Registration No. 333-64751
Registration No. 811-08754
- -------------------------------------------------------------------------------
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. 2 [X]
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 20 [X]
(Check appropriate box or boxes)
-------------------------
SEPARATE ACCOUNT No. 45
of
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
(Exact Name of Registrant)
-------------------------
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
(Name of Depositor)
1290 Avenue of the Americas, New York, New York 10104
(Address of Depositor's Principal Executive Offices)
Depositor's Telephone Number, including Area Code: (212) 554-1234
-------------------------
MARY JOAN HOENE
VICE PRESIDENT AND COUNSEL
The Equitable Life Assurance Society of the United States
1290 Avenue of the Americas, New York, New York 10104
(Name and Address of Agent for Service)
-------------------------
Please send copies of all communications to:
PETER E. PANARITES
Freedman, Levy, Kroll & Simonds
1050 Connecticut Avenue, N.W., Suite 825
Washington, D.C. 20036
-------------------------
<PAGE>
Approximate Date of Proposed Public Offering: Continuous.
It is proposed that this filing will become effective (check
appropriate box):
[X] Immediately upon filing pursuant to paragraph (b) of Rule 485 .
[ ] On (date) 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 box:
[ ] This post-effective amendment designates a new effective date for
previously filed post-effective amendment.
Title of Securities Being Registered:
Units of interest in Separate Account under variable annuity contracts.
<PAGE>
SUBSTITUTION OF NEW PORTFOLIOS OF EQ ADVISORS TRUST
FOR PORTFOLIOS OF THE HUDSON RIVER TRUST
Supplement dated August 30, 1999
to prospectuses dated before May 1, 1999, and Supplemented as of May 1, 1999;
and prospectuses dated May 1, 1999 or later
for all Variable Annuity Contracts and Variable Life Insurance Policies
issued by
The Equitable Life Assurance Society of the United States
- --------------------------------------------------------------------------------
This supplement relates to our prospectuses for VARIABLE ANNUITY CONTRACTS and
VARIABLE LIFE INSURANCE POLICIES.
Currently, the variable investment options invest in Class IA or IB shares of
the corresponding Portfolios of The Hudson River Trust or EQ Advisors Trust.
The Securities and Exchange Commission has published a notice of our filing
of an application for an order approving the Substitution of new Portfolios of
EQ Advisors Trust for Portfolios of The Hudson River Trust. The new Portfolios
that will be available under your contract or policy will replace each of The
Hudson River Trust Portfolios currently available under this contract or policy.
We expect the order to be issued in September 1999. The proposed Substitution is
discussed in the applicable prospectus or supplement dated May 1, 1999 or later.
We plan to effect the Substitution on or about October 1, 1999. At that time,
the assets of each of the Portfolios of The Hudson River Trust will be
transferred to the corresponding new Portfolios of EQ Advisors Trust. Class IA
and Class IB shares of The Hudson River Trust will become Class IA and Class IB
shares of EQ Advisors Trust. At the time the Substitution is effected, the value
of your variable investment options under a contract or policy will be the same
as immediately before the Substitution.
We will send you written confirmation that the Substitution has been completed.
After that, your investment results in any affected variable investment option
will be based on the investment performance of the corresponding EQ Advisors
Trust Portfolio. The Hudson River Trust Portfolios will no longer be available.
The management fees for the new Portfolios will be the same as those for the
corresponding Portfolios of The Hudson River Trust. It is expected that the
other Portfolio expenses may increase marginally by 0.01%.
Of course, you may make transfers among the investment options, as usual. From
now through 30 days after the Substitution, we will waive any applicable
charges.
If you have any questions regarding the Substitution, please communicate with us
directly or contact your registered representative.
Copyright 1999 The Equitable Life Assurance Society of the United States.
All rights reserved.
888-1217
<PAGE>
EQUITABLE ACCUMULATOR
PLUS(SM)
A variable deferred annuity contract
Prospectus dated September 2, 1999
Please read and keep this prospectus for future reference. It contains
important information that you should know before purchasing or taking any
other action under your contract. Also, at the end of this prospectus you will
find attached the prospectuses for The Hudson River Trust and EQ Advisors
Trust, which contain important information about their portfolios.
- --------------------------------------------------------------------------------
WHAT IS THE EQUITABLE ACCUMULATOR PLUS?
Equitable Accumulator Plus is a deferred annuity contract issued by THE
EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES. It provides for the
accumulation of retirement savings and for income. The contract offers death
benefit protection and a number of payout options. You invest to accumulate
value on a tax-deferred basis in one or more of our variable investment
options. This contract may not currently be available in all states.
- --------------------------------------------------------------------------------
VARIABLE INVESTMENT OPTIONS
- --------------------------------------------------------------------------------
FIXED INCOME OPTIONS:
- --------------------------------------------------------------------------------
Domestic Fixed Income Aggressive Fixed Income
- --------------------------------------------------------------------------------
o Alliance Money Market o Alliance High Yield
o Alliance Intermediate
Government Securities
- --------------------------------------------------------------------------------
EQUITY OPTIONS:
- --------------------------------------------------------------------------------
Domestic Equity International Equity
- --------------------------------------------------------------------------------
o T. Rowe Price Equity Income o Alliance Global
o Alliance Growth & Income o Alliance International
o MFS Growth with Income o T. Rowe Price International
o BT Equity 500 Index Stock
o Merrill Lynch Basic Value Equity o Morgan Stanley Emerging
o Alliance Common Stock Markets Equity
o MFS Research o BT International Equity Index
o EQ/Alliance Premier Growth
o Capital Guardian Research
o Capital Guardian U.S. Equity
- --------------------------------------------------------------------------------
Aggressive Equity
- --------------------------------------------------------------------------------
o BT Small Company Index o Alliance Small Cap Growth
o Alliance Aggressive Stock o MFS Emerging Growth
o EQ/Evergreen Companies
o Warburg Pincus Small Company
Value
- --------------------------------------------------------------------------------
ASSET ALLOCATION OPTIONS:
- --------------------------------------------------------------------------------
o Alliance Conservative Investors o Alliance Growth Investors
o EQ/Evergreen Foundation o Merrill Lynch World Strategy
- --------------------------------------------------------------------------------
You may allocate amounts to any of the variable investment options. They, in
turn, invest in a corresponding securities portfolio ("Portfolio") of The
Hudson River Trust or EQ Advisors Trust. Your investment results in a variable
investment option will depend on the investment performance of the related
Portfolio. Each variable investment option is a subaccount of our Separate
Account No. 45.
TYPES OF CONTRACTS. We offer the contracts for use as:
o A nonqualified annuity ("NQ") for after-tax contributions only.
o An individual retirement annuity ("IRA"), either traditional IRA ("Rollover
IRA") or Roth IRA ("Roth Conversion IRA").
o An annuity that is an investment vehicle for a qualified defined
contribution or defined benefit plan ("QP").
A contribution of at least $25,000 is required to purchase a contract. We add
an amount ("credit") to your contract with each contribution you make.
A registration statement relating to this offering has been filed with the
Securities and Exchange Commission ("SEC"). The statement of additional
information ("SAI") dated September 2, 1999 is a part of the registration
statement.
The SAI is available free of charge. You may request one by writing to our
Processing Office or calling 1-800-789-7771. The SAI has been incorporated by
reference into this prospectus. This prospectus and the SAI can also be
obtained from the SEC's Web site at http://www.sec.gov. The table of contents
for the SAI appears at the back of this prospectus.
THE SEC HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE. THE CONTRACTS ARE NOT INSURED BY THE FDIC OR ANY OTHER
AGENCY. THEY ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK AND ARE NOT
BANK GUARANTEED. THEY ARE SUBJECT TO INVESTMENT RISKS AND POSSIBLE LOSS OF
PRINCIPAL.
<PAGE>
- --------------------------------------------------------------------------------
2 CONTENTS OF THIS PROSPECTUS
- --------------------------------------------------------------------------------
CONTENTS OF THIS PROSPECTUS
- --------------------------------------------------------------------------------
EQUITABLE ACCUMULATOR PLUS(SM)
- --------------------------------------------------------------------------------
Index of key words and phrases 4
Who is Equitable Life? 5
How to reach us 6
Equitable Accumulator Plus at a glance - key features 8
- --------------------------------------------------------------------------------
FEE TABLE 10
- --------------------------------------------------------------------------------
Examples 13
1
- --------------------------------------------------------------------------------
CONTRACT FEATURES AND BENEFITS 15
- --------------------------------------------------------------------------------
How you can purchase and contribute to your contract 15
Owner and annuitant requirements 17
How you can make your contributions 17
What are your variable investment options under the
contract? 17
Allocating your contributions 20
Credits 20
Guaranteed minimum death benefit 20
Your right to cancel within a certain number of days 21
2
- --------------------------------------------------------------------------------
DETERMINING YOUR CONTRACT'S VALUE 22
- --------------------------------------------------------------------------------
Your account value 22
Your contract's value in the variable investment options 22
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
"We," "our" and "us" refer to Equitable Life.
When we address the reader of this prospectus with words such as "you" and
"your," we mean the person who has the right or responsibility that the
prospectus is discussing at that point. This is usually the contract owner.
When we use the word "contract" it also includes certificates that are issued
under group contracts in some states.
<PAGE>
- --------------------------------------------------------------------------------
CONTENTS OF THIS PROSPECTUS 3
- --------------------------------------------------------------------------------
3
- --------------------------------------------------------------------------------
TRANSFERRING YOUR MONEY AMONG THE
VARIABLE INVESTMENT OPTIONS 23
- --------------------------------------------------------------------------------
Transferring your account value 23
Dollar cost averaging your account value 23
Rebalancing your account value 23
4
- --------------------------------------------------------------------------------
ACCESSING YOUR MONEY 25
- --------------------------------------------------------------------------------
Withdrawing your account value 25
How withdrawals are taken from your account value 26
How withdrawals affect your guaranteed minimum death
benefit 26
Surrendering your contract to receive its cash value 27
When to expect payments 27
Choosing your annuity payout options 27
5
- --------------------------------------------------------------------------------
CHARGES AND EXPENSES 31
- --------------------------------------------------------------------------------
Charges that Equitable Life deducts 31
Charges that the trusts deduct 33
Group or sponsored arrangements 33
6
- --------------------------------------------------------------------------------
PAYMENT OF DEATH BENEFIT 34
- --------------------------------------------------------------------------------
Your beneficiary and payment of benefit 34
How death benefit payment is made 34
Beneficiary continuation option for Rollover IRA contracts 35
7
- --------------------------------------------------------------------------------
TAX INFORMATION 35
- --------------------------------------------------------------------------------
Overview 36
Transfers among variable investment options 36
Taxation of nonqualified annuities 36
Special rules for NQ contracts issued in Puerto Rico 37
Individual retirement arrangements (IRAs) 38
Special rules for nonqualified contracts in qualified plans 46
Federal and state income tax withholding and
information reporting 46
Impact of taxes to Equitable Life 47
8
- --------------------------------------------------------------------------------
MORE INFORMATION 48
- --------------------------------------------------------------------------------
About our Separate Account No. 45 48
About The Hudson River Trust and EQ Advisors Trust 48
About the general account 49
About other methods of payment 49
Dates and prices at which contract events occur 50
About your voting rights 50
About our year 2000 progress 51
About legal proceedings 52
About our independent accountants 52
Transfers of ownership, collateral assignments, loans,
and borrowing 52
Distribution of the contracts 52
9
- --------------------------------------------------------------------------------
INVESTMENT PERFORMANCE 53
- --------------------------------------------------------------------------------
Benchmarks 53
Communicating performance data 62
- --------------------------------------------------------------------------------
APPENDICES
- --------------------------------------------------------------------------------
I -- Purchase considerations for QP contracts A-1
II - Guaranteed minimum death benefit example B-1
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
4 CONTENTS OF THIS PROSPECTUS
- --------------------------------------------------------------------------------
Index of key words and phrases
- --------------------------------------------------------------------------------
This index should help you locate more information on the terms used in this
prospectus.
PAGE IN
TERM PROSPECTUS
account value 22
annuitant 15
annuity payout option 27
beneficiary 34
business day 50
cash value 22
conduit IRA 41
contract date 9
contract date anniversary 9
contract year 9
contributions to Roth IRAs 44
rollover contributions 44
conversion contributions 44
direct custodian-to-custodian
transfers 44
contributions to traditional IRAs 38
rollover contributions 39
direct custodian-to-custodian
transfers 39
credit 20
PAGE IN
TERM PROSPECTUS
guaranteed minimum death benefit 20
IRA 38
IRS 36
NQ 36
participant 17
Portfolio cover
Processing Office 6
QP 46
recharacterized 39
Required Beginning Date 41
Rollover IRA cover
Roth IRA 43
Roth Conversion IRA cover
SAI cover
SEC cover
Substitution 48
TOPS 6
traditional IRA 38
unit 22
variable investment options 17
To make this prospectus easier to read, we sometimes use different words than in
the contract or supplemental materials. This is illustrated below. Although we
use different words, they have the same meaning in this prospectus as in the
contract or supplemental materials. Your Equitable associate can provide further
explanation about your contract or supplemental materials.
- --------------------------------------------------------------------------------
PROSPECTUS CONTRACT OR SUPPLEMENTAL MATERIALS
- --------------------------------------------------------------------------------
variable investment options Investment Funds
account value Annuity Account Value
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
CONTENTS OF THIS PROSPECTUS 5
- --------------------------------------------------------------------------------
WHO IS EQUITABLE LIFE?
We are The Equitable Life Assurance Society of the United States ("Equitable
Life"), a New York stock life insurance corporation. We have been doing business
since 1859. Equitable Life is a wholly owned subsidiary of The Equitable
Companies Incorporated ("Equitable Companies"), whose majority shareholder is
AXA, a French holding company for an international group of insurance and
related financial services companies. As a majority shareholder, and under its
other arrangements with Equitable Life and Equitable Life's parent, AXA
exercises significant influence over the operations and capital structure of
Equitable Life and its parent. No company other than Equitable Life, however,
has any legal responsibility to pay amounts that Equitable Life owes under the
contracts. In September 1999, Equitable Companies plans to change its name to
AXA Financial, Inc.
Equitable Companies and its consolidated subsidiaries managed approximately
$347.5 billion in assets as of December 31, 1998. For over 100 years we have
been among the largest insurance companies in the United States. We are licensed
to sell life insurance and annuities in all fifty states, the District of
Columbia, Puerto Rico, and the U.S. Virgin Islands. Our home office is located
at 1290 Avenue of the Americas, New York, N.Y. 10104.
<PAGE>
- --------------------------------------------------------------------------------
6 WHO IS EQUITABLE LIFE?
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HOW TO REACH US
- --------------------------------------------------------------------------------
You may communicate with our Processing Office as listed below for any of the
following purposes:
- --------------------------------------------------------------------------------
FOR CONTRIBUTIONS SENT BY REGULAR MAIL:
- --------------------------------------------------------------------------------
Equitable Accumulator Plus
P.O. Box 13014
Newark, NJ 07188-0014
- --------------------------------------------------------------------------------
FOR CONTRIBUTIONS SENT BY EXPRESS DELIVERY:
- --------------------------------------------------------------------------------
Equitable Accumulator Plus
c/o Bank One, N.A.
300 Harmon Meadow Boulevard, 3rd Floor
Attn: Box 13014
Secaucus, NJ 07094
- --------------------------------------------------------------------------------
FOR ALL OTHER COMMUNICATIONS (E.G., REQUESTS FOR TRANSFERS, WITHDRAWALS, OR
REQUIRED NOTICES) SENT BY REGULAR MAIL:
- --------------------------------------------------------------------------------
Equitable Accumulator Plus
P.O. Box 1547
Secaucus, NJ 07096-1547
- --------------------------------------------------------------------------------
FOR ALL OTHER COMMUNICATIONS (E.G., REQUESTS FOR TRANSFERS, WITHDRAWALS, OR
REQUIRED NOTICES) SENT BY EXPRESS DELIVERY:
- --------------------------------------------------------------------------------
Equitable Accumulator Plus
200 Plaza Drive, 4th Floor
Secaucus, NJ 07094
- --------------------------------------------------------------------------------
REPORTS WE PROVIDE:
- --------------------------------------------------------------------------------
o written confirmation of financial transactions;
o statement of your contract values at the close of each calendar quarter (four
per year);
o annual statement of your contract values as of the close of the contract
year.
- --------------------------------------------------------------------------------
TELEPHONE OPERATED PROGRAM SUPPORT
("TOPS") SYSTEM
- --------------------------------------------------------------------------------
TOPS is designed to provide you with up-to-date information via touch-tone
telephone. You can obtain information on:
o your current account value;
o your current allocation percentages;
o the number of units you have in the variable investment options; and
o the daily unit values for the variable investment options.
You can also:
o change your allocation percentages and/or transfer among the variable
investment options; and
o obtain or change your personal identification number (PIN).
TOPS is normally available seven days a week, 24 hours a day, by calling toll
free 1-888-909-7770. Of course, for reasons beyond our control, the service may
sometimes be unavailable.
We have established procedures to reasonably confirm that the instructions
communicated by telephone are genuine. For example, we will require certain
personal identification information before we will act on telephone instructions
and we will provide written confirmation of your transfers. We will not be
liable for following telephone instructions we reasonably believe to be genuine.
- --------------------------------------------------------------------------------
BY INTERNET:
- --------------------------------------------------------------------------------
You can also access information about your contract on the Internet. Please
visit our Web site at http://www.equitable.com, and click on EQAccess.
<PAGE>
- --------------------------------------------------------------------------------
WHO IS EQUITABLE LIFE? 7
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CUSTOMER SERVICE REPRESENTATIVE:
- --------------------------------------------------------------------------------
You may also use our toll-free number (1-800-789-7771) to speak with one of our
customer service representatives. Our customer service representatives are
available on any business day from 8:30 a.m. until 5:30 p.m., Eastern time.
You should send all contributions, notices, and requests to our Processing
Office at the address above.
WE REQUIRE THAT THE FOLLOWING TYPES OF COMMUNICATIONS BE ON SPECIFIC FORMS WE
PROVIDE FOR THAT PURPOSE:
(1) conversion of a traditional IRA to a Roth Conversion IRA contract;
(2) election of the automatic investment program;
(3) election of the rebalancing program; and
(4) beneficiary continuation option election.
WE ALSO HAVE SPECIFIC FORMS THAT WE RECOMMEND YOU USE FOR THE FOLLOWING TYPES
OF REQUESTS:
(1) address changes;
(2) beneficiary changes;
(3) transfers between variable investment options;
(4) withdrawal requests;
(5) waiver of withdrawal charge;
(6) tax withholding election; and
(7) contract surrender.
TO CANCEL OR CHANGE ANY OF THE FOLLOWING WE REQUIRE WRITTEN NOTIFICATION
GENERALLY AT LEAST SEVEN CALENDAR DAYS BEFORE THE NEXT SCHEDULED TRANSACTION:
(1) automatic investment program;
(2) dollar cost averaging;
(3) rebalancing;
(4) substantially equal withdrawals;
(5) systematic withdrawals; and
(6) the date annuity payments are to begin.
You must sign and date all these requests. Any written request that is not on
one of our forms must include your name and your contract number along with
adequate details about the notice you wish to give or the action you wish us
to take.
SIGNATURES:
The proper person to sign forms, notices and requests would normally be the
owner. If there are joint owners both must sign.
<PAGE>
- --------------------------------------------------------------------------------
8 EQUITABLE ACCUMULATOR PLUS AT A GLANCE-- KEY FEATURES
- --------------------------------------------------------------------------------
EQUITABLE ACCUMULATOR PLUS
AT A GLANCE - KEY
FEATURES
<TABLE>
<CAPTION>
<S> <C>
- -------------------------------------------------------------------------------------------------------------------------
PROFESSIONAL Equitable Accumulator Plus' variable investment options invest in 28 different Portfolios
INVESTMENT managed by professional investment advisers.
MANAGEMENT
- -------------------------------------------------------------------------------------------------------------------------
TAX ADVANTAGES o On earnings inside the No tax on any dividends, interest or capital gains until you
contract make withdrawals from your contract or receive annuity
payments.
------------------------------------------------------------------------------------------------
o On transfers inside the No tax on transfers among variable investment options.
contract
------------------------------------------------------------------------------------------------
If you are buying a contract to fund a retirement plan that already provides tax deferral under
sections of the Internal Revenue Code (IRA and QP), you should do so for the contract's
features and benefits other than tax deferral. In such situations, the tax deferral of the
contract does not provide additional benefits.
- -------------------------------------------------------------------------------------------------------------------------
CONTRIBUTION AMOUNTS o Initial minimum: $25,000
o Additional minimum: $1,000
$100 monthly and $300 quarterly under our automatic
investment program (NQ contracts)
------------------------------------------------------------------------------------------------
Maximum contribution limitations may apply.
- -------------------------------------------------------------------------------------------------------------------------
CREDIT We allocate your contributions to your account value. We allocate a credit to your account
value at the same time that we allocate your contributions. The amount of the credit is
equal to 4% of each contribution. The credit is subject to recovery by us in certain limited
circumstances.
- -------------------------------------------------------------------------------------------------------------------------
ACCESS TO YOUR MONEY o Lump sum withdrawals
o Several withdrawal options on a periodic basis
o Contract surrender
You may incur a withdrawal charge for certain withdrawals or if you surrender your contract.
You may also incur income tax and a tax penalty.
- ------------------------------------------------------------------------------------------------------------------------
PAYOUT ALTERNATIVES o Annuity payout options
o Income Manager(Reg. TM) payout options
- ------------------------------------------------------------------------------------------------------------------------
ADDITIONAL FEATURES o Dollar cost averaging
o Automatic investment program
o Account value rebalancing (quarterly, semiannually, and annually)
o Unlimited free transfers
o Waiver of withdrawal charge for disability, terminal illness, or
confinement to a nursing home
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
EQUITABLE ACCUMULATOR PLUS AT GLANCE -- KEY FEATURES 9
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FEES AND CHARGES o Daily charges on amounts invested in variable
investment options for mortality and expense risks,
administrative, and distribution charges at an annual
rate of 1.60%.
o No sales charge deducted at the time you make
contributions and no annual contract fee.
o During the first nine contract years following a
contribution, a charge will be deducted from amounts
that you withdraw that exceed 15% of your account
value. We use the account value on the most recent
contract date anniversary to calculate the 15% amount
available. The charge is 8% in each of the first two
contract years following a contribution. It declines
each year beginning in the third contract year to 1%
in the ninth contract year. There is no withdrawal
charge in the tenth and later contract years
following a contribution.
-----------------------------------------------------
The 12-month period beginning on your contract date
and each 12-month period after that date is a
"contract year." The end of each 12-month period is
your "contract date anniversary." The "contract date"
is the effective date of a contract. This usually is
the business day we receive your initial
contribution. Your contract date will be shown in
your contract.
-----------------------------------------------------
o We deduct a charge for taxes such as premium taxes
that may be imposed in your state. This charge is
generally deducted from the amount applied to an
annuity payout option.
o We generally deduct a $350 annuity administrative fee
from amounts applied to purchase certain life annuity
payout options.
o Annual expenses of The Hudson River Trust and EQ
Advisors Trust Portfolios are calculated as a
percentage of the average daily net assets invested
in each Portfolio. These expenses include management
and advisory fees ranging from 0.25% to 1.15%
annually, 12b-1 fees of 0.25% and other expenses.
- --------------------------------------------------------------------------------
ANNUITANT ISSUE AGES NQ: 0-80
Rollover IRA and Roth Conversion
IRA: 20-78
QP: 20-70
- --------------------------------------------------------------------------------
THE ABOVE IS NOT A COMPLETE DESCRIPTION OF ALL MATERIAL PROVISIONS OF THE
CONTRACT. IN SOME CASES RESTRICTIONS OR EXCEPTIONS APPLY. ALSO, ALL FEATURES OF
THE CONTRACT ARE NOT NECESSARILY AVAILABLE IN YOUR STATE OR AT CERTAIN AGES.
For more detailed information we urge you to read the contents of this
prospectus, as well as your contract. Please feel free to speak with your
Equitable associate, or call us, if you have any questions.
<PAGE>
- --------------------------------------------------------------------------------
10 FEE TABLE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The fee table below will help you understand the various charges and expenses
that apply to your contract. The table reflects charges you will directly incur
under the contract, as well as charges and expenses of the Portfolios that you
will bear indirectly. Charges for taxes, such as premium taxes, may also apply.
Also, an annuity administrative fee may apply when your annuity payments are to
begin. Each of the charges and expenses is more fully described under "Charges
and expenses" later in this prospectus. For a complete description of Portfolio
charges and expenses, please see the attached prospectuses for The Hudson River
Trust and EQ Advisors Trust.
- --------------------------------------------------------------------------------
CHARGES WE DEDUCT FROM YOUR VARIABLE INVESTMENT OPTIONS EXPRESSED AS
AN ANNUAL PERCENTAGE OF DAILY NET ASSETS
- --------------------------------------------------------------------------------
Mortality and expense risks(1) 1.10%
Administrative(2) 0.25%
Distribution 0.25%
-----
Total annual expenses 1.60%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
CHARGES WE DEDUCT FROM YOUR ACCOUNT VALUE AT THE TIME YOU REQUEST CERTAIN
TRANSACTIONS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
WITHDRAWAL CHARGE AS A PERCENTAGE OF CONTRIBUTIONS (deducted if you Contract year
surrender your contract or make certain withdrawals. The withdrawal charge 1................ 8.00%
percentage we use is determined by the contract year in which you make the 2................ 8.00%
withdrawal or surrender your contract. For each contribution, we consider the 3................ 7.00%
contract year in which we receive that contribution to be "contract year 1")(3) 4................ 6.00%
5................ 5.00%
6................ 4.00%
7................ 3.00%
8................ 2.00%
9................ 1.00%
10+.............. 0.00%
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
THE HUDSON RIVER TRUST ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS IN EACH PORTFOLIO)
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL
ANNUAL
INVESTMENT EXPENSES
MANAGEMENT & OTHER (AFTER EXPENSE
ADVISORY FEES 12B-1 FEES(4) EXPENSES LIMITATION)(4)(5)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alliance Aggressive Stock 0.54% 0.25% 0.03% 0.82%
Alliance Common Stock 0.36% 0.25% 0.03% 0.64%
Alliance Conservative Investors 0.48% 0.25% 0.05% 0.78%
Alliance Global 0.64% 0.25% 0.07% 0.96%
Alliance Growth & Income 0.55% 0.25% 0.03% 0.83%
Alliance Growth Investors 0.51% 0.25% 0.04% 0.80%
Alliance High Yield 0.60% 0.25% 0.03% 0.88%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
FEE TABLE 11
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL
ANNUAL
INVESTMENT EXPENSES
MANAGEMENT & OTHER (AFTER EXPENSE
ADVISORY FEES 12B-1 FEES(4) EXPENSES LIMITATION)(4)(5)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alliance Intermediate Government
Securities 0.50% 0.25% 0.05% 0.80%
Alliance International 0.90% 0.25% 0.16% 1.31%
Alliance Money Market 0.35% 0.25% 0.02% 0.62%
Alliance Small Cap Growth 0.90% 0.24% 0.06% 1.20%
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
EQ ADVISORS TRUST ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS IN EACH PORTFOLIO)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL
OTHER ANNUAL
INVESTMENT EXPENSES EXPENSES
MANAGEMENT & (AFTER EXPENSE (AFTER EXPENSE
ADVISORY FEES 12B-1 FEES(4) LIMITATION)(6) LIMITATION)(6)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EQ/Alliance Premier Growth 0.90% 0.25% 0.00% 1.15%
BT Equity 500 Index 0.25% 0.25% 0.05% 0.55%
BT International Equity Index 0.35% 0.25% 0.40% 1.00%
BT Small Company Index 0.25% 0.25% 0.25% 0.75%
Capital Guardian Research 0.65% 0.25% 0.05% 0.95%
Capital Guardian U.S. Equity 0.65% 0.25% 0.05% 0.95%
EQ/Evergreen 0.75% 0.25% 0.05% 1.05%
EQ/Evergreen Foundation 0.63% 0.25% 0.07% 0.95%
MFS Emerging Growth Companies 0.55% 0.25% 0.05% 0.85%
MFS Growth with Income 0.55% 0.25% 0.05% 0.85%
MFS Research 0.55% 0.25% 0.05% 0.85%
Merrill Lynch Basic Value Equity 0.55% 0.25% 0.05% 0.85%
Merrill Lynch World Strategy 0.70% 0.25% 0.25% 1.20%
Morgan Stanley Emerging Markets
Equity 1.15% 0.25% 0.35% 1.75%
T. Rowe Price Equity Income 0.55% 0.25% 0.05% 0.85%
T. Rowe Price International Stock 0.75% 0.25% 0.20% 1.20%
Warburg Pincus Small Company
Value 0.65% 0.25% 0.10% 1.00%
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
- -------------
Notes:
(1) A portion of this charge is for providing the guaranteed minimum death
benefit.
(2) We reserve the right to increase this charge to a maximum annual rate of
0.35%.
(3) Deducted upon a withdrawal of amounts in excess of the 15% free withdrawal
amount and upon surrender of a contract.
(4) Portfolio shares are all subject to fees imposed under distribution
plans (the "Rule 12b-1 Plans") adopted by The Hudson River Trust and EQ
Advisors Trust pursuant to Rule 12b-1 under the Investment Company Act
of 1940, as amended. The
<PAGE>
- --------------------------------------------------------------------------------
12 FEE TABLE
- --------------------------------------------------------------------------------
12b-1 fee will not be increased for the life of the contracts. The Rule
12b-1 Plan for the Alliance Small Cap Growth Portfolio provides that EQ
Financial Consultants, Inc. ("EQF"), EQ Advisors Trust's manager, will
receive an annual fee not to exceed the lesser of (a) 0.25% of the average
daily net assets of the Portfolio attributable to Class IB shares and (b) an
amount that, when added to certain other expenses of the Class IB shares,
would result in the ratio of expenses to average daily net assets
attributable to Class IB shares equaling 1.20%. Absent the expense
limitation, the total annual expenses for 1998 for the Alliance Small Cap
Growth Portfolio would have been 1.21%.
(5) The fees and expenses shown for all Portfolios are for the year ended
December 31, 1998. The investment management and advisory fees for each
Portfolio of The Hudson River Trust may vary from year to year depending
upon the average daily net assets of the respective Portfolio. The maximum
investment management and advisory fees, however, cannot be increased
without a vote of that Portfolio's shareholders. See the prospectus for The
Hudson River Trust. The other direct operating expenses will also fluctuate
from year to year depending on actual expenses.
(6) The investment management and advisory fees for each Portfolio of EQ
Advisors Trust cannot be increased without a vote of that Portfolio's
shareholders. The amounts shown as "Other Expenses" will fluctuate from year
to year depending on actual expenses. However, EQF has entered into an
expense limitation agreement with respect to each Portfolio. Under this
agreement, EQF has agreed to waive or limit its fees and assume other
expenses. Under the expense limitation agreement, total annual operating
expenses of each Portfolio (other than interest, taxes, brokerage
commissions, capitalized expenditures, extraordinary expenses, and 12b-1
fees) are limited for the average daily net assets of each Portfolio as
follows: 0.90% for EQ/Alliance Premier Growth; 0.30% for BT Equity 500
Index; 0.75% for BT International Equity Index; 0.50% for BT Small Company
Index; 0.70% for Capital Guardian Research and Capital Guardian U.S. Equity;
0.80% for EQ/Evergreen; 0.70% for EQ/Evergreen Foundation; 0.60% for MFS
Emerging Growth Companies, MFS Growth with Income, MFS Research, and Merrill
Lynch Basic Value Equity; 0.95% for Merrill Lynch World Strategy; 1.50% for
Morgan Stanley Emerging Markets Equity; 0.60% for T. Rowe Price Equity
Income; 0.95% for T. Rowe Price International Stock; and 0.75% for Warburg
Pincus Small Company Value. The expenses shown for the BT International
Equity Index and BT Small Company Index Portfolios reflect an increase
effective on May 1, 1999.
Absent the expense limitation, the "Other Expenses" for 1998 on an
annualized basis for each of the Portfolios would have been as follows:
0.33% for BT Equity 500 Index; 0.89% for BT International Equity Index;
1.31% for BT Small Company Index; 0.24% for MFS Emerging Growth Companies;
0.25% for MFS Research; 0.26% for Merrill Lynch Basic Value Equity; 0.66%
for Merrill Lynch World Strategy; 1.23% for Morgan Stanley Emerging Markets
Equity; 0.24% for T. Rowe Price Equity Income; 0.40% for T. Rowe Price
International Stock; and 0.27% for Warburg Pincus Small Company Value. For
the following Portfolios, the "Other Expenses" for 1999, absent the expense
limitation, are estimated to be as follows: 0.74% for EQ/Alliance Premier
Growth, Capital Guardian Research, and Capital Guardian U.S. Equity; 0.76%
for EQ/Evergreen; 0.86% for EQ/Evergreen Foundation; 0.59% for MFS Growth
with Income. Initial seed capital was invested on December 31, 1998 for the
EQ/Evergreen, EQ/Evergreen Foundation, and MFS Growth with Income
Portfolios. The EQ/Alliance Premier Growth, Capital Guardian Research, and
Capital Guardian U.S. Equity Portfolios commenced operations on May 1, 1999.
Each Portfolio may at a later date make a reimbursement to EQF for any of
the management fees waived or limited and other expenses assumed and paid by
EQF pursuant to the expense limitation agreement provided that, among other
things, such Portfolio has reached sufficient size to permit such
reimbursement to be made and provided that the Portfolio's current annual
operating expenses do not exceed the operating expense limit determined for
such Portfolio. For more information see the prospectus for EQ Advisors
Trust.
<PAGE>
- --------------------------------------------------------------------------------
FEE TABLE 13
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EXAMPLES
The examples below show the expenses that a hypothetical contract owner would
pay in the situations illustrated. We assume that a $1,000 contribution plus a
$40 credit is invested in one of the variable investment options listed and a 5%
annual return is earned on the assets in that option.(1)
The examples should not be considered a representation of past or future
expenses for each option. Actual expenses may be greater or less than those
shown. Similarly, the annual rate of return assumed in the examples is not an
estimate or guarantee of future investment performance.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
IF YOU SURRENDER YOUR CONTRACT IF YOU DO NOT SURRENDER YOUR CONTRACT
AT THE END OF EACH PERIOD SHOWN, AT THE END OF EACH PERIOD SHOWN,
THE EXPENSES WOULD BE: THE EXPENSES WOULD BE:
-------------------------------------- -------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------------------------------------------------------------------------------------------------------------------
THE HUDSON RIVER TRUST OPTIONS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Alliance Aggressive Stock $105.52 $148.49 $184.16 $286.04 $25.52 $78.49 $134.16 $286.04
Alliance Common Stock $103.66 $142.91 $174.84 $267.39 $23.66 $72.91 $124.84 $267.39
Alliance Conservative Investors $105.10 $147.24 $182.09 $281.93 $25.10 $77.24 $132.09 $281.93
Alliance Global $106.96 $152.82 $191.36 $300.33 $26.96 $82.82 $141.36 $300.33
Alliance Growth & Income $105.62 $148.80 $184.67 $287.06 $25.62 $78.80 $134.67 $287.06
Alliance Growth Investors $105.31 $147.87 $183.12 $283.98 $25.31 $77.87 $133.12 $283.98
Alliance High Yield $106.14 $150.35 $187.26 $292.20 $26.14 $80.35 $137.26 $292.20
Alliance Intermediate Government Securities $105.31 $147.87 $183.12 $283.98 $25.31 $77.87 $133.12 $283.98
Alliance International $110.57 $163.59 $209.19 $335.22 $30.57 $93.59 $159.19 $335.22
Alliance Money Market $103.45 $142.28 $173.79 $265.29 $23.45 $72.28 $123.79 $265.29
Alliance Small Cap Growth $109.44 $160.22 $203.63 $324.39 $29.44 $90.22 $153.63 $324.39
- ------------------------------------------------------------------------------------------------------------------------------------
EQ ADVISORS TRUST OPTIONS
- ------------------------------------------------------------------------------------------------------------------------------------
EQ/Alliance Premier Growth $108.92 $158.67 -- -- $28.92 $88.67 -- --
BT Equity 500 Index $102.73 $140.10 $170.14 $257.93 $22.73 $70.10 $120.14 $257.93
BT International Equity Index $107.37 $154.05 $193.41 $304.38 $27.37 $84.05 $143.41 $304.38
BT Small Company Index $104.79 $146.31 $180.53 $278.81 $24.79 $76.31 $130.53 $278.81
Capital Guardian Research $106.86 $152.51 -- -- $26.86 $82.51 -- --
Capital Guardian U.S. Equity $106.86 $152.51 -- -- $26.86 $82.51 -- --
EQ/Evergreen $107.89 $155.60 -- -- $27.89 $85.60 -- --
EQ/Evergreen Foundation $106.86 $152.51 -- -- $26.86 $82.51 -- --
MFS Emerging Growth Companies $105.83 $149.42 $185.71 $289.13 $25.83 $79.42 $135.71 $289.13
MFS Growth with Income $105.83 $149.42 -- -- $25.83 $79.42 -- --
MFS Research $105.83 $149.42 $185.71 $289.13 $25.83 $79.42 $135.71 $289.13
Merrill Lynch Basic Value Equity $105.83 $149.42 $185.71 $289.13 $25.83 $79.42 $135.71 $289.13
Merrill Lynch World Strategy $109.44 $160.22 $203.63 $324.39 $29.44 $90.22 $153.63 $324.39
Morgan Stanley Emerging Markets Equity $115.11 $177.02 $231.25 $377.46 $35.11 $107.02 $181.25 $377.46
T. Rowe Price Equity Income $105.83 $149.42 $185.71 $289.13 $25.83 $79.42 $135.71 $289.13
T. Rowe Price International Stock $109.44 $160.22 $203.63 $324.39 $29.44 $90.22 $153.63 $324.39
Warburg Pincus Small Company Value $107.37 $154.05 $193.41 $304.38 $27.37 $84.05 $143.41 $304.38
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
14 FEE TABLE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) The amount accumulated from the $1,000 contribution plus the $40 credit
could not be paid in the form of an annuity payout option at the end of any
of the periods shown in the examples. This is because if the amount applied
to purchase an annuity payout option is less than $2,000, or the initial
payment is less than $20, we may pay the amount to you in a single sum
instead of as payments under an annuity payout option. See "Accessing your
money."
IF YOU ELECT AN ANNUITY PAYOUT OPTION:
Assuming an annuity payout option could be issued (see note (1) above), and you
elect a life annuity payout option, the expenses shown in the examples for "if
you do not surrender you contract" would, in each case, be increased by $4.43
based on the average amount applied to annuity payout options in 1998. See
"Annuity administrative fee" under "Charges and expenses."
<PAGE>
- --------------------------------------------------------------------------------
CONTRACT FEATURES AND BENEFITS 15
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HOW YOU CAN PURCHASE AND CONTRIBUTE TO YOUR CONTRACT
You may purchase a contract by making payments to us we call "contributions." We
require a minimum initial contribution of $25,000 for you to purchase a
contract. You may make additional contributions of at least $1,000 each, subject
to limitations noted below. The following table summarizes our rules regarding
contributions to your contract. All ages in the table refer to the age of the
annuitant named in the contract.
- --------------------------------------------------------------------------------
The "annuitant" is the person who is the measuring life for determining contract
benefits. The annuitant is not necessarily the contract owner.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
AVAILABLE
CONTRACT FOR ANNUITANT LIMITATIONS ON
TYPE ISSUE AGES SOURCE OF CONTRIBUTIONS CONTRIBUTIONS
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NQ 0 through 80 o After-tax money. o No additional contributions after
age 81.
o Paid to us by check or transfer of
contract value in a tax-deferred
exchange under Section 1035 of the
Internal Revenue Code.
- ----------------------------------------------------------------------------------------------------------------------------
Rollover IRA 20 through 78 o Rollovers from a qualified plan. o No additional rollover or direct
transfer contributions after age 79.
o Rollovers from a Tax-Sheltered
Annuity ("TSA").
o Contributions after age 70 1/2
o Rollovers from another must be net of required
traditional individual retirement minimum distributions.
arrangement.
o Regular IRA contributions are
o Direct custodian-to-custodian not permitted.
transfers from another
traditional individual retirement
arrangement.
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
16 CONTRACT FEATURES AND BENEFITS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
AVAILABLE
CONTRACT FOR ANNUITANT LIMITATIONS ON
TYPE ISSUE AGES SOURCE OF CONTRIBUTIONS CONTRIBUTIONS
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Roth 20 through 78 o Rollovers from another Roth o No additional rollover or direct
Conversion IRA. transfer contributions after
IRA age 79.
o Conversion rollovers from a
traditional IRA. o Conversion rollovers after
age 70 1/2 must be net of
o Direct transfers from another required minimum distributions
Roth IRA. for the traditional IRA you are
rolling over.
o You cannot roll over funds from
a traditional IRA if your adjusted
gross income is $100,000 or
more.
o Regular after-tax contributions
are not permitted.
- ----------------------------------------------------------------------------------------------------------------------------
QP 20 through 70 o Only transfer contributions from o Regular ongoing payroll
an existing qualified plan trust contributions are not permitted.
as a change of investment o Only one additional contribution
vehicle under the plan. may be made during a contract
o The plan must be qualified year.
under Section 401(a) of the o No additional transfer
Internal Revenue Code. contributions after age 71.
o For 401(k) plans, transferred o For defined benefit plans,
contributions may only include employee contributions are not
employee pre-tax contributions. permitted.
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
See "Tax information" for a more detailed discussion of sources of contributions
and certain contribution limitations. We may refuse to accept any contribution
if the sum of all contributions under all Equitable Accumulator contracts with
the same annuitant would then total more than $1,500,000. We may also refuse to
accept any contribution if the sum of all contributions under all Equitable Life
annuity accumulation contracts that you own would then total more than
$2,500,000.
For information on when contributions are credited under your contract see
"Dates and prices at which contract events occur" under "More information" later
in this prospectus.
<PAGE>
- --------------------------------------------------------------------------------
CONTRACT FEATURES AND BENEFITS 17
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
OWNER AND ANNUITANT REQUIREMENTS
Under NQ contracts, the annuitant can be different than the owner. A joint owner
may also be named. Only natural persons can be joint owners. This means that an
entity such as a corporation cannot be a joint owner.
Under Rollover IRA and Roth Conversion IRA contracts, the owner and annuitant
must be the same person.
Under QP contracts, the owner must be the trustee of the qualified plan and the
annuitant must be the plan participant/employee. See Appendix I for more
information on QP contracts.
- --------------------------------------------------------------------------------
A participant is an individual who is currently, or was formerly, participating
in an eligible employer's QP plan.
- --------------------------------------------------------------------------------
HOW YOU CAN MAKE YOUR CONTRIBUTIONS
Except as noted below, contributions must be by check drawn on a U.S. bank, in
U.S. dollars, and made payable to Equitable Life. We do not accept third-party
checks endorsed to us except for rollover contributions, tax-free exchanges or
trustee checks that involve no refund. All checks are subject to our ability to
collect the funds. We reserve the right to reject a payment if it is received in
an unacceptable form.
Additional contributions may also be made under our automatic investment
program. This method of payment is discussed in detail under "More information"
later in this prospectus.
Your initial contribution must generally be accompanied by an application and
any other form we need to process the payments. If any information is missing or
unclear, we will try to obtain that information. If we are unable to obtain all
of the information we require within five business days after we receive an
incomplete application or form, we will inform the Equitable associate
submitting the application on your behalf. We will then return the contribution
to you unless you specifically direct us to keep your contribution until we
receive the required information.
- --------------------------------------------------------------------------------
Our "business day" is any day the New York Stock Exchange is open for trading.
- --------------------------------------------------------------------------------
SECTION 1035 EXCHANGES
You may apply the value of an existing nonqualified deferred annuity contract
(or life insurance or endowment contract) to purchase an Equitable Accumulator
Plus NQ contract in a tax-free exchange if you follow certain procedures as
shown in the form that we require you to use. Also see "Tax information" later
in this prospectus.
WHAT ARE YOUR VARIABLE INVESTMENT OPTIONS UNDER THE CONTRACT?
Your investment results in any one of the 28 variable investment options will
depend on the investment performance of the underlying Portfolios. Listed below
are the currently available Portfolios, their investment objectives, and their
advisers.
- -------------------------------------------------------------------------------
You can choose from among 28 variable investment options.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
18 CONTRACT FEATURES AND BENEFITS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
PORTFOLIOS OF THE HUDSON RIVER TRUST
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PORTFOLIO NAME OBJECTIVE ADVISER
- ----------------------------------------------------------------------------------------------------------------------------
Alliance Aggressive Stock Long-term growth of capital Alliance Capital Management L.P.
- ----------------------------------------------------------------------------------------------------------------------------
Alliance Common Stock Long-term growth of capital and increasing Alliance Capital Management L.P.
income
- ----------------------------------------------------------------------------------------------------------------------------
Alliance Conservative Investors High total return without, in the adviser's Alliance Capital Management L.P.
opinion, undue risk to principal
- ----------------------------------------------------------------------------------------------------------------------------
Alliance Global Long-term growth of capital Alliance Capital Management L.P.
- ----------------------------------------------------------------------------------------------------------------------------
Alliance Growth & Income High total return through a combination of Alliance Capital Management L.P.
current income and capital appreciation
- ----------------------------------------------------------------------------------------------------------------------------
Alliance Growth Investors High total return consistent with the adviser's Alliance Capital Management L.P.
determination of reasonable risk
- ----------------------------------------------------------------------------------------------------------------------------
Alliance High Yield High return by maximizing current income and, Alliance Capital Management L.P.
to the extent consistent with that objective,
capital appreciation
- ----------------------------------------------------------------------------------------------------------------------------
Alliance Intermediate High current income consistent with relative Alliance Capital Management L.P.
Government Securities stability of principal
- ----------------------------------------------------------------------------------------------------------------------------
Alliance International Long-term growth of capital Alliance Capital Management L.P.
- ----------------------------------------------------------------------------------------------------------------------------
Alliance Money Market High level of current income while preserving Alliance Capital Management L.P.
assets and maintaining liquidity
- ----------------------------------------------------------------------------------------------------------------------------
Alliance Small Cap Growth Long-term growth of capital Alliance Capital Management L.P.
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
PORTFOLIOS OF EQ ADVISORS TRUST
- ----------------------------------------------------------------------------------------------------------------------------
PORTFOLIO NAME OBJECTIVE ADVISER
- ----------------------------------------------------------------------------------------------------------------------------
EQ/Alliance Premier Growth Long-term growth of capital Alliance Capital Management L.P.
- ----------------------------------------------------------------------------------------------------------------------------
BT Equity 500 Index Replicate as closely as possible (before deduction Bankers Trust Company
of Portfolio expenses) the total return of the
Standard & Poor's 500 Composite Stock Price
Index
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
CONTRACT FEATURES AND BENEFITS 19
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
PORTFOLIOS OF EQ ADVISORS TRUST
- ----------------------------------------------------------------------------------------------------------------------------
PORTFOLIO NAME OBJECTIVE ADVISER
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BT International Equity Index Replicate as closely as possible (before deduction Bankers Trust Company
of Portfolio expenses) the total return of the
Morgan Stanley Capital International Europe,
Australia, Far East Index
- -------------------------------------------------------------------------------------------------------------------------------
BT Small Company Index Replicate as closely as possible (before reduction Bankers Trust Company
of Portfolio expenses) the total return of the
Russell 2000 Index
- -------------------------------------------------------------------------------------------------------------------------------
Capital Guardian Research Long-term growth of capital Capital Guardian Trust Company
- -------------------------------------------------------------------------------------------------------------------------------
Capital Guardian U.S. Equity Long-term growth of capital Capital Guardian Trust Company
- -------------------------------------------------------------------------------------------------------------------------------
EQ/Evergreen Capital appreciation Evergreen Asset Management Corp.
- -------------------------------------------------------------------------------------------------------------------------------
EQ/Evergreen Foundation In order of priority, reasonable income, Evergreen Asset Management Corp.
conservation of capital, and capital appreciation
- -------------------------------------------------------------------------------------------------------------------------------
MFS Emerging Growth Long-term capital growth Massachusetts Financial Services Company
Companies
- -------------------------------------------------------------------------------------------------------------------------------
MFS Growth with Income Reasonable current income and long-term Massachusetts Financial Services Company
growth of capital and income
- -------------------------------------------------------------------------------------------------------------------------------
MFS Research Long-term growth of capital and future income Massachusetts Financial Services Company
- -------------------------------------------------------------------------------------------------------------------------------
Merrill Lynch Basic Value Equity Capital appreciation and secondarily, income Merrill Lynch Asset Management, L.P.
- -------------------------------------------------------------------------------------------------------------------------------
Merrill Lynch World Strategy High total investment return Merrill Lynch Asset Management, L.P.
- -------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Emerging Long-term capital appreciation Morgan Stanley Asset Management
Markets Equity
- -------------------------------------------------------------------------------------------------------------------------------
T. Rowe Price Equity Income Substantial dividend income and also capital T. Rowe Price Associates, Inc.
appreciation
- -------------------------------------------------------------------------------------------------------------------------------
T. Rowe Price International Stock Long-term growth of capital Rowe Price-Fleming International, Inc.
- -------------------------------------------------------------------------------------------------------------------------------
Warburg Pincus Small Company Long-term capital appreciation Warburg Pincus Asset Management, Inc.
Value
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
20 CONTRACT FEATURES AND BENEFITS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Other important information about the Portfolios is included in the separate
prospectuses for The Hudson River Trust and EQ Advisors Trust attached at the
end of this prospectus.
See "Proposed substitution of Portfolios" under "More information" for
information regarding the proposed substitution of newly created Portfolios of
EQ Advisors Trust for the Portfolios of The Hudson River Trust currently
available under the variable investment options.
ALLOCATING YOUR CONTRIBUTIONS
You may allocate your contributions to one or more, or all, of the variable
investment options. Allocations must be in whole percentages and you may change
your allocations at any time. However, the total of your allocations must equal
100%. Once contributions are allocated to the variable investment options they
become part of your account value. We discuss account value under "Determining
your contract's value."
CREDITS
A credit will also be allocated to your account value at the same time that we
allocate your contribution. The amount of the credit is equal to 4% of the
amount of each contribution. Credits are allocated to the same variable
investment options based on the same percentages used to allocate your
contributions.
We will recover the amount of the credit if you exercise your right to cancel
the contract. See "Your right to cancel within a certain number of days" below.
Also, if you start receiving annuity payments within three years of making any
additional contribution, we will recover the amount of the credit that applies
to that contribution.
We do not consider credits to be contributions for purposes of any discussion in
this prospectus. Credits are also not considered to be your investment in the
contract for tax purposes.
GUARANTEED MINIMUM DEATH BENEFIT
Applicable for annuitant ages 0 through 79 at issue of NQ contracts; 20 through
78 at issue of Rollover IRA and Roth Conversion IRA contracts; and 20 through 70
at issue of QP contracts.
You may elect either the "5% roll up to age 80" or the "annual ratchet to age
80" guaranteed minimum death benefit when you apply for a contract. Once you
have made your election, you may not change it.
5% ROLL UP TO AGE 80. On the contract date, the guaranteed minimum death benefit
equals your initial contribution plus the credit. Thereafter, the guaranteed
minimum death benefit will be credited with interest each day through the
annuitant's age 80. The effective annual interest rate is 5% except for amounts
invested in the Alliance Money Market option and Alliance Intermediate
Government Securities option. Amounts in the Alliance Money Market option and
Alliance Intermediate Government Securities option will be credited with
interest at a 3% effective annual rate. No interest is credited after the
annuitant is age 80.
If you make additional contributions, we will increase your current guaranteed
minimum death benefit by the dollar amount of the additional contribution plus
the amount of the credit on the date the contribution is allocated to your
variable investment options. If you take a withdrawal from your contract, we
will adjust your guaranteed minimum death benefit for the withdrawal on the date
you take the withdrawal.
<PAGE>
- --------------------------------------------------------------------------------
CONTRACT FEATURES AND BENEFITS 21
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The 5% roll up to age 80 guaranteed minimum death benefit is not available in
New York.
ANNUAL RATCHET TO AGE 80. On the contract date, your guaranteed minimum death
benefit equals your initial contribution plus the credit. Then, on each contract
date anniversary, we will determine your guaranteed minimum death benefit by
comparing your current guaranteed minimum death benefit to your account value on
that contract date anniversary. If your account value is higher than your
guaranteed minimum death benefit, we will increase your guaranteed minimum death
benefit to equal your account value. On the other hand, if your account value on
the contract date anniversary is less than your guaranteed minimum death
benefit, we will not adjust your guaranteed minimum death benefit either up or
down.
If you make additional contributions, we will increase your current guaranteed
minimum death benefit by the dollar amount of the contribution plus the amount
of the credit on the date the contribution is allocated to your variable
investment options. If you take a withdrawal from your contract, we will adjust
your guaranteed minimum death benefit on the date you take the withdrawal.
Applicable for an annuitant that is age 80 when the contract is issued.
On the contract date, your guaranteed minimum death benefit equals your initial
contribution plus the credit. Thereafter, it will be increased by the dollar
amount of any additional contributions. We will adjust your guaranteed minimum
death benefit if you take any withdrawals.
- --------------------------------------------------------------------------------
Please see "How withdrawals affect your guaranteed minimum death benefit" under
"Accessing your money" for information on how withdrawals affect your guaranteed
minimum death benefit.
See Appendix II for an example of how we calculate the guaranteed minimum death
benefit.
YOUR RIGHT TO CANCEL WITHIN A CERTAIN NUMBER OF DAYS
If for any reason you are not satisfied with your contract, you may return it to
us for a refund. To exercise this cancellation right you must mail the contract
directly to our Processing Office within 10 days after you receive it. In some
states, this "free look" period may be longer.
Generally, your refund will equal your account value under the contract and will
reflect any investment gain or loss in the variable investment options that also
reflect the daily charges we deduct through the date we receive your contract.
Please note that you will forfeit the credit by exercising this right of
cancellation. Some states require that we refund the full amount of your
contribution (not reflecting any investment gain or loss). For any IRA contract
returned to us within seven days after you receive it, we are required to refund
the full amount of your contribution.
We may require that you wait six months before you may apply for a contract with
us again if:
o you cancel your contract during the free look period; or
o you change your mind before you receive your contract whether we have received
your contribution or not.
Please see "Tax information" for possible consequences of cancelling your
contract.
If you fully convert an existing traditional IRA contract to a Roth Conversion
IRA contract, you may cancel your Roth Conversion IRA contract and return to a
Rollover IRA contract. Our Processing Office, or your Equitable associate, can
provide you with the cancellation instructions.
<PAGE>
- --------------------------------------------------------------------------------
22 DETERMINING YOUR CONTRACT'S VALUE
- --------------------------------------------------------------------------------
2
DETERMINING YOUR CONTRACT'S VALUE
- --------------------------------------------------------------------------------
YOUR ACCOUNT VALUE
Your "account value" is the total value you have in the variable investment
options. This amount is subject to certain fees and charges discussed under
"Charges and expenses."
Your contract also has a "cash value." At any time before annuity payments
begin, your contract's cash value is equal to the account value, less any
withdrawal charge that may apply if you surrender your contract. The 15% free
withdrawal amount does not apply if you surrender your contract. Please see
"Surrendering your contract to receive its cash value" under "Accessing your
money."
YOUR CONTRACT'S VALUE IN THE VARIABLE INVESTMENT OPTIONS
Each variable investment option invests in shares of a corresponding Portfolio.
Your value in each variable investment option is measured by "units." The value
of your units will increase or decrease as though you had invested it in the
corresponding Portfolio's shares directly. Your value, however, will be reduced
by the amount of the fees and charges that we deduct under the contract.
- --------------------------------------------------------------------------------
Units measure your value in each variable investment option.
- --------------------------------------------------------------------------------
The unit value for each variable investment option depends on the investment
performance of that option, minus daily charges for mortality and expense risks,
administrative, and distribution expenses. On any day, your value in any
variable investment option equals the number of units credited to your contract
under that option, multiplied by that day's value for one unit. The number of
your contract units in any variable investment option does not change unless you
make additional contributions, make a withdrawal, or transfer amounts between
variable investment options. In addition, when we deduct any withdrawal charge
the number of units credited to your contract will be reduced. A description of
how unit values are calculated is found in the SAI.
<PAGE>
- --------------------------------------------------------------------------------
TRANSFERRING YOUR MONEY AMONG THE VARIABLE INVESTMENT OPTIONS 23
- --------------------------------------------------------------------------------
3
TRANSFERRING YOUR MONEY AMONG THE VARIABLE INVESTMENT OPTIONS
- --------------------------------------------------------------------------------
TRANSFERRING YOUR ACCOUNT VALUE
At any time before the date annuity payments are to begin, you can transfer some
or all of your account value among the variable investment options.
You may request a transfer in writing or by telephone using TOPS. You must send
in all written transfer requests directly to our Processing Office. Transfer
requests should specify:
(1) the contract number,
(2) the dollar amounts or percentages of your current account value to be
transferred, and
(3) the variable investment options to and from which you are transferring.
We may, at any time, restrict the use of market timers and other agents acting
under a power of attorney who are acting on behalf of more than one contract
owner. Any agreements to use market timing services to make transfers are
subject to our rules in effect at that time.
We will confirm all transfers in writing.
DOLLAR COST AVERAGING YOUR ACCOUNT VALUE
Dollar cost averaging allows you to gradually transfer amounts from the Alliance
Money Market option to the other variable investment options by periodically
transferring approximately the same dollar amount to the variable investment
options you select. This will cause you to purchase more units if the unit's
value is low and fewer units if the unit's value is high. Therefore, you may get
a lower average cost per unit over the long term. This plan of investing,
however, does not guarantee that you will earn a profit or be protected against
losses.
If your value in the Alliance Money Market option is at least $5,000, you may
choose, at any time, to have a specified dollar amount or percentage of your
value transferred from that option to the other variable investment options. You
can select to have transfers made on a monthly, quarterly, or annual basis. The
transfer date will be the same calendar day of the month as the contract date,
but not later than the 28th day of the month. You can also specify the number of
transfers or instruct us to continue making the transfers until all amounts in
the Alliance Money Market option have been transferred out.
The minimum amount that we will transfer each time is $250. The maximum amount
we will transfer is equal to your value in the Alliance Money Market option at
the time the program is elected, divided by the number of transfers scheduled to
be made.
If, on any transfer date, your value in the Alliance Money Market option is
equal to or less than the amount you have elected to have transferred, the
entire amount will be transferred. The dollar cost averaging program will then
end. You may change the transfer amount once each contract year or cancel this
program at any time.
Dollar cost averaging may not be elected if you are participating in the
rebalancing program.
REBALANCING YOUR ACCOUNT VALUE
We currently offer a rebalancing program that you can use to automatically
reallocate your account value among the variable investment options. You must
tell us:
(a) the percentage you want invested in each variable investment option (whole
percentages only), and
(b) how often you want the rebalancing to occur (quarterly, semiannually, or
annually on a contract year basis. Rebalancing will occur on the same day of
the month as the contract date).
While your rebalancing program is in effect, we will transfer amounts among each
variable investment option so that the percentage of your account value that you
specify is invested in each option at the end of each rebalancing date.
- --------------------------------------------------------------------------------
Rebalancing does not assure a profit or protect against loss. You should
periodically review your allocation percentages as your needs change. You may
want to discuss the rebalancing program with your Equitable associate or other
financial adviser before electing the program.
- --------------------------------------------------------------------------------
You may elect the rebalancing program at any time. You may also change your
allocation instructions or cancel the
<PAGE>
- --------------------------------------------------------------------------------
24 TRANSFERRING YOUR MONEY AMONG THE VARIABLE INVESTMENT OPTIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
program at any time. If you request a transfer while the rebalancing program
is in effect, we will process the transfer as requested and then cancel the
rebalancing program.
You may not elect the rebalancing program if you are participating in the dollar
cost averaging program.
<PAGE>
- --------------------------------------------------------------------------------
ACCESSING YOUR MONEY 25
- --------------------------------------------------------------------------------
4
ACCESSING YOUR MONEY
- --------------------------------------------------------------------------------
WITHDRAWING YOUR ACCOUNT VALUE
You have several ways to withdraw your account value before annuity payments
begin. The table below shows the methods available under each type of contract.
More information follows the table. For the tax consequences of withdrawals, see
"Tax information."
- --------------------------------------------------------------------------------
METHOD OF WITHDRAWAL
- --------------------------------------------------------------------------------
SUBSTANTIALLY MINIMUM
CONTRACT LUMP SUM SYSTEMATIC EQUAL DISTRIBUTION
NQ Yes Yes No No
Rollover IRA Yes Yes Yes Yes
Roth
Conversion
IRA Yes Yes Yes No
QP Yes No No Yes
- --------------------------------------------------------------------------------
LUMP SUM WITHDRAWALS
(All contracts)
You may take lump sum withdrawals from your account value at any time. The
minimum amount you may withdraw is $1,000. If you request to withdraw more than
90% of a contract's current cash value we will treat it as a request to
surrender the contract for its cash value. See "Surrendering your contract to
receive its cash value" below.
Lump sum withdrawals in excess of the 15% free withdrawal amount may be subject
to a withdrawal charge.
SYSTEMATIC WITHDRAWALS
(NQ, Rollover IRA, and Roth Conversion IRA contracts only)
You may take systematic withdrawals of a particular dollar amount or a
particular percentage of your account value.
You may take systematic withdrawals on a monthly, quarterly, or annual basis as
long as the withdrawals do not exceed the following percentages of your account
value: 1.2% monthly, 3.6% quarterly, and 15.0% annually. The minimum amount you
may take in each systematic withdrawal is $250. If the amount withdrawn would be
less than $250 on the date a withdrawal is to be taken, we will not make a
payment and we will terminate your systematic withdrawal election.
We will make the withdrawals on any day of the month that you select as long as
it is not later than the 28th day of the month. If you do not select a date, we
will make the withdrawals on the same calendar day of the month as the contract
date. You must wait at least 28 days after your contract is issued before your
systematic withdrawals can begin.
You may elect to take systematic withdrawals at any time. If you own a Rollover
IRA or Roth Conversion IRA contract, you may elect this withdrawal method only
if you are between ages 59 1/2 and 70 1/2.
You may change the payment frequency, or the amount or percentage of your
systematic withdrawals, once each contract year. However, you may not change the
amount or percentage in any contract year in which you have already taken a lump
sum withdrawal. You can cancel the systematic withdrawal option at any time.
Systematic withdrawals are not subject to a withdrawal charge, except to the
extent that, when added to a lump sum withdrawal previously taken in the same
contract year, the systematic withdrawal exceeds the 15% free withdrawal amount.
SUBSTANTIALLY EQUAL WITHDRAWALS
(Rollover IRA and Roth Conversion IRA contracts only)
The substantially equal withdrawals option allows you to receive distributions
from your account value without triggering the 10% additional federal tax
penalty, which normally applies to distributions made before age 59 1/2. See
"Tax information." Once you begin to take substantially equal withdrawals, you
should not stop them or change the pattern of your withdrawals until the later
of age 59 1/2 or five full years after the first withdrawal. If you stop or
change the withdrawals or take a lump sum withdrawal, you may be liable for the
10% federal tax penalty that would have otherwise been due on prior withdrawals
made under this option and for any interest on those withdrawals.
You may elect to take substantially equal withdrawals at any time before age
59 1/2. We will make the withdrawal on any day of the month that you select as
long as it is not later
<PAGE>
- --------------------------------------------------------------------------------
26 ACCESSING YOUR MONEY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
than the 28th day of the month. You may not elect to receive the first payment
in the same contract year in which you took a lump sum withdrawal. We will
calculate the amount of your substantially equal withdrawals based on the method
you choose from the choices we offer. The payments will be made monthly,
quarterly, or annually as you select. These payments will continue until we
receive written notice from you to cancel this option or you take a lump sum
withdrawal. You may elect to start receiving substantially equal withdrawals
again, but the payments may not restart in the same contract year in which you
took a lump sum withdrawal. We will calculate the new withdrawal amount.
Substantially equal withdrawals are not subject to a withdrawal charge.
MINIMUM DISTRIBUTION WITHDRAWALS
(Rollover IRA and QP contracts only - See "Tax information")
We offer the minimum distribution withdrawal option to help you meet required
minimum distributions under federal income tax rules. You may elect this option
in the year in which you reach age 70 1/2. The minimum amount we will pay out
is $250. You may elect the method you want us to use to calculate your minimum
distribution withdrawals from the choices we offer. Currently, minimum
distribution withdrawal payments will be made annually.
We do not impose a withdrawal charge on minimum distribution withdrawals except
if when added to a lump sum withdrawal previously taken in the same contract
year, the minimum distribution withdrawal exceeds the 15% free withdrawal
amount.
We will calculate your annual payment based on your account value at the end of
the prior calendar year based on the method you choose.
- --------------------------------------------------------------------------------
For Rollover IRA and QP contracts, we will send a form outlining the
distribution options available before you reach age 70 1/2 (if you have not
begun your annuity payments before that time).
- --------------------------------------------------------------------------------
HOW WITHDRAWALS ARE TAKEN FROM YOUR ACCOUNT VALUE
Unless you specify otherwise, we will subtract your withdrawals on a pro rata
basis from your value in the variable investment options.
HOW WITHDRAWALS AFFECT YOUR GUARANTEED MINIMUM DEATH BENEFIT
Withdrawals will reduce your guaranteed minimum death benefit on either a
dollar-for-dollar basis or on a pro rata basis as explained below:
5% roll up to age 80 - If you elect the 5% roll up to age 80 guaranteed
minimum death benefit, your current guaranteed minimum death benefit will be
reduced on a dollar-for-dollar basis as long as the sum of your withdrawals in a
contract year is 5% or less of the guaranteed minimum death benefit on the most
recent contract date anniversary. Once you take a withdrawal that causes the sum
of your withdrawals in a contract year to exceed 5% of the guaranteed minimum
death benefit on the most recent contract date anniversary, that withdrawal and
any subsequent withdrawals in that same contract year will reduce your current
guaranteed minimum death benefit on a pro rata basis.
Annual ratchet to age 80 - If you elect the annual ratchet to age 80
guaranteed minimum death benefit, each withdrawal will always reduce your
current guaranteed minimum death benefit on a pro rata basis.
Annuitant issue age 80 - If your contract was issued when the annuitant was
age 80, each withdrawal will always reduce your current guaranteed minimum death
benefit on a pro rata basis.
--------------------
Reduction on a dollar-for-dollar basis means that your current benefit will be
reduced by the dollar amount of the withdrawal. Reduction on a pro rata basis
means that we calculate the percentage of your current account value that is
being withdrawn and we reduce your current benefit by that same percentage. For
example, if your account value is
<PAGE>
- --------------------------------------------------------------------------------
ACCESSING YOUR MONEY 27
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$30,000 and you withdraw $12,000, you have withdrawn 40% of your account value.
If your guaranteed minimum death benefit was $40,000 before the withdrawal, it
would be reduced by $16,000 ($40,000 x .40) and your new guaranteed minimum
death benefit after the withdrawal would be $24,000 ($40,000 - $16,000).
The timing of your withdrawals and whether they exceed the 5% threshold
described above can have a significant impact on your guaranteed minimum death
benefit.
SURRENDERING YOUR CONTRACT TO RECEIVE ITS CASH VALUE
You may surrender your contract to receive its cash value at any time while the
annuitant is living and before you begin to receive annuity payments. For a
surrender to be effective, we must receive your written request and your
contract at our Processing Office. We will determine your cash value on the date
we receive the required information. All benefits under the contract will
terminate as of that date.
You may receive your cash value in a single sum payment or apply it to one or
more of the annuity payout options. See "Choosing your annuity payout options"
below. We will usually pay the cash value within seven calendar days, but we may
delay payment as described in "When to expect payments" below. For the tax
consequences of surrenders, see "Tax information."
WHEN TO EXPECT PAYMENTS
Generally, we will fulfill requests for payments out of the variable investment
options within seven calendar days after the date of the transaction to which
the request relates. These transactions may include applying proceeds to a
variable annuity, payment of a death benefit, payment of any amount you withdraw
(less any withdrawal charge) and, upon surrender, payment of the cash value. We
may postpone such payments or applying proceeds for any period during which:
(1) the New York Stock Exchange is closed or restricts trading,
(2) sales of securities or determination of the fair value of a variable
investment option's assets is not reasonably practicable because of an
emergency, or
(3) the SEC, by order, permits us to defer payment to protect people remaining
in the variable investment options.
We also may defer payments for a reasonable amount of time (not to exceed 15
days) while we are waiting for a contribution check to clear.
All payments are made by check and are mailed to you (or the payee named in a
tax-free exchange) by U.S. mail, unless you request that we use an express
delivery service at your expense.
CHOOSING YOUR ANNUITY PAYOUT OPTIONS
Equitable Accumulator Plus offers you several choices for receiving retirement
income. Each choice enables you to receive fixed or, in some cases, variable
annuity payments.
You can choose from among the six different annuity payout options listed below.
Restrictions apply, depending on the type of contract you own.
- --------------------------------------------------------------------------------
Annuity payout options Life annuity
Life annuity - period
certain
Life annuity - refund
certain
Period certain annuity
- --------------------------------------------------------------------------------
Income Manager payout Life annuity with a period
options certain
Period certain annuity
- --------------------------------------------------------------------------------
ANNUITY PAYOUT OPTIONS
You can choose from among the following annuity payout options:
o Life annuity: An annuity that guarantees payments for the rest of the
annuitant's life. Payments end with the last monthly payment before the
annuitant's death. Because there is no continuation of benefits following the
annuitant's death with this payout option, it provides the
<PAGE>
- --------------------------------------------------------------------------------
28 ACCESSING YOUR MONEY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
highest monthly payment of any of the life annuity options, so long as the
annuitant is living.
o Life annuity - period certain: An annuity that guarantees payments for the
rest of the annuitant's life. If the annuitant dies before the end of a selected
period of time ("period certain"), payments continue to the beneficiary for the
balance of the period certain. A life annuity with a period certain of 10 years
is the normal form of annuity under the contracts. The period certain cannot
extend beyond the annuitant's life expectancy.
o Life annuity - refund certain: An annuity that guarantees payments for the
rest of the annuitant's life. If the annuitant dies before the amount applied
to purchase the annuity option has been recovered, payments to the beneficiary
will continue until that amount has been recovered. This payout option is
available only as a fixed annuity.
o Period certain annuity: An annuity that guarantees payments for a specific
period of time, usually 5, 10, 15, or 20 years. This option does not guarantee
payments for the rest of the annuitant's life. It does not permit any
repayment of the unpaid principal, so you cannot elect to receive part of the
payments as a single sum payment with the rest paid in monthly annuity
payments. Currently, this payout option is available only as a fixed annuity.
All of the above payout options are available as fixed annuities. With fixed
annuities, we guarantee fixed annuity payments that will be based either on the
tables of guaranteed annuity payments in your contract or on our then current
annuity rates, whichever is more favorable for you.
The life annuity, life annuity - period certain, and life annuity - refund
certain payout options are available on a single life or joint and survivor life
basis. The joint and survivor life annuity guarantees payments for the rest of
the annuitant's life and, after the annuitant's death, payments continue to the
survivor.
The following annuity payout options are available as variable annuities:
o Life annuity (except in New York)
o Life annuity - period certain
o Joint and survivor life annuity (100% to survivor)
o Joint and survivor life period certain annuity (100% to survivor)
Variable annuities may be funded through your choice of variable investment
options investing in Portfolios of The Hudson River Trust. On or about October
1, 1999, these Portfolios will become Portfolios of EQ Advisors Trust. See
"Proposed substitution of Portfolios" under "About The Hudson River Trust and EQ
Advisors Trust" later in this prospectus. The contract also offers a fixed
annuity payout option that can be elected in combination with the variable
annuity payout options. The amount of each variable annuity payment will
fluctuate, depending upon the performance of the variable investment options,
and whether the actual rate of investment return is higher or lower than an
assumed base rate. Please see "Annuity Unit Values" in the SAI.
We may offer other payout options not outlined here. Your Equitable associate
can provide details.
SELECTING AN ANNUITY PAYOUT OPTION
When you select a payout option, we will issue you a separate written agreement
confirming your right to receive annuity payments. We require you to return your
contract before annuity payments begin.
For NQ, Rollover IRA, and Roth Conversion IRA contracts, unless you choose a
different payout option, we will pay annuity payments under a life annuity with
a period certain of 10 years. The only payout options available under QP
contracts are the life annuity 10 year period certain and the joint and survivor
life annuity 10 year period certain. You choose whether these payments will
be either fixed or variable.
You can choose the date annuity payments begin but it may not be earlier than
five years from the contract date. You can change the date your annuity payments
are to begin anytime before that date as long as you do not choose a date later
than the 28th day of any month. Also, that date may not be later than the
contract date anniversary that follows the annuitant's 90th birthday. This may
be different in some states.
<PAGE>
- --------------------------------------------------------------------------------
ACCESSING YOUR MONEY 29
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
If you elect to start receiving annuity payments within three years of making an
additional contribution, we will recover the amount of any credit that applies
to that contribution.
Before your annuity payments are to begin, we will notify you by letter that the
annuity payout options are available. Once you have selected a payout option and
payments have begun, no change can be made other than transfers (if permitted in
the future) among the variable investment options if a variable annuity is
selected.
The amount of the annuity payments will depend on:
(1) the amount applied to purchase the annuity;
(2) the type of annuity chosen, and whether it is fixed or variable. If you
choose a variable annuity, we will use an assumed base rate of either 5% or
3 1/2% to calculate the level of payments. We provide information about the
assumed base rate in the SAI;
(3) in the case of a life annuity, the annuitant's age (or the annuitant's and
joint annuitant's ages); and
(4) in certain instances, the sex of the annuitant(s).
In no event will you ever receive payments under a fixed option or an initial
payment under a variable option of less than the minimum amounts guaranteed by
the contract.
If, at the time you elect a payout option, the amount to be applied is less than
$2,000 or the initial payment under the form elected is less than $20 monthly,
we reserve the right to pay the account value in a single sum rather than as
payments under the payout option chosen.
INCOME MANAGER PAYOUT OPTIONS
For NQ and IRA contracts, two Income Manager payout options are also available.
These are the Income Manager (life annuity with a period certain) and the Income
Manager (period certain).
For QP contracts, the Income Manager payout options are available only after the
trustee of the qualified plan directly rolls over the QP contract to a Rollover
IRA contract. In this process the ownership of the QP contract is changed to the
annuitant. The rollover to a Rollover IRA contract and the change of ownership
may only occur when the annuitant will no longer be a participant in the
qualified plan.
The Income Manager (life annuity with a period certain) provides guaranteed
payments for the annuitant's life or for the annuitant's life and the life of a
joint annuitant. The Income Manager (period certain) provides payments for a
specified period. The contract owner and annuitant must meet the issue age and
payment requirements. Both Income Manager annuities provide guaranteed level
payments (NQ and IRA contracts). The Income Manager (life annuity with a period
certain) also provides guaranteed increasing payments (NQ contracts only).
If you apply only part of the account value of your contract to either of the
Income Manager payout annuities we will consider it a withdrawal and may deduct
a withdrawal charge. We will not deduct a withdrawal charge if you apply all of
your account value at a time when the dollar amount of the withdrawal charge is
greater than 2% of remaining contributions (after withdrawals). However, a new
withdrawal charge schedule will apply under the Income Manager annuity. For
purposes of the withdrawal charge schedule, the year in which your account value
is applied under the Income Manager annuity will be "contract year 1." In
addition, we will not deduct a withdrawal charge if you apply all of your
account value from your Equitable Accumulator Plus contract when the dollar
amount of the withdrawal charge under such contract is 2% or less. This means
that no withdrawal charge schedule will apply under the Income Manager payout
annuity contract.
You should consider the timing of your purchase as it relates to the potential
for withdrawal charges under the Income Manager annuity. No additional
contributions will be permitted under an Income Manager (life annuity with a
period certain).
<PAGE>
- --------------------------------------------------------------------------------
30 ACCESSING YOUR MONEY
- --------------------------------------------------------------------------------
You also may apply your account value to an Income Manager (period certain)
annuity once withdrawal charges are no longer in effect under your contract. No
withdrawal charges will apply under that Income Manager annuity.
The Income Manager annuities are described in a separate prospectus. Copies of
the most current version are available from your Equitable associate. To
purchase an Income Manager annuity we also require the return of your contract.
We will issue an Income Manager annuity to put one of the payout annuities into
effect. Depending upon your circumstances, this may be done on a tax-free basis.
Please consult your tax adviser.
<PAGE>
- --------------------------------------------------------------------------------
CHARGES AND EXPENSES 31
- --------------------------------------------------------------------------------
5
CHARGES AND EXPENSES
- --------------------------------------------------------------------------------
CHARGES THAT EQUITABLE LIFE DEDUCTS
We deduct the following charges each day from the net assets of each variable
investment option. These charges are reflected in the unit values of each
variable investment option:
o A mortality and expense risks charge
o An administrative charge
o A distribution charge
We deduct the following charges from your account value. When we deduct these
charges from your variable investment options, we reduce the number of units
credited to your contract:
o At the time you make certain withdrawals or surrender your contract - a
withdrawal charge.
o At the time annuity payments are to begin charges for state premium and other
taxes. An annuity administrative fee may also apply.
More information about these charges appears below. We will not increase these
charges for the life of your contract, except as noted. We may reduce certain
charges under group or sponsored arrangements. See "Group or sponsored
arrangements" below.
To help with your retirement planning, we may offer other annuities with
different charges, benefits, and features. Please contact your Equitable
associate for more information.
MORTALITY AND EXPENSE RISKS CHARGE
We deduct a daily charge from the net assets in each variable investment option
to compensate us for mortality and expense risks, including the guaranteed
minimum death benefit. The daily charge is equivalent to an annual rate of 1.10%
of the net assets in each variable investment option.
The mortality risk we assume is the risk that annuitants as a group will live
for a longer time than our actuarial tables predict. If that happens, we would
be paying more in annuity income than we planned. We also assume a risk that the
mortality assumptions reflected in our guaranteed annuity payment tables, shown
in each contract, will differ from actual mortality experience. Lastly, we
assume a mortality risk to the extent that at the time of death, the guaranteed
minimum death benefit exceeds the cash value of the contract. The expense risk
we assume is the risk that it will cost us more to issue and administer the
contracts than we expect.
ADMINISTRATIVE CHARGE
We deduct a daily charge from the net assets in each variable investment option
to compensate us for administrative expenses under the contracts. The daily
charge is equivalent to an annual rate of 0.25% of the net assets in each
variable investment option. We reserve the right under the contracts to increase
this charge to an annual rate of 0.35%.
DISTRIBUTION CHARGE
We deduct a daily charge from the net assets in each variable investment option
to compensate us for a portion of our sales expenses under the contracts. The
daily charge is equivalent to an annual rate of 0.25% of the net assets in each
variable investment option.
WITHDRAWAL CHARGE
A withdrawal charge applies in two circumstances: (1) if you make one or more
withdrawals during a contract year that, in total, exceed the 15% free
withdrawal amount, described below, or (2) if you surrender your contract to
receive its cash value.
The withdrawal charge equals a percentage of the contributions withdrawn. We do
not consider credits to be contributions. Therefore, there is no withdrawal
charge associated with a credit.
The percentage of the withdrawal charge that applies to each contribution
depends on how long each contribution has been invested in the contract. We
determine the withdrawal charge separately for each contribution according to
the following table:
<PAGE>
- --------------------------------------------------------------------------------
32 CHARGES AND EXPENSES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONTRACT YEAR
- --------------------------------------------------------------------------------
1 2 3 4 5 6 7 8 9 10+
- --------------------------------------------------------------------------------
Percentage of
contribution 8% 8% 7% 6% 5% 4% 3% 2% 1% 0%
- --------------------------------------------------------------------------------
For purposes of calculating the withdrawal charge, we treat the contract year
in which we receive a contribution as "contract year 1." Amounts withdrawn up
to the free withdrawal amount are not considered withdrawal of any
contribution. We also treat contributions that have been invested the longest
as being withdrawn first. We treat contributions as withdrawn before earnings
for purposes of calculating the withdrawal charge. However, federal income tax
rules treat earnings under your contract as withdrawn first. See "Tax
information."
In order to give you the exact dollar amount of the withdrawal you request, we
deduct the amount of the withdrawal and the withdrawal charge from your
account value. Any amount deducted to pay withdrawal charges is also subject
to a withdrawal charge. We deduct the charge in proportion to the amount of
the withdrawal subtracted from each variable investment option. The withdrawal
charge helps cover our sales expenses.
The withdrawal charge does not apply in the circumstances described below.
15% FREE WITHDRAWAL AMOUNT. Each contract year you can withdraw up to 15% of
your account value without paying a withdrawal charge. The 15% free withdrawal
amount is determined using your account value on the most recent contract date
anniversary, minus any other withdrawals made during the contract year. The
15% free withdrawal amount does not apply if you surrender your contract.
MINIMUM DISTRIBUTIONS. The withdrawal charge does not apply to withdrawals
taken under our minimum distribution withdrawal option. However, those
withdrawals are counted towards the 15% free withdrawal amount if you also
make a lump sum withdrawal in any contract year.
DISABILITY, TERMINAL ILLNESS, OR CONFINEMENT TO NURSING HOME. The withdrawal
charge also does not apply if:
o The annuitant has qualified to receive Social Security disability benefits
as certified by the Social Security Administration; or
o We receive proof satisfactory to us (including certification by a licensed
physician) that the annuitant's life expectancy is six months or less; or
o The annuitant has been confined to a nursing home for more than 90 days (or
such other period, as required in your state) as verified by a licensed
physician. A nursing home for this purpose means one that is (a) approved by
Medicare as a provider of skilled nursing care service, or (b) licensed as a
skilled nursing home by the state or territory in which it is located (it must
be within the United States, Puerto Rico, or U.S. Virgin Islands) and meets
all of the following:
- its main function is to provide skilled, intermediate, or custodial nursing
care;
- it provides continuous room and board to three or more persons;
- it is supervised by a registered nurse or licensed practical nurse;
- it keeps daily medical records of each patient;
- it controls and records all medications dispensed; and
- its primary service is other than to provide housing for residents.
We reserve the right to impose a withdrawal charge, in accordance with your
contract and applicable state law, if the disability is caused by a
preexisting condition or a condition that began within 12 months of the
contract date. Some states may not permit us to waive the withdrawal charge in
the above circumstances, or may limit the circumstances for which the
withdrawal charge may be waived. Your Equitable associate can provide more
information or you may contact our Processing Office.
<PAGE>
- --------------------------------------------------------------------------------
CHARGES AND EXPENSES 33
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CHARGES FOR STATE PREMIUM AND OTHER APPLICABLE TAXES
We deduct a charge for applicable taxes such as premium taxes that may be
imposed in your state. Generally, we deduct the charge from the amount applied
to provide an annuity payout option. The current tax charge that might be
imposed varies by state and ranges from 0% to 3.5% (1% in Puerto Rico and 5%
in the U.S. Virgin Islands).
ANNUITY ADMINISTRATIVE FEE
We generally deduct a fee of up to $350 from the amount to be applied to
purchase a life annuity payout option.
CHARGES THAT THE TRUSTS DEDUCT
The Hudson River Trust and EQ Advisors Trust each deducts charges for the
following types of fees and expenses:
o Investment advisory fees ranging from 0.25% to 1.15%.
o 12b-1 fees of 0.25%.
o Operating expenses, such as trustees' fees, independent auditors' fees,
legal counsel fees, administrative service fees, custodian fees, and
liability insurance.
o Investment-related expenses, such as brokerage commissions.
These charges are reflected in the daily share price of each Portfolio. Since
shares of each trust are purchased at their net asset value, these fees and
expenses are, in effect, passed on to the variable investment options and are
reflected in their unit values. For more information about these charges,
please refer to the prospectuses for The Hudson River Trust and EQ Advisors
Trust following this prospectus.
GROUP OR SPONSORED ARRANGEMENTS
For certain group or sponsored arrangements, we may reduce the withdrawal
charge or the mortality and expense risks charge or change the minimum initial
contribution requirements. We also may change the guaranteed minimum death
benefit or offer variable investment options that invest in shares of The
Hudson River Trust or EQ Advisors Trust that are not subject to the 12b-1 fee.
Group arrangements include those in which a trustee or an employer, for
example, purchases contracts covering a group of individuals on a group basis.
Group arrangements are not available for Rollover IRA and Roth Conversion IRA
contracts. Sponsored arrangements include those in which an employer allows us
to sell contracts to its employees or retirees on an individual basis.
Our costs for sales, administration, and mortality generally vary with the
size and stability of the group or sponsoring organization, among other
factors. We take all these factors into account when reducing charges. To
qualify for reduced charges, a group or sponsored arrangement must meet
certain requirements, such as requirements for size and number of years in
existence. Group or sponsored arrangements that have been set up solely to buy
contracts or that have been in existence less than six months will not qualify
for reduced charges.
We will make these and any similar reductions according to our rules in effect
when we approve a contract for issue. We may change these rules from time to
time. Any variation will reflect differences in costs or services and will not
be unfairly discriminatory.
Group or sponsored arrangements may be governed by federal income tax rules,
the Employee Retirement Income Security Act of 1974 or both. We make no
representations with regard to the impact of these and other applicable laws
on such programs. We recommend that employers, trustees, and others purchasing
or making contracts available for purchase under such programs seek the advice
of their own legal and benefits advisers.
<PAGE>
- --------------------------------------------------------------------------------
34 PAYMENT OF DEATH BENEFIT
- --------------------------------------------------------------------------------
6
PAYMENT OF DEATH BENEFIT
- --------------------------------------------------------------------------------
YOUR BENEFICIARY AND PAYMENT OF BENEFIT
You designate your beneficiary when you apply for your contract. You may
change your beneficiary at any time. The change will be effective on the date
the written request for the change is received in our Processing Office. We
are not responsible for any beneficiary change request that we do not receive.
Under jointly owned contracts, the surviving owner is considered the
beneficiary, and will take the place of any other beneficiary. In a QP
contract, the beneficiary must be the trustee.
The death benefit is equal to your account value, or, if greater, the
guaranteed minimum death benefit. We determine the amount of the death benefit
as of the date we receive satisfactory proof of the annuitant's death and any
required instructions for the method of payment.
EFFECT OF THE ANNUITANT'S DEATH
If the annuitant dies before the annuity payments begin, we will pay the death
benefit to your beneficiary.
Generally, the death of the annuitant terminates the contract. However, a
beneficiary who is the surviving spouse of the owner/annuitant can choose to
be treated as the successor owner/annuitant and continue the contract. Only a
spouse can be a successor owner/annuitant.
For Rollover IRA contracts, a beneficiary who is not a surviving spouse may be
able to have limited ownership as discussed under "Beneficiary continuation
option for Rollover IRA contracts" below.
WHEN AN NQ CONTRACT OWNER DIES BEFORE THE ANNUITANT
Under certain conditions the owner can change after the original owner's
death. When you are not the annuitant under an NQ contract and you die before
annuity payments begin, the beneficiary named to receive the death benefit
upon the annuitant's death will automatically become the successor owner. If
you do not want the beneficiary to be the successor owner, you should name a
successor owner. You may name a successor owner at any time by sending
satisfactory notice to our Processing Office. If the contract is jointly owned
and the first owner to die is not the annuitant, the surviving owner becomes
the sole contract owner. This person will be considered the beneficiary for
purposes of the distribution rules described in this section. The surviving
owner automatically takes the place of any other beneficiary designation.
Unless the surviving spouse of the owner who has died (or in the case of a
joint ownership situation, the surviving spouse of the first owner to die) is
the successor owner for this purpose, the entire interest in the contract must
be distributed under the following rules:
o The cash value of the contract must be fully paid to the designated
beneficiary (new owner) by December 31st of the fifth calendar year after your
death (or in a joint ownership situation, the death of the first owner to
die).
o The successor owner may instead elect to receive the cash value as a life
annuity (or payments for a period certain of not longer than the new owner's
life expectancy). Payments must begin no later than December 31st following
the calendar year of the non-annuitant owner's death. Unless this
alternative is elected, we will pay any cash value on December 31st of the
fifth calendar year following the year of your death (or the death of the
first owner to die).
o If the surviving spouse is the successor owner or joint owner, the spouse
may elect to continue the contract. No distributions are required as long as
the surviving spouse and annuitant are living.
HOW DEATH BENEFIT PAYMENT IS MADE
We will pay the death benefit to the beneficiary in the form of the annuity
payout option you have chosen. If you have not chosen an annuity payout option
as of the time of the annuitant's death, the beneficiary will receive the
death benefit in a single sum. However, subject to any exceptions in the
contract, our rules and any applicable requirements under federal income tax
rules, the beneficiary may elect to apply the death benefit to one or more
annuity payout options we offer at the time. See "Choosing your annuity
<PAGE>
- --------------------------------------------------------------------------------
PAYMENT OF DEATH BENEFIT 35
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
payout options" under "Accessing your money" earlier in this prospectus. Please
note that if you are both the contract owner and the annuitant, you may elect
only a life annuity or an annuity that does not extend beyond the life
expectancy of the beneficiary.
SUCCESSOR OWNER AND ANNUITANT
If you are both the contract owner and the annuitant, and your spouse is the
sole beneficiary or the joint owner, then your spouse may elect to receive the
death benefit or continue the contract as successor owner/annuitant.
If your surviving spouse decides to continue the contract, then on the contract
date anniversary following your death, we will increase the account value to
equal your current guaranteed minimum death benefit, if it is higher than the
account value. In determining whether the guaranteed minimum death benefit will
continue to grow, we will use your surviving spouse's age (as of the contract
date anniversary).
BENEFICIARY CONTINUATION OPTION FOR ROLLOVER IRA CONTRACTS
Upon your death under a Rollover IRA contract, a nonspouse beneficiary may
generally elect to keep the contract in your name and receive distributions
under the contract instead of the death benefit being paid in a single sum.
If you die AFTER the "Required Beginning Date" (see "Tax information") for
required minimum distributions, the contract will continue if:
(a) you were receiving minimum distribution withdrawals from this contract; and
(b) the pattern of minimum distribution withdrawals you chose was based in
part on the life of the designated beneficiary.
The withdrawals will then continue to be paid to the beneficiary on the same
basis as you chose before your death. We will be able to tell your beneficiary
whether this option is available to them. You should contact our Processing
Office for further information.
If you die BEFORE the Required Beginning Date (and therefore you were not taking
minimum distribution withdrawals under the contract), the beneficiary may begin
taking minimum distribution withdrawals under the contract. We will increase the
account value to equal the death benefit if the death benefit is greater than
the account value. That amount will be used to provide the withdrawals. These
withdrawals will begin by December 31st of the calendar year following your
death and will be based on the beneficiary's life expectancy. If there is more
than one beneficiary, the shortest life expectancy is used.
The designated beneficiary must be a natural person and of legal age at the time
of election. The beneficiary must elect this option within 30 days following the
date we receive proof of your death. If no election is made within 30 days to:
(1) receive the death benefit, or (2) continue the contract and take annual
withdrawals as described above, or (3) defer payment of the account value for up
to five years, the death benefit will be paid to the beneficiary according to
our standard procedures.
While the contract continues in your name, the beneficiary may make transfers
among the variable investment options. However, additional contributions will
not be permitted and the death benefit provisions will no longer be in effect.
Although the only withdrawals that will be permitted are minimum distribution
withdrawals, the beneficiary may choose at any time to withdraw all of the
account value and no withdrawal charges will apply.
<PAGE>
- --------------------------------------------------------------------------------
36 TAX INFORMATION
- --------------------------------------------------------------------------------
7
TAX INFORMATION
- --------------------------------------------------------------------------------
OVERVIEW
In this part of the prospectus, we discuss the current federal income tax rules
that generally apply to Equitable Accumulator Plus contracts owned by United
States taxpayers. The tax rules can differ, depending on the type of contract,
whether NQ, Rollover IRA, Roth Conversion IRA, or QP. Therefore, we discuss the
tax aspects of each type of contract separately.
Federal income tax rules include the United States laws in the Internal Revenue
Code, and Treasury Department Regulations and Internal Revenue Service ("IRS")
interpretations of the Internal Revenue Code. These tax rules may change. We
cannot predict whether, when, or how these rules could change. Any change could
affect contracts purchased before the change.
We cannot provide detailed information on all tax aspects of the contracts.
Moreover, the tax aspects that apply to a particular person's contract may vary
depending on the facts applicable to that person. We do not discuss state income
and other state taxes, federal income tax, and withholding rules for non-U.S.
taxpayers, or federal gift and estate taxes. Transfers of the contract, rights
under the contract, or payments under the contract may be subject to gift or
estate taxes. You should not rely only on this document, but should consult your
tax adviser before your purchase.
If you are buying a contract to fund a retirement plan that already provides tax
deferral under sections of the Internal Revenue Code (IRA and QP), you should do
so for the contract's features and benefits other than tax deferral. In such
situations, the tax deferral of the contract does not provide additional
benefits.
TRANSFERS AMONG VARIABLE INVESTMENT OPTIONS
You can make transfers among variable investment options inside the contract
without triggering taxable income.
TAXATION OF NONQUALIFIED ANNUITIES
CONTRIBUTIONS
You may not deduct the amount of your contributions to a nonqualified annuity
contract.
CONTRACT EARNINGS
Generally, you are not taxed on contract earnings until you receive a
distribution from your contract, whether as a withdrawal or as an annuity
payment. However, earnings are taxable, even without a distribution:
o if a contract fails investment diversification requirements as specified in
federal income tax rules (these rules are based on or are similar to those
specified for mutual funds under the securities laws);
o if you transfer a contract, for example, as a gift to someone other than
your spouse (or former spouse);
o if you use a contract as security for a loan (in this case, the amount
pledged will be treated as a distribution); and
o if the owner is other than an individual (such as a corporation,
partnership, trust, or other non-natural person).
All nonqualified deferred annuity contracts that Equitable Life and its
affiliates issue to you during the same calendar year are linked together and
treated as one contract for calculating the taxable amount of any distribution
from any of those contracts.
ANNUITY PAYMENTS
Once annuity payments begin, a portion of each payment is taxable as ordinary
income. You get back the remaining portion without paying taxes on it. This is
your "investment in the contract." Generally, your investment in the contract
equals the contributions you made, less any amounts you previously withdrew that
were not taxable.
For fixed annuity payments, the tax-free portion of each payment is determined
by (1) dividing your investment in the contract by the total amount you are
expected to receive out
<PAGE>
- --------------------------------------------------------------------------------
TAX INFORMATION 37
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
of the contract, and (2) multiplying the result by the amount of the payment.
For variable annuity payments, your investment in the contract divided by the
number of expected payments is your tax-free portion of each payment.
Once you have received the amount of your investment in the contract, all
payments after that are fully taxable. If payments under a life annuity stop
because the annuitant dies, there is an income tax deduction for any unrecovered
investment in the contract.
PAYMENTS MADE BEFORE ANNUITY PAYMENTS BEGIN
If you make withdrawals before annuity payments begin under your contract, they
are taxable to you as ordinary income if there are earnings in the contract.
Generally, earnings are your account value less your investment in the contract.
If you withdraw an amount which is more than the earnings in the contract as of
the date of the withdrawal, the balance of the distribution is treated as a
return of your investment in the contract and is not taxable.
CONTRACTS PURCHASED THROUGH EXCHANGES
You may purchase your NQ contract through an exchange of another contract.
Normally, exchanges of contracts are taxable events. The exchange will not be
taxable under Section 1035 of the Internal Revenue Code if:
o the contract that is the source of the funds you are using to purchase the
NQ contract is another nonqualified deferred annuity contract (or life
insurance or endowment contract).
o the owner and the annuitant are the same under the source contract and the
Equitable Accumulator Plus NQ contract. If you are using a life insurance or
endowment contract the owner and the insured must be the same on both sides of
the exchange transaction.
The tax basis of the source contract carries over to the Equitable Accumulator
Plus NQ contract.
SURRENDERS
If you surrender or cancel the contract, the distribution is taxable as ordinary
income (not capital gain) to the extent it exceeds your investment in the
contract.
DEATH BENEFIT PAYMENTS MADE TO A BENEFICIARY AFTER YOUR DEATH
For the rules applicable to death benefits, see "Payment of death benefit" and
"When an NQ contract owner dies before the annuitant" earlier in this
prospectus. The tax treatment of a death benefit taken as a single sum is
generally the same as the tax treatment of a withdrawal from or surrender of
your contract. The tax treatment of a death benefit taken as annuity payments is
generally the same as the tax treatment of annuity payments under your contract.
EARLY DISTRIBUTION PENALTY TAX
If you take distributions before you are age 59 1/2 a penalty tax of 10% of the
taxable portion of your distribution applies in addition to the income tax. The
extra penalty tax does not apply to pre-age 59 1/2 distributions made:
o on or after your death; or
o because you are disabled (special federal income tax definition); or
o in the form of substantially equal periodic annuity payments for your life
(or life expectancy) or the joint lives (or joint life expectancy) of you and
a beneficiary.
SPECIAL RULES FOR NQ CONTRACTS ISSUED IN PUERTO RICO
Under current law we treat income from NQ contracts as U.S. source. A Puerto
Rico resident is subject to U.S. taxation on such U.S. source income. Only
Puerto Rico source income of Puerto Rico residents is excludable from U.S.
taxation. Income from NQ contracts is also subject to Puerto Rico tax. The
calculation of the taxable portion of amounts distributed from a contract may
differ in the two jurisdictions. Therefore, you might have to file both U.S. and
Puerto Rico tax returns, showing different amounts of income from the contract
for each tax return. Puerto Rico generally provides a credit against Puerto Rico
tax for U.S. tax paid. Depending on your
<PAGE>
- --------------------------------------------------------------------------------
38 TAX INFORMATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
personal situation and the timing of the different tax liabilities, you may not
be able to take full advantage of this credit.
INDIVIDUAL RETIREMENT ARRANGEMENTS (IRAS)
GENERAL
"IRA" stands for individual retirement arrangement. There are two basic types
of such arrangements, individual retirement accounts and individual retirement
annuities. In an individual retirement account, a trustee or custodian holds
the assets for the benefit of the IRA owner. The assets can include mutual
funds and certificates of deposit. In an individual retirement annuity, an
insurance company issues an annuity contract that serves as the IRA.
There are several types of IRAs, as follows:
o Traditional IRAs, typically funded on a pre-tax basis;
o Roth IRAs, first available in 1998, funded on an after-tax basis; and
o SEP-IRAs and SIMPLE-IRAs, issued and funded in connection with
employer-sponsored retirement plans.
Regardless of the type of IRA, your ownership interest in the IRA cannot be
forfeited. You or your beneficiaries who survive you are the only ones who can
receive the IRA's benefits or payments.
You can hold your IRA assets in as many different accounts and annuities as
you would like, as long as you meet the rules for setting up and making
contributions to IRAs. However, if you own multiple IRAs, you may be required
to combine IRA values or contributions for tax purposes. For further
information about individual retirement arrangements, you can read Internal
Revenue Service Publication 590 ("Individual Retirement Arrangements (IRAs)").
This publication is usually updated annually, and can be obtained from any IRS
district office or the IRS Web site (http://www.irs.ustreas.gov).
Equitable Life designs its traditional IRA contracts to qualify as individual
retirement annuities under Section 408(b) of the Internal Revenue Code. You
may purchase the contract as a traditional IRA ("Rollover IRA") or Roth IRA
("Roth Conversion IRA"). This prospectus contains the information that the IRS
requires you to have before you purchase an IRA. This section of the
prospectus covers some of the special tax rules that apply to IRAs. The next
section covers Roth IRAs. Education IRAs are not discussed in this prospectus
because they are not available in individual retirement annuity form.
The Equitable Accumulator Plus IRA contract has been approved by the IRS as to
form for use as a traditional IRA. We have submitted the Roth IRA version for
formal IRS approval. This IRS approval is a determination only as to the form
of the annuity. It does not represent a determination of the merits of the
annuity as an investment. The IRS approval does not address every feature
possibly available under the Equitable Accumulator Plus IRA contract.
CANCELLATION
You can cancel an Equitable Accumulator Plus IRA contract by following the
directions under "Your right to cancel within a certain number of days" under
"Contract features and benefits" earlier in the prospectus. You can cancel an
Equitable Accumulator Plus Roth Conversion IRA contract issued as a result of
a full conversion of an Equitable Accumulator Plus Rollover IRA contract by
following the instructions in the request for full conversion form. The form
is available from our Processing Office or your Equitable associate. If you
cancel an IRA contract, we may have to withhold tax, and we must report the
transaction to the IRS. A contract cancellation could have an unfavorable tax
impact.
TRADITIONAL INDIVIDUAL RETIREMENT ANNUITIES (TRADITIONAL IRAS)
CONTRIBUTIONS TO TRADITIONAL IRAS. Individuals may make three different types
of contributions to a traditional IRA:
o tax-free "rollover" contributions; or
<PAGE>
- --------------------------------------------------------------------------------
TAX INFORMATION 39
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
o direct custodian-to-custodian transfers from other traditional IRAs
("direct transfers"); or
o regular contributions out of earned income or compensation.
We require that all of your contributions to the Equitable Accumulator Plus
Rollover IRA contract must be either a rollover or a direct
custodian-to-custodian transfer. See "Rollovers and transfers" below. Since we
do not permit regular contributions under the Equitable Accumulator Plus
Rollover IRA contract, we do not discuss them in great detail in this
prospectus.
EXCESS CONTRIBUTIONS
Excess contributions to IRAs are subject to a 6% excise tax for the year in
which made and for each year after until withdrawn. The following are excess
contributions to IRAs:
o regular contributions of more than $2,000; or
o regular contributions of more than earned income for the year, if that
amount is under $2,000; or
o regular contributions to a traditional IRA made after you reach age 70 1/2; or
o rollover contributions of amounts which are not eligible to be rolled over.
For example, after-tax contributions to a qualified plan or minimum
distributions required to be made after age 70 1/2.
You can avoid the excise tax by withdrawing an excess contribution (rollover or
regular) before the due date (including extensions) for filing your federal
income tax return for the year. If it is an excess regular traditional IRA
contribution, you cannot take a tax deduction for the amount withdrawn. You do
not have to include the excess contribution withdrawn as part of your income. It
is also not subject to the 10% additional penalty tax on early distributions,
discussed below under "Early distribution penalty tax." You do have to withdraw
any earnings that are attributed to the excess contribution. The withdrawn
earnings would be included in your gross income and could be subject to the 10%
penalty tax.
Even after the due date for filing your return, you may withdraw an excess
rollover contribution, without income inclusion or 10% penalty, if:
(1) the rollover was from a qualified retirement plan to a traditional IRA;
(2) the excess contribution was due to incorrect information that the plan
provided; and
(3) you took no tax deduction for the excess contribution.
RECHARACTERIZATIONS
Amounts that have been contributed as traditional IRA funds may subsequently be
treated as Roth IRA funds. Special federal income tax rules allow you to change
your mind again and have amounts that are subsequently treated as Roth IRA
funds, once again treated as traditional IRA funds. You do this by using the
forms we prescribe. This is referred to as having "recharacterized" your
contribution.
ROLLOVERS AND TRANSFERS
Rollover contributions may be made to a traditional IRA from these sources:
o qualified plans;
o TSAs (including Internal Revenue Code Section 403(b)(7) custodial accounts);
and
o other traditional IRAs.
Any amount contributed to a traditional IRA after you reach age 70 1/2 must
be net of your required minimum distribution for the year in which the rollover
or direct transfer contribution is made.
ROLLOVERS FROM QUALIFIED PLANS OR TSAS
There are two ways to do rollovers:
o Do it yourself
You actually receive a distribution that can be rolled over and you roll it
over to a traditional IRA within 60 days after the date you receive the
funds. The distribution from your qualified plan or TSA will be net of 20%
mandatory federal income tax withholding. If you want, you can replace the
withheld funds yourself and roll over the full amount.
<PAGE>
- --------------------------------------------------------------------------------
40 TAX INFORMATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
o Direct rollover
You tell your qualified plan trustee or TSA issuer/custodian/fiduciary to
send the distribution directly to your traditional IRA issuer. Direct
rollovers are not subject to mandatory federal income tax withholding.
All distributions from a TSA or qualified plan are eligible rollover
distributions, unless the distribution is:
o only after-tax contributions you made to the plan; or
o "required minimum distributions" after age 70 1/2 or separation from
service; or
o substantially equal periodic payments made at least annually for your life
(or life expectancy) or the joint lives (or joint life expectancies) of you
and your designated beneficiary; or
o a hardship withdrawal; or
o substantially equal periodic payments made for a specified period of 10
years or more; or
o corrective distributions that fit specified technical tax rules; or
o loans that are treated as distributions; or
o a death benefit payment to a beneficiary who is not your surviving spouse;
or
o a qualified domestic relations order distribution to a beneficiary who is
not your current spouse or former spouse.
ROLLOVERS FROM TRADITIONAL IRAS TO TRADITIONAL IRAS
You may roll over amounts from one traditional IRA to one or more of your other
traditional IRAs if you complete the transaction within 60 days after you
receive the funds. You may make such a rollover only once in every 12-month
period for the same funds. Trustee-to-trustee or custodian-to-custodian direct
transfers are not rollover transactions. You can make these more frequently than
once in every 12-month period.
The surviving spouse beneficiary of a deceased individual can roll over or
directly transfer an inherited traditional IRA to one or more other traditional
IRAs. Also, in some cases, traditional IRAs can be transferred on a tax-free
basis between spouses or former spouses as a result of a court-ordered divorce
or separation decree.
WITHDRAWALS, PAYMENTS AND TRANSFERS OF FUNDS OUT OF TRADITIONAL IRAS
NO FEDERAL INCOME TAX LAW RESTRICTIONS ON WITHDRAWALS. You can withdraw any or
all of your funds from a traditional IRA at any time. You do not need to wait
for a special event like retirement.
TAXATION OF PAYMENTS. Earnings in traditional IRAs are not subject to federal
income tax until you or your beneficiary receives them. Taxable payments or
distributions include withdrawals from your contract, surrender of your
contract, and annuity payments from your contract. Death benefits are also
taxable. Except as discussed below, the total amount of any distribution from a
traditional IRA must be included in your gross income as ordinary income.
If you have ever made nondeductible IRA contributions to any traditional IRA (it
does not have to be to this particular traditional IRA contract), those
contributions are recovered tax free when you get distributions from any
traditional IRA. You must keep permanent tax records of all of your
nondeductible contributions to traditional IRAs. At the end of any year in which
you have received a distribution from any traditional IRA, you calculate the
ratio of your total nondeductible traditional IRA contributions (less any
amounts previously withdrawn tax free) to the total account balances of all
traditional IRAs you own at the end of the year plus all traditional IRA
distributions made during the year. Multiply this by all distributions from the
traditional IRA during the year to determine the nontaxable portion of each
distribution.
<PAGE>
- --------------------------------------------------------------------------------
TAX INFORMATION 41
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In addition, a distribution is not taxable if:
o the amount received is a withdrawal of excess contributions, as described
under "Excess contributions" above; or
o the entire amount received is rolled over to another traditional IRA (see
"Rollovers and transfers" above); or
o in certain limited circumstances, where the traditional IRA acts as a
"conduit," you roll over the entire amount into a qualified plan or TSA that
accepts rollover contributions. To get this conduit traditional IRA
treatment:
o the source of funds you used to establish the traditional IRA must have
been a rollover contribution from a qualified plan; and
o the entire amount received from the traditional IRA (including any
earnings on the rollover contribution) must be rolled over into another
qualified plan within 60 days of the date received.
Similar rules apply in the case of a TSA.
However, you may lose conduit treatment, if you make an eligible rollover
distribution contribution to a traditional IRA and you commingle this
contribution with other contributions. In that case, you may not be able to roll
over these eligible rollover distribution contributions and earnings to another
qualified plan or TSA at a future date. The Rollover IRA contract can be used as
a conduit IRA if amounts are not commingled.
Distributions from a traditional IRA are not eligible for favorable five-year
averaging (or, in some cases, ten-year averaging and long-term capital gain
treatment) available to certain distributions from qualified plans.
REQUIRED MINIMUM DISTRIBUTIONS
LIFETIME REQUIRED MINIMUM DISTRIBUTIONS. You must start taking annual
distributions from your traditional IRAs beginning at age 70 1/2.
WHEN YOU HAVE TO TAKE THE FIRST REQUIRED MINIMUM DISTRIBUTION. The first
required minimum distribution is for the calendar year in which you turn age
70 1/2. You have the choice to take this first required minimum distribution
during the calendar year you actually reach age 70 1/2, or to delay taking it
until the first three-month period in the next calendar year (January 1 - April
1). Distributions must start no later than your "Required Beginning Date," which
is April 1st of the calendar year after the calendar year in which you turn age
70 1/2. If you choose to delay taking the first annual minimum distribution,
then you will have to take two minimum distributions in that year -- the delayed
one for the first year and the one actually for that year. Once minimum
distributions begin, they must be made at some time each year.
HOW YOU CAN CALCULATE REQUIRED MINIMUM DISTRIBUTIONS. There are two approaches
to taking required minimum distributions -- "account-based" or "annuity-based."
Account-based method. If you choose an account-based method, you divide the
value of your traditional IRA as of December 31st of the past calendar year by a
life expectancy factor from IRS tables. This gives you the required minimum
distribution amount for that particular IRA for that year. The required minimum
distribution amount will vary each year as the account value and your life
expectancy factors change.
You have a choice of life expectancy factors, depending on whether you choose a
method based only on your life expectancy, or the joint life expectancies of you
and another individual. You can decide to "recalculate" your life expectancy
every year by using your current life expectancy factor. You can decide instead
to use the "term certain" method, where you reduce your life expectancy by one
every year after the initial year. If your spouse is your designated beneficiary
for the purpose of calculating annual account-based required minimum
distributions, you can also annually recalculate your spouse's life expectancy
if you want. If you choose someone who is not your spouse as your designated
beneficiary for the purpose of calculating annual account-based required minimum
distributions, you have to
<PAGE>
- --------------------------------------------------------------------------------
42 TAX INFORMATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
use the term certain method of calculating that person's life expectancy. If you
pick a nonspouse designated beneficiary, you may also have to do another special
calculation.
You can later apply your traditional IRA funds to a life annuity-based payout.
You can only do this if you already chose to recalculate your life expectancy
annually (and your spouse's life expectancy if you select a spousal joint
annuity). For example, if you anticipate selecting any other form of life
annuity payout after you are age 70 1/2, you must have elected to recalculate
life expectancies.
Annuity-based method. If you choose an annuity-based method, you do not
have to do annual calculations. You apply the account value to an annuity payout
for your life or the joint lives of you and a designated beneficiary, or for a
period certain not extending beyond applicable life expectancies.
DO YOU HAVE TO PICK THE SAME METHOD TO CALCULATE YOUR REQUIRED MINIMUM
DISTRIBUTIONS FOR ALL OF YOUR TRADITIONAL IRAS AND OTHER RETIREMENT PLANS? No.
If you want, you can choose a different method and a different beneficiary for
each of your traditional IRAs and other retirement plans. For example, you can
choose an annuity payout from one IRA, a different annuity payout from a
qualified plan, and an account-based annual withdrawal from another IRA.
WILL WE PAY YOU THE ANNUAL AMOUNT EVERY YEAR FROM YOUR TRADITIONAL IRA BASED ON
THE METHOD YOU CHOOSE? No, unless you affirmatively select an annuity payout
option or an account-based withdrawal option such as our minimum distribution
withdrawal option. Because the options we offer do not cover every option
permitted under federal income tax rules, you may prefer to do your own required
minimum distribution calculations for one or more of your traditional IRAs.
WHAT IF YOU TAKE MORE THAN YOU NEED TO FOR ANY YEAR? The required minimum
distribution amount for your traditional IRAs is calculated on a year-by-year
basis. There are no carry-back or carry-forward provisions. Also, you cannot
apply required minimum distribution amounts you take from your qualified plans
to the amounts you have to take from your traditional IRAs and vice versa.
However, the IRS will let you calculate the required minimum distribution for
each traditional IRA that you maintain, using the method that you picked for
that particular IRA. You can add these required minimum distribution amount
calculations together. As long as the total amount you take out every year
satisfies your overall traditional IRA required minimum distribution amount, you
may choose to take your annual required minimum distribution from any one or
more traditional IRAs that you own.
WHAT IF YOU TAKE LESS THAN YOU NEED TO FOR ANY YEAR? Your IRA could be
disqualified, and you could have to pay tax on the entire value. Even if your
IRA is not disqualified, you could have to pay a 50% penalty tax on the
shortfall (required amount for traditional IRAs less amount actually taken). It
is your responsibility to meet the required minimum distribution rules. We will
remind you when our records show that your age 70 1/2 is approaching. If you do
not select a method with us, we will assume you are taking your required minimum
distribution from another traditional IRA that you own.
WHAT ARE THE REQUIRED MINIMUM DISTRIBUTION PAYMENTS AFTER YOU DIE? If you die
after either (a) the start of annuity payments, or (b) your Required Beginning
Date, your beneficiary must receive payment of the remaining values in the
contract at least as rapidly as under the distribution method before your death.
In some circumstances, your surviving spouse may elect to become the owner of
the traditional IRA and halt distributions until he or she reaches age 70 1/2.
If you die before your Required Beginning Date and before annuity payments
begin, federal income tax rules require complete distribution of your entire
value in the contract within five years after your death. Payments to a
designated beneficiary over the beneficiary's life or over a period certain that
does not extend beyond the beneficiary's life expectancy are also permitted, if
these payments start within one year of your death. A surviving spouse
beneficiary can also (a) delay
<PAGE>
- --------------------------------------------------------------------------------
TAX INFORMATION 43
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
starting any payments until you would have reached age 70 1/2 or (b) roll over
your traditional IRA into his or her own traditional IRA.
SUCCESSOR ANNUITANT AND OWNER. If your spouse is the sole primary beneficiary
and elects to become the successor annuitant and owner, no death benefit is
payable until your surviving spouse's death.
PAYMENTS TO A BENEFICIARY AFTER YOUR DEATH
IRA death benefits are taxed the same as IRA distributions.
BORROWING AND LOANS ARE PROHIBITED TRANSACTIONS
You cannot get loans from a traditional IRA. You cannot use a traditional IRA as
collateral for a loan or other obligation. If you borrow against your IRA or use
it as collateral, its tax-favored status will be lost as of the first day of the
tax year in which this prohibited event occurs. If this happens, you must
include the value of the traditional IRA in your federal gross income. Also, the
early distribution penalty tax of 10% will apply if you have not reached age
59 1/2 before the first day of that tax year.
EARLY DISTRIBUTION PENALTY TAX
A penalty tax of 10% of the taxable portion of a distribution applies to
distributions from a traditional IRA made before you reach age 59 1/2. The
extra penalty tax does not apply to pre-age 59 1/2 distributions made:
o on or after your death; or
o because you are disabled (special federal income tax definition); or
o used to pay certain extraordinary medical expenses (special federal income
tax definition); or
o used to pay medical insurance premiums for unemployed individuals (special
federal income tax definition); or
o used to pay certain first-time home buyer expenses (special federal income
tax definition); or
o used to pay certain higher education expenses (special federal income tax
definition); or
o in the form of substantially equal periodic payments made at least annually
over your life (or your life expectancy), or over the joint lives of you and
your beneficiary (or your joint life expectancy) using an IRS-approved
distribution method.
To meet this last exception, you could elect to apply your contract value to an
Income Manager (life annuity with a period certain) payout annuity contract
(level payments version). You could also elect the substantially equal
withdrawals option. We will calculate the substantially equal annual payments
under a method we select based on guidelines issued by the IRS (currently
contained in IRS Notice 89-25, Question and Answer 12). Although substantially
equal withdrawals and Income Manager payments are not subject to the 10% penalty
tax, they are taxable as discussed in "Withdrawals, payments and transfers of
funds out of traditional IRAs" above. Once substantially equal withdrawals or
Income Manager annuity payments begin, the distributions should not be stopped
or changed until the later of your reaching age 59 1/2 or five years after the
date of the first distribution, or the penalty tax, including an interest charge
for the prior penalty avoidance, may apply to all prior distributions under
either option. Also, it is possible that the IRS could view any additional
withdrawal or payment you take from your contract as changing your pattern of
substantially equal withdrawals or Income Manager payments for purposes of
determining whether the penalty applies.
ROTH INDIVIDUAL RETIREMENT ANNUITIES (ROTH IRAS)
This section of the prospectus covers some of the special tax rules that apply
to Roth IRAs. If the rules are the same as those that apply to the traditional
IRA, we will refer you to the same topic under "traditional IRAs."
The Equitable Accumulator Plus Roth Conversion IRA contract is designed to
qualify as a Roth individual retirement annuity under Sections 408A and 408(b)
of the Internal Revenue Code.
<PAGE>
- --------------------------------------------------------------------------------
44 TAX INFORMATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONTRIBUTIONS TO ROTH IRAS
Individuals may make four different types of contributions to a Roth IRA:
o taxable rollover contributions from traditional IRAs ("conversion"
contributions); or
o tax-free rollover contributions from other Roth IRAs; or
o tax-free direct custodian-to-custodian transfers from other Roth IRAs
("direct transfers"); or
o regular after-tax contributions out of earnings.
Since we only permit direct transfer and rollover contributions under the
Equitable Accumulator Plus Roth Conversion IRA contract, we do not discuss
regular after-tax contributions here. If you use the forms we require, we will
also accept traditional IRA funds which are subsequently recharacterized as Roth
IRA funds following special federal income tax rules
ROLLOVERS AND DIRECT TRANSFERS
WHAT IS THE DIFFERENCE BETWEEN ROLLOVER AND DIRECT TRANSFER TRANSACTIONS? You
may make rollover contributions to a Roth IRA from only two sources:
o another Roth IRA ("tax-free rollover contribution"); or
o another traditional IRA, including a SEP-IRA or SIMPLE-IRA, in a taxable
conversion rollover ("conversion contribution").
You may not make contributions to a Roth IRA from a qualified plan under Section
401(a) of the Internal Revenue Code, or a TSA under Section 403(b) of the
Internal Revenue Code. You may make direct transfer contributions to a Roth IRA
only from another Roth IRA.
The difference between a rollover transaction and a direct transfer transaction
is the following: in a rollover transaction you actually take possession of the
funds rolled over, or are considered to have received them under tax law in the
case of a change from one type of plan to another. In a direct transfer
transaction, you never take possession of the funds, but direct the first Roth
IRA custodian, trustee, or issuer to transfer the first Roth IRA funds directly
to Equitable Life, as the Roth IRA issuer. You can make direct transfer
transactions only between identical plan types (for example, Roth IRA to Roth
IRA). You can also make rollover transactions between identical plan types.
However, you can only use rollover transactions between different plan types
(for example, traditional IRA to Roth IRA).
You may make both Roth IRA to Roth IRA rollover transactions and Roth IRA to
Roth IRA direct transfer transactions. This can be accomplished on a completely
tax-free basis. However, you may make Roth IRA to Roth IRA rollover transactions
only once in any 12-month period for the same funds. Trustee-to-trustee or
custodian-to-custodian direct transfers can be made more frequently than once a
year. Also, if you send us the rollover contribution to apply it to a Roth IRA,
you must do so within 60 days after you receive the proceeds from the original
IRA to get rollover treatment.
The surviving spouse beneficiary of a deceased individual can roll over or
directly transfer an inherited Roth IRA to one or more other Roth IRAs. In some
cases, Roth IRAs can be transferred on a tax-free basis between spouses or
former spouses as a result of a court-ordered divorce or separation decree.
CONVERSION CONTRIBUTIONS TO ROTH IRAS. In a conversion rollover transaction, you
withdraw (or are considered to have withdrawn) all or a portion of funds from a
traditional IRA you maintain and convert it to a Roth IRA within 60 days after
you receive (or are considered to have received) the traditional IRA proceeds.
Unlike a rollover from a traditional IRA to another traditional IRA, the
conversion rollover transaction is not tax exempt. Instead, the distribution
from the traditional IRA is generally fully taxable. For this reason, we are
required to withhold 10% federal income tax from the amount converted unless you
elect out of such withholding. If you have ever made nondeductible regular
contributions to any traditional IRA -- whether or not it is the traditional IRA
you are converting -- a pro rata portion of the distribution is tax free.
<PAGE>
- --------------------------------------------------------------------------------
TAX INFORMATION 45
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
There is, however, no early distribution penalty tax on the traditional IRA
withdrawal that you are converting to a Roth IRA, even if you are under age
59 1/2.
You cannot make conversion contributions to a Roth IRA for any taxable year in
which your adjusted gross income exceeds $100,000. For this purpose, your
adjusted gross income is calculated without the gross income stemming from the
traditional IRA conversion. You also cannot make conversion contributions to a
Roth IRA for any taxable year in which your federal income tax filing status is
"married filing separately."
Finally, you cannot make conversion contributions to a Roth IRA to the extent
that the funds in your traditional IRA are subject to the annual required
minimum distribution rule applicable to traditional IRAs beginning at age
70 1/2.
WITHDRAWALS, PAYMENTS AND TRANSFERS OF FUNDS OUT OF ROTH IRAS
NO FEDERAL INCOME TAX LAW RESTRICTIONS ON WITHDRAWALS. You can withdraw any or
all of your funds from a Roth IRA at any time; you do not need to wait for a
special event like retirement.
DISTRIBUTIONS FROM ROTH IRAS
Distributions include withdrawals from your contract, surrender of your
contract, and annuity payments from your contract. Death benefits are also
distributions.
The following distributions from Roth IRAs are free of income tax:
o Rollover from a Roth IRA to another Roth IRA;
o Direct transfer from a Roth IRA to another Roth IRA;
o Qualified distribution from a Roth IRA; and
o Return of excess contributions or amounts recharacterized to a traditional
IRA.
QUALIFIED DISTRIBUTIONS FROM ROTH IRAS. Qualified distributions from Roth IRAs
made because of one of the following four qualifying events or reasons are not
includable in income:
o you reach age 59 1/2; or
o you die; or
o you become disabled (special federal income tax definition); or
o your distribution is a "qualified first-time homebuyer distribution"
(special federal income tax definition; $10,000 lifetime total limit for
these distributions from all of your traditional and Roth IRAs).
You also have to meet a five-year aging period. A qualified distribution is any
distribution made after the five-taxable-year period beginning with the first
taxable year for which you made any contribution to any Roth IRA (whether or not
the one from which the distribution is being made). It is not possible to have a
tax-free qualified distribution before the year 2003 because of the five-year
aging requirement.
NONQUALIFIED DISTRIBUTIONS FROM ROTH IRAS. Nonqualified distributions from Roth
IRAs are distributions that do not meet the qualifying event and five-year aging
period tests described above. Such distributions are potentially taxable as
ordinary income. Nonqualified distributions receive return-of-investment-first
treatment. Only the difference between the amount of the distribution and the
amount of contributions to all of your Roth IRAs is taxable. You have to reduce
the amount of contributions to all of your Roth IRAs to reflect any previous
tax-free recoveries.
You must keep your own records of regular and conversion contributions to all
Roth IRAs to assure appropriate taxation. You may have to file information on
your contributions to and distributions from any Roth IRA on your tax return.
You may have to retain all income tax returns and records pertaining to such
contributions and distributions until your interests in all Roth IRAs are
distributed.
Like traditional IRAs, taxable distributions from a Roth IRA are not entitled to
the special favorable five-year averaging method (or, in certain cases,
favorable ten-year averaging and long-term capital gain treatment) available in
certain cases to distributions from qualified plans.
<PAGE>
- --------------------------------------------------------------------------------
46 TAX INFORMATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REQUIRED MINIMUM DISTRIBUTIONS AT DEATH
Same as traditional IRA under "What are the required minimum distribution
payments after you die?" Lifetime required minimum distributions do not apply.
PAYMENTS TO A BENEFICIARY AFTER YOUR DEATH
Distributions to a beneficiary generally receive the same tax treatment as if
the distribution had been made to you.
BORROWING AND LOANS ARE PROHIBITED TRANSACTIONS
Same as traditional IRA.
EXCESS CONTRIBUTIONS
Same as traditional IRA, except that regular contributions made after age 70 1/2
are not excess contributions.
Excess rollover contributions to Roth IRAs are contributions not eligible to be
rolled over (for example, conversion contributions from a traditional IRA if
your adjusted gross income is in excess of $100,000 in the conversion year).
You can withdraw or recharacterize any contribution to a Roth IRA before the due
date (including extensions) for filing your federal income tax return for the
tax year. If you do this, you must also withdraw or recharacterize any earnings
attributable to the contribution.
EARLY DISTRIBUTION PENALTY TAX
Same as traditional IRA.
For Roth IRAs, special penalty rules may apply to amounts withdrawn attributable
to 1998 conversion rollovers.
SPECIAL RULES FOR NONQUALIFIED CONTRACTS IN QUALIFIED PLANS
Under QP contracts your plan administrator or trustee notifies you as to tax
consequences. See Appendix I.
FEDERAL AND STATE INCOME TAX WITHHOLDING AND INFORMATION REPORTING
We must withhold federal income tax from distributions from annuity contracts.
You may be able to elect out of this income tax withholding in some cases.
Generally, we do not have to withhold if your distributions are not taxable. The
rate of withholding will depend on the type of distribution and, in certain
cases, the amount of your distribution. Any income tax withheld is a credit
against your income tax liability. If you do not have sufficient income tax
withheld or do not make sufficient estimated income tax payments, you may incur
penalties under the estimated income tax rules.
You must file your request not to withhold in writing before the payment or
distribution is made. Our Processing Office will provide forms for this purpose.
You cannot elect out of withholding unless you provide us with your correct
Taxpayer Identification Number and a United States residence address. You cannot
elect out of withholding if we are sending the payment out of the United States.
You should note the following special situations:
o We might have to withhold on amounts we pay under a free look or
cancellation.
o We are generally required to withhold on conversion rollovers of traditional
IRAs to Roth IRAs, as it is considered a withdrawal from the traditional IRA
and is taxable.
o We are required to withhold on the gross amount of a distribution from a Roth
IRA unless you elect out of withholding. This may result in tax being
withheld even though the Roth IRA distribution is not taxable in whole or in
part.
Special withholding rules apply to foreign recipients and United States citizens
residing outside the United States. We do not discuss these rules here. Certain
states have indicated that state income tax withholding will also apply to
payments from the contracts made to residents. In some states, you may elect out
of state withholding, even if federal withholding applies. Generally, an
election out of federal withholding will also be considered an election out of
state withholding. If you need more information concerning a particular state or
any required forms, call our Processing Office at the toll-free number.
<PAGE>
- --------------------------------------------------------------------------------
TAX INFORMATION 47
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX WITHHOLDING ON PERIODIC ANNUITY PAYMENTS
We withhold differently on "periodic" and "non-periodic" payments. For a
periodic annuity payment, for example, unless you specify a different number of
withholding exemptions, we withhold assuming that you are married and claiming
three withholding exemptions. If you do not give us your correct Taxpayer
Identification Number, we withhold as if you are single with no exemptions.
Based on the assumption that you are married and claiming three withholding
exemptions, if you receive less than $14,700 in periodic annuity payments in
1999, your payments will generally be exempt from federal income tax
withholding. You could specify a different choice of withholding exemption or
request that tax be withheld. Your withholding election remains effective unless
and until you revoke it. You may revoke or change your withholding election at
any time.
FEDERAL INCOME TAX WITHHOLDING ON NON-PERIODIC ANNUITY PAYMENTS (WITHDRAWALS)
For a non-periodic distribution (total surrender or partial withdrawal), we
generally withhold at a flat 10% rate. We apply that rate to the taxable amount
in the case of nonqualified contracts, and to the payment amount in the case of
IRAs and Roth IRAs.
You cannot elect out of withholding if the payment is an eligible rollover
distribution from a qualified plan or TSA. If a non-periodic distribution from
a qualified plan or TSA is not an eligible rollover distribution then the 10%
withholding rate applies.
MANDATORY WITHHOLDING FROM QUALIFIED PLAN DISTRIBUTIONS
Unless you have the distribution go directly to the new plan, eligible rollover
distributions from qualified plans are subject to mandatory 20% withholding. An
eligible rollover distribution from a qualified plan can be rolled over to
another qualified plan or traditional IRA. All distributions from a qualified
plan are eligible rollover distributions unless they are on the following list
of exceptions:
o any after-tax contributions you made to the plan; or
o any distributions which are required minimum distributions after age 70 1/2
or separation from service; or
o hardship withdrawals; or
o substantially equal periodic payments made at least annually for your life
(or life expectancy) or the joint lives (or joint life expectancy) of you and
your designated beneficiary; or
o substantially equal periodic payments made for a specified period of 10 years
or more; or
o corrective distributions that fit specified technical tax rules; or
o loans that are treated as distributions; or
o a death benefit payment to a beneficiary who is not your surviving spouse; or
o a qualified domestic relations order distribution to a beneficiary who is not
your current spouse or former spouse.
A death benefit payment to your surviving spouse, or a qualified domestic
relations order distribution to your current or former spouse, may be a
distribution subject to mandatory 20% withholding.
IMPACT OF TAXES TO EQUITABLE LIFE
The contracts provide that we may charge Separate Account No. 45 for taxes. We
do not now, but may in the future set up reserves for such taxes.
<PAGE>
- --------------------------------------------------------------------------------
48 MORE INFORMATION
- --------------------------------------------------------------------------------
8
MORE INFORMATION
- --------------------------------------------------------------------------------
ABOUT OUR SEPARATE ACCOUNT NO. 45
Each variable investment option is a subaccount of our Separate Account No. 45.
We established Separate Account No. 45 in 1994 under special provisions of the
New York Insurance Law. These provisions prevent creditors from any other
business we conduct from reaching the assets we hold in our variable investment
options for owners of our variable annuity contracts. We are the legal owner of
all of the assets in Separate Account No. 45 and may withdraw any amounts that
exceed our reserves and other liabilities with respect to variable investment
options under our contracts. The results of Separate Account No. 45's operations
are accounted for without regard to Equitable Life's other operations.
Separate Account No. 45 is registered under the Investment Company Act of 1940
and is classified by that act as a "unit investment trust." The SEC, however,
does not manage or supervise Equitable Life or Separate Account No. 45.
Each subaccount (variable investment option) within Separate Account No. 45
invests solely in class IB shares issued by the corresponding Portfolio of The
Hudson River Trust and EQ Advisors Trust.
We reserve the right subject to compliance with laws that apply:
(1) to add variable investment options to, or to remove variable investment
options from, Separate Account No. 45, or to add other separate accounts;
(2) to combine any two or more variable investment options;
(3) to transfer the assets we determine to be the shares of the class of
contracts to which the contracts belong from any variable investment option
to another variable investment option;
(4) to operate Separate Account No. 45 or any variable investment option as a
management investment company under the Investment Company Act of 1940 (in
which case, charges and expenses that otherwise would be assessed against an
underlying mutual fund would be assessed against Separate Account No. 45 or
a variable investment option directly);
(5) to deregister Separate Account No. 45 under the Investment Company Act of
1940;
(6) to restrict or eliminate any voting rights as to Separate Account No. 45;
and
(7) to cause one or more variable investment options to invest some or all of
their assets in one or more other trusts or investment companies.
ABOUT THE HUDSON RIVER TRUST AND EQ ADVISORS TRUST
The Hudson River Trust and EQ Advisors Trust are registered under the Investment
Company Act of 1940. They are classified as "open-end management investment
companies," more commonly called mutual funds. Each trust issues different
shares relating to each Portfolio.
The Hudson River Trust and EQ Advisors Trust do not impose sales charges or
"loads" for buying and selling their shares. All dividends and other
distributions on a trust's shares are reinvested in full. The Boards of Trustees
of The Hudson River Trust and EQ Advisors Trust each may establish additional
Portfolios or eliminate existing Portfolios at any time. More detailed
information about The Hudson River Trust and EQ Advisors Trust, their investment
objectives, policies, restrictions, risks, expenses, their Rule 12b-1 Plans
relating to their Class IB shares, and other aspects of their operations,
appears in their prospectuses attached at the end of this prospectus, or in
their SAIs which are available upon request.
PROPOSED SUBSTITUTION OF PORTFOLIOS. We are asking the SEC to approve the
substitution of newly created Portfolios of EQ Advisors Trust for each of The
Hudson River Trust Portfolios currently available under the variable investment
options (the "Substitution"). The EQ Advisors Trust Portfolios will have
substantially identical investment objectives, strategies, and policies as those
of The Hudson River Trust Portfolios they would replace. The assets of any
<PAGE>
- --------------------------------------------------------------------------------
MORE INFORMATION 49
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Portfolio of The Hudson River Trust underlying your contract would be
transferred to the substituted EQ Advisors Trust Portfolio.
We believe that this Substitution will be in your best interest because you
would have a single set of variable investment options with similar advisory
structures. You also will have a single EQ Advisors Trust prospectus for all the
Portfolios, rather than the two separate prospectuses you now receive. EQ
Financial Consultants Inc. will be the manager of the new EQ Advisors Trust
Portfolios, and Alliance Capital Management L.P. will continue to provide the
day-to-day advisory services to each of the new Portfolios.
You should note that:
o No action is required on your part. You will not need to vote a proxy, file a
new election, or take any other action if the SEC approves the Substitution.
o The elections you have on file for allocating your account value and
contributions will remain unchanged until you direct us otherwise.
o We will bear all expenses directly relating to the Substitution transaction.
o The management fees for the new Portfolios will be the same as those for the
corresponding Portfolios of The Hudson River Trust. Certain of the new EQ
Advisors Trust Portfolios may have slightly higher expense ratios.
o On the effective date of the Substitution transaction, your account value
(i.e., the units you own) in the variable investment options will be the same
as before the transaction.
o The Substitution will have no tax consequences for you.
Please review the EQ Advisors Trust prospectus that accompanies this prospectus.
It contains more information about EQ Advisors Trust, including its management
structure, advisory arrangements, and general fees and expenses that will be of
interest to you.
Subject to SEC approval, we expect the Substitution to be completed in the fall
of 1999. It will affect everyone who has a balance in The Hudson River Trust
Portfolios at that time. Of course, you may transfer your account value among
the variable investment options, as usual.
We will notify you when we receive SEC approval, and again when the Substitution
is complete.
ABOUT THE GENERAL ACCOUNT
Our general account supports all of our policy and contract guarantees, as well
as our general obligations. Credits allocated to your account value are funded
from our general account.
The general account is subject to regulation and supervision by the Insurance
Department of the State of New York and to the insurance laws and regulations of
all jurisdictions where we are authorized to do business. Because of exemptions
and exclusionary provisions that apply, interests in the general account have
not been registered under the Securities Act of 1933, nor is the general account
an investment company under the Investment Company Act of 1940.
We have been advised that the staff of the SEC has not reviewed the portions of
this prospectus that relate to the general account. The disclosure with regard
to the general account, however, may be subject to certain provisions of the
federal securities laws relating to the accuracy and completeness of statements
made in prospectuses.
ABOUT OTHER METHODS OF PAYMENT
AUTOMATIC INVESTMENT PROGRAM -- FOR NQ CONTRACTS ONLY
You may use our automatic investment program, or "AIP," to have a specified
amount automatically deducted from a checking account, money market account, or
credit union checking account and contributed as an additional contribution into
an NQ contract on a monthly or quarterly basis. AIP is not available for
Rollover IRA, Roth Conversion IRA, or QP contracts.
The minimum amounts we will deduct are $100 monthly and $300 quarterly. AIP
additional contributions may be
<PAGE>
- --------------------------------------------------------------------------------
50 MORE INFORMATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
allocated to any of the variable investment options. You choose the day of the
month you wish to have your account debited as long as it is not later than the
28th day of the month.
You may cancel AIP at any time by notifying our Processing Office. We are not
responsible for any debits made to your account before the time written notice
of cancellation is received at our Processing Office.
DATES AND PRICES AT WHICH CONTRACT EVENTS OCCUR
We describe below the general rules for when, and at what prices, events under
your contract will occur. Other portions of this prospectus describe
circumstances that may cause exceptions. We generally do not repeat those
exceptions below.
BUSINESS DAY
Our business day is any day the New York Stock Exchange is open for trading. We
calculate unit values for our variable investment options as of the end of each
business day. This is usually 4:00 p.m., Eastern time. Contributions will be
applied and any other transaction requests will be processed when they are
received along with all the required information.
o If your contribution, transfer, or any other transaction request, containing
all the required information, reaches us on a non-business day or after 4:00
p.m. on a business day, we will use the next business day.
o If your transaction is set to occur on the same day of the month as the
contract date and that date is the 29th, 30th or 31st of the month, then the
transaction will occur on the 1st day of the next month.
o When a charge is to be deducted on a contract date anniversary that is a
non-business day, we will deduct the charge on the next business day.
CONTRIBUTIONS, CREDITS, AND TRANSFERS
o Contributions and credits allocated to the variable investment options are
invested at the value next determined after the close of the business day.
o Transfers to or from variable investment options will be made at the value
next determined after the close of the business day.
ABOUT YOUR VOTING RIGHTS
As the owner of the shares of The Hudson River Trust and EQ Advisors Trust we
have the right to vote on certain matters involving the Portfolios, such as:
o the election of trustees;
o the formal approval of independent auditors selected for each trust; or
o any other matters described in the prospectuses for the trusts or requiring a
shareholders' vote under the Investment Company Act of 1940.
We will give contract owners the opportunity to instruct us how to vote the
number of shares attributable to their contracts if a shareholder vote is taken.
If we do not receive instructions in time from all contract owners, we will vote
the shares of a Portfolio for which no instructions have been received in the
same proportion as we vote shares of that Portfolio for which we have received
instructions. We will also vote any shares that we are entitled to vote directly
because of amounts we have in a Portfolio in the same proportions that contract
owners vote.
VOTING RIGHTS OF OTHERS
Currently, we control each trust. EQ Advisors Trust shares are sold only to our
separate accounts and an affiliated qualified plan trust. The Hudson River Trust
shares are held by other separate accounts of ours and by separate accounts of
insurance companies unaffiliated with us. Shares held by these separate accounts
will probably be voted according to the instructions of the owners of insurance
policies and contracts issued by those insurance companies. While this
<PAGE>
- --------------------------------------------------------------------------------
MORE INFORMATION 51
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
will dilute the effect of the voting instructions of the contract owners, we
currently do not foresee any disadvantages because of this. The Hudson River
Trust Board of Trustees intends to monitor events in order to identify any
material irreconcilable conflicts that may arise and to determine what action,
if any, should be taken in response. If we believe that a response to any of
those events insufficiently protects our contract owners, we will see to it that
appropriate action is taken.
SEPARATE ACCOUNT NO. 45 VOTING RIGHTS
If actions relating to Separate Account No. 45 require contract owner approval,
contract owners will be entitled to one vote for each unit they have in the
variable investment options. Each contract owner who has elected a variable
annuity payout option may cast the number of votes equal to the dollar amount of
reserves we are holding for that annuity in a variable investment option divided
by the annuity unit value for that option. We will cast votes attributable to
any amounts we have in the variable investment options in the same proportion as
votes cast by contract owners.
CHANGES IN APPLICABLE LAW
The voting rights we describe in this prospectus are created under applicable
federal securities laws. To the extent that those laws or the regulations
published under those laws eliminate the necessity to submit matters for
approval by persons having voting rights in separate accounts of insurance
companies, we reserve the right to proceed in accordance with those laws or
regulations.
ABOUT OUR YEAR 2000 PROGRESS
Equitable Life relies upon various computer systems in order to administer your
contract and operate the variable investment options. Some of these systems
belong to service providers who are not affiliated with Equitable Life.
In 1995, Equitable Life began addressing the question of whether its computer
systems would recognize the year 2000 before, on or after January 1, 2000, and
Equitable Life has identified those of its systems critical to business
operations that were not year 2000 compliant. Equitable Life has completed the
work of modifying or replacing non-compliant systems and has certified through
testing that its systems are year 2000 compliant. Equitable Life has contacted
third-party vendors and service providers to seek confirmation that they are
acting to address the year 2000 issue with the goal of avoiding any material
adverse effect on services provided to contract owners and on operations of the
variable investment options. All third-party vendors and service providers
considered critical to Equitable Life's business have provided us confirmation
of their year 2000 compliance or a satisfactory plan for compliance. With
respect to vendors and service providers considered non-critical, we believe we
are on schedule for substantially all such vendors and service providers, to be
confirmed by September 30, 1999 as year 2000 compliant or be the subject of a
satisfactory plan for compliance. If such confirmation is not received by
September 30, 1999, the vendor or service provider will be replaced, eliminated,
or be the subject of contingency plans. Additionally, Equitable Life has
supplemented its existing business continuity and disaster recovery plans to
cover certain categories of contingencies that could arise as a result of year
2000 related failures.
There are many risks associated with year 2000 issues, including the risk that
Equitable Life's computer systems will not operate as intended. Additionally,
there can be no assurance that the systems of third parties will be year 2000
compliant. Any significant unresolved difficulty related to the year 2000
compliance initiatives could result in an interruption in, or a failure of,
normal business operations and, accordingly, could have a material adverse
effect on our ability to administer your contract and operate the variable
investment options.
To the fullest extent permitted by law, the foregoing year 2000 discussion is a
"Year 2000 Readiness Disclosure" within the meaning of The Year 2000 Information
and Readiness Disclosure Act, (P.L. 105-271) (1998).
<PAGE>
- --------------------------------------------------------------------------------
52 MORE INFORMATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ABOUT LEGAL PROCEEDINGS
Equitable Life and its affiliates are parties to various legal proceedings. In
our view, none of these proceedings is likely to have a material adverse effect
upon Separate Account No. 45, our ability to meet our obligations under the
contracts, or the distribution of the contracts.
ABOUT OUR INDEPENDENT ACCOUNTANTS
The financial statements of Separate Account No. 45 as at December 31, 1998 and
for the periods ended December 31, 1998 and 1997, and the consolidated financial
statements of Equitable Life as at December 31, 1998 and 1997 and for each of
the three years ended December 31, 1998 included in the SAI have been so
included in reliance on the reports of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
TRANSFERS OF OWNERSHIP, COLLATERAL ASSIGNMENTS, LOANS, AND BORROWING
You can transfer ownership of an NQ contract at any time before annuity payments
begin. We will continue to treat you as the owner until we receive written
notification of any change at our Processing Office. You cannot assign your NQ
contract as collateral or security for a loan. Loans are also not available
under your NQ contract. In some cases, an assignment or change of ownership may
have adverse tax consequences. See "Tax information" earlier in this prospectus.
You cannot assign or transfer ownership of a Rollover IRA, Roth Conversion IRA,
or QP contract except by surrender to us. Loans are not available and you cannot
assign Rollover IRA, Roth Conversion IRA, and QP contracts as security for a
loan or other obligation.
For limited transfers of ownership after the owner's death see "Payment of death
benefit" and "Beneficiary continuation option for Rollover IRA contracts." You
may direct the transfer of the values under your Rollover IRA, Roth Conversion
IRA, or QP contract to another similar arrangement. Under federal income tax
rules, in the case of such a transfer, we will impose a withdrawal charge, if
one applies.
DISTRIBUTION OF THE CONTRACTS
EQ Financial Consultants, Inc. ("EQF"), an indirect, wholly owned subsidiary of
Equitable Life, is the distributor of the contracts and has responsibility for
sales and marketing functions for Separate Account No. 45. EQF serves as the
principal underwriter of Separate Account No. 45. EQF is registered with the SEC
as a broker-dealer and is a member of the National Association of Securities
Dealers, Inc. EQF's principal business address is 1290 Avenue of the Americas,
New York, New York 10104. Pursuant to a Distribution and Servicing Agreement
between EQF, Equitable Life, and certain of Equitable Life's separate accounts,
including Separate Account No. 45, Equitable Life paid EQF distribution fees of
$325,380 for 1998, as the distributor of certain contracts and as the principal
underwriter of certain separate accounts including Separate Account No. 45.
Before May 1, 1998, Equitable Distributors, Inc. ("EDI"), also an indirect,
wholly owned subsidiary of Equitable Life, served as the distributor of the
contracts and the principal underwriter of Separate Account No. 45. Pursuant to
a Distribution Agreement between Equitable Life, certain of Equitable Life's
separate accounts, including Separate Account No. 45, and EDI, Equitable Life
paid EDI distribution fees of $9,444,621 for 1997 and $888,486 for 1996 as the
distributor of certain contracts and as the principal underwriter of certain
separate accounts including Separate Account No. 45. In September 1999, EQF
plans to become AXA Advisors, LLC, and will become a subsidiary of AXA
Financial, Inc.
The contracts will be sold by registered representatives of EQF and its
affiliates, who are also our licensed agents. EQF may also receive compensation
and reimbursement for its marketing services under the terms of its distribution
agreements with Equitable Life. The offering of the contracts is intended to be
continuous.
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PERFORMANCE 53
- --------------------------------------------------------------------------------
9
INVESTMENT PERFORMANCE
- --------------------------------------------------------------------------------
We provide the following tables to show five different measurements of the
investment performance of the variable investment options and/or the Portfolios
in which they invest. We include these tables because they may be of general
interest to you. THE RESULTS SHOWN REFLECT PAST PERFORMANCE. THEY DO NOT
INDICATE HOW THE VARIABLE INVESTMENT OPTIONS MAY PERFORM IN THE FUTURE. THEY
ALSO DO NOT REPRESENT THE RESULTS EARNED BY ANY PARTICULAR INVESTOR. YOUR
RESULTS WILL DIFFER.
Table 1 shows the average annual total return of the variable investment
options. Average annual total return is the annual rate of growth that would be
necessary to achieve the ending value of a contribution plus the 4% credit
invested in the variable investment options for the periods shown.
Table 2 shows the growth of a hypothetical $1,000 investment plus a $40 credit
in the variable investment options over the periods shown. Both Tables 1 and 2
take into account all fees and charges under the contract, but do not reflect
the charges for any applicable taxes such as premium taxes or any applicable
annuity administrative fee.
Tables 3, 4, and 5 show the rates of return of the variable investment options
on an annualized, cumulative, and year-by-year basis. These tables take into
account all fees and charges under the contract, but do not reflect the
withdrawal charge or the charges for any applicable taxes such as premium taxes
or any applicable annuity administrative fee. If the charges were reflected they
would effectively reduce the rates of return shown.
In all cases the results shown are based on the actual historical investment
experience of the Portfolios in which the variable investment options invest. In
some cases, the results shown relate to periods when the variable investment
options and/or contracts were not available. In those cases, we adjusted the
results of the Portfolios to reflect the charges under the contracts that would
have applied had the variable investment options and/or contracts been
available. The contracts are being offered for the first time as of the date of
the prospectus.
In addition, we have adjusted the results prior to October 1996, when The Hudson
River Trust Class IB shares were not available, to reflect the 12b-1 fees
currently imposed. Finally, the results shown for the Alliance Money Market and
Alliance Common Stock options for periods before March 22, 1985 reflect the
results of the variable investment options that preceded them. The "Since
Portfolio inception" figures for these options are based on the date of
inception of the preceding variable investment options. We have adjusted these
results to reflect the maximum investment advisory fee payable for the
Portfolios, as well as an assumed charge of 0.06% for direct operating expenses.
EQ Advisors Trust commenced operations on May 1, 1997.
All rates of return presented are time-weighted and include reinvestment of
investment income, including interest and dividends.
From time to time, we may advertise different measurements of the investment
performance of the variable investment options and/or the Portfolios, including
the measurements reflected in the tables below. We will indicate that the 4%
credit is reflected when we show performance numbers that give effect to the
credit.
THE PERFORMANCE INFORMATION THAT WE ADVERTISE REFLECTS PAST PERFORMANCE AND DOES
NOT INDICATE HOW THE VARIABLE INVESTMENT OPTIONS MAY PERFORM IN THE FUTURE. SUCH
INFORMATION ALSO DOES NOT REPRESENT THE RESULTS EARNED BY ANY PARTICULAR
INVESTOR. YOUR RESULTS WILL DIFFER.
BENCHMARKS
Tables 3 and 4 compare the performance of variable investment options to market
indices that serve as benchmarks. Market indices are not subject to any charges
for investment advisory fees, brokerage commission or other operating expenses
typically associated with a managed Portfolio. Also, they do not reflect other
contract charges
<PAGE>
- --------------------------------------------------------------------------------
54 INVESTMENT PERFORMANCE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
such as the mortality and expense risks charge, administrative charge,
distribution charge, or any withdrawal charge. Comparisons with these
benchmarks, therefore, may be of limited use. We include them because they are
widely known and may help you to understand the universe of securities from
which each Portfolio is likely to select its holdings. Benchmark data reflect
the reinvestment of dividend income. The benchmarks include:
Alliance Aggressive Stock: 50% Russell 2000 Index and 50% Standard & Poor's
Mid-Cap Total Return Index.
Alliance Common Stock: Standard & Poor's 500 Index.
Alliance Conservative Investors: 70% Lehman Treasury Bond Composite Index and
30% Standard & Poor's 500 Index.
Alliance Global: Morgan Stanley Capital International World Index.
Alliance Growth & Income: 75% Standard & Poor's 500 Index and 25% Value Line
Convertibles Index.
Alliance Growth Investors: 70% Standard & Poor's 500 Index and 30% Lehman
Government/Corporate Bond Index.
Alliance High Yield: Merrill Lynch High Yield Master Index.
Alliance Intermediate Government Securities: Lehman Intermediate Government Bond
Index.
Alliance International: Morgan Stanley Capital International Europe, Australia,
Far East Index.
Alliance Money Market: Salomon Brothers Three-Month T-Bill Index.
Alliance Small Cap Growth: Russell 2000 Growth Index.
EQ/Alliance Premier Growth: Standard & Poor's 500 Index.
BT Equity 500 Index: Standard & Poor's 500 Index.
BT International Equity Index: Morgan Stanley Capital International Europe,
Australia, Far East Index.
BT Small Company Index: Russell 2000 Index.
Capital Guardian Research: Standard & Poor's 500 Index.
Capital Guardian U.S. Equity: Standard & Poor's 500 Index.
EQ/Evergreen: Russell 2000 Index.
EQ/Evergreen Foundation: 60% Standard & Poor's 500 Index/40% Lehman Brothers
Aggregate Bond Index.
MFS Emerging Growth Companies: Russell 2000 Index.
MFS Growth with Income: Standard & Poor's 500 Index.
MFS Research: Standard & Poor's 500 Index.
Merrill Lynch Basic Value Equity: Standard & Poor's 500 Index.
Merrill Lynch World Strategy: 36% Standard & Poor's 500 Index/24% Morgan Stanley
Capital International Europe, Australia, Far East Index/21% Salomon Brothers
U.S. Treasury Bond 1 Year+/14% Salomon Brothers World Government Bond
(excluding U.S.)/and 5% Three-Month U.S. Treasury Bill.
Morgan Stanley Emerging Markets Equity: Morgan Stanley Capital International
Emerging Markets Free Price Return Index.
T. Rowe Price Equity Income: Standard & Poor's 500 Index.
T. Rowe Price International Stock: Morgan Stanley Capital International Europe,
Australia, Far East Index.
Warburg Pincus Small Company Value: Russell 2000 Index.
- --------------------------------------------------------------------------------
LIPPER SURVEY. The Lipper Variable Insurance Products Performance Analysis
Survey (Lipper Survey) records the performance of a large group of variable
annuity products, including managed separate accounts of insurance companies.
According to Lipper Analytical Services, Inc. (Lipper), the data are presented
net of investment management fees, direct operating expenses and asset-based
charges applicable under annuity contracts. Lipper data provide a more accurate
picture than market benchmarks of the Equitable Accumulator Plus performance
relative to other variable annuity products.
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PERFORMANCE 55
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TABLE 1
AVERAGE ANNUAL TOTAL RETURN UNDER A CONTRACT SURRENDERED ON DECEMBER 31, 1998+
- -----------------------------------------------------------------------------------------------------------------
LENGTH OF INVESTMENT PERIOD
------------------------------------------------------------------------
SINCE SINCE
1 3 5 10 OPTION PORTFOLIO
VARIABLE INVESTMENT OPTIONS YEAR YEARS YEARS YEARS INCEPTION* INCEPTION**
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Alliance Aggressive Stock (5.61)% 8.17% 9.57% 17.15% 12.26% --
- -----------------------------------------------------------------------------------------------------------------
Alliance Common Stock 24.08% 25.43% 20.13% 16.90% 24.66% --
- -----------------------------------------------------------------------------------------------------------------
Alliance Conservative Investors 8.26% 8.13% 7.48% -- 9.55% 7.76%
- -----------------------------------------------------------------------------------------------------------------
Alliance Global 16.34% 13.48% 12.41% 13.13% 13.92% 10.24%
- -----------------------------------------------------------------------------------------------------------------
Alliance Growth & Income 15.38% 20.26% 16.00% -- 19.23% 13.12%
- -----------------------------------------------------------------------------------------------------------------
Alliance Growth Investors 13.61% 13.72% 12.05% -- 14.89% 13.26%
- -----------------------------------------------------------------------------------------------------------------
Alliance High Yield (11.18)% 8.80% 8.08% 9.54% 9.38% --
- -----------------------------------------------------------------------------------------------------------------
Alliance Intermediate Government
Securities 1.99% 3.53% 3.40% -- 4.69% 5.32%
- -----------------------------------------------------------------------------------------------------------------
Alliance International 4.87% 2.84% -- -- 4.56% 4.89%
- -----------------------------------------------------------------------------------------------------------------
Alliance Money Market (0.46)% 2.61% 3.17% 4.04% 2.84% --
- -----------------------------------------------------------------------------------------------------------------
Alliance Small Cap Growth (10.21)% -- -- -- 6.96% 6.96%
- -----------------------------------------------------------------------------------------------------------------
BT Equity 500 Index 20.06% -- -- -- 20.06% 20.06%
- -----------------------------------------------------------------------------------------------------------------
BT International Equity Index 14.90% -- -- -- 14.90% 14.90%
- -----------------------------------------------------------------------------------------------------------------
BT Small Company Index (8.02)% -- -- -- (8.02)% (8.02)%
- -----------------------------------------------------------------------------------------------------------------
MFS Emerging Growth Companies 29.66% -- -- -- 25.99% 25.99%
- -----------------------------------------------------------------------------------------------------------------
MFS Research 19.00% -- -- -- 17.39% 17.39%
- -----------------------------------------------------------------------------------------------------------------
Merrill Lynch Basic Value Equity 6.19% -- -- -- 11.45% 11.45%
- -----------------------------------------------------------------------------------------------------------------
Merrill Lynch World Strategy 1.31% -- -- -- 2.58% 2.58%
- -----------------------------------------------------------------------------------------------------------------
Morgan Stanley Emerging Markets
Equity (33.32)% -- -- -- (25.24)% (28.41)%
- -----------------------------------------------------------------------------------------------------------------
T. Rowe Price Equity Income 3.62% -- -- -- 12.63% 12.63%
- -----------------------------------------------------------------------------------------------------------------
T. Rowe Price International Stock 8.36% -- -- -- 2.65% 2.65%
- -----------------------------------------------------------------------------------------------------------------
Warburg Pincus Small Company Value (15.91)% -- -- -- 0.26% 0.26%
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
+ If you start receiving annuity payments within three years of making an
additional contribution we will recover the amount of any credit applied
to that contribution.
* The variable investment option inception dates are: Alliance Aggressive
Stock, Alliance Common Stock, Alliance Conservative Investors, Alliance
Global, Alliance Growth & Income, Alliance Growth Investors, Alliance
Intermediate Government Securities, Alliance International, and Alliance
Money Market (May 1, 1995); Alliance High Yield, Alliance Small Cap Growth,
MFS Emerging Growth Companies, MFS Research, Merrill Lynch Basic Value
Equity, Merrill Lynch World Strategy, T. Rowe Price Equity Income, T. Rowe
Price International Stock, and Warburg Pincus Small Company Value (May 1,
1997); Morgan Stanley Emerging Markets Equity (September 2, 1997); BT
Equity 500 Index, BT International Equity Index, and BT Small Company Index
(December 31, 1997). The inception dates for the variable investment
options that became available on or after December 31, 1998 and are
therefore not shown in this table are: EQ Evergreen, EQ/Evergreen
Foundation, and MFS Growth with Income (December 31, 1998); EQ/Alliance
Premier Growth, Capital Guardian U.S. Equity, and Capital Guardian Research
(May 1, 1999).
** The portfolio inception dates are: Alliance Aggressive Stock (January 27,
1986); Alliance Common Stock (January 13, 1976); Alliance Conservative
Investors and Alliance Growth Investors (October 2, 1989); Alliance Global
(August 27, 1987); Alliance Growth & Income (October 1, 1993); Alliance
High Yield (January 2, 1987); Alliance Intermediate Government Securities
(April 1, 1991); Alliance International (April, 3 1995); Alliance Money
Market (July 13, 1981); Alliance Small Cap Growth, MFS Emerging Growth
Companies, MFS Research, Merrill Lynch Basic Value Equity, Merrill Lynch
World Strategy, T. Rowe Price Equity Income, T. Rowe Price International
Stock, and Warburg Pincus Small Company Value (May 1, 1997); BT Equity 500
Index, BT International Equity Index, and BT Small Company Index (December
31, 1997); and Morgan Stanley Emerging Markets Equity (August 20, 1997).
The inception dates for the Portfolios that became available on or after
December 31, 1998 and are therefore not shown in the tables are:
EQ/Evergreen, EQ/Evergreen Foundation, and MFS Growth with Income (December
31, 1998); EQ/Alliance Premier Growth, Capital Guardian U.S. Equity, and
Capital Guardian Research (May 1, 1999).
<PAGE>
- --------------------------------------------------------------------------------
56 INVESTMENT PERFORMANCE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TABLE 2
GROWTH OF $1,040 UNDER A CONTRACT SURRENDERED ON DECEMBER 31, 1998+
- ------------------------------------------------------------------------------------------------------------------------------------
LENGTH OF INVESTMENT PERIOD
-------------------------------------------------------------------------------------------
SINCE
1 3 5 10 PORTFOLIO
VARIABLE INVESTMENT OPTIONS YEAR YEARS YEARS YEARS INCEPTION*
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Alliance Aggressive Stock $ 943.88 $1,265.63 $1,579.30 $4,867.64 --
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Common Stock $1,240.80 $1,973.37 $2,501.91 $4,766.00 --
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Conservative Investors $1,082.62 $1,264.25 $1,434.54 -- $2,111.96
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Global $1,163.42 $1,461.19 $1,794.59 $3,433.22 $3,219.93
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Growth & Income $1,153.75 $1,739.19 $2,100.31 -- $2,094.83
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Growth Investors $1,136.07 $1,470.49 $1,766.58 -- $3,472.05
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance High Yield $ 888.24 $1,287.80 $1,475.06 $2,486.46 --
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Intermediate Government Securities $1,019.90 $1,109.74 $1,181.89 -- $1,513.62
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance International $1,048.71 $1,087.54 -- -- $1,210.51
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Money Market $ 995.36 $1,080.28 $1,169.07 $1,486.17 --
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Small Cap Growth $ 897.91 -- -- -- $1,143.96
- ------------------------------------------------------------------------------------------------------------------------------------
BT Equity 500 Index $1,200.55 -- -- -- $1,200.55
- ------------------------------------------------------------------------------------------------------------------------------------
BT International Equity Index $1,148.97 -- -- -- $1,148.97
- ------------------------------------------------------------------------------------------------------------------------------------
BT Small Company Index $ 919.75 -- -- -- $ 919.75
- ------------------------------------------------------------------------------------------------------------------------------------
MFS Emerging Growth Companies $1,296.65 -- -- -- $1,587.26
- ------------------------------------------------------------------------------------------------------------------------------------
MFS Research $1,190.05 -- -- -- $1,378.02
- ------------------------------------------------------------------------------------------------------------------------------------
Merrill Lynch Basic Value Equity $1,061.92 -- -- -- $1,242.00
- ------------------------------------------------------------------------------------------------------------------------------------
Merrill Lynch World Strategy $1,013.14 -- -- -- $1,052.28
- ------------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Emerging Markets Equity $ 666.82 -- -- -- $ 512.53
- ------------------------------------------------------------------------------------------------------------------------------------
T. Rowe Price Equity Income $1,036.23 -- -- -- $1,268.52
- ------------------------------------------------------------------------------------------------------------------------------------
T. Rowe Price International Stock $1,083.55 -- -- -- $1,053.65
- ------------------------------------------------------------------------------------------------------------------------------------
Warburg Pincus Small Company Value $ 840.92 -- -- -- $1,005.21
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- -----------
+ If you start receiving annuity payments within three years of making an
additional contribution we will recover the amount of any credit applied to
that contribution.
* Portfolio inception dates are shown in Table 1.
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PERFORMANCE 57
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TABLE 3
ANNUALIZED RATES OF RETURN FOR PERIODS ENDED DECEMBER 31, 1998:
- ------------------------------------------------------------------------------------------------------------------------------------
SINCE
PORTFOLIO
1 YEAR 3 YEARS 5 YEARS 10 YEARS 20 YEARS INCEPTION*
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ALLIANCE AGGRESSIVE STOCK (1.55)% 8.69% 9.39% 16.69% -- 15.59%
- -----------------------------------------------------------------------------------------------------------------------------------
Lipper Mid-Cap Growth 12.16% 16.33% 14.87% 15.44% -- 13.69%
- -----------------------------------------------------------------------------------------------------------------------------------
Benchmark 8.28% 17.77% 15.56% 16.49% -- 14.78%
- -----------------------------------------------------------------------------------------------------------------------------------
ALLIANCE COMMON STOCK 27.00% 25.24% 19.66% 16.44% -- 14.24%
- -----------------------------------------------------------------------------------------------------------------------------------
Lipper Growth 22.86% 22.23% 18.63% 16.72% 16.30% 16.01%
- -----------------------------------------------------------------------------------------------------------------------------------
Benchmark 28.58% 28.23% 24.06% 19.21% 17.76% 15.98%
- -----------------------------------------------------------------------------------------------------------------------------------
ALLIANCE CONSERVATIVE INVESTORS 11.79% 8.66% 7.37% -- -- 7.96%
- -----------------------------------------------------------------------------------------------------------------------------------
Lipper Flexible Portfolio 14.20% 15.62% 14.31% -- -- 12.55%
- -----------------------------------------------------------------------------------------------------------------------------------
Benchmark 15.59% 14.45% 13.37% -- -- 12.08%
- -----------------------------------------------------------------------------------------------------------------------------------
ALLIANCE GLOBAL 19.56% 13.76% 12.14% 12.69% -- 10.47%
- -----------------------------------------------------------------------------------------------------------------------------------
Lipper Global 14.34% 14.67% 11.98% 11.21% -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Benchmark 24.34% 17.77% 11.98% 11.21% -- 9.55%
- -----------------------------------------------------------------------------------------------------------------------------------
ALLIANCE GROWTH & INCOME 18.63% 20.27% 15.64% -- -- 14.68%
- -----------------------------------------------------------------------------------------------------------------------------------
Lipper Growth & Income 15.61% 21.25% 18.35% -- -- 17.89%
- -----------------------------------------------------------------------------------------------------------------------------------
Benchmark 22.85% 22.69% 19.96% -- -- 20.48%
- -----------------------------------------------------------------------------------------------------------------------------------
ALLIANCE GROWTH INVESTORS 16.93% 13.99% 11.80% -- -- 13.93%
- -----------------------------------------------------------------------------------------------------------------------------------
Lipper Flexible Portfolio 14.20% 15.62% 14.31% -- -- 12.55%
- -----------------------------------------------------------------------------------------------------------------------------------
Benchmark 22.85% 22.69% 19.96% -- -- 15.55%
- -----------------------------------------------------------------------------------------------------------------------------------
ALLIANCE HIGH YIELD (6.90)% 9.30% 7.96% 9.11% -- 8.45%
- -----------------------------------------------------------------------------------------------------------------------------------
Lipper High Current Yield (0.44)% 8.21% 7.37% 9.34% -- 8.97%
- -----------------------------------------------------------------------------------------------------------------------------------
Benchmark 3.66% 9.11% 9.01% 11.08% -- 10.72%
- -----------------------------------------------------------------------------------------------------------------------------------
ALLIANCE INTERMEDIATE GOVERNMENT
SECURITIES 5.76% 4.29% 3.44% -- -- 5.14%
- -----------------------------------------------------------------------------------------------------------------------------------
Lipper Intermediate Government 7.68% 6.21% 5.91% -- -- 7.25%
- -----------------------------------------------------------------------------------------------------------------------------------
Benchmark 8.49% 6.74% 6.45% -- -- 7.60%
- -----------------------------------------------------------------------------------------------------------------------------------
ALLIANCE INTERNATIONAL 8.53% 3.63% -- -- -- 5.49%
- -----------------------------------------------------------------------------------------------------------------------------------
Lipper International 13.02% 9.94% -- -- -- 10.74%
- -----------------------------------------------------------------------------------------------------------------------------------
Benchmark 20.00% 9.00% -- -- -- 9.68%
- -----------------------------------------------------------------------------------------------------------------------------------
ALLIANCE MONEY MARKET 3.40% 3.42% 3.23% 3.63% -- 5.11%
- -----------------------------------------------------------------------------------------------------------------------------------
Lipper Money Market 4.84% 4.87% 4.77% 5.20% -- 6.77%
- -----------------------------------------------------------------------------------------------------------------------------------
Benchmark 5.05% 5.18% 5.11% 5.44% -- 6.76%
- -----------------------------------------------------------------------------------------------------------------------------------
ALLIANCE SMALL CAP GROWTH (5.97)% -- -- -- -- 10.25%
- -----------------------------------------------------------------------------------------------------------------------------------
Lipper Small Company Growth (0.33)% -- -- -- -- 16.72%
- -----------------------------------------------------------------------------------------------------------------------------------
Benchmark 1.23% -- -- -- -- 16.58%
- -----------------------------------------------------------------------------------------------------------------------------------
BT EQUITY 500 INDEX 23.13% -- -- -- -- 23.13%
- -----------------------------------------------------------------------------------------------------------------------------------
Lipper S&P 500 Index 26.78% -- -- -- -- 26.78%
- -----------------------------------------------------------------------------------------------------------------------------------
Benchmark 28.58% -- -- -- -- 28.58%
- -----------------------------------------------------------------------------------------------------------------------------------
BT INTERNATIONAL EQUITY INDEX 18.17% -- -- -- -- 18.17%
- -----------------------------------------------------------------------------------------------------------------------------------
Lipper International 12.17% -- -- -- -- 12.17%
- -----------------------------------------------------------------------------------------------------------------------------------
Benchmark 20.00% -- -- -- -- 20.00%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
58 INVESTMENT PERFORMANCE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TABLE 3 (CONTINUED)
ANNUALIZED RATES OF RETURN FOR PERIODS ENDED DECEMBER 31, 1998:
- ------------------------------------------------------------------------------------------------------------------------------------
SINCE
PORTFOLIO
1 YEAR 3 YEARS 5 YEARS 10 YEARS 20 YEARS INCEPTION*
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BT SMALL COMPANY INDEX (3.87)% -- -- -- -- (3.87)%
- ------------------------------------------------------------------------------------------------------------------------------------
Lipper Small Cap 1.53% -- -- -- -- 1.53%
- ------------------------------------------------------------------------------------------------------------------------------------
Benchmark (2.54)% -- -- -- -- (2.54)%
- ------------------------------------------------------------------------------------------------------------------------------------
MFS EMERGING GROWTH COMPANIES 32.37% -- -- -- -- 32.69%
- ------------------------------------------------------------------------------------------------------------------------------------
Lipper Mid-Cap 15.97% -- -- -- -- 22.72%
- ------------------------------------------------------------------------------------------------------------------------------------
Benchmark (2.54)% -- -- -- -- 14.53%
- ------------------------------------------------------------------------------------------------------------------------------------
MFS RESEARCH 22.12% -- -- -- -- 22.44%
- ------------------------------------------------------------------------------------------------------------------------------------
Lipper Growth 25.82% -- -- -- -- 28.73%
- ------------------------------------------------------------------------------------------------------------------------------------
Benchmark 28.58% -- -- -- -- 31.63%
- ------------------------------------------------------------------------------------------------------------------------------------
MERRILL LYNCH BASIC VALUE EQUITY 9.80% -- -- -- -- 15.46%
- ------------------------------------------------------------------------------------------------------------------------------------
Lipper Growth & Income 15.54% -- -- -- -- 21.32%
- ------------------------------------------------------------------------------------------------------------------------------------
Benchmark 28.58% -- -- -- -- 31.63%
- ------------------------------------------------------------------------------------------------------------------------------------
MERRILL LYNCH WORLD STRATEGY 5.11% -- -- -- -- 5.23%
- ------------------------------------------------------------------------------------------------------------------------------------
Lipper Global Flexible Portfolio 9.34% -- -- -- -- 11.15%
- ------------------------------------------------------------------------------------------------------------------------------------
Benchmark 19.55% -- -- -- -- 20.00%
- ------------------------------------------------------------------------------------------------------------------------------------
MORGAN STANLEY EMERGING MARKETS
EQUITY (28.19)% -- -- -- -- (33.79)%
- ------------------------------------------------------------------------------------------------------------------------------------
Lipper Emerging Markets (30.50)% -- -- -- -- (36.28)%
- ------------------------------------------------------------------------------------------------------------------------------------
Benchmark (25.34)% -- -- -- -- (28.92)%
- ------------------------------------------------------------------------------------------------------------------------------------
T. ROWE PRICE EQUITY INCOME 7.33% -- -- -- -- 16.85%
- ------------------------------------------------------------------------------------------------------------------------------------
Lipper Equity Income 10.76% -- -- -- -- 19.07%
- ------------------------------------------------------------------------------------------------------------------------------------
Benchmark 28.58% -- -- -- -- 31.63%
- ------------------------------------------------------------------------------------------------------------------------------------
T. ROWE PRICE INTERNATIONAL STOCK 11.88% -- -- -- -- 5.30%
- ------------------------------------------------------------------------------------------------------------------------------------
Lipper International 12.17% -- -- -- -- 9.06%
- ------------------------------------------------------------------------------------------------------------------------------------
Benchmark 20.00% -- -- -- -- 13.43%
- ------------------------------------------------------------------------------------------------------------------------------------
WARBURG PINCUS SMALL COMPANY VALUE (11.45)% -- -- -- -- 2.58%
- ------------------------------------------------------------------------------------------------------------------------------------
Lipper Small Cap 1.53% -- -- -- -- 16.77%
- ------------------------------------------------------------------------------------------------------------------------------------
Benchmark (2.54)% -- -- -- -- 14.53%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- -----------
* Portfolio inception dates are shown in Table 1.
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PERFORMANCE 59
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TABLE 4
CUMULATIVE RATES OF RETURN FOR PERIODS ENDED DECEMBER 31, 1998:
- ------------------------------------------------------------------------------------------------------------------------------------
SINCE
PORTFOLIO
1 YEAR 3 YEARS 5 YEARS 10 YEARS 20 YEARS INCEPTION*
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ALLIANCE AGGRESSIVE STOCK (1.55)% 28.42% 56.67% 368.05% -- 550.62%
- ------------------------------------------------------------------------------------------------------------------------------------
Lipper Mid-Cap Growth 12.16% 58.64% 102.73% 334.88% -- 448.32%
- ------------------------------------------------------------------------------------------------------------------------------------
Benchmark 8.28% 63.35% 106.12% 360.30% -- 494.67%
- ------------------------------------------------------------------------------------------------------------------------------------
ALLIANCE COMMON STOCK 27.00% 96.46% 145.35% 358.29% -- 2,026.84%
- ------------------------------------------------------------------------------------------------------------------------------------
Lipper Growth 22.86% 84.52% 138.97% 388.00% 2,185.68% 3,490.04%
- ------------------------------------------------------------------------------------------------------------------------------------
Benchmark 28.58% 110.85% 193.91% 479.62% 2,530.43% 2,919.92%
- ------------------------------------------------------------------------------------------------------------------------------------
ALLIANCE CONSERVATIVE INVESTORS 11.79% 28.29% 42.73% -- -- 103.05%
- ------------------------------------------------------------------------------------------------------------------------------------
Lipper Flexible Portfolio 14.20% 15.62% 14.31% -- -- 12.55%
- ------------------------------------------------------------------------------------------------------------------------------------
Benchmark 15.59% 14.45% 13.37% -- -- 12.08%
- ------------------------------------------------------------------------------------------------------------------------------------
ALLIANCE GLOBAL 19.56% 47.23% 77.37% 230.13% -- 209.63%
- ------------------------------------------------------------------------------------------------------------------------------------
Lipper Global 14.34% 14.67% 11.98% 11.21% -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Benchmark 24.34% 17.77% 11.98% 11.21% -- 9.55%
- ------------------------------------------------------------------------------------------------------------------------------------
ALLIANCE GROWTH & INCOME 18.63% 73.96% 106.77% -- -- 105.27%
- ------------------------------------------------------------------------------------------------------------------------------------
Lipper Growth & Income 15.61% 21.25% 18.35% -- -- 17.89%
- ------------------------------------------------------------------------------------------------------------------------------------
Benchmark 22.85% 22.69% 19.96% -- -- 20.48%
- ------------------------------------------------------------------------------------------------------------------------------------
ALLIANCE GROWTH INVESTORS 16.93% 48.12% 74.67% -- -- 233.85%
- ------------------------------------------------------------------------------------------------------------------------------------
Lipper Flexible Portfolio 14.20% 15.62% 14.31% -- -- 12.55%
- ------------------------------------------------------------------------------------------------------------------------------------
Benchmark 22.85% 22.69% 19.96% -- -- 15.55%
- ------------------------------------------------------------------------------------------------------------------------------------
ALLIANCE HIGH YIELD (6.90)% 30.56% 46.65% 139.11% -- 164.68%
- ------------------------------------------------------------------------------------------------------------------------------------
Lipper High Current Yield (0.44)% 26.80% 43.00% 145.62 -- 182.21%
- ------------------------------------------------------------------------------------------------------------------------------------
Benchmark 3.66% 29.90% 53.96% 186.01% -- 239.69%
- ------------------------------------------------------------------------------------------------------------------------------------
ALLIANCE INTERMEDIATE GOVERNMENT
SECURITIES 5.76% 13.43% 18.44% -- -- 47.46%
- ------------------------------------------------------------------------------------------------------------------------------------
Lipper Intermediate Government 7.68% 6.21% 5.91% -- -- 7.25%
- ------------------------------------------------------------------------------------------------------------------------------------
Benchmark 8.49% 6.74% 6.45% -- -- 7.60%
- ------------------------------------------------------------------------------------------------------------------------------------
ALLIANCE INTERNATIONAL 8.53% 11.30% -- -- -- 22.17%
- ------------------------------------------------------------------------------------------------------------------------------------
Lipper International 13.02% 9.94% -- -- -- 10.74%
- ------------------------------------------------------------------------------------------------------------------------------------
Benchmark 20.00% 9.00% -- -- -- 9.68%
- ------------------------------------------------------------------------------------------------------------------------------------
ALLIANCE MONEY MARKET 3.40% 10.60% 17.22% 42.89% -- 138.78%
- ------------------------------------------------------------------------------------------------------------------------------------
Lipper Money Market 4.84% 15.34% 26.25% 66.09% -- 214.68%
- ------------------------------------------------------------------------------------------------------------------------------------
Benchmark 5.05% 16.35% 28.27% 69.88% -- 214.45%
- ------------------------------------------------------------------------------------------------------------------------------------
ALLIANCE SMALL CAP GROWTH (5.97)% -- -- -- -- 17.69%
- ------------------------------------------------------------------------------------------------------------------------------------
Lipper Small Company Growth (0.33)% -- -- -- -- 28.98%
- ------------------------------------------------------------------------------------------------------------------------------------
Benchmark 1.23% -- -- -- -- 29.23%
- ------------------------------------------------------------------------------------------------------------------------------------
BT EQUITY 500 INDEX 23.13% -- -- -- -- 23.13%
- ------------------------------------------------------------------------------------------------------------------------------------
Lipper S&P 500 Index 26.78% -- -- -- -- 26.78%
- ------------------------------------------------------------------------------------------------------------------------------------
Benchmark 28.58% -- -- -- -- 28.58%
- ------------------------------------------------------------------------------------------------------------------------------------
BT INTERNATIONAL EQUITY INDEX 18.17% -- -- -- -- 18.17%
- ------------------------------------------------------------------------------------------------------------------------------------
Lipper International 12.17% -- -- -- -- 12.23%
- ------------------------------------------------------------------------------------------------------------------------------------
Benchmark 20.00% -- -- -- -- 20.00%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
60 INVESTMENT PERFORMANCE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TABLE 4 (CONTINUED)
CUMULATIVE RATES OF RETURN FOR PERIODS ENDED DECEMBER 31, 1998:
- ------------------------------------------------------------------------------------------------------------------------------------
SINCE
PORTFOLIO
1 YEAR 3 YEARS 5 YEARS 10 YEARS 20 YEARS INCEPTION*
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BT SMALL COMPANY INDEX (3.87)% -- -- -- -- (3.87)%
- ------------------------------------------------------------------------------------------------------------------------------------
Lipper Small Cap 1.53% -- -- -- -- 1.49%
- ------------------------------------------------------------------------------------------------------------------------------------
Benchmark (2.54)% -- -- -- -- (2.54)%
- ------------------------------------------------------------------------------------------------------------------------------------
MFS EMERGING GROWTH COMPANIES 32.37% -- -- -- -- 60.31%
- ------------------------------------------------------------------------------------------------------------------------------------
Lipper Mid-Cap 15.97% -- -- -- -- 42.16%
- ------------------------------------------------------------------------------------------------------------------------------------
Benchmark (2.54)% -- -- -- -- 25.40%
- ------------------------------------------------------------------------------------------------------------------------------------
MFS RESEARCH 22.12% -- -- -- -- 40.19%
- ------------------------------------------------------------------------------------------------------------------------------------
Lipper Growth 25.82% -- -- -- -- 52.86%
- ------------------------------------------------------------------------------------------------------------------------------------
Benchmark 28.58% -- -- -- -- 57.60%
- ------------------------------------------------------------------------------------------------------------------------------------
MERRILL LYNCH BASIC VALUE EQUITY 9.80% -- -- -- -- 27.11%
- ------------------------------------------------------------------------------------------------------------------------------------
Lipper Growth & Income 15.54% -- -- -- -- 21.32%
- ------------------------------------------------------------------------------------------------------------------------------------
Benchmark 28.58% -- -- -- -- 31.63%
- ------------------------------------------------------------------------------------------------------------------------------------
MERRILL LYNCH WORLD STRATEGY 5.11% -- -- -- -- 8.88%
- ------------------------------------------------------------------------------------------------------------------------------------
Lipper Global Flexible Portfolio 9.34% -- -- -- -- 11.15%
- ------------------------------------------------------------------------------------------------------------------------------------
Benchmark 19.55% -- -- -- -- 20.00%
- ------------------------------------------------------------------------------------------------------------------------------------
MORGAN STANLEY EMERGING MARKETS EQUITY (28.19)% -- -- -- -- (43.02)%
- ------------------------------------------------------------------------------------------------------------------------------------
Lipper Emerging Markets (30.50)% -- -- -- -- (45.67)%
- ------------------------------------------------------------------------------------------------------------------------------------
Benchmark (25.34)% -- -- -- -- (36.71)%
- ------------------------------------------------------------------------------------------------------------------------------------
T. ROWE PRICE EQUITY INCOME 7.33% -- -- -- -- 29.66%
- ------------------------------------------------------------------------------------------------------------------------------------
Lipper Equity Income 10.76% -- -- -- -- 19.07%
- ------------------------------------------------------------------------------------------------------------------------------------
Benchmark 28.58% -- -- -- -- 31.63%
- ------------------------------------------------------------------------------------------------------------------------------------
T. ROWE PRICE INTERNATIONAL STOCK 11.88% -- -- -- -- 9.00%
- ------------------------------------------------------------------------------------------------------------------------------------
Lipper International 12.17% -- -- -- -- 9.06%
- ------------------------------------------------------------------------------------------------------------------------------------
Benchmark 20.00% -- -- -- -- 13.43%
- ------------------------------------------------------------------------------------------------------------------------------------
WARBURG PINCUS SMALL COMPANY VALUE (11.45)% -- -- -- -- 4.35%
- ------------------------------------------------------------------------------------------------------------------------------------
Lipper Small Cap 1.53% -- -- -- -- 16.77%
- ------------------------------------------------------------------------------------------------------------------------------------
Benchmark (2.54)% -- -- -- -- 14.53%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- -----------
* Portfolio inception dates are shown in Table 1.
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PERFORMANCE 61
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TABLE 5
YEAR-BY-YEAR RATES OF RETURN
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
1989 1990 1991 1992 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Alliance Aggressive Stock 40.86% 6.16% 83.43% (4.95)% 14.59%
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Common Stock 23.28% (9.82)% 35.34% 1.31% 22.52%
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Conservative Investors 2.61% 4.40% 17.67% 3.76% 8.77%
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Global 24.41% (7.81)% 28.15% (2.35)% 29.68%
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Growth & Income -- -- -- -- (0.72)%
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Growth Investors 3.35% 8.61% 46.16% 2.96% 13.15%
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance High Yield 3.20% (2.95)% 22.17% 10.23% 20.88%
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Intermediate Government
Securities -- -- 10.71% 3.64% 8.50%
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance International -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Money Market 7.18% 6.23% 4.23% 1.65% 1.06%
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Small Cap Growth -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
BT Equity 500 Index -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
BT International Equity Index -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
BT Small Company Index -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
MFS Emerging Growth Companies -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
MFS Research -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Merrill Lynch Basic Value Equity -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Merrill Lynch World Strategy -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Emerging Markets Equity -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
T. Rowe Price Equity Income -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
T. Rowe Price International Stock -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Warburg Pincus Small Company Value -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
1994 1995 1996 1997 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Alliance Aggressive Stock (5.59)% 29.21% 19.93% 8.77% (1.55)%
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Common Stock (3.94)% 30.01% 21.97% 26.84% 27.00%
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Conservative Investors (5.86)% 18.19% 3.25% 11.15% 11.79%
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Global 3.29% 16.63% 12.47% 9.49% 19.56%
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Growth & Income (2.41)% 21.79% 17.86% 24.42% 18.63%
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Growth Investors (4.94)% 24.05% 10.51% 14.63% 16.93%
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance High Yield (4.58)% 17.71% 20.60% 16.28% (6.90)%
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Intermediate Government
Securities (6.13)% 11.24% 1.85% 5.31% 5.76%
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance International -- 9.76% 1.77% (4.84)% 8.53%
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Money Market 2.10% 3.80% 3.37% 3.48% 3.40%
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Small Cap Growth -- -- -- 25.16% + (5.97)%
- ------------------------------------------------------------------------------------------------------------------------------------
BT Equity 500 Index -- -- -- -- 23.13%
- ------------------------------------------------------------------------------------------------------------------------------------
BT International Equity Index -- -- -- -- 18.17%
- ------------------------------------------------------------------------------------------------------------------------------------
BT Small Company Index -- -- -- -- (3.87)%
- ------------------------------------------------------------------------------------------------------------------------------------
MFS Emerging Growth Companies -- -- -- 21.11% + 32.37%
- ------------------------------------------------------------------------------------------------------------------------------------
MFS Research -- -- -- 14.80% + 22.12%
- ------------------------------------------------------------------------------------------------------------------------------------
Merrill Lynch Basic Value Equity -- -- -- 15.77% + 9.80%
- ------------------------------------------------------------------------------------------------------------------------------------
Merrill Lynch World Strategy -- -- -- 3.58% + 5.11%
- ------------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Emerging Markets Equity -- -- -- (20.66)%+ (28.19)%
- ------------------------------------------------------------------------------------------------------------------------------------
T. Rowe Price Equity Income -- -- -- 20.81% + 7.33%
- ------------------------------------------------------------------------------------------------------------------------------------
T. Rowe Price International Stock -- -- -- (2.57)%+ 11.88%
- ------------------------------------------------------------------------------------------------------------------------------------
Warburg Pincus Small Company Value -- -- -- 17.84% + (11.45)%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------
+ Returns for these Portfolios represent less than 12 months of performance.
The returns are as of each Portfolio inception date as shown in Table 1.
<PAGE>
- --------------------------------------------------------------------------------
62 INVESTMENT PERFORMANCE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMUNICATING PERFORMANCE DATA
In reports or other communications to contract owners or in advertising
material, we may describe general economic and market conditions affecting our
variable investment options and the Portfolios and may compare the performance
or ranking of those options and the Portfolios with:
o those of other insurance company separate accounts or mutual funds included
in the rankings prepared by Lipper Analytical Services, Inc., Morningstar,
Inc., VARDS, or similar investment services that monitor the performance of
insurance company separate accounts or mutual funds;
o other appropriate indices of investment securities and averages for peer
universes of mutual funds; or
o data developed by us derived from such indices or averages.
We also may furnish to present or prospective contract owners advertisements or
other communications that include evaluations of a variable investment option or
Portfolio by nationally recognized financial publications. Examples of such
publications are:
- --------------------------------------------------------------------------------
Barron's Money Management Letter
Morningstar's Variable Annuity Sourcebook Investment Dealers Digest
Business Week National Underwriter
Forbes Pension & Investments
Fortune USA Today
Institutional Investor Investor's Business Daily
Money The New York Times
Kiplinger's Personal Finance The Wall Street Journal
Financial Planning The Los Angeles Times
Investment Adviser The Chicago Tribune
Investment Management Weekly
- --------------------------------------------------------------------------------
Lipper compiles performance data for peer universes of funds with similar
investment objectives in its Lipper Survey. Morningstar, Inc. compiles similar
data in the Morningstar Variable Annuity/Life Report (Morningstar Report).
The Lipper Survey records performance data as reported to it by over 800 mutual
funds underlying variable annuity and life insurance products. It divides these
actively managed Portfolios into 25 categories by Portfolio objectives. The
Lipper Survey contains two different universes, which reflect different types of
fees in performance data:
o The "separate account" universe reports performance data net of investment
management fees, direct operating expenses and asset-based charges applicable
under variable life and annuity contracts, and
o The "mutual fund" universe reports performance net only of investment
management fees and direct operating expenses, and therefore reflects only
charges that relate to the underlying mutual fund.
The Morningstar Variable Annuity/Life Report consists of nearly 700 variable
life and annuity funds, all of which report their data net of investment
management fees, direct operating expenses and separate account level charges.
VARDS is a monthly reporting service that monitors approximately 2,500 variable
life and variable annuity funds on performance and account information.
YIELD INFORMATION
Current yield for the Alliance Money Market option will be based on net changes
in a hypothetical investment over a given seven-day period, exclusive of capital
changes, and then "annualized" (assuming that the same seven-day result would
occur each week for 52 weeks). Current yields for the Alliance High Yield option
and Alliance Intermediate Government Securities option will be based on net
changes in a hypothetical investment over a given 30-day period, exclusive of
capital changes, and then "annualized" (assuming that the same 30-day result
would occur each month for 12 months).
"Effective yield" is calculated in a similar manner, but when annualized, any
income earned by the investment is assumed to be reinvested. The "effective
yield" will be slightly higher than the "current yield" because any earnings are
compounded weekly for the Alliance Money Market option. The yields and effective
yields assume the deduction of all contract charges and expenses other than the
withdrawal charge, and any charge for taxes such as premium tax. For
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PERFORMANCE 63
- --------------------------------------------------------------------------------
more information, see "Yield Information for the Alliance Money Market Option,
Alliance High Yield Option, and Alliance Intermediate Government Securities
Option" in the SAI.
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX I: PURCHASE CONSIDERATIONS FOR QP CONTRACTS A-1
- --------------------------------------------------------------------------------
APPENDIX I: PURCHASE
CONSIDERATIONS FOR
QP CONTRACTS
- --------------------------------------------------------------------------------
Trustees who are considering the purchase of an Equitable Accumulator Plus QP
contract should discuss with their tax advisers whether this is an appropriate
investment vehicle for the employer's plan. Trustees should consider whether the
plan provisions permit the investment of plan assets in the QP contract, the
distribution of such an annuity and the payment of death benefits in accordance
with the requirements of the federal income tax rules. The QP contract and this
prospectus should be reviewed in full, and the following factors, among others,
should be noted. Assuming continued plan qualification and operation, earnings
on qualified plan assets will accumulate value on a tax-deferred basis even if
the plan is not funded by the Equitable Accumulator Plus QP contract or another
annuity. Therefore, you should purchase an Equitable Accumulator Plus QP
contract to fund a plan for the contract's features and benefits other than tax
deferral. This QP contract accepts transfer contributions only and not regular,
ongoing payroll contributions. For 401(k) plans under defined contribution
plans, no employee after-tax contributions are accepted.
Under defined benefit plans, we will not accept rollovers from a defined
contribution plan to a defined benefit plan. We will only accept transfers from
a defined benefit plan or a change of investment vehicles in the plan. For
defined benefit plans, the maximum percentage of actuarial value of the plan
participant/employee's normal retirement benefit that can be funded by a QP
contract is 80%. The account value under a QP contract may at any time be more
or less than the lump sum actuarial equivalent of the accrued benefit for a
defined benefit plan participant/employee. Equitable Life does not guarantee
that the account value under a QP contract will at any time equal the actuarial
value of 80% of a participant/employee's accrued benefit. If overfunding of a
plan occurs, withdrawals from the QP contract may be required. A withdrawal
charge may apply.
Further, Equitable Life will not perform or provide any plan recordkeeping
services with respect to the QP contracts. The plan's administrator will be
solely responsible for performing or providing for all such services. There is
no loan feature offered under the QP contracts, so if the plan provides for
loans and a participant/employee takes a loan from the plan, other plan assets
must be used as the source of the loan and any loan repayments must be credited
to other investment vehicles and/or accounts available under the plan.
Given that required minimum distributions must generally commence from the plan
for annuitants after age 70 1/2, trustees should consider whether the QP
contract is an appropriate purchase for annuitants approaching or over age
70 1/2.
Finally, because the method of purchasing the QP contract and the features of
the QP contract may appeal more to plan participants/employees who are older and
tend to be highly paid, and because certain features of the QP contract are
available only to plan participants/employees who meet certain minimum and/or
maximum age requirements, plan trustees should discuss with their advisers
whether the purchase of the QP contract would cause the plan to engage in
prohibited discrimination in contributions, benefits or otherwise.
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX II: GUARANTEED MINIMUM DEATH BENEFIT EXAMPLE B-1
- --------------------------------------------------------------------------------
APPENDIX II: GUARANTEED
MINIMUM DEATH
BENEFIT EXAMPLE
- --------------------------------------------------------------------------------
The death benefit under the contracts is equal to the account value or, if
greater, the guaranteed minimum death benefit.
The following illustrates the guaranteed minimum death benefit calculation.
Assuming $100,000 is allocated to the variable investment options (with no
allocation to the Alliance Money Market option or Alliance Intermediate
Government Securities option), no additional contributions, no transfers and no
withdrawals, the guaranteed minimum death benefit for an annuitant age 45 would
be calculated as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
END OF 5% ROLL UP TO AGE 80 ANNUAL RATCHET TO AGE 80
CONTRACT GUARANTEED MINIMUM GUARANTEED MINIMUM
YEAR ACCOUNT VALUE DEATH BENEFIT(1) DEATH BENEFIT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 $105,000 $105,000(1) $105,000(3)
- ------------------------------------------------------------------------------------------------------------------------------------
2 $115,500 $110,250(2) $115,500(3)
- ------------------------------------------------------------------------------------------------------------------------------------
3 $129,360 $115,763(2) $129,360(3)
- ------------------------------------------------------------------------------------------------------------------------------------
4 $103,488 $121,551(1) $129,360(4)
- ------------------------------------------------------------------------------------------------------------------------------------
5 $113,837 $127,628(1) $129,360(4)
- ------------------------------------------------------------------------------------------------------------------------------------
6 $127,497 $134,010(1) $129,360(4)
- ------------------------------------------------------------------------------------------------------------------------------------
7 $127,497 $140,710(1) $129,360(4)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The account values for contract years 1 through 7 are based on hypothetical
rates of return of 5.00%, 10.00%, 12.00%, (20.00)%, 10.00%, 12.00% and 0.00%. We
are using these rates solely to illustrate how the benefit is determined. The
return rates bear no relationship to past or future investment results.
5% ROLL UP TO AGE 80
(1) At the end of contract year 1, and again at the end of contract years 4
through 7, the death benefit will be equal to the guaranteed minimum death
benefit.
(2) At the end of contract years 2 and 3, the death benefit will be equal to the
current account value since it is higher than the current guaranteed minimum
death benefit.
ANNUAL RATCHET TO AGE 80
(3) At the end of contract years 1 through 3, the guaranteed minimum death
benefit is equal to the current account value.
(4) At the end of contract years 4 through 7, the guaranteed minimum death
benefit is equal to the guaranteed minimum death benefit at the end of the
prior year since it is equal to or higher than the current account value.
<PAGE>
STATEMENT OF ADDITIONAL
INFORMATION
- --------------------------------------------------------------------------------
TABLE OF CONTENTS PAGE
Unit Values 2
Annuity Unit Values 2
Custodian and Independent Accountants 3
Yield Information for the Alliance Money Market Option,
Alliance High Yield Option, and Alliance Intermediate
Government Securities Option 3
Long-Term Market Trends 4
Key Factors in Retirement Planning 7
Financial Statements 11
HOW TO OBTAIN AN EQUITABLE ACCUMULATOR PLUS STATEMENT OF ADDITIONAL INFORMATION
FOR SEPARATE ACCOUNT NO. 45
Send this request form to:
Equitable Accumulator Plus
P.O. Box 1547
Secaucus, NJ 07096-1547
- --------------------------------------------------------------------------------
Please send me an Equitable Accumulator Plus SAI for Separate Account No. 45
dated September 2, 1999:
- --------------------------------------------------------------------------------
Name
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
City State Zip
(IM-99-12 SAI(7/99))
<PAGE>
Equitable Accumulator Plus(SM) THE EQUITABLE LIFE ASSURANCE SOCIETY
OF THE UNITED STATES
A combination variable and 1290 AVENUE OF THE AMERICAS
fixed deferred annuity contract NEW YORK, NEW YORK 10104
STATEMENT OF ADDITIONAL INFORMATION
September 2, 1999
- --------------------------------------------------------------------------------
This statement of additional information ("SAI") is not a prospectus. It should
be read in conjunction with the related Equitable Accumulator Plus prospectus,
dated September 2, 1999. That prospectus provides detailed information
concerning the contracts and the variable investment options that fund the
contracts. Each variable investment option is a subaccount of Equitable Life's
Separate Account No. 45. Definitions of special terms used in the SAI are found
in the prospectus.
A copy of the prospectus is available free of charge by writing the Processing
Office (Post Office Box 1547, Secaucus, NJ 07096-1547), by calling
1-800-789-7771 toll-free, or by contacting your Equitable associate.
TABLE OF CONTENTS
Unit Values 2
Annuity Unit Values 2
Custodian and Independent Accountants 3
Yield Information for the Alliance Money Market option,
Alliance High Yield option, and Alliance Intermediate
Government Securities option 3
Long-term Market Trends 4
Key Factors in Retirement Planning 7
Financial Statements 11
Copyright 1999 The Equitable Life Assurance Society of the United States.
All rights reserved. Accumulator is a service mark of
The Equitable Life Assurance Society of the United States.
(IM-99-12 SAI(7/99))
<PAGE>
- --------------------------------------------------------------------------------
2
- --------------------------------------------------------------------------------
UNIT VALUES
Unit values are determined at the end of each valuation period for each of the
variable investment options. We may offer other annuity contracts and
certificates which will have their own unit values for the variable investment
options. They may be different from the unit values for the Equitable
Accumulator Plus.
The unit value for a variable investment option for any valuation period is
equal to: (1) the unit value for the preceding valuation period multiplied by
(ii) the net investment factor for that option for that valuation period. A
valuation period is each business day together with any preceding non-business
days. The net investment factor is:
(a/b) -c
where:
(a) is the value of the variable investment option's shares of the
corresponding Portfolio at the end of the valuation period. Any amounts
allocated to or withdrawn from the option for the valuation period are not
taken into account. For this purpose, we use the share value reported to us
by The Hudson River Trust or EQ Advisors Trust.
(b) is the value of the variable investment option's shares of the
corresponding Portfolio at the end of the preceding valuation period. (Any
amounts allocated or withdrawn for that valuation period are taken into
account.)
(c) is the daily mortality and expense risks charge, administrative charge, and
distribution charge relating to the contracts, times the number of calendar
days in the valuation period. These daily charges are at an effective
annual rate not to exceed a total of 1.60%.
ANNUITY UNIT VALUES
The annuity unit value for each variable investment option was fixed at $1.00 on
each option's respective effective date (as shown in the prospectus) for
contracts with assumed base rates of net investment return of both 5% and 3 1/2%
a year. For each valuation period after that date, it is the annuity unit value
for the immediately preceding valuation period multiplied by the adjusted net
investment factor under the contract. For each valuation period, the adjusted
net investment factor is equal to the net investment factor reduced for each day
in the valuation period by:
o .00013366 of the net investment factor if the assumed base rate of net
investment return is 5% a year; or
o .00009425 of the net investment factor if the assumed base rate of net
investment return is 3 1/2%.
Because of this adjustment, the annuity unit value rises and falls depending on
whether the actual rate of net investment return (after deduction of charges) is
higher or lower than the assumed base rate.
All contracts have a 5% assumed base rate of net investment return, except in
states where that rate is not permitted. Annuity payments under contracts with
an assumed base rate of 3 1/2% will at first be smaller than those under
contracts with a 5% assumed base rate. Payments under the 3 1/2% contracts,
however, will rise more rapidly when unit values are rising, and payments will
fall more slowly when unit values are falling than those under 5% contracts.
The amounts of variable annuity payments are determined as follows:
Payments normally start on the business day specified on your election form, or
on such other future date you specify. The payments are made on a monthly basis.
The first three payments are of equal amounts. Each of the first three payments
will be based on the amount specified in the Tables of Guaranteed Annuity
Payments in your contract.
The first three payments depend on the assumed base rate of net investment
return and the form of annuity chosen (and any fixed period or period certain).
If the annuity involved is a life
<PAGE>
- --------------------------------------------------------------------------------
3
- --------------------------------------------------------------------------------
contingency, the risk class and the age of the annuitants will affect payments.
The amount of the fourth and each later payment will vary according to the
investment performance of the variable investment options. We calculate each
monthly payment by multiplying the number of annuity units credited by the
average annuity unit value for the second calendar month immediately preceding
the due date of the payment. We calculate the number of units by dividing the
first monthly payment by the annuity unit value for the valuation period. This
includes the due date of the first monthly payment. The average annuity unit
value is the average of the annuity unit values for the valuation periods ending
in that month. Variable income annuities may also be available by separate
prospectus through other separate accounts we offer.
ILLUSTRATION OF CHANGES IN ANNUITY UNIT VALUES
To show how we determine variable annuity payments from month to month, assume
that the account value on the date annuity payments are to begin is enough to
fund an annuity with a monthly payment of $363. Also assume that the annuity
unit value for the valuation period that includes the due date of the first
annuity payment is $1.05. The number of annuity units credited under the
contract would be 345.71 (363 divided by 1.05 = 345.71).
If the fourth monthly payment is due in March, and the average annuity unit
value for January was $1.10, the annuity payment for March would be the number
of units (345.71) times the average annuity unit value ($1.10), or $380.28. If
the average annuity unit value was $1 in February, the annuity payment for April
would be 345.71 times $1, or $345.71.
CUSTODIAN AND INDEPENDENT ACCOUNTANTS
Equitable Life is the custodian for the shares of The Hudson River Trust and EQ
Advisors Trust owned by Separate Account No. 45.
The financial statements of Separate Account No. 45 as at December 31, 1998 and
for the periods ended December 31, 1998 and 1997, and the consolidated financial
statements of Equitable Life as at December 31, 1998 and 1997 and for each of
the three years ended December 31, 1998 included in this SAI have been so
included in reliance on the reports of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
YIELD INFORMATION FOR THE ALLIANCE MONEY MARKET OPTION, ALLIANCE HIGH YIELD
OPTION, AND ALLIANCE INTERMEDIATE GOVERNMENT SECURITIES OPTION
ALLIANCE MONEY MARKET OPTION
The Alliance Money Market option calculates yield information for seven-day
periods. The seven-day current yield calculation is based on a hypothetical
contract with one unit at the beginning of the period. To determine the
seven-day rate of return, the net change in the unit value is computed by
subtracting the unit value at the beginning of the period from a unit value,
exclusive of capital changes, at the end of the period.
Unit values reflect all other accrued expenses of the Alliance Money Market
option but do not reflect any withdrawal charge or charges for applicable taxes
such as state or local premium taxes.
The adjusted net change is divided by the unit value at the beginning of the
period to obtain what is called the adjusted base period rate of return. This
seven-day adjusted base period return is then multiplied by 365/7 to produce an
annualized seven-day current yield figure carried to the nearest one-hundredth
of one percent.
The effective yield is obtained by modifying the current yield to take into
account the compounding nature of the Alliance Money Market option's
investments, as follows: the unannualized adjusted base period return is
compounded by adding one to the adjusted base period return, raising the sum to
a power equal to 365 divided by 7, and subtracting one from the result, i.e.,
effective yield = (base period return + 1 )[Superscript: 365/7]-1.
<PAGE>
- --------------------------------------------------------------------------------
4
- --------------------------------------------------------------------------------
The Alliance Money Market option yields will fluctuate daily. Accordingly,
yields for any given period do not necessarily represent future results. In
addition, the value of units of the Alliance Money Market option will fluctuate
and not remain constant.
ALLIANCE HIGH YIELD OPTION AND ALLIANCE INTERMEDIATE GOVERNMENT SECURITIES
OPTION
The Alliance High Yield option and Alliance Intermediate Government Securities
option calculate yield information for 30-day periods. The 30-day current yield
calculation is based on a hypothetical contract with one unit at the beginning
of the period. To determine the 30-day rate of return, the net change in the
unit value is computed by subtracting the unit value at the beginning of the
period from a unit value, exclusive of capital changes, at the end of the
period.
Unit values reflect all other accrued expenses of the Alliance High Yield option
and Alliance Intermediate Government Securities option but do not reflect any
withdrawal charge or charges for applicable taxes such as state or local premium
taxes.
The adjusted net change is divided by the unit value at the beginning of the
period to obtain the adjusted base period rate of return. This 30-day adjusted
base period return is then multiplied by 365/30 to produce an annualized 30-day
current yield figure carried to the nearest one-hundredth of one percent.
Yields for the Alliance High Yield option and Alliance Intermediate Government
Securities option will fluctuate daily. Accordingly, yields for any given period
do not necessarily represent future results. In addition, the value of units of
the Alliance High Yield option and Alliance Intermediate Government Securities
option will fluctuate and not remain constant.
YIELD INFORMATION FOR THE ALLIANCE MONEY MARKET OPTION, ALLIANCE HIGH YIELD
OPTION, AND ALLIANCE INTERMEDIATE GOVERNMENT SECURITIES OPTION
The yields for the Alliance Money Market option, Alliance High Yield option, and
Alliance Intermediate Government Securities option reflect charges that are not
normally reflected in the yields of other investments. Therefore, they may be
lower when compared with yields of other investments. The yields for the options
should not be compared to the return on fixed rate investments which guarantee
rates of interest for specified periods.
Nor should the yields be compared to the yields of money market options made
available to the general public.
Because the Equitable Accumulator Plus Contracts described in the prospectus are
being offered for the first time in 1999, no yield information is presented.
LONG-TERM MARKET TRENDS
As a tool for understanding how different investment strategies may affect
long-term results, it may be useful to consider the historical returns on
different types of assets. The following charts present historical return trends
for various types of securities. The information presented, while not directly
related to the performance of the variable investment options, helps to provide
a perspective on the potential returns of different asset classes over different
periods of time. By combining this information with knowledge of your own
financial needs (for example, the length of time until you retire, your
financial requirements at retirement), you may be able to better determine how
you wish to allocate contributions among the variable investment options.
Historically, the long-term investment performance of common stocks has
generally been superior to that of long- or short-term debt securities. For
those investors who have many years until retirement, or whose primary focus is
on long-term growth potential and protection against inflation, there may be
advantages to allocating some or all of their account value to those variable
investment options that invest in stocks.
<PAGE>
- --------------------------------------------------------------------------------
5
- --------------------------------------------------------------------------------
GROWTH OF $1 INVESTED ON JANUARY 1, 1958
(VALUES ARE AS OF LAST BUSINESS DAY)
[THE FOLLOWING DATA WAS REPRESENTED AS A
SHADED AREA GRAPH IN THE PRINTED DOCUMENT:]
Common Stock Inflation
1958 1.00 1.00
1959 1.12 1.01
1960 1.12 1.03
1961 1.43 1.04
1962 1.30 1.05
1963 1.60 1.07
1964 1.86 1.08
1965 2.10 1.10
1966 1.88 1.14
1967 2.34 1.17
1968 2.59 1.23
1969 2.37 1.30
1970 2.47 1.37
1971 2.82 1.42
1972 3.36 1.47
1973 2.87 1.60
1974 2.11 1.79
1975 2.89 1.92
1976 3.58 2.01
1977 3.32 2.15
1978 3.54 2.34
1979 4.19 2.65
1980 5.55 2.98
1981 5.28 3.25
1982 6.41 3.37
1983 7.86 3.50
1984 8.35 3.64
1985 11.03 3.78
1986 13.07 3.82
1987 13.75 3.99
1988 16.07 4.16
1989 21.13 4.36
1990 20.46 4.62
1991 26.74 4.76
1992 28.75 4.90
1993 31.63 5.04
1994 32.04 5.17
1995 44.03 5.30
1996 54.19 5.48
1997 72.27 5.57
1998 92.93 5.67
[LIGHT SHADED AREA = COMMON STOCK]
[DARK SHADED AREA = INFLATION]
[END OF GRAPHICALLY REPRESENTED DATA]
Over shorter periods of time, however, common stocks tend to be subject to more
dramatic changes in value than fixed-income (debt) securities. Investors who are
nearing retirement age, or who have a need to limit short-term risk, may find it
preferable to allocate a smaller percentage of their account value to those
variable investment options that invest in common stocks. The following graph
illustrates the monthly fluctuations in value of $1 based on monthly returns of
the Standard & Poor's 500 during 1990, a year that represents more typical
volatility than 1998.
GROWTH OF $1 INVESTED ON JANUARY 1, 1990
(VALUES ARE AS OF LAST BUSINESS DAY)
[THE FOLLOWING DATA WAS REPRESENTED AS A BLACK AND WHITE LINE GRAPH
IN THE PRINTED DOCUMENT:]
Intermediate-Term
Govt. Bonds Common Stocks
1/1/90 1.00 1.00
Jan. 0.99 0.93
Feb. 0.99 0.94
Mar. 0.99 0.97
Apr. 0.98 0.95
May 1.01 1.04
June 1.02 1.03
July 1.04 1.03
Aug. 1.03 0.93
Sep. 1.04 0.89
Oct. 1.06 0.89
Nov. 1.08 0.94
Dec. 1.10 0.97
[END OF GRAPHICALLY REPRESENTED DATA]
The following chart illustrates average annual rates of return over selected
time periods between December 31, 1926 and December 31, 1998 for different types
of securities: common stocks, long-term government bonds, long-term corporate
bonds, intermediate-term government bonds and U.S. Treasury Bills. For
comparison purposes, the Consumer Price Index is shown as a measure of
inflation. The average annual returns shown in the chart reflect capital
appreciation and assume the reinvestment of dividends and interest. Investment
management fees or expenses and charges typically associated with deferred
annuity products, are not reflected.
The information presented is merely a summary of past experience for unmanaged
groups of securities and is neither an estimate nor guarantee of future
performance. Any investment in securities, whether equity or debt, involves
varying degrees of potential risk, in addition to offering varying degrees of
potential reward.
- --------------------------------------------------------------------------------
The rates of return illustrated do not represent returns of the variable
investment options. In addition, there is no assurance that the performance of
the variable investment options will correspond to rates of return such as those
illustrated in the chart.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
6
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
MARKET TRENDS:
ILLUSTRATIVE ANNUAL RATES OF RETURN
- -----------------------------------------------------------------------------------------------------------------------
LONG-TERM LONG-TERM INTERMEDIATE- U.S.
FOR THE FOLLOWING PERIODS COMMON GOVERNMENT CORPORATE TERM GOV'T. TREASURY CONSUMER
ENDING DECEMBER 31, 1998 STOCKS BONDS BONDS BONDS BILLS PRICE INDEX
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Year 28.58% 13.06% 10.76% 10.21% 4.86% 1.80%
- -----------------------------------------------------------------------------------------------------------------------
3 Years 28.27 9.07 8.25 6.84 5.11 2.27
- -----------------------------------------------------------------------------------------------------------------------
5 Years 24.06 9.52 8.74 6.20 4.96 2.41
- -----------------------------------------------------------------------------------------------------------------------
10 Years 19.19 11.66 10.85 8.74 5.29 3.14
- -----------------------------------------------------------------------------------------------------------------------
20 Years 17.75 11.14 10.86 9.85 7.17 4.53
- -----------------------------------------------------------------------------------------------------------------------
30 Years 12.67 9.09 9.14 8.71 6.76 5.24
- -----------------------------------------------------------------------------------------------------------------------
40 Years 12.00 7.20 7.43 7.39 5.94 4.44
- -----------------------------------------------------------------------------------------------------------------------
50 Years 13.56 5.89 6.20 6.21 5.07 3.92
- -----------------------------------------------------------------------------------------------------------------------
60 Years 12.49 5.43 5.62 5.50 4.26 4.19
- -----------------------------------------------------------------------------------------------------------------------
Since 12/31/26 11.21 5.29 5.78 5.32 3.78 3.15
- -----------------------------------------------------------------------------------------------------------------------
Inflation Adjusted Since 1926 7.82 2.08 2.55 2.11 0.62 0.00
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
SOURCE: Ibbotson, Roger G., and Rex A. Sinquefield, Stocks, Bonds, Bills, and
Inflation (SBBI), 1982, updated in Stocks, Bonds, Bills and Inflation 1998
Yearbook,(tm) Ibbotson Associates, Inc., Chicago. All rights reserved.
COMMON STOCKS (S&P 500) - Standard and Poor's Composite Index, an unmanaged
weighted index of the stock performance of 500 industrial, transportation,
utility and financial companies.
LONG-TERM GOVERNMENT BONDS - Measured using a one-bond portfolio constructed
each year containing a bond with approximately a twenty-year maturity and a
reasonably current coupon.
LONG-TERM CORPORATE BONDS - For the period 1969-1998, represented by the Salomon
Brothers Long-Term, High-Grade Corporate Bond Index; for the period 1946-1968,
the Salomon Brothers Index was backdated using Salomon Brothers monthly yield
data and a methodology similar to that used by Salomon Brothers for 1969-1998;
for the period 1927-1945, the Standard and Poor's monthly High-Grade Corporate
Composite yield data were used, assuming a 4 percent coupon and a twenty-year
maturity.
INTERMEDIATE-TERM GOVERNMENT BONDS - Measured by a one-bond portfolio
constructed each year containing a bond with approximately a five-year maturity.
U.S. TREASURY BILLS - Measured by rolling over each month a one-bill portfolio
containing, at the beginning of each month, the bill having the shortest
maturity not less than one month.
INFLATION - Measured by the Consumer Price Index for all Urban Consumers
(CPI-U), not seasonally adjusted.
<PAGE>
- --------------------------------------------------------------------------------
7
- --------------------------------------------------------------------------------
KEY FACTORS IN RETIREMENT PLANNING
INTRODUCTION
The Equitable Accumulator Plus is available to help meet the retirement income
and investment needs of individuals. In assessing these retirement needs, some
key factors need to be addressed: (1) the impact of inflation on fixed
retirement incomes; (2) the importance of planning early for retirement; (3) the
benefits of tax deferral; (4) the selection of an appropriate investment
strategy; and (5) the benefit of receiving annuity payments. Each of these
factors is addressed below.
- --------------------------------------------------------------------------------
Unless otherwise noted, all of the following presentations use an assumed annual
rate of return of 7.5% compounded annually. This rate of return is for
illustrative purposes only and is not intended to represent an expected or
guaranteed rate of return for any investment vehicle. In addition, unless
otherwise noted, none of the illustrations reflect any charges that may be
applied under a particular investment vehicle. Such charges would effectively
reduce the actual return under any type of investment.
- --------------------------------------------------------------------------------
All earnings in these presentations are assumed to accumulate tax deferred
unless otherwise noted. Most programs designed for retirement savings offer tax
deferral. Monies are taxed upon withdrawal and a 10% penalty tax may apply to
premature withdrawals. Certain retirement programs prohibit early withdrawals.
See "Tax information" in the prospectus. Where taxes are taken into
consideration in these presentations, a 28% tax rate is assumed.
The source of the data used by us to compile the charts which appear in this
section (other than charts 1, 2, 3, 4 and 7) is Ibbotson Associates, Inc.,
Chicago, Stocks, Bonds, Bills and Inflation [1998] Yearbook.(tm) All rights
reserved.
In reports or other communications or in advertising material, we may make use
of these or other graphic or numerical illustrations that we prepare showing the
impact of inflation, planning early for retirement, tax deferral,
diversification and other concepts important to retirement planning.
INFLATION
Inflation erodes purchasing power. This means that, in an inflationary period,
the dollar is worth less as time passes. Because many people live on a fixed
income during retirement, inflation is of particular concern to them. The charts
that follow illustrate the harmful impact of inflation over an extended period
of time. Between 1968 and 1998, the average annual inflation rate was 5.24%. As
demonstrated in Chart 1, this 5.24% annual rate of inflation would cause the
purchasing power of $35,000 to decrease to only $7,562 after 30 years.
CHART 1
[THE FOLLOWING DATA WAS REPRESENTED AS A
SHADED VERTICAL BAR GRAPH IN THE PRINTED DOCUMENT:]
(Income)
Today 35,000
10 Years 21,002
20 Years 12,602
30 Years 7,562
[END OF GRAPHICALLY REPRESENTED DATA]
In Chart 2, the impact of inflation is examined from another perspective.
Specifically, the chart illustrates the additional income needed to maintain the
purchasing power of $35,000 over a thirty-year period. Again, the 1968-1998
historical inflation rate of 5.24% is used. In this case, an additional $126,992
would be required to maintain the purchasing power of $35,000 after 30 years.
<PAGE>
- --------------------------------------------------------------------------------
8
- --------------------------------------------------------------------------------
CHART 2
[THE FOLLOWING DATA WAS REPRESENTED AS A SHADED
VERTICAL BAR GRAPH IN THE PRINTED DOCUMENT:]
Annual
Income Increase
Needed Needed
Today 35,000 -
10 Years 58,328 23,325
20 Years 97,204 62,204
30 Years 161,992 126,992
[END OF GRAPHICALLY REPRESENTED DATA]
STARTING EARLY
The impact of inflation highlights the need to begin a retirement program early.
The value of starting early is illustrated in the following charts.
As shown in Chart 3, if an individual makes annual contributions of $2,500 to
his or her retirement program beginning at age 30, he or she would accumulate
$414,551 by age 65 under the assumptions described earlier. If that individual
waited until age 50, he or she would only accumulate $70,193 by age 65 under the
same assumptions.
CHART 3
[THE FOLLOWING DATA WAS REPRESENTED AS A SHADED
AREA GRAPH IN THE PRINTED DOCUMENT:]
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
[BLACK:] Age 50 $0 $0 $0 $0 $0 $15,610 $38,020 $70,193
[WHITE:] Age 40 $0 $0 $0 $15,610 $38,020 $70,193 $116,381 $182,691
[GRAY:] Age 30 $0 $15,610 $38,020 $70,193 $116,381 $182,691 $277,886 $414,551
</TABLE>
[END OF GRAPHICALLY REPRESENTED DATA]
In Table 1, the impact of starting early is demonstrated in another format. For
example, if an individual invests $300 monthly, he or she would accumulate
$387,193 in thirty years under our assumptions. In contrast, if that individual
invested the same $300 per month for 15 years, he or she would accumulate only
$97,804 under our assumptions.
TABLE 1
- --------------------------------------------------------------------------------
MONTHLY
CONTRI- YEAR YEAR YEAR YEAR YEAR
BUTION 10 15 20 25 30
- --------------------------------------------------------------------------------
$ 20 $ 3,532 $ 6,520 $ 10,811 $ 16,970 $ 25,813
- --------------------------------------------------------------------------------
50 8,829 16,301 27,027 42,425 64,532
- --------------------------------------------------------------------------------
100 17,659 32,601 54,053 84,851 129,064
- --------------------------------------------------------------------------------
200 35,317 65,202 108,107 169,701 258,129
- --------------------------------------------------------------------------------
300 52,976 97,804 162,160 254,552 387,193
- --------------------------------------------------------------------------------
Chart 4 presents an additional way to demonstrate the significant impact of
starting to make contributions to a retirement program earlier rather than
later. It assumes that an individual had a goal to accumulate $250,000 (pretax)
by age 65. If he or she starts at age 30, under our assumptions he or she could
reach the goal by making a monthly pretax contribution of $129 (equivalent to
$93 after taxes). The
<PAGE>
- --------------------------------------------------------------------------------
9
- --------------------------------------------------------------------------------
total net cost for the 30-year-old in this hypothetical example would be
$39,265. If the individual in this hypothetical example waited until age 50, he
or she would have to make a monthly pretax contribution of $767 (equivalent to
$552 after taxes) to attain the goal, illustrating the importance of starting
early.
CHART 4
GOAL: $250,000 BY AGE 65
[THE FOLLOWING DATA WAS REPRESENTED AS A BLACK AND WHITE
VERTICAL BAR GRAPH IN THE PRINTED DOCUMENT:]
Tax Savings
and Tax-deferred
Net Cost Earnings at 7.5%
$93 per month Age 30 $ 39,265 $ 210,735
$212 per month Age 40 63,641 186,359
$552 per month Age 50 99,383 150,617
[END OF GRAPHICALLY REPRESENTED DATA]
TAX DEFERRAL
Contributing to a retirement plan early is part of an effective strategy for
addressing the impact of inflation. Another part of such a strategy is to
carefully select the types of retirement programs in which to invest. In
deciding where to invest retirement contributions, there are three basic types
of programs.
The first type offers the most tax benefits, and therefore is potentially the
most beneficial for accumulating funds for retirement. Contributions are made
with pre-tax dollars or are tax deductible and earnings grow income tax
deferred. An example of this type of program is the deductible traditional IRA.
The second type of program also provides for tax-deferred earnings growth;
however, contributions are made with after-tax dollars. Examples of this type of
program are nondeductible traditional IRAs and non-qualified annuities.
The third approach to retirement savings is fully taxable. Contributions are
made with after-tax dollars and earnings are taxed each year. Examples of this
type of program include certificates of deposit, savings accounts, and taxable
stock, bond or mutual fund investments.
Consider an example. For the type of retirement program that offers both pre-tax
contributions and tax deferral, assume that a $2,000 annual pre-tax contribution
is made for thirty years. In this example, the retirement funds would be
$164,527 after thirty years (assuming a 7.5% rate of return, no withdrawals and
assuming the deduction of the 1.60% Separate Account daily asset charge - but no
other charges under the contract, or trust charges to Portfolios), and such
funds would be $222,309 without the effect of any charges. Assuming a lump sum
withdrawal was made in year thirty and a 28% tax bracket, these amounts would be
$118,460 and $160,062, respectively.
For the type of program that offers only tax deferral, assume an after-tax
annual contribution of $1,440 for thirty years and the same rate of return. The
after-tax contribution is derived by taxing the $2,000 pre-tax contribution,
again assuming a 28% tax bracket. In this example, the retirement funds would be
$118,460 after thirty years assuming the deduction of charges and no
withdrawals, and $160,062 without the effect of charges. Assuming a lump sum
withdrawal in year thirty, the total after-tax amount would be $97,387 with
charges deducted and $127,341 without charges as described above.
For the fully taxable investment, assume an after-tax contribution of $1,440 for
thirty years. Earnings are taxed annually. After thirty years, the amount of
this fully taxable investment is $108,046.
Keep in mind that taxable investments have fees and charges, too (investment
advisory fees, administrative charges, 12b-1 fees, sales loads, brokerage
commissions,
<PAGE>
- --------------------------------------------------------------------------------
10
- --------------------------------------------------------------------------------
etc.). We have not attempted to apply these fees and charges to the
fully taxable amounts since this is intended merely as an example of tax
deferral.
Again, it must be emphasized that the assumed rate of return of 7.5% compounded
annually used in these examples is for illustrative purposes only. It is not
intended to represent a guaranteed or expected rate of return on any type of
investment. Moreover, early withdrawals of tax-deferred investments are
generally subject to a 10% penalty tax.
INVESTMENT FOR RETIREMENT
Selecting an appropriate retirement program is clearly an important part of an
effective retirement planning strategy. Carefully choosing among available
investment is another essential component.
During the 1968-1998 period, common stock average annual returns outperformed
the average annual returns of fixed investments such as long-term government
bonds and Treasury Bills (T-Bills). See "Notes" below. Common stocks earned an
average annual return of 12.67% over this period, in contrast to 9.09% and 6.76%
for the other two investment categories. Significantly, common stock returns
also outpaced inflation, which grew at 5.24% over this period.
The Equitable Accumulator Plus can be an effective program for diversifying
ongoing investments between various asset categories. In addition, the Equitable
Accumulator Plus offers special features which help address the risk associated
with timing the equity markets, such as dollar cost averaging. By transferring
the same dollar amount each month from the Alliance Money Market option to other
variable investment options, dollar cost averaging attempts to shield your
investment from short-term price fluctuations.
This, however, does not assure a profit or protect against a loss in declining
markets.
THE BENEFIT OF ANNUITIZATION
An individual may shift the risk of outliving his or her principal by electing a
lifetime income annuity. See "Choosing your annuity payout options" under
"Accessing your money" in the prospectus. Chart 5 below shows the monthly income
that can be generated under various forms of life annuities, as compared to
receiving level payments of interest only or principal and interest from the
investment. Calculations in the Chart are based on the following assumption: a
$100,000 contribution was made at one of the ages shown, annuity payments begin
immediately, and a 5% annuitization interest rate is used. For purposes of this
example, principal and interest are paid out on a level basis over 15 years. In
the case of the interest-only scenario, the principal is always available and
may be left to other individuals at death. Under the principal and interest
scenario, a portion of the principal will be left at death, assuming the
individual dies within the 15-year period. In contrast, under the life annuity
scenarios, there is no residual amount left.
CHART 5
MONTHLY INCOME
($100,000 CONTRIBUTION)
- --------------------------------------------------------------------------------
PRINCIPAL JOINT AND SURVIVOR*
AND ----------------------------------
INTEREST INTEREST 50% 66.67% 100%
ONLY FOR 15 SINGLE TO TO TO
ANNUITANT FOR LIFE YEARS LIFE SURVIVOR SURVIVOR SURVIVOR
-------------------------------------------------------------------------------
Male 65 $401 $785 $ 617 $560 $544 $513
Male 70 401 785 685 609 588 549
Male 75 401 785 771 674 646 598
Male 80 401 785 888 760 726 665
Male 85 401 785 1,045 878 834 757
- -------------------
The numbers are based on 5% interest compounded annually and the 1983 Individual
Annuity Mortality Table "a" projected with modified Scale G. Annuity purchase
rates available at annuitization may vary, depending primarily on the
annuitization interest rate, which may not be less than an annual rate of 2.5%.
* The joint and survivor annuity forms are based on male and female
annuitants of the same age.
<PAGE>
- --------------------------------------------------------------------------------
11
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
The consolidated financial statements of Equitable Life included herein should
be considered only as bearing upon the ability of Equitable Life to meet its
obligations under the contracts.
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 45
INDEX TO FINANCIAL STATEMENTS
Report of Independent Accountants ..................................... FS-2
Financial Statements:
Statements of Assets and Liabilities, December 31, 1998 ............ FS-3
Statements of Operations for the Year Ended December 31, 1998 ...... FS-6
Statements of Changes in Net Assets for the Years Ended
December 31, 1998 and 1997 ....................................... FS-9
Notes to Financial Statements ...................................... FS-15
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Accountants ..................................... F-1
Consolidated Financial Statements:
Consolidated Balance Sheets, December 31, 1998 and 1997 ............ F-2
Consolidated Statements of Earnings, Years Ended December
31, 1998, 1997 and 1996 .......................................... F-3
Consolidated Statements of Shareholder's Equity, Years Ended
December 31, 1998,
1997 and 1996 ................................................... F-4
Consolidated Statements of Cash Flows, Years Ended December 31,
1998, 1997 and 1996 .............................................. F-5
Notes to Consolidated Financial Statements ......................... F-6
FS-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
The Equitable Life Assurance Society of the United States
and Contractowners of Separate Account No. 45
of The Equitable Life Assurance Society of the United States
In our opinion, the accompanying statements of assets and liabilities and the
related statements of operations and of changes in net assets present fairly, in
all material respects, the financial position of the Alliance Money Market Fund,
Alliance Intermediate Government Securities Fund, Alliance High Yield Fund,
Alliance Growth & Income Fund, Alliance Equity Index Fund, Alliance Common Stock
Fund, Alliance Global Fund, Alliance International Fund, Alliance Aggressive
Stock Fund, Alliance Small Cap Growth Fund, Alliance Conservative Investors
Fund, Alliance Growth Investors Fund, ("Hudson River Trust funds") and T. Rowe
Price Equity Income Fund, EQ/Putnam Growth & Income Value Fund, BT Equity 500
Index Fund, Merrill Lynch Basic Value Equity Fund, MFS Research Fund, BT
International Equity Index Fund, T. Rowe Price International Stock Fund, Morgan
Stanley Emerging Markets Equity Fund, Warburg Pincus Small Company Value Fund,
BT Small Company Index Fund, MFS Emerging Growth Companies Fund, EQ/Putnam
Balanced Fund and Merrill Lynch World Strategy Fund ("EQ Advisors Trust funds"),
separate investment funds of The Equitable Life Assurance Society of the United
States ("Equitable Life") Separate Account No. 45 at December 31, 1998 and the
results of each of their operations and changes in each of their net assets for
the periods indicated, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of Equitable
Life's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of shares owned in The Hudson River Trust and in The EQ Advisors
Trust at December 31, 1998 with the transfer agent, provide a reasonable basis
for the opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
February 8, 1999
FS-2
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 45
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
FIXED INCOME SERIES:
------------------------------------------
ALLIANCE
ALLIANCE INTERMEDIATE
MONEY GOVERNMENT ALLIANCE
MARKET SECURITIES HIGH
FUND FUND YIELD FUND
------------ ------------ ------------
<S> <C> <C> <C>
ASSETS
Investments in shares of the Trusts --
at market value (Note 1)
Cost: $162,642,654 ....................... $162,027,740
38,988,768 ....................... $39,087,424
79,874,329 ....................... $68,956,617
52,351,834 .......................
38,500,311 .......................
179,571,303 .......................
51,702,567 .......................
367,878 .......................
40,156,608 .......................
Receivable for Trust shares sold ............ -- -- --
Receivable for policy-related transactions .. 4,052,521 284,956 281,931
------------ ----------- -----------
Total Assets ................................ 166,080,261 39,372,380 69,238,548
------------ ----------- -----------
LIABILITIES
Payable for Trust shares
purchased ................................ 4,071,280 311,491 285,060
Payable for policy-related
transactions ............................. -- -- --
Amount retained by Equitable Life in Separate
Account No. 45 (Note 5) .................. 51,090 37,552 17,444
------------ ----------- -----------
Total Liabilities ........................... 4,122,370 349,043 302,504
------------ ----------- -----------
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS ... $161,957,891 $39,023,337 $68,936,044
============ =========== ===========
<CAPTION>
EQUITY SERIES:
------------------------------------------------------------------------------------
MERRILL
T. ROWE EQ/PUTNAM ALLIANCE LYNCH
PRICE GROWTH & ALLIANCE BT EQUITY EQUITY BASIC VALUE
EQUITY INCOME GROWTH & 500 INDEX INDEX EQUITY
INCOME FUND VALUE FUND INCOME FUND FUND FUND FUND
------------ ------------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments in shares of the Trusts --
at market value (Note 1)
Cost: $162,642,654 .......................
38,988,768 .......................
79,874,329 .......................
52,351,834 ....................... $54,352,075
38,500,311 ....................... $41,327,548
179,571,303 ....................... $194,812,344
51,702,567 ....................... $57,083,310
367,878 ....................... $429,900
40,156,608 ....................... $40,154,990
Receivable for Trust shares sold ............ -- -- -- -- -- --
Receivable for policy-related transactions .. 192,690 169,537 886,818 1,978,165 12,773 297,870
----------- ----------- ------------ ----------- -------- -----------
Total Assets ................................ 54,544,765 41,497,085 195,699,162 59,061,475 442,673 40,452,860
----------- ----------- ------------ ----------- -------- -----------
LIABILITIES
Payable for Trust shares purchased .......... 192,690 169,537 914,736 1,978,218 13,332 297,913
Payable for policy related transactions...... -- -- -- -- -- --
Amount retained by Equitable Life in Separate
Account No. 45 (Note 5) .................. 38,209 31,750 144,163 59,481 8,903 24,813
----------- ----------- ------------ ----------- -------- -----------
Total Liabilities ........................... 230,899 201,287 1,058,899 2,037,699 22,235 322,726
----------- ----------- ------------ ----------- -------- -----------
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS ... $54,313,866 $41,295,798 $194,640,263 $57,023,776 $420,438 $40,130,134
=========== =========== ============ =========== ======== ===========
</TABLE>
- -------------------
See Notes to Financial Statements.
FS-3
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 45
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
EQUITY SERIES (CONTINUED):
---------------------------------------------------------
ALLIANCE
COMMON MFS ALLIANCE ALLIANCE
STOCK RESEARCH GLOBAL INTERNATIONAL
FUND FUND FUND FUND
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
Investments in shares of the Trusts --
at market value (Note 1)
Cost: $614,422,976 ....................... $673,522,100
46,867,524 ....................... $53,094,944
62,242,799 ....................... $66,482,102
19,182,262 ....................... $20,109,775
5,069,139 .......................
28,158,931 .......................
5,282,220 .......................
158,195,007 .......................
Receivable for Trust shares sold ............ -- -- -- 1,621,423
Receivable for policy-related transaction ... 3,169,259 789,675 223,087 --
------------ ----------- ----------- -----------
Total Assets ................................ 676,691,359 53,884,619 66,705,189 21,731,198
------------ ----------- ----------- -----------
LIABILITIES
Payable for Trust shares sold ............... 3,174,080 789,704 228,019 --
Payable for policy-related transactions ..... -- -- -- 1,629,516
Amount retained by Equitable Life in Separate
Account No. 45 (Note 5) .................. 15,873 11,321 69,713 23,074
------------ ----------- ----------- -----------
Total Liabilities ........................... 3,189,953 801,025 297,732 1,652,590
------------ ----------- ----------- -----------
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS ... $673,501,406 $53,083,594 $66,407,457 $20,078,608
============ =========== =========== ===========
<CAPTION>
EQUITY SERIES (CONTINUED):
---------------------------------------------------------
MORGAN
T. ROWE STANLEY
BT PRICE EMERGING ALLIANCE
INTERNATIONAL INTERNATIONAL MARKETS AGGRESSIVE
EQUITY STOCK EQUITY STOCK
INDEX FUND FUND FUND
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
Investments in shares of the Trusts --
at market value (Note 1)
Cost: $614,422,976 .......................
46,867,524 .......................
62,242,799 .......................
19,182,262 .......................
5,069,139 ....................... $5,353,580
28,158,931 ....................... $29,654,895
5,282,220 ....................... $4,273,794
158,195,007 ....................... $147,616,537
Receivable for Trust shares sold ............ 228,451 -- -- --
Receivable for policy-related transaction ... -- 158,444 25,127 305,836
---------- ----------- ---------- ------------
Total Assets ................................ 5,582,031 29,813,339 4,298,921 147,922,373
---------- ----------- ---------- ------------
LIABILITIES
Payable for Trust shares sold ............... -- 158,443 26,143 313,060
Payable for policy-related transactions ..... 228,419 -- -- --
Amount retained by Equitable Life in Separate
Account No. 45 (Note 5) .................. 6,600 22,436 8,961 11,344
---------- ----------- ---------- ------------
Total Liabilities ........................... 235,019 180,879 35,104 324,404
---------- ----------- ---------- ------------
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS ... $5,347,012 $29,632,460 $4,263,817 $147,597,969
========== =========== ========== ============
</TABLE>
- ------------------
See Notes to Financial Statements.
FS-4
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 45
STATEMENTS OF ASSETS AND LIABILITIES (CONCLUDED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
EQUITY SERIES (CONCLUDED):
------------------------------------------------------
WARBURG MFS
PINCUS ALLIANCE EMERGING
SMALL SMALL CAP BT SMALL GROWTH
COMPANY GROWTH COMPANY COMPANIES
VALUE FUND FUND INDEX FUND FUND
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
ASSETS
Investments in shares of the Trusts --
at market value (Note 1)
Cost: $ 41,502,596............................... $37,275,602
42,123,172............................. $40,301,314
5,078,731............................. $5,098,116
61,770,493............................. $73,588,750
50,900,433.............................
33,319,831.............................
120,367,795.............................
5,865,231.............................
Receivable for Trust shares sold.................. -- -- -- --
Receivable for policy-related transactions........ 87,152 1,031,150 41,271 834,313
------------ ---------- ----------- ------------
Total Assets...................................... 37,362,754 41,332,464 5,139,387 74,423,063
------------ ---------- ----------- ------------
LIABILITIES
Payable for Trust shares purchased................ 87,151 1,035,757 41,271 834,334
Payable for policy-related transactions.......... -- -- -- --
Amount retained by Equitable Life in Separate
Account No. 45 (Note 5)........................ 25,995 51,378 6,603 24,127
------------ ---------- ----------- ------------
Total Liabilities................................. 113,146 1,087,135 47,874 858,461
------------ ---------- ----------- ------------
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS......... $37,249,608 $40,245,329 $5,091,513 $73,564,602
=========== =========== ========== ============
<CAPTION>
ASSET ALLOCATION SERIES:
-------------------------------------------------------
MERRILL
ALLIANCE ALLIANCE LYNCH
CONSERVATIVE EQ/PUTNAM GROWTH WORLD
INVESTORS BALANCED INVESTORS STRATEGY
FUND FUND FUND FUND
----------- ------------ ------------- -----------
<S> <C> <C> <C> <C>
ASSETS
Investments in shares of the Trusts --
at market value (Note 1)
Cost: $ 41,502,596.............................
42,123,172.............................
5,078,731.............................
61,770,493.............................
50,900,433............................. $51,458,514
33,319,831............................. $34,637,097
120,367,795............................. $126,599,682
5,865,231............................. $5,947,148
Receivable for Trust shares sold.................. -- -- -- --
Receivable for policy-related transactions........ 445,717 649,638 394,969 45,950
----------- ----------- ------------ ----------
Total Assets...................................... 51,904,231 35,286,735 126,994,651 5,993,098
----------- ----------- ------------ ----------
LIABILITIES
Payable for Trust shares purchased................ 447,264 649,660 435,647 45,950
Payable for policy-related transactions.......... -- -- -- --
Amount retained by Equitable Life in Separate
Account No. 45 (Note 5)........................ 141,475 16,519 79,665 5,185
----------- ----------- ------------ ----------
Total Liabilities................................. 588,739 666,179 515,312 51,135
----------- ----------- ------------ ----------
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS......... $51,315,492 $34,620,556 $126,479,339 $5,941,963
=========== =========== ============ ==========
</TABLE>
- -------------------
See Notes to Financial Statements.
FS-5
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 45
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
FIXED INCOME SERIES:
----------------------------------------
ALLIANCE
ALLIANCE INTERMEDIATE ALLIANCE
MONEY GOVERNMENT HIGH
MARKET SECURITIES YIELD
FUND FUND FUND
----------- ---------- -------------
<S> <C> <C> <C>
INCOME AND EXPENSES:
Investment Income (Note 2):
Dividends from the Trusts .............$5,658,138 $1,260,940 $ 5,454,605
Expenses (Note 3):
Asset-based charges 737,652 268,963 542,692
---------- ---------- -----------
NET INVESTMENT INCOME (LOSS) ................ 4,920,486 991,977 4,911,913
---------- ---------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS (Note 2):
Realized gain (loss) on investments ......
Realized gain distribution from the ...... 149,548 255,764 (1,040,219)
Trusts ................................ 4,257 -- 1,292,662
---------- ---------- -----------
NET REALIZED GAIN (LOSS) .................... 153,805 255,764 252,443
---------- ---------- -----------
Unrealized appreciation (depreciation)
on investments:
Beginning of period ...................... (465,201) 21,939 (786,186)
End of period ............................ (614,915) 98,656 (10,917,712)
---------- ---------- -----------
Change in unrealized appreciation ........
(depreciation) during the period ...... (149,714) 76,717 (10,131,526)
---------- ---------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON ..
INVESTMENTS .............................. 4,091 332,481 (9,879,083)
---------- ---------- -----------
NET INCREASE (DECREASE) IN NET ASSETS ....
RESULTING FROM OPERATIONS ................$4,924,577 $1,324,458 $(4,967,170)
========== ========== ===========
<CAPTION>
EQUITY SERIES:
-----------------------------------------------------------------------------------
T.ROWE MERRILL
PRICE EQ/PUTNAM ALLIANCE ALLIANCE LYNCH
EQUITY GROWTH & GROWTH & BT EQUITY EQUITY BASIC VALUE
INCOME INCOME INCOME 500 INDEX INDEX EQUITY
FUND FUND VALUE FUND FUND FUND FUND
---------- ----------- ------------ ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
INCOME AND EXPENSES:
Investment Income (Note 2):
Dividends from the Trusts .............$ 871,348 $ 348,923 $ 382,870 $ 254,693 $ 2,310 $ 377,168
Expenses (Note 3):
Asset-based charges
394,056 298,502 1,602,233 203,672 2,588 269,948
---------- ---------- ----------- ---------- ------- ----------
NET INVESTMENT INCOME (LOSS) ................ 477,292 50,421 (1,219,363) 51,021 (278) 107,220
---------- ---------- ----------- ---------- ------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS (Note 2):
Realized gain (loss) on investments ......
Realized gain distribution from the ...... 43,764 (69,351) 2,807,006 (262,278) 5,225 (175,666)
Trusts ................................ 1,120,050 315,112 15,440,331 -- 112 1,307,680
---------- ---------- ----------- ---------- ------- ----------
NET REALIZED GAIN (LOSS) .................... 1,163,814 245,761 18,247,337 (262,278) 5,337 1,132,014
---------- ---------- ----------- ---------- ------- ----------
Unrealized appreciation (depreciation)
on investments:
Beginning of period ...................... 980,406 191,128 5,616,378 -- 4,722 (64,333)
End of period ............................ 2,000,241 2,827,238 15,241,041 5,380,743 62,022 (1,617)
---------- ---------- ----------- ---------- ------- ----------
Change in unrealized appreciation ........
(depreciation) during the period ...... 1,019,835 2,636,110 9,624,663 5,380,743 57,300 62,716
---------- ---------- ----------- ---------- ------- ----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON ..
INVESTMENTS .............................. 2,183,649 2,881,871 27,872,000 5,118,465 62,637 1,194,730
---------- ---------- ----------- ---------- ------- ==========
NET INCREASE (DECREASE) IN NET ASSETS ....
RESULTING FROM OPERATIONS ................$2,660,941 $2,932,292 $26,652,637 $5,169,486 $62,359 $1,301,950
========== ========== =========== ========== ======= ==========
</TABLE>
- -------------------
See Notes to Financial Statements.
FS-6
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 45
STATEMENTS OF OPERATIONS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
EQUITY SERIES (CONTINUED):
-----------------------------------------------------------
ALLIANCE
COMMON MFS ALLIANCE ALLIANCE
STOCK RESEARCH GLOBAL INTERNATIONAL
FUND FUND FUND FUND
------------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
INCOME AND EXPENSES:
Investment Income (Note 2):
Dividends from the Trusts ............. $ 2,403,283 $ 131,068 $ 598,042 $ 340,200
Expenses (Note 3):
Asset-based charges ................... 5,424,534 307,489 589,611 215,726
------------ ---------- ---------- -----------
NET INVESTMENT INCOME (LOSS) ................ (3,021,251) (176,421) 8,431 124,474
------------ ---------- ---------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS (Note 2):
Realized gain (loss) on investments ...... 10,230,950 60,560 749,415 (1,566,752)
Realized gain distribution from the Trusts 79,194,636 -- 4,143,459 3,718
------------ ---------- ---------- -----------
NET REALIZED GAIN (LOSS) .................... 89,425,586 60,560 4,892,874 (1,563,034)
------------ ---------- ---------- -----------
Unrealized appreciation (depreciation)
on investments:
Beginning of period ...................... 23,451,447 37,510 (244,398) (2,137,851)
End of period ............................ 59,099,124 6,227,419 4,239,304 927,513
------------ ---------- ---------- -----------
Change in unrealized appreciation
(depreciation) during the period ........ 35,647,677 6,189,909 4,483,702 3,065,364
------------ ---------- ---------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS .............................. 125,073,263 6,250,469 9,376,576 1,502,330
------------ ---------- ---------- -----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ................... $122,052,012 $6,074,048 $9,385,007 $ 1,626,804
============ ========== ========== ===========
<CAPTION>
EQUITY SERIES (CONTINUED):
-------------------------------------------------------
MORGAN
T. ROWE STANLEY
BT PRICE EMERGING ALLIANCE
INTERNATIONAL INTER- MARKETS AGGRESSIVE
EQUITY NATIONAL EQUITY STOCK
INDEX FUND STOCK FUND FUND FUND
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
INCOME AND EXPENSES:
Investment Income (Note 2):
Dividends from the Trusts ............. $ 66,107 $ 245,522 $ 16,085 $ 586,576
Expenses (Note 3):
Asset-based charges ................... 22,058 217,929 35,466 1,537,723
-------- ---------- ----------- -----------
NET INVESTMENT INCOME (LOSS) ................ 44,049 27,593 (19,381) (951,147)
-------- ---------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS (Note 2):
Realized gain (loss) on investments ...... (38,281) 73,956 (337,130) (1,170,454)
Realized gain distribution from the Trusts -- 228 -- 6,889,454
-------- ---------- ----------- -----------
NET REALIZED GAIN (LOSS) .................... (38,281) 74,184 (337,130) 5,719,000
-------- ---------- ----------- -----------
Unrealized appreciation (depreciation)
on investments:
Beginning of period ...................... -- (576,978) (238,282) (3,851,402)
End of period ............................ 284,441 1,495,964 (1,008,425) 10,578,470)
-------- ---------- ----------- -----------
Change in unrealized appreciation
(depreciation) during the period ........ 284,441 2,072,942 (770,143) (6,727,068)
-------- ---------- ----------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS .............................. 246,160 2,147,126 (1,107,273) (1,008,068)
-------- ---------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ................... $290,209 $2,174,719 $(1,126,654) $(1,959,215)
======== ========== =========== ===========
</TABLE>
- ------------------
See Notes to Financial Statements.
FS-7
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 45
STATEMENTS OF OPERATIONS (CONCLUDED)
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
EQUITY SERIES (CONCLUDED):
---------------------------------------------------
WARBURG
PINCUS MFS
SMALL ALLIANCE BT SMALL EMERGING
COMPANY SMALL CAP COMPANY GROWTH
VALUE GROWTH INDEX COMPANIES
FUND FUND FUND FUND
----------- ----------- -------- ------------
<S> <C> <C> <C> <C>
INCOME AND EXPENSES:
Investment Income (Note 2):
Dividends from the Trusts .................... $ 172,128 $ 716 $ 34,326 $ 901
Expenses (Note 3):
Asset-based charges .......................... 355,215 336,205 20,638 373,152
----------- ----------- -------- -----------
NET INVESTMENT INCOME (LOSS) ....................... (183,087) (335,489) 13,688 (372,251)
----------- ----------- -------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS (Note 2):
Realized gain (loss) on investments ............. (395,526) (513,118) (50,161) 163,114
Realized gain distribution from the Trusts ...... -- -- 65,264 --
----------- ----------- -------- -----------
NET REALIZED GAIN (LOSS) ........................... (395,526) (513,118) 15,103 163,114
----------- ----------- -------- -----------
Unrealized appreciation (depreciation)
on investments:
Beginning of period ............................. (300,436) (344,436) -- (259,194)
End of period ................................... (4,226,993) (1,821,859) 19,385 11,818,257
----------- ----------- -------- -----------
Change in unrealized appreciation
(depreciation)during the period ................ (3,926,557) (1,477,423) 19,385 12,077,451
----------- ----------- -------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS ..................................... (4,322,083) (1,990,541) 34,488 12,240,565
----------- ----------- -------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS ...................................... $(4,505,170) $(2,326,030) $ 48,176 $11,868,314
=========== =========== ======== ===========
<CAPTION>
ASSET ALLOCATION SERIES:
----------------------------------------------------
ALLIANCE MERRILL
CONSERVA- ALLIANCE LYNCH
TIVE EQ/PUTNAM GROWTH WORLD
INVESTORS BALANCED INVESTORS STRATEGY
FUND FUND FUND FUND
---------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
INCOME AND EXPENSES:
Investment Income (Note 2):
Dividends from the Trusts .................... $1,373,189 $ 593,087 $ 1,887,685 $ 42,482
Expenses (Note 3):
Asset-based charges .......................... 387,733 194,358 1,064,812 31,672
---------- ---------- ----------- ---------
NET INVESTMENT INCOME (LOSS) ....................... 985,456 398,729 822,873 10,810
---------- ---------- ----------- ---------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS (Note 2):
Realized gain (loss) on investments ............. 568,518 (130,136) 736,026 (38,321)
Realized gain distribution from the Trusts ...... 2,571,769 355,759 9,800,094 --
---------- ---------- ----------- ---------
NET REALIZED GAIN (LOSS) ........................... 3,140,287 225,623 10,536,120 (38,321)
---------- ---------- ----------- ---------
Unrealized appreciation (depreciation)
on investments:
Beginning of period ............................. 482,745 73,582 1,685,711 (129,123)
End of period ................................... 558,081 1,317,266 6,231,888 81,917
---------- ---------- ----------- ---------
Change in unrealized appreciation
(depreciation)during the period ................ 75,336 1,243,684 4,546,177 211,040
---------- ---------- ----------- ---------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS ..................................... 3,215,623 1,469,307 15,082,297 172,719
---------- ---------- ----------- ---------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS ...................................... $4,201,079 $1,868,036 $15,905,170 $ 183,529
========== ========== =========== =========
</TABLE>
- -------------------
See Notes to Financial Statements.
FS-8
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 45
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
FIXED INCOME SERIES:
-------------------------------
ALLIANCE
MONEY MARKET FUND
-------------------------------
1998 1997
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income......................................... $ 4,920,486 $ 2,322,115
Net realized gain (loss)...................................... 153,805 64,275
Change in unrealized appreciation (depreciation) of investments (149,714) (267,302)
------------ ------------
Net increase (decrease) in net assets from operations......... 4,924,577 2,119,088
------------ ------------
FROM CONTRACTOWNERS TRANSACTIONS:
Contributions and Transfers:
Contributions............................................... 216,826,115 137,532,670
Transfers from other Funds and Guaranteed Interest Rate
Account (Note 1).......................................... 113,746,706 55,819,439
------------ ------------
Total..................................................... 330,572,821 193,352,109
------------ ------------
WITHDRAWAL AND TRANSFERS:
Benefits and other policy transactions........................ 10,986,665 1,577,365
Withdrawal and administrative charges......................... 230,600 618,083
Transfers to other Funds and Guaranteed Interest Rate
Account (Note 1)............................................ 243,665,058 144,167,408
------------ ------------
Total....................................................... 254,882,323 146,362,856
------------ ------------
Net increase in net assets from Contractowners
transactions................................................ 75,690,498 46,989,253
------------ ------------
NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE LIFE
IN SEPARATE ACCOUNT NO. 45 (NOTE 5)........................... (15,545) (46,770)
------------ ------------
INCREASE IN NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS ........... 80,599,530 49,061,571
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS,
BEGINNING OF PERIOD........................................... 81,358,361 32,296,790
------------ ------------
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS,
END OF PERIOD................................................. $161,957,891 $ 81,358,361
============ ============
<CAPTION>
FIXED INCOME SERIES:
---------------------------
ALLIANCE INTERMEDIATE
GOVERNMENT SECURITIES FUND
--------------------------
1998 1997
----------- -----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income......................................... $ 991,977 $ 303,709
Net realized gain (loss)...................................... 255,764 12,754
Change in unrealized appreciation (depreciation) of investments 76,717 58,654
----------- -----------
Net increase (decrease) in net assets from operations......... 1,324,458 375,117
----------- -----------
FROM CONTRACTOWNERS TRANSACTIONS:
Contributions and Transfers:
Contributions............................................... 19,720,434 5,416,131
Transfers from other Funds and Guaranteed Interest Rate
Account (Note 1).......................................... 20,781,791 3,270,944
----------- -----------
Total..................................................... 40,502,225 8,687,075
----------- -----------
WITHDRAWAL AND TRANSFERS:
Benefits and other policy transactions........................ 1,040,600 189,517
Withdrawal and administrative charges......................... 73,339 128,377
Transfers to other Funds and Guaranteed Interest Rate
Account (Note 1)............................................ 12,745,544 1,145,902
----------- -----------
Total....................................................... 13,859,483 1,463,796
----------- -----------
Net increase in net assets from Contractowners
transactions................................................ 26,642,742 7,223,279
----------- -----------
NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE LIFE
IN SEPARATE ACCOUNT NO. 45 (NOTE 5)........................... (6,113) (12,130)
----------- -----------
INCREASE IN NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS ........... 27,961,087 7,586,266
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS,
BEGINNING OF PERIOD........................................... 11,062,250 3,475,984
----------- -----------
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS,
END OF PERIOD................................................. $39,023,337 $11,062,250
============ ===========
<CAPTION>
FIXED INCOME SERIES:
------------------------------
ALLIANCE
HIGH YIELD FUND (a)
-----------------------------
1998 1997
------------ -----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income......................................... $ 4,911,913 $ 601,148
Net realized gain (loss)...................................... 252,443 783,323
Change in unrealized appreciation (depreciation) of investments (10,131,526) (786,186)
------------ -----------
Net increase (decrease) in net assets from operations......... (4,967,170) 598,285
------------ -----------
FROM CONTRACTOWNERS TRANSACTIONS:
Contributions and Transfers:
Contributions............................................... 47,559,333 13,779,925
Transfers from other Funds and Guaranteed Interest Rate
Account (Note 1).......................................... 47,655,636 22,095,921
------------ -----------
Total..................................................... 95,214,969 35,875,846
------------ -----------
WITHDRAWAL AND TRANSFERS:
Benefits and other policy transactions........................ 2,110,668 161,257
Withdrawal and administrative charges......................... 128,063 45,545
Transfers to other Funds and Guaranteed Interest Rate
Account (Note 1)............................................ 37,545,562 17,780,088
------------ -----------
Total....................................................... 39,784,293 17,986,890
------------ -----------
Net increase in net assets from Contractowners
transactions................................................ 55,430,676 17,888,956
------------ -----------
NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE LIFE
IN SEPARATE ACCOUNT NO. 45 (NOTE 5)........................... (8,801) (5,902)
------------ -----------
INCREASE IN NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS ........... 50,454,705 18,481,339
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS,
BEGINNING OF PERIOD........................................... 18,481,339 --
------------ -----------
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS,
END OF PERIOD................................................. $ 68,936,044 $18,481,339
============= ============
</TABLE>
- -------------------
See Notes to Financial Statements.
(a) Commenced operations on May 1, 1997.
FS-9
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 45
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
EQUITY SERIES:
-------------------------------------------------------
T. ROWE PRICE EQUITY EQ/PUTNAM GROWTH &
INCOME FUND (a) INCOME VALUE FUND (a)
-------------------------- --------------------------
1998 1997 1998 1997
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss).......... $ 477,292 $ 78,818 $ 50,421 $ 21,273
Net realized gain (loss).............. 1,163,814 54,535 245,761 54,646
Change in unrealized appreciation
(depreciation) of investments....... 1,019,835 980,406 2,636,110 191,128
----------- ----------- ------------ -----------
Net increase (decrease) in net
assets from operations.............. 2,660,941 1,113,759 2,932,292 267,047
----------- ----------- ------------ -----------
FROM CONTRACTOWNERS TRANSACTIONS:
Contributions and Transfers:
Contributions....................... 26,813,091 13,813,772 22,432,656 10,975,199
Transfers from other Funds and
Guaranteed Interest Rate Account
(Note 1).......................... 10,252,099 4,356,204 6,980,421 3,217,543
----------- ----------- ------------ -----------
Total............................. 37,065,190 18,169,976 29,413,077 14,192,742
----------- ----------- ------------ -----------
WITHDRAWAL AND TRANSFERS:
Benefits and other policy
transactions......................... 1,205,409 86,052 1,300,000 58,925
Withdrawal and administrative charges.. 109,823 40,797 90,762 32,578
Transfers to other Funds and
Guaranteed Interest
Rate Account (Note 1)................ 3,039,300 183,349 3,822,075 180,506
----------- ----------- ------------ -----------
Total................................ 4,354,532 310,198 5,212,837 272,009
----------- ----------- ------------ -----------
Net increase in net assets from
Contractowners transactions.......... 32,710,658 17,859,778 24,200,240 13,920,733
NET (INCREASE) DECREASE IN AMOUNT
RETAINED BY EQUITABLE LIFE IN
SEPARATE ACCOUNT NO. 45 (NOTE 5)....... (26,248) (5,022) (22,154) (2,360)
----------- ----------- ------------ -----------
INCREASE IN NET ASSETS ATTRIBUTABLE TO
CONTRACTOWNERS......................... 35,345,351 18,968,515 27,110,378 14,185,420
NET ASSETS ATTRIBUTABLE TO
CONTRACTOWNERS,
BEGINNING OF PERIOD.................... 18,968,515 -- 14,185,420 --
----------- ----------- ------------ -----------
NET ASSETS ATTRIBUTABLE TO
CONTRACTOWNERS,
END OF PERIOD.......................... $54,313,866 $18,968,515 $ 41,295,798 $14,185,420
=========== =========== ============ ===========
<CAPTION>
EQUITY SERIES:
-------------------------------------------------------------
ALLIANCE BT EQUITY ALLIANCE
GROWTH & INCOME 500 INDEX EQUITY INDEX
FUND FUND (b) FUND (a)
------------------------- ---------- ------------------
1998 1997 1998 1998 1997
----------- ---------- ---------- ------- ------
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss).......... $ (1,219,363) $ (95,244) $ 51,021 $ (278) $ 187
Net realized gain (loss).............. 18,247,337 6,014,564 (262,278) 5,337 1,392
Change in unrealized appreciation
(depreciation) of investments....... 9,624,663 4,852,142 5,380,743 57,300 4,722
----------- ---------- ---------- ------- ------
Net increase (decrease) in net
assets from operations.............. 26,652,637 10,771,462 5,169,486 62,359 6,301
----------- ---------- ---------- ------- ------
FROM CONTRACTOWNERS TRANSACTIONS:
Contributions and Transfers:
Contributions....................... 69,137,309 58,696,016 38,685,440 69,113 77,031
Transfers from other Funds and
Guaranteed Interest Rate
Account (Note 1).................. 25,662,665 16,269,895 24,595,843 198,702 15,328
----------- ---------- ---------- ------- ------
Total............................. 94,799,974 74,965,911 63,281,283 267,815 92,359
----------- ---------- ---------- ------- ------
WITHDRAWAL AND TRANSFERS:
Benefits and other policy
transactions......................... 5,922,537 1,455,357 533,098 -- --
Withdrawal and administrative charges.. 501,695 425,279 13,875 380 --
Transfers to other Funds and
Guaranteed Interest
Rate Account (Note 1)................ 14,167,225 4,907,606 10,862,244 4,913 --
----------- ---------- ---------- ------- ------
Total................................ 20,591,457 6,788,242 11,409,217 5,293 --
----------- ---------- ---------- ------- ------
Net increase in net assets from
Contractowners transactions.......... 74,208,517 68,177,669 51,872,066 262,522 92,359
NET (INCREASE) DECREASE IN AMOUNT
RETAINED BY EQUITABLE LIFE IN
SEPARATE ACCOUNT NO. 45 (NOTE 5)....... (101,665) (94,285) (17,776) (1,961) (1,142)
----------- ---------- ---------- ------- ------
INCREASE IN NET ASSETS ATTRIBUTABLE TO
CONTRACTOWNERS......................... 100,759,489 78,854,846 57,023,776 322,920 97,518
NET ASSETS ATTRIBUTABLE TO
CONTRACTOWNERS,
BEGINNING OF PERIOD.................... 93,880,774 15,025,928 -- 97,518 --
----------- ---------- ---------- ------- ------
NET ASSETS ATTRIBUTABLE TO
CONTRACTOWNERS,
END OF PERIOD.......................... $194,640,263 $93,880,774 $57,023,776 $420,438 $97,518
============ =========== =========== ======== =======
</TABLE>
- -------------------
See Notes to Financial Statements.
(a) Commenced operations on May 1, 1997.
(b) Commenced operations on January 1, 1998.
FS-10
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 45
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
EQUITY SERIES (CONTINUED):
---------------------------------------------------------
MERRILL LYNCH ALLIANCE
BASIC VALUE COMMON
EQUITY FUND (a) STOCK FUND
-------------------------- ----------------------------
1998 1997 1998 1997
----------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)..................... $ 107,220 $ 20,510 $ (3,021,251) $ (1,209,624)
Net realized gain (loss)......................... 1,132,014 47,779 89,425,586 27,433,324
Change in unrealized appreciation (depreciation)
of investments................................. 62,716 (64,333) 35,647,677 22,094,993
----------- ----------- ------------ ------------
Net increase (decrease) in net assets from operations 1,301,950 3,956 122,052,012 48,318,693
----------- ----------- ------------ ------------
FROM CONTRACTOWNERS TRANSACTIONS:
Contributions and Transfers:
Contributions.................................. 24,093,025 8,075,199 222,706,977 175,880,351
Transfers from other Funds and Guaranteed
Interest Rate Account (Note 1)............... 9,221,650 1,941,071 88,116,261 61,077,537
----------- ----------- ------------ ------------
Total.......................................... 33,314,675 10,016,270 310,823,238 236,957,888
----------- ----------- ------------ ------------
WITHDRAWAL AND TRANSFERS:
Benefits and other policy transactions........... 967,509 9,691 20,666,466 4,271,079
Withdrawal and administrative charges............ 69,854 17,792 1,652,840 1,459,175
Transfers to other Funds and Guaranteed Interest
Rate Account (Note 1).......................... 3,287,976 137,464 56,065,697 35,438,036
----------- ----------- ------------ ------------
Total.......................................... 4,325,339 164,947 78,385,003 41,168,290
----------- ----------- ------------ ------------
Net increase in net assets from Contractowners
transactions................................... 28,989,336 9,851,323 232,438,235 195,789,598
----------- ----------- ------------ ------------
NET (INCREASE) DECREASE IN AMOUNT RETAINED BY
EQUITABLE LIFE IN SEPARATE ACCOUNT NO. 45 (NOTE 5) (15,592) (839) (298,491) (305,436)
----------- ----------- ------------ ------------
INCREASE IN NET ASSETS ATTRIBUTABLE TO
CONTRACTOWNERS................................... 30,275,694 9,854,440 354,191,756 243,802,855
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS,
BEGINNING OF PERIOD.............................. 9,854,440 -- 319,309,650 75,506,795
----------- ----------- ------------ ------------
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS,
END OF PERIOD.................................... $40,130,134 $ 9,854,440 $673,501,406 $319,309,650
=========== =========== ============ ============
<CAPTION>
EQUITY SERIES (CONTINUED):
------------------------------------------------------
MFS RESEARCH ALLIANCE
FUND (a) GLOBAL FUND
------------------------- --------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)..................... $ (176,421) $ (15,339) $ 8,431 $ 328,372
Net realized gain (loss)......................... 60,560 101,923 4,892,874 2,837,865
Change in unrealized appreciation (depreciation)
of investments................................. 6,189,909 37,510 4,483,702 (443,882)
----------- ----------- ----------- -----------
Net increase (decrease) in net assets from operations 6,074,048 124,094 9,385,007 2,722,355
----------- ----------- ----------- -----------
FROM CONTRACTOWNERS TRANSACTIONS:
Contributions and Transfers:
Contributions.................................. 28,178,818 9,502,168 20,084,493 20,384,580
Transfers from other Funds and Guaranteed
Interest Rate Account (Note 1)............... 10,528,629 2,602,553 7,177,452 7,792,945
----------- ----------- ----------- -----------
Total.......................................... 38,707,447 12,104,721 27,261,945 28,177,525
----------- ----------- ----------- -----------
WITHDRAWAL AND TRANSFERS:
Benefits and other policy transactions........... 1,059,377 28,630 1,765,622 621,118
Withdrawal and administrative charges............ 74,772 23,738 190,033 155,169
Transfers to other Funds and Guaranteed Interest
Rate Account (Note 1).......................... 2,504,801 209,610 6,748,641 6,961,429
----------- ----------- ----------- -----------
Total.......................................... 3,638,950 261,978 8,704,296 7,737,716
----------- ----------- ----------- -----------
Net increase in net assets from Contractowners
transactions................................... 35,068,497 11,842,743 18,557,649 20,439,809
----------- ----------- ----------- -----------
NET (INCREASE) DECREASE IN AMOUNT RETAINED BY
EQUITABLE LIFE IN SEPARATE ACCOUNT NO. 45 (NOTE 5) (23,737) (2,051) (44,868) (28,799)
----------- ----------- ----------- -----------
INCREASE IN NET ASSETS ATTRIBUTABLE TO
CONTRACTOWNERS................................... 41,118,808 11,964,786 27,897,788 23,133,365
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS,
BEGINNING OF PERIOD.............................. 11,964,786 -- 38,509,669 15,376,304
----------- ----------- ----------- -----------
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS,
END OF PERIOD.................................... $53,083,594 $11,964,786 $66,407,457 $38,509,669
=========== =========== =========== ===========
</TABLE>
- -------------------
See Notes to Financial Statements.
(a) Commenced operations on May 1, 1997.
FS-11
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 45
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
EQUITY SERIES (CONTINUED):
----------------------------------------------------------------------
BT
INTER-
NATIONAL
EQUITY T. ROWE PRICE
ALLIANCE INDEX INTERNATIONAL
INTERNATIONAL FUND STOCK
FUND 1998 (c) FUND (a)
------------------------- ---------- -------------------------
1998 1997 1998 1998 1997
----------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income.................. $ 124,474 $ 288,466 $ 44,049 $ 27,593 $ (45,798)
Net realized gain (loss)............... (1,563,034) 1,093,826 (38,281) 74,184 (53,503)
Change in unrealized appreciation
(depreciation) of investments........ 3,065,364 (2,169,239) 284,441 2,072,942 (576,978)
----------- ----------- ---------- ----------- -----------
Net increase (decrease) in net
assets from
operations........................... 1,626,804 (786,947) 290,209 2,174,719 (676,279)
----------- ----------- ---------- ----------- -----------
FROM CONTRACTOWNERS TRANSACTIONS:
Contributions and Transfers:
Contributions........................ 4,384,851 9,574,522 3,655,757 13,036,180 9,658,570
Transfers from other Funds and
Guaranteed Interest Rate Account
(Note 1)........................... 44,058,459 18,180,472 2,070,284 10,402,147 5,113,170
----------- ----------- ---------- ----------- -----------
Total..................................... 48,443,310 27,754,994 5,726,041 23,438,327 14,771,740
----------- ----------- ---------- ----------- -----------
WITHDRAWAL AND TRANSFERS:
Benefits and other policy
transactions......................... 810,093 341,327 22,805 754,896 37,224
Withdrawal and administrative charges.. 82,131 97,083 2,573 64,687 22,024
Transfers to other Funds and
Guaranteed Interest Rate Account
(Note 1)............................. 45,566,819 18,593,662 642,046 7,759,247 1,416,476
----------- ----------- ---------- ----------- -----------
Total................................... 46,459,043 19,032,072 667,424 8,578,830 1,475,724
----------- ----------- ---------- ----------- -----------
Net increase in net assets from
Contractowners transactions.......... 1,984,267 8,722,922 5,058,617 14,859,497 13,296,016
----------- ----------- ---------- ----------- -----------
NET (INCREASE) DECREASE IN AMOUNT
RETAINED BY EQUITABLE LIFE IN
SEPARATE ACCOUNT
NO. 45 (NOTE 5)........................ (15,805) (36,637) (1,814) (18,463) (3,030)
----------- ----------- ---------- ----------- -----------
INCREASE IN NET ASSETS ATTRIBUTABLE TO
CONTRACTOWNERS......................... 3,595,266 7,899,338 5,347,012 17,015,753 12,616,707
NET ASSETS ATTRIBUTABLE TO
CONTRACTOWNERS,
BEGINNING OF PERIOD.................... 16,483,342 8,584,004 -- 12,616,707 --
----------- ----------- ---------- ----------- -----------
NET ASSETS ATTRIBUTABLE TO
CONTRACTOWNERS,
END OF PERIOD.......................... $20,078,608 $16,483,342 $5,347,012 $29,632,460 $12,616,707
============ ============ =========== ============ ============
<CAPTION>
EQUITY SERIES (CONTINUED):
-------------------------------------------------------
MORGAN STANLEY
EMERGING MARKETS ALLIANCE
EQUITY AGGRESSIVE STOCK
FUND (b) FUND
------------------------- ----------------------------
1998 1997 1998 1997
----------- ----------- ------------- ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income.................. $ (19,381) $ 1,234 $ (951,147) $ (880,189)
Net realized gain (loss)............... (337,130) (26,406) 5,719,000 9,879,526
Change in unrealized appreciation
(depreciation) of investments........ (770,143) (238,282) (6,727,068) (1,686,216)
----------- ----------- ------------ ------------
Net increase (decrease) in net
assets from
operations........................... (1,126,654) (263,454) (1,959,215) 7,313,121
----------- ----------- ------------ ------------
FROM CONTRACTOWNERS TRANSACTIONS:
Contributions and Transfers:
Contributions........................ 2,708,321 1,617,148 45,526,795 66,019,813
Transfers from other Funds and
Guaranteed Interest Rate Account
(Note 1)........................... 1,357,280 889,247 12,684,235 17,726,363
----------- ----------- ------------ ------------
Total..................................... 4,065,601 2,506,395 58,211,030 83,746,176
----------- ----------- ------------ ------------
WITHDRAWAL AND TRANSFERS:
Benefits and other policy
transactions......................... 59,492 -- 5,047,753 1,854,804
Withdrawal and administrative charges.. 7,737 394 540,786 482,491
Transfers to other Funds and
Guaranteed Interest Rate Account
(Note 1)............................. 857,518 2,488 20,928,020 11,669,668
----------- ----------- ------------ ------------
Total................................... 924,747 2,882 26,516,559 14,006,963
----------- ----------- ------------ ------------
Net increase in net assets from
Contractowners transactions.......... 3,140,854 2,503,513 31,694,471 69,739,213
----------- ----------- ------------ ------------
NET (INCREASE) DECREASE IN AMOUNT
RETAINED BY EQUITABLE LIFE IN
SEPARATE ACCOUNT
NO. 45 (NOTE 5)........................ 10,524 (966) 35,035 (111,908)
----------- ----------- ------------ -------------
INCREASE IN NET ASSETS ATTRIBUTABLE TO
CONTRACTOWNERS......................... 2,024,724 2,239,093 29,770,291 76,940,426
NET ASSETS ATTRIBUTABLE TO
CONTRACTOWNERS,
BEGINNING OF PERIOD.................... 2,239,093 -- 117,827,678 40,887,252
----------- ----------- ------------ -------------
NET ASSETS ATTRIBUTABLE TO
CONTRACTOWNERS,
END OF PERIOD.......................... $ 4,263,817 $ 2,239,093 $147,597,969 $117,827,678
=========== =========== ============ ============
</TABLE>
- -------------------
See Notes to Financial Statements.
(a) Commenced operations on May 1, 1997.
(b) Commenced operations on August 20, 1997.
(c) Commenced operations on January 1, 1998.
FS-12
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 45
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
EQUITY SERIES (CONCLUDED):
--------------------------------------------------------
WARBURG PINCUS SMALL ALLIANCE
COMPANY VALUE SMALL CAP GROWTH
FUND (a) FUND (a)
--------------------------- ---------------------------
1998 1997 1998 1997
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income......................... $ (183,087) $ (64,437) $ (335,489) $ (49,856)
Net realized gain (loss)...................... (395,526) 338,068 (513,118) 440,546
Change in unrealized appreciation
(depreciation) of investments............... (3,926,557) (300,436) (1,477,423) (344,436)
----------- ----------- ----------- -----------
Net increase (decrease) in net assets from
operations.................................. (4,505,170) (26,805) (2,326,030) 46,254
----------- ----------- ----------- -----------
FROM CONTRACTOWNERS TRANSACTIONS:
Contributions and Transfers:
Contributions............................... 17,316,209 17,791,841 22,333,800 12,116,331
Transfers from other Funds and Guaranteed
Interest Rate Account (Note 1)............ 10,231,935 11,695,862 10,827,569 5,602,864
----------- ----------- ----------- -----------
Total............................................ 27,548,144 29,487,703 33,161,369 17,719,195
----------- ----------- ----------- -----------
WITHDRAWAL AND TRANSFERS:
Benefits and other policy transactions........ 1,086,279 134,692 1,022,179 20,842
Withdrawal and administrative charges......... 103,922 23,284 78,365 8,570
Transfers to other Funds and Guaranteed
Interest Rate Account (Note 1).............. 9,358,044 4,520,417 5,823,960 1,504,600
----------- ----------- ----------- -----------
Total............................................ 10,548,245 4,678,393 6,924,504 1,534,012
----------- ----------- ----------- -----------
Net increase in net assets from Contractowners
transactions.................................. 16,999,899 24,809,310 26,236,865 16,185,183
----------- ----------- ----------- -----------
NET (INCREASE) DECREASE IN AMOUNT RETAINED BY
EQUITABLE LIFE IN SEPARATE ACCOUNT NO. 45
(NOTE 5)...................................... (17,047) (10,579) 106,435 (3,378)
----------- ----------- ----------- -----------
INCREASE IN NET ASSETS ATTRIBUTABLE TO
CONTRACTOWNERS................................ 12,477,682 24,771,926 24,017,270 16,228,059
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS,
BEGINNING OF PERIOD........................... 24,771,926 -- 16,228,059 --
----------- ----------- ----------- -----------
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS,
END OF PERIOD................................. $37,249,608 $24,771,926 $40,245,329 $16,228,059
=========== =========== =========== ===========
<CAPTION>
EQUITY SERIES (CONCLUDED):
----------------------------------------
BT SMALL
COMPANY MFS EMERGING GROWTH
INDEX COMPANIES
FUND (b) FUND (a)
---------- ---------------------------
1998 1998 1997
---------- ----------- -----------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income......................... $ 13,688 $ (372,251) $ (15,821)
Net realized gain (loss)...................... 15,103 163,114 327,209
Change in unrealized appreciation
(depreciation) of investments............... 19,385 12,077,451 (259,194)
---------- ----------- -----------
Net increase (decrease) in net assets from
operations.................................. 48,176 11,868,314 52,194
---------- ----------- -----------
FROM CONTRACTOWNERS TRANSACTIONS:
Contributions and Transfers:
Contributions............................... 4,131,338 40,723,333 9,607,211
Transfers from other Funds and Guaranteed
Interest Rate Account (Note 1)............ 1,311,488 16,938,315 3,864,604
---------- ----------- -----------
Total............................................ 5,442,826 57,661,648 13,471,815
---------- ----------- -----------
WITHDRAWAL AND TRANSFERS:
Benefits and other policy transactions........ 21,074 1,543,076 45,537
Withdrawal and administrative charges......... 1,781 76,137 14,345
Transfers to other Funds and Guaranteed
Interest Rate Account (Note 1).............. 375,472 6,249,256 1,527,808
---------- ----------- -----------
Total............................................ 398,327 7,868,469 1,587,690
---------- ----------- -----------
Net increase in net assets from Contractowners
transactions.................................. 5,044,499 49,793,179 11,884,125
---------- ----------- -----------
NET (INCREASE) DECREASE IN AMOUNT RETAINED BY
EQUITABLE LIFE IN SEPARATE ACCOUNT NO. 45
(NOTE 5)...................................... (1,162) (31,251) (1,959)
---------- ----------- -----------
INCREASE IN NET ASSETS ATTRIBUTABLE TO
CONTRACTOWNERS................................ 5,091,513 61,630,242 11,934,360
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS,
BEGINNING OF PERIOD........................... -- 11,934,360 --
---------- ----------- -----------
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS,
END OF PERIOD................................. $5,091,513 $73,564,602 $11,934,360
========== ============ ===========
</TABLE>
- -------------------
See Notes to Financial Statements.
(a) Commenced operations on May 1, 1997.
(b) Commenced operations on January 1, 1998.
FS-13
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 45
STATEMENTS OF CHANGES IN NET ASSETS (CONCLUDED)
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
ASSET ALLOCATION SERIES:
-------------------------------------------------------
ALLIANCE
CONSERVATIVE EQ/PUTNAM
INVESTORS FUND BALANCED FUND (a)
--------------------------- ------------------------
1998 1997 1998 1997
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income............................. $ 985,456 $ 481,754 $ 398,729 $ 51,548
Net realized gain (loss).......................... 3,140,287 687,695 225,623 45,528
Change in unrealized appreciation (depreciation)
of investments.................................. 75,336 478,094 1,243,684 73,582
----------- ----------- ----------- ----------
Net increase (decrease) in net assets from
operations...................................... 4,201,079 1,647,543 1,868,036 170,658
----------- ----------- ----------- ----------
FROM CONTRACTOWNERS TRANSACTIONS:
Contributions and Transfers:
Contributions................................... 21,651,343 10,862,780 20,768,914 4,294,496
Transfers from other Funds and Guaranteed
Interest Rate Account (Note 1)................ 13,282,997 3,151,066 9,211,559 1,721,220
----------- ----------- ----------- ----------
Total......................................... 34,934,340 14,013,846 29,980,473 6,015,716
----------- ----------- ----------- ----------
WITHDRAWAL AND TRANSFERS:
Benefits and other policy transactions............ 1,883,884 567,547 567,437 17,533
Withdrawal and administrative charges............. 117,513 138,461 42,998 15,293
Transfers to other Funds and Guaranteed
Interest Rate Account (Note 1).................. 7,120,635 1,428,179 2,636,967 120,099
----------- ----------- ----------- ----------
Total........................................... 9,122,032 2,134,187 3,247,402 152,925
----------- ----------- ----------- ----------
Net increase in net assets from Contractowners
transactions.................................... 25,812,308 11,879,659 26,733,071 5,862,791
----------- ----------- ----------- ----------
NET (INCREASE) DECREASE IN AMOUNT RETAINED BY
EQUITABLE LIFE IN SEPARATE ACCOUNT NO. 45 (NOTE 5) (26,353) (57,026) (13,517) (483)
----------- ----------- ----------- ----------
INCREASE IN NET ASSETS ATTRIBUTABLE TO
CONTRACTOWNERS.................................... 29,987,034 13,470,176 28,587,590 6,032,966
NET ASSETS ATTRIBUTABLE TO
CONTRACTOWNERS, BEGINNING OF PERIOD............... 21,328,458 7,858,282 6,032,966 --
----------- ----------- ----------- ----------
NET ASSETS ATTRIBUTABLE TO
CONTRACTOWNERS, END OF PERIOD..................... $51,315,492 $21,328,458 $34,620,556 $6,032,966
=========== =========== =========== ==========
<CAPTION>
ASSET ALLOCATION SERIES:
-------------------------------------------------------
ALLIANCE
GROWTH MERRILL LYNCH WORLD
INVESTORS FUND STRATEGY FUND (a)
--------------------------- ------------------------
1998 1997 1998 1997
------------ ----------- ---------- ----------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income............................. $ 822,873 $ 736,541 $ 10,810 $ 2,974
Net realized gain (loss).......................... 10,536,120 3,620,598 (38,321) 24,219
Change in unrealized appreciation (depreciation)
of investments.................................. 4,546,177 1,844,488 211,040 (129,123)
------------ ----------- ---------- ----------
Net increase (decrease) in net assets from
operations...................................... 15,905,170 6,201,627 183,529 (101,930)
------------ ----------- ---------- ----------
FROM CONTRACTOWNERS TRANSACTIONS:
Contributions and Transfers:
Contributions................................... 44,347,044 32,084,069 2,756,653 2,043,811
Transfers from other Funds and Guaranteed
Interest Rate Account (Note 1)................ 13,494,160 7,981,423 1,208,993 561,601
------------ ----------- ---------- ----------
Total......................................... 57,841,204 40,065,492 3,965,646 2,605,412
------------ ----------- ---------- ----------
WITHDRAWAL AND TRANSFERS:
Benefits and other policy transactions............ 3,711,360 1,014,211 125,335 3,514
Withdrawal and administrative charges............. 325,958 421,582 13,717 2,597
Transfers to other Funds and Guaranteed
Interest Rate Account (Note 1).................. 9,119,743 2,744,848 463,447 84,455
------------ ----------- ---------- ----------
Total........................................... 13,157,061 4,180,641 602,499 90,566
------------ ----------- ---------- ----------
Net increase in net assets from Contractowners
transactions.................................... 44,684,143 35,884,851 3,363,147 2,514,846
------------ ----------- ---------- ----------
NET (INCREASE) DECREASE IN AMOUNT RETAINED BY
EQUITABLE LIFE IN SEPARATE ACCOUNT NO. 45 (NOTE 5) (93,008) (111,839) (17,508) (121)
------------ ----------- ---------- ----------
INCREASE IN NET ASSETS ATTRIBUTABLE TO
CONTRACTOWNERS.................................... 60,496,305 41,974,639 3,529,168 2,412,795
NET ASSETS ATTRIBUTABLE TO
CONTRACTOWNERS, BEGINNING OF PERIOD............... 65,983,034 24,008,395 2,412,795 --
------------ ----------- ---------- ----------
NET ASSETS ATTRIBUTABLE TO
CONTRACTOWNERS, END OF PERIOD..................... $126,479,339 $65,983,034 $5,941,963 $2,412,795
============ =========== ========== ==========
</TABLE>
- -------------------
See Notes to Financial Statements.
(a) Commenced operations on May 1, 1997.
FS-14
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 45
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. General
The Equitable Life Assurance Society of the United States (Equitable Life)
Separate Account No. 45 (the Account) is organized as a unit investment
trust, a type of investment company, and is registered with the Securities
and Exchange Commission under the Investment Company Act of 1940 (the 1940
Act). Alliance Capital Management L.P., an indirect majority owned
subsidiary of Equitable Life, manages The Hudson River Trust (HRT) and is
the investment adviser for all of the investment funds of HRT. EQ Financial
Consultants, Inc., ("EQFC") is a wholly owned subsidiary of Equitable Life.
EQFC manages the EQ Advisors Trust (EQAT) and has overall responsibility
for general management and administration of EQAT. The Account consists of
25 investment funds (Funds): Alliance Money Market Fund, Alliance
Intermediate Government Securities Fund, Alliance High Yield Fund, T. Rowe
Price Equity Income Fund, EQ/Putnam Growth & Income Value Fund, Alliance
Growth & Income Fund, BT Equity 500 Index Fund, Alliance Equity Index Fund,
Merrill Lynch Basic Value Equity Fund, Alliance Common Stock Fund, MFS
Research Fund, Alliance Global Fund, Alliance International Fund, BT
International Equity Index Fund, T. Rowe Price International Stock Fund,
Morgan Stanley Emerging Markets Equity Fund, Alliance Aggressive Stock
Fund, Warburg Pincus Small Company Value Fund, Alliance Small Cap Growth
Fund, BT Small Company Index Fund, MFS Emerging Growth Companies Fund,
Alliance Conservative Investors Fund, EQ/Putnam Balanced Fund, Alliance
Growth Investors Fund and Merrill Lynch World Strategy Fund. The assets in
each Fund are invested in shares of a corresponding portfolio (Portfolio)
of a mutual fund, Class 1A and 1B shares of HRT or Class 1B shares of EQAT
(collectively, the "Trusts"). Class 1A and 1B shares are offered by the
Trusts at net asset value. Both classes of shares are subject to fees for
investment management and advisory services and other Trust expenses. Class
1B shares are subject to distribution fees imposed under a distribution
plan (herein the "Rule 12b-1 Plans") adopted pursuant to Rule 12b-1 under
the 1940 Act, as amended. The Rule 12b-1 Plans provide that the Trusts, on
behalf of each Fund, may charge annually up to 0.25% of the average daily
net assets of a Fund attributable to its Class 1B shares in respect of
activities primarily intended to result in the sale of the Class 1B shares.
These fees are reflected in the net asset value of the shares. Class 1A
shares of HRT continue to be purchased by contracts in-force prior to May
1, 1997. The Trusts are open-ended, diversified management investment
companies that sell their shares to separate accounts of insurance
companies. Each Portfolio has separate investment objectives.
EQFC earns fees from both Trusts under distribution agreements held with
the Trusts. EQFC also earns fees under an investment management agreement
with EQAT. Alliance earns fees under an investment advisory agreement
with the HRT.
The Account is used to fund benefits for the Equitable Accumulator and
Income Manager Accumulator non-qualified deferred variable annuities which
combine the portfolios in the Account with guaranteed fixed rate options,
and the Equitable Accumulator IRA and Income Manager Accumulator IRA, which
offer the same investment options as Equitable Accumulator and Income
Manager Accumulator for the non-qualified market. The Equitable Accumulator
and Income Manager Accumulator are also available for purchase by certain
types of qualified plans. The Equitable Accumulator (IRA, NQ and QP) and
Income Manager Accumulator (IRA, NQ and QP), collectively referred to as
the Contracts, are offered under group and individual variable annuity
forms.
All Contracts are issued by Equitable Life. The assets of the Account are
the property of Equitable Life. However, the portion of the Account's
assets attributable to the Contracts will not be chargeable with
liabilities arising out of any other business Equitable Life may conduct.
Receivable/Payable for policy-related transactions represent amounts due
to/from general account predominately related to premiums, surrenders and
death benefit.
Contractowners may allocate amounts in their individual accounts to the
Funds of the Account, and/or to the guaranteed interest account of
Equitable Life's General Account, and/or to other Separate Accounts. The
net assets of any Fund of the Account may not be less than the aggregate of
the Contractowners' accounts allocated to that Fund. Additional assets are
set aside in Equitable Life's General Account to provide for other policy
benefits, as required under the state insurance law. Equitable Life's
General Account is subject to creditor rights.
Included in the Withdrawal and Administrative Charges line of the
Statements of Changes in Net Assets are certain administrative charges
which are deducted from the Contractowners account value.
FS-15
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 45
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998
2. Significant Accounting Policies
The accompanying financial statements are prepared in conformity with
generally accepted accounting principles (GAAP). The preparation of
financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
Investments are made in shares of the Trust and are valued at the net asset
values per share of the respective Portfolios. The net asset value is
determined by the Trust using the market or fair value of the underlying
assets of the Portfolio less liabilities.
Investment transactions in the Trusts are recorded on the trade date.
Realized gains and losses include (1) gains and losses on redemptions of
the Trust's shares (determined on the identified cost basis) and (2) Trust
distributions representing the net realized gains on Trust investment
transactions which are distributed by the Trusts at the end of each year
and automatically reinvested in additional shares. Dividends are recorded
by HRT at the end of each quarter and by EQAT in the fourth quarter on the
ex-dividend date. Capital gains are distributed by the Trust at the end of
each year.
No federal income tax based on net income or realized and unrealized
capital gains is currently applicable to Contracts participating in the
Account by reason of applicable provisions of the Internal Revenue Code and
no federal income tax payable by Equitable Life is expected to affect the
unit value of Contracts participating in the Account. Accordingly, no
provision for income taxes is required. However, Equitable Life retains the
right to charge for any federal income tax incurred which is attributable
to the Account if the law is changed.
3. Asset Charges
Charges are made directly against the net assets of the Account and are
reflected daily in the computation of the unit values of the Contracts.
Under the Contracts, Equitable Life charges for mortality and expense risks
at an annual rate of 1.10% of daily net assets for Equitable Accumulator
Contracts (0.90% for Income Manager Accumulator Contracts). In addition,
asset-based administrative charges are also charged to the account at an
annual rate of 0.25% of daily net assets. The charges may be retained in
the Account by Equitable Life and participate in the net investment results
of the Trusts. The aggregate of these charges may not exceed a total
effective annual rate of 1.35% for Equitable Accumulator (1.15% for Income
Manager Accumulator). Trust shares are valued at their net asset value with
investment advisory or management fees, the 12b-1 fee, and other expenses
of the Trust, in effect, passed on to the Account and reflected in the
accumulation unit values of the Contracts.
4. Contributions, Transfers and Charges
Net accumulation units issued and redeemed during the periods indicated
were:
DECEMBER 31, DECEMBER 31,
1998 1997
-------------- --------------
ALLIANCE MONEY MARKET FUND (IN THOUSANDS)
-------------------------- --------------
Net Issued (Redeemed) Class A 115bp .......... (89) (374)
Net Issued (Redeemed) Class B 0bp ............ 853 1,178
Net Issued (Redeemed) Class B 115bp .......... 399 794
Net Issued (Redeemed) Class B 135bp .......... 1,566 --
ALLIANCE INTERMEDIATE GOVERNMENT SECURITIES FUND
- --------------------------------------------------
Net Issued (Redeemed) Class A 115bp .......... 111 161
Net Issued (Redeemed) Class B 115bp .......... 734 345
Net Issued (Redeemed) Class B 135bp .......... 928 --
FS-16
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 45
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
4. Contributions, Transfers and Charges (Continued)
Net accumulation units issued and redeemed during the periods indicated
were:
DECEMBER 31, DECEMBER 31,
1998 1997
-------------- --------------
ALLIANCE HIGH YIELD FUND (a) (IN THOUSANDS)
----------------------------
Net Issued (Redeemed) Class A 115bp..... 75 98
Net Issued (Redeemed) Class B 115bp..... 946 505
Net Issued (Redeemed) Class B 135bp..... 801 --
T. ROWE PRICE EQUITY INCOME FUND (a)
------------------------------------
Net Issued (Redeemed) Class B 115bp..... 1,537 1,565
Net Issued (Redeemed) Class B 135bp..... 1,059 --
EQ/PUTNAM GROWTH & INCOME FUND (a)
----------------------------------
Net Issued (Redeemed) Class B 115bp..... 1,117 1,230
Net Issued (Redeemed) Class B 135bp..... 867 --
ALLIANCE GROWTH & INCOME FUND
-----------------------------
Net Issued (Redeemed) Class A 115bp..... 48 2,377
Net Issued (Redeemed) Class B 115bp..... 2,016 1,829
Net Issued (Redeemed) Class B 135bp..... 1,854 --
BT EQUITY 500 INDEX (c)
------------------------
Net Issued (Redeemed) Class B 115bp..... 2,189 --
Net Issued (Redeemed) Class B 135bp..... 2,246 --
ALLIANCE EQUITY INDEX FUND (a)
------------------------------
Net Issued (Redeemed) Class A 115bp..... -- --
Net Issued (Redeemed) Class B 115bp..... 9 5
Net Issued (Redeemed) Class B 135bp..... 2 --
MERRILL LYNCH BASIC VALUE FUND (a)
----------------------------------
Net Issued (Redeemed) Class B 115bp..... 1,278 849
Net Issued (Redeemed) Class B 135bp..... 1,010 --
ALLIANCE COMMON STOCK FUND
--------------------------
Net Issued (Redeemed) Class A 115bp..... (35) 620
Net Issued (Redeemed) Class B 115bp..... 582 519
Net Issued (Redeemed) Class B 135bp..... 550 --
- ----------
(a) Commenced operations on May 1, 1997.
(b) Commenced operations on August 20, 1997.
(c) Commenced operations on January 1, 1998.
FS-17
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 45
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
4. Contributions, Transfers and Charges (Continued)
Net accumulation units issued and redeemed during the periods indicated
were:
DECEMBER 31, DECEMBER 31,
1998 1997
------------- -------------
MFS RESEARCH FUND (a) (IN THOUSANDS)
---------------------
Net Issued (Redeemed) Class B 115bp .... 1,244 1,039
Net Issued (Redeemed) Class B 135bp .... 1,479 --
ALLIANCE GLOBAL FUND
--------------------
Net Issued (Redeemed) Class A 115bp .... (103) 444
Net Issued (Redeemed) Class B 115bp .... 360 308
Net Issued (Redeemed) Class B 135bp .... 354 --
ALLIANCE INTERNATIONAL FUND
---------------------------
Net Issued (Redeemed) Class A 115bp .... (150) 438
Net Issued (Redeemed) Class B 115bp .... 153 285
Net Issued (Redeemed) Class B 135bp .... 166 --
BT INTERNATIONAL EQUITY INDEX (c)
---------------------------------
Net Issued (Redeemed) Class B 115bp .... 209 --
Net Issued (Redeemed) Class B 135bp .... 242 --
T. ROWE PRICE INTERNATIONAL STOCK FUND (a)
------------------------------------------
Net Issued (Redeemed) Class B 115bp .... 704 1,291
Net Issued (Redeemed) Class B 113bp .... 705 --
MORGAN STANLEY EMERGING MARKETS FUND (b)
----------------------------------------
Net Issued (Redeemed) Class B 115bp .... 285 282
Net Issued (Redeemed) Class B 135bp .... 177 --
ALLIANCE AGGRESSIVE STOCK FUND
------------------------------
Net Issued (Redeemed) Class A 115bp .... (160) 641
Net Issued (Redeemed) Class B 115bp .... 311 369
Net Issued (Redeemed) Class B 135bp .... 293 --
- ------------------
(a) Commenced operations on May 1, 1997.
(b) Commenced operations on August 20, 1997.
(c) Commenced operations on January 1, 1998.
FS-18
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 45
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
4. Contributions, Transfers and Charges (Concluded)
Net accumulation units issued and redeemed during the periods indicated
were:
DECEMBER 31, DECEMBER 31,
1998 1997
------------- ------------
WARBURG PINCUS SMALL COMPANY FUND (a) (IN THOUSANDS)
-------------------------------------
Net Issued (Redeemed) Class B 115bp........... 888 2,096
Net Issued (Redeemed) Class B 135bp........... 560 --
Net Issued (Redeemed) Class B 135bp........... 1,448 --
ALLIANCE SMALL CAP GROWTH FUND (a)
--------------------------------------
Net Issued (Redeemed) Class A 115bp........... 106 208
Net Issued (Redeemed) Class B 115bp........... 1,222 1,084
Net Issued (Redeemed) Class B 135bp........... 775 --
MFS EMERGING GROWTH COMPANIES FUND (a)
-------------------------------------
Net Issued (Redeemed) Class B 115bp........... 1,637 982
Net Issued (Redeemed) Class B 135bp........... 1,942 --
BT SMALL COMPANY INDEX FUND (b)
------------------------------------
Net Issued (Redeemed) Class B 115bp........... 243 --
Net Issued (Redeemed) Class B 135bp........... 284 --
ALLIANCE CONSERVATIVE INVESTORS FUND
--------------------------------------
Net Issued (Redeemed) Class A 115bp........... 52 356
Net Issued (Redeemed) Class B 115bp........... 565 295
Net Issued (Redeemed) Class B 135bp........... 659 --
EQ/PUTNAM BALANCED FUND (a)
--------------------------------
Net Issued (Redeemed) Class B 115bp........... 1,094 531
Net Issued (Redeemed) Class B 135bp........... 1,136 --
ALLIANCE GROWTH INVESTORS FUND
---------------------------------
Net Issued (Redeemed) Class A 115bp........... (81) 682
Net Issued (Redeemed) Class B 115bp........... 778 581
Net Issued (Redeemed) Class B 135bp........... 694 --
MERRILL LYNCH WORLD STRATEGY FUND (a)
----------------------------------------
Net Issued (Redeemed) Class B 115bp........... 170 232
Net Issued (Redeemed) Class B 135bp........... 140 --
- ------------------
(a) Commenced operations on May 1, 1997.
(b) Commenced operations on January 1, 1998.
(c) Units were made available for sale on May 1, 1998.
FS-19
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 45
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
5. Amounts retained by Equitable Life in Separate Account No. 45
The amount retained by Equitable Life in the Account arises principally
from (1) contributions from Equitable Life, (2) mortality and expense
charges and asset-based administrative charges accumulated in the account,
and (3) that portion, determined ratably, of the Account's investment
results applicable to those assets in the Account in excess of the net
assets for the Contracts. Amounts retained by Equitable Life are not
subject to charges for mortality and expense risks and asset-based
administrative expenses.
Amounts retained by Equitable Life in the Account may be transferred at any
time by Equitable Life to its General Account.
The following table shows the contributions (withdrawals) in net amounts
retained by Equitable Life by investment fund:
YEARS ENDED DECEMBER 31,
------------------------------
INVESTMENT FUND 1998 1997
--------------- ------------------------------
Alliance Money Market Fund ..................... $ (908,916) $(240,000)
Alliance Intermediate Government Securities Fund (293,270) (60,000)
Alliance High Yield Fund(1) .................... (593,703) 10,000
T. Rowe Price Equity Income Fund(1) ............ (397,541) --
EQ/Putnam Growth & Income Value Fund(1) ........ (300,588) --
Alliance Growth & Income Fund .................. (1,926,708) (250,000)
BT Equity 500 Index Fund(3) .................... (161,967) --
Alliance Equity Index Fund ..................... (2,128) 5,000
Merrill Lynch Basic Value Equity Fund(1) ....... (268,189) --
Alliance Common Stock Fund ..................... (6,883,461) (840,000)
MFS Research Fund(1) ........................... (329,924) --
Alliance Global Fund ........................... (708,300) (185,000)
Alliance International Fund .................... (298,470) (120,000)
BT International Equity Index Fund(3) .......... (17,272) --
T. Rowe Price International Stock Fund(1) ...... (223,491) --
Morgan Stanley Emerging Markets Equity Fund(2) . (17,574) --
Alliance Aggressive Stock Fund ................. (1,947,808) (435,000)
Warburg Pincus Small Company Value Fund(1) ..... (365,698) --
Alliance Small Cap Growth Fund(1) .............. (232,599) 10,000
BT Small Company Index Fund(3) ................. (15,197) --
MFS Emerging Growth Companies Fund(1) .......... (389,504) --
Alliance Conservative Investors Fund ........... (415,465) (87,000)
EQ/Putnam Balanced Fund(1) ..................... (196,023) --
Alliance Growth Investors Fund ................. (1,444,473) (185,000)
Merrill Lynch World Strategy Fund(1) ........... (45,763) --
- -------------------
(1) Commenced operations on May 1, 1997.-
(2) Commenced operations on August 20, 1997.
(3) Commenced operations on January 1, 1998.
FS-20
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 45
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
6. Accumulation Unit Values
Shown below is accumulation unit value information for a unit outstanding
throughout the period shown.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------
1998 1997 1996
----------- ----------- ----------
<S> <C> <C> <C>
ALLIANCE MONEY MARKET FUND
- --------------------------
Class A 115bp Unit value, beginning of period.............. $25.85 $24.81 $23.83
Class A 115bp Unit value, end of period.................... $26.92 $25.85 $24.81
Class B 0bp Unit value, beginning of period (a)............ $31.27 $30.25 --
Class B 0bp Unit value, end of period (a) ................. $32.86 $31.27 --
Class B 115bp Unit value, beginning of period (b).......... $25.85 $25.17 --
Class B 115bp Unit value, end of period (b)................ $26.85 $25.85 --
Class B 135bp Unit value, beginning of period (c).......... $25.31 -- --
Class B 135bp Unit value, end of period (c)................ $25.92 -- --
Number of units outstanding, end of period (000's):
Class A 115bp........................................... 839 928 1,302
Class B 0bp............................................. 2,031 1,178 --
Class B 115bp........................................... 1,193 794 --
Class B 135bp........................................... 1,566 -- --
ALLIANCE INTERMEDIATE GOVERNMENT SECURITIES FUND
- ------------------------------------------------
Class A 115bp Unit value, beginning of period.............. $14.60 $13.77 $13.42
Class A 115bp Unit value, end of period.................... $15.55 $14.60 $13.77
Class B 115bp Unit value, beginning of period (b).......... $14.58 $13.88 --
Class B 115bp Unit value, end of period (b)................ $15.49 $14.58 --
Class B 135bp Unit value, beginning of period (c).......... $14.59 -- --
Class B 135bp Unit value, end of period (c)................ $15.25 -- --
Number of units outstanding, end of period (000's):
Class A 115bp........................................... 524 413 252
Class B 115bp........................................... 1,079 345 --
Class B 135bp........................................... 929 -- --
ALLIANCE HIGH YIELD FUND
- ------------------------
Class A 115bp Unit value, beginning of period (a).......... $30.73 $26.95 --
Class A 115bp Unit value, end of period (a)................ $28.81 $30.73 --
Class B 115bp Unit value, beginning of period (a).......... $30.63 $26.91 --
Class B 115bp Unit value, end of period (a)................ $28.65 $30.63 --
Class B 135bp Unit value, beginning of period (c).......... $31.54 -- --
Class B 135bp Unit value, end of period (c)................ $27.96 -- --
Number of units outstanding, end of period (000's):
Class A 115bp........................................... 173 98 --
Class B 115bp........................................... 1,451 505 --
Class B 135bp........................................... 801 -- --
</TABLE>
- -------------------
(a) Commenced operations on May 1, 1997.
(b) Units were made available for sale on May 1, 1997.
(c) Units were made available for sale on May 1, 1998.
FS-21
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 45
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
6. Accumulation Unit Values (Continued)
Shown below is accumulation unit value information for a unit outstanding
throughout the period shown.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------
1998 1997 1996
----------- ----------- ----------
<S> <C> <C> C>
T. ROWE PRICE EQUITY INCOME FUND (a)
- ------------------------------------
Class B 115bp Unit value, beginning of period.............. $12.12 $10.00 --
Class B 115bp Unit value, end of period.................... $13.07 $12.12 --
Class B 135bp Unit value, beginning of period (c).......... $13.19 -- --
Class B 135bp Unit value, end of period (c)................ $13.02 -- --
Number of units outstanding, end of period (000's):
Class B 115bp........................................... 3,102 1,565 --
Class B 135bp........................................... 1,059 -- --
EQ/PUTNAM GROWTH & INCOME VALUE FUND (a)
- ----------------------------------------
Class B 115bp Unit value, beginning of period.............. $11.53 $10.00 --
Class B 115bp Unit value, end of period.................... $12.86 $11.53 --
Class B 135bp Unit value, beginning of period (c) ......... $12.86 -- --
Class B 135bp Unit value, end of period (c) ............... $12.82 -- --
Number of units outstanding, end of period (000's):
Class B 115bp........................................... 2,347 1,230 --
Class B 135bp........................................... 867 -- --
ALLIANCE GROWTH & INCOME FUND
- -----------------------------
Class A 115bp Unit value, beginning of period.............. $17.83 $14.23 $11.99
Class A 115bp Unit value, end of period.................... $21.30 $17.83 $14.23
Class B 115bp Unit value, beginning of period (b).......... $17.80 $14.67 --
Class B 115bp Unit value, end of period (b)................ $21.22 $17.80 --
Class B 135bp Unit value, beginning of period (c).......... $19.99 -- --
Class B 135bp Unit value, end of period (c)................ $20.99 -- --
Number of units outstanding, end of period (000's):
Class A 115bp........................................... 3,481 3,433 1,056
Class B 115bp........................................... 3,845 1,829 --
Class B 135bp........................................... 1,853 -- --
BT EQUITY 500 INDEX FUND (c)
- ----------------------------
Class B 115bp Unit value, beginning of period.............. $10.00 -- --
Class B 115bp Unit value, end of period.................... $12.37 -- --
Class B 135bp Unit value, beginning of period (c).......... $11.28 -- --
Class B 135bp Unit value, end of period (c)................ $12.34 -- --
Number of units outstanding, end of period (000's):
Class B 115bp........................................... 2,189 -- --
Class B 135bp........................................... 2,426 -- --
</TABLE>
- -------------------
(a) Commenced operations on May 1, 1997.
(b) Units were made available for sale on May 1, 1997.
(c) Units were made available for sale on May 1, 1998.
FS-22
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 45
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
6. Accumulation Unit Values (Continued)
Shown below is accumulation unit value information for a unit outstanding
throughout the period shown.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------
1998 1997 1996
----------- ----------- ----------
<S> <C> <C> <C>
ALLIANCE EQUITY INDEX FUND (a)
- ------------------------------
Class A 115bp Unit value, beginning of period.............. $21.41 $17.62 --
Class A 115bp Unit value, end of period.................... $27.11 $21.41 --
Class B 115bp Unit value, beginning of period.............. $21.38 $17.62 --
Class B 115bp Unit value, end of period.................... $26.99 $21.38 --
Class B 135bp Unit value, beginning of period (d).......... $24.44 -- --
Class B 135bp Unit value, end of period (d)................ $26.73 -- --
Number of units outstanding, end of period (000's):
Class A 115bp........................................... -- -- --
Class B 115bp........................................... 14 5 --
Class B 135bp........................................... 2 -- --
MERRILL LYNCH BASIC VALUE EQUITY FUND (a)
- -----------------------------------------
Class B 115bp Unit value, beginning of period (b).......... $11.61 $10.00 --
Class B 115bp Unit value, end of period (b)................ $12.81 $11.61 --
Class B 135bp Unit value, beginning of period (d).......... $13.70 -- --
Class B 135bp Unit value, end of period (d)................ $12.76 -- --
Number of units outstanding, end of period (000's):
Class B 115bp........................................... 2,127 849 --
Class B 135bp........................................... 1,009 -- --
ALLIANCE COMMON STOCK FUND
- --------------------------
Class A 115bp Unit value, beginning of period.............. $195.37 $152.96 $124.52
Class A 115bp Unit value, end of period.................... $249.88 $195.37 $152.96
Class B 115bp Unit value, beginning of period (b).......... $194.74 $153.35 --
Class B 115bp Unit value, end of period (b)................ $248.45 $194.74 --
Class B 135bp Unit value, beginning of period (d).......... $211.50 -- --
Class B 135bp Unit value, end of period (d)................ $237.18 -- --
Number of units outstanding, end of period (000's):
Class A 115bp........................................... 1,079 1,114 494
Class B 115bp........................................... 1,101 519 --
Class B 135bp........................................... 550 -- --
</TABLE>
- -------------------
(a) Commenced operations on May 1, 1997.
(b) Units were made available for sale on May 1, 1997.
(c) Commenced operations on January 1, 1998.
(d) Units were made available for sale on May 1, 1998.
FS-23
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 45
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
6. Accumulation Unit Values (Continued)
Shown below is accumulation unit value information for a unit outstanding
throughout the period shown.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------
1998 1997 1996
----------- ----------- ----------
<S> <C> <C> <C>
MFS RESEARCH FUND (a)
- ---------------------
Class B 115bp Unit value, beginning of period.............. $11.52 $10.00 --
Class B 115bp Unit value, end of period.................... $14.13 $11.52 --
Class B 135bp Unit value, beginning of period (d).......... $13.53 -- --
Class B 135bp Unit value, end of period (d)................ $14.08 -- --
Number of units outstanding, end of period (000's):
Class B 115bp........................................... 2,283 1,039 --
Class B 135bp........................................... 1,479 -- --
ALLIANCE GLOBAL FUND
- --------------------
Class A 115bp Unit value, beginning of period.............. $27.85 $25.25 $22.29
Class A 115bp Unit value, end of period.................... $33.53 $27.85 $25.25
Class B 115bp Unit value, beginning of period (c).......... $27.76 $24.87 --
Class B 115bp Unit value, end of period (c)................ $33.34 $27.76 --
Class B 135bp Unit value, beginning of period (d).......... $31.57 -- --
Class B 135bp Unit value, end of period (d)................ $32.58 -- --
Number of units outstanding, end of period (000's):
Class A 115bp........................................... 971 1,074 609
Class B 115bp........................................... 668 308 --
Class B 135bp........................................... 354 -- --
ALLIANCE INTERNATIONAL FUND
- ---------------------------
Class A 115bp Unit value, beginning of period.............. $11.48 $11.98 $11.03
Class A 115bp Unit value, end of period.................... $12.54 $11.48 $11.98
Class B 115bp Unit value, beginning of period (c).......... $11.46 $11.86 --
Class B 115bp Unit value, end of period (c)................ $12.49 $11.46 --
Class B 135bp Unit value, beginning of period (d).......... $13.41 -- --
Class B 135bp Unit value, end of period (d)................ $12.40 -- --
Number of units outstanding, end of period (000's):
Class A 115bp........................................... 1,001 1,151 717
Class B 115bp........................................... 438 285 --
Class B 135bp........................................... 166 -- --
</TABLE>
- -------------------
(a) Commenced operations on May 1, 1997.
(b) Commenced operations on January 1, 1998.
(c) Units were made available for sale on May 1, 1997.
(d) Units were made available for sale on May 1, 1998.
FS-24
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 45
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
6. Accumulation Unit Values (Continued)
Shown below is accumulation unit value information for a unit outstanding
throughout the period shown.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------
1998 1997 1996
----------- ----------- ----------
<S> <C> <C> <C>
BT INTERNATIONAL EQUITY INDEX FUND (c)
- --------------------------------------
Class B 115bp Unit value, beginning of period.............. $10.00 -- --
Class B 115bp Unit value, end of period.................... $11.87 -- --
Class B 135bp Unit value, beginning of period (e).......... $11.50 -- --
Class B 135bp Unit value, end of period (e)................ $11.85 -- --
Number of units outstanding, end of period (000's):
Class B 115bp........................................... 209 -- --
Class B 135bp........................................... 242 -- --
T. ROWE PRICE INTERNATIONAL STOCK FUND (a)
- ------------------------------------------
Class B 115bp Unit value, beginning of period.............. $9.77 $10.00 --
Class B 115bp Unit value, end of period.................... $10.98 $9.77 --
Class B 135bp Unit value, beginning of period (e).......... $11.13 -- --
Class B 135bp Unit value, end of period (e)................ $10.95 -- --
Number of units outstanding, end of period (000's):
Class B 115bp........................................... 1,995 1,291 --
Class B 135bp........................................... 705 -- --
MORGAN STANLEY EMERGING MARKETS EQUITY FUND (b)
- -----------------------------------------------
Class B 115bp Unit value, beginning of period.............. $7.95 $10.00 --
Class B 115bp Unit value, end of period.................... $5.73 $7.95 --
Class B 135bp Unit value, beginning of period(e)........... $8.23 -- --
Class B 135bp Unit value, end of period (e)................ $5.72 -- --
Number of units outstanding, end of period (000's):
Class B 115bp........................................... 567 282 --
Class B 135bp........................................... 177 -- --
ALLIANCE AGGRESSIVE STOCK FUND
- ------------------------------
Class A 115bp Unit value, beginning of period.............. $72.23 $65.94 $54.59
Class A 115bp Unit value, end of period.................... $71.60 $72.23 $65.94
Class B 115bp Unit value, beginning of period (d).......... $72.00 $62.84 --
Class B 115bp Unit value, end of period (d)................ $71.21 $72.00 --
Class B 135bp Unit value, beginning of period (e).......... $79.87 -- --
Class B 135bp Unit value, end of period (e)................ $69.37 -- --
Number of units outstanding, end of period (000's):
Class A 115bp........................................... 1,101 1,261 620
Class B 115bp........................................... 680 369 --
Class B 135bp........................................... 293 -- --
</TABLE>
- -------------------
(a) Commenced operations on May 1, 1997.
(b) Commenced operations on August 20, 1997.
(c) Commenced operations on January 1, 1998.
(d) Units were made available for sale May 1, 1997.
(e) Units were made available for sale on May 1, 1998.
FS-25
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 45
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
6. Accumulation Unit Values (Continued)
Shown below is accumulation unit value information for a unit outstanding
throughout the period shown.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------
1998 1997 1996
----------- ----------- ----------
<S> <C> <C> <C>
WARBURG PINCUS SMALL COMPANY VALUE FUND (a)
- -------------------------------------------
Class B 115bp Unit value, beginning of period.............. $11.82 $10.00 --
Class B 115bp Unit value, end of period.................... $10.52 $11.82 --
Class B 135bp Unit value, beginning of period (c).......... $12.72 -- --
Class B 135bp Unit value, end of period (c)................ $10.48 -- --
Number of units outstanding, end of period (000's):
Class B 115bp........................................... 2,984 2,096 --
Class B 135bp........................................... 560 -- --
ALLIANCE SMALL CAP GROWTH FUND (a)
- ----------------------------------
Class A 115bp Unit value, beginning of period.............. $12.57 $10.00 --
Class A 115bp Unit value, end of period.................... $11.90 $12.57 --
Class B 115bp Unit value, beginning of period.............. $12.55 $10.00 --
Class B 115bp Unit value, end of period.................... $11.86 $12.55 --
Class B 135bp Unit value, beginning of period (c).......... $14.29 -- --
Class B 135bp Unit value, end of period (c)................ $11.82 -- --
Number of units outstanding, end of period (000's):
Class A 115bp........................................... 314 208 --
Class B 115bp........................................... 2,306 1,084 --
Class B 135bp........................................... 775 -- --
BT SMALL COMPANY INDEX FUND (b)
- -------------------------------
Class B 115bp Unit value, beginning of period.............. $10.00 -- --
Class B 115bp Unit value, end of period.................... $9.66 -- --
Class B 135bp Unit value, beginning of period (c).......... $10.97 -- --
Class B 135bp Unit value, end of period (c)................ $9.64 -- --
Number of units outstanding, end of period (000's):
Class B 115bp........................................... 244 -- --
Class B 135bp........................................... 284 -- --
MFS EMERGING GROWTH FUND (a)
- ----------------------------
Class B 115bp Unit value, beginning of period.............. $12.15 $10.00 --
Class B 115bp Unit value, end of period.................... $16.16 $12.15 --
Class B 135bp Unit value, beginning of period (c).......... $14.42 -- --
Class B 135bp Unit value, end of period (c)................ $16.10 -- --
Number of units outstanding, end of period (000's):
Class B 115bp........................................... 2,619 982 --
Class B 135bp........................................... 1,942 -- --
</TABLE>
- -------------------
(a) Commenced operations on May 1, 1997.
(b) Commenced operations on January 1, 1998.
(c) Units were made available for sale on May 1, 1998.
FS-26
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 45
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
6. Accumulation Unit Values (Continued)
Shown below is accumulation unit value information for a unit outstanding
throughout the period shown.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------
1998 1997 1996
----------- ----------- ----------
<S> <C> <C> <C>
ALLIANCE CONSERVATIVE INVESTORS FUND
- ------------------------------------
Class A 115bp Unit value, beginning of period.............. $19.26 $17.21 $16.55
Class A 115bp Unit value, end of period.................... $21.68 $19.26 $17.21
Class B 115bp Unit value, beginning of period (b).......... $19.23 $17.33 --
Class B 115bp Unit value, end of period (b)................ $21.60 $19.23 --
Class B 135bp Unit value, beginning of period (c).......... $20.06 -- --
Class B 135bp Unit value, end of period (c)................ $21.20 -- --
Number of units outstanding, end of period (000's):
Class A 115bp........................................... 865 813 457
Class B 115bp........................................... 860 295 --
Class B 135bp........................................... 659 -- --
EQ/PUTNAM BALANCED FUND (a)
- ---------------------------
Class B 115bp Unit value, beginning of period.............. $11.36 $10.00 --
Class B 115bp Unit value, end of period.................... $12.56 $11.36 --
Class B 135bp Unit value, beginning of period (c).......... $12.29 -- --
Class B 135bp Unit value, end of period (c)................ $12.51 -- --
Number of units outstanding, end of period (000's):
Class B 115bp........................................... 1,625 531 --
Class B 135bp........................................... 1,136 -- --
ALLIANCE GROWTH INVESTORS FUND
- ------------------------------
Class A 115bp Unit value, beginning of period.............. $30.31 $26.26 $23.59
Class A 115bp Unit value, end of period.................... $35.70 $30.31 $26.26
Class B 115bp Unit value, beginning of period (b).......... $30.22 $26.23 --
Class B 115bp Unit value, end of period (b)................ $35.50 $30.22 --
Class B 135bp Unit value, beginning of period (c).......... $32.93 -- --
Class B 135bp Unit value, end of period (c)................ $34.84 -- --
Number of units outstanding, end of period (000's):
Class A 115bp........................................... 1,515 1,596 914
Class B 115bp........................................... 1,359 581 --
Class B 135bp........................................... 694 -- --
</TABLE>
- -------------------
(a) Commenced operations on May 1, 1997.
(b) Units were made available for sale on May 1, 1997.
(c) Units were made available for sale on May 1, 1998.
FS-27
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 45
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
DECEMBER 31, 1998
6. Accumulation Unit Values (Concluded)
Shown below is accumulation unit value information for a unit outstanding
throughout the period shown.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------
1998 1997 1996
----------- ----------- ----------
<S> <C> <C> <C>
MERRILL LYNCH WORLD STRATEGY FUND (a)
- -------------------------------------
Class B 115bp Unit value, beginning of period.............. $10.39 $10.00 --
Class B 115bp Unit value, end of period.................... $10.97 $10.39 --
Class B 135bp Unit value, beginning of period (b).......... $11.31 -- --
Class B 135bp Unit value, end of period (b)................ $10.94 -- --
Number of units outstanding, end of period (000's):
Class B 115bp........................................... 402 232 --
Class B 135bp........................................... 140 -- --
</TABLE>
- -------------------
(a) Commenced operations on May 1, 1997.
(b) Units were made available for sale on May 1, 1998.
FS-28
<PAGE>
Report of Independent Accountants
To the Board of Directors and Shareholder of
The Equitable Life Assurance Society of the United States
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of earnings, of shareholder's equity and comprehensive
income and of cash flows present fairly, in all material respects, the financial
position of The Equitable Life Assurance Society of the United States and its
subsidiaries ("Equitable Life") at December 31, 1998 and 1997, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1998, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of Equitable
Life's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
As discussed in Note 2 to the consolidated financial statements, Equitable Life
changed its method of accounting for long-lived assets in 1996.
/s/PricewaterhouseCoopers LLP
- -----------------------------
PricewaterhouseCoopers LLP
New York, New York
February 8, 1999
F-1
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
----------------- -----------------
(In Millions)
<S> <C> <C>
ASSETS
Investments:
Fixed maturities:
Available for sale, at estimated fair value............................. $ 18,993.7 $ 19,630.9
Held to maturity, at amortized cost..................................... 125.0 -
Mortgage loans on real estate............................................. 2,809.9 2,611.4
Equity real estate........................................................ 1,676.9 2,495.1
Policy loans.............................................................. 2,086.7 2,422.9
Other equity investments.................................................. 713.3 951.5
Investment in and loans to affiliates..................................... 928.5 731.1
Other invested assets..................................................... 808.2 612.2
----------------- -----------------
Total investments..................................................... 28,142.2 29,455.1
Cash and cash equivalents................................................... 1,245.5 300.5
Deferred policy acquisition costs........................................... 3,563.8 3,236.6
Amounts due from discontinued operations.................................... 2.7 572.8
Other assets................................................................ 3,051.9 2,687.4
Closed Block assets......................................................... 8,632.4 8,566.6
Separate Accounts assets.................................................... 43,302.3 36,538.7
----------------- -----------------
Total Assets................................................................ $ 87,940.8 $ 81,357.7
================= =================
LIABILITIES
Policyholders' account balances............................................. $ 20,889.7 $ 21,579.5
Future policy benefits and other policyholders' liabilities................. 4,694.2 4,553.8
Short-term and long-term debt............................................... 1,181.7 1,716.7
Other liabilities........................................................... 3,474.3 3,267.2
Closed Block liabilities.................................................... 9,077.0 9,073.7
Separate Accounts liabilities............................................... 43,211.3 36,306.3
----------------- -----------------
Total liabilities..................................................... 82,528.2 76,497.2
----------------- -----------------
Commitments and contingencies (Notes 11, 13, 14, 15 and 16)
SHAREHOLDER'S EQUITY
Common stock, $1.25 par value 2.0 million shares authorized, issued
and outstanding........................................................... 2.5 2.5
Capital in excess of par value.............................................. 3,110.2 3,105.8
Retained earnings........................................................... 1,944.1 1,235.9
Accumulated other comprehensive income...................................... 355.8 516.3
----------------- -----------------
Total shareholder's equity............................................ 5,412.6 4,860.5
----------------- -----------------
Total Liabilities and Shareholder's Equity.................................. $ 87,940.8 $ 81,357.7
================= =================
</TABLE>
See Notes to Consolidated Financial Statements.
F-2
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
CONSOLIDATED STATEMENTS OF EARNINGS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ----------------- -----------------
(In Millions)
<S> <C> <C> <C>
REVENUES
Universal life and investment-type product policy fee
income...................................................... $ 1,056.2 $ 950.6 $ 874.0
Premiums...................................................... 588.1 601.5 597.6
Net investment income......................................... 2,228.1 2,282.8 2,203.6
Investment gains (losses), net................................ 100.2 (45.2) (9.8)
Commissions, fees and other income............................ 1,503.0 1,227.2 1,081.8
Contribution from the Closed Block............................ 87.1 102.5 125.0
----------------- ----------------- -----------------
Total revenues.......................................... 5,562.7 5,119.4 4,872.2
----------------- ----------------- -----------------
BENEFITS AND OTHER DEDUCTIONS
Interest credited to policyholders' account balances.......... 1,153.0 1,266.2 1,270.2
Policyholders' benefits....................................... 1,024.7 978.6 1,317.7
Other operating costs and expenses............................ 2,201.2 2,203.9 2,075.7
----------------- ----------------- -----------------
Total benefits and other deductions..................... 4,378.9 4,448.7 4,663.6
----------------- ----------------- -----------------
Earnings from continuing operations before Federal
income taxes, minority interest and cumulative
effect of accounting change................................. 1,183.8 670.7 208.6
Federal income taxes.......................................... 353.1 91.5 9.7
Minority interest in net income of consolidated subsidiaries.. 125.2 54.8 81.7
----------------- ----------------- -----------------
Earnings from continuing operations before cumulative
effect of accounting change................................. 705.5 524.4 117.2
Discontinued operations, net of Federal income taxes.......... 2.7 (87.2) (83.8)
Cumulative effect of accounting change, net of Federal
income taxes................................................ - - (23.1)
----------------- ----------------- -----------------
Net Earnings.................................................. $ 708.2 $ 437.2 $ 10.3
================= ================= =================
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY AND COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ----------------- -----------------
(In Millions)
<S> <C> <C> <C>
Common stock, at par value, beginning and end of year......... $ 2.5 $ 2.5 $ 2.5
----------------- ----------------- -----------------
Capital in excess of par value, beginning of year............. 3,105.8 3,105.8 3,105.8
Additional capital in excess of par value..................... 4.4 - -
----------------- ----------------- -----------------
Capital in excess of par value, end of year................... 3,110.2 3,105.8 3,105.8
Retained earnings, beginning of year.......................... 1,235.9 798.7 788.4
Net earnings.................................................. 708.2 437.2 10.3
----------------- ----------------- -----------------
Retained earnings, end of year................................ 1,944.1 1,235.9 798.7
----------------- ----------------- -----------------
Accumulated other comprehensive income,
beginning of year........................................... 516.3 177.0 361.4
Other comprehensive income.................................... (160.5) 339.3 (184.4)
----------------- ----------------- -----------------
Accumulated other comprehensive income, end of year........... 355.8 516.3 177.0
----------------- ----------------- -----------------
Total Shareholder's Equity, End of Year....................... $ 5,412.6 $ 4,860.5 $ 4,084.0
================= ================= =================
COMPREHENSIVE INCOME
Net earnings.................................................. $ 708.2 $ 437.2 $ 10.3
----------------- ----------------- -----------------
Change in unrealized gains (losses), net of reclassification
adjustment.................................................. (149.5) 343.7 (206.6)
Minimum pension liability adjustment.......................... (11.0) (4.4) 22.2
----------------- ----------------- -----------------
Other comprehensive income.................................... (160.5) 339.3 (184.4)
----------------- ----------------- -----------------
Comprehensive Income.......................................... $ 547.7 $ 776.5 $ (174.1)
================= ================= =================
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ----------------- -----------------
(In Millions)
<S> <C> <C> <C>
Net earnings.................................................. $ 708.2 $ 437.2 $ 10.3
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Interest credited to policyholders' account balances........ 1,153.0 1,266.2 1,270.2
Universal life and investment-type product
policy fee income......................................... (1,056.2) (950.6) (874.0)
Investment (gains) losses................................... (100.2) 45.2 9.8
Change in Federal income tax payable........................ 123.1 (74.4) (197.1)
Other, net.................................................. (324.9) 169.4 330.2
----------------- ----------------- -----------------
Net cash provided by operating activities..................... 503.0 893.0 549.4
----------------- ----------------- -----------------
Cash flows from investing activities:
Maturities and repayments................................... 2,289.0 2,702.9 2,275.1
Sales....................................................... 16,972.1 10,385.9 8,964.3
Purchases................................................... (18,578.5) (13,205.4) (12,559.6)
Decrease (increase) in short-term investments............... 102.4 (555.0) 450.3
Decrease in loans to discontinued operations................ 660.0 420.1 1,017.0
Sale of subsidiaries........................................ - 261.0 -
Other, net.................................................. (341.8) (612.6) (281.0)
----------------- ----------------- -----------------
Net cash provided (used) by investing activities.............. 1,103.2 (603.1) (133.9)
----------------- ----------------- -----------------
Cash flows from financing activities:
Policyholders' account balances:
Deposits.................................................. 1,508.1 1,281.7 1,925.4
Withdrawals............................................... (1,724.6) (1,886.8) (2,385.2)
Net (decrease) increase in short-term financings............ (243.5) 419.9 (.3)
Repayments of long-term debt................................ (24.5) (196.4) (124.8)
Payment of obligation to fund accumulated deficit of
discontinued operations................................... (87.2) (83.9) -
Other, net.................................................. (89.5) (62.7) (66.5)
----------------- ----------------- -----------------
Net cash used by financing activities......................... (661.2) (528.2) (651.4)
----------------- ----------------- -----------------
Change in cash and cash equivalents........................... 945.0 (238.3) (235.9)
Cash and cash equivalents, beginning of year.................. 300.5 538.8 774.7
----------------- ----------------- -----------------
Cash and Cash Equivalents, End of Year........................ $ 1,245.5 $ 300.5 $ 538.8
================= ================= =================
Supplemental cash flow information
Interest Paid............................................... $ 130.7 $ 217.1 $ 109.9
================= ================= =================
Income Taxes Paid (Refunded)................................ $ 254.3 $ 170.0 $ (10.0)
================= ================= =================
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1) ORGANIZATION
The Equitable Life Assurance Society of the United States ("Equitable
Life") is a wholly owned subsidiary of The Equitable Companies
Incorporated (the "Holding Company"). Equitable Life's insurance
business is conducted principally by Equitable Life and its wholly owned
life insurance subsidiaries, Equitable of Colorado ("EOC"), and, prior
to December 31, 1996, Equitable Variable Life Insurance Company
("EVLICO"). Effective January 1, 1997, EVLICO was merged into Equitable
Life, which continues to conduct the Company's insurance business.
Equitable Life's investment management business, which comprises the
Investment Services segment, is conducted principally by Alliance
Capital Management L.P. ("Alliance"), in which Equitable Life has a
57.7% ownership interest, and Donaldson, Lufkin & Jenrette, Inc.
("DLJ"), an investment banking and brokerage affiliate in which
Equitable Life has a 32.5% ownership interest. AXA ("AXA"), a French
holding company for an international group of insurance and related
financial services companies, is the Holding Company's largest
shareholder, owning approximately 58.5% at December 31, 1998 (53.4% if
all securities convertible into, and options on, common stock were to be
converted or exercised).
The Insurance segment offers a variety of traditional, variable and
interest-sensitive life insurance products, disability income, annuity
products, mutual fund and other investment products to individuals and
small groups. It also administers traditional participating group
annuity contracts with conversion features, generally for corporate
qualified pension plans, and association plans which provide full
service retirement programs for individuals affiliated with professional
and trade associations. This segment includes Separate Accounts for
individual insurance and annuity products.
The Investment Services segment includes Alliance, the results of DLJ
which are accounted for on an equity basis, and, through June 10, 1997,
Equitable Real Estate Investment Management, Inc. ("EREIM"), a real
estate investment management subsidiary which was sold. Alliance
provides diversified investment fund management services to a variety of
institutional clients, including pension funds, endowments, and foreign
financial institutions, as well as to individual investors, principally
through a broad line of mutual funds. This segment includes
institutional Separate Accounts which provide various investment options
for large group pension clients, primarily deferred benefit contribution
plans, through pooled or single group accounts. DLJ's businesses include
securities underwriting, sales and trading, merchant banking, financial
advisory services, investment research, venture capital, correspondent
brokerage services, online interactive brokerage services and asset
management. DLJ serves institutional, corporate, governmental and
individual clients both domestically and internationally. EREIM provided
real estate investment management services, property management
services, mortgage servicing and loan asset management, and agricultural
investment management.
2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements are prepared in
conformity with generally accepted accounting principles ("GAAP") which
require management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
The accompanying consolidated financial statements include the accounts
of Equitable Life and its wholly owned life insurance subsidiary
(collectively, the "Insurance Group"); non-insurance subsidiaries,
principally Alliance and EREIM (see Note 5); and those partnerships and
joint ventures in which Equitable Life or its subsidiaries has control
F-6
<PAGE>
and a majority economic interest (collectively, including its
consolidated subsidiaries, the "Company"). The Company's investment in
DLJ is reported on the equity basis of accounting. Closed Block assets,
liabilities and results of operations are presented in the consolidated
financial statements as single line items (see Note 7). Unless
specifically stated, all other footnote disclosures contained herein
exclude the Closed Block related amounts.
All significant intercompany transactions and balances except those with
the Closed Block and discontinued operations (see Note 8) have been
eliminated in consolidation. The years "1998," "1997" and "1996" refer
to the years ended December 31, 1998, 1997 and 1996, respectively.
Certain reclassifications have been made in the amounts presented for
prior periods to conform these periods with the 1998 presentation.
Closed Block
On July 22, 1992, Equitable Life established the Closed Block for the
benefit of certain individual participating policies which were in force
on that date. The assets allocated to the Closed Block, together with
anticipated revenues from policies included in the Closed Block, were
reasonably expected to be sufficient to support such business, including
provision for payment of claims, certain expenses and taxes, and for
continuation of dividend scales payable in 1991, assuming the experience
underlying such scales continues.
Assets allocated to the Closed Block inure solely to the benefit of the
Closed Block policyholders and will not revert to the benefit of the
Holding Company. No reallocation, transfer, borrowing or lending of
assets can be made between the Closed Block and other portions of
Equitable Life's General Account, any of its Separate Accounts or any
affiliate of Equitable Life without the approval of the New York
Superintendent of Insurance (the "Superintendent"). Closed Block assets
and liabilities are carried on the same basis as similar assets and
liabilities held in the General Account. The excess of Closed Block
liabilities over Closed Block assets represents the expected future
post-tax contribution from the Closed Block which would be recognized in
income over the period the policies and contracts in the Closed Block
remain in force.
Discontinued Operations
Discontinued operations include the Group Non-Participating Wind-Up
Annuities ("Wind-Up Annuities") and the Guaranteed Interest Contract
("GIC") lines of business. An allowance was established for the premium
deficiency reserve for Wind-Up Annuities and estimated future losses of
the GIC line of business. Management reviews the adequacy of the
allowance each quarter and believes the allowance for future losses at
December 31, 1998 is adequate to provide for all future losses; however,
the quarterly allowance review continues to involve numerous estimates
and subjective judgments regarding the expected performance of
Discontinued Operations Investment Assets. There can be no assurance the
losses provided for will not differ from the losses ultimately realized.
To the extent actual results or future projections of the discontinued
operations differ from management's current best estimates and
assumptions underlying the allowance for future losses, the difference
would be reflected in the consolidated statements of earnings in
discontinued operations. In particular, to the extent income, sales
proceeds and holding periods for equity real estate differ from
management's previous assumptions, periodic adjustments to the allowance
are likely to result (see Note 8).
Accounting Changes
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 131,
"Disclosures about Segments of an Enterprise and Related Information".
SFAS No. 131 establishes standards for public companies to report
information about operating segments in annual and interim financial
statements issued to shareholders. It also specifies related disclosure
requirements for products and services, geographic areas and major
customers. Generally, financial information must be reported using the
basis management uses to make operating decisions and to evaluate
business performance. The Company implemented SFAS No. 131 effective
December 31, 1998 and continues to identify two operating segments to
reflect its major businesses: Insurance and Investment Services. While
the segment descriptions are the same as those previously reported,
certain amounts have been reattributed between the two reportable
segments. Prior period comparative segment information has been
restated.
F-7
<PAGE>
In March 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") 98-1, "Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use,"
which requires capitalization of external and certain internal costs
incurred to obtain or develop internal-use computer software during the
application development stage. The Company applied the provisions of SOP
98-1 prospectively effective January 1, 1998. The adoption of SOP 98-1
did not have a material impact on the Company's consolidated financial
statements. Capitalized internal-use software is amortized on a
straight-line basis over the estimated useful life of the software.
The Company implemented SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," as of
January 1, 1996. SFAS No. 121 requires long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or
changes in circumstances indicate the carrying value of such assets may
not be recoverable. Effective with SFAS No. 121's adoption, impaired
real estate is written down to fair value with the impairment loss being
included in investment gains (losses), net. Before implementing SFAS No.
121, valuation allowances on real estate held for the production of
income were computed using the forecasted cash flows of the respective
properties discounted at a rate equal to the Company's cost of funds.
Adoption of the statement resulted in the release of valuation
allowances of $152.4 million and recognition of impairment losses of
$144.0 million on real estate held for production of income. Real estate
which management intends to sell or abandon is classified as real estate
held for sale. Valuation allowances on real estate held for sale
continue to be computed using the lower of depreciated cost or estimated
fair value, net of disposition costs. Initial adoption of the impairment
requirements of SFAS No. 121 to other assets to be disposed of resulted
in a charge for the cumulative effect of an accounting change of $23.1
million, net of a Federal income tax benefit of $12.4 million, due to
the writedown to fair value of building improvements relating to
facilities vacated in 1996.
New Accounting Pronouncements
In October 1998, the FASB issued SFAS No. 134, "Accounting for
Mortgage-Backed Securities Retained after the Securitization of Mortgage
Loans Held for Sale by a Mortgage Banking Enterprise," which amends
existing accounting and reporting standards for certain activities of
mortgage banking enterprises and other enterprises that conduct
operations that are substantially similar to the primary operations of a
mortgage banking enterprise. This statement is effective for the first
fiscal quarter beginning after December 15, 1998. This statement is not
expected to have a material impact on the Company's consolidated
financial statements.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes accounting and
reporting standards for derivative instruments, including certain
derivatives embedded in other contracts, and for hedging activities. It
requires all derivatives to be recognized on the balance sheet at fair
value. The accounting for changes in the fair value of a derivative
depends on its intended use. Derivatives not used in hedging activities
must be adjusted to fair value through earnings. Changes in the fair
value of derivatives used in hedging activities will, depending on the
nature of the hedge, either be offset in earnings against the change in
fair value of the hedged item attributable to the risk being hedged or
recognized in other comprehensive income until the hedged item affects
earnings. For all hedging activities, the ineffective portion of a
derivative's change in fair value will be immediately recognized in
earnings.
SFAS No. 133 requires adoption in fiscal years beginning after June 15,
1999 and permits early adoption as of the beginning of any fiscal
quarter following issuance of the statement. Retroactive application to
financial statements of prior periods is prohibited. The Company expects
to adopt SFAS No. 133 effective January 1, 2000. Adjustments resulting
from initial adoption of the new requirements will be reported in a
manner similar to the cumulative effect of a change in accounting
principle and will be reflected in net income or accumulated other
comprehensive income based upon existing hedging relationships, if any.
Management currently is assessing the impact of adoption. However,
Alliance's adoption is not expected to have a significant impact on the
Company's consolidated balance sheet or statement of earnings. Also,
since most of DLJ's derivatives are carried at fair values, the
Company's consolidated earnings and financial position are not expected
to be significantly affected by DLJ's adoption of the new requirements.
F-8
<PAGE>
In late 1998, the AICPA issued SOP 98-7, "Deposit Accounting: Accounting
for Insurance and Reinsurance Contracts that Do Not Transfer Insurance
Risk". This SOP, effective for fiscal years beginning after June 15,
1999, provides guidance to both the insured and insurer on how to apply
the deposit method of accounting when it is required for insurance and
reinsurance contracts that do not transfer insurance risk. The SOP does
not address or change the requirements as to when deposit accounting
should be applied. SOP 98-7 applies to all entities and all insurance
and reinsurance contracts that do not transfer insurance risk except for
long-duration life and health insurance contracts. This SOP is not
expected to have a material impact on the Company's consolidated
financial statements.
In December 1997, the AICPA issued SOP 97-3, "Accounting by Insurance
and Other Enterprises for Insurance-Related Assessments". SOP 97-3
provides guidance for assessments related to insurance activities and
requirements for disclosure of certain information. SOP 97-3 is
effective for financial statements issued for periods beginning after
December 31, 1998. Restatement of previously issued financial statements
is not required. SOP 97-3 is not expected to have a material impact on
the Company's consolidated financial statements.
Valuation of Investments
Fixed maturities identified as available for sale are reported at
estimated fair value. Fixed maturities, which the Company has both the
ability and the intent to hold to maturity, are stated principally at
amortized cost. The amortized cost of fixed maturities is adjusted for
impairments in value deemed to be other than temporary.
Valuation allowances are netted against the asset categories to which
they apply.
Mortgage loans on real estate are stated at unpaid principal balances,
net of unamortized discounts and valuation allowances. Valuation
allowances are based on the present value of expected future cash flows
discounted at the loan's original effective interest rate or the
collateral value if the loan is collateral dependent. However, if
foreclosure is or becomes probable, the measurement method used is
collateral value.
Real estate, including real estate acquired in satisfaction of debt, is
stated at depreciated cost less valuation allowances. At the date of
foreclosure (including in-substance foreclosure), real estate acquired
in satisfaction of debt is valued at estimated fair value. Impaired real
estate is written down to fair value with the impairment loss being
included in investment gains (losses), net. Valuation allowances on real
estate held for sale are computed using the lower of depreciated cost or
current estimated fair value, net of disposition costs. Depreciation is
discontinued on real estate held for sale. Prior to the adoption of SFAS
No. 121, valuation allowances on real estate held for production of
income were computed using the forecasted cash flows of the respective
properties discounted at a rate equal to the Company's cost of funds.
Policy loans are stated at unpaid principal balances.
Partnerships and joint venture interests in which the Company does not
have control or a majority economic interest are reported on the equity
basis of accounting and are included either with equity real estate or
other equity investments, as appropriate.
Common stocks are carried at estimated fair value and are included in
other equity investments.
Short-term investments are stated at amortized cost which approximates
fair value and are included with other invested assets.
F-9
<PAGE>
Cash and cash equivalents includes cash on hand, amounts due from banks
and highly liquid debt instruments purchased with an original maturity
of three months or less.
All securities are recorded in the consolidated financial statements on
a trade date basis.
Net Investment Income, Investment Gains, Net and Unrealized Investment
Gains (Losses)
Net investment income and realized investment gains (losses)
(collectively, "investment results") related to certain participating
group annuity contracts which are passed through to the contractholders
are reflected as interest credited to policyholders' account balances.
Realized investment gains (losses) are determined by specific
identification and are presented as a component of revenue. Changes in
valuation allowances are included in investment gains (losses).
Unrealized investment gains and losses on equity securities and fixed
maturities available for sale held by the Company are accounted for as a
separate component of accumulated comprehensive income, net of related
deferred Federal income taxes, amounts attributable to discontinued
operations, participating group annuity contracts and deferred policy
acquisition costs ("DAC") related to universal life and investment-type
products and participating traditional life contracts.
Recognition of Insurance Income and Related Expenses
Premiums from universal life and investment-type contracts are reported
as deposits to policyholders' account balances. Revenues from these
contracts consist of amounts assessed during the period against
policyholders' account balances for mortality charges, policy
administration charges and surrender charges. Policy benefits and claims
that are charged to expense include benefit claims incurred in the
period in excess of related policyholders' account balances.
Premiums from participating and non-participating traditional life and
annuity policies with life contingencies generally are recognized as
income when due. Benefits and expenses are matched with such income so
as to result in the recognition of profits over the life of the
contracts. This match is accomplished by means of the provision for
liabilities for future policy benefits and the deferral and subsequent
amortization of policy acquisition costs.
For contracts with a single premium or a limited number of premium
payments due over a significantly shorter period than the total period
over which benefits are provided, premiums are recorded as income when
due with any excess profit deferred and recognized in income in a
constant relationship to insurance in force or, for annuities, the
amount of expected future benefit payments.
Premiums from individual health contracts are recognized as income over
the period to which the premiums relate in proportion to the amount of
insurance protection provided.
Deferred Policy Acquisition Costs
The costs of acquiring new business, principally commissions,
underwriting, agency and policy issue expenses, all of which vary with
and are primarily related to the production of new business, are
deferred. DAC is subject to recoverability testing at the time of policy
issue and loss recognition testing at the end of each accounting period.
For universal life products and investment-type products, DAC is
amortized over the expected total life of the contract group (periods
ranging from 25 to 35 years and 5 to 17 years, respectively) as a
constant percentage of estimated gross profits arising principally from
investment results, mortality and expense margins and surrender charges
based on historical and anticipated future experience, updated at the
end of each accounting period. The effect on the amortization of DAC of
revisions to estimated gross profits is reflected in earnings in the
period such estimated gross profits are revised. The effect on the DAC
asset that would result from realization of unrealized gains (losses) is
recognized with an offset to accumulated other comprehensive income in
consolidated shareholder's equity as of the balance sheet date.
F-10
<PAGE>
For participating traditional life policies (substantially all of which
are in the Closed Block), DAC is amortized over the expected total life
of the contract group (40 years) as a constant percentage based on the
present value of the estimated gross margin amounts expected to be
realized over the life of the contracts using the expected investment
yield. At December 31, 1998, the expected investment yield, excluding
policy loans, generally ranged from 7.29% grading to 6.5% over a 20 year
period. Estimated gross margin includes anticipated premiums and
investment results less claims and administrative expenses, changes in
the net level premium reserve and expected annual policyholder
dividends. The effect on the amortization of DAC of revisions to
estimated gross margins is reflected in earnings in the period such
estimated gross margins are revised. The effect on the DAC asset that
would result from realization of unrealized gains (losses) is recognized
with an offset to accumulated comprehensive income in consolidated
shareholder's equity as of the balance sheet date.
For non-participating traditional life and annuity policies with life
contingencies, DAC is amortized in proportion to anticipated premiums.
Assumptions as to anticipated premiums are estimated at the date of
policy issue and are consistently applied during the life of the
contracts. Deviations from estimated experience are reflected in
earnings in the period such deviations occur. For these contracts, the
amortization periods generally are for the total life of the policy.
For individual health benefit insurance, DAC is amortized over the
expected average life of the contracts (10 years for major medical
policies and 20 years for disability income ("DI") products) in
proportion to anticipated premium revenue at time of issue.
Policyholders' Account Balances and Future Policy Benefits
Policyholders' account balances for universal life and investment-type
contracts are equal to the policy account values. The policy account
values represents an accumulation of gross premium payments plus
credited interest less expense and mortality charges and withdrawals.
For participating traditional life policies, future policy benefit
liabilities are calculated using a net level premium method on the basis
of actuarial assumptions equal to guaranteed mortality and dividend fund
interest rates. The liability for annual dividends represents the
accrual of annual dividends earned. Terminal dividends are accrued in
proportion to gross margins over the life of the contract.
For non-participating traditional life insurance policies, future policy
benefit liabilities are estimated using a net level premium method on
the basis of actuarial assumptions as to mortality, persistency and
interest established at policy issue. Assumptions established at policy
issue as to mortality and persistency are based on the Insurance Group's
experience which, together with interest and expense assumptions,
includes a margin for adverse deviation. When the liabilities for future
policy benefits plus the present value of expected future gross premiums
for a product are insufficient to provide for expected future policy
benefits and expenses for that product, DAC is written off and
thereafter, if required, a premium deficiency reserve is established by
a charge to earnings. Benefit liabilities for traditional annuities
during the accumulation period are equal to accumulated contractholders'
fund balances and after annuitization are equal to the present value of
expected future payments. Interest rates used in establishing such
liabilities range from 2.25% to 11.5% for life insurance liabilities and
from 2.25% to 13.5% for annuity liabilities.
During the fourth quarter of 1996 a loss recognition study of
participating group annuity contracts and conversion annuities ("Pension
Par") was completed which included management's revised estimate of
assumptions, such as expected mortality and future investment returns.
The study's results prompted management to establish a premium
deficiency reserve which decreased earnings from continuing operations
and net earnings by $47.5 million ($73.0 million pre-tax).
Individual health benefit liabilities for active lives are estimated
using the net level premium method and assumptions as to future
morbidity, withdrawals and interest. Benefit liabilities for disabled
lives are estimated using the present value of benefits method and
experience assumptions as to claim terminations, expenses and interest.
F-11
<PAGE>
During the fourth quarter of 1996, the Company completed a loss
recognition study of the DI business which incorporated management's
revised estimates of future experience with regard to morbidity,
investment returns, claims and administration expenses and other
factors. The study indicated DAC was not recoverable and the reserves
were not sufficient. Earnings from continuing operations and net
earnings decreased by $208.0 million ($320.0 million pre-tax) as a
result of strengthening DI reserves by $175.0 million and writing off
unamortized DAC of $145.0 million related to DI products issued prior to
July 1993. The determination of DI reserves requires making assumptions
and estimates relating to a variety of factors, including morbidity and
interest rates, claims experience and lapse rates based on then known
facts and circumstances. Such factors as claim incidence and termination
rates can be affected by changes in the economic, legal and regulatory
environments and work ethic. While management believes its Pension Par
and DI reserves have been calculated on a reasonable basis and are
adequate, there can be no assurance reserves will be sufficient to
provide for future liabilities.
Claim reserves and associated liabilities for individual DI and major
medical policies were $938.6 million and $886.7 million at December 31,
1998 and 1997, respectively. Incurred benefits (benefits paid plus
changes in claim reserves) and benefits paid for individual DI and major
medical policies (excluding reserve strengthening in 1996) are
summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
Incurred benefits related to current year.......... $ 202.1 $ 190.2 $ 189.0
Incurred benefits related to prior years........... 22.2 2.1 69.1
----------------- ---------------- -----------------
Total Incurred Benefits............................ $ 224.3 $ 192.3 $ 258.1
================= ================ =================
Benefits paid related to current year.............. $ 17.0 $ 28.8 $ 32.6
Benefits paid related to prior years............... 155.4 146.2 153.3
----------------- ---------------- -----------------
Total Benefits Paid................................ $ 172.4 $ 175.0 $ 185.9
================= ================ =================
</TABLE>
Policyholders' Dividends
The amount of policyholders' dividends to be paid (including those on
policies included in the Closed Block) is determined annually by
Equitable Life's board of directors. The aggregate amount of
policyholders' dividends is related to actual interest, mortality,
morbidity and expense experience for the year and judgment as to the
appropriate level of statutory surplus to be retained by Equitable Life.
At December 31, 1998, participating policies, including those in the
Closed Block, represent approximately 19.9% ($49.3 billion) of directly
written life insurance in force, net of amounts ceded.
Federal Income Taxes
The Company files a consolidated Federal income tax return with the
Holding Company and its consolidated subsidiaries. Current Federal
income taxes are charged or credited to operations based upon amounts
estimated to be payable or recoverable as a result of taxable operations
for the current year. Deferred income tax assets and liabilities are
recognized based on the difference between financial statement carrying
amounts and income tax bases of assets and liabilities using enacted
income tax rates and laws.
Separate Accounts
Separate Accounts are established in conformity with the New York State
Insurance Law and generally are not chargeable with liabilities that
arise from any other business of the Insurance Group. Separate Accounts
assets are subject to General Account claims only to the extent the
value of such assets exceeds Separate Accounts liabilities.
F-12
<PAGE>
Assets and liabilities of the Separate Accounts, representing net
deposits and accumulated net investment earnings less fees, held
primarily for the benefit of contractholders, and for which the
Insurance Group does not bear the investment risk, are shown as separate
captions in the consolidated balance sheets. The Insurance Group bears
the investment risk on assets held in one Separate Account; therefore,
such assets are carried on the same basis as similar assets held in the
General Account portfolio. Assets held in the other Separate Accounts
are carried at quoted market values or, where quoted values are not
available, at estimated fair values as determined by the Insurance
Group.
The investment results of Separate Accounts on which the Insurance Group
does not bear the investment risk are reflected directly in Separate
Accounts liabilities. For 1998, 1997 and 1996, investment results of
such Separate Accounts were $4,591.0 million, $3,411.1 million and
$2,970.6 million, respectively.
Deposits to Separate Accounts are reported as increases in Separate
Accounts liabilities and are not reported in revenues. Mortality, policy
administration and surrender charges on all Separate Accounts are
included in revenues.
Employee Stock Option Plan
The Company accounts for stock option plans sponsored by the Holding
Company, DLJ and Alliance in accordance with the provisions of
Accounting Principles Board Opinion ("APB") No. 25, "Accounting for
Stock Issued to Employees," and related interpretations. In accordance
with the Statement, compensation expense is recorded on the date of
grant only if the current market price of the underlying stock exceeds
the option price. See Note 22 for the pro forma disclosures for the
Holding Company, DLJ and Alliance required by SFAS No. 123, "Accounting
for Stock-Based Compensation".
F-13
<PAGE>
3) INVESTMENTS
The following tables provide additional information relating to fixed
maturities and equity securities:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
----------------- ----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C> <C>
December 31, 1998
Fixed Maturities:
Available for Sale:
Corporate.......................... $ 14,520.8 $ 793.6 $ 379.6 $ 14,934.8
Mortgage-backed.................... 1,807.9 23.3 .9 1,830.3
U.S. Treasury securities and
U.S. government and
agency securities................ 1,464.1 107.6 .7 1,571.0
States and political subdivisions.. 55.0 9.9 - 64.9
Foreign governments................ 363.3 20.9 30.0 354.2
Redeemable preferred stock......... 242.7 7.0 11.2 238.5
----------------- ----------------- ---------------- -----------------
Total Available for Sale............... $ 18,453.8 $ 962.3 $ 422.4 $ 18,993.7
================= ================= ================ =================
Held to Maturity: Corporate......... $ 125.0 $ - $ - $ 125.0
================= ================= ================ =================
Equity Securities:
Common stock......................... $ 58.3 $ 114.9 $ 22.5 $ 150.7
================= ================= ================ =================
December 31, 1997
Fixed Maturities:
Available for Sale:
Corporate.......................... $ 14,850.5 $ 785.0 $ 74.5 $ 15,561.0
Mortgage-backed.................... 1,702.8 23.5 1.3 1,725.0
U.S. Treasury securities and
U.S. government and
agency securities................ 1,583.2 83.9 .6 1,666.5
States and political subdivisions.. 52.8 6.8 .1 59.5
Foreign governments................ 442.4 44.8 2.0 485.2
Redeemable preferred stock......... 128.0 6.7 1.0 133.7
----------------- ----------------- ---------------- -----------------
Total Available for Sale............... $ 18,759.7 $ 950.7 $ 79.5 $ 19,630.9
================= ================= ================ =================
Equity Securities:
Common stock......................... $ 408.4 $ 48.7 $ 15.0 $ 442.1
================= ================= ================ =================
</TABLE>
For publicly traded fixed maturities and equity securities, estimated
fair value is determined using quoted market prices. For fixed
maturities without a readily ascertainable market value, the Company
determines an estimated fair value using a discounted cash flow
approach, including provisions for credit risk, generally based on the
assumption such securities will be held to maturity. Estimated fair
values for equity securities, substantially all of which do not have a
readily ascertainable market value, have been determined by the Company.
Such estimated fair values do not necessarily represent the values for
which these securities could have been sold at the dates of the
consolidated balance sheets. At December 31, 1998 and 1997, securities
without a readily ascertainable market value having an amortized cost of
$3,539.9 million and $3,759.2 million, respectively, had estimated fair
values of $3,748.5 million and $3,903.9 million, respectively.
F-14
<PAGE>
The contractual maturity of bonds at December 31, 1998 is shown below:
<TABLE>
<CAPTION>
Available for Sale
------------------------------------
Amortized Estimated
Cost Fair Value
---------------- -----------------
(In Millions)
<S> <C> <C>
Due in one year or less................................................ $ 324.8 $ 323.4
Due in years two through five.......................................... 3,778.2 3,787.9
Due in years six through ten........................................... 6,543.4 6,594.1
Due after ten years.................................................... 5,756.8 6,219.5
Mortgage-backed securities............................................. 1,807.9 1,830.3
---------------- -----------------
Total.................................................................. $ 18,211.1 $ 18,755.2
================ =================
</TABLE>
Corporate bonds held to maturity with an amortized cost and estimated
fair value of $125.0 million are due in one year or less.
Bonds not due at a single maturity date have been included in the above
table in the year of final maturity. Actual maturities will differ from
contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
The Insurance Group's fixed maturity investment portfolio includes
corporate high yield securities consisting of public high yield bonds,
redeemable preferred stocks and directly negotiated debt in leveraged
buyout transactions. The Insurance Group seeks to minimize the higher
than normal credit risks associated with such securities by monitoring
concentrations in any single issuer or a particular industry group.
Certain of these corporate high yield securities are classified as other
than investment grade by the various rating agencies, i.e., a rating
below Baa or National Association of Insurance Commissioners ("NAIC")
designation of 3 (medium grade), 4 or 5 (below investment grade) or 6
(in or near default). At December 31, 1998, approximately 15.1% of the
$18,336.1 million aggregate amortized cost of bonds held by the Company
was considered to be other than investment grade.
In addition, the Insurance Group is an equity investor in limited
partnership interests which primarily invest in securities considered to
be other than investment grade.
Fixed maturity investments with restructured or modified terms are not
material.
Investment valuation allowances and changes thereto are shown below:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
Balances, beginning of year........................ $ 384.5 $ 137.1 $ 325.3
SFAS No. 121 release............................... - - (152.4)
Additions charged to income........................ 86.2 334.6 125.0
Deductions for writedowns and
asset dispositions............................... (240.1) (87.2) (160.8)
----------------- ---------------- -----------------
Balances, End of Year.............................. $ 230.6 $ 384.5 $ 137.1
================= ================ =================
Balances, end of year comprise:
Mortgage loans on real estate.................... $ 34.3 $ 55.8 $ 50.4
Equity real estate............................... 196.3 328.7 86.7
----------------- ---------------- -----------------
Total.............................................. $ 230.6 $ 384.5 $ 137.1
================= ================ =================
</TABLE>
F-15
<PAGE>
At December 31, 1998, the carrying value of fixed maturities which are
non-income producing for the twelve months preceding the consolidated
balance sheet date was $60.8 million.
At December 31, 1998 and 1997, mortgage loans on real estate with
scheduled payments 60 days (90 days for agricultural mortgages) or more
past due or in foreclosure (collectively, "problem mortgage loans on
real estate") had an amortized cost of $7.0 million (0.2% of total
mortgage loans on real estate) and $23.4 million (0.9% of total mortgage
loans on real estate), respectively.
The payment terms of mortgage loans on real estate may from time to time
be restructured or modified. The investment in restructured mortgage
loans on real estate, based on amortized cost, amounted to $115.1
million and $183.4 million at December 31, 1998 and 1997, respectively.
Gross interest income on restructured mortgage loans on real estate that
would have been recorded in accordance with the original terms of such
loans amounted to $10.3 million, $17.2 million and $35.5 million in
1998, 1997 and 1996, respectively. Gross interest income on these loans
included in net investment income aggregated $8.3 million, $12.7 million
and $28.2 million in 1998, 1997 and 1996, respectively.
Impaired mortgage loans (as defined under SFAS No. 114) along with the
related provision for losses were as follows:
<TABLE>
<CAPTION>
December 31,
----------------------------------------
1998 1997
------------------- -------------------
(In Millions)
<S> <C> <C>
Impaired mortgage loans with provision for losses.................. $ 125.4 $ 196.7
Impaired mortgage loans without provision for losses............... 8.6 3.6
------------------- -------------------
Recorded investment in impaired mortgage loans..................... 134.0 200.3
Provision for losses............................................... (29.0) (51.8)
------------------- -------------------
Net Impaired Mortgage Loans........................................ $ 105.0 $ 148.5
=================== ===================
</TABLE>
Impaired mortgage loans without provision for losses are loans where the
fair value of the collateral or the net present value of the expected
future cash flows related to the loan equals or exceeds the recorded
investment. Interest income earned on loans where the collateral value
is used to measure impairment is recorded on a cash basis. Interest
income on loans where the present value method is used to measure
impairment is accrued on the net carrying value amount of the loan at
the interest rate used to discount the cash flows. Changes in the
present value attributable to changes in the amount or timing of
expected cash flows are reported as investment gains or losses.
During 1998, 1997 and 1996, respectively, the Company's average recorded
investment in impaired mortgage loans was $161.3 million, $246.9 million
and $552.1 million. Interest income recognized on these impaired
mortgage loans totaled $12.3 million, $15.2 million and $38.8 million
($.9 million, $2.3 million and $17.9 million recognized on a cash basis)
for 1998, 1997 and 1996, respectively.
The Insurance Group's investment in equity real estate is through direct
ownership and through investments in real estate joint ventures. At
December 31, 1998 and 1997, the carrying value of equity real estate
held for sale amounted to $836.2 million and $1,023.5 million,
respectively. For 1998, 1997 and 1996, respectively, real estate of $7.1
million, $152.0 million and $58.7 million was acquired in satisfaction
of debt. At December 31, 1998 and 1997, the Company owned $552.3 million
and $693.3 million, respectively, of real estate acquired in
satisfaction of debt.
Depreciation of real estate held for production of income is computed
using the straight-line method over the estimated useful lives of the
properties, which generally range from 40 to 50 years. Accumulated
depreciation on real estate was $374.8 million and $541.1 million at
December 31, 1998 and 1997, respectively. Depreciation expense on real
estate totaled $30.5 million, $74.9 million and $91.8 million for 1998,
1997 and 1996, respectively.
F-16
<PAGE>
4) JOINT VENTURES AND PARTNERSHIPS
Summarized combined financial information for real estate joint ventures
(25 and 29 individual ventures as of December 31, 1998 and 1997,
respectively) and for limited partnership interests accounted for under
the equity method, in which the Company has an investment of $10.0
million or greater and an equity interest of 10% or greater, is as
follows:
<TABLE>
<CAPTION>
December 31,
------------------------------------
1998 1997
---------------- -----------------
(In Millions)
<S> <C> <C>
BALANCE SHEETS
Investments in real estate, at depreciated cost........................ $ 913.7 $ 1,700.9
Investments in securities, generally at estimated fair value........... 636.9 1,374.8
Cash and cash equivalents.............................................. 85.9 105.4
Other assets........................................................... 279.8 584.9
---------------- -----------------
Total Assets........................................................... $ 1,916.3 $ 3,766.0
================ =================
Borrowed funds - third party........................................... $ 367.1 $ 493.4
Borrowed funds - the Company........................................... 30.1 31.2
Other liabilities...................................................... 197.2 284.0
---------------- -----------------
Total liabilities...................................................... 594.4 808.6
---------------- -----------------
Partners' capital...................................................... 1,321.9 2,957.4
---------------- -----------------
Total Liabilities and Partners' Capital................................ $ 1,916.3 $ 3,766.0
================ =================
Equity in partners' capital included above............................. $ 312.9 $ 568.5
Equity in limited partnership interests not included above............. 442.1 331.8
Other.................................................................. .7 4.3
---------------- -----------------
Carrying Value......................................................... $ 755.7 $ 904.6
================ =================
</TABLE>
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
STATEMENTS OF EARNINGS
Revenues of real estate joint ventures............. $ 246.1 $ 310.5 $ 348.9
Revenues of other limited partnership interests.... 128.9 506.3 386.1
Interest expense - third party..................... (33.3) (91.8) (111.0)
Interest expense - the Company..................... (2.6) (7.2) (30.0)
Other expenses..................................... (197.0) (263.6) (282.5)
----------------- ---------------- -----------------
Net Earnings....................................... $ 142.1 $ 454.2 $ 311.5
================= ================ =================
Equity in net earnings included above.............. $ 59.6 $ 76.7 $ 73.9
Equity in net earnings of limited partnership
interests not included above..................... 22.7 69.5 35.8
Other.............................................. - (.9) .9
----------------- ---------------- -----------------
Total Equity in Net Earnings....................... $ 82.3 $ 145.3 $ 110.6
================= ================ =================
</TABLE>
F-17
<PAGE>
5) NET INVESTMENT INCOME AND INVESTMENT GAINS (LOSSES)
The sources of net investment income are summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
Fixed maturities................................... $ 1,489.0 $ 1,459.4 $ 1,307.4
Mortgage loans on real estate...................... 235.4 260.8 303.0
Equity real estate................................. 356.1 390.4 442.4
Other equity investments........................... 83.8 156.9 122.0
Policy loans....................................... 144.9 177.0 160.3
Other investment income............................ 185.7 181.7 217.4
----------------- ---------------- -----------------
Gross investment income.......................... 2,494.9 2,626.2 2,552.5
Investment expenses.............................. (266.8) (343.4) (348.9)
----------------- ---------------- -----------------
Net Investment Income.............................. $ 2,228.1 $ 2,282.8 $ 2,203.6
================= ================ =================
</TABLE>
Investment gains (losses), net, including changes in the valuation
allowances, are summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
Fixed maturities................................... $ (24.3) $ 88.1 $ 60.5
Mortgage loans on real estate...................... (10.9) (11.2) (27.3)
Equity real estate................................. 74.5 (391.3) (79.7)
Other equity investments........................... 29.9 14.1 18.9
Sale of subsidiaries............................... (2.6) 252.1 -
Issuance and sales of Alliance Units............... 19.8 - 20.6
Issuance and sale of DLJ common stock.............. 18.2 3.0 -
Other.............................................. (4.4) - (2.8)
----------------- ---------------- -----------------
Investment Gains (Losses), Net..................... $ 100.2 $ (45.2) $ (9.8)
================= ================ =================
</TABLE>
Writedowns of fixed maturities amounted to $101.6 million, $11.7 million
and $29.9 million for 1998, 1997 and 1996, respectively, and writedowns
of equity real estate subsequent to the adoption of SFAS No. 121
amounted to $136.4 million for 1997. In the fourth quarter of 1997, the
Company reclassified $1,095.4 million depreciated cost of equity real
estate from real estate held for the production of income to real estate
held for sale. Additions to valuation allowances of $227.6 million were
recorded upon these transfers. Additionally, in fourth quarter 1997,
$132.3 million of writedowns on real estate held for production of
income were recorded.
For 1998, 1997 and 1996, respectively, proceeds received on sales of
fixed maturities classified as available for sale amounted to $15,961.0
million, $9,789.7 million and $8,353.5 million. Gross gains of $149.3
million, $166.0 million and $154.2 million and gross losses of $95.1
million, $108.8 million and $92.7 million, respectively, were realized
on these sales. The change in unrealized investment gains (losses)
related to fixed maturities classified as available for sale for 1998,
1997 and 1996 amounted to $(331.7) million, $513.4 million and $(258.0)
million, respectively.
For 1998, 1997 and 1996, investment results passed through to certain
participating group annuity contracts as interest credited to
policyholders' account balances amounted to $136.9 million, $137.5
million and $136.7 million, respectively.
F-18
<PAGE>
On June 10, 1997, Equitable Life sold EREIM (other than its interest in
Column Financial, Inc.) ("ERE") to Lend Lease Corporation Limited ("Lend
Lease"), a publicly traded, international property and financial
services company based in Sydney, Australia. The total purchase price
was $400.0 million and consisted of $300.0 million in cash and a $100.0
million note which was paid in 1998. The Company recognized an
investment gain of $162.4 million, net of Federal income tax of $87.4
million as a result of this transaction. Equitable Life entered into
long-term advisory agreements whereby ERE continues to provide
substantially the same services to Equitable Life's General Account and
Separate Accounts, for substantially the same fees, as provided prior to
the sale.
Through June 10, 1997 and for the year ended December 31, 1996,
respectively, the businesses sold reported combined revenues of $91.6
million and $226.1 million and combined net earnings of $10.7 million
and $30.7 million.
In 1996, Alliance acquired the business of Cursitor Holdings L.P. and
Cursitor Holdings Limited (collectively, "Cursitor") for approximately
$159.0 million. The purchase price consisted of $94.3 million in cash,
1.8 million of Alliance's publicly traded units ("Alliance Units"), 6%
notes aggregating $21.5 million payable ratably over four years, and
additional consideration to be determined at a later date but currently
estimated to not exceed $10.0 million. The excess of the purchase price,
including acquisition costs and minority interest, over the fair value
of Cursitor's net assets acquired resulted in the recognition of
intangible assets consisting of costs assigned to contracts acquired and
goodwill of approximately $122.8 million and $38.3 million,
respectively. The Company recognized an investment gain of $20.6 million
as a result of the issuance of Alliance Units in this transaction. On
June 30, 1997, Alliance reduced the recorded value of goodwill and
contracts associated with Alliance's acquisition of Cursitor by $120.9
million. This charge reflected Alliance's view that Cursitor's
continuing decline in assets under management and its reduced
profitability, resulting from relative investment underperformance, no
longer supported the carrying value of its investment. As a result, the
Company's earnings from continuing operations before cumulative effect
of accounting change for 1997 included a charge of $59.5 million, net of
a Federal income tax benefit of $10.0 million and minority interest of
$51.4 million. The remaining balance of intangible assets is being
amortized over its estimated useful life of 20 years. At December 31,
1998, the Company's ownership of Alliance Units was approximately 56.7%.
F-19
<PAGE>
Net unrealized investment gains (losses), included in the consolidated
balance sheets as a component of accumulated comprehensive income and
the changes for the corresponding years, are summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
Balance, beginning of year......................... $ 533.6 $ 189.9 $ 396.5
Changes in unrealized investment gains (losses).... (242.4) 543.3 (297.6)
Changes in unrealized investment losses
(gains) attributable to:
Participating group annuity contracts.......... (5.7) 53.2 -
DAC............................................ 13.2 (89.0) 42.3
Deferred Federal income taxes.................. 85.4 (163.8) 48.7
----------------- ---------------- -----------------
Balance, End of Year............................... $ 384.1 $ 533.6 $ 189.9
================= ================ =================
Balance, end of year comprises:
Unrealized investment gains on:
Fixed maturities............................... $ 539.9 $ 871.2 $ 357.8
Other equity investments....................... 92.4 33.7 31.6
Other, principally Closed Block................ 111.1 80.9 53.1
----------------- ---------------- -----------------
Total........................................ 743.4 985.8 442.5
Amounts of unrealized investment gains
attributable to:
Participating group annuity contracts........ (24.7) (19.0) (72.2)
DAC.......................................... (127.8) (141.0) (52.0)
Deferred Federal income taxes................ (206.8) (292.2) (128.4)
----------------- ---------------- -----------------
Total.............................................. $ 384.1 $ 533.6 $ 189.9
================= ================ =================
</TABLE>
6) ACCUMULATED OTHER COMPREHENSIVE INCOME
Accumulated other comprehensive income represents cumulative gains and
losses on items that are not reflected in earnings. The balances for the
years 1998, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
Unrealized gains on investments.................... $ 384.1 $ 533.6 $ 189.9
Minimum pension liability.......................... (28.3) (17.3) (12.9)
----------------- ---------------- -----------------
Total Accumulated Other
Comprehensive Income............................. $ 355.8 $ 516.3 $ 177.0
================= ================ =================
</TABLE>
F-20
<PAGE>
The components of other comprehensive income for the years 1998, 1997
and 1996 are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
Net unrealized gains (losses) on investment
securities:
Net unrealized gains (losses) arising during
the period..................................... $ (186.1) $ 564.0 $ (249.8)
Reclassification adjustment for (gains) losses
included in net earnings....................... (56.3) (20.7) (47.8)
----------------- ---------------- -----------------
Net unrealized gains (losses) on investment
securities....................................... (242.4) 543.3 (297.6)
Adjustments for policyholder liabilities,
DAC and deferred
Federal income taxes............................. 92.9 (199.6) 91.0
----------------- ---------------- -----------------
Change in unrealized gains (losses), net of
reclassification and adjustments................. (149.5) 343.7 (206.6)
Change in minimum pension liability................ (11.0) (4.4) 22.2
----------------- ---------------- -----------------
Total Other Comprehensive Income................... $ (160.5) $ 339.3 $ (184.4)
================= ================ =================
</TABLE>
7) CLOSED BLOCK
Summarized financial information for the Closed Block follows:
<TABLE>
<CAPTION>
December 31,
--------------------------------------
1998 1997
----------------- -----------------
(In Millions)
<S> <C> <C>
Assets
Fixed Maturities:
Available for sale, at estimated fair value (amortized cost,
$4,149.0 and $4,059.4)........................................... $ 4,373.2 $ 4,231.0
Mortgage loans on real estate........................................ 1,633.4 1,341.6
Policy loans......................................................... 1,641.2 1,700.2
Cash and other invested assets....................................... 86.5 282.0
DAC.................................................................. 676.5 775.2
Other assets......................................................... 221.6 236.6
----------------- -----------------
Total Assets......................................................... $ 8,632.4 $ 8,566.6
================= =================
Liabilities
Future policy benefits and policyholders' account balances........... $ 9,013.1 $ 8,993.2
Other liabilities.................................................... 63.9 80.5
----------------- -----------------
Total Liabilities.................................................... $ 9,077.0 $ 9,073.7
================= =================
</TABLE>
F-21
<PAGE>
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
Revenues
Premiums and other revenue......................... $ 661.7 $ 687.1 $ 724.8
Investment income (net of investment
expenses of $15.5, $27.0 and $27.3).............. 569.7 574.9 546.6
Investment losses, net............................. .5 (42.4) (5.5)
----------------- ---------------- -----------------
Total revenues............................... 1,231.9 1,219.6 1,265.9
----------------- ---------------- -----------------
Benefits and Other Deductions
Policyholders' benefits and dividends.............. 1,082.0 1,066.7 1,106.3
Other operating costs and expenses................. 62.8 50.4 34.6
----------------- ---------------- -----------------
Total benefits and other deductions.......... 1,144.8 1,117.1 1,140.9
----------------- ---------------- -----------------
Contribution from the Closed Block................. $ 87.1 $ 102.5 $ 125.0
================= ================ =================
</TABLE>
At December 31, 1998 and 1997, problem mortgage loans on real estate had
an amortized cost of $5.1 million and $8.1 million, respectively, and
mortgage loans on real estate for which the payment terms have been
restructured had an amortized cost of $26.0 million and $70.5 million,
respectively.
Impaired mortgage loans (as defined under SFAS No. 114) along with the
related provision for losses were as follows:
<TABLE>
<CAPTION>
December 31,
------------------------------------
1998 1997
---------------- -----------------
(In Millions)
<S> <C> <C>
Impaired mortgage loans with provision for losses...................... $ 55.5 $ 109.1
Impaired mortgage loans without provision for losses................... 7.6 .6
---------------- -----------------
Recorded investment in impaired mortgages.............................. 63.1 109.7
Provision for losses................................................... (10.1) (17.4)
---------------- -----------------
Net Impaired Mortgage Loans............................................ $ 53.0 $ 92.3
================ =================
</TABLE>
During 1998, 1997 and 1996, the Closed Block's average recorded
investment in impaired mortgage loans was $85.5 million, $110.2 million
and $153.8 million, respectively. Interest income recognized on these
impaired mortgage loans totaled $4.7 million, $9.4 million and $10.9
million ($1.5 million, $4.1 million and $4.7 million recognized on a
cash basis) for 1998, 1997 and 1996, respectively.
Valuation allowances amounted to $11.1 million and $18.5 million on
mortgage loans on real estate and $15.4 million and $16.8 million on
equity real estate at December 31, 1998 and 1997, respectively. As of
January 1, 1996, the adoption of SFAS No. 121 resulted in the
recognition of impairment losses of $5.6 million on real estate held for
production of income. Writedowns of fixed maturities amounted to $3.5
million and $12.8 million for 1997 and 1996, respectively. Writedowns of
equity real estate subsequent to the adoption of SFAS No. 121 amounted
to $28.8 million for 1997.
In the fourth quarter of 1997, $72.9 million depreciated cost of equity
real estate held for production of income was reclassified to equity
real estate held for sale. Additions to valuation allowances of $15.4
million were recorded upon these transfers. Additionally, in fourth
quarter 1997, $28.8 million of writedowns on real estate held for
production of income were recorded.
Many expenses related to Closed Block operations are charged to
operations outside of the Closed Block; accordingly, the contribution
from the Closed Block does not represent the actual profitability of the
Closed Block operations. Operating costs and expenses outside of the
Closed Block are, therefore, disproportionate to the business outside of
the Closed Block.
F-22
<PAGE>
8) DISCONTINUED OPERATIONS
Summarized financial information for discontinued operations follows:
<TABLE>
<CAPTION>
December 31,
--------------------------------------
1998 1997
----------------- -----------------
(In Millions)
<S> <C> <C>
Assets
Mortgage loans on real estate........................................ $ 553.9 $ 635.2
Equity real estate................................................... 611.0 874.5
Other equity investments............................................. 115.1 209.3
Other invested assets................................................ 24.9 152.4
----------------- -----------------
Total investments.................................................. 1,304.9 1,871.4
Cash and cash equivalents............................................ 34.7 106.8
Other assets......................................................... 219.0 243.8
----------------- -----------------
Total Assets......................................................... $ 1,558.6 $ 2,222.0
================= =================
Liabilities
Policyholders' liabilities........................................... $ 1,021.7 $ 1,048.3
Allowance for future losses.......................................... 305.1 259.2
Amounts due to continuing operations................................. 2.7 572.8
Other liabilities.................................................... 229.1 341.7
----------------- -----------------
Total Liabilities.................................................... $ 1,558.6 $ 2,222.0
================= =================
</TABLE>
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
Revenues
Investment income (net of investment
expenses of $63.3, $97.3 and $127.5)............. $ 160.4 $ 188.6 $ 245.4
Investment gains (losses), net..................... 35.7 (173.7) (18.9)
Policy fees, premiums and other income............. (4.3) .2 .2
----------------- ---------------- -----------------
Total revenues..................................... 191.8 15.1 226.7
Benefits and other deductions...................... 141.5 169.5 250.4
Earnings added (losses charged) to allowance
for future losses................................ 50.3 (154.4) (23.7)
----------------- ---------------- -----------------
Pre-tax loss from operations....................... - - -
Pre-tax earnings from releasing (loss from
strengthening) of the allowance for future
losses........................................... 4.2 (134.1) (129.0)
Federal income tax (expense) benefit............... (1.5) 46.9 45.2
----------------- ---------------- -----------------
Earnings (Loss) from Discontinued Operations....... $ 2.7 $ (87.2) $ (83.8)
================= ================ =================
</TABLE>
The Company's quarterly process for evaluating the allowance for future
losses applies the current period's results of the discontinued
operations against the allowance, re-estimates future losses and adjusts
the allowance, if appropriate. Additionally, as part of the Company's
annual planning process which takes place in the fourth quarter of each
year, investment and benefit cash flow projections are prepared. These
updated assumptions and estimates resulted in a release of allowance in
1998 and strengthening of allowance in 1997 and 1996.
F-23
<PAGE>
In the fourth quarter of 1997, $329.9 million depreciated cost of equity
real estate was reclassified from equity real estate held for production
of income to real estate held for sale. Additions to valuation
allowances of $79.8 million were recognized upon these transfers.
Additionally, in fourth quarter 1997, $92.5 million of writedowns on
real estate held for production of income were recognized.
Benefits and other deductions includes $26.6 million, $53.3 million and
$114.3 million of interest expense related to amounts borrowed from
continuing operations in 1998, 1997 and 1996, respectively.
Valuation allowances amounted to $3.0 million and $28.4 million on
mortgage loans on real estate and $34.8 million and $88.4 million on
equity real estate at December 31, 1998 and 1997, respectively. As of
January 1, 1996, the adoption of SFAS No. 121 resulted in a release of
existing valuation allowances of $71.9 million on equity real estate and
recognition of impairment losses of $69.8 million on real estate held
for production of income. Writedowns of equity real estate subsequent to
the adoption of SFAS No. 121 amounted to $95.7 million and $12.3 million
for 1997 and 1996, respectively.
At December 31, 1998 and 1997, problem mortgage loans on real estate had
amortized costs of $1.1 million and $11.0 million, respectively, and
mortgage loans on real estate for which the payment terms have been
restructured had amortized costs of $3.5 million and $109.4 million,
respectively.
Impaired mortgage loans (as defined under SFAS No. 114) along with the
related provision for losses were as follows:
<TABLE>
<CAPTION>
December 31,
------------------------------------
1998 1997
---------------- -----------------
(In Millions)
<S> <C> <C>
Impaired mortgage loans with provision for losses...................... $ 6.7 $ 101.8
Impaired mortgage loans without provision for losses................... 8.5 .2
---------------- -----------------
Recorded investment in impaired mortgages.............................. 15.2 102.0
Provision for losses................................................... (2.1) (27.3)
---------------- -----------------
Net Impaired Mortgage Loans............................................ $ 13.1 $ 74.7
================ =================
</TABLE>
During 1998, 1997 and 1996, the discontinued operations' average
recorded investment in impaired mortgage loans was $73.3 million, $89.2
million and $134.8 million, respectively. Interest income recognized on
these impaired mortgage loans totaled $4.7 million, $6.6 million and
$10.1 million ($3.4 million, $5.3 million and $7.5 million recognized on
a cash basis) for 1998, 1997 and 1996, respectively.
At December 31, 1998 and 1997, discontinued operations had carrying
values of $50.0 million and $156.2 million, respectively, of real estate
acquired in satisfaction of debt.
F-24
<PAGE>
9) SHORT-TERM AND LONG-TERM DEBT
Short-term and long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31,
--------------------------------------
1998 1997
----------------- -----------------
(In Millions)
<S> <C> <C>
Short-term debt...................................................... $ 179.3 $ 422.2
----------------- -----------------
Long-term debt:
Equitable Life:
6.95% surplus notes scheduled to mature 2005....................... 399.4 399.4
7.70% surplus notes scheduled to mature 2015....................... 199.7 199.7
Other.............................................................. .3 .3
----------------- -----------------
Total Equitable Life........................................... 599.4 599.4
----------------- -----------------
Wholly Owned and Joint Venture Real Estate:
Mortgage notes, 5.91% - 12.00%, due through 2017................... 392.2 676.6
----------------- -----------------
Alliance:
Other.............................................................. 10.8 18.5
----------------- -----------------
Total long-term debt................................................. 1,002.4 1,294.5
----------------- -----------------
Total Short-term and Long-term Debt.................................. $ 1,181.7 $ 1,716.7
================= =================
</TABLE>
Short-term Debt
Equitable Life has a $350.0 million bank credit facility available to
fund short-term working capital needs and to facilitate the securities
settlement process. The credit facility consists of two types of
borrowing options with varying interest rates and expires in September
2000. The interest rates are based on external indices dependent on the
type of borrowing and at December 31, 1998 range from 5.23% to 7.75%.
There were no borrowings outstanding under this bank credit facility at
December 31, 1998.
Equitable Life has a commercial paper program with an issue limit of
$500.0 million. This program is available for general corporate purposes
used to support Equitable Life's liquidity needs and is supported by
Equitable Life's existing $350.0 million bank credit facility. At
December 31, 1998, there were no borrowings outstanding under this
program.
During July 1998, Alliance entered into a $425.0 million five-year
revolving credit facility with a group of commercial banks which
replaced a $250.0 million revolving credit facility. Under the facility,
the interest rate, at the option of Alliance, is a floating rate
generally based upon a defined prime rate, a rate related to the London
Interbank Offered Rate ("LIBOR") or the Federal Funds Rate. A facility
fee is payable on the total facility. During September 1998, Alliance
increased the size of its commercial paper program from $250.0 million
to $425.0 million. Borrowings from these two sources may not exceed
$425.0 million in the aggregate. The revolving credit facility provides
backup liquidity for commercial paper issued under Alliance's commercial
paper program and can be used as a direct source of borrowing. The
revolving credit facility contains covenants which require Alliance to,
among other things, meet certain financial ratios. As of December 31,
1998, Alliance had commercial paper outstanding totaling $179.5 million
at an effective interest rate of 5.5% and there were no borrowings
outstanding under Alliance's revolving credit facility.
Long-term Debt
Several of the long-term debt agreements have restrictive covenants
related to the total amount of debt, net tangible assets and other
matters. The Company is in compliance with all debt covenants.
F-25
<PAGE>
The Company has pledged real estate, mortgage loans, cash and securities
amounting to $640.2 million and $1,164.0 million at December 31, 1998
and 1997, respectively, as collateral for certain short-term and
long-term debt.
At December 31, 1998, aggregate maturities of the long-term debt based
on required principal payments at maturity for 1999 and the succeeding
four years are $322.8 million, $6.9 million, $1.7 million, $1.8 million
and $2.0 million, respectively, and $668.0 million thereafter.
10) FEDERAL INCOME TAXES
A summary of the Federal income tax expense in the consolidated
statements of earnings is shown below:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
Federal income tax expense (benefit):
Current.......................................... $ 283.3 $ 186.5 $ 97.9
Deferred......................................... 69.8 (95.0) (88.2)
----------------- ---------------- -----------------
Total.............................................. $ 353.1 $ 91.5 $ 9.7
================= ================ =================
</TABLE>
The Federal income taxes attributable to consolidated operations are
different from the amounts determined by multiplying the earnings before
Federal income taxes and minority interest by the expected Federal
income tax rate of 35%. The sources of the difference and the tax
effects of each are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
Expected Federal income tax expense................ $ 414.3 $ 234.7 $ 73.0
Non-taxable minority interest...................... (33.2) (38.0) (28.6)
Adjustment of tax audit reserves................... 16.0 (81.7) 6.9
Equity in unconsolidated subsidiaries.............. (39.3) (45.1) (32.3)
Other.............................................. (4.7) 21.6 (9.3)
----------------- ---------------- -----------------
Federal Income Tax Expense......................... $ 353.1 $ 91.5 $ 9.7
================= ================ =================
</TABLE>
The components of the net deferred Federal income taxes are as follows:
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997
--------------------------------- ---------------------------------
Assets Liabilities Assets Liabilities
--------------- ---------------- --------------- ---------------
(In Millions)
<S> <C> <C> <C> <C>
Compensation and related benefits...... $ 235.3 $ - $ 257.9 $ -
Other.................................. 27.8 - 30.7 -
DAC, reserves and reinsurance.......... - 231.4 - 222.8
Investments............................ - 364.4 - 405.7
--------------- ---------------- --------------- ---------------
Total.................................. $ 263.1 $ 595.8 $ 288.6 $ 628.5
=============== ================ =============== ===============
</TABLE>
F-26
<PAGE>
The deferred Federal income taxes impacting operations reflect the net
tax effects of temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts
used for income tax purposes. The sources of these temporary differences
and the tax effects of each are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
DAC, reserves and reinsurance...................... $ (7.7) $ 46.2 $ (156.2)
Investments........................................ 46.8 (113.8) 78.6
Compensation and related benefits.................. 28.6 3.7 22.3
Other.............................................. 2.1 (31.1) (32.9)
----------------- ---------------- -----------------
Deferred Federal Income Tax
Expense (Benefit)................................ $ 69.8 $ (95.0) $ (88.2)
================= ================ =================
</TABLE>
The Internal Revenue Service (the "IRS") is in the process of examining
the Holding Company's consolidated Federal income tax returns for the
years 1992 through 1996. Management believes these audits will have no
material adverse effect on the Company's results of operations.
11) REINSURANCE AGREEMENTS
The Insurance Group assumes and cedes reinsurance with other insurance
companies. The Insurance Group evaluates the financial condition of its
reinsurers to minimize its exposure to significant losses from reinsurer
insolvencies. Ceded reinsurance does not relieve the originating insurer
of liability. The effect of reinsurance (excluding group life and
health) is summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
Direct premiums.................................... $ 438.8 $ 448.6 $ 461.4
Reinsurance assumed................................ 203.6 198.3 177.5
Reinsurance ceded.................................. (54.3) (45.4) (41.3)
----------------- ---------------- -----------------
Premiums........................................... $ 588.1 $ 601.5 $ 597.6
================= ================ =================
Universal Life and Investment-type Product
Policy Fee Income Ceded.......................... $ 75.7 $ 61.0 $ 48.2
================= ================ =================
Policyholders' Benefits Ceded...................... $ 85.9 $ 70.6 $ 54.1
================= ================ =================
Interest Credited to Policyholders' Account
Balances Ceded................................... $ 39.5 $ 36.4 $ 32.3
================= ================ =================
</TABLE>
Beginning in May 1997, the Company began reinsuring on a yearly renewal
term basis 90% of the mortality risk on new issues of certain term,
universal and variable life products. During 1996, the Company's
retention limit on joint survivorship policies was increased to $15.0
million. Effective January 1, 1994, all in force business above $5.0
million was reinsured. The Insurance Group also reinsures the entire
risk on certain substandard underwriting risks as well as in certain
other cases.
The Insurance Group cedes 100% of its group life and health business to
a third party insurance company. Premiums ceded totaled $1.3 million,
$1.6 million and $2.4 million for 1998, 1997 and 1996, respectively.
Ceded death and disability benefits totaled $15.6 million, $4.3 million
and $21.2 million for 1998, 1997 and 1996, respectively. Insurance
liabilities ceded totaled $560.3 million and $593.8 million at December
31, 1998 and 1997, respectively.
F-27
<PAGE>
12) EMPLOYEE BENEFIT PLANS
The Company sponsors qualified and non-qualified defined benefit plans
covering substantially all employees (including certain qualified
part-time employees), managers and certain agents. The pension plans are
non-contributory. Equitable Life's benefits are based on a cash balance
formula or years of service and final average earnings, if greater,
under certain grandfathering rules in the plans. Alliance's benefits are
based on years of credited service, average final base salary and
primary social security benefits. The Company's funding policy is to
make the minimum contribution required by the Employee Retirement Income
Security Act of 1974 ("ERISA").
Components of net periodic pension cost (credit) for the qualified and
non-qualified plans are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
Service cost....................................... $ 33.2 $ 32.5 $ 33.8
Interest cost on projected benefit obligations..... 129.2 128.2 120.8
Actual return on assets............................ (175.6) (307.6) (181.4)
Net amortization and deferrals..................... 6.1 166.6 43.4
----------------- ---------------- -----------------
Net Periodic Pension Cost (Credit)................. $ (7.1) $ 19.7 $ 16.6
================= ================ =================
</TABLE>
The plan's projected benefit obligation under the qualified and
non-qualified plans was comprised of:
<TABLE>
<CAPTION>
December 31,
------------------------------------
1998 1997
---------------- -----------------
(In Millions)
<S> <C> <C>
Benefit obligation, beginning of year.................................. $ 1,801.3 $ 1,765.5
Service cost........................................................... 33.2 32.5
Interest cost.......................................................... 129.2 128.2
Actuarial (gains) losses............................................... 108.4 (15.5)
Benefits paid.......................................................... (138.7) (109.4)
---------------- -----------------
Benefit Obligation, End of Year........................................ $ 1,933.4 $ 1,801.3
================ =================
</TABLE>
The funded status of the qualified and non-qualified pension plans is as
follows:
<TABLE>
<CAPTION>
December 31,
------------------------------------
1998 1997
---------------- -----------------
(In Millions)
<S> <C> <C>
Plan assets at fair value, beginning of year........................... $ 1,867.4 $ 1,626.0
Actual return on plan assets........................................... 338.9 307.5
Contributions.......................................................... - 30.0
Benefits paid and fees................................................. (123.2) (96.1)
---------------- -----------------
Plan assets at fair value, end of year................................. 2,083.1 1,867.4
Projected benefit obligations.......................................... 1,933.4 1,801.3
---------------- -----------------
Projected benefit obligations less than plan assets.................... 149.7 66.1
Unrecognized prior service cost........................................ (7.5) (9.9)
Unrecognized net loss from past experience different
from that assumed.................................................... 38.7 95.0
Unrecognized net asset at transition................................... 1.5 3.1
---------------- -----------------
Prepaid Pension Cost.................................................. $ 182.4 $ 154.3
================ =================
</TABLE>
The discount rate and rate of increase in future compensation levels
used in determining the actuarial present value of projected benefit
obligations were 7.0% and 3.83%, respectively, at December 31, 1998 and
7.25% and 4.07%, respectively, at December 31, 1997. As of January 1,
1998 and 1997, the expected long-term rate of return on assets for the
retirement plan was 10.25%.
F-28
<PAGE>
The Company recorded, as a reduction of shareholders' equity an
additional minimum pension liability of $28.3 million and $17.3 million,
net of Federal income taxes, at December 31, 1998 and 1997,
respectively, primarily representing the excess of the accumulated
benefit obligation of the qualified pension plan over the accrued
liability.
The pension plan's assets include corporate and government debt
securities, equity securities, equity real estate and shares of group
trusts managed by Alliance.
Prior to 1987, the qualified plan funded participants' benefits through
the purchase of non-participating annuity contracts from Equitable Life.
Benefit payments under these contracts were approximately $31.8 million,
$33.2 million and $34.7 million for 1998, 1997 and 1996, respectively.
The Company provides certain medical and life insurance benefits
(collectively, "postretirement benefits") for qualifying employees,
managers and agents retiring from the Company (i) on or after attaining
age 55 who have at least 10 years of service or (ii) on or after
attaining age 65 or (iii) whose jobs have been abolished and who have
attained age 50 with 20 years of service. The life insurance benefits
are related to age and salary at retirement. The costs of postretirement
benefits are recognized in accordance with the provisions of SFAS No.
106. The Company continues to fund postretirement benefits costs on a
pay-as-you-go basis and, for 1998, 1997 and 1996, the Company made
estimated postretirement benefits payments of $28.4 million, $18.7
million and $18.9 million, respectively.
The following table sets forth the postretirement benefits plan's
status, reconciled to amounts recognized in the Company's consolidated
financial statements:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
Service cost....................................... $ 4.6 $ 4.5 $ 5.3
Interest cost on accumulated postretirement
benefits obligation.............................. 33.6 34.7 34.6
Net amortization and deferrals..................... .5 1.9 2.4
----------------- ---------------- -----------------
Net Periodic Postretirement Benefits Costs......... $ 38.7 $ 41.1 $ 42.3
================= ================ =================
</TABLE>
<TABLE>
<CAPTION>
December 31,
------------------------------------
1998 1997
---------------- -----------------
(In Millions)
<S> <C> <C>
Accumulated postretirement benefits obligation, beginning
of year.............................................................. $ 490.8 $ 388.5
Service cost........................................................... 4.6 4.5
Interest cost.......................................................... 33.6 34.7
Contributions and benefits paid........................................ (28.4) 72.1
Actuarial (gains) losses............................................... (10.2) (9.0)
---------------- -----------------
Accumulated postretirement benefits obligation, end of year............ 490.4 490.8
Unrecognized prior service cost........................................ 31.8 40.3
Unrecognized net loss from past experience different
from that assumed and from changes in assumptions.................... (121.2) (140.6)
---------------- -----------------
Accrued Postretirement Benefits Cost................................... $ 401.0 $ 390.5
================ =================
</TABLE>
Since January 1, 1994, costs to the Company for providing these medical
benefits available to retirees under age 65 are the same as those
offered to active employees and medical benefits will be limited to 200%
of 1993 costs for all participants.
F-29
<PAGE>
The assumed health care cost trend rate used in measuring the
accumulated postretirement benefits obligation was 8.0% in 1998,
gradually declining to 2.5% in the year 2009, and in 1997 was 8.75%,
gradually declining to 2.75% in the year 2009. The discount rate used in
determining the accumulated postretirement benefits obligation was 7.0%
and 7.25% at December 31, 1998 and 1997, respectively.
If the health care cost trend rate assumptions were increased by 1%, the
accumulated postretirement benefits obligation as of December 31, 1998
would be increased 4.83%. The effect of this change on the sum of the
service cost and interest cost would be an increase of 4.57%. If the
health care cost trend rate assumptions were decreased by 1% the
accumulated postretirement benefits obligation as of December 31, 1998
would be decreased by 5.6%. The effect of this change on the sum of the
service cost and interest cost would be a decrease of 5.4%.
13) DERIVATIVES AND FAIR VALUE OF FINANCIAL INSTRUMENTS
Derivatives
The Insurance Group primarily uses derivatives for asset/liability risk
management and for hedging individual securities. Derivatives mainly are
utilized to reduce the Insurance Group's exposure to interest rate
fluctuations. Accounting for interest rate swap transactions is on an
accrual basis. Gains and losses related to interest rate swap
transactions are amortized as yield adjustments over the remaining life
of the underlying hedged security. Income and expense resulting from
interest rate swap activities are reflected in net investment income.
The notional amount of matched interest rate swaps outstanding at
December 31, 1998 and 1997, respectively, was $880.9 million and
$1,353.4 million. The average unexpired terms at December 31, 1998
ranged from 1 month to 4.3 years. At December 31, 1998, the cost of
terminating swaps in a loss position was $8.0 million. Equitable Life
has implemented an interest rate cap program designed to hedge crediting
rates on interest-sensitive individual annuities contracts. The
outstanding notional amounts at December 31, 1998 of contracts purchased
and sold were $8,450.0 million and $875.0 million, respectively. The net
premium paid by Equitable Life on these contracts was $54.8 million and
is being amortized ratably over the contract periods ranging from 1 to 5
years. Income and expense resulting from this program are reflected as
an adjustment to interest credited to policyholders' account balances.
Substantially all of DLJ's activities related to derivatives are, by
their nature trading activities which are primarily for the purpose of
customer accommodations. DLJ enters into certain contractual agreements
referred to as derivatives or off-balance-sheet financial instruments
involving futures, forwards and options. DLJ's derivative activities
consist of writing over-the-counter ("OTC") options to accommodate its
customer needs, trading in forward contracts in U.S. government and
agency issued or guaranteed securities and in futures contracts on
equity-based indices, interest rate instruments and currencies and
issuing structured products based on emerging market financial
instruments and indices. DLJ's involvement in swap contracts and
commodity derivative instruments is not significant.
Fair Value of Financial Instruments
The Company defines fair value as the quoted market prices for those
instruments that are actively traded in financial markets. In cases
where quoted market prices are not available, fair values are estimated
using present value or other valuation techniques. The fair value
estimates are made at a specific point in time, based on available
market information and judgments about the financial instrument,
including estimates of the timing and amount of expected future cash
flows and the credit standing of counterparties. Such estimates do not
reflect any premium or discount that could result from offering for sale
at one time the Company's entire holdings of a particular financial
instrument, nor do they consider the tax impact of the realization of
unrealized gains or losses. In many cases, the fair value estimates
cannot be substantiated by comparison to independent markets, nor can
the disclosed value be realized in immediate settlement of the
instrument.
Certain financial instruments are excluded, particularly insurance
liabilities other than financial guarantees and investment contracts.
Fair market value of off-balance-sheet financial instruments of the
Insurance Group was not material at December 31, 1998 and 1997.
F-30
<PAGE>
Fair values for mortgage loans on real estate are estimated by
discounting future contractual cash flows using interest rates at which
loans with similar characteristics and credit quality would be made.
Fair values for foreclosed mortgage loans and problem mortgage loans are
limited to the estimated fair value of the underlying collateral if
lower.
Fair values of policy loans are estimated by discounting the face value
of the loans from the time of the next interest rate review to the
present, at a rate equal to the excess of the current estimated market
rates over the current interest rate charged on the loan.
The estimated fair values for the Company's association plan contracts,
supplementary contracts not involving life contingencies ("SCNILC") and
annuities certain, which are included in policyholders' account
balances, and guaranteed interest contracts are estimated using
projected cash flows discounted at rates reflecting expected current
offering rates.
The estimated fair values for variable deferred annuities and single
premium deferred annuities ("SPDA"), which are included in
policyholders' account balances, are estimated by discounting the
account value back from the time of the next crediting rate review to
the present, at a rate equal to the excess of current estimated market
rates offered on new policies over the current crediting rates.
Fair values for long-term debt are determined using published market
values, where available, or contractual cash flows discounted at market
interest rates. The estimated fair values for non-recourse mortgage debt
are determined by discounting contractual cash flows at a rate which
takes into account the level of current market interest rates and
collateral risk. The estimated fair values for recourse mortgage debt
are determined by discounting contractual cash flows at a rate based
upon current interest rates of other companies with credit ratings
similar to the Company. The Company's carrying value of short-term
borrowings approximates their estimated fair value.
The following table discloses carrying value and estimated fair value
for financial instruments not otherwise disclosed in Notes 3, 7 and 8:
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------------------
1998 1997
--------------------------------- ---------------------------------
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
--------------- ---------------- --------------- ---------------
(In Millions)
<S> <C> <C> <C> <C>
Consolidated Financial Instruments:
Mortgage loans on real estate.......... $ 2,809.9 $ 2,961.8 $ 2,611.4 $ 2,822.8
Other limited partnership interests.... 562.6 562.6 509.4 509.4
Policy loans........................... 2,086.7 2,370.7 2,422.9 2,493.9
Policyholders' account balances -
investment contracts................. 12,892.0 13,396.0 12,611.0 12,714.0
Long-term debt......................... 1,002.4 1,025.2 1,294.5 1,257.0
Closed Block Financial Instruments:
Mortgage loans on real estate.......... 1,633.4 1,703.5 1,341.6 1,420.7
Other equity investments............... 56.4 56.4 86.3 86.3
Policy loans........................... 1,641.2 1,929.7 1,700.2 1,784.2
SCNILC liability....................... 25.0 25.0 27.6 30.3
Discontinued Operations Financial
Instruments:
Mortgage loans on real estate.......... 553.9 599.9 655.5 779.9
Fixed maturities....................... 24.9 24.9 38.7 38.7
Other equity investments............... 115.1 115.1 209.3 209.3
Guaranteed interest contracts.......... 37.0 34.0 37.0 34.0
Long-term debt......................... 147.1 139.8 296.4 297.6
</TABLE>
F-31
<PAGE>
14) COMMITMENTS AND CONTINGENT LIABILITIES
The Company has provided, from time to time, certain guarantees or
commitments to affiliates, investors and others. These arrangements
include commitments by the Company, under certain conditions: to make
capital contributions of up to $142.9 million to affiliated real estate
joint ventures; and to provide equity financing to certain limited
partnerships of $287.3 million at December 31, 1998, under existing loan
or loan commitment agreements.
Equitable Life is the obligor under certain structured settlement
agreements which it had entered into with unaffiliated insurance
companies and beneficiaries. To satisfy its obligations under these
agreements, Equitable Life owns single premium annuities issued by
previously wholly owned life insurance subsidiaries. Equitable Life has
directed payment under these annuities to be made directly to the
beneficiaries under the structured settlement agreements. A contingent
liability exists with respect to these agreements should the previously
wholly owned subsidiaries be unable to meet their obligations.
Management believes the satisfaction of those obligations by Equitable
Life is remote.
The Insurance Group had $24.7 million of letters of credit outstanding
at December 31, 1998.
15) LITIGATION
Major Medical Insurance Cases
Equitable Life agreed to settle, subject to court approval, previously
disclosed cases involving lifetime guaranteed renewable major medical
insurance policies issued by Equitable Life in five states. Plaintiffs
in these cases claimed that Equitable Life's method for determining
premium increases breached the terms of certain forms of the policies
and was misrepresented. In certain cases plaintiffs also claimed that
Equitable Life misrepresented to policyholders that premium increases
had been approved by insurance departments, and that it determined
annual rate increases in a manner that discriminated against the
policyholders.
In December 1997, Equitable Life entered into a settlement agreement,
subject to court approval, which would result in creation of a
nationwide class consisting of all persons holding, and paying premiums
on, the policies at any time since January 1, 1988 and the dismissal
with prejudice of the pending actions and the resolution of all similar
claims on a nationwide basis. Under the terms of the settlement, which
involves approximately 127,000 former and current policyholders,
Equitable Life would pay $14.2 million in exchange for release of all
claims and will provide future relief to certain current policyholders
by restricting future premium increases, estimated to have a present
value of $23.3 million. This estimate is based upon assumptions about
future events that cannot be predicted with certainty and accordingly
the actual value of the future relief may vary. In October 1998, the
court entered a judgment approving the settlement agreement and, in
November, a member of the national class filed a notice of appeal of the
judgment. In January 1999, the Court of Appeals granted Equitable Life's
motion to dismiss the appeal.
Life Insurance and Annuity Sales Cases
A number of lawsuits are pending as individual claims and purported
class actions against Equitable Life and its subsidiary insurance
companies Equitable Variable Life Insurance Company ("EVLICO," which was
merged into Equitable Life effective January 1, 1997) and The Equitable
of Colorado, Inc. ("EOC"). These actions involve, among other things,
sales of life and annuity products for varying periods from 1980 to the
present, and allege, among other things, sales practice
misrepresentation primarily involving: the number of premium payments
required; the propriety of a product as an investment vehicle; the
propriety of a product as a replacement of an existing policy; and
failure to disclose a product as life insurance. Some actions are in
state courts and others are in U.S. District Courts in varying
jurisdictions, and are in varying stages of discovery and motions for
class certification.
F-32
<PAGE>
In general, the plaintiffs request an unspecified amount of damages,
punitive damages, enjoinment from the described practices, prohibition
against cancellation of policies for non-payment of premium or other
remedies, as well as attorneys' fees and expenses. Similar actions have
been filed against other life and health insurers and have resulted in
the award of substantial judgments, including material amounts of
punitive damages, or in substantial settlements. Although the outcome of
litigation cannot be predicted with certainty, particularly in the early
stages of an action, The Equitable's management believes that the
ultimate resolution of these cases should not have a material adverse
effect on the financial position of The Equitable. The Equitable's
management cannot make an estimate of loss, if any, or predict whether
or not any such litigation will have a material adverse effect on The
Equitable's results of operations in any particular period.
Discrimination Case
Equitable Life is a defendant in an action, certified as a class action
in September 1997, in the United States District Court for the Northern
District of Alabama, Southern Division, involving alleged discrimination
on the basis of race against African-American applicants and potential
applicants in hiring individuals as sales agents. Plaintiffs seek a
declaratory judgment and affirmative and negative injunctive relief,
including the payment of back-pay, pension and other compensation.
Although the outcome of litigation cannot be predicted with certainty,
The Equitable's management believes that the ultimate resolution of this
matter should not have a material adverse effect on the financial
position of The Equitable. The Equitable's management cannot make an
estimate of loss, if any, or predict whether or not such matter will
have a material adverse effect on The Equitable's results of operations
in any particular period.
Alliance Capital
In July 1995, a class action complaint was filed against Alliance North
American Government Income Trust, Inc. (the "Fund"), Alliance and
certain other defendants affiliated with Alliance, including the Holding
Company, alleging violations of Federal securities laws, fraud and
breach of fiduciary duty in connection with the Fund's investments in
Mexican and Argentine securities. The original complaint was dismissed
in 1996; on appeal, the dismissal was affirmed. In October 1996,
plaintiffs filed a motion for leave to file an amended complaint,
alleging the Fund failed to hedge against currency risk despite
representations that it would do so, the Fund did not properly disclose
that it planned to invest in mortgage-backed derivative securities and
two Fund advertisements misrepresented the risks of investing in the
Fund. In October 1998, the U.S. Court of Appeals for the Second Circuit
issued an order granting plaintiffs' motion to file an amended complaint
alleging that the Fund misrepresented its ability to hedge against
currency risk and denying plaintiffs' motion to file an amended
complaint containing the other allegations. Alliance believes that the
allegations in the amended complaint, which was filed in February 1999,
are without merit and intends to defend itself vigorously against these
claims. While the ultimate outcome of this matter cannot be determined
at this time, Alliance's management does not expect that it will have a
material adverse effect on Alliance's results of operations or financial
condition.
DLJSC
DLJSC is a defendant along with certain other parties in a class action
complaint involving the underwriting of units, consisting of notes and
warrants to purchase common shares, of Rickel Home Centers, Inc.
("Rickel"), which filed a voluntary petition for reorganization pursuant
to Chapter 11 of the Bankruptcy Code. The complaint seeks unspecified
compensatory and punitive damages from DLJSC, as an underwriter and as
an owner of 7.3% of the common stock, for alleged violation of Federal
securities laws and common law fraud for alleged misstatements and
omissions contained in the prospectus and registration statement used in
the offering of the units. DLJSC is defending itself vigorously against
all the allegations contained in the complaint. Although there can be no
assurance, DLJ's management does not believe that the ultimate outcome
of this litigation will have a material adverse effect on DLJ's
consolidated financial condition. Due to the early stage of this
litigation, based on the information currently available to it, DLJ's
management cannot predict whether or not such litigation will have a
material adverse effect on DLJ's results of operations in any particular
period.
F-33
<PAGE>
DLJSC is a defendant in a purported class action filed in a Texas State
Court on behalf of the holders of $550 million principal amount of
subordinated redeemable discount debentures of National Gypsum
Corporation ("NGC"). The debentures were canceled in connection with a
Chapter 11 plan of reorganization for NGC consummated in July 1993. The
litigation seeks compensatory and punitive damages for DLJSC's
activities as financial advisor to NGC in the course of NGC's Chapter 11
proceedings. Trial is expected in early May 1999. DLJSC intends to
defend itself vigorously against all the allegations contained in the
complaint. Although there can be no assurance, DLJ's management does not
believe that the ultimate outcome of this litigation will have a
material adverse effect on DLJ's consolidated financial condition. Based
upon the information currently available to it, DLJ's management cannot
predict whether or not such litigation will have a material adverse
effect on DLJ's results of operations in any particular period.
DLJSC is a defendant in a complaint which alleges that DLJSC and a
number of other financial institutions and several individual defendants
violated civil provisions of RICO by inducing plaintiffs to invest over
$40 million in The Securities Groups, a number of tax shelter limited
partnerships, during the years 1978 through 1982. The plaintiffs seek
recovery of the loss of their entire investment and an approximately
equivalent amount of tax-related damages. Judgment for damages under
RICO are subject to trebling. Discovery is complete. Trial has been
scheduled for May 17, 1999. DLJSC believes that it has meritorious
defenses to the complaints and will continue to contest the suits
vigorously. Although there can be no assurance, DLJ's management does
not believe that the ultimate outcome of this litigation will have a
material adverse effect on DLJ's consolidated financial condition. Based
upon the information currently available to it, DLJ's management cannot
predict whether or not such litigation will have a material adverse
effect on DLJ's results of operations in any particular period.
DLJSC is a defendant along with certain other parties in four actions
involving Mid-American Waste Systems, Inc. ("Mid-American"), which filed
a voluntary petition for reorganization pursuant to Chapter 11 of the
Bankruptcy Code in January 1997. Three actions seek rescission,
compensatory and punitive damages for DLJSC's role in underwriting notes
of Mid-American. The other action, filed by the Plan Administrator for
the bankruptcy estate of Mid-American, alleges that DLJSC is liable as
an underwriter for alleged misrepresentations and omissions in the
prospectus for the notes, and liable as financial advisor to
Mid-American for allegedly failing to advise Mid-American about its
financial condition. DLJSC believes that it has meritorious defenses to
the complaints and will continue to contest the suits vigorously.
Although there can be no assurance, DLJ's management does not believe
that the ultimate outcome of this litigation will have a material
adverse effect on DLJ's consolidated financial condition. Based upon
information currently available to it, DLJ's management cannot predict
whether or not such litigation will have a material adverse effect on
DLJ's results of operations in any particular period.
Other Matters
In addition to the matters described above, the Holding Company and its
subsidiaries are involved in various legal actions and proceedings in
connection with their businesses. Some of the actions and proceedings
have been brought on behalf of various alleged classes of claimants and
certain of these claimants seek damages of unspecified amounts. While
the ultimate outcome of such matters cannot be predicted with certainty,
in the opinion of management no such matter is likely to have a material
adverse effect on the Company's consolidated financial position or
results of operations.
16) LEASES
The Company has entered into operating leases for office space and
certain other assets, principally data processing equipment and office
furniture and equipment. Future minimum payments under noncancelable
leases for 1999 and the succeeding four years are $98.7 million, $92.7
million, $73.4 million, $59.9 million, $55.8 million and $550.1 million
thereafter. Minimum future sublease rental income on these noncancelable
leases for 1999 and the succeeding four years is $7.6 million, $5.6
million, $4.6 million, $2.3 million, $2.3 million and $25.4 million
thereafter.
F-34
<PAGE>
At December 31, 1998, the minimum future rental income on noncancelable
operating leases for wholly owned investments in real estate for 1999
and the succeeding four years is $189.2 million, $177.0 million, $165.5
million, $145.4 million, $122.8 million and $644.7 million thereafter.
17) OTHER OPERATING COSTS AND EXPENSES
Other operating costs and expenses consisted of the following:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
Compensation costs................................. $ 772.0 $ 721.5 $ 704.8
Commissions........................................ 478.1 409.6 329.5
Short-term debt interest expense................... 26.1 31.7 8.0
Long-term debt interest expense.................... 84.6 121.2 137.3
Amortization of policy acquisition costs........... 292.7 287.3 405.2
Capitalization of policy acquisition costs......... (609.1) (508.0) (391.9)
Rent expense, net of sublease income............... 100.0 101.8 113.7
Cursitor intangible assets writedown............... - 120.9 -
Other.............................................. 1,056.8 917.9 769.1
----------------- ---------------- -----------------
Total.............................................. $ 2,201.2 $ 2,203.9 $ 2,075.7
================= ================ =================
</TABLE>
During 1997 and 1996, the Company restructured certain operations in
connection with cost reduction programs and recorded pre-tax provisions
of $42.4 million and $24.4 million, respectively. The amounts paid
during 1998, associated with cost reduction programs, totaled $22.6
million. At December 31, 1998, the liabilities associated with cost
reduction programs amounted to $39.4 million. The 1997 cost reduction
program included costs related to employee termination and exit costs.
The 1996 cost reduction program included restructuring costs related to
the consolidation of insurance operations' service centers. Amortization
of DAC in 1996 included a $145.0 million writeoff of DAC related to DI
contracts.
18) INSURANCE GROUP STATUTORY FINANCIAL INFORMATION
Equitable Life is restricted as to the amounts it may pay as dividends
to the Holding Company. Under the New York Insurance Law, the
Superintendent has broad discretion to determine whether the financial
condition of a stock life insurance company would support the payment of
dividends to its shareholders. For 1998, 1997 and 1996, statutory net
income (loss) totaled $384.4 million, $(351.7) million and $(351.1)
million, respectively. Statutory surplus, capital stock and Asset
Valuation Reserve ("AVR") totaled $4,728.0 million and $3,907.1 million
at December 31, 1998 and 1997, respectively. No dividends have been paid
by Equitable Life to the Holding Company to date.
At December 31, 1998, the Insurance Group, in accordance with various
government and state regulations, had $25.6 million of securities
deposited with such government or state agencies.
The differences between statutory surplus and capital stock determined
in accordance with Statutory Accounting Principles ("SAP") and total
shareholders' equity on a GAAP basis are primarily attributable to: (a)
inclusion in SAP of an AVR intended to stabilize surplus from
fluctuations in the value of the investment portfolio; (b) future policy
benefits and policyholders' account balances under SAP differ from GAAP
due to differences between actuarial assumptions and reserving
methodologies; (c) certain policy acquisition costs are expensed under
SAP but deferred under GAAP and amortized over future periods to achieve
a matching of revenues and expenses; (d) Federal income taxes are
generally accrued under SAP based upon revenues and expenses in the
Federal income tax return while under GAAP deferred taxes are provided
for timing differences between recognition of revenues and expenses for
financial reporting and income tax purposes; (e) valuation of assets
under SAP and GAAP differ due to different investment valuation and
depreciation methodologies, as well as the deferral of interest-related
realized capital gains and losses on fixed income investments; and (f)
differences in the accrual methodologies for post-employment and
retirement benefit plans.
F-35
<PAGE>
19) BUSINESS SEGMENT INFORMATION
The Company's operations consist of Insurance and Investment Services.
The Company's management evaluates the performance of each of these
segments independently and allocates resources based on current and
future requirements of each segment. Management evaluates the
performance of each segment based upon operating results adjusted to
exclude the effect of unusual or non-recurring events and transactions
and certain revenue and expense categories not related to the base
operations of the particular business net of minority interest.
Information for all periods is presented on a comparable basis.
Intersegment investment advisory and other fees of approximately $61.8
million, $84.1 million and $129.2 million for 1998, 1997 and 1996,
respectively, are included in total revenues of the Investment Services
segment. These fees, excluding amounts related to discontinued
operations of $.5 million, $4.2 million and $13.3 million for 1998, 1997
and 1996, respectively, are eliminated in consolidation.
The following tables reconcile each segment's revenues and operating
earnings to total revenues and earnings from continuing operations
before Federal income taxes and cumulative effect of accounting change
as reported on the consolidated statements of earnings and the segments'
assets to total assets on the consolidated balance sheets, respectively.
<TABLE>
<CAPTION>
Investment
Insurance Services Elimination Total
--------------- ----------------- --------------- ----------------
(In Millions)
<S> <C> <C> <C> <C>
1998
Segment revenues..................... $ 4,029.8 $ 1,438.4 $ (5.7) $ 5,462.5
Investment gains..................... 64.8 35.4 - 100.2
--------------- ----------------- --------------- ----------------
Total Revenues....................... $ 4,094.6 $ 1,473.8 $ (5.7) $ 5,562.7
=============== ================= =============== ================
Pre-tax operating earnings........... $ 688.6 $ 284.3 $ - $ 972.9
Investment gains , net of
DAC and other charges.............. 41.7 27.7 - 69.4
Pre-tax minority interest............ - 141.5 - 141.5
--------------- ----------------- --------------- ----------------
Earnings from Continuing
Operations......................... $ 730.3 $ 453.5 $ - $ 1,183.8
=============== ================= =============== ================
Total Assets......................... $ 75,626.0 $ 12,379.2 $ (64.4) $ 87,940.8
=============== ================= =============== ================
1997
Segment revenues..................... $ 3,990.8 $ 1,200.0 $ (7.7) $ 5,183.1
Investment gains (losses)............ (318.8) 255.1 - (63.7)
--------------- ----------------- --------------- ----------------
Total Revenues....................... $ 3,672.0 $ 1,455.1 $ (7.7) $ 5,119.4
=============== ================= =============== ================
Pre-tax operating earnings........... $ 507.0 $ 258.3 $ - $ 765.3
Investment gains (losses), net of
DAC and other charges.............. (292.5) 252.7 - (39.8)
Non-recurring costs and expenses..... (41.7) (121.6) - (163.3)
Pre-tax minority interest............ - 108.5 - 108.5
--------------- ----------------- --------------- ----------------
Earnings from Continuing
Operations......................... $ 172.8 $ 497.9 $ - $ 670.7
=============== ================= =============== ================
Total Assets......................... $ 67,762.4 $ 13,691.4 $ (96.1) $ 81,357.7
=============== ================= =============== ================
</TABLE>
F-36
<PAGE>
<TABLE>
<CAPTION>
Investment
Insurance Services Elimination Total
--------------- ----------------- --------------- ----------------
(In Millions)
<S> <C> <C> <C> <C>
1996
Segment revenues..................... $ 3,789.1 $ 1,105.5 $ (12.6) $ 4,882.0
Investment gains (losses)............ (30.3) 20.5 - (9.8)
--------------- ----------------- --------------- ----------------
Total Revenues....................... $ 3,758.8 $ 1,126.0 $ (12.6) $ 4,872.2
=============== ================= =============== ================
Pre-tax operating earnings........... $ 337.1 $ 224.6 $ - $ 561.7
Investment gains (losses), net of
DAC and other charges.............. (37.2) 16.9 - (20.3)
Reserve strengthening and DAC
writeoff........................... (393.0) - - (393.0)
Non-recurring costs and
expenses........................... (22.3) (1.1) - (23.4)
Pre-tax minority interest............ - 83.6 - 83.6
--------------- ----------------- --------------- ----------------
Earnings (Loss) from
Continuing Operations.............. $ (115.4) $ 324.0 $ - $ 208.6
=============== ================= =============== ================
</TABLE>
20) QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The quarterly results of operations for 1998 and 1997 are summarized
below:
<TABLE>
<CAPTION>
Three Months Ended
------------------------------------------------------------------------------
March 31 June 30 September 30 December 31
----------------- ----------------- ------------------ ------------------
(In Millions)
<S> <C> <C> <C> <C>
1998
Total Revenues................ $ 1,470.2 $ 1,422.9 $ 1,297.6 $ 1,372.0
================= ================= ================== ==================
Earnings from Continuing
Operations before
Cumulative Effect
of Accounting Change........ $ 212.8 $ 197.0 $ 136.8 $ 158.9
================= ================= ================== ==================
Net Earnings.................. $ 213.3 $ 198.3 $ 137.5 $ 159.1
================= ================= ================== ==================
1997
Total Revenues................ $ 1,266.0 $ 1,552.8 $ 1,279.0 $ 1,021.6
================= ================= ================== ==================
Earnings from Continuing
Operations before
Cumulative Effect
of Accounting Change........ $ 117.4 $ 222.5 $ 145.1 $ 39.4
================= ================= ================== ==================
Net Earnings (Loss)........... $ 114.1 $ 223.1 $ 144.9 $ (44.9)
================= ================= ================== ==================
</TABLE>
Net earnings for the three months ended December 31, 1997 includes a
charge of $212.0 million related to additions to valuation allowances on
and writeoffs of real estate of $225.2 million, and reserve
strengthening on discontinued operations of $84.3 million offset by a
reversal of prior years tax reserves of $97.5 million.
F-37
<PAGE>
21) INVESTMENT IN DLJ
At December 31, 1998, the Company's ownership of DLJ interest was
approximately 32.5%. The Company's ownership interest will be further
reduced upon the issuance of common stock after the vesting of
forfeitable restricted stock units acquired by and/or the exercise of
options granted to certain DLJ employees. DLJ restricted stock units
represents forfeitable rights to receive approximately 5.2 million
shares of DLJ common stock through February 2000.
The results of operations of DLJ are accounted for on the equity basis
and are included in commissions, fees and other income in the
consolidated statements of earnings. The Company's carrying value of DLJ
is included in investment in and loans to affiliates in the consolidated
balance sheets.
Summarized balance sheets information for DLJ, reconciled to the
Company's carrying value of DLJ, are as follows:
<TABLE>
<CAPTION>
December 31,
------------------------------------
1998 1997
---------------- -----------------
(In Millions)
<S> <C> <C>
Assets:
Trading account securities, at market value............................ $ 13,195.1 $ 16,535.7
Securities purchased under resale agreements........................... 20,063.3 22,628.8
Broker-dealer related receivables...................................... 34,264.5 28,159.3
Other assets........................................................... 4,759.3 3,182.0
---------------- -----------------
Total Assets........................................................... $ 72,282.2 $ 70,505.8
================ =================
Liabilities:
Securities sold under repurchase agreements............................ $ 35,775.6 $ 36,006.7
Broker-dealer related payables......................................... 26,161.5 26,127.2
Short-term and long-term debt.......................................... 3,997.6 3,249.5
Other liabilities...................................................... 3,219.8 2,860.9
---------------- -----------------
Total liabilities...................................................... 69,154.5 68,244.3
DLJ's company-obligated mandatorily redeemed preferred
securities of subsidiary trust holding solely debentures of DLJ...... 200.0 200.0
Total shareholders' equity............................................. 2,927.7 2,061.5
---------------- -----------------
Total Liabilities, Cumulative Exchangeable Preferred Stock and
Shareholders' Equity................................................. $ 72,282.2 $ 70,505.8
================ =================
DLJ's equity as reported............................................... $ 2,927.7 $ 2,061.5
Unamortized cost in excess of net assets acquired in 1985
and other adjustments................................................ 23.7 23.5
The Holding Company's equity ownership in DLJ.......................... (1,002.4) (740.2)
Minority interest in DLJ............................................... (1,118.2) (729.3)
---------------- -----------------
The Company's Carrying Value of DLJ.................................... $ 830.8 $ 615.5
================ =================
</TABLE>
F-38
<PAGE>
Summarized statements of earnings information for DLJ reconciled to the
Company's equity in earnings of DLJ is as follows:
<TABLE>
<CAPTION>
1998 1997
---------------- -----------------
(In Millions)
<S> <C> <C>
Commission, fees and other income...................................... $ 3,184.7 $ 2,430.7
Net investment income.................................................. 2,189.1 1,652.1
Dealer, trading and investment gains, net.............................. 33.2 557.7
---------------- -----------------
Total revenues......................................................... 5,407.0 4,640.5
Total expenses including income taxes.................................. 5,036.2 4,232.2
---------------- -----------------
Net earnings........................................................... 370.8 408.3
Dividends on preferred stock........................................... 21.3 12.2
---------------- -----------------
Earnings Applicable to Common Shares................................... $ 349.5 $ 396.1
================ =================
DLJ's earnings applicable to common shares as reported................. $ 349.5 $ 396.1
Amortization of cost in excess of net assets acquired in 1985.......... (.8) (1.3)
The Holding Company's equity in DLJ's earnings......................... (136.8) (156.8)
Minority interest in DLJ............................................... (99.5) (109.1)
---------------- -----------------
The Company's Equity in DLJ's Earnings................................. $ 112.4 $ 128.9
================ =================
</TABLE>
22) ACCOUNTING FOR STOCK-BASED COMPENSATION
The Holding Company sponsors a stock option plan for employees of
Equitable Life. DLJ and Alliance each sponsor their own stock option
plans for certain employees. The Company has elected to continue to
account for stock-based compensation using the intrinsic value method
prescribed in APB No. 25. Had compensation expense for the Holding
Company, DLJ and Alliance Stock Option Incentive Plan options been
determined based on SFAS No. 123's fair value based method, the
Company's pro forma net earnings for 1998, 1997 and 1996 would have
been:
<TABLE>
<CAPTION>
1998 1997 1996
--------------- --------------- ---------------
(In Millions)
<S> <C> <C> <C>
Net Earnings:
As reported............................................. $ 708.2 $ 437.2 $ 10.3
Pro forma............................................... 678.4 426.3 3.3
</TABLE>
The fair values of options granted after December 31, 1994, used as a
basis for the above pro forma disclosures, were estimated as of the
dates of grant using the Black-Scholes option pricing model. The option
pricing assumptions for 1998, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
Holding Company DLJ Alliance
------------------------------ ------------------------------- ----------------------------------
1998 1997 1996 1998 1997 1996 1998 1997 1996
--------- ---------- --------- ---------- -------------------- ---------------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Dividend yield...... 0.32% 0.48% 0.80% 0.69% 0.86% 1.54% 6.50% 8.00% 8.00%
Expected volatility. 28% 20% 20% 40% 33% 25% 29% 26% 23%
Risk-free interest
rate.............. 5.48% 5.99% 5.92% 5.53% 5.96% 6.07% 4.40% 5.70% 5.80%
Expected life
in years.......... 5 5 5 5 5 5 7.2 7.2 7.4
Weighted average
fair value per
option at
grant-date........ $22.64 $12.25 $6.94 $16.27 $10.81 $4.03 $3.86 $2.18 $1.35
</TABLE>
F-39
<PAGE>
A summary of the Holding Company, DLJ and Alliance's option plans is as
follows:
<TABLE>
<CAPTION>
Holding Company DLJ Alliance
----------------------------- ----------------------------- -----------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Price of Price of Price of
Shares Options Shares Options Units Options
(In Millions) Outstanding (In Millions) Outstanding (In Millions) Outstanding
--------------- ------------- --------------- ------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance as of
January 1, 1996........ 6.7 $20.27 18.4 $13.50 9.6 $ 8.86
Granted................ .7 $24.94 4.2 $16.27 1.4 $12.56
Exercised.............. (.1) $19.91 - (.8) $ 6.82
Expired................ - - -
Forfeited.............. (.6) $20.21 (.4) $13.50 (.2) $ 9.66
--------------- ------------- ---------------
Balance as of
December 31, 1996...... 6.7 $20.79 22.2 $14.03 10.0 $ 9.54
Granted................ 3.2 $41.85 6.4 $30.54 2.2 $18.28
Exercised.............. (1.6) $20.26 (.2) $16.01 (1.2) $ 8.06
Forfeited.............. (.4) $23.43 (.2) $13.79 (.4) $10.64
--------------- ------------- ---------------
Balance as of
December 31, 1997...... 7.9 $29.05 28.2 $17.78 10.6 $11.41
Granted................ 4.3 $66.26 1.5 $38.59 2.8 $26.28
Exercised.............. (1.1) $21.18 (1.4) $14.91 (.9) $ 8.91
Forfeited.............. (.4) $47.01 (.1) $17.31 (.2) $13.14
--------------- ------------- ---------------
Balance as of
December 31, 1998...... 10.7 $44.00 28.2 $19.04 12.3 $14.94
=============== ============= ===============
</TABLE>
F-40
<PAGE>
Information about options outstanding and exercisable at December 31,
1998 is as follows:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
---------------------------------------------------- -----------------------------------
Weighted
Average Weighted Weighted
Range of Number Remaining Average Number Average
Exercise Outstanding Contractual Exercise Exercisable Exercise
Prices (In Millions) Life (Years) Price (In Millions) Price
--------------------------------------- ----------------- ---------------- ------------------- ---------------
Holding
Company
----------------------
<S> <C> <C> <C> <C> <C>
$18.125 -$27.75 3.7 5.19 $20.97 3.0 $20.33
$28.50 -$45.25 3.0 8.68 $41.79 -
$50.63 -$66.75 2.1 9.21 $52.73 -
$81.94 -$82.56 1.9 9.62 $82.56 -
----------------- -------------------
$18.125 -$82.56 10.7 7.75 $44.00 3.0 $20.33
================= ================= ================ ==================== ==============
DLJ
----------------------
$13.50 -$25.99 22.3 7.1 $14.59 21.4 $15.05
$26.00 -$38.99 5.0 8.8 $33.94 -
$39.00 -$52.875 .9 9.4 $44.65 -
----------------- -------------------
$13.50 -$52.875 28.2 7.5 $19.04 21.4 $15.05
================= ================== ============== ===================== =============
Alliance
----------------------
$ 3.03 -$ 9.69 3.1 4.5 $ 8.03 2.4 $ 7.57
$ 9.81 -$10.69 2.0 5.3 $10.05 1.6 $10.07
$11.13 -$13.75 2.4 7.5 $11.92 1.0 $11.77
$18.47 -$18.78 2.0 9.0 $18.48 .4 $18.48
$22.50 -$26.31 2.8 9.9 $26.28 - -
----------------- -------------------
$ 3.03 -$26.31 12.3 7.2 $14.94 5.4 $ 9.88
================= =================== ============= ===================== =============
</TABLE>
F-41
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(a) Financial Statements included in Part B.
1. Separate Account No. 45:
- Report of Independent Accountants - PricewaterhouseCoopers LLP;
- Statements of Assets and Liabilities for the Year Ended
December 31, 1998;
- Statements of Operations for the Year Ended December 31, 1998;
- Statements of Changes in Net Assets for the Years Ended
December 31, 1998 and 1997; and
- Notes to Financial Statements.
2. The Equitable Life Assurance Society of the United States:
- Report of Independent Accountants - PricewaterhouseCoopers LLP;
- Consolidated Balance Sheets as of December 31, 1998 and
1997;
- Consolidated Statements of Earnings for Years Ended
December 31, 1998, 1997 and 1996;
- Consolidated Statements of Equity for Years Ended
December 31, 1998, 1997 and 1996;
- Consolidated Statements of Cash Flows for Years Ended
December 31, 1998, 1997 and 1996; and
- Notes to Consolidated Financial Statements.
(b) Exhibits.
The following exhibits are filed herewith:
1. Resolutions of the Board of Directors of The Equitable Life
Assurance Society of the United States ("Equitable") authorizing the
establishment of the Registrant, incorporated herein by reference to
Exhibit No. (1) to Registration Statement No. 33-83750, filed
February 27, 1998.
2. Not applicable.
3. (a) Distribution and Servicing Agreement among Equico Securities,
Inc. (now EQ Financial Consultants, Inc.), The Equitable Life
Assurance Society of the United States and Equitable Variable
Life Insurance Company, dated as of May 1, 1994, incorporated
herein by reference to Exhibit 3(c) to the Registration
Statement on Form N-4 (File No. 2-30070) on February 14, 1995.
(b) Letter of Agreement for Distribution Agreement among The
Equitable Life Assurance Society of the United States and EQ
Financial Consultants, Inc., dated April 20, 1998 incorporated
herein by reference to Exhibit 3(c) to Registration Statement
No. 33-83750, filed May 1, 1998.
(c) Form of Sales Agreement among Equitable Distributors, Inc., as
Distributor, a Broker- Dealer (to be named) and a General Agent
(to be named), incorporated herein by reference to Exhibit No.
3(b) to Registration Statement No. 33-83750, filed February 27,
1998.
(d) Form of The Hudson River Trust Sales Agreement by and among
Equico Securities, Inc., The Equitable Life Assurance Society of
the United States, Equitable Distributors, Inc. and Separate
Account No. 45 of The Equitable Life Assurance Society of the
United States, incorporated herein by reference to Exhibit 3(c)
to Registration Statement No. 33-83750, filed February 27, 1998.
C-1
<PAGE>
4. (a) Form of group annuity contract no. 1050-94IC, incorporated
herein by reference to Exhibit 4(a) to Registration Statement
No. 33-83750, filed February 27, 1998.
(b) Forms of group annuity certificate nos. 94ICA and 94ICB,
incorporated herein by reference to Exhibit 4(b) to Registration
Statement No. 33-83750, filed February 27, 1998.
(c) Forms of endorsement nos. 94ENIRAI, 94ENNQI and 94ENMVAI to
contract no. 1050-94IC and data pages nos. 94ICA/BIM and
94ICA/BMVA, incorporated herein by reference to Exhibit 4(c) to
Registration Statement No. 33-83750, filed February 27, 1998.
(d) Form of Guaranteed Minimum Income Benefit Endorsement to
Contract Form No. 1050-94IC and the Certificates under the
Contract, incorporated herein by reference to Exhibit 4(h) to
Registration Statement No. 33-83750, filed April 23, 1996.
(e) Form of endorsement No. 98Roth to Contract Form No. 1050-94IC
and the Certificates under the Contract, incorporated herein by
reference to Exhibit 4(l) to Registration Statement No.
33-83750, filed December 31, 1997.
(f) Form of data pages No. 94ICB and 94ICBMVA for Equitable
Accumulator (IRA) Certificates, incorporated herein by
reference to Exhibit 4(m) to Registration Statement No.
33-83750, filed February 27, 1998.
(g) Form of data pages No. 94ICB and 94ICBMVA for Equitable
Accumulator (NQ) Certificates, incorporated herein by reference
to Exhibit 4(n) to Registration Statement No. 33-83750, filed
February 27, 1998.
(h) Form of data pages No. 94ICB and 94ICBMVA for Equitable
Accumulator (QP) Certificates, incorporated herein by reference
to Exhibit 4(o) to Registration Statement No. 33-83750, filed
February 27, 1998.
(i) Form of Endorsement applicable to Defined Benefit Qualified Plan
Certificates No. 98ENDQPI, incorporated herein by reference to
Exhibit 4(r) to Registration Statement No. 33-83750, filed
May 1, 1998.
(j) Form of Endorsement applicable to Non-Qualified Certificates No.
98ENJONQI, incorporated herein by reference to Exhibit 4(s) to
Registration Statement on No. 33-83750, filed February 27, 1998.
(k) Form of Endorsement for Extra Credit Annuity Form No. 98ECENDI
and Data Pages, previously filed with this Registration
Statement File No. 333-64751 on September 30, 1998.
(l) Form of Endorsement applicable to Defined Contribution Qualified
Plan Certificates No. 97ENQPI and Data Pages 94ICA/B, previously
filed with this Registration Statement File No. 333-64751 on
September 30, 1998.
C-2
<PAGE>
5. (a) Form of Enrollment Form/Application No. 126737 (5/98) for
Equitable Accumulator (IRA, NQ and QP), incorporated herein by
reference to Exhibit 5(e) to Registration Statement No.
33-83750, filed February 27, 1998.
6. (a) Restated Charter of Equitable, as amended January 1, 1997,
incorporated herein by reference to Exhibit 6(a) to Registration
Statement No. 33-83750, filed March 6, 1997.
(b) By-Laws of Equitable, as amended November 21, 1996, incorporated
herein by reference to Exhibit 6(b) to Registration Statement
No. 33-83750, filed March 6, 1997.
7. Not applicable.
8. Form of Participation Agreement among EQ Advisors Trust,
Equitable, Equitable Distributors, Inc. and EQ Financial
Consultants, Inc., incorporated by reference to the
Registration Statement of EQ Advisors Trust on Form N-1A.
(File Nos. 333-17217 and 811-07953).
9. Opinion and Consent of Counsel, previously filed with this
Registration Statement, File No. 333-64751 on June 7, 1999.
10. (a) Consent of PricewaterhouseCoopers LLP.
(b) Powers of Attorney, previously filed with this
Registration Statement, File No. 333-64751 on June 7, 1999.
(c) Power of Attorney.
11. Not applicable.
12. Not applicable.
13. (a) Formulae for Determining Money Market Fund Yield for a Seven-Day
Period, incorporated herein by reference to Exhibit 13(a) to
Registration Statement No. 33-83750, filed February 27, 1998.
(b) Formulae for Determining Cumulative and Annualized Rates of
Return, incorporated herein by reference to Exhibit 13(b) to
Registration Statement No. 33-83750, filed February 27, 1998.
(c) Formulae for Determining Standardized Performance Value and
Annualized Average Performance Ratio, incorporated herein by
reference to Exhibit 13(c) to Registration Statement No.
33-83750, filed February 27, 1998.
C-3
<PAGE>
Item 25: Directors and Officers of Equitable.
Set forth below is information regarding the directors and principal
officers of Equitable. Equitable's address is 1290 Avenue of Americas,
New York, New York 10104. The business address of the persons whose
names are preceded by an asterisk is that of Equitable.
POSITIONS AND
NAME AND PRINCIPAL OFFICES WITH
BUSINESS ADDRESS EQUITABLE
- ---------------- ---------
DIRECTORS
Francoise Colloc'h Director
AXA
23, Avenue Matignon
75008 Paris, France
Henri de Castries Director
AXA
23, Avenue Matignon
75008 Paris, France
Joseph L. Dionne Director
The McGraw-Hill Companies
1221 Avenue of the Americas
New York, NY 10020
Denis Duverne Director
AXA
23, Avenue Matignon
75008 Paris, France
Jean-Rene Fourtou Director
Rhone-Poulenc S.A.
25 Quai Paul Doumer
92408 Courbevoie Cedex,
France
Norman C. Francis Director
Xavier University of Louisiana
7325 Palmetto Street
New Orleans, LA 70125
C-4
<PAGE>
POSITIONS AND
NAME AND PRINCIPAL OFFICES WITH
BUSINESS ADDRESS EQUITABLE
- ---------------- ---------
Donald J. Greene Director
LeBouef, Lamb, Greene & MacRae
125 West 55th Street
New York, NY 10019-4513
John T. Hartley Director
Harris Corporation
1025 NASA Boulevard
Melbourne, FL 32919
John H.F. Haskell Jr. Director
Warburg Dillion Read LLC
535 Madison Avenue
New York, NY 10028
Mary R. (Nina) Henderson Director
International Plaza
P.O. Box 8000
Englewood Cliffs, NJ 07632-9976
W. Edwin Jarmain Director
Jarmain Group Inc.
121 King Street West
Suite 2525
Toronto, Ontario M5H 3T9,
Canada
George T. Lowy Director
Cravath, Swaine & Moore
825 Eighth Avenue
New York, NY 10019
C-5
<PAGE>
POSITIONS AND
NAME AND PRINCIPAL OFFICES WITH
BUSINESS ADDRESS EQUITABLE
- ---------------- ---------
Didier Pineau-Valencienne Director
Schneider S.A.
64-70 Avenue Jean-Baptiste Clement
92646 Boulogne-Billancourt Cedex
France
George J. Sella, Jr. Director
P.O. Box 397
Newton, NJ 07860
Peter J. Tobin Director
St. John's University
8000 Utopia Parkway
Jamaica, NY 11439
Dave H. Williams Director
Alliance Capital Management Corporation
1345 Avenue of the Americas
New York, NY 10105
OFFICER-DIRECTORS
- -----------------
*Michael Hegarty President, Chief Operating
Officer and Director
*Edward D. Miller Chairman of the Board,
Chief Executive Officer
and Director
* Stanley B. Tulin Vice Chairman of the Board,
Chief Financial Officer and Director
OTHER OFFICERS
- --------------
*Leon Billis Executive Vice President
and Chief Information Officer
*Derry Bishop Executive Vice President and Chief
Agency Officer
*Harvey Blitz Senior Vice President
*Kevin R. Byrne Senior Vice President and Treasurer
*John A. Caroselli Executive Vice President
*Alvin H. Fenichel Senior Vice President and
Controller
C-6
<PAGE>
POSITIONS AND
NAME AND PRINCIPAL OFFICES WITH
BUSINESS ADDRESS EQUITABLE
- ---------------- ---------
*Paul J. Flora Senior Vice President and Auditor
*Robert E. Garber Executive Vice President and
General Counsel
*James D. Goodwin Vice President
*Edward J. Hayes Senior Vice President
*Mark A. Hug Senior Vice President
*Donald R. Kaplan Vice President and Chief Compliance
Officer and Associate General
Counsel
*Michael S. Martin Executive Vice President and Chief
Marketing Officer
*Richard J. Matteis Executive Vice President
*Peter D. Noris Executive Vice President and Chief
Investment Officer
*Brian S. O'Neil Executive Vice President
*Anthony C. Pasquale Senior Vice President
*Pauline Sherman Senior Vice President, Secretary and
Associate General Counsel
*Samuel B. Shlesinger Senior Vice President
*Richard V. Silver Senior Vice President and Deputy
General Counsel
*Jose Suquet Senior Executive Vice President and
Chief Distribution Officer
*Naomi J. Weinstein Vice President
*Gregory Wilcox Executive Vice President
*R. Lee Wilson Executive Vice President
*Maureen K. Wolfson Vice President
C-7
<PAGE>
Item 26. Persons Controlled by or Under Common Control with the Insurance
Company or Registrant
Separate Account No. 45 of The Equitable Life Assurance Society of the
United States (the "Separate Account") is a separate account of Equitable.
Equitable, a New York stock life insurance company, is a wholly owned
subsidiary of The Equitable Companies Incorporated (the "Holding Company"), a
publicly traded company.
The largest stockholder of the Holding Company is AXA which as of
July 31, 1999 beneficially owned 58.3% of the Holding Company's outstanding
common stock. AXA is able to exercise significant influence over the
operations and capital structure of the Holding Company and its subsidiaries,
including Equitable. AXA, a French company, is the holding company for an
international group of insurance and related financial services companies.
C-8
<PAGE>
ORGANIZATION CHART OF EQUITABLE'S AFFILIATES
The Equitable Companies Incorporated (l991) (Delaware)
Donaldson, Lufkin & Jenrette, Inc. (1993) (Delaware) (41.8%) (See
Addendum B(1) for subsidiaries)
The Equitable Life Assurance Society of the United States (1859)
(New York) (a)(b)
The Equitable of Colorado, Inc. (l983) (Colorado)
EVLICO, INC. (1995) (Delaware)
EVLICO East Ridge, Inc. (1995) (California)
GP/EQ Southwest, Inc. (1995) (Texas)
Franconom, Inc. (1985) (Pennsylvania)
Frontier Trust Company (1987) (North Dakota)
Gateway Center Buildings, Garage, and Apartment Hotel, Inc.
(inactive) (pre-l970) (Pennsylvania)
Equitable Deal Flow Fund, L.P.
Equitable Managed Assets (Delaware)
EREIM LP Associates (99%)
EML Associates, L.P. (19.8%)
Alliance Capital Management L.P. (2.7% limited partnership
interest)
ACMC, Inc. (1991) (Delaware)(s)
Alliance Capital Management L.P. (1988) (Delaware)
(39.1% limited partnership interest)
EVCO, Inc. (1991) (New Jersey)
EVSA, Inc. (1992) (Pennsylvania)
Prime Property Funding, Inc. (1993) (Delaware)
Wil Gro, Inc. (1992) (Pennsylvania)
Equitable Underwriting and Sales Agency (Bahamas) Limited (1993)
(Bahamas)
(a) Registered Broker/Dealer (b) Registered Investment Advisor
C-9
<PAGE>
The Equitable Companies Incorporated (cont.)
Donaldson Lufkin & Jenrette, Inc.
The Equitable Life Assurance Society of the United States (cont.)
Fox Run, Inc. (1994) (Massachusetts)
STCS, Inc. (1992) (Delaware)
CCMI Corporation (1994) (Maryland)
FTM Corporation (1994) (Maryland)
Equitable BJVS, Inc. (1992) (California)
Equitable Rowes Wharf, Inc. (1995) (Massachusetts)
Camelback JVS, Inc. (1995) (Arizona)
ELAS Realty, Inc. (1996) (Delaware)
100 Federal Street Realty Corporation (Massachusetts)
Equitable Structured Settlement Corporation (1996) (Delaware)
Prime Property Funding II, Inc. (1997) (Delaware)
Sarasota Prime Hotels, Inc. (1997) (Florida)
ECLL, Inc. (1997) (Michigan)
Equitable Holdings LLC (1997) (New York) (into which Equitable Holding
Corporation was merged in 1997)
EQ Financial Consultants, Inc. (l97l) (Delaware) (a) (b)
ELAS Securities Acquisition Corp. (l980) (Delaware)
100 Federal Street Funding Corporation (Massachusetts)
EquiSource of New York, Inc. (1986) (New York) (See
Addendum A for subsidiaries)
Equitable Casualty Insurance Company (l986) (Vermont)
EREIM LP Corp. (1986) (Delaware)
EREIM LP Associates (1%)
EML Associates (.02%)
Equitable Distributors, Inc. (1988) (Delaware) (a)
(a) Registered Broker/Dealer (b) Registered Investment Advisor
C-10
<PAGE>
The Equitable Companies Incorporated (cont.)
Donaldson Lufkin & Jenrette, Inc.
The Equitable Life Assurance Society of the United States (cont.)
Equitable Holdings, LLC (cont.)
Equitable JVS, Inc. (1988) (Delaware)
Astor/Broadway Acquisition Corp. (1990) (New York)
Astor Times Square Corp. (1990) (New York)
PC Landmark, Inc. (1990) (Texas)
Equitable JVS II, Inc. (1994) (Maryland)
EJSVS, Inc. (1995) (New Jersey)
Donaldson, Lufkin & Jenrette, Inc. (1985 by EIC; 1993 by EQ and
EHC) (Delaware) (34.4%) (See Addendum B(1) for
subsidiaries)
JMR Realty Services, Inc. (1994) (Delaware)
Equitable Investment Corporation (l97l) (New York)
Stelas North Carolina Limited Partnership (50% limited
partnership interest) (l984)
Equitable JV Holding Corporation (1989) (Delaware)
Alliance Capital Management Corporation (l991) (Delaware) (b)
(See Addendum B(2) for subsidiaries)
Equitable Capital Management Corporation (l985)
(Delaware) (b)
Alliance Capital Management L.P. (1988)
(Delaware) (14.7% limited partnership interest)
EQ Services, Inc. (1992) (Delaware)
EREIM Managers Corp. (1986) (Delaware)
ML/EQ Real Estate Portfolio, L.P.
EML Associates, L.P.
(a) Registered Broker/Dealer (b) Registered Investment
Advisor
C-11
<PAGE>
ORGANIZATION CHART OF EQUITABLE'S AFFILIATES
ADDENDUM A - SUBSIDIARY
OF EQUITABLE HOLDINGS, LLC
HAVING MORE THAN FIVE SUBSIDIARIES
-------------------------------------------------------
EquiSource of New York, Inc. (formerly Traditional Equinet Business Corporation
of New York) has the following subsidiaries that are brokerage companies to
make available to Equitable Agents within each state traditional (non-equity)
products and services not manufactured by Equitable:
EquiSource of Alabama, Inc. (1986) (Alabama)
EquiSource of Arizona, Inc. (1986) (Arizona)
EquiSource of Arkansas, Inc. (1987) (Arkansas)
EquiSource Insurance Agency of California, Inc. (1987) (California)
EquiSource of Colorado, Inc. (1986) (Colorado)
EquiSource of Delaware, Inc. (1986) (Delaware)
EquiSource of Hawaii, Inc. (1987) (Hawaii)
EquiSource of Maine, Inc. (1987) (Maine)
EquiSource Insurance Agency of Massachusetts, Inc. (1988)
(Massachusetts)
EquiSource of Montana, Inc. (1986) (Montana)
EquiSource of Nevada, Inc. (1986) (Nevada)
EquiSource of New Mexico, Inc. (1987) (New Mexico)
EquiSource of Pennsylvania, Inc. (1986) (Pennsylvania)
EquiSource of Puerto Rico, Inc. (1997) (Puerto Rico)
EquiSource Insurance Agency of Utah, Inc. (1986) (Utah)
EquiSource of Washington, Inc. (1987) (Washington)
EquiSource of Wyoming, Inc. (1986) (Wyoming)
C-12
<PAGE>
ORGANIZATION CHART OF EQUITABLE'S AFFILIATES
ADDENDUM B - INVESTMENT SUBSIDIARIES
HAVING MORE THAN FIVE SUBSIDIARIES
------------------------------------
Donaldson, Lufkin & Jenrette, Inc. has the following subsidiaries, and
approximately 150 other subsidiaries, most of which are special purpose
subsidiaries (the number fluctuates according to business needs):
Donaldson, Lufkin & Jenrette, Securities Corporation (1985)
(Delaware) (a) (b)
Wood, Struthers & Winthrop Management Corp. (1985)
(Delaware) (b)
Autranet, Inc. (1985) (Delaware) (a)
DLJ Real Estate, Inc.
DLJ Capital Corporation (b)
DLJ Mortgage Capital, Inc. (1988) (Delaware)
Alliance Capital Management Corporation (as general partner) (b) has the
following subsidiaries:
Alliance Capital Management L.P. (1988) (Delaware) (b)
Alliance Capital Management Corporation of Delaware, Inc.
(Delaware)
Alliance Fund Services, Inc. (Delaware) (a)
Alliance Fund Distributors, Inc. (Delaware) (a)
Alliance Capital Oceanic Corp. (Delaware)
Alliance Capital Management Australia Pty. Ltd.
(Australia)
Meiji - Alliance Capital Corp. (Delaware) (50%)
Alliance Capital (Luxembourg) S.A. (99.98%)
Alliance Eastern Europe Inc. (Delaware)
Alliance Barra Research Institute, Inc. (Delaware)
(50%)
Alliance Capital Management Canada, Inc. (Canada)
(99.99%)
Alliance Capital Management (Brazil) Llda
Alliance Capital Global Derivatives Corp. (Delaware)
Alliance International Fund Services S.A.
(Luxembourg)
Alliance Capital Management (India) Ltd. (Delaware)
Alliance Capital Mauritius Ltd.
Alliance Corporate Finance Group, Incorporated
(Delaware)
Equitable Capital Diversified Holdings, L.P. I
Equitable Capital Diversified Holdings, L.P. II
Curisitor Alliance L.L.C. (Delaware)
Curisitor Holdings Limited (UK)
Alliance Capital Management (Japan), Inc.
Alliance Capital Management (Asia) Ltd.
Alliance Capital Management (Turkey), Ltd.
Cursitor Alliance Management Limited (UK)
(a) Registered Broker/Dealer (b) Registered Investment Advisor
C-13
<PAGE>
AXA GROUP CHART
The information listed below is dated as of January 1, 1999; percentages
shown represent voting power. The name of the owner is noted when AXA
indirectly controls the company.
AXA INSURANCE AND REINSURANCE BUSINESS HOLDING
COMPANY COUNTRY VOTING POWER
- ------- ------- ------------
AXA Assurances IARD France 100% by AXA France Assurance
AXA Assurances Vie France 88.1% by AXA France Assurance
and 11.9% by AXA Collectives
AXA Courtage IARD France 100% by AXA France Assurance
and AXA Global Risks
AXA Conseil Vie France 100% by AXA France Assurance
AXA Conseil IARD France 100% by AXA France Assurance
AXA Direct France 100% by AXA
Direct Assurances IARD France 100% by AXA Direct
Direct Assurances Vie France 100% by AXA Direct
Tellit Vie Germany 100% by AKA-CKAG
Axiva France 100% by AXA France Assurance
and AXA Conseil Vie
Juridica France 100% by AXA France Assurance
AXA Assistance France France 100% by AXA Assistance SA
AXA Collectives France AXA France Assurance, AXA
Assurances IARD and AXA
Courtage IARD Mutuelle
Societe Beaujon France 100% by AXA
Lor Finance France 99.3% by AXA
Jour Finance France 100% by AXA Conseil and
by AXA Assurances IARD
Financiere 45 France 99.8% by AXA
Mofipar France 99.9% by AXA
NSM Vie France 40.1% by AXA France Assurance
Saint Georges Re France 100% by France Assurance
AXA Global Risks France 100% owned by AXA France
Assurance, AXA Courtage
Assurance Mutuelle, and AXA
Assurances IARD Mutuelle
Argovie France 94% by Axiva
AXA Assistance SA France 76.8% by AXA and 23.2% by AXA
France Assurance
S.P.S. Reassurance France 69.9% by AXA Reassurance
AXA Participations France 50% by AXA, 25% by AXA Global
Risks and 25% by AXA Courtage
IARD
Colisee Excellence France 100% by Financiere Mermoz
Financiere Mermoz France 100% by AXA
C-14
<PAGE>
COMPANY COUNTRY VOTING POWER
- ------- ------- ------------
AXA Assistance SA France 76.8% by AXA and 23.2% by AXA
France Assurance
S.P.S. Reassurance France 69.9% by AXA Reassurance
AXA Participations France 50% by AXA, 25% by AXA Global
Risks and 25% by AXA Courtage
IARD
Colisee Excellence France 100% by Financiere Mermoz
Financiere Mermoz France 100% by AXA
AXA France Assurance France 100% by AXA
Thema Vie France 99.6% by Axiva
AXA-Colonia Konzern AG (AXA-
CKAG) Germany 39.7% by Vinci BV, 25.6% by
Kolnische Verwaltungs and
9.4% by AXA
Finaxa Belgium Belgium 100% by AXA
AXA Belgium Belgium 86.1% by Royale Belge and 13.9%
by Parcolvi
De Kortrijske Verzekering Belgium 99.8% by AXA Belgium
Juris Belgium 100% owned by AXA Belgium
Royale Belge Belgium 51.2% by AXA Holdings Belgium,
44.5% by AXA and 3.2% by AKA
Global Risks
Royale Belge 1994 Belgium 97.8% by Royale Belge and 2%
by UAB
UAB Belgium 100% by Royale Belge
Ardenne Prevoyante Belgium 99.4% by Royale Belge
GB Lex Belgium 55% by Royale Belge, 25% by
Royale Belge 1994, 10% by
Juridica and 10% by AXA
Conseil IARD
Royale Belge Re Belgium 100% by Royale Belge
Parcolvi Belgium 100% by Vinci Belgium Holding
BV
Vinci Belgium Belgium 99.5% by Vinci BV
Finaxa Luxembourg Luxembourg 100%
AXA Assurance IARD Luxembourg Luxembourg 100% by AXA Holding Luxembourg
AXA Assurance Vie Luxembourg Luxembourg 100% by AXA Holding Luxembourg
Royale UAP Luxembourg 100% by AXA Holding Luxembourg
Paneurolife Luxembourg 90% by different companies of
the AXA Group
Paneurore Luxembourg 100% by different companies of
the AXA Group
Crealux Luxembourg 100% by Royale Belge
Futur Re Luxembourg 100% by AXA Global Risks
AXA Holding Luxembourg Luxembourg 100% by Royale Belge
AXA Aurora Spain 30% owned by AXA and 40%
by AXA Participations
Reaseguros Aurora Vida SA de Spain 97% owned by Aurora Iberica SA
Seguros y Reaseguros de Seguros y Reaseguros and
1.5% by AXA
Hilo Direct Seguros y Reaseguros Spain 71.4% by AXA Aurora
Ayuda Legal Spain 88% by AXA Aurora Iberica SA de
Seguros y Reaseguros and 12% by
Aurora Vida
AXA Aurora Iberica SA de Spain 99.8% by AXA Aurora
Seguros y Reaseguros
AXA Assicurazioni Italy 83.7% owned by AXA, 12% by
Grupo UAP Italiana, 2.2% by
AXA Conseil Vie and 2.1%
by AXA Collectives
Eurovita Italy 30% owned by AXA Assicurazioni,
19% by AXA Conseil Vie and 19%
by AXA Collectives
Gruppo UAP Italia (GUI) Italy 97% by AXA Participations and
3% by AXA Collectives
UAP Vita Italy 62% by AXA
Allsecures Vita Italy 100% by AXA
AXA Equity & Law Plc U.K. 99.9% by AXA
AXA Equity & Law Life U.K. 100% by Sun Life Holdings Plc
Assurance Society
Sun Life lle de Man U.K. 100% owned by Sun Life
Assurance
AXA Global Risks U.K. 51% owned by AXA Global
Risks (France) and 49% by
AXA Courtage IARD
Sun Life and Provincial U.K. 71.6% by AXA and AXA
Holdings (SLPH) Equity & Law Plc
Sun Life Corporation Plc U.K. 100% by AXA Sun Life Holdings
Plc
Sun Life Assurance Society Plc U.K. 100% by AXA Sun Life Holdings
Plc
AXA Provincial Insurance U.K. 100% by SLPH
English & Scottish U.K. 100% by AXA UK
AXA UK U.K. 100% by AXA
Servco U.K. 100% by AXA Sun Life Holdings
Plc
AXA Sun Life Plc U.K. 100% by AXA Sun Life Holdings
Plc
AXA Leven The Nether- 100% by Nieuw Rotterdam
lands Verzekeringen
AXA Nederland BV The Nether- 55.4% by Royale Belge and 38.9%
lands by Gelderland BV
UNIROBE Groep BV The Nether- 100% by UAP Nieuw Rotterdam
lands Holding
AXA Levensverzekeringen The Nether- 100% by UAP Nieuw Rotterdam
lands Verzekeringen
AXA Schade The Nether- 100% by UAP Nieuw Rotterdam
lands Verzekeringen
Societe Generale d'Assistance The Nether- 100% by AXA Assistance Holding
lands
Gelderland BV The Nether- 100% by Royale Belge
lands
AXA Zorg The Nether- 100% by UAP Nieuw Rotterdam
lands Verzekeringen
Vinci BV The Nether- 100% by AXA
lands
AXA Portugal Companhia de Portugal 96.2% by different companies
Serguros SA of the AXA Group
AXA Portugal Companhia de Portugal 87.6% by AXA Conseil Vie and
Serguros de Vida SA 7.5% by AXA Participations
AXA Compagnie d' Assurances Switzerland 100% by AXA Participations
AXA Compagnie d' Assurances Switzerland 95% by AXA Participations
sur la Vie
AXA Al Amane Assurances Morocco 52% by AXA Participations and
15% by Empargne Croissance
AXA Canada Inc. Canada 100% by AXA
Empargne Croissance Morocco 99.3% by AXA Al Amane
Assurances
Colonia Nordstern Leben Germany 50% by AXA-CKAG and 50% by
Colonia Nordstern Versicherungs
Kolnische Verwaltungs Germany 67.7% by Vinci BV, 23% by AXA
Colonia Konzern AG and 8.8% by
AXA
Sicher Direkt Versicherung Germany 50% by AXA Direct and 50% by
AXA-CKAG
AXA Colonia Krankenversicherung Germany 51% by AXA-CKAG, 39.6% by AXA
Colonia Lebenversicherung and
12% by Deutsche
Arzleversicherung
Colonia Nordstern Versicherungs Germany 100% by AXA-CKAG
C-15
<PAGE>
COMPANY COUNTRY VOTING POWER
- ------- ------- ------------
AXA non life Insurance Cy. Ltd. Japan 100% by AXA Direct
AXA Life Insurance Japan 100% by AXA
Dongbu AXA Life Korea 50% by AXA
Insurance Co. Ltd.
Sime AXA Berhad Malaysia 30% owned by AXA and
AXA Reassurance
AXA Insurance Investment Singapore 88.7% by AXA and 11.41% by AXA
Holdings Pte Ltd Courtage IARD
AXA Life Insurance Singapore 100% owned by AXA
AXA Insurance Hong Kong 82.5% owned by AXA Investment
Holdings Pte Ltd and 17.5%
by AXA
National Mutual Asia Ltd Hong Kong 53.8% by National Mutual
Holdings, Ltd and 20% by Detura
The Equitable Companies U.S.A. 43% by AXA, Financiere 45
Incorporated 3.2%, Lorfinance 6.4%, AXA
Equity & Law Life Association
Society 4.1% and AXA
Reassurance 2.9% and 0.4% by
Societe Beaujon
The Equitable Life Assurance U.S.A. 100% owned by The Equitable
Society of the United States Companies Incorporated
(ELAS)
National Mutual Holdings Ltd Australia 42.1% by AXA and 8.9% by
AXA Equity & Law Life
Assurance Society
The National Mutual Life Australia 100% owned by National Mutual
Association of Australasia Holdings Ltd
National Mutual International Australia 100% owned by National Mutual
Holdings Ltd
Australian Casualty & Life Ltd Australia 100% owned by National Mutual
Holdings Ltd
National Mutual Health Australia 100% owned by National Mutual
Insurance Pty Ltd Holdings Ltd
Detura Hong Kong 75% by National Mutual Holdings
AXA Insurance Pte Ltd Singapore 100% by AXA Insurance
Investment Holdings Pte Ltd
AXA Reinsurance Asia Pte Ltd Singapore 100% by AXA Reassurance
C-16
<PAGE>
COMPANY COUNTRY VOTING POWER
- ------- ------- ------------
AXA Reassurance France 100% owned by AXA, AXA
Assurances IARD and AXA Global
Risks
AXA Re Finance France 79% owned by AXA Reassurance
AXA Cessions France 100% by AXA
AXA Reinsurance U.K. Plc U.K. 100% owned by AXA Re U.K.
Holding
AXA Re U.K. Company Limited U.K. 100% owned by AXA Reassurance
AXA Reinsurance Company U.S.A. 100% owned by AXA America
AXA America U.S.A. 100% owned by AXA Reassurance
AXA Gobal Risks US U.S.A. 96.4% by AXA Global Risks and
3.6% by Colonia Nordstern
Versicherungs AG
AXA Re Life Insurance Company U.S.A. 100% owned by AXA America
C.G.R.M. Monaco 100% owned by AXA Reassurance
Nordstern Colonia Osterreich Austria 88.5% by Colonia Nordstern
Versicherungs and 11.5% by
Colonia Nordstern Leben
Royale Belge International Belgium 100% by Royale Belge
Investissement
AXA Holding Belgium Belgium 75% by AXA, 17.7% by AXA Global
Risks and 7.4% by Various
Companies of the Group
Assurances de la Poste Belgium 50% by Royale Belge
Assurances de la Poste Vie Belgium 50% by Royale Belge
AXA Asset Management LTD U.K. 91% by AXA Investment Managers
and 9% by National Mutual
Funds Management
AXA Sun Life Holdings Plc U.K. 100% by SLPH
C-17
<PAGE>
AXA FINANCIAL BUSINESS
COMPANY COUNTRY VOTING POWER
- ------- ------- ------------
Compagnie Financiere de Paris France 100% AXA and the Mutuelles
(C.F.P.)
AXA Banque France 98.7% owned by Compagnie
Financiere de Paris
AXA Credit France 65% owned by Compagnie
Financiere de Paris
AXA Gestion FCP France 100% owned by AXA Investment
Managers Paris
Sofapi France 100% owned by Compagnie
Financiere de Paris
Soffim Holding France 100% owned by Compagnie
Financiere de Paris
Sofinad France 100% by Compagnie
Financiere de Paris
Banque des Tuileries France 100% by Compagnie
Financiere de Paris
Banque de marches et d'arbitrage France 18.5% by AXA and 8.2% by AXA
Courtage IARD
AXA Investment Managers France 100% by various companies
AXA Investment Managers Paris France 100% owned by AXA Investment
Managers
Colonia Bausbykasse Germany 66.7% by AXA-CKAG and 31.1% by
Colonia Nordstern Leben
Banque IPPA Belgium 99.9% by Royale Belge
Royal Belge Investissement Belgium 100% by Royale Belge
ANHYP Belgium 98.8% by Royale Belge
AXA Sun Life Asset Management U.K. 66.7% owned by SLPH and 33.3%
by AXA Asset Management Ltd.
C-18
<PAGE>
COMPANY COUNTRY VOTING POWER
- ------- ------- ------------
Alliance Capital Management U.S.A. 57.7% held by ELAS
Donaldson Lufkin & Jenrette U.S.A. 70.9% owned by Equitable
Holdings Corp. and ELAS
National Mutual Funds Australia 100% owned by National
Management (Global) Ltd Mutual Holdings Ltd
C-19
<PAGE>
AXA REAL ESTATE BUSINESS
COMPANY COUNTRY VOTING POWER
- ------- ------- ------------
S.G.C.I. France 100% by AXA
Transaxim France 100% owned by Compagnie
Parisienne de Participations
Compagnie Parisienne de France 100% owned by Sofinad
Participations (C.P.P.)
Monte Scopeto France 100% owned by Compagnie
Parisienne de Participations
Colisee Jeuneurs France 99.9% by Colisee Suresnes
Colisee Delcasse France 100% by Colisee Suresnes
Colisee Victoire France 99.7% by S.G.C.I.
Colisee Suresnes France 100% by Various Companies and
the Mutuelles
Colisee 21 Matignon France 99.4% by S.G.C.I. and 0.6% by
AXA
C-20
<PAGE>
COMPANY COUNTRY VOTING POWER
- ------- ------- ------------
Colisee Saint Georges France 100% by SGCI
AXA Millesimes France 92.9% owned by AXA and the
Mutuelles
AXA Immobiller France 100% by AXA
C-21
<PAGE>
ORGANIZATION CHART OF EQUITABLE'S AFFILIATES
NOTES
-----
1. The year of formation or acquisition and state or country of incorporation
of each affiliate is shown.
2. The chart omits certain relatively inactive special purpose real estate
subsidiaries, partnerships, and joint ventures formed to operate or
develop a single real estate property or a group of related properties,
and certain inactive name-holding corporations.
3. All ownership interests on the chart are 100% common stock ownership
except: (a) The Equitable Companies Incorporated's 41.8% interest in
Donaldson, Lufkin & Jenrette, Inc. and Equitable Holdings, LLC's
34.4% interest in same; (b) as noted for certain partnership interests; (c)
Equitable Life's ACMC, Inc.'s and Equitable Capital Management
Corporation's limited partnership interests in Alliance Capital Management
L.P.; and (d) as noted for certain subsidiaries of Alliance Capital
Management Corp. of Delaware, Inc.
4. The following entities are not included in this chart because, while they
have an affiliation with The Equitable, their relationship is not the
ongoing equity-based form of control and ownership that is characteristic
of the affiliations on the chart, and, in the case of the first two
entities, they are under the direction of at least a majority of "outside"
trustees:
The Hudson River Trust
EQ Advisors Trust
Separate Accounts
5. This chart was last revised on July 30, 1999.
C-22
<PAGE>
Item 27. Number of Contractowners
Currently, there are no holders of the contracts to be offered.
Item 28. Indemnification
Indemnification of Principal Underwriter
To the extent permitted by law of the State of New York and subject
to all applicable requirements thereof, EQ Financial Consultants, Inc. ("EQ
Financial") has undertaken to indemnify each of its directors and officers who
is made or threatened to be made a party to any action or proceeding, whether
civil or criminal, by reason of the fact the director or officer, or his or her
testator or intestate, is or was a director or officer of EQ Financial.
Indemnification of Directors and Officers
The By-Laws of The Equitable Life Assurance Society of the United
States ("Equitable Life") provides, in Article VII, as follows:
7.4 Indemnification of Directors, Officers and Employees. (a) To the
extent permitted by the law of the State of New York and subject
to all applicable requirements thereof:
(i) any person made or threatened to be made a party to any action or
proceeding, whether civil or criminal, by reason of the fact that
he or she, or his or her testator or intestate, is or was a
director, officer or employee of the Company shall be indemnified
by the Company;
(ii) any person made or threatened to be made a party to any action or
proceeding, whether civil or criminal, by reason of the fact that
he or she, or his or her testator or intestate serves or served
any other organization in any capacity at the request of the
Company may be indemnified by the Company; and
(iii) the related expenses of any such person in any of said categories
may be advanced by the Company.
(b) To the extent permitted by the law of the State of New York, the
Company may provide for further indemnification or advancement of
expenses by resolution of shareholders of the Company or the Board
of Directors, by amendment of these By-laws, or by agreement.
(Business Corporation Law ss.ss. 721-726; Insurance Law ss.1216)
The directors and officers of Equitable Life are insured under policies
issued by Lloyd's of London. X.L. Insurance Company and ACE Insurance Company.
The annual limit on such policies in $100 million, and the policies insure the
officers and directors against certain liablities arising out of their conduct
in such capacities.
Undertaking
Insofar as indemnification for liability arising under the Securities
Act of 1933 ("Act") may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant 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 is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant 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 registrant 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) EQ Financial, an indirect wholly owned subsidiary of Equitable, is
the principal underwriter for Separate Account No. 45. The principal business
address of EQ Financial is 1290 Avenue of the Americas, NY, NY 10104.
(b) Set forth below is certain information regarding the directors
and principal officers of EQ Financial Consultants, Inc. The business address of
the persons whose names are preceded by an asterisk is that of EQ Financial.
C-23
<PAGE>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER (EQ FINANCIAL CONSULTANTS)
- ---------------- -------------------------------------------
*Michael S. Martin Chairman of the Board and Director
*Michael F. McNelis President, Chief Operating Officer
and Director
*Martin J. Telles Executive Vice President and Chief
Marketing Officer
*Derry E. Bishop Executive Vice President and Director
*Harvey E. Blitz Executive Vice President and Director
G. Patrick McGunagle Executive Vice President and Director
*Michael J. Laughlin Director
*Richard V. Silver Director
*Mark R. Wutt Director
Edward J. Hayes Executive Vice President
200 Plaza Drive
Secaucus, NJ 07096
*Craig A. Junkins Executive Vice President
*Peter D. Noris Executive Vice President
*Mark A. Silberman Senior Vice President and Chief
Financial Officer
Stephen T. Burnthall Senior Vice President
6435 Shiloh Road
Suite A
Alpharetta, GA 30005
Richard Magaldi Senior Vice President
6435 Shiloh Road
Suite A
Alpharetta, GA 30005
*Donna M. Dazzo First Vice President
*Robin K. Murray First Vice President
*James Bodowitz Vice President and Counsel
*Michael Brzozowski Vice President and Compliance Director
*Mark D. Godolsky Vice President and Controller
*Linda J. Galasso Secretary
*Francesca Divone Assistant Secretary
(c) The information under "Distribution of the Certificates" in the
Prospectus forming a part of this Registration Statement is incorporated
herein by reference.
Item 30. Location of Accounts and Records
The records required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and Rules 31a-1 to 31a-3 thereunder are
maintained by Equitable at 1290 Avenue of the Americas, New York,
C-24
<PAGE>
New York 10104, 135 West 50th Street, New York, NY 10020, and 200 Plaza Drive,
Secaucus, NJ 07096. The policies files will be kept at Vantage Computer System,
Inc., 301 W. 11th Street, Kansas City, Mo. 64105.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
The Registrant hereby undertakes:
(a) 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 16 months old for so long as payments
under the variable annuity contracts may be accepted;
(b) 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) to deliver any Statement of Additional Information and any
financial statements required to be made available under
this Form promptly upon written or oral request.
Equitable represents that the fees and charges deducted under the Certificates
described in this Registration Statement, in the aggregate, in each case, are
reasonable in relation to the services rendered, the expenses to be incurred,
and the risks assumed by Equitable under the respective Certificates. Equitable
bases its representation on its assessment of all of the facts and
circumstances, including such relevant factors as: the nature and extent of
such services, expenses and risks, the need for Equitable to earn a profit, the
degree to which the Certificates include innovative features, and regulatory
standards for the grant of exemptive relief under the Investment Company Act of
1940 used prior to October 1996, including the range of industry practice. This
representation applies to all certificates sold pursuant to this Registration
Statement, including those sold on the terms specifically described in the
prospectuses contained herein, or any variations therein, based on supplements,
endorsements, data pages, or riders to any certificate or prospectus, or
otherwise.
C-25
<PAGE>
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 Amendment to the Registration Statement
and has duly caused this amendment to the Registration Statement to be signed
on its behalf, in the City and State of New York, on this 2nd day of September,
1999.
SEPARATE ACCOUNT No. 45 OF
THE EQUITABLE LIFE ASSURANCE SOCIETY
OF THE UNITED STATES
(Registrant)
By: The Equitable Life Assurance
Society of the United States
(Depositor)
By: /s/ Naomi J. Weinstein
-----------------------------------
Naomi J. Weinstein
Vice President
The Equitable Life
Assurance Society of the
United States
C-26
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company
Act of 1940, the Depositor has duly caused this amendment to the Registration
Statement to be signed on its behalf, in the City and State of New York, on this
2nd day of September, 1999.
THE EQUITABLE LIFE ASSURANCE SOCIETY
OF THE UNITED STATES
(Depositor)
By: /s/ Naomi J. Weinstein
---------------------------------
Naomi J. Weinstein
Vice President,
The Equitable Life Assurance
Society of the United States
As required by the Securities Act of 1933, this amendment to the
Registration Statement has been signed by the following persons in the
capacities and on the date indicated:
PRINCIPAL EXECUTIVE OFFICERS:
*Michael Hegarty President, Chief Operating Officer
and Director
*Edward D. Miller Chairman of the Board, Chief
Executive Officer and Director
PRINCIPAL FINANCIAL OFFICER:
*Stanley B. Tulin Vice Chairman of the Board
Chief Financial Officer and Director
PRINCIPAL ACCOUNTING OFFICER:
*Alvin H. Fenichel Senior Vice President and Controller
*DIRECTORS:
Francoise Colloc'h Donald J. Greene George T. Lowy
Henri de Castries John T. Hartley Edward D. Miller
Joseph L. Dionne John H.F. Haskell, Jr. Didier Pineau-Valencienne
Denis Duverne Michael Hegarty George J. Sella, Jr.
William T. Esrey Mary R. (Nina) Henderson Peter J. Tobin
Jean-Rene Fourtou W. Edwin Jarmain Stanley B. Tulin
Norman C. Francis Dave H. Williams
*By: /s/ Naomi J. Weinstein
------------------------
Naomi J. Weinstein
Attorney-in-Fact
September 2, 1999
C-27
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. TAG VALUE
- ----------- ---------
10(a) Consent of PricewaterhouseCoopers LLP EX-99.10a
10(c) Power of Attorney EX-99.10c
C-28
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 2 to the Registration
Statement No. 333-64751 on Form N-4 (the "Registration Statement") of (1) our
report dated February 8, 1999 relating to the financial statements of Separate
Account No. 45 of The Equitable Life Assurance Society of the United States for
the year ended December 31, 1998, and (2) our report dated February 8, 1999
relating to the consolidated financial statements of The Equitable Life
Assurance Society of the United States for the year ended December 31, 1998,
which reports appear in the Statement of Additional Information, and to the
incorporation by reference of our reports into the Prospectus which constitutes
part of this Registration Statement. We also consent to the references to us
under the headings "Custodian and Independent Accountants" in the Statement of
Additional Information and "About our independent accountants" in the
Prospectus.
/s/PricewaterhouseCoopers LLP
- -----------------------------
PricewaterhouseCoopers LLP
New York, New York
September 1, 1999
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or
Director of The Equitable Life Assurance Society of the United States (the
"Company"), a New York stock life insurance company, hereby constitutes and
appoints, Mark A. Hug, James D. Goodwin, Pauline Sherman, Michael F. McNelis,
Naomi J. Weinstein, Maureen K. Wolfson, Mildred Oliver, Mary P. Breen and each
of them (with full power to each of them to act alone), his or her true and
lawful attorney-in-fact and agent, with full power of substitution to each, for
him or her and on his or her behalf and in his or her name, place and stead, to
execute and file any of the documents referred to below relating to
registrations under the Securities Act of 1933, the Securities Exchange Act of
1934 and the Investment Company Act of 1940 with respect to any insurance or
annuity contracts or other agreements providing for allocation of amounts to
Separate Accounts of the Company, and related units or interests in Separate
Accounts: registration statements on any form or forms under the Securities Act
of 1933 and the Investment Company Act of 1940 and annual reports on any form or
forms under the Securities Exchange Act of 1934, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his, her or their substitutes being empowered to act with or without the
others, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand this
11th day of August, 1999.
/s/ Alvin H. Fenichel
---------------------
Alvin H. Fenichel
59838v2
