first anniversary of any purchase payment and
reduces by 1% at each subsequent purchase payment anniversary.
NOTE 3 - FEDERAL INCOME TAXES
Operations of the Account form a part of the operations of the Company which
is taxed as a life insurance company under the Internal Revenue Code. Under
current law, no federal income taxes are payable with respect to operations of
the Account.
NOTE 4 - PURCHASES AND SALES OF INVESTMENT SECURITIES
The aggregate cost of purchases and proceeds from sales of investments
were as follows:
<TABLE>
<CAPTION>
Period From Period From
January 1, 1996 or January 1, 1995 or
Commencement of Commencement of
Operations Operations
to December 31, 1996 to December 31, 1995
_________________________ _________________________
Purchases Sales Purchases Sales
____________ ____________ ____________ ____________
<S> <C> <C> <C> <C>
Research Portfolio $54,653,079 $1,744,943 $14,168,762 $230,594
OTC Portfolio 28,902,017 341,386 8,736,489 410,391
Total Return Portfolio 39,063,198 532,334 14,267,685 137,651
International Equity
Portfolio 8,397,915 126,647 1,754,791 1,113
Income and Growth
Portfolio 17,726,592 542,555 3,373,110 6,680
High Income Portfolio 7,606,805 320,692 792,963 1,972
Money Market Portfolio 11,135,757 8,725,874 2,614,578 1,336,686
Appreciation Portfolio 5,719,716 100,280 -- --
</TABLE>
NOTE 5 - SUMMARY OF CHANGES FROM UNIT TRANSACTIONS
Transactions in units were as follows:
<TABLE>
<CAPTION>
Period From Period From
January 1, 1996 or January 1, 1995 or
Commencement of Commencement of
Operations Operations
to December 31, 1996 to December 31, 1995
_________________________ _________________________
Purchases Sales Purchases Sales
____________ ____________ ____________ ____________
<S> <C> <C> <C> <C>
Research Account 3,947,429 357,941 1,196,506 9,931
OTC Account 2,002,398 159,271 705,565 9,749
Total Return Account 3,298,269 256,496 1,315,204 35,745
International Equity
Account 663,194 12,607 154,388 --
Income and Growth
Account 1,330,977 46,462 295,140 6
High Income Account 623,760 25,307 72,433 150
Money Market Account 1,696,660 1,472,802 295,977 170,929
Appreciation Account 509,854 12,820 -- --
</TABLE>
NOTE 6 - NET ASSETS
Net assets at December 31, 1996 consisted of the following:
<TABLE>
<CAPTION>
Total International
Research OTC Return Equity
Account Account Account Account
____________ ____________ ____________ ______________
<S> <C> <C> <C> <C>
Unit transactions $68,507,383 $36,983,620 $53,320,057 $10,117,851
Accumulated net
investment income (loss) 1,719,749 2,637,867 1,335,360 (75,517)
Net unrealized appreciation
(depreciation) of
investments 6,948,151 1,231,335 4,179,748 762,728
____________ ____________ ____________ ______________
$77,175,283 $40,852,822 $58,835,165 $10,805,062
============ ============ ============ ==============
</TABLE>
<TABLE>
<CAPTION>
Income High Money
and Growth Income Market Appreciation
Account Account Account Account
____________ ____________ ____________ ______________
<S> <C> <C> <C> <C>
Unit transactions $20,290,356 $7,669,715 $3,676,170 $5,219,752
Accumulated net
investment income (loss) 374,178 430,059 17,820 407,946
Net unrealized appreciation
(depreciation) of
investments 1,806,346 94,857 -- (41,534)
____________ ____________ ____________ ______________
$22,470,880 $8,194,631 $3,693,990 $5,586,164
============ ============ ============ ==============
</TABLE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
A. FINANCIAL STATEMENTS
The following financial statements of the Company are included in Part B
hereof:
Audited Consolidated Financial Statements:
1. Report of Independent Auditors
2. Consolidated Balance Sheets - as of December 31, 1996 and 1995.
3. Consolidated Statements of Income - for the years ended December 31,
1996, 1995, and 1994.
4. Consolidated Statements of Changes in Stockholder's Equity - for the
years ended December 31, 1996, 1995, and 1994.
5. Consolidated Statements of Cash Flows - for the years ended December
31, 1996, 1995, and 1994.
6. Notes to Consolidated Financial Statements - December 31, 1996.
Schedules to Consolidated Financial Statements - December 31, 1996:
Schedule I - Summary of Investments Other Than Investment in
Related Parties
Schedule III - Supplementary Insurance Information
Schedule IV - Reinsurance
All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under
the related instructions or are inapplicable and therefore have been omitted.
The following financial statements of the Separate Account are included in
Part B hereof:
Audited Financial Statements:
1. Statements of Net Assets - Equi-Select Product - December 31, 1996.
2. Statements of Operations - Equi-Select Product - For the year ended
December 31, 1996.
3. Statements of Changes in Net Assets - Equi-Select Product - For the
years ended December 31, 1995 and 1996.
4. Notes to Financial Statements - Equi-Select Product - December 31,
1996.
5. Statements of Net Assets - PrimElite Product - December 31, 1996.
6. Statements of Operations - PrimElite Product - For the year
ended December 31, 1996.
7. Statements of Changes in Net Assets - PrimElite Product - For the
years ended December 31, 1995 and 1996.
8. Notes to Financial Statements - PrimElite Product - December 31,
1996.
B. EXHIBITS
1. Resolution of Board of Directors of the Company authorizing the
establishment of the Separate Account.**
2. Not Applicable.
3. Principal Underwriter's Agreement dated October 1, 1994 between
Equitable Life Insurance Company of Iowa on behalf of the Registrant
and Equitable of Iowa Securities Network, Inc.**
4. Individual Flexible Purchase Payment Deferred Variable Annuity
Contract.**
5. Application Form.**
6. (i) Copy of Restated Articles of Incorporation of the Company.*
(ii) Copy of the Restated Bylaws of the Company.*
7. Not Applicable.
8. (i) Form of Fund Participation Agreement between the Company and
Smith Barney/Travelers Series Fund, Inc.*
(ii) Form of Fund Participation Agreement between the Company
and Warburg Pincus Trust.***
(iii)Form of Fund Participation Agreement between the Company and
Smith Barney Concert Allcation Series Inc. (to be filed by
Amendment).
9. Opinion and Consent of Counsel.
10. Consent of Independent Auditors.
11. Not Applicable.
12. (i) Agreement Governing Initial Contribution to Equi-Select Series
Trust by Equitable Life Insurance Company of Iowa dated
September 15, 1994.**
(ii) Agreement Governing Contribution of Working Capital to
Equi-Select Series Trust by Equitable Life Insurance Company of
Iowa dated October 4, 1994.**
(iii) Agreement Governing Initial Contribution to Equi-Select Series
Trust by Equitable Life Insurance Company of Iowa dated March
20, 1996.**
(iv) Agreement Governing Contribution of Working Capital to
Equi-Select Series Trust by Equitable Life Insurance Company of
Iowa dated April 1, 1996.**
13. Not Applicable
14. Company Organizational Chart.***
* Incorporated by reference to Registrant's Post-Effective Amendment No. 3 as
filed electronically on February 9, 1996.
**Incorporated by reference to Registrant's Post-Effective Amendment No. 4 as
filed electronically on March 29, 1996.
***Incorporated by reference to Registrant's Post-Effective Amendment No. 5 as
filed electronically on January 31, 1997.
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
The following are the Executive Officers and Directors of the
Company:
<TABLE>
<CAPTION>
<S> <C>
Name and Principal Position and Offices
Business Address with Depositor
- ------------------------ ----------------------------------------
Frederick S. Hubbell President, Chairman of the Board, Chief
604 Locust Street Executive Officer and Director
Des Moines, Iowa 50309
Paul E. Larson Executive Vice President, Chief Financial
604 Locust Street Officer, Assistant Secretary and Director
Des Moines, Iowa 50309
Doug Lourens Vice President, Corporate Actuary
604 Locust Street and Assistant Secretary
Des Moines, Iowa 50309
Beth B. Neppl Vice President-
604 Locust Street Human Resources and Director
Des Moines, Iowa 50309
Dennis D. Hargens Treasurer
604 Locust Street
Des Moines, Iowa 50309
Paul R. Schlaack Director
604 Locust Street
Des Moines, Iowa 50309
John A. Merriman General Counsel, Secretary
604 Locust Street and Director
Des Moines, Iowa 50309
Terry L. Kendall Executive Vice President and Director
1001 Jefferson Street, Suite 400
Wilmington, Delaware 19801
Jerome L. Sychowski Senior Vice President and Chief
604 Locust Street Information Officer and Director
Des Moines, Iowa 50309
David A. Terwilliger Vice President, Controller, Assistant
604 Locust Street Treasurer and Assistant Secretary
Des Moines, Iowa 50309
Arthur E. Kent Senior Vice President - Sales and
604 Locust Street Marketing
Des Moines, Iowa 50309
Lawrence V. Durland, Jr. Senior Vice President, Assistant
604 Locust Street Secretary and Director
Des Moines, Iowa 50309
Thomas L. May Senior Vice President - Marketing
604 Locust Street and Director
Des Moines, Iowa 50309
</TABLE>
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
The Company organizational chart was filed as Exhibit 14 in
Post-Effective Amendment No.5 and is incorporated herein by reference.
ITEM 27. NUMBER OF CONTRACT OWNERS
As of March 31, 1997, there were 6,538 Qualified Contract Owners and 8,042
Non-Qualified Contract Owners.
ITEM 28. INDEMNIFICATION
The Restated Articles of Incorporation of the Company (Article VII)
provide, in part, that:
Section 1. In the manner and to the fullest extent permitted by the Iowa
Business Corporation Act as the same now exists or may hereafter be amended,
the Corporation shall indemnify directors, officers, employees and agents and
shall pay or reimburse them for reasonable expenses in any proceeding to which
said person is or was a party.
Section 2. A director of this Corporation shall not be personally liable to
the Corporation or its shareholders for monetary damages for breach of
fiduciary duty as a Director, except for liability (i) for any breach of any
duty of the Director of loyalty to the Corporation or its shareholders, (ii)
for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) for any transaction from which
the Director derived an improper personal benefit, or (iv) under Section
490.833 of the Iowa Business Corporation Act for assenting to or voting for an
unlawful distribution. If Chapter 490 of the Code of Iowa, is subsequently
amended to authorize corporate action further eliminating or limiting personal
liability of directors, then the liability of a director to the Corporation
shall be eliminated or limited to the fullest extent permitted by Chapter 490
of the Code of Iowa, as so amended. Any repeal or modification of the
provisions of this Article shall not adversely affect any right or protection
of a director of the Corporation existing at the time of such repeal or
modification.
The Restated Bylaws of the Company (Article VI, Section 2) provide that:
Any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceedings, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Corporation) by reason of the fact that he is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or enterprise, shall be
indemnified to the following extent and under the following circumstances:
(a) In an action, suit or proceeding other than an action by or in the
right of the Corporation, such person shall be indemnified against expenses
(including attorney's fees), judgments, fines, and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit
or proceeding if he acted in good faith and in a manner he reasonably believed
to be in the best interests of the Corporation, in the case of conduct in his
official capacity with the Corporation, or, in all other cases, at least not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, if he had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding
judgment, order, settlement, conviction or upon a plea of nolo contendere or
its equivalent shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be in or
not opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his
conduct was unlawful.
(b) In an action, suit or proceedings by or in the right of the
Corporation, notwithstanding any provision precluding liability in the
Articles of Incorporation, such person shall nonetheless be indemnified
against expenses (including attorney's fees) actually and reasonably incurred
by him in connection with the defense or settlement of such action or suit if
he acted in good faith and in a manner he reasonably believed to be in the
best interests of the Corporation, in the case of conduct in his official
capacity with the Corporation, or, in all other cases, at least not opposed to
the best interests of the Corporation, except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable for negligence or misconduct in the
performance of his duty to the Corporation unless and only to the extent that
the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability, but in view of all
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which such court shall deem proper.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted directors and officers or controlling persons of the
Company pursuant to the foregoing, or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company
in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the Company will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Not Applicable.
(b) Equitable of Iowa Securities Network, Inc. ("Securities Network") is the
principal underwriter for the Contracts. The following persons are the
officers and directors of Securities Network. The principal business address
for each officer and director of Securities Network is 604 Locust Street, Des
Moines, Iowa 50309.
<TABLE>
<CAPTION>
<S> <C>
Name and Principal Positions and Offices
Business Address with Underwriter
- ------------------- ---------------------
William L. Lowe President
Lawrence V. Durland, Jr. Director
Frederick S. Hubbell Director
Paul E. Larson Director
Terry L. Kendall Director
Jerome L. Sychowski Director
Thomas L. May Director
John A. Merriman Director and Secretary
Paul R. Schlaack Director
Edward J. Berkson Vice President
Susan K. Wheat Treasurer
Beth B. Neppl Director
</TABLE>
(c) Not Applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
David A. Terwilliger, Vice President and Controller, whose address is 604
Locust Street, Des Moines, Iowa 50309, maintains physical possession of the
accounts, books or documents of the Separate Account required to be maintained
by Section 31(a) of the Investment Company Act of 1940 and the rules
promulgated thereunder.
ITEM 31. MANAGEMENT SERVICES
Not Applicable.
ITEM 32. UNDERTAKINGS
a. Registrant hereby undertakes to file a post-effective amendment to
this registration statement as frequently as is necessary to ensure that the
audited financial statements in the registration statement are never more than
sixteen (16) months old for so long as payment under the variable annuity
contracts may be accepted.
b. Registrant hereby undertakes to include either (1) as part of any
application to purchase a contract offered by the Prospectus, a space that an
applicant can check to request a Statement of Additional Information, or (2) a
postcard or similar written communication affixed to or included in the
Prospectus that the applicant can remove to send for a Statement of Additional
Information.
c. Registrant hereby undertakes to deliver any Statement of Additional
Information and any financial statement required to be made available under
this Form promptly upon written or oral request.
d. Equitable Life Insurance Company of Iowa ("Company") hereby
represents that the fees and charges deducted under the Contract described in
the Prospectus, in the aggregate, are reasonable in relation to the services
rendered, the expenses to be incurred and the risks assumed by the Company.
REPRESENTATIONS
The Company hereby represents that it is relying upon a No-Action Letter
issued to the American Council of Life Insurance dated November 28, 1988
(Commission ref. IP-6-88) and that the following provisions have been complied
with:
1. Include appropriate disclosure regarding the redemption restrictions
imposed by Section 403(b)(11) in each registration statement, including the
prospectus, used in connection with the offer of the contract;
2. Include appropriate disclosure regarding the redemption restrictions
imposed by Section 403(b)(11) in any sales literature used in connection with
the offer of the contract;
3. Instruct sales representatives who solicit participants to purchase
the contract specifically to bring the redemption restrictions imposed by
Section 403(b)(11) to the attention of the potential participants;
4. Obtain from each plan participant who purchases a Section 403(b)
annuity contract, prior to or at the time of such purchase, a signed statement
acknowledging the participant's understanding of (1) the restrictions on
redemption imposed by Section 403(b)(11), and (2) other investment
alternatives available under the employer's Section 403(b) arrangement to
which the participant may elect to transfer his contract value.
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant certifies that it meets the requirements of Securities
Act Rule 485(b) for effectiveness of this Registration Statement and has
caused this Registration Statement to be signed on its behalf, in the City of
Des Moines, and State of Iowa on this 30th day of April, 1997.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
Registrant
By: EQUITABLE LIFE INSURANCE COMPANY OF IOWA
By: /S/ FRED S. HUBBELL
___________________________________________
Fred S. Hubbell, Chairman of the Board and
Chief Executive Officer
By: EQUITABLE LIFE INSURANCE COMPANY OF IOWA
Depositor
By: /S/ FRED S. HUBBELL
___________________________________________
Fred S. Hubbell, Chairman of the Board and
Chief Executive Officer
As required by the Securities Act of 1933, this Registration Statement has
been signed by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
President, Chairman of the
/S/ FRED S. HUBBELL Board and Chief Executive 4-30-97
- ------------------------- -------
Fred S. Hubbell Officer and Director Date
Executive Vice President,
Paul E. Larson* Chief Financial Officer, 4-30-97
- ------------------------- -------
Paul E. Larson Assistant Secretary and Director Date
Senior Vice President-
Thomas L. May* Marketing and Director 4-30-97
- ------------------------- -------
Thomas L. May Date
Paul R. Schlaack* Director 4-30-97
- ------------------------- -------
Paul R. Schlaack Date
General Counsel, Secretary
John A. Merriman* and Director 4-30-97
- ------------------------- -------
John A. Merriman Date
Senior Vice President,
Lawrence V. Durland, Jr.* Assistant Secretary and 4-30-97
- ------------------------- Director -------
Lawrence V. Durland, Jr. Date
Senior Vice President, Chief
Jerome L. Sychowski* Information Officer and 4-30-97
- ------------------------- Director -------
Jerome L. Sychowski Date
Vice President- Human Resources
Beth B. Neppl* and Director 4-30-97
- ------------------------- -------
Beth B. Neppl Date
- ------------------------- Executive Vice President -------
Terry L. Kendall and Director Date
</TABLE>
*By: /S/ FRED S. HUBBELL
-------------------------------------
Fred S. Hubbell, Attorney-in-Fact
EXHIBITS
TO
POST-EFFECTIVE AMENDMENT NO. 6
TO
FORM N-4
FOR
EQUITABLE LIFE INSURANCE COMPANY OF IOWA SEPARATE ACCOUNT A
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
INDEX TO EXHIBITS
EXHIBIT PAGE
99.B9 Opinion and Consent of Counsel
99.B10 Consent of Independent Auditors
[Letterhead of Blazzard, Grodd, & Hasenauer, P.C.]
Blazzard, Grodd & Hasenauer, P.C.
943 Post Road East
P.O. BOX 5108
Westport, CT 06881-5108
(203) 226-7866
April 29, 1997
Board of Directors
Equitable Life Insurance Company of Iowa
604 Locust Street
Des Moines, Iowa 50309
RE: Opinion of Counsel - Equitable Life
Insurance Company of Iowa Separate Account A
Gentlemen:
You have requested our Opinion of Counsel in connection with the filing with
the Securities and Exchange Commission of a Registration Statement on Form N-4
for the Individual Flexible Purchase Payment Deferred Variable and Fixed
Annuity Contracts (the "Contracts") to be issued by Equitable Life Insurance
Company of Iowa and its separate account, Equitable Life Insurance Company
of Iowa Separate Account A.
We have made such examination of the law and have examined such records and
documents as in our judgment are necessary or appropriate to enable us to
render the opinions expressed below.
We are of the following opinions:
1. Equitable Life Insurance Company of Iowa Separate Account A is a
Unit Investment Trust as that term is defined in Section 4(2) of the Investment
Company Act of 1940 (the "Act"), and is currently registered with the
Securities and Exchange Commission, pursuant to Section 8(a) of the Act.
2. Upon the acceptance of purchase payments made by an Owner pursuant to
a Contract issued in accordance with the Prospectus contained in the
Registration Statement and upon compliance with applicable law, such an Owner
will have a legally-issued, fully paid, non-assessable contractual interest
under such Contract.
You may use this opinion letter, or a copy thereof, as an exhibit to the
Registration Statement.
We consent to the reference to our Firm under the caption "Legal Opinions"
contained in the Statement of Additional Information which forms a part of the
Registration Statement.
Sincerely,
BLAZZARD, GRODD & HASENAUER, P.C.
By: /S/ RAYMOND A. O'HARA III
_____________________________________
Raymond A. O'Hara III
EXHIBIT 10 - CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our reports dated February 11, 1997, with respect to Equitable
Life Insurance Company of Iowa and each account within Equitable Life
Insurance Company of Iowa Separate Account A in Post-Effective Amendment
No. 6 to the Registration Statement (Form N-4 No. 33-79170) and related
Prospectus of Equitable Life Insurance Company of Iowa Separate Account A.
/s/ ERNST & YOUNG LLP
Ernst & Young LLP
Des Moines, Iowa
April 24, 1997
