-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EyenPcQYZDuJzX936QSHgl7AJPd7N+gPJx/km3pA1VkmKnYxJsAY3RkSNegvheFi A0nOf6Xctuxz5OMI91whEQ== 0000771726-96-000120.txt : 19961212 0000771726-96-000120.hdr.sgml : 19961212 ACCESSION NUMBER: 0000771726-96-000120 CONFORMED SUBMISSION TYPE: S-6EL24 PUBLIC DOCUMENT COUNT: 60 FILED AS OF DATE: 19961211 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SEPARATE ACCOUNT FP OF EQUITABLE VARIABLE LIFE INSURANCE CO CENTRAL INDEX KEY: 0000771726 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-6EL24 SEC ACT: 1933 Act SEC FILE NUMBER: 333-17663 FILM NUMBER: 96679357 BUSINESS ADDRESS: STREET 1: 787 SEVENTH AVE CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2126418357 S-6EL24 1 IL PLUS MERGER FILING Registration No. 333- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 - -------------------------------------------------------------------------------- FORM S-6 FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933 OF SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED ON FORM N-8B-2 SEPARATE ACCOUNT FP of THE EQUITABLE LIFE ASSURANCE James M. Benson, President SOCIETY OF THE UNITED STATES The Equitable Life Assurance Society of (Exact Name of Trust) the United States 787 Seventh Avenue THE EQUITABLE LIFE ASSURANCE New York, New York 10019 SOCIETY OF THE UNITED STATES (Name and Address of Agent for Service) (Exact Name of Depositor) 1290 Avenue of the Americas New York, New York 10104 (Address of Depositor's Principal Executive Offices) --------------------------------------- Telephone Number, Including Area Code: (212) 554-1234 ---------------------------------------- Please send copies of all communications to: MARY P. BREEN, ESQ. with a copy to: Vice President and Associate General Counsel THOMAS C. LAUERMAN The Equitable Life Assurance Freedman, Levy, Kroll & Simonds Society of the United States 1050 Connecticut Avenue, N.W., Suite 825 787 Seventh Avenue Washington, D.C. 20036 New York, New York 10019 ---------------------------------------- Securities Being Registered: Units of Interest in Separate Account FP - -------------------------------------------------------------------------------- Approximate date of proposed public offering: As soon as practicable after the effective date of the Registration Statement. An indefinite amount of the Registrant's securities has been registered pursuant to a declaration, under Rule 24f-2 under the Investment Company Act of 1940, set out in the Form S-6 Registration Statement contained in File No. 2-98590. The Registrant filed a Rule 24f-2 Notice for the December 31, 1995 fiscal year end on February 27, 1996. The registrant hereby amends this Registration Statement under the Securities Act of 1933 on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. SEPARATE ACCOUNT FP OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES RECONCILIATION AND TIE ---------------------- INCENTIVE LIFE PLUS(SM) ITEMS OF FORM N-8B-2* CAPTIONS IN PROSPECTUS - ------------ ---------------------- 1 Summary of Incentive Life Plus(SM) Features - Putting Money Into The Policy. 2 Part 1: The Company That Issues Incentive Life Plus(SM). 3 Inapplicable. 4 Part 3: Distribution; Part 1: Equitable. 5, 6 Part 1: The Separate Account. 7 Inapplicable.** 8 Inapplicable.** 9 Part 3: Legal Proceedings. 10(a) Part 3: Your Beneficiary, Assigning Your Policy. 10(b) Part 2: How We Determine The Unit Value; Part 3: Dividends. 10(c), 10(d) Part 2: Death Benefits; Changing The Face Amount; Maturity Benefit; Transfers of Policy Account Value; Telephone Transfers; Borrowing From Your Policy Account; Partial Withdrawals and Surrender; Part 3: Your Payment Options; Assigning Your Policy; When We Pay Policy Proceeds. - ---------- *Registrants include this Reconciliation and Tie in their Registration Statement in compliance with Instruction 4 as to the Prospectus as set out in Form S-6. Separate Account FP is an investment company registered under the Investment Company Act of 1940 on a Form N-8B-2 Registration Statement (File No. 811-4388). Pursuant to Sections 8 and 30(b)(1) of the Investment Company Act of 1940, Rule 30a-1 under the Act, and Forms N-8B-2 and N-SAR under that Act, the Account keeps its Form N-8B-2 Registration Statement current through the filing of periodic reports required by the Securities and Exchange Commission. **Not required pursuant to either Instruction 1(a) as to the Prospectus as set out in Form S-6 or the administrative practice of the Commission and its staff of adapting the disclosure requirements of the Commission's registration statement forms in recognition of the differences between variable life insurance policies and other periodic payment plan certificates issued by investment companies and between separate accounts organized as management companies and unit investment trusts. -1- ITEMS OF FORM N-8B-2 CAPTIONS IN PROSPECTUS - ----------- ---------------------- 10(e) Part 2: Your Policy Can Terminate; You May Restore A Policy After It Terminates. 10(f) Part 3: Your Voting Privileges. 10(g)(1), 10(g)(2), 10(h)(1), 10(h)(2) Part 3: Our Right to Change How We Operate; Your Voting Privileges. 10(g)(3), 10(g)(4), 10(h)(3), 10(h)(4) Inapplicable.** 10(i) Part 1: The Separate Account And The Trust; Part 2: Amounts In The Separate Account; Tax Effects. 11 Part 1: The Trust; Investment Policies Of The Trust's Portfolios; The Separate Account. 12(a) Part 1: The Separate Account And The Trust - The Trust. 12(b) Inapplicable. 12(c) Part 1: The Trust. 12(d) Part 3: Distribution. 12(e) Inapplicable.** 13(a) Part 2: Transfers Of Policy Account Value; Partial Withdrawals; Deductions and Charges. 13(b), 13(c), 13(g) Inapplicable.** (But see Part 4: Illustrations of Policy Benefits). 13(d) Part 3: Special Circumstances. 13(e), 13(f) Inapplicable. 14 Part 2: Flexible Premiums; Policy Periods, Anniversaries, Dates and Ages. 15 Part 2: Flexible Premiums; Policy Periods, Anniversaries, Dates and Ages. 16 Part 1: The Separate Account; Transfers Out Of The Guaranteed Investment Division; Part 2: Amounts In The Separate Account; Transfers Of Policy Account Value; Repaying The Loan. -2- ITEMS OF FORM N-8B-2 CAPTIONS IN PROSPECTUS - ----------- ---------------------- 17(a), 17(b) Captions referenced under Items 10(c), 10(d) and 10(e) above. 17(c) Inapplicable.** 18(a) Part 2: How We Determine The Unit Value. 18(b), 18(d) Inapplicable. 18(c) Part 2: How We Determine The Unit Value; Tax Effects - Our Taxes 19 Part 3: Our Reports to Policyowners; Distribution; and Your Voting Privileges. 20(a) Captions referenced under Items 10(g)(1), 10(g)(2), 10(h)(1), and 10(h)(2). 20(b), 20(c), 20(d), 20(e), 20(f) Inapplicable. 21(a), 21(b) Part 2: Borrowing From Your Policy Account. 21(c) Inapplicable.** 22 Part 3: Limits On Our Right to Challenge The Policy. 23 Inapplicable. 24 Part 1; Part 2; Part 3. 25 Part 1; Equitable. 26(a), 26(b) Inapplicable.** 27 Part 1: Equitable; Part 3: Distribution 28 Part 3: Management. 29 Part 1: Equitable. 30 Inapplicable. 31, 32, 33, 34 Inapplicable.** 35 Part 3: Regulation. 36 Inapplicable.** 37 Inapplicable. 38 Part 3: Distribution. -3- ITEMS OF FORM N-8B-2 CAPTIONS IN PROSPECTUS - ----------- ---------------------- 39(a) Part 1: Equitable. 39(b) Part 3: Distribution. 40(a) Inapplicable.** (But see Part 3: Distribution.) 40(b) Inapplicable. 41(a) Part 1: Equitable; Part 3: Distribution. 41(b), 41(c), 42 Inapplicable.** 43 Inapplicable. 44(a)(1) Part 2: How We Determine The Unit Value. 44(a)(2) Part 1: The Separate Account: Transfers Out Of The Guaranteed Interest Division; Part 2: Death Benefits; Maturity Benefit; Amounts In The Separate Account; How We Determine The Unit Value; Transfers Of Policy Account Value; Telephone Transfers; Borrowing From Your Policy Account; Partial Withdrawals; Surrender For Net Cash Surrender Value; Policy Periods, Anniversaries, Dates and Ages; Part 3: When We Pay Policy Proceeds. 44(a)(3) Captions referenced under Item 44(a)(2) and Part 2: Your Policy Account Value. 44(a)(4) Part 2: Our Taxes. 44(a)(5) Part 2: Deductions From Premiums. 44(a)(6) Part 2: Your Policy Account Value; Amounts In The Separate Account; How We Determine The Unit Value; Part 4: Illustration Of Policy Benefits. 44(b) Inapplicable.** 44(c) Part 3: Special Circumstances. 45 Inapplicable. 46(a) Captions referenced under Item 44(a) above. 46(b) Inapplicable.** 47, 48, 49 Inapplicable. -4- ITEMS OF FORM N-8B-2 CAPTIONS IN PROSPECTUS - ----------- ---------------------- 50 Part 1: The Separate Account. 51(a)-(j) Inapplicable.** 52(a), 52(c) Part 3: Our Right To Change How We Operate. 52(b), 52(d) Inapplicable. 53(a) Part 2: Our Taxes. 53(b), 54 Inapplicable. 55 Inapplicable.** 56 - 59 Inapplicable.** 15241/brd-1.doc -5- THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES SUPPLEMENT DATED JANUARY 1, 1997 TO INCENTIVE LIFE PLUS PROSPECTUS DATED JANUARY 1, 1997 This supplement modifies certain information in the Prospectus dated January 1, 1997 (the "Prospectus") for Incentive Life Plus, a flexible premium variable life insurance policy issued by Equitable. Terms used in this Supplement have the same meanings as in the Prospectus. Subject to the conditions discussed below, Equitable will offer an Endorsement to the Incentive Life Plus policy that will refund or waive all or a portion of certain policy charges if the policy is surrendered for its net cash surrender value within a limited time period (the "Endorsement"). Under Equitable's current rules, the Endorsement will be offered where the following conditions are met: o a minimum of five policies are issued, each on the life of a different insured person; o the persons proposed to be insured are deemed by us to be highly compensated individuals; o the policies must have an average Face Amount of at least $500,000; o the initial premium under each of the policies must be remitted to Equitable by the employer; and o the aggregate annualized first year planned periodic premium for all policies must be at least $150,000. The Endorsement operates to reduce the difference between premiums paid and Cash Surrender Value upon surrender in the early policy years, which, in turn, is expected to reduce any charge against the employers' earnings when a policy is accounted for under generally accepted accounting principles (GAAP). Policyowners must rely on the advice of their own accountants, however, to determine how the purchase of a policy, as modified by the Endorsement, will affect their GAAP financial statements. The Endorsement reduces the difference between premiums paid and Cash Surrender Value by refunding all or a portion of the deductions from premiums (charge for applicable taxes and Premium Sales Charge), and waiving all or a portion of the Surrender Charges if the policy is surrendered in the early policy years. The percentage of charges refunded or waived under the Endorsement are as follows: SURRENDER IN PERCENT OF PREMIUM PERCENT OF SURRENDER POLICY YEAR DEDUCTIONS REFUNDED CHARGES WAIVED - ----------------- ------------------------ ---------------------- 1 100% 100% 2 67% 80% 3 33% 60% 4 0% 40% 5 0% 20% 6 and later 0% 0% For example, if a policy subject to the Endorsement were surrendered in the first policy year, Equitable would refund 100% of the charges that had been deducted for premium tax and the Premium Sales Charge, and would waive 100% of the Administrative Surrender Charge and the Premium Surrender Charge otherwise payable at that time. Once the Endorsement terminates at the end of the fifth policy year, however, there will be no refund of prior premium deductions and the full amount of the Surrender Charges payable under the policy will be assessed upon surrender. The Endorsement only operates if the policy is surrendered in full. There is no waiver of the Surrender Charges or refund of premium deductions if the policy terminates or if the Face Amount is reduced. Nor is there a refund of prior premium deductions for partial withdrawals. The Endorsement does not affect the calculation of Cash Surrender Value or Net Cash Surrender Value for purposes of determining limitations on loans and partial withdrawals, or for determining whether a policy will terminate. See BORROWING FROM YOUR POLICY ACCOUNT, PARTIAL WITHDRAWALS and YOUR POLICY CAN TERMINATE in the Prospectus. We will not approve Face Amount increases while the Endorsement is in effect. EVM-102 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES SUPPLEMENT DATED JANUARY 1, 1997 TO INCENTIVE LIFE PLUS PROSPECTUS DATED JANUARY 1, 1997 This supplement modifies certain information in the Prospectus, dated January 1, 1997 (the "Prospectus") for Incentive Life Plus, a flexible premium variable life insurance policy issued by Equitable. Subject to the rules discussed below, Equitable will offer a modified version of its Incentive Life Plus policy (the "Incentive Life COLI Policy") to qualified offerees. This supplement describes the material differences between the Incentive Life COLI Policy and the Incentive Life Plus policy described in the Prospectus and is for use only in connection with offers of the Incentive Life COLI Policy. Capitalized terms used in this Supplement have the same meanings as in the Prospectus. Under Equitable's current rules, the Incentive Life COLI Policy will be offered to corporations and partnerships that meet the following conditions at issue: o a minimum of five policies are issued, each on the life of a different eligible insured person; o the persons proposed to be insured under the policies are deemed by us to be highly compensated individuals; o the minimum initial premium under each of the policies must be remitted to Equitable by the employer; o the aggregate annualized first year planned periodic premium for all policies must be at least $150,000; and o certain undertakings, which may be required by Equitable in certain situations, have been submitted to Equitable. Set forth below are modifications to the discussion in the Prospectus which are appropriate with respect to the Incentive Life COLI Policy. MINIMUM FACE AMOUNT. The minimum Face Amount for the Incentive Life COLI Policy is $100,000. CHANGES IN INSURANCE PROTECTION. There are no face amount increases under the Incentive Life COLI Policy. DEDUCTIONS AND CHARGES. Additional Benefits. The additional benefits (certain extra charge, optional benefits) described in the Incentive Life Plus prospectus on page 11 are not available under the Incentive Life COLI Policy. Deductions From Premium. Rather than deducting the Premium Sales Charge from premiums, Equitable will deduct the charge from the Policy Account at the beginning of each policy month during the first ten policy years. The amount deducted will be 1/2% of one "sales load target premium." The total amount deducted, however, will not exceed 6% of cumulative premiums actually paid to the date of deduction. The sales load target premium varies by issue age, sex and tobacco user status of the insured person and the policy's Face Amount, and is generally less than or equal to 75% of one annual whole life premium calculated at 4% interest and guaranteed maximum cost of insurance and expense charges. Charges Against the Separate Account. There are no charges assessed against the Separate Account under the Incentive Life COLI Policy, but a mortality and expense risk charge is deducted from the Policy Account each month at a current annual rate of .60% of the unloaned Policy Account value. The annual guaranteed maximum rate is .90%. Current cost of insurance rates during the first two policy years are generally lower than the current cost of insurance rates for the Incentive Life Plus policy. This relationship between the cost of insurance rates of the two policies is not guaranteed. The reduction in the current cost of insurance charge that begins in the tenth policy year will grade up to an annual rate of .60% in the twenty-fifth policy year and later. This cost of insurance charge reduction applies on a current basis and is not guaranteed. Surrender Charges. There is no Administrative Surrender Charge. Subject to a maximum described below, the Premium Surrender Charge is equal to 24% of premiums paid in the first policy year, up to one surrender charge target premium, and 3% of additional premiums paid through the fifteenth policy year. In each of the first five policy years, the Premium Surrender Charge is reduced by a percentage equal to: 100% in the first policy year; 80% in the second policy year; 60% in the third policy year; 40% in the fourth policy year; and 20% in the fifth policy year. There is no Premium Surrender Charge after the fifteenth policy year. The surrender charge target premium is less than or equal to the SEC Guideline Annual Premium associated with this policy. The SEC Guideline Annual Premium is the level annual amount that would be payable in each policy year under certain assumptions defined by the SEC. These assumptions include cost of insurance charges based on the 1980 Commissioner's Standard Ordinary Mortality Tables, net investment earnings at an annual rate of 5%, and the fees and charges associated with the policy. We guarantee that the maximum Premium Surrender Charge will never be greater than 66% of one target premium. Before the sixth policy year, the 66% maximum is reduced by the same percentages described above. After the ninth policy year, the 66% maximum begins to decrease by 11% per year on a monthly basis, until it reaches zero at the end of the fifteenth policy year. Target premiums are actuarially determined based on the age of the insured person and the Face Amount of the policy. EVM-101 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES IL PROTECTOR(SM) IL COLI II(SM) IL COLI INCENTIVE LIFE PLUS(SM) SURVIVORSHIP 2000 SPECIAL OFFER POLICY INCENTIVE LIFE 2000 CHAMPION 2000 SP-FLEX INCENTIVE LIFE PROSPECTUS SUPPLEMENT DATED JANUARY 1, 1997 This supplement updates certain information in the Prospectus you received for the variable life insurance policy you purchased from Equitable Variable Life Insurance Company ("Equitable Variable")*. If your prospectus is dated 1995 or earlier, we also mailed to you a prospectus supplement dated May 1, 1996. Capitalized terms used in this supplement have the same meanings as in the Prospectus. You should keep this supplement with your Prospectus and any May 1, 1996 supplement. We will send you another copy of any Prospectus or supplement, without charge, on written request. On January 1, 1997, Equitable Variable, a wholly-owned subsidiary of The Equitable Life Assurance Society of the United States ("Equitable") was merged with and into Equitable. As a result of this merger, all of Equitable Variable's assets, including the assets of Equitable Variable's Separate Account FP, became the assets of Equitable, and all of Equitable Variable's obligations, including your policy, were assumed by Equitable. The merger did not affect any policy values, premiums, investment options or other terms and conditions of your policy in any way. Policy Account values allocated to the Separate Account Funds continue after the merger without change or interruption. Management. A list of our directors and, to the extent they are responsible for variable life insurance operations, our principal officers and a brief statement of their business experience for the past five years is contained in Appendix A to this supplement. Financial Statements. The financial statements of Separate Account FP and Equitable included in this prospectus supplement have been audited for the years ended December 31, 1995, 1994 and 1993 by the accounting firm of Price Waterhouse LLP, independent accountants, as stated in their reports. The financial statements of Separate Account FP and Equitable for the years ended December 31, 1995, 1994 and 1993 included in this prospectus supplement have been so included in reliance on the reports of Price Waterhouse LLP, given on the authority of such firm as experts in accounting and auditing. The financial statements of Separate Account FP and Equitable for the periods ended September 30, 1996 and 1995 included in this prospectus supplement are unaudited. The financial statements of Equitable contained in this prospectus supplement should be considered only as bearing upon the ability of Equitable to meet its obligations under the policies. They should not be considered as bearing upon the investment experience of the funds in the Separate Account. The financial statements of Separate Account FP include periods prior to the merger when Separate Account FP was part of Equitable Variable. - ------------------- *This supplement updates certain information contained in the IL Protector Prospectus dated July 25, 1996; the IL COLI II Prospectus dated July 24, 1996; the Incentive Life Plus Prospectuses dated December 19, 1994, May 1, 1995, September 15, 1995 and May 1, 1996; the IL COLI supplements thereto dated September 15, 1995 and May 1, 1996, and the Special Offer Policy supplements thereto dated May 1, 1995, September 15, 1995 and May 1, 1996; the Survivorship 2000 Prospectuses dated August 18, 1992 and May 1, 1993, 1994, 1995 and 1996; the Incentive Life 2000 Prospectuses dated November 27, 1991 and May 1, 1993 and 1994, and the Special Offer Policy supplements thereto dated November 27, 1991, January 29, 1993, May 1, 1993, May 1, 1994, and May 1, 1995; the Champion 2000 Prospectuses dated November 27, 1991 and May 1, 1993 and 1994; the SP-FLEX Prospectuses dated September 30 and August 24, 1987; and the Incentive Life Prospectuses dated August 29, 1989, February 27, 1991 and May 1, 1990, 1993 and 1994. EVM-103 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP INDEX TO FINANCIAL STATEMENTS Independent Auditor's Report.......................................................................................... FSA-2 Financial Statements: Statement of Assets and Liabilities, December 31, 1995.......................................................... FSA-3 Statement of Operations for the Years Ended December 31, 1995, 1994 and 1993.................................... FSA-4 Statement of Changes in Net Assets for the Years Ended December 31, 1995, 1994 and 1993......................... FSA-8 Notes to Financial Statements................................................................................... FSA-12 Interim Financial Statements: Statement of Assets and Liabilities, September 30, 1996 (unaudited)............................................. FSA-20 Statement of Operations for the Nine Months Ended September 30, 1996 and 1995 (unaudited)....................... FSA-21 Statement of Changes in Net Assets for the Nine Months Ended September 30, 1996 and 1995 (unaudited)............ FSA-24 Notes to Interim Financial Statements (unaudited)............................................................... FSA-27
FSA-1 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors of Equitable Variable Life Insurance Company and Policyowners of Separate Account FP of Equitable Variable Life Insurance Company 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 Money Market Division, Intermediate Government Securities Division, Quality Bond Division, High Yield Division, Growth and Income Division, Equity Index Division, Common Stock Division, Global Division, International Division, Aggressive Stock Division, Conservative Investors Division, Balanced Division and Growth Investors Division, separate investment divisions of Equitable Variable Life Insurance Company ("Equitable Variable Life") Separate Account FP at December 31, 1995 and the results of each of their operations and changes in each of their net assets for each of the periods indicated, in conformity with generally accepted accounting principles. These financial statements are the responsibility of Equitable Variable Life's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of shares in The Hudson River Trust at December 31, 1995 with the transfer agent, provide a reasonable basis for the opinion expressed above. PRICE WATERHOUSE LLP New York, NY February 7, 1996, except as to Note 8 which is as of September 19, 1996 FSA-2 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 1995
INTERMEDIATE MONEY GOVERNMENT QUALITY HIGH GROWTH & EQUITY MARKET SECURITIES BOND YIELD INCOME INDEX DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION ------------ ----------- ------------ ----------- ----------- ----------- ASSETS Investments in shares of The Hudson River Trust -- at market value (Notes 2 and 7) Cost: $207,548,119..... $207,638,095 37,536,467..... $37,681,989 141,011,715..... $138,906,039 68,700,148..... $72,524,129 17,021,456..... $19,144,802 59,443,291..... $71,895,056 Receivable for sales of shares of The Hudson River Trust........... -- -- -- -- -- -- Receivable for policy- related transactions.. 1,030,719 472,227 195,736 671,870 272,371 214,843 ------------ ----------- ------------ ----------- ----------- ----------- Total Assets............ 208,668,814 38,154,216 139,101,775 73,195,999 19,417,173 72,109,899 ------------ ----------- ------------ ----------- ----------- ----------- LIABILITIES Payable for purchases of shares of The Hudson River Trust................. 1,021,043 488,551 195,429 740,734 272,227 214,856 Payable for policy- related transactions.. -- -- -- -- -- -- Amount retained by Equitable Variable Life in Separate Account FP (Note 4)........... 514,240 516,621 618,900 524,303 526,633 271,428 ------------ ----------- ------------ ----------- ---------- ----------- Total Liabilities....... 1,535,283 1,005,172 814,329 1,265,037 798,860 486,284 ------------ ----------- ------------ ----------- ---------- ----------- NET ASSETS ATTRIBUTABLE TO POLICYOWNERS......... $207,133,531 $37,149,044 $138,287,446 $71,930,962 $18,618,313 $71,623,615 ============ =========== ============ =========== =========== ===========
See Notes to Financial Statements.
COMMON AGGRESSIVE STOCK GLOBAL INTERNATIONAL STOCK DIVISION DIVISION DIVISION DIVISION -------------- ------------ ----------- ------------ ASSETS Investments in shares of The Hudson River Trust -- at market value (Notes 2 and 7) Cost: $966,230,780...... $1,148,055,059 297,303,481...... $333,829,077 11,991,226...... $12,659,132 475,758,260...... $556,029,378 Receivable for sales of shares of The Hudson River Trust........... -- -- -- -- Receivable for policy- related transactions.. 233,000 421,042 137,166 800,569 -------------- ------------ ----------- ------------ Total Assets............ 1,148,288,059 334,250,119 12,796,298 556,829,947 -------------- ------------ ----------- ------------ LIABILITIES Payable for purchases of shares of The Hudson River Trust................. 679,729 246,368 143,511 1,121,615 Payable for policy- related transactions.. -- -- -- -- Amount retained by Equitable Variable Life in Separate Account FP (Note 4)........... 1,023,056 506,731 220,849 520,201 -------------- ------------ ----------- ------------ Total Liabilities....... 1,702,785 753,099 364,360 1,641,816 -------------- ------------ ----------- ------------ NET ASSETS ATTRIBUTABLE TO POLICYOWNERS....... $1,146,585,274 $333,497,020 $12,431,938 $555,188,131 ============== ============ =========== ============
See Notes to Financial Statements. ASSET ALLOCATION SERIES -------------------------------------------- CONSERVATIVE GROWTH INVESTORS BALANCED INVESTORS DIVISION DIVISION DIVISION ------------ ------------ ------------ ASSETS Investments in shares of The Hudson River Trust -- at market value (Notes 2 and 7) Cost: $162,300,470...... $172,662,590 356,282,500...... $399,379,687 474,917,898...... $556,703,771 Receivable for sales of shares of The Hudson River Trust........... 76,736 -- -- Receivable for policy- related transactions.. -- -- 191,779 ------------ ------------ ------------ Total Assets............ 172,739,326 399,379,687 556,895,550 ------------ ------------ ------------ LIABILITIES Payable for purchases of shares of The Hudson River Trust................. -- 179,701 414,996 Payable for policy- related transactions.. 81,465 47,918 -- Amount retained by Equitable Variable Life in Separate Account FP (Note 4)........... 570,762 586,859 602,888 ------------ ------------ ------------ Total Liabilities....... 652,227 814,478 1,017,884 ------------ ------------ ------------ NET ASSETS ATTRIBUTABLE TO POLICYOWNERS....... $172,087,099 $398,565,209 $555,877,666 ============ ============ ============ See Notes to Financial Statements. FSA-3 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP STATEMENTS OF OPERATIONS
MONEY MARKET DIVISION INTERMEDIATE GOVERNMENT SECURITIES DIVISION ------------------------------------ ------------------------------------------- YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, ------------------------------------ -------------------------------------- 1995 1994 1993 1995 1994 1993 ---------- ---------- ---------- ---------- ------------ ---------- INCOME AND EXPENSES: Income (Note 2): Dividends from The Hudson River Trust....... $9,225,401 $5,368,883 $4,163,389 $2,010,283 $ 5,671,984 $14,930,827 Expenses (Note 3): Mortality and expense risk charges.......... 954,556 826,379 834,113 197,721 527,675 1,470,325 ---------- ---------- ---------- ---------- ----------- ----------- NET INVESTMENT INCOME........................... 8,270,845 4,542,504 3,329,276 1,812,562 5,144,309 13,460,502 ---------- ---------- ---------- ---------- ----------- ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 2): Realized gain (loss) on investments......... (432,347) 95,530 (339,754) (810,768) (10,163,976) 3,999,846 Realized gain distribution from The Hudson River Trust.................... -- -- -- -- -- 11,449,074 ---------- ---------- ---------- ---------- ----------- ----------- NET REALIZED GAIN (LOSS)........................ (432,347) 95,530 (339,754) (810,768) (10,163,976) 15,448,920 Unrealized appreciation/depreciation on investments: Beginning of period......................... 32,760 (14,267) (224,885) (2,736,863) (1,617,237) 1,966,231 End of period............................... 89,976 32,760 (14,267) 145,522 (2,736,863) (1,617,237) ---------- ---------- ---------- ---------- ----------- ----------- Change in unrealized appreciation/depreciation during the period........................... 57,216 47,027 210,618 2,882,385 (1,119,626) (3,583,468) ---------- ---------- ---------- ---------- ----------- ----------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS................................ (375,131) 142,557 (129,136) 2,071,617 (11,283,602) 11,865,452 ---------- ---------- ---------- ---------- ----------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS............................... $7,895,714 $4,685,061 $3,200,140 $3,884,179 $(6,139,293) $25,325,954 ========== ========== ========== ========== =========== ===========
QUALITY BOND DIVISION ------------------------------------------- OCTOBER 1* TO YEAR ENDED DECEMBER 31, DECEMBER 31, --------------------------- ------------ 1995 1994 1993 ----------- ------------ ------------ INCOME AND EXPENSES: Income (Note 2): Dividends from The Hudson River Trust....... $ 7,958,285 $ 8,123,722 $ 1,221,840 Expenses (Note 3): Mortality and expense risk charges.......... 767,627 689,178 163,308 ----------- ------------ ------------ NET INVESTMENT INCOME........................... 7,190,658 7,434,544 1,058,532 ----------- ------------ ------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 2): Realized gain (loss) on investments......... (632,666) (410,697) (106) Realized gain distribution from The Hudson River Trust.................... -- -- 130,973 ----------- ------------ ------------ NET REALIZED GAIN (LOSS)........................ (632,666) (410,697) 130,867 Unrealized appreciation/depreciation on investments: Beginning of period......................... (15,521,200) (1,886,621) -- End of period............................... (2,105,676) (15,521,200) (1,886,621) ----------- ------------ ----------- Change in unrealized appreciation/depreciation during the period........................... 13,415,524 (13,634,579) (1,886,621) ----------- ------------ ----------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS................................ 12,782,858 (14,045,276) (1,755,754) ----------- ------------ ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS............................... $19,973,516 $ (6,610,732) $ (697,222) =========== ============ ===========
See Notes to Financial Statements. * Commencement of Operations FSA-4 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP STATEMENTS OF OPERATIONS (CONTINUED)
HIGH YIELD DIVISION ---------------------------------------- YEAR ENDED DECEMBER 31, ---------------------------------------- 1995 1994 1993 ----------- ----------- ---------- INCOME AND EXPENSES: Income (Note 2): Dividends from The Hudson River Trust................. $ 6,518,568 $ 4,578,946 $4,488,259 Expenses (Note 3): Mortality and expense risk charges.................... 371,369 305,522 285,992 ----------- ----------- ---------- NET INVESTMENT INCOME..................................... 6,147,199 4,273,424 4,202,267 ----------- ----------- ---------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 2): Realized gain (loss) on investments................... (179,454) (328,199) 107,852 Realized gain distribution from The Hudson River Trust.............................. -- -- 1,030,687 ----------- ----------- ---------- NET REALIZED GAIN (LOSS).................................. (179,454) (328,199) 1,138,539 Unrealized appreciation/depreciation on investments: Beginning of period................................... (873,103) 4,734,999 763,746 End of period......................................... 3,823,981 (873,103) 4,734,999 ----------- ----------- ---------- Change in unrealized appreciation/depreciation during the period..................................... 4,697,084 (5,608,102) 3,971,253 ----------- ----------- ---------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS.... 4,517,630 (5,936,301) 5,109,792 ----------- ----------- ---------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS......................................... $10,664,829 $(1,662,877) $9,312,059 =========== =========== ==========
See Notes to Financial Statements.
GROWTH & INCOME DIVISION EQUITY INDEX DIVISION --------------------------------------- -------------------------- OCTOBER 1* APRIL 1* TO YEAR ENDED TO YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, ------------------------ ------------- ----------- ------------- 1995 1994 1993 1995 1994 ---------- --------- ------------- ----------- ------------- INCOME AND EXPENSES: Income (Note 2): Dividends from The Hudson River Trust................. $ 380,677 $ 108,492 $ 3,394 $ 964,775 $ 596,180 Expenses (Note 3): Mortality and expense risk charges.................... 69,716 19,204 1,833 289,199 152,789 ---------- --------- ------- ----------- --------- NET INVESTMENT INCOME..................................... 310,961 89,288 1,561 675,576 443,391 ---------- --------- ------- ----------- --------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 2): Realized gain (loss) on investments................... 2,791 (11,709) (134) 3,060 (6,949) Realized gain distribution from The Hudson River Trust.............................. -- -- -- 536,890 134,154 ---------- --------- ------- ----------- --------- NET REALIZED GAIN (LOSS).................................. 2,791 (11,709) (134) 539,950 127,205 Unrealized appreciation/depreciation on investments: Beginning of period................................... (141,585) (904) -- (399,286) -- End of period......................................... 2,123,346 (141,585) (904) 12,451,765 (399,286) ---------- --------- ------- ----------- --------- Change in unrealized appreciation/depreciation during the period..................................... 2,264,931 (140,681) (904) 12,851,051 (399,286) ---------- --------- ------- ----------- --------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS.... 2,267,722 (152,390) (1,038) 13,391,001 (272,081) ---------- --------- ------- ----------- --------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS......................................... $2,578,683 $ (63,102) $ 523 $14,066,577 $ 171,310 ========== ========= ======= =========== =========
See Notes to Financial Statements. * Commencement of Operations FSA-5 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP STATEMENTS OF OPERATIONS (CONTINUED)
COMMON STOCK DIVISION GLOBAL STOCK DIVISION -------------------------------------------- ----------------------------------------- YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, -------------------------------------------- ----------------------------------------- 1995 1994 1993 1995 1994 1993 ------------ ------------ ------------ ----------- ----------- ----------- INCOME AND EXPENSES: Income (Note 2): Dividends from The Hudson River Trust.................... $ 14,259,262 $ 11,755,355 $ 10,311,886 $ 5,152,442 $ 2,768,605 $ 1,060,406 Expenses (Note 3): Mortality and expense risk charges........................ 6,050,368 4,741,008 4,005,102 1,743,898 1,211,620 466,897 ------------ ------------ ------------ ----------- ----------- ----------- NET INVESTMENT INCOME................ 8,208,894 7,014,347 6,306,784 3,408,544 1,556,985 593,509 ------------ ------------ ------------ ----------- ----------- ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 2): Realized gain (loss) on investments.................... 16,793,683 292,144 4,176,629 3,049,444 3,347,704 1,333,766 Realized gain distribution from The Hudson River Trust......... 63,838,178 43,936,280 85,777,775 9,214,950 4,821,242 11,642,904 ------------ ------------ ------------ ----------- ----------- ----------- NET REALIZED GAIN (LOSS)............. 80,631,861 44,228,424 89,954,404 12,264,394 8,168,946 12,976,670 Unrealized appreciation (depreciation) on investments: Beginning of period.............. (2,048,649) 71,350,568 22,647,989 3,130,280 7,062,877 2,783,724 End of period.................... 181,824,279 (2,048,649) 71,350,568 36,525,596 3,130,280 7,062,877 ------------ ------------ ------------ ----------- ----------- ----------- Change in unrealized appreciation/ depreciation during the period... 183,872,928 (73,399,217) 48,702,579 33,395,316 (3,932,597) 4,279,153 ------------ ------------ ------------ ----------- ----------- ----------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS.............. 264,504,789 (29,170,793) 138,656,983 45,659,710 4,236,349 17,255,823 ------------ ------------ ------------ ----------- ----------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS.......... $272,713,683 $(22,156,446) $144,963,767 $49,068,254 $ 5,793,334 $17,849,332 ============ ============ ============ =========== =========== ===========
See Notes to Financial Statements.
INTERNATIONAL DIVISION AGGRESSIVE STOCK DIVISION -------------- -------------------------------------------- APRIL 3* TO DECEMBER 31, YEAR ENDED DECEMBER 31, -------------- -------------------------------------------- 1995 1995 1994 1993 ---------- ------------ ------------ ------------ INCOME AND EXPENSES: Income (Note 2): Dividends from The Hudson River Trust.................... $195,500 $ 1,268,689 $ 400,102 $ 766,228 Expenses (Note 3): Mortality and expense risk charges........................ 36,471 2,702,978 1,944,639 1,757,109 -------- ------------ ------------ ------------ NET INVESTMENT INCOME................ 159,029 (1,434,289) (1,544,537) (990,881) -------- ------------ ------------ ------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 2): Realized gain (loss) on investments.................... (790) 11,560,966 (6,075,250) 35,696,507 Realized gain distribution from The Hudson River Trust......... 51,741 61,903,470 -- 25,339,962 -------- ------------ ------------ ------------ NET REALIZED GAIN (LOSS)............. 50,951 73,464,436 (6,075,250) 61,036,469 Unrealized appreciation (depreciation) on investments: Beginning of period.............. -- 30,761,318 35,185,988 53,885,737 End of period.................... 667,906 80,271,118 30,761,318 35,185,988 -------- ------------ ------------ ------------ Change in unrealized appreciation/ depreciation during the period... 667,906 49,509,800 (4,424,670) (18,699,749) -------- ------------ ------------ ------------ NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS.............. 718,857 122,974,236 (10,499,920) 42,336,720 -------- ------------ ------------ ------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS.......... $877,886 $121,539,947 $(12,044,457) $ 41,345,839 ======== ============ ============ ============
See Notes to Financial Statements. *Commencement of Operations FSA-6 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP STATEMENTS OF OPERATIONS (CONCLUDED)
ASSET ALLOCATION SERIES --------------------------------------------------------------------------------- CONSERVATIVE INVESTORS DIVISION BALANCED DIVISION -------------------------------------- ---------------------------------------- YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, -------------------------------------- ---------------------------------------- 1995 1994 1993 1995 1994 1993 ----------- ----------- ---------- ----------- ------------ ----------- INCOME AND EXPENSES: Income (Note 2): Dividends from The Hudson River Trust....... $ 8,169,109 $ 6,205,574 $4,088,977 $12,276,328 $ 10,557,487 $10,062,862 Expenses (Note 3): Mortality and expense risk charges.......... 921,294 750,164 551,610 2,237,982 2,103,510 2,047,811 ----------- ----------- ---------- ----------- ------------ ----------- NET INVESTMENT INCOME........................... 7,247,815 5,455,410 3,537,367 10,038,346 8,453,977 8,015,051 ----------- ----------- ---------- ----------- ------------ ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 2): Realized gain (loss) on investments......... (378,551) (421,501) 91,739 (2,466,524) 858,164 1,446,919 Realized gain distribution from The Hudson River Trust.................... 1,068,272 -- 4,651,717 10,894,130 -- 20,280,817 ----------- ----------- ---------- ----------- ------------ ----------- NET REALIZED GAIN (LOSS)........................ 689,721 (421,502) 4,743,456 8,427,606 858,164 21,727,736 Unrealized appreciation (depreciation) on investments: Beginning of period......................... (8,767,697) 1,915,037 2,223,612 (2,878,875) 37,960,661 30,072,900 End of period............................... 10,362,120 (8,767,697) 1,915,037 43,097,187 (2,878,875) 37,960,661 ----------- ----------- ---------- ----------- ------------ ----------- Change in unrealized appreciation/depreciation during the period........................... 19,129,817 (10,682,734) (308,575) 45,976,062 (40,839,536) 7,887,761 ----------- ----------- ---------- ----------- ------------ ----------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS................................ 19,819,538 (11,104,236) 4,434,881 54,403,668 (39,981,372) 29,615,497 ----------- ----------- ---------- ----------- ------------ ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS............................... $27,067,353 $(5,648,826) $7,972,248 $64,442,014 $(31,527,395) $37,630,548 =========== =========== ========== =========== ============ ===========
See Notes to Financial Statements.
ASSET ALLOCATION SERIES ------------------------------------------- GROWTH INVESTORS DIVISION ------------------------------------------- YEAR ENDED DECEMBER 31, ------------------------------------------- 1995 1994 1993 ------------ ------------ ----------- INCOME AND EXPENSES: Income (Note 2): Dividends from The Hudson River Trust......... $ 15,855,901 $ 10,663,204 $ 5,922,228 Expenses (Note 3): Mortality and expense risk charges............ 2,796,354 1,995,747 1,274,117 ------------ ------------ ----------- NET INVESTMENT INCOME............................. 13,059,547 8,667,457 4,648,111 ------------ ------------ ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 2): Realized gain (loss) on investments........... 1,752,185 241,591 52,392 Realized gain distribution from The Hudson River Trust...................... 7,421,853 -- 14,624,517 ------------ ------------ ----------- NET REALIZED GAIN (LOSS).......................... 9,174,038 241,591 14,676,909 Unrealized appreciation (depreciation) on investments: Beginning of period........................... (770,693) 20,567,604 12,746,740 End of period................................. 81,785,873 (770,693) 20,567,604 ------------ ------------ ----------- Change in unrealized appreciation/depreciation during the period............................. 82,556,566 (21,338,297) 7,820,864 ------------ ------------ ----------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS.................................. 91,730,604 (21,096,706) 22,497,773 ------------ ------------ ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS................................. $104,790,151 $(12,429,249) $27,145,884 ============ ============ ===========
See Notes to Financial Statements. FSA-7 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP STATEMENTS OF CHANGES IN NET ASSETS
INTERMEDIATE GOVERNMENT MONEY MARKET DIVISION SECURITIES DIVISION ------------------------------------------ ------------------------------------------- YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, ------------------------------------------ ------------------------------------------- 1995 1994 1993 1995 1994 1993 ------------ ------------ ------------ ----------- ------------- ------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income............. $ 8,270,845 $ 4,542,504 $ 3,329,276 $ 1,812,562 $ 5,144,309 $ 13,460,502 Net realized gain (loss).......... (432,347) 95,530 (339,754) (810,768) (10,163,976) 15,448,920 Change in unrealized appreciation/ depreciation on investments..... 57,216 47,027 210,618 2,882,385 (1,119,626) (3,583,468) ------------ ------------ ------------ ----------- ------------- ------------- Net increase (decrease) from operations................. 7,895,714 4,685,061 3,200,140 3,884,179 (6,139,293) 25,325,954 ------------ ------------ ------------ ----------- ------------- ------------- FROM POLICY-RELATED TRANSACTIONS: Net premiums (Note 3)............. 96,773,056 82,536,703 64,845,505 11,016,347 18,915,140 26,598,113 Benefits and other policy-related transactions (Note 3)........... (39,770,849) (32,432,771) (31,747,197) (6,286,070) (5,813,181) (7,539,335) Net transfers among divisions..... 4,776,165 (25,466,044) (50,510,704) 953,149 (125,116,319) (180,916,946) ------------ ------------ ------------ ----------- ------------- ------------- Net increase (decrease) from policy-related transactions..... 61,778,372 24,637,888 (17,412,396) 5,683,426 (112,014,360) (161,858,168) ------------ ------------ ------------ ----------- ------------- ------------- NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE VARIABLE IN SEPARATE ACCOUNT FP (Note 4)...... (36,640) (24,067) 92,890 (72,636) 15,335 (69,330) ------------ ------------ ------------ ----------- ------------- ------------- INCREASE (DECREASE) IN NET ASSETS... 69,637,446 29,298,882 (14,119,366) 9,494,969 (118,138,318) (136,601,544) NET ASSETS, BEGINNING OF PERIOD..... 137,496,085 108,197,203 122,316,569 27,654,075 145,792,393 282,393,937 ------------ ------------ ------------ ----------- ------------- ------------- NET ASSETS, END OF PERIOD........... $207,133,531 $137,496,085 $108,197,203 $37,149,044 $ 27,654,075 $ 145,792,393 ============ ============ ============ =========== ============= =============
See Notes to Financial Statements.
QUALITY BOND DIVISION ------------------------------------------- OCTOBER 1* TO YEAR ENDED DECEMBER 31, DECEMBER 31, ---------------------------- ----------- 1995 1994 1993 ------------ ------------ ----------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income............. $ 7,190,658 $ 7,434,544 $ 1,058,532 Net realized gain (loss).......... (632,666) (410,697) 130,867 Change in unrealized appreciation/ depreciation on investments..... 13,415,524 (13,634,579) (1,886,621) ------------ ------------ ----------- Net increase (decrease) from operations................. 19,973,516 (6,610,732) (697,222) ------------ ------------ ----------- FROM POLICY-RELATED TRANSACTIONS: Net premiums (Note 3)............. 2,516,135 850,240 181,283 Benefits and other policy-related transactions (Note 3)........... (3,189,044) (2,891,278) (441,626) Net transfers among divisions..... 2,462,969 25,765,197 100,786,909 ------------ ------------ ----------- Net increase (decrease) from policy-related transactions..... 1,790,060 23,724,159 100,526,566 ------------ ------------ ----------- NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE VARIABLE IN SEPARATE ACCOUNT FP (Note 4)...... (712,602) 255,654 38,047 ------------ ------------ ----------- INCREASE (DECREASE) IN NET ASSETS... 21,050,974 17,369,081 99,867,391 NET ASSETS, BEGINNING OF PERIOD..... 117,236,472 99,867,391 -- ------------ ------------ ----------- NET ASSETS, END OF PERIOD........... $138,287,446 $117,236,472 $99,867,391 ============ ============ ===========
See Notes to Financial Statements. *Commencement of Operations FSA-8 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
HIGH YIELD DIVISION ------------------------------------------ YEAR ENDED DECEMBER 31, ------------------------------------------ 1995 1994 1993 ----------- ------------ ----------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income................................... $ 6,147,199 $ 4,273,424 $ 4,202,267 Net realized gain (loss)................................ (179,454) (328,199) 1,138,539 Change in unrealized appreciation/ depreciation on investments........................... 4,697,084 (5,608,102) 3,971,253 ----------- ------------ ----------- Net increase (decrease) from operations................. 10,664,829 (1,662,877) 9,312,059 ----------- ------------ ----------- FROM POLICY-RELATED TRANSACTIONS: Net premiums (Note 3)................................... 15,333,474 14,287,345 10,787,763 Benefits and other policy-related transactions (Note 3)................................. (8,211,013) (7,162,537) (5,179,424) Net transfers among divisions........................... 4,789,450 (11,048,174) 1,006,671 ----------- ------------ ----------- Net increase (decrease) from policy-related transactions.......................................... 11,911,911 (3,923,366) 6,615,010 ----------- ------------ ----------- NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE VARIABLE IN SEPARATE ACCOUNT FP (Note 4)................ (100,679) 16,028 (31,889) ----------- ------------ ----------- INCREASE (DECREASE) IN NET ASSETS......................... 22,476,061 (5,570,215) 15,895,180 NET ASSETS, BEGINNING OF PERIOD........................... 49,454,901 55,025,116 39,129,936 ----------- ------------ ----------- NET ASSETS, END OF PERIOD................................. $71,930,962 $ 49,454,901 $55,025,116 =========== ============ ===========
See Notes to Financial Statements.
GROWTH & INCOME DIVISION EQUITY INDEX DIVISION ------------------------------------- -------------------------- OCTOBER 1* APRIL 1* TO YEAR ENDED TO YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, ------------------------- ----------- ----------- ----------- 1995 1994 1993 1995 1994 ----------- ---------- ----------- ----------- ----------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income................................... $ 310,961 $ 89,288 $ 1,561 $ 675,576 $ 443,391 Net realized gain (loss)................................ 2,791 (11,709) (134) 539,950 127,205 Change in unrealized appreciation/ depreciation on investments........................... 2,264,931 (140,681) (904) 12,851,051 (399,286) ----------- ---------- -------- ----------- ----------- Net increase (decrease) from operations................. 2,578,683 (63,102) 523 14,066,577 171,310 ----------- ---------- -------- ----------- ----------- FROM POLICY-RELATED TRANSACTIONS: Net premiums (Note 3)................................... 6,464,035 2,953,965 182,381 10,308,871 690,540 Benefits and other policy-related transactions (Note 3)................................. (1,385,132) (481,430) (6,581) (2,111,532) (472,818) Net transfers among divisions........................... 5,274,221 3,033,230 279,153 18,305,589 30,736,505 ----------- ---------- -------- ----------- ----------- Net increase (decrease) from policy-related transactions.......................................... 10,353,124 5,505,765 454,953 26,502,928 30,954,227 ----------- ---------- -------- ----------- ----------- NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE VARIABLE IN SEPARATE ACCOUNT FP (Note 4)................ (221,877) 6,113 4,131 (71,293) (134) ----------- ---------- -------- ----------- ----------- INCREASE (DECREASE) IN NET ASSETS......................... 12,709,930 5,448,776 459,607 40,498,212 31,125,403 NET ASSETS, BEGINNING OF PERIOD........................... 5,908,383 459,607 -- 31,125,403 -- ----------- ---------- -------- ----------- ----------- NET ASSETS, END OF PERIOD................................. $18,618,313 $5,908,383 $459,607 $71,623,615 $31,125,403 =========== ========== ======== =========== ===========
See Notes to Financial Statements. *Commencement of Operations FSA-9 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
COMMON STOCK DIVISION GLOBAL STOCK DIVISION -------------------------------------------- ------------------------------------------ YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, -------------------------------------------- ------------------------------------------ 1995 1994 1993 1995 1994 1993 -------------- ------------- ----------- ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income..... $ 8,208,894 $ 7,014,347 $ 6,306,784 $ 3,408,544 $ 1,556,985 $ 593,509 Net realized gain (loss).. 80,631,861 44,228,424 89,954,404 12,264,394 8,168,946 12,976,670 Change in unrealized appreciation/ depreciation on investments............. 183,872,928 (73,399,217) 48,702,579 33,395,316 (3,932,597) 4,279,153 -------------- ------------ ------------ ------------ ------------ ------------ Net increase (decrease) from operations......... 272,713,683 (22,156,446) 144,963,767 49,068,254 5,793,334 17,849,332 -------------- ------------ ------------ ------------ ------------ ------------ FROM POLICY-RELATED TRANSACTIONS: Net premiums (Note 3)..... 216,068,996 171,525,812 124,210,476 92,666,618 77,766,997 25,508,452 Benefits and other policy-related transactions (Note 3)... (118,456,643) (93,481,219) (77,837,895) (37,507,499) (23,371,745) (8,931,159) Net transfers among divisions............... (34,354,864) 19,730,410 (9,498,455) (12,472,104) 47,610,957 59,544,080 -------------- ------------ ------------ ------------ ------------ ------------ Net increase (decrease) from policy-related transactions............ 63,257,489 97,775,003 36,874,126 42,687,015 102,006,209 76,121,373 -------------- ------------ ------------ ------------ ------------ ------------ NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE VARIABLE IN SEPARATE ACCOUNT FP (Note 4).................. (392,099) 44,948 (124,376) (96,720) (17,737) 4,085 -------------- ------------ ------------ ------------ ------------ ------------ INCREASE IN NET ASSETS...... 335,579,073 75,663,505 181,713,517 91,658,549 107,781,806 93,974,790 NET ASSETS, BEGINNING OF PERIOD.................... 811,006,201 735,342,696 553,629,179 241,838,471 134,056,665 40,081,875 -------------- ------------ ------------ ------------ ------------ ------------ NET ASSETS, END OF PERIOD.................... $1,146,585,274 $811,006,201 $735,342,696 $333,497,020 $241,838,471 $134,056,665 ============== ============ ============ ============ ============ ============
See Notes to Financial Statements.
INTERNATIONAL DIVISION AGGRESSIVE STOCK DIVISION ----------- ------------------------------------------ APRIL 3* TO DECEMBER 31, YEAR ENDED DECEMBER 31, ----------- ------------------------------------------ 1995 1995 1994 1993 ----------- ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income..... $ 159,029 $ (1,434,289) $ (1,544,537) $ (990,881) Net realized gain (loss).. 50,951 73,464,436 (6,075,250) 61,036,469 Change in unrealized appreciation/ depreciation on investments............. 667,906 49,509,800 (4,424,670) (18,699,749) ----------- ------------ ------------ ------------ Net increase (decrease) from operations......... 877,886 121,539,947 (12,044,457) 41,345,839 ----------- ------------ ------------ ------------ FROM POLICY-RELATED TRANSACTIONS: Net premiums (Note 3)..... 2,028,670 121,962,483 101,932,221 77,930,596 Benefits and other policy-related transactions (Note 3)... (339,723) (63,165,185) (48,604,650) (39,462,340) Net transfers among divisions............... 9,885,952 19,367,834 4,346,636 (73,890,214) ----------- ------------ ------------ ------------ Net increase (decrease) from policy-related transactions............ 11,574,899 78,165,132 57,674,207 (35,421,958) ----------- ------------ ------------ ------------ NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE VARIABLE IN SEPARATE ACCOUNT FP (Note 4).................. (20,847) (188,813) 35,791 (2,220) ----------- ------------ ------------ ------------ INCREASE IN NET ASSETS...... 12,431,938 199,516,266 45,665,541 5,921,661 NET ASSETS, BEGINNING OF PERIOD.................... 0 355,671,865 310,006,324 304,084,663 ----------- ------------ ------------ ------------ NET ASSETS, END OF PERIOD.................... $12,431,938 $555,188,131 $355,671,865 $310,006,324 =========== ============ ============ ============
See Notes to Financial Statements. *Commencement of Operations FSA-10 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP STATEMENTS OF CHANGES IN NET ASSETS (CONCLUDED)
ASSET ALLOCATION SERIES ----------------------------------------------------------------------------------------- CONSERVATIVE INVESTORS DIVISION BALANCED DIVISION ------------------------------------------- ------------------------------------------ YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, ------------------------------------------- ------------------------------------------ 1995 1994 1993 1995 1994 1993 ------------- ------------ ------------ ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income.............. $ 7,247,815 $ 5,455,410 $ 3,537,367 $ 10,038,346 $ 8,453,977 $ 8,015,051 Net realized gain (loss)........... 689,721 (421,502) 4,743,456 8,427,606 858,164 21,727,736 Change in unrealized appreciation/ depreciation on investments...... 19,129,817 (10,682,734) (308,575) 45,976,062 (40,839,536) 7,887,761 ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) from operations.................. 27,067,353 (5,648,826) 7,972,248 64,442,014 (31,527,395) 37,630,548 ------------ ------------ ------------ ------------ ------------ ------------ FROM POLICY-RELATED TRANSACTIONS: Net premiums (Note 3).............. 41,419,959 48,492,315 43,782,002 63,451,955 70,116,900 67,351,402 Benefits and other policy-related transactions (Note 3)............ (22,866,003) (21,612,430) (17,644,077) (48,742,571) (45,655,363) (44,497,967) Net transfers among divisions...... (3,379,296) (2,076,793) 6,165,330 (18,908,540) (19,954,097) (6,834,099) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) from policy-related transactions...... 15,174,660 24,803,092 32,303,255 (4,199,156) 4,507,440 16,019,336 ------------ ------------ ------------ ------------ ------------ ------------ NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE VARIABLE IN SEPARATE ACCOUNT FP (Note 4).... (95,412) 22,600 18,535 (93,214) 47,322 256,506 ------------ ------------ ------------ ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS.... 42,146,601 19,176,866 40,294,038 60,149,644 (26,972,633) 53,906,390 NET ASSETS, BEGINNING OF PERIOD...... 129,940,498 110,763,632 70,469,594 338,415,565 365,388,198 311,481,808 ------------ ------------ ------------ ------------ ------------ ------------ NET ASSETS, END OF PERIOD............ $172,087,099 $129,940,498 $110,763,632 $398,565,209 $338,415,565 $365,388,198 ============ ============ ============ ============ ============ ============
See Notes to Financial Statements.
ASSET ALLOCATION SERIES -------------------------------------------- GROWTH INVESTORS DIVISION -------------------------------------------- YEAR ENDED DECEMBER 31, -------------------------------------------- 1995 1994 1993 ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income.............. $ 13,059,547 $ 8,667,457 $ 4,648,111 Net realized gain (loss)........... 9,174,038 241,591 14,676,909 Change in unrealized appreciation/ depreciation on investments...... 82,556,566 (21,338,297) 7,820,864 ------------ ------------ ------------ Net increase (decrease) from operations.................. 104,790,151 (12,429,249) 27,145,884 ------------ ------------ ------------ FROM POLICY-RELATED TRANSACTIONS: Net premiums (Note 3).............. 155,616,059 139,140,391 105,136,825 Benefits and other policy-related transactions (Note 3)............ (68,357,709) (54,863,821) (36,431,873) Net transfers among divisions...... (3,269,896) 20,294,785 30,908,183 ------------ ------------ ------------ Net increase (decrease) from policy-related transactions...... 83,988,454 104,571,355 99,613,135 ------------ ------------ ------------ NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE VARIABLE IN SEPARATE ACCOUNT FP (Note 4).... (120,493) 15,372 (27,455) ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS.... 188,658,112 92,157,478 126,731,564 NET ASSETS, BEGINNING OF PERIOD...... 367,219,554 275,062,076 148,330,512 ------------ ------------ ------------ NET ASSETS, END OF PERIOD............ $555,877,666 $367,219,554 $275,062,076 ============ ============ ============
See Notes to Financial Statements. FSA-11 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995 1. General Equitable Variable Life Insurance Company (Equitable Variable Life), a wholly-owned subsidiary of The Equitable Life Assurance Society of the United States (Equitable Life), established Separate Account FP (the Account) as a unit investment trust registered with the Securities and Exchange Commission under the Investment Company Act of 1940. The Account consists of thirteen investment divisions: the Money Market Division, the Intermediate Government Securities Division, the High Yield Division, the Balanced Division, the Common Stock Division, the Global Division, the Aggressive Stock Division, the Conservative Investors Division, the Growth Investors Division, the Growth & Income Division, the Quality Bond Division, the Equity Index Division and the International Division. The assets in each Division are invested in shares of a designated portfolio (Portfolio) of a mutual fund, The Hudson River Trust (the Trust). Each Portfolio has separate investment objectives. The Account supports the operations of Incentive Life,(TM) flexible premium variable life insurance policies, Incentive Life 2000,(TM) flexible premium variable life insurance policies, Champion 2000,(TM) modified premium variable whole life insurance policies, Survivorship 2000,(TM) flexible premium joint survivorship variable life insurance policies, Incentive Life Plus,(TM) flexible premium variable life insurance policies and SP-Flex,(TM) variable life insurance policies with additional premium option, collectively, the Policies, and the Incentive Life 2000, Champion 2000 and Survivorship 2000 policies are referred to as the Series 2000 Policies. Incentive Life policies offered with the prospectus dated September 15, 1995, are referred to as Incentive Life Plus Second Series. Incentive Life Plus policies issued with a prior prospectus are referred to as Incentive Life Plus Original Series. All Policies are issued by Equitable Variable. The assets of the Account are the property of Equitable Variable. However, the portion of the Account's assets attributable to the Policies will not be chargeable with liabilities arising out of any other business Equitable Variable may conduct. Policyowners may allocate amounts in their individual accounts to the Divisions of the Account and/or (except for SP-Flex policies) to the guaranteed interest division of Equitable Variable Life's General Account. Net transfers to the guaranteed interest division of the General Account and other Separate Accounts of $6,569,372, $35,120,632 and $125,668,098 for the years ended 1995, 1994 and 1993, respectively, are included in Net Transfers Among Divisions. The net assets of any Division of the Account may not be less than the aggregate of the policyowners' accounts allocated to that Division. Additional assets are set aside in Equitable Variable Life's General Account to provide for (1) the unearned portion of the monthly charges for mortality costs, and (2) other policy benefits, as required under the state insurance law. 2. Significant Accounting Policies The accompanying financial statements are prepared in conformity with generally accepted accounting principles (GAAP). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Investments are made in shares of the Trust and are valued at the net asset values per share of the respective Portfolios. The net asset value is determined by the Trust using the market or fair value of the underlying assets of the Portfolio. Investment transactions are recorded on the trade date. Realized gains and losses include gains and losses on redemptions of the Trust's shares (determined on the identified cost basis) and Trust distributions representing the net realized gains on Trust investment transactions. The operations of the Account are included in the consolidated Federal income tax return of Equitable Life. Under the provisions of the Policies, Equitable Variable Life has the right to charge the Account for Federal income tax attributable to the Account. No charge is currently being made against the Account for such tax since, under current tax law, Equitable Variable Life pays no tax on investment income and capital gains reflected in variable life insurance policy reserves. However, Equitable Variable Life retains the right to charge for any Federal income tax incurred which is attributable to the Account if the law is changed. Charges for state and local taxes, if any, attributable to the Account also may be made. Dividends are recorded as income at the end of each quarter on the ex-dividend date. Capital gains are distributed by the Trust at the end of each year. 3. Asset Charges Under the Policies, Equitable Variable Life assumes mortality and expense risks and, to cover these risks, deducts charges from the assets of the Account currently at annual rates of 0.60% of the net assets attributable to Incentive Life, Incentive Life 2000, Incentive Life Plus Second Series and Champion 2000 policyowners, 0.90% of net assets attributable to Survivorship 2000 policyowners, and 0.85% for SP-Flex policyowners. Incentive Life Plus Original Series deducts this charge from the Policy Account. Under SP-Flex, Equitable Variable Life also deducts charges from the assets of the Account for mortality and administrative costs of 0.60% and 0.35%, respectively, of net assets attributable to SP-Flex policies. FSA-12 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 1995 Under Incentive Life, Incentive Life Plus and the Series 2000 Policies, mortality and administrative costs are charged in a different manner than SP-Flex policies (see Notes 4 and 5). Before amounts are allocated to the Account for Incentive Life, Incentive Life Plus and the Series 2000 Policies, Equitable Variable Life deducts a charge for taxes and either an initial policy fee (Incentive Life) or a premium sales charge (Incentive Life Plus and Series 2000 Policies) from premiums. Under SP-Flex, the entire initial premium is allocated to the Account. Before any additional premiums under SP-Flex are allocated to the Account, an administrative charge is deducted. The amounts attributable to Incentive Life, Incentive Life Plus and the Series 2000 policyowners' accounts are charged monthly by Equitable Variable Life for mortality and administrative costs. These charges are withdrawn from the Account along with amounts for additional benefits. Under the Policies, amounts for certain policy-related transactions (such as policy loans and surrenders) are transferred out of the Separate Account. 4. Amounts Retained by Equitable Variable Life in Separate Account FP The amount retained by Equitable Variable Life in the Account arises principally from (1) contributions from Equitable Variable Life, and (2) that portion, determined ratably, of the Account's investment results applicable to those assets in the Account in excess of the net assets for the Policies. Amounts retained by Equitable Variable Life are not subject to charges for mortality and expense risks or mortality and administrative costs. Amounts retained by Equitable Variable Life in the Account may be transferred at any time by Equitable Variable Life to its General Account. The following table shows the surplus contributions (withdrawals) by Equitable Variable Life by investment division:
INVESTMENT DIVISION 1995 1994 1993 ------------------- ----------- ----------- ---------- Common Stock $ (630,000) -- -- Money Market (250,000) -- $1,145,000 Balanced -- -- -- Aggressive Stock (350,000) -- -- High Yield (100,000) -- 330,000 Global (130,000) -- (6,895,000) Conservative Investors -- -- 575,000 Growth Investors -- -- 130,000 Short-Term World Income -- $(5,165,329) -- Intermediate Government Securities (165,000) -- -- Growth & Income (685,000) -- 1,000,000 Quality Bond (4,800,000) -- 5,000,000 Equity Index -- 200,000 -- International 200,000 -- -- ----------- ----------- ---------- $(6,910,000) $(4,965,329) $1,285,000 =========== =========== ==========
5. Distribution and Servicing Agreements Equitable Variable Life has entered into a Distribution and Servicing Agreement with Equitable Life and Equico Securities Inc. (Equico), whereby registered representatives of Equico, authorized as variable life insurance agents under applicable state insurance laws, sell the Policies. The registered representatives are compensated on a commission basis by Equitable Life. Equitable Variable Life also has entered into an agreement with Equitable Life under which Equitable Life performs the administrative services related to the Policies, including underwriting and issuance, billings and collections, and policyowner services. There is no charge to the Account related to this agreement. 6. Share Substitution On February 22, 1994, Equitable Variable Life, the Account and the Trust substituted shares of the Trust's Intermediate Government Securities Portfolio for shares of the Trust's Short-Term World Income Portfolio. The amount transferred to Intermediate Government Securities Portfolio was $2,192,109. The statements of operations and statements of changes in net assets for the Intermediate Government Securities Portfolio is combined with the Short-Term World Income Portfolio for periods prior to the merger on February 22, 1994. The Short-Term World Income Division is not available for future investment. FSA-13 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 1995 7. Investment Returns The Separate Account rates of return attributable to Incentive Life, Incentive Life 2000, Incentive Life Plus Second Series and Champion 2000 policyowners are different than those attributable to Survivorship 2000, Incentive Life Plus Original Series and to SP-Flex policyowners because asset charges are deducted at different rates under each policy (see Note 3). The tables on this page and the following pages show the gross and net investment returns with respect to the Divisions for the periods shown. The net return for each Division is based upon net assets for a policy whose policy commences with the beginning date of such period and is not based on the average net assets in the Division during such period. Gross return is equal to the total return earned by the underlying Trust investment. RATES OF RETURN: INCENTIVE LIFE, - -------------- INCENTIVE LIFE 2000, - -------------------- INCENTIVE LIFE PLUS SECOND SERIES - --------------------------------- AND CHAMPION 2000* - -----------------
JANUARY 26(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, ---------------------------------------------------------------------------------------------------- MONEY MARKET DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 - --------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return.............. 5.74 % 4.02 % 3.00 % 3.56 % 6.18 % 8.24 % 9.18 % 7.32 % 6.63 % 6.05 % Net return................ 5.11 % 3.39 % 2.35 % 2.94 % 5.55 % 7.59 % 8.53 % 6.68 % 5.99 % 5.47 %
APRIL 1(A) TO INTERMEDIATE YEAR ENDED DECEMBER 31, DECEMBER 31, GOVERNMENT ----------------------------------------------- SECURITIES DIVISION 1995 1994 1993 1992 1991 - ------------------- ---- ---- ---- ---- ---- Gross return.............. 13.33 % (4.37)% 10.58 % 5.60 % 12.26 % Net return................ 12.65 % (4.95)% 9.88 % 4.96 % 11.60 % YEAR ENDED OCTOBER 1(A) DECEMBER 31, DECEMBER 31, ---------------------------------- QUALITY BOND DIVISION 1995 1994 1993 - --------------------- ---- ---- ---- Gross return.............. 17.02 % (5.10)% (0.51)% Net return................ 16.32 % (5.67)% (0.66)%
JANUARY 26(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, ---------------------------------------------------------------------------------------------------- HIGH YIELD DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 - ------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return.............. 19.92 % (2.79)% 23.15 % 12.31 % 24.46 % (1.12)% 5.13 % 9.73 % 4.68 % -- Net return................ 19.20 % (3.37)% 22.41 % 11.64 % 23.72 % (1.71)% 4.50 % 9.08 % 4.05 % --
YEAR ENDED OCTOBER 1(A) TO DECEMBER 31, DECEMBER 31, ---------------------------------- GROWTH & INCOME DIVISION 1995 1994 1993 - ------------------------- ---- ---- ---- Gross return.............. 24.07 % (0.58)% (0.25)% Net return................ 23.33 % (1.17)% (0.41)% YEAR ENDED MARCH 31(A) TO DECEMBER 31, DECEMBER 31, ----------------------------------- EQUITY INDEX DIVISION 1995 1994 - --------------------- ---- ---- Gross return.............. 36.48 % 1.08 % Net return................ 35.66 % 0.58 % - ------------------------------- * Sales of Incentive Life 2000 and Champion 2000 commenced on March 2, 1992. Sales of Incentive Life Plus Second Series commenced on September 15, 1995. (a) Date as of which net premiums under the policies were first allocated to the Division. The gross return and the net return for the periods indicated are not annual rates of return. FSA-14 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 1995
JANUARY 26(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, ---------------------------------------------------------------------------------------------------- COMMON STOCK DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 - --------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return.............. 32.45 % (2.14)% 24.84 % 3.22 % 37.88 % (8.12)% 25.59 % 22.43 % 7.49 % 15.65 % Net return................ 31.66 % (2.73)% 24.08 % 2.60 % 37.06 % (8.67)% 24.84 % 21.70 % 6.84 % 15.01 %
AUGUST 31(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, ------------------------------------------------------------------------------------------- GLOBAL DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 - --------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return.............. 18.81 % 5.23 % 32.09 % (0.50)% 30.55 % (6.07)% 26.93 % 10.88 % (13.27)% Net return................ 18.11 % 4.60 % 31.33 % (1.10)% 29.77 % (6.63)% 26.17 % 10.22 % (13.45)%
APRIL 3(A) TO DECEMBER 31, INTERNATIONAL DIVISION 1995 - ---------------------- ---------- Gross return.............. 11.29 % Net return................ 10.79 %
JANUARY 26(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, ---------------------------------------------------------------------------------------------------- AGGRESSIVE STOCK DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 - -------------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return.............. 31.63 % (3.81)% 16.77 % (3.16)% 86.86 % 8.17 % 43.50 % 1.17 % 7.31 % 35.88 % Net return................ 30.85 % (4.39)% 16.05 % (3.74)% 85.75 % 7.51 % 42.64 % 0.53 % 6.66 % 35.13 %
JANUARY 26(A) TO ASSET ALLOCATION SERIES YEAR ENDED DECEMBER 31, DECEMBER 31, ------------------------------------------------------------------------------------------------------ BALANCED DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 - ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return.............. 19.75 % (8.02)% 12.28 % (2.84)% 41.26 % 0.24 % 25.83 % 13.27 % (0.85)% 29.07 % Net return................ 19.03 % (8.57)% 11.64 % (3.42)% 40.42 % (0.36)% 25.08 % 12.59 % (1.45)% 28.34 %
OCTOBER 2(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, CONSERVATIVE -------------------------------------------------------------------------------- INVESTORS DIVISION 1995 1994 1993 1992 1991 1990 1989 - ------------------ ---- ---- ---- ---- ---- ---- ---- Gross return.............. 20.40 % (4.10)% 10.76 % 5.72 % 19.87 % 6.37 % 3.09 % Net return................ 19.68 % (4.67)% 10.15 % 5.09 % 19.16 % 5.73 % 2.94 %
GROWTH INVESTORS DIVISION 1995 1994 1993 1992 1991 1990 1989 - ------------------------- ---- ---- ---- ---- ---- ---- ---- Gross return.............. 26.37 % (3.15)% 15.26 % 4.90 % 48.89 % 10.66 % 3.98 % Net return................ 25.62 % (3.73)% 14.58 % 4.27 % 48.01 % 10.00 % 3.82 %
- ---------------------------- * Sales of Incentive Life 2000 and Champion 2000 commenced on March 2, 1992. (a) Date as of which net premiums under the policies were first allocated to the Division. The gross return and the net return for the periods indicated are not annual rates of return. RATES OF RETURN: SURVIVORSHIP 2000 - ----------------- AUGUST 17(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, --------------------------------------------------- MONEY MARKET DIVISION 1995 1994 1993 1992 - --------------------- ---- ---- ---- ---- Gross return.............. 5.74 % 4.02 % 3.00 % 1.11 % Net return................ 4.80 % 3.08 % 2.04 % 0.77 % INTERMEDIATE GOVERNMENT SECURITIES DIVISION 1995 1994 1993 1992 - ------------------- ---- ---- ---- ---- Gross return.............. 13.33 % (4.37)% 10.58 % 0.90 % Net return................ 12.31 % (5.23)% 9.55 % 0.56 % - ---------- (a) Date as of which net premiums under the policies were first allocated to the Division. The gross return and the net return for the periods indicated are not annual rates of return. FSA-15 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 1995 OCTOBER 1(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, ------------------------------------------------ QUALITY BOND DIVISION 1995 1994 1993 - --------------------- ---- ---- ---- Gross return.............. 17.02 % (5.10)% (0.51)% Net return................ 15.97 % (5.95)% (0.73)% AUGUST 17(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, --------------------------------------------------- HIGH YIELD DIVISION 1995 1994 1993 1992 - ------------------- ---- ---- ---- ---- Gross return.............. 19.92 % (2.79)% 23.15 % 1.84 % Net return................ 18.84 % (3.66)% 22.04 % 1.50 % OCTOBER 1(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, -------------------------------------------------- GROWTH & INCOME DIVISION 1995 1994 1993 - ------------------------ ---- ---- ---- Gross return.............. 24.07 % (0.58)% (0.25)% Net return................ 22.96 % (1.47)% (0.48)% YEAR ENDED MARCH 1(A) TO DECEMBER 31, DECEMBER 31, ------------------------------ EQUITY INDEX DIVISION 1995 1994 - --------------------- ---- ---- Gross return.............. 36.48 % 1.08 % Net return................ 35.26 % 0.33 % AUGUST 17(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, --------------------------------------------------- COMMON STOCK DIVISION 1995 1994 1993 1992 - --------------------- ---- ---- ---- ---- Gross return.............. 32.45 % (2.14)% 24.84 % 5.28 % Net return................ 31.26 % (3.02)% 23.70 % 4.93 % GLOBAL DIVISION - --------------- Gross return.............. 18.81 % 5.23 % 32.09 % 4.87 % Net return................ 17.75 % 4.29 % 30.93 % 4.52 % APRIL 3(A) TO DECEMBER 31, ---------------- INTERNATIONAL DIVISION 1995 - ---------------------- ---- Gross return.............. 11.29 % Net return................ 10.55 % AUGUST 17(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, --------------------------------------------------- AGGRESSIVE STOCK DIVISION 1995 1994 1993 1992 - ------------------------- ---- ---- ---- ---- Gross return.............. 31.63 % (3.81)% 16.77 % 11.49 % Net return................ 30.46 % (4.68)% 15.70 % 11.11 % ASSET ALLOCATION SERIES AUGUST 17(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, CONSERVATIVE INVESTORS -------------------------------------------------- DIVISION 1995 1994 1993 1992 - -------- ---- ---- ---- ---- Gross return.............. 20.40 % (4.10)% 10.76 % 1.38 % Net return................ 19.32 % (4.96)% 9.81 % 1.04 % BALANCED DIVISION 1995 1994 1993 1992 - ----------------- ---- ---- ---- ---- Gross return.............. 19.75 % (8.02)% 12.28 % 5.37 % Net return................ 18.68 % (8.84)% 11.30 % 5.02 % GROWTH INVESTORS DIVISION 1995 1994 1993 1992 - ------------------------- ---- ---- ---- ---- Gross return.............. 26.37 % (3.15)% 15.26 % 6.89 % Net return................ 25.24 % (4.02)% 14.24 % 6.53 % - ---------- (a) Date as of which net premiums under the policies were first allocated to the Division. The gross return and the net return for the periods indicated are not annual rates of return. FSA-16 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31,1995 RATES OF RETURN: INCENTIVE LIFE PLUS ORIGINAL SERIES*(B) - --------------------------------------- YEAR ENDED DECEMBER 31, ------------------------- 1995 ---- Money Market Division ........... 5.69% Intermediate Government Securities Division ............. 13.31% Quality Bond Division ........... 17.13% High Yield Division ............. 19.95% Growth & Income Division ........ 24.38% Equity Index Division ........... 36.53% Common Stock Division ........... 33.07% Global Division ................. 19.38% APRIL 30 TO DECEMBER 31, ------------------------ 1995 ---- International Division .......... 11.29% YEAR ENDED DECEMBER 31, ------------------------ 1995 ---- Aggressive Stock Division ....... 33.00% ASSET ALLOCATION SERIES ......... YEAR ENDED DECEMBER 31, ------------------------ 1995 ---- Conservative Investors Division . 20.59% Balanced Division ............... 20.32% Growth Investors Division ....... 26.92% - -------------------- *Sales of Incentive Life Plus Original Series commenced on January 6, 1995. (b) There are no Separate Account asset charges for this policy and therefore the gross and net rates of return are the same. The rate of return for the period indicated is not an annual rate of return. FSA-17 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31,1995 RATES OF RETURN: SP-FLEX - -------
AUGUST 31(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, ------------------------------------------------------------------------------------------- MONEY MARKET DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 - --------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return.............. 5.74 % 4.02 % 3.00 % 3.56 % 6.17 % 8.24 % 9.18 % 7.32 % 2.15 % Net return................ 3.86 % 2.17 % 1.13 % 1.71 % 4.29 % 6.30 % 7.24 % 5.41 % 1.62 %
APRIL 1(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, INTERMEDIATE GOVERNMENT -------------------------------------------------- SECURITIES DIVISION 1995 1994 1993 1992 1991 - ------------------- ---- ---- ---- ---- ---- Gross return.............. 13.33 % (4.37) % 10.58 % 5.60 % 12.10 % Net return................ 11.31 % (6.08) % 8.57 % 3.71 % 10.59 % YEAR ENDED SEPTEMBER 1(A) TO DECEMBER 31, DECEMBER 31, ------------------------------- QUALITY BOND DIVISION 1995 1994 - --------------------- ---- ---- Gross return.............. 17.02 % (2.20)% Net return................ 14.94 % (2.35)%
AUGUST 31(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, ------------------------------------------------------------------------------------------- HIGH YIELD DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 - ------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return.............. 19.92 % (2.79)% 23.15 % 12.31 % 24.46 % (1.12)% 5.13 % 9.73 % 1.95 % Net return................ 17.79 % (4.52)% 20.96 % 10.30 % 22.25 % (2.89)% 3.26 % 7.78 % 1.39 %
YEAR ENDED SEPTEMBER 1(A) TO DECEMBER 31, DECEMBER 31, --------------------------------- GROWTH & INCOME DIVISION 1995 1994 - ------------------------ ---- ---- Gross return.............. 24.07 % (3.40)% Net return................ 21.87 % (3.55)% EQUITY INDEX DIVISION 1995 1994 - --------------------- ---- ---- Gross return.............. 36.48 % (2.54)% Net return................ 34.06 % (2.69)%
AUGUST 31(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, -------------------------------------------------------------------------------------------- COMMON STOCK DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 - --------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return.............. 32.45 % 2.14 % 24.84 % 3.23 % 37.87 % (8.12)% 25.59 % 22.43 % (22.57)% Net return................ 30.10 % (3.88)% 22.60 % 1.38 % 35.43 % (9.76)% 23.36 % 20.26 % (23.00)% GLOBAL DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 - --------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return.............. 18.81 % 5.23 % 32.09 % (0.50)% 30.55 % (6.07)% 26.93 % 10.88 % (11.40)% Net return................ 16.70 % 3.36 % 29.77 % (2.28)% 28.23 % (7.75)% 24.67 % 8.90 % (11.86)%
APRIL 3(A) TO DECEMBER 31, ------------- INTERNATIONAL DIVISION 1995 - ---------------------- ---- Gross return.............. 11.29 % Net return................ 9.82 %
AUGUST 31(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, -------------------------------------------------------------------------------------------- AGGRESSIVE STOCK DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 - ------------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return.............. 31.63 % 3.81 % 16.77 % (3.16)% 86.86 % 8.17 % 43.50 % 1.17 % (24.28)% Net return................ 29.30 % (5.53)% 14.67 % (4.89)% 83.54 % 6.23 % 40.95 % (0.66)% (24.68)%
- ------------------------------ (a) Date as of which net premiums under the policies were first allocated to the Division. The gross return and the net return for the periods indicated are not annual rates of return. FSA-18 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 1995 ASSET ALLOCATION SERIES YEAR ENDED SEPTEMBER 1(A) TO DECEMBER 31, DECEMBER 31, CONSERVATIVE INVESTORS --------------------------------------- DIVISION 1995 1994 - -------- ---- ---- Gross return.......... 20.40 % (1.83)% Net return............ 18.26 % (1.98)%
AUGUST 31(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, ------------------------------------------------------------------------------------------------- BALANCED DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 - ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return.......... 19.75 % (8.02)% 12.28 % (2.83)% 41.27 % 0.24 % 25.83 % 13.27 % (20.26)% Net return............ 17.62 % (9.66)% 10.31 % (4.57)% 38.75 % (1.56)% 23.59 % 11.25 % (20.71)%
YEAR ENDED SEPTEMBER 1(A) TO DECEMBER 31, DECEMBER 31, GROWTH INVESTORS ------------------------------------ DIVISION 1995 1994 - -------- ---- ---- Gross return........... 26.37 % (3.16)% Net return............. 24.12 % (3.31)% - ------------------------- (a) Date as of which net premiums under the policies were first allocated to the Division. The gross return and the net return for the periods indicated are not annual rates of return. 8. Subsequent Event On September 19, 1996 the Board of Directors of Equitable Life approved an Agreement and Plan of Merger by and between Equitable Life and Equitable Variable Life (the "Merger Agreement"). The merger is expected to be effective on January 1, 1997, subject to receipt of all necessary regulatory approvals. On that date, and in accordance with the provisions of the Merger Agreement, the separate existence of Equitable Variable Life will cease and Equitable Life will survive the merger. From and after the effective date of the merger, Equitable Life will be liable in place of Equitable Variable Life for the liabilities and obligations of Equitable Variable Life, including liabilities under policies and contracts issued by Equitable Variable Life, and all of Equitable Variable Life's assets will become assets of Equitable Life. FSA-19 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP STATEMENTS OF ASSETS AND LIABILITIES SEPTEMBER 30, 1996 (UNAUDITED)
FIXED INCOME SERIES EQUITY SERIES ------------------------------------------------------------------ ------------------------------- INTERMEDIATE MONEY GOVERNMENT QUALITY HIGH GROWTH & EQUITY COMMON MARKET SECURITIES BOND YIELD INCOME INDEX STOCK FUND FUND FUND FUND FUND FUND FUND ------------ ------------ -------------- ------------ ------------- --------------- -------------- ASSETS Investments in shares of The Hudson River Trust -- at market value (Notes 2 and 6) Cost: $165,564,928....... $165,937,243 43,750,516....... $43,305,378 154,236,243....... $147,904,622 87,558,526....... $95,912,162 27,455,859....... $31,071,304 97,100,736....... $119,477,987 1,194,664,886....... $1,481,486,712 351,595,598....... 33,337,481....... 661,363,283....... 166,617,325....... 381,690,336....... 608,848,116....... Receivable for shares of The Hudson River Trust ................ -- 25,723 95,980 -- -- -- -- Receivable for policy- related transactions 3,827,870 -- -- -- 86,467 196,738 -- ------------ ----------- ------------ ----------- ----------- ------------ -------------- Total Assets ............. 169,765,113 43,331,101 148,000,602 95,912,162 31,157,771 119,674,725 1,481,486,712 ------------ ----------- ------------ ----------- ----------- ------------ -------------- LIABILITIES Payable for purchases of shares of The Hudson River Trust .......... 3,912,050 -- -- 43,386 93,070 199,909 197,381 Payable for policy- related transactions -- 43,270 154,723 3,328 -- -- 169,260 Amount retained by Equitable Variable in Separate Account FP (Note 4) .......... 574,980 528,646 633,857 688,420 579,643 313,444 1,309,288 ------------ ----------- ------------ ----------- ----------- ------------ -------------- Total Liabilities ........ 4,487,030 571,916 788,580 735,134 672,713 513,353 1,675,929 ------------ ----------- ------------ ----------- ----------- ------------ -------------- NET ASSETS ATTRIBUTABLE TO POLICYOWNERS ...... $165,278,083 $42,759,185 $147,212,022 $95,177,028 $30,485,058 $119,161,372 $1,479,810,783 ============ =========== ============ =========== =========== ============ ==============
See Notes to Financial Statements.
EQUITY SERIES ASSET ALLOCATION SERIES ------------------------------------------- ------------------------------------------- AGGRESSIVE CONSERVATIVE GROWTH GLOBAL INTERNATIONAL STOCK INVESTORS BALANCED INVESTORS FUND FUND FUND FUND FUND FUND -------------- ------------- ------------- ------------- -------------- -------------- ASSETS Investments in shares of The Hudson River Trust -- at market value (Notes 2 and 6) Cost: $165,564,928....... 43,750,516....... 154,236,243....... 87,558,526....... 27,455,859....... 97,100,736....... 1,194,664,886....... 351,595,598....... $403,967,887 33,337,481....... $35,007,334 661,363,283....... $745,660,006 166,617,325....... $170,418,342 381,690,336....... $415,550,419 608,848,116....... $659,684,627 Receivable for shares of The Hudson River Trust ................ -- -- 3,329,166 98,112 207,444 -- Receivable for policy- related transactions 368,849 120,728 -- -- -- -- ------------ ----------- ------------ ------------ ------------ ------------ Total Assets ............. 404,336,736 35,128,062 748,989,172 170,516,454 415,757,863 659,684,627 ------------ ----------- ------------ ------------ ------------ ------------ LIABILITIES Payable for purchases of shares of The Hudson River Trust .......... 181,369 96,161 -- -- -- 250,106 Payable for policy- related transactions -- -- 3,650,196 129,358 478,338 78,373 Amount retained by Equitable Variable in Separate Account FP (Note 4) .......... 576,659 237,480 715,086 584,802 690,475 677,559 ------------ ----------- ------------ ------------ ------------ ------------ Total Liabilities ........ 758,028 333,641 4,365,282 714,160 1,168,813 1,006,038 ------------ ----------- ------------ ------------ ------------ ------------ NET ASSETS ATTRIBUTABLE TO POLICYOWNERS ...... $403,578,708 $34,794,421 $744,623,890 $169,802,294 $414,589,050 $658,678,589 ============ =========== ============ ============ ============ ============ See Notes to Financial Statements.
FSA-20 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP STATEMENTS OF OPERATIONS FOR NINE MONTHS ENDED SEPTEMBER 30, (UNAUDITED)
INTERMEDIATE GOVERNMENT MONEY MARKET FUND SECURITIES FUND -------------------------- ------------------------- 1996 1995 1996 1995 ----------- ---------- ---------- ---------- INCOME AND EXPENSES: Income (Note 2): Dividends from The Hudson River Trust ............ $ 6,300,108 $6,517,222 $1,696,840 $1,479,090 Expenses (Note 3): Mortality and expense risk charges ............... 738,965 647,879 177,582 143,478 ----------- ---------- ---------- ---------- NET INVESTMENT INCOME .................................... 5,561,143 5,869,343 1,519,258 1,335,612 ----------- ---------- ---------- ---------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 2): Realized gain (loss) on investments .............. (149,139) (208,460) (408,620) (768,233) Realized gain distribution from The Hudson River Trust ........................ -- -- -- -- ----------- ---------- ---------- ---------- NET REALIZED GAIN (LOSS) ................................. (149,139) (208,460) (408,620) (768,233) ----------- ---------- ---------- ---------- Unrealized appreciation (depreciation) on investments: Beginning of period .............................. 89,976 32,760 145,522 2,736,863 End of period .................................... 372,315 (240,472) (445,138) (463,025) ----------- ---------- ---------- ---------- Change in unrealized appreciation (depreciation) during the period ................................ 282,339 (273,232) (590,660) 2,273,838 ----------- ---------- ---------- ---------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS ....................................... 133,200 (481,692) (999,280) 1,505,605 ----------- ---------- ---------- ---------- NET INCREASE IN NET ASSETS RESULTING ..................... FROM OPERATIONS ...................................... $ 5,694,343 $5,387,651 $ 519,978 $2,841,217 =========== ========== ========== ==========
See Notes to Financial Statements.
QUALITY BOND FUND HIGH YIELD FUND -------------------------- ------------------------- 1996 1995 1996 1995 ---------- ----------- ---------- ---------- INCOME AND EXPENSES: Income (Note 2): Dividends from The Hudson River Trust ............ $6,372,295 $ 6,057,328 $6,020,378 $4,515,142 Expenses (Note 3): Mortality and expense risk charges ............... 639,290 564,909 365,819 266,220 ---------- ----------- ---------- ---------- NET INVESTMENT INCOME .................................... 5,733,005 5,492,419 5,654,559 4,248,922 ---------- ----------- ---------- ---------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 2): Realized gain (loss) on investments .............. (220,874) (377,247) 372,478 (275,035) Realized gain distribution from The Hudson River Trust ........................ -- -- 3,227,791 -- ---------- ----------- ---------- ---------- NET REALIZED GAIN (LOSS) ................................. (220,874) (377,247) 3,600,269 (275,035) ---------- ----------- ---------- ---------- Unrealized appreciation (depreciation) on investments: Beginning of period .............................. (2,105,676) (15,521,200) 3,823,981 (873,103) End of period .................................... (6,331,621) (6,084,645) 8,353,636 2,942,319 ---------- ----------- ---------- ---------- Change in unrealized appreciation (depreciation) during the period ................................ (4,225,945) 9,436,555 4,529,655 3,815,422 ---------- ----------- ---------- ---------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS ....................................... (4,446,819) 9,059,308 8,129,924 3,540,387 ---------- ----------- ---------- ---------- NET INCREASE IN NET ASSETS RESULTING ..................... FROM OPERATIONS ...................................... $1,286,186 $14,551,727 $13,784,483 $7,789,309 ========== =========== =========== ==========
See Notes to Financial Statements. FSA-21 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP STATEMENTS OF OPERATIONS (CONTINUED) FOR NINE MONTHS ENDED SEPTEMBER 30, (UNAUDITED)
GROWTH & INCOME EQUITY INDEX FUND FUND ------------------------- ---------------------------- 1996 1995 1996 1995 ---------- ---------- ----------- ----------- INCOME AND EXPENSES: Income (Note 2): Dividends from The Hudson River Trust ............ $ 381,846 $ 257,323 $ 1,390,087 $ 651,968 Expenses (Note 3): Mortality and expense risk charges ............... 105,544 45,104 415,358 191,805 ---------- ---------- ----------- ----------- NET INVESTMENT INCOME .................................... 276,302 212,219 974,729 460,163 ---------- ---------- ----------- ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 2): Realized gain (loss) on investments .............. (4,941) (1,023) (21,227) (9) Realized gain distribution from The Hudson River Trust ........................ 568,408 -- 338,110 -- ---------- ---------- ----------- ----------- NET REALIZED GAIN (LOSS) ................................. 563,467 (1,023) 316,883 (9) ---------- ---------- ----------- ----------- Unrealized appreciation (depreciation) on investments: Beginning of period .............................. 2,123,346 (141,585) 12,451,765 (399,286) End of period .................................... 3,615,445 1,604,757 22,377,251 9,547,751 ---------- ---------- ----------- ----------- Change in unrealized appreciation (depreciation) during the period ................................ 1,492,099 1,746,342 9,925,486 9,947,037 ---------- ---------- ----------- ----------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS ....................................... 2,055,566 1,745,319 10,242,369 9,947,028 ---------- ---------- ----------- ----------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ...................................... $2,331,868 $1,957,538 $11,217,098 $10,407,191 ========== ========== =========== ===========
See Notes to Financial Statements. *Commencement of operations on April 3.
COMMON STOCK GLOBAL STOCK FUND FUND ----------------------------- ---------------------------- 1996 1995 1996 1995 ------------ ------------ ----------- ----------- INCOME AND EXPENSES: Income (Note 2): Dividends from The Hudson River Trust ............ $ 9,004,982 $ 9,752,460 $ 4,146,524 $ 4,033,348 Expenses (Note 3): Mortality and expense risk charges ............... 5,915,587 4,375,532 1,674,106 1,255,121 ------------ ------------ ----------- ----------- NET INVESTMENT INCOME .................................... 3,089,395 5,376,928 2,472,418 2,778,227 ------------ ------------ ----------- ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 2): Realized gain (loss) on investments .............. 5,062,716 14,917,528 2,370,310 2,236,458 Realized gain distribution from The Hudson River Trust ........................ 61,461,578 -- 9,397,912 -- ------------ ------------ ----------- ----------- NET REALIZED GAIN (LOSS) ................................. 66,524,294 14,917,528 11,768,222 2,236,458 ------------ ------------ ----------- ----------- Unrealized appreciation (depreciation) on investments: Beginning of period .............................. 181,824,279 (2,048,649) 36,525,596 3,049,444 End of period .................................... 286,821,826 222,292,389 52,372,289 39,743,464 ------------ ------------ ----------- ----------- Change in unrealized appreciation (depreciation) during the period ................................ 104,997,547 224,341,038 15,846,693 36,694,020 ------------ ------------ ----------- ----------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS ....................................... 171,521,841 239,258,566 27,614,915 38,930,478 ------------ ------------ ----------- ----------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ...................................... $174,611,236 $244,635,494 $30,087,333 $41,708,705 ============ ============ =========== ===========
See Notes to Financial Statements. *Commencement of operations on April 3.
INTERNATIONAL FUND ----------------------- 1996 1995* ---------- -------- INCOME AND EXPENSES: Income (Note 2): Dividends from The Hudson River Trust ............ $ 268,735 $ 56,215 Expenses (Note 3): Mortality and expense risk charges ............... 107,106 20,602 ---------- -------- NET INVESTMENT INCOME .................................... 161,629 35,613 ---------- -------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 2): Realized gain (loss) on investments .............. (17,105) (275) Realized gain distribution from The Hudson River Trust ........................ 312,086 -- ---------- -------- NET REALIZED GAIN (LOSS) ................................. 294,981 (275) ---------- -------- Unrealized appreciation (depreciation) on investments: Beginning of period .............................. 667,906 -- End of period .................................... 1,669,853 435,057 ---------- -------- Change in unrealized appreciation (depreciation) during the period ................................ 1,001,947 435,057 ---------- -------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS ....................................... 1,296,928 434,782 ---------- -------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ...................................... $1,458,557 $470,395 ========== ========
See Notes to Financial Statements. *Commencement of operations on April 3. FSA-22 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP STATEMENTS OF OPERATIONS (CONCLUDED) FOR NINE MONTHS ENDED SEPTEMBER 30, (UNAUDITED)
ASSET ALLOCATION SERIES ------------------------------ CONSERVATIVE INVESTORS AGGRESSIVE STOCK FUND FUND -------------------------------- ------------------------------ 1996 1995 1996 1995 ------------- ------------- ------------ ------------ INCOME AND EXPENSES: Income (Note 2): Dividends from The Hudson River Trust ............ $ 1,105,507 $ 1,083,866 $ 5,867,240 $ 6,040,445 Expenses (Note 3): Mortality and expense risk charges ............... 2,923,580 1,915,033 777,140 666,346 ------------- ------------- ------------ ------------ NET INVESTMENT INCOME .................................... (1,818,073) (831,167) 5,090,100 5,374,099 ------------- ------------- ------------ ------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 2): Realized gain (loss) on investments .............. 23,657,174 4,846,290 (560,234) (379,912) Realized gain distribution from The Hudson River Trust ........................ 85,627,087 -- 2,804,963 -- ------------- ------------- ------------ ------------ NET REALIZED GAIN (LOSS) ................................. 109,284,261 4,846,290 2,244,729 (379,912) ------------- ------------- ------------ ------------ Unrealized appreciation (depreciation) on investments: Beginning of period .............................. 80,271,118 11,560,966 10,362,120 (8,767,697) End of period .................................... 84,296,723 105,041,544 3,801,017 5,707,618 ------------- ------------- ------------ ------------ Change in unrealized appreciation (depreciation) during the period ................................ 4,025,605 93,480,578 (6,561,103) 14,475,315 ------------- ------------- ------------ ------------ NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS ....................................... 113,309,866 98,326,868 (4,316,374) 14,095,403 ------------- ------------- ------------ ------------ NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ...................................... $ 111,491,793 $ 97,495,701 $ 773,726 $ 19,469,502 ============= ============= ============ ============
See Notes to Financial Statements.
ASSET ALLOCATION SERIES ---------------------------------------------------------------- BALANCED FUND GROWTH INVESTORS FUND ------------------------------- ------------------------------ 1996 1995 1996 1995 ------------- ------------- ------------ ------------- INCOME AND EXPENSES: Income (Note 2): Dividends from The Hudson River Trust ............ $ 9,585,426 $ 9,067,337 $ 10,945,015 $ 11,331,010 Expenses (Note 3): Mortality and expense risk charges ............... 1,833,659 1,639,489 2,710,777 1,986,105 ------------ ------------ ------------ ------------ NET INVESTMENT INCOME .................................... 7,751,767 7,427,848 8,234,238 9,344,905 ------------ ------------ ------------ ------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 2): Realized gain (loss) on investments .............. (913,215) (1,988,151) 894,207 1,539,280 Realized gain distribution from The Hudson River Trust ........................ 26,596,466 -- 63,035,263 -- ------------ ------------ ------------ ------------ NET REALIZED GAIN (LOSS) ................................. 25,683,251 (1,988,151) 63,929,470 1,539,280 ------------ ------------ ------------ ------------ Unrealized appreciation (depreciation) on investments: Beginning of period .............................. 43,097,187 (2,878,875) 81,785,873 (770,693) End of period .................................... 33,860,083 42,508,029 50,836,511 73,394,942 ------------ ------------ ------------ ------------ Change in unrealized appreciation (depreciation) during the period ................................ (9,237,104) 45,386,904 (30,949,362) 74,165,635 ------------ ------------ ------------ ------------ NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS ....................................... 16,446,147 43,398,753 32,980,108 75,704,915 ------------ ------------ ------------ ------------ NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ...................................... $ 24,197,914 $ 50,826,601 $ 41,214,346 $ 85,049,820 ============ ============ ============ ============
See Notes to Financial Statements. FSA-23 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP STATEMENTS OF CHANGES IN NET ASSETS FOR NINE MONTHS ENDED SEPTEMBER 30, (UNAUDITED)
Intermediate Government MONEY MARKET FUND Securities Fund -------------------------------- ----------------------------- 1996 1995 1996 1995 -------------- ------------- ------------ ------------ INCREASE (DECREASE) IN NET ASSETS ATTRIBUTABLE TO POLICYOWNERS: FROM OPERATIONS: Net investment income .................... $ 5,561,143 $ 5,869,343 $ 1,519,258 $ 1,335,612 Net realized gain (loss) ................. (149,139) (208,460) (408,620) (768,233) Change in unrealized appreciation (depreciation) on investments ........ 282,339 (273,232) (590,660) 2,273,838 ------------- ------------- ------------ ------------ Net increase (decrease) from operations ...................... 5,694,343 5,387,651 519,978 2,841,217 ------------- ------------- ------------ ------------ FROM POLICY-RELATED TRANSACTIONS: Net premiums (Note 3) .................... 73,901,686 70,231,391 7,713,294 8,391,577 Benefits and other policy-related transactions (Note 3) ................ (27,123,574) (29,452,310) (5,367,810 (4,950,311) Net transfers among Funds ................ (94,267,163) 17,093,189 2,756,705 136,079 ------------- ------------- ------------ ------------ Net increase (decrease) from policy-related transactions .......... (47,489,051) 57,872,270 5,102,189 3,577,345 ------------- ------------- ------------ ------------ NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE VARIABLE IN SEPARATE ACCOUNT FP (Note 4) ............. (60,740) (30,797) (12,026) (55,730) ------------- ------------- ------------ ------------ INCREASE (DECREASE) IN NET ASSETS ATTRIBUTABLE TO POLICYHOLDERS ......................... (41,855,448) 63,229,124 5,610,141 6,362,832 NET ASSETS ATTRIBUTABLE TO POLICYOWNERS, BEGINNING OF PERIOD ...................... 207,133,531 137,496,085 37,149,044 27,654,075 ------------- ------------- ------------ ----------- NET ASSETS ATTRIBUTABLE TO POLICYOWNERS, END OF PERIOD ............................ $ 165,278,083 $ 200,725,209 $42,729,185 $34,016,907 ============= ============= ============ ===========
See Notes to Financial Statements.
QUALITY BOND FUND HIGH YIELD FUND ------------------------------- ------------------------------ 1996 1995 1996 1995 ------------ ------------- ------------ ------------ INCREASE (DECREASE) IN NET ASSETS ATTRIBUTABLE TO POLICYOWNERS: FROM OPERATIONS: Net investment income .................... $ 5,733,005 $ 5,492,419 $ 5,654,559 $ 4,248,922 Net realized gain (loss) ................. (220,874) (377,247) 3,600,269 (275,035) Change in unrealized appreciation (depreciation) on investments ........ (4,225,945) 9,436,555 4,529,655 3,815,422 ------------ ------------- ------------ ------------ Net increase (decrease) from operations ...................... 1,286,186 14,551,727 13,784,483 7,789,309 ------------- ------------- ------------ ------------ FROM POLICY-RELATED TRANSACTIONS: Net premiums (Note 3) .................... 4,698,961 1,895,869 13,765,625 11,553,599 Benefits and other policy-related transactions (Note 3) ................ (2,816,687) (2,565,098) (7,942,483) (5,852,984) Net transfers among Funds ................ 5,771,073 1,565,156 3,802,558 2,835,740 ------------- ------------- ------------ ------------ Net increase (decrease) from policy-related transactions .......... 7,653,347 895,927 9,625,700 8,536,355 ------------- ------------- ------------ ------------ NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE VARIABLE IN SEPARATE ACCOUNT FP (Note 4) ............. (14,957) (583,778) (164,117) (77,962) ------------- ------------- ------------ ------------ INCREASE (DECREASE) IN NET ASSETS ATTRIBUTABLE TO POLICYHOLDERS ......................... 8,924,576 14,863,876 23,246,066 16,247,702 NET ASSETS ATTRIBUTABLE TO POLICYOWNERS, BEGINNING OF PERIOD ...................... 138,287,446 117,236,472 71,930,962 49,454,901 ------------- ------------- ------------ ------------ NET ASSETS ATTRIBUTABLE TO POLICYOWNERS, END OF PERIOD ............................ $ 147,212,022 $ 132,100,348 $ 95,177,028 $ 65,702,603 ============= ============= ============ ============
See Notes to Financial Statements. FSA-24 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR NINE MONTHS ENDED SEPTEMBER 30, (UNAUDITED)
GROWTH & INCOME FUND EQUITY INDEX FUND ------------------------------ ------------------------------- 1996 1995 1996 1995* ------------ ------------ ------------- ------------ INCREASE (DECREASE) IN NET ASSETS ATTRIBUTABLE TO POLICYOWNERS: FROM OPERATIONS: Net investment income ............ $ 276,302 $ 212,219 $ 974,729 $ 460,163 Net realized gain (loss) ......... 563,467 (1,023) 316,883 (9) Change in unrealized appreciation (depreciation) on investments 1,492,099 1,746,342 9,925,486 9,947,037 ------------ ------------ ------------- ----------- Net increase (decrease) from operations .............. 2,331,868 1,957,538 11,217,098 10,407,191 ------------ ------------ ------------- ------------ FROM POLICY-RELATED TRANSACTIONS: Net premiums (Note 3) ............ 8,373,294 4,359,667 24,299,229 6,034,578 Benefits and other policy-related transactions (Note 3) ........ (2,102,400) (961,902) (5,365,898) (1,188,165) Net transfers among Funds ........ 3,316,994 3,789,319 17,429,345 13,078,752 ------------ ------------- ------------ ------------ Net increase from Assets policy-related transactions .. 9,587,888 7,187,084 36,362,676 17,925,165 ------------ ------------- ------------- ------------ NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE VARIABLE IN SEPARATE ACCOUNT FP (Note 4) ..... (53,011) (195,384) (42,017) (57,807) ------------ ------------ ------------- ------------ INCREASE IN NET ASSETS ATTRIBUTABLE TO POLICYHOLDERS ................. 11,866,745 8,949,238 47,537,757 28,274,549 NET ASSETS ATTRIBUTABLE TO POLICYOWNERS, BEGINNING OF PERIOD 18,618,313 5,908,383 71,623,615 31,125,403 ------------- ------------ ------------- ------------ NET ASSETS ATTRIBUTABLE TO POLICYOWNERS, END OF PERIOD ..... $ 30,485,058 $ 14,857,621 $ 119,161,372 $ 59,399,952 ============ ============ ============= ============
See Notes to Financial Statements. *Commencement of operations on April 3.
COMMON STOCK FUND GLOBAL STOCK FUND ------------------------------------ ------------------------------- 1996 1995 1996 1995 --------------- --------------- ------------- ------------- INCREASE (DECREASE) IN NET ASSETS ATTRIBUTABLE TO POLICYOWNERS: FROM OPERATIONS: Net investment income ............ $ 3,089,395 $ 5,376,928 $ 2,472,418 $ 2,778,227 Net realized gain (loss) ......... 66,524,294 14,917,528 11,768,222 2,236,458 Change in unrealized appreciation (depreciation) on investments 104,997,547 224,341,038 15,846,693 36,694,020 --------------- --------------- ------------- ------------- Net increase (decrease) from operations .............. 174,611,236 244,635,494 30,087,333 41,708,705 --------------- --------------- ------------- ------------- FROM POLICY-RELATED TRANSACTIONS: Net premiums (Note 3) ............ 202,074,526 160,014,740 73,729,435 72,248,903 Benefits and other policy-related transactions (Note 3) ........ (112,009,732) (86,608,436) (31,604,430) (26,985,045) Net transfers among Funds ........ 68,835,712 (38,614,310) (2,060,721) (10,330,932) --------------- --------------- ------------- ------------- Net increase from Assets policy-related transactions .. 158,900,506 34,791,994 40,064,284 34,932,926 --------------- --------------- ------------- ------------- NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE VARIABLE IN SEPARATE ACCOUNT FP (Note 4) ..... (286,233) (371,006) (69,929) (89,566) --------------- --------------- ------------- ------------- INCREASE IN NET ASSETS ATTRIBUTABLE TO POLICYHOLDERS ................. 333,225,509 279,056,482 70,081,688 76,552,065 NET ASSETS ATTRIBUTABLE TO POLICYOWNERS, BEGINNING OF PERIOD 1,146,585,274 811,006,200 333,497,020 241,838,471 ---------------- --------------- ------------- ------------- NET ASSETS ATTRIBUTABLE TO POLICYOWNERS, END OF PERIOD ..... $ 1,479,810,783 $ 1,090,062,682 $ 403,578,708 $ 318,390,536 =============== =============== ============= =============
See Notes to Financial Statements. *Commencement of operations on April 3. INTERNATIONAL FUND ----------------------------- 1996 1995* ------------ ----------- INCREASE (DECREASE) IN NET ASSETS ATTRIBUTABLE TO POLICYOWNERS: FROM OPERATIONS: Net investment income ............ $ 161,629 $ 35,613 Net realized gain (loss) ......... 294,981 (275) Change in unrealized appreciation (depreciation) on investments 1,001,947 435,057 ------------ ----------- Net increase (decrease) from operations .............. 1,458,557 470,395 ------------ ----------- FROM POLICY-RELATED TRANSACTIONS: Net premiums (Note 3) ............ 8,182,092 804,351 Benefits and other policy-related transactions (Note 3) ........ (1,516,547) (150,197) Net transfers among Funds ........ 14,255,013 7,399,293 ------------ ----------- Net increase from Assets policy-related transactions .. 20,920,558 8,053,447 ------------ ----------- NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE VARIABLE IN SEPARATE ACCOUNT FP (Note 4) ..... (16,632) (13,498) ------------ ----------- INCREASE IN NET ASSETS ATTRIBUTABLE TO POLICYHOLDERS ................. 22,362,483 8,510,344 NET ASSETS ATTRIBUTABLE TO POLICYOWNERS, BEGINNING OF PERIOD 12,431,938 0 ------------- ----------- NET ASSETS ATTRIBUTABLE TO POLICYOWNERS, END OF PERIOD ..... $ 34,794,421 $ 8,510,344 ============ =========== See Notes to Financial Statements. *Commencement of operations on April 3. FSA-25 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP STATEMENTS OF CHANGES IN NET ASSETS (CONCLUDED) FOR NINE MONTHS ENDED SEPTEMBER 30, (UNAUDITED)
ASSET ALLOCATION SERIES ------------------------------- AGGRESSIVE STOCK CONSERVATIVE INVESTORS FUND FUND -------------------------------- ------------------------------- 1996 1995 1996 1995 ------------- ------------- ------------- ------------- INCREASE (DECREASE) IN NET ASSETS ATTRIBUTABLE TO POLICYOWNERS: FROM OPERATIONS: Net investment income ............... $ (1,818,073) $ (831,167) $ 5,090,100 $ 5,374,099 Net realized gain (loss) ............ 109,284,261 4,846,290 2,244,729 (379,912) Change in unrealized appreciation (depreciation) on investments ... 4,025,605 93,480,578 (6,561,103) 14,475,315 ------------- ------------- ------------- ------------- Net increase (decrease) from operations ................. 111,491,793 97,495,701 773,726 19,469,502 ------------- ------------- ------------- ------------- FROM POLICY-RELATED TRANSACTIONS: Net premiums (Note 3) ............... 122,205,511 89,700,780 29,624,479 31,286,054 Benefits and other policy-related transactions (Note 3) ........... (61,714,088) (46,154,214) (19,045,888) (17,525,531) Net transfers among Funds ........... 17,647,426 15,707,464 (13,623,081) (2,274,604) ------------- ------------- ------------- ------------- Net increase (decrease) from policy-related transactions ..... 78,138,849 59,254,030 (3,044,490) 11,485,919 ------------- ----------- ------------- ------------- NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE VARIABLE IN SEPARATE ACCOUNT FP (Note 4) ........ (194,883) (172,982) (14,041) (72,273) ------------- ------------- ------------- ------------- INCREASE (DECREASE) IN NET ASSETS ATTRIBUTABLE TO POLICYHOLDERS ....... 189,435,759 156,576,749 (2,284,805) 30,883,148 NET ASSETS ATTRIBUTABLE TO POLICYOWNERS, BEGINNING OF PERIOD................. 555,188,131 355,671,865 172,087,099 129,940,498 ------------- ------------- ------------- ------------- NET ASSETS ATTRIBUTABLE TO POLICYOWNERS, END OF PERIOD ....................... $ 744,623,890 $ 512,248,614 $ 169,802,294 $ 160,823,646 ============= ============= ============= =============
See Notes to Financial Statements.
ASSET ALLOCATION SERIES ------------------------------------------------------------------- GROWTH INVESTORS BALANCED FUND FUND ------------------------------- ------------------------------- 1996 1995 1996 1995 ------------- ------------- ------------- ------------- INCREASE (DECREASE) IN NET ASSETS ATTRIBUTABLE TO POLICYOWNERS: FROM OPERATIONS: Net investment income ............... $ 7,751,767 $ 7,427,848 $ 8,234,238 $ 9,344,905 Net realized gain (loss) ............ 25,683,251 (1,988,151) 63,929,470 1,539,280 Change in unrealized appreciation (depreciation) on investments ... (9,237,104) 45,386,904 (30,949,362) 74,165,635 ------------- ------------- ------------- ------------- Net increase (decrease) from operations ................. 24,197,914 50,826,601 41,214,346 85,049,820 ------------- ------------- ------------- ------------- FROM POLICY-RELATED TRANSACTIONS: Net premiums (Note 3) ............... 47,887,117 49,301,601 122,316,625 118,766,910 Benefits and other policy-related transactions (Note 3) ........... (38,894,806) (37,166,454) (60,278,616) (49,995,250) Net transfers among Funds ........... (17,062,769) (13,985,044) (376,762) (4,344,785) ------------- ------------- ------------- ------------- Net increase (decrease) from policy-related transactions ..... (8,070,458) (1,849,897) 61,661,247 64,426,875 ------------- ------------- ------------- ------------- NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE VARIABLE IN SEPARATE ACCOUNT FP (Note 4) ........ (103,615) (79,293) (74,670) (107,675) ------------- ------------- ------------- ------------- INCREASE (DECREASE) IN NET ASSETS ATTRIBUTABLE TO POLICYHOLDERS ....... 16,023,841 48,897,411 102,800,923 149,369,020 NET ASSETS ATTRIBUTABLE TO POLICYOWNERS, BEGINNING OF PERIOD................. 398,565,209 338,415,565 555,877,666 367,219,554 ------------- ------------- ------------- ------------- NET ASSETS ATTRIBUTABLE TO POLICYOWNERS, END OF PERIOD ....................... $ 414,589,050 $ 387,312,976 $ 658,678,589 $ 516,588,574 ============= ============= ============= =============
See Notes to Financial Statements. FSA-26 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP NOTES TO FINANCIAL STATEMENTS (UNAUDITED) SEPTEMBER 30, 1996 1. General Equitable Variable Life Insurance Company (Equitable Variable Life), a wholly-owned subsidiary of The Equitable Life Assurance Society of the United States (Equitable Life), established Separate Account FP (the Account) as a unit investment trust registered with the Securities and Exchange Commission under the Investment Company Act of 1940. The Account consists of thirteen investment funds: the Money Market Fund, the Intermediate Government Securities Fund, the High Yield Fund, the Balanced Fund, the Common Stock Fund, the Global Fund, the Aggressive Stock Fund, the Conservative Investors Fund, the Growth Investors Fund, the Growth & Income Fund, the Quality Bond Fund, the Equity Index Fund and the International Fund. The assets in each Fund are invested in shares of a designated portfolio (Portfolio) of a mutual fund, The Hudson River Trust (the Trust). Each Portfolio has separate investment objectives. The Account supports the operations of Incentive Life, flexible premium variable life insurance policies, Incentive Life 2000, flexible premium variable life insurance policies, Champion 2000, modified premium variable whole life insurance policies, Survivorship 2000, flexible premium joint survivorship variable life insurance policies, Incentive Life Plus,(SM) flexible premium variable life insurance policies, IL Protector,(SM) flexible premium variable life insurance policies, IL COLI II, flexible premium variable life insurance policies, and SP-Flex, variable life insurance policies with additional premium option, collectively, the Policies, and the Incentive Life 2000, Champion 2000 and Survivorship 2000 policies are referred to as the Series 2000 Policies. Incentive Life Plus policies offered with a prospectus dated on or after September 15, 1995, are referred to as Incentive Life Plus Second Series. Incentive Life Plus policies issued with a prior prospectus are referred to as Incentive Life Plus Original Series. All Policies are issued by Equitable Variable. The assets of the Account are the property of Equitable Variable. However, the portion of the Account's assets attributable to the Policies will not be chargeable with liabilities arising out of any other business Equitable Variable may conduct. Policyowners may allocate amounts in their individual accounts to the Funds of the Account and/or (except for SP-Flex policies) to the guaranteed interest fund of Equitable Variable Life's General Account. Net transfers to (from) the guaranteed interest fund of the General Account and other Separate Accounts of ($6,424,330) and $7,944,683 for the nine months ended 1996 and 1995, respectively, are included in Net Transfers Among Funds. The net assets of any Fund of the Account may not be less than the aggregate of the policyowners' accounts allocated to that Fund. Additional assets are set aside in Equitable Variable Life's General Account to provide for (1) the unearned portion of the monthly charges for mortality costs, and (2) other policy benefits, as required under the state insurance law. 2. Significant Accounting Policies The accompanying financial statements are prepared in conformity with generally accepted accounting principles (GAAP). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. These statements should be read in conjunction with the financial statements of Separate Account FP for the year ended December 31, 1995. The results of operations for the nine months ended September 30, 1996 are not necessarily indicative of the results to be expected for the full year. Investments are made in shares of the Trust and are valued at the net asset values per share of the respective Portfolios. The net asset value is determined by the Trust using the market or fair value of the underlying assets of the Portfolio. Investment transactions are recorded on the trade date. Realized gains and losses include gains and losses on redemptions of the Trust's shares (determined on the identified cost basis) and Trust distributions representing the net realized gains on Trust investment transactions. The operations of the Account are included in the consolidated Federal income tax return of Equitable Life. Under the provisions of the Policies, Equitable Variable Life has the right to charge the Account for Federal income tax attributable to the Account. No charge is currently being made against the Account for such tax since, under current tax law, Equitable Variable Life pays no tax on investment income and capital gains reflected in variable life insurance policy reserves. However, Equitable Variable Life retains the right to charge for any Federal income tax incurred which is attributable to the Account if the law is changed. Charges for state and local taxes, if any, attributable to the Account also may be made. Dividends are recorded as income at the end of each quarter on the ex-dividend date. Capital gains are distributed by the Trust at the end of each year. FSA-27 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED) SEPTEMBER 30, 1996 3. Asset Charges Under the Policies, Equitable Variable Life assumes mortality and expense risks and, to cover these risks, deducts charges from the assets of the Account currently at annual rates of 0.60% of the net assets attributable to Incentive Life, Incentive Life 2000, Incentive Life Plus Second Series and Champion 2000 policyowners, 0.90% of net assets attributable to Survivorship 2000 policyowners, 0.80% for IL Protector policyowners, and 0.85% for SP-Flex policyowners. Incentive Life Plus Original Series, IL COLI, and IL COLI II deduct this charge from the Policy Account. Under SP-Flex, Equitable Variable Life also deducts charges from the assets of the Account for mortality and administrative costs of 0.60% and 0.35%, respectively, of net assets attributable to SP-Flex policies. Under Incentive Life, Incentive Life Plus, the Series 2000 Policies, IL Protector and IL COLI II mortality and administrative charges are assessed in a different manner than SP-Flex policies (see Notes 4 and 5). Before amounts are allocated to the Account for Incentive Life, Incentive Life Plus, IL COLI, IL COLI II and the Series 2000 Policies, Equitable Variable Life deducts a charge for taxes and either an initial policy fee (Incentive Life) or a premium sales charge (Incentive Life Plus, IL COLI II and Series 2000 Policies) from premiums. Under SP-Flex, the entire initial premium is allocated to the Account. Before any additional premiums under SP-Flex are allocated to the Account, an administrative charge is deducted. The amounts attributable to Incentive Life, Incentive Life Plus, IL Protector, IL COLI, IL COLI II, and the Series 2000 policyowners' accounts are assessed monthly by Equitable Variable Life with mortality and administrative charges. These charges are withdrawn from the Account along with amounts for additional benefits. Under the Policies, amounts for certain policy-related transactions (such as policy loans and surrenders) are transferred out of the Separate Account. 4. Amounts Retained by Equitable Variable Life in Separate Account FP The amount retained by Equitable Variable Life in the Account arises principally from (1) contributions from Equitable Variable Life, and (2) that portion, determined ratably, of the Account's investment results applicable to those assets in the Account in excess of the net assets for the Policies. Amounts retained by Equitable Variable Life are not subject to charges for mortality and expense risks or mortality and administrative costs. Amounts retained by Equitable Variable Life in the Account may be transferred at any time by Equitable Variable Life to its General Account. During the nine months ended September 30, 1995 surplus contribution of $200,000 were made by EVLICO into the International Fund. 5. Distribution and Servicing Agreements Equitable Variable Life has entered into a Distribution and Servicing Agreement with Equitable Life and EQ Financial Consultants Inc., whereby registered representatives of EQ Financial Consultants Inc., authorized as variable life insurance agents under applicable state insurance laws, sell the Policies. The registered representatives are compensated on a commission basis by Equitable Life. Equitable Variable Life also has entered into an agreement with Equitable Life under which Equitable Life performs the administrative services related to the Policies, including underwriting and issuance, billings and collections, and policyowner services. There is no charge to the Account related to this agreement. 6. Investment Returns The Separate Account rates of return attributable to Incentive Life, Incentive Life 2000, Incentive Life Plus Second Series and Champion 2000 policyowners are different than those attributable to Survivorship 2000, Incentive Life Plus Original Series, IL Protector, IL COLI, IL COLI II and to SP-Flex policyowners because asset charges are deducted at different rates under each policy (see Note 3). The tables on this page and the following pages show the gross and net investment returns with respect to the Funds for the periods shown. The net return for each Fund is based upon net assets for a policy whose policy commences with the beginning date of such period and is not based on the average net assets in the Fund during such period. Gross return is equal to the total return earned by the underlying Trust investment. FSA-28 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED) RATES OF RETURN: INCENTIVE LIFE - -------------- INCENTIVE LIFE 2000* - ------------------- INCENTIVE LIFE PLUS SECOND SERIES* - --------------------------------- AND CHAMPION 2000* - ------------------
NINE MONTHS ENDED(B) JANUARY 26(A)(B) TO SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31, ------------------- -------------------------------------------------------------- ------------------- MONEY MARKET FUND 1996 1995 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 - ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return......... 3.91% 4.30% 5.74% 4.02% 3.00% 3.56% 6.18% 8.24% 9.18% 7.32% 6.63% 6.05% Net return........... 3.44% 3.83% 5.11% 3.39% 2.35% 2.94% 5.55% 7.59% 8.53% 6.68% 5.99% 5.47%
INTERMEDIATE NINE MONTHS ENDED(B) APRIL 1(A)(B) TO GOVERNMENT SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31, SECURITIES FUND -------------------- -------------------------------------- ------------------ - --------------- 1996 1995 1995 1994 1993 1992 1991 ---- ---- ---- ---- ---- ---- ---- Gross return......... 1.71% 9.94% 13.33% (4.37)% 10.58% 5.60% 12.26% Net return........... 1.25% 9.45% 12.65% (4.95)% 9.88% 4.96% 11.60%
NINE MONTHS ENDED(B) YEARS ENDED OCTOBER 1(A)(B) TO SEPTEMBER 30, DECEMBER 31, DECEMBER 31, -------------------- -------------------- ------------------- QUALITY BOND FUND 1996 1995 1995 1994 1993 - ----------------- ---- ---- ---- ---- ---- Gross return......... 1.28% 12.37% 17.02% (5.10)% (0.51)% Net return........... 0.82% 11.86% 16.32% (5.67)% (0.66)%
NINE MONTHS ENDED(B) SEPTEMBER 30, YEARS ENDED DECEMBER 31, -------------------- ---------------------------------------------------------------------- HIGH YIELD FUND 1996 1995 1995 1994 1993 1992 1991 1990 1989 1988 1987 - --------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return......... 18.79% 14.89% 19.92% (2.79)% 23.15% 12.31% 24.46% (1.12)% 5.13% 9.73% 4.68% Net return........... 18.25% 14.37% 19.20% (3.37)% 22.41% 11.64% 23.72% (1.71)% 4.50% 9.08% 4.05%
NINE MONTHS ENDED(B) YEARS ENDED OCTOBER 1(A)(B) TO SEPTEMBER 30, DECEMBER 31, DECEMBER 31, -------------------- --------------------- ---------------------- GROWTH & INCOME FUND 1996 1995 1995 1994 1993 - -------------------- ---- ---- ---- ---- ---- Gross return......... 9.89% 19.76% 24.07% (0.58)% (0.25)% Net return........... 9.39% 19.23% 23.33% (1.17)% (0.41)%
SEPTEMBER 30(A)(B) NINE MONTHS ENDED(B) YEAR ENDED TO SEPTEMBER 30, DECEMBER 31, DECEMBER 31, ------------------------- ----------------------- ---------------------- EQUITY INDEX FUND 1996 1995 1995 1994 - ----------------- ---- ---- ---- ---- Gross return........ 13.10% 28.97% 36.48% 1.08% Net return.......... 12.59% 28.39% 35.66% 0.58%
NINE MONTHS ENDED(B) JANUARY 26(A)(B) TO SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31, -------------------- ----------------------------------------------------------------------- --------------- COMMON STOCK FUND 1996 1995 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 - ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return......... 14.25% 28.99% 32.45% (2.14)% 24.84% 3.22% 37.88% (8.12)% 25.59% 22.43% 7.49% 15.65% Net return........... 13.73% 28.42% 31.66% (2.73)% 24.08% 2.60% 37.06% (8.67)% 24.84% 21.70% 6.84% 15.01%
- ------------------ *Sales of Incentive Life 2000 and Champion 2000 commenced on March 2, 1992. Sales of Incentive Life Plus Second Series commenced on September 15, 1995. (a) Date as of which net premiums under the policies were first allocated to the Fund. (b) The gross return and the net return for the periods indicated are not annual rates of return. FSA-29 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED) RATES OF RETURN: INCENTIVE LIFE - -------------- INCENTIVE LIFE 2000* - ------------------- INCENTIVE LIFE PLUS SECOND SERIES* - --------------------------------- AND CHAMPION 2000* - ------------------
NINE MONTHS ENDED(B) AUGUST 31(A)(B) TO SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31, -------------------- ----------------------------------------------------------------- ----------------- GLOBAL FUND 1996 1995 1995 1994 1993 1992 1991 1990 1989 1988 1987 - ----------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return.......... 8.96% 16.02% 18.81% 5.23% 32.09% (0.50)% 30.55% (6.07)% 26.93% 10.88% (13.27)% Net return............ 8.47% 15.50% 18.11% 4.60% 31.33% (1.10)% 29.77% (6.63)% 26.17% 10.22% (13.45)%
NINE MONTHS ENDED(B) APRIL 3(A)(B) TO SEPTEMBER 30, DECEMBER 31, -------------------- ---------------- INTERNATIONAL FUND 1996 1995 1995 - ------------------ ---- ---- ---- Gross return.......... 7.29% 5.71% 11.29% Net return............ 6.80% 6.94% 10.79%
NINE MONTHS ENDED(B) JANUARY 26(A)(B) TO SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31, -------------------- --------------------------------------------------------------------- --------------- AGGRESSIVE STOCK FUND 1996 1995 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 - --------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return.......... 19.52% 25.74% 31.63% (3.81)% 16.77% (3.16)% 86.86% 8.17% 43.50% 1.17% 7.31% 35.88% Net return............ 18.98% 25.17% 30.85% (4.39)% 16.05% (3.74)% 85.75% 7.51% 42.64% 0.53% 6.66% 35.13%
ASSET ALLOCATION SERIES - -----------------------
NINE MONTHS ENDED(B) JANUARY 26(A)(B) TO SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31, -------------------- ------------------------------------------------------------------------ -------------- BALANCED FUND 1996 1995 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 - ------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return.......... 6.63% 15.50% 19.75% (8.02)% 12.28% (2.84)% 41.26% 0.24% 25.83% 13.27% (0.85)% 29.07% Net return............ 6.15% 14.98% 19.03% (8.57)% 11.64% (3.42)% 40.42% (0.36)% 25.08% 12.59% (1.45)% 28.34%
CONSERVATIVE NINE MONTHS ENDED(B) OCTOBER 2(A)(B) TO INVESTORS FUND SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31, - -------------- ------------------ ----------------------------------------------------- ------------------ 1996 1995 1995 1994 1993 1992 1991 1990 1989 ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return.......... 0.94% 14.87% 20.40% (4.10)% 10.76% 5.72% 19.87% 6.37% 3.09% Net return............ 0.48% 14.35% 19.68% (4.67)% 10.15% 5.09% 19.16% 5.73% 2.94%
NINE MONTHS ENDED(B) OCTOBER 2(A)(B) TO SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31, -------------------- ---------------------------------------------------- ----------------- GROWTH INVESTORS FUND 1996 1995 1995 1994 1993 1992 1991 1990 1989 - --------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return.......... 7.39% 21.63% 26.37% (3.15)% 15.26% 4.90% 48.89% 10.66% 3.98% Net return............ 6.90% 21.09% 25.62% (3.73)% 14.58% 4.27% 48.01% 10.00% 3.82%
- ---------- *Sales of Incentive Life 2000 and Champion 2000 commenced on March 2, 1992. Sales of Incentive Life Plus Second Series commenced on September 15, 1995. (a) Date as of which net premiums under the policies were first allocated to the Fund. (b) The gross return and the net return for the periods indicated are not annual rates of return. FSA-30 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED) RATES OF RETURN: SURVIVORSHIP 2000 - -----------------
NINE MONTHS ENDED(B) AUGUST 17(A)(B) TO SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31, ---------------------- -------------------------------- --------------------- MONEY MARKET FUND 1996 1995 1995 1994 1993 1992 - ----------------- ---- ---- ---- ---- ---- ---- Gross return..................... 3.91% 4.30% 5.74% 4.02% 3.00% 1.11% Net return....................... 3.20% 3.60% 4.80% 3.08% 2.04% 0.77% INTERMEDIATE GOVERNMENT SECURITIES FUND - --------------- Gross return..................... 1.71% 9.94% 13.33% (4.37)% 10.58% 0.90% Net return....................... 1.02% 9.20% 12.31% (5.23)% 9.55% 0.56%
NINE MONTHS ENDED(B) OCTOBER 1(A)(B) TO SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31, ---------------------- ------------------------ ------------------ QUALITY BOND FUND 1996 1995 1995 1994 1993 - ----------------- ---- ---- ---- ---- ---- Gross return..................... 1.28% 12.37% 17.02% (5.10)% (0.51)% Net return....................... 0.59% 11.61% 15.97% (5.95)% (0.73)%
NINE MONTHS ENDED(B) AUGUST 17(A)(B) TO SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31, --------------------- ----------------------------------------- ------------------- HIGH YIELD FUND 1996 1995 1995 1994 1993 1992 - --------------- ---- ---- ---- ---- ---- ---- Gross return..................... 18.79% 14.89% 19.92% (2.79)% 23.15% 1.84% Net return....................... 17.98% 14.12% 18.84% (3.66)% 22.04% 1.50%
NINE MONTHS ENDED(B) OCTOBER 1(A)(B) TO SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31, ---------------------- ------------------------- ----------------------- GROWTH & INCOME FUND 1996 1995 1995 1994 1993 - ----------- ---- ---- ---- ---- ---- Gross return..................... 9.89% 19.76% 24.07% (0.58)% (0.25)% Net return....................... 9.14% 18.96% 22.96% (1.47)% (0.48)%
NINE MONTHS ENDED(B) YEAR ENDED MARCH 1 (A)(B) TO SEPTEMBER 30, DECEMBER 31, DECEMBER 31, ---------------------- ------------------ ------------------- EQUITY INDEX FUND 1996 1995 1995 1994 - ----------------- ---- ---- ---- ---- Gross return..................... 13.10% 28.97% 36.48% 1.08% Net return....................... 12.33% 28.10% 35.26% 0.33%
NINE MONTHS ENDED(B) AUGUST 17(A)(B) TO SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31, ---------------------- -------------------------------------- ---------------------- COMMON STOCK FUND 1996 1995 1995 1994 1993 1992 - ----------------- ---- ---- ---- ---- ---- ---- Gross return..................... 14.25% 28.99% 32.45% (2.14)% 24.84% 5.28% Net return....................... 13.47% 28.13% 31.26% (3.02)% 23.70% 4.93% GLOBAL FUND - ----------- Gross return..................... 8.96% 16.02% 18.81% 5.23% 32.09% 4.87% Net return....................... 8.22% 15.25% 17.75% 4.29% 30.93% 4.52% AGGRESSIVE STOCK FUND - --------------------- Gross return..................... 19.52% 25.74% 31.63% (3.81)% 16.77% 11.49% Net return....................... 18.71% 24.89% 30.46% (4.68)% 15.70% 11.11%
NINE MONTHS ENDED(B) APRIL 3(A)(B) TO SEPTEMBER 30, DECEMBER 31, ---------------------- ------------------ INTERNATIONAL FUND 1996 1995 1995 - ------------------ ---- ---- ---- Gross return..................... 7.29% 5.71% 11.29% Net return....................... 6.56% 6.78% 10.55% ASSET ALLOCATION SERIES - -----------------------
NINE MONTHS ENDED(B) AUGUST 17(A)(B) TO SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31, CONSERVATIVE ----------------------- ---------------------------------------- ---------------------- INVESTORS FUND 1996 1995 1995 1994 1993 1992 - -------------- ---- ---- ---- ---- ---- ---- Gross return..................... 0.94% 14.87% 20.40% (4.10)% 10.76% 1.38% Net return....................... 0.25% 14.09% 19.32% (4.96)% 9.81% 1.04% BALANCED FUND - ------------- Gross return..................... 6.63% 15.50% 19.75% (8.02)% 12.28% 5.37% Net return....................... 5.90% 14.72% 18.68% (8.84)% 11.30% 5.02% GROWTH INVESTORS FUND - --------------------- Gross return..................... 7.39% 21.63% 26.37% (3.15)% 15.26% 6.89% Net return....................... 6.65% 20.81% 25.24% (4.02)% 14.24% 6.53%
- ---------- (a) Date as of which net premiums under the policies were first allocated to the Fund. (b) The gross return and the net return for the periods indicated are not annual rates of return. FSA-31 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED) RATES OF RETURN: INCENTIVE LIFE PLUS ORIGINAL SERIES*(A) - ----------------------------------- IL COLI**(A) - -------
INCENTIVE LIFE PLUS ORIGINAL SERIES IL COLI ---------------------------------------------- ------------------------------------------------- NINE MONTHS NINE MONTHS ENDED JANUARY 6 TO JANUARY 6 TO ENDED SEPTEMBER 15 TO SEPTEMBER 15 TO SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, --------------- -------------- ------------- --------------- --------------- --------------- 1996 1995 1995 1996 1995 1995 ---- ---- ---- ---- ---- ---- Money Market Fund........... 3.91% 4.25% 5.69% 3.91% 0.19% 1.58% Intermediate Government Securities Fund............. 1.71% 9.92% 13.31% 1.71% 0.00% 3.08% Quality Bond Fund........... 1.28% 12.47% 17.13% 1.28% 0.16% 4.31% High Yield Fund............. 18.79% 14.92% 19.95% 18.79% 0.31% 4.70% Growth & Income Fund........ 9.89% 20.05% 24.38% 9.89% 0.30% 3.91% Equity Index Fund........... 13.10% 29.01% 36.53% 13.10% 0.24% 6.08% Common Stock Fund........... 14.25% 29.60% 33.07% 14.25% (1.13)% 1.51% Global Fund................. 8.96% 16.57% 19.38% 8.96% 0.25% 2.67% NINE MONTHS NINE MONTHS ENDED APRIL 30 TO APRIL 30 TO ENDED APRIL 30 TO APRIL 30 TO SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, --------------- -------------- ------------- --------------- --------------- --------------- 1996 1995 1995 1996 1995 1995 ---- ---- ---- ---- ---- ---- International Fund.......... 7.29% 7.26% 11.29% 7.29% 0.71% 4.49% NINE MONTHS NINE MONTHS ENDED JANUARY 6 TO JANUARY 6 TO ENDED SEPTEMBER 15 TO SEPTEMBER 15 TO SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, --------------- -------------- ------------- --------------- --------------- --------------- 1996 1995 1995 1996 1995 1995 ---- ---- ---- ---- ---- ---- Aggressive Stock Fund....... 19.52% 27.02% 33.00% 19.52% (0.38)% 4.28% ASSET ALLOCATION SERIES NINE MONTHS NINE MONTHS ENDED JANUARY 6 TO JANUARY 6 TO ENDED SEPTEMBER 15 TO SEPTEMBER 15 SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, --------------- -------------- ------------- --------------- --------------- --------------- 1996 1995 1995 1996 1995 1995 ---- ---- ---- ---- ---- ---- Conservative Investors Fund.. 8.96% 15.05% 20.59% 8.96% 0.07% 4.91% Balanced Fund................ 6.63% 16.05% 20.32% 6.63% (0.47)% 3.18% Growth Investors Fund........ 7.39% 22.16% 26.92% 7.39% 0.90% 4.83%
- ---------------------------- *Sales of Incentive Life Plus Original Series commenced on January 6, 1995. **Sales of IL COLI commenced on September 15, 1995. (a)There are no Separate Account asset charges for this policy and therefore the gross and net rates of return are the same. The rates of return for the periods indicated are not annual rates of return. FSA-32 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED) RATES OF RETURN: SP-FLEX - -------
NINE MONTHS ENDED(B) AUGUST 31(A)(B) TO SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31, -------------------- ------------------------------------------------------------ ---------------- MONEY MARKET FUND 1996 1995 1995 1994 1993 1992 1991 1990 1989 1988 1987 - ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return................. 3.91% 4.30% 5.74% 4.02% 3.00% 3.56% 6.17% 8.24% 9.18% 7.32% 2.15% Net return................... 2.51% 2.91% 3.86% 2.17% 1.13% 1.71% 4.29% 6.30% 7.24% 5.41% 1.62%
NINE MONTHS ENDED(B) APRIL 1(A)(B) TO SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31, INTERMEDIATE GOVERNMENT -------------------- --------------------------------- ------------------ SECURITIES FUND 1996 1995 1995 1994 1993 1992 1991 - --------------- ---- ---- ---- ---- ---- ---- ---- Gross return................. 1.71% 9.94% 13.33% (4.37)% 10.58% 5.60% 12.10% Net return................... 0.34% 8.47% 11.31% (6.08)% 8.57% 3.71% 10.59%
NINE MONTHS ENDED(B) YEAR ENDED SEPTEMBER 1(A)(B) TO SEPTEMBER 30, DECEMBER 31, DECEMBER 31, -------------------- ----------------- ------------------- QUALITY BOND FUND 1996 1995 1995 1994 - ----------------- ---- ---- ---- ---- Gross return................. 1.28% 12.37% 17.02% (2.20)% Net return................... (0.09)% 10.86% 14.94% (2.35)%
NINE MONTHS ENDED(B) AUGUST 31(A)(B) TO SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31, -------------------- --------------------------------------------------------------- --------------- HIGH YIELD FUND 1996 1995 1995 1994 1993 1992 1991 1990 1989 1988 1987 - --------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return................. 18.79% 14.89% 19.92% (2.79)% 23.15% 12.31% 24.46% (1.12)% 5.13% 9.73% 1.95% Net return................... 17.19% 13.35% 17.79% (4.52)% 20.96% 10.30% 22.25% (2.89)% 3.26% 7.78% 1.39%
NINE MONTHS ENDED(B) YEAR ENDED SEPTEMBER 1(A)(B) TO SEPTEMBER 30, DECEMBER 31, DECEMBER 31, GROWTH & -------------------- ------------------------------------ INCOME FUND 1996 1995 1995 1994 - ----------- ---- ---- ---- ---- Gross return................. 9.89% 19.76% 24.07% (3.40)% Net return................... 8.40% 18.16% 21.87% (3.55)% EQUITY INDEX FUND - ----------------- Gross return................. 13.10% 28.97% 36.48% (2.54)% Net return................... 11.58% 27.25% 34.06% (2.69)%
NINE MONTHS ENDED(B) AUGUST 31(A)(B) TO SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31, -------------------- ---------------------------------------------------------------- -------------- COMMON STOCK FUND 1996 1995 1995 1994 1993 1992 1991 1990 1989 1988 1987 - ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return................. 14.25% 28.99% 32.45% (2.14)% 24.84% 3.23% 37.87% (8.12)% 25.59% 22.43% (22.57)% Net return................... 12.70% 27.27% 30.10% (3.88)% 22.60% 1.38% 35.43% (9.76)% 23.36% 20.26% (23.00)% GLOBAL FUND - ----------- Gross return................. 8.96% 16.02% 18.81% 5.23% 32.09% (0.50)% 30.55% (6.07)% 26.93% 10.88% (11.40)% Net return................... 7.49% 14.47% 16.70% 3.36% 29.77% (2.28)% 28.23% (7.75)% 24.67% 8.90% (11.86)%
NINE MONTHS ENDED(B) APRIL 3(A)(B) TO SEPTEMBER 30, DECEMBER 31, -------------------- --------------- INTERNATIONAL FUND 1996 1995 1995 - ------------------ ---- ---- ---- Gross return................ 7.29% 5.71% 11.29% Net return.................. 5.84% 6.31% 9.82%
NINE MONTHS ENDED(B) AUGUST 31(A)(B) TO SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31, -------------------- ---------------------------------------------------------------- ---------------- AGGRESSIVE STOCK FUND 1996 1995 1995 1994 1993 1992 1991 1990 1989 1988 1987 - --------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return................ 19.52% 25.74% 31.63% (3.81)% 16.77% (3.16)% 86.86% 8.17% 43.50% 1.17% (24.28)% Net return.................. 17.91% 24.06% 29.30% (5.53)% 14.67% (4.89)% 83.54% 6.23% 40.95% (0.66)% (24.68)%
- ---------- (a) Date as of which net premiums under the policies were first allocated to the Fund. (b) The gross return and the net return for the periods indicated are not annual rates of return. FSA-33 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONCLUDED) ASSET ALLOCATION SERIES
NINE MONTHS ENDED(B) YEAR ENDED SEPTEMBER 1(A)(B) TO SEPTEMBER 30, DECEMBER 31, DECEMBER 31, CONSERVATIVE -------------------- ------------------------------------- INVESTORS FUND 1996 1995 1995 1994 - -------------- ---- ---- ---- ---- Gross return................. 0.94% 14.87% 20.40% (1.83)% Net return................... (0.43)% 13.33% 18.26% (1.98)%
NINE MONTHS ENDED(B) AUGUST 31(A)(B) TO SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31, -------------------- ---------------------------------------------------------------- -------------- BALANCED FUND 1996 1995 1995 1994 1993 1992 1991 1990 1989 1988 1987 - ------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return................. 6.63% 15.50% 19.75% (8.02)% 12.28% (2.83)% 41.27% 0.24% 25.83% 13.27% (20.26)% Net return................... 5.19% 13.96% 17.62% (9.66)% 10.31% (4.57)% 38.75% (1.56)% 23.59% 11.25% (20.71)%
NINE MONTHS ENDED(B) YEAR ENDED SEPTEMBER 1(A)(B) TO SEPTEMBER 30, DECEMBER 31, DECEMBER 31, GROWTH -------------------- -------------------------------------- INVESTORS FUND 1996 1995 1995 1994 - -------------- ---- ---- ---- ---- Gross return................. 7.39% 21.63% 26.37% (3.16)% Net return................... 5.93% 20.01% 24.12% (3.31)%
- ---------- (a) Date as of which net premiums under the policies were first allocated to the Fund. (b) The gross return and the net return for the periods indicated are not annual rates of return. FSA-34 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED) RATES OF RETURN: IL PROTECTOR* - ---------------------------- AUGUST 22 TO SEPTEMBER 30,(A) ----------------- 1996 ------ Money Market Fund................. 1.80% Intermediate Government Securities Fund................... 2.62% Quality Bond...................... 3.89% High Yield Fund................... 10.33% Growth & Income Fund.............. 6.01% Equity Index Fund................. 7.65% Common Stock Fund................. 8.18% Global Fund....................... 1.73% International Fund................ (0.03)% Aggressive Stock Fund............. 4.10% ASSET ALLOCATION SERIES AUGUST 5 TO SEPTEMBER 30,(A) ----------------- 1996 ------ Conservative Investors Fund....... 3.77% Balanced Fund..................... 3.97% Growth Investors Fund............. 4.52% - ---------- *Sales of IL Protector commenced on August 22, 1996. (a) Date as of which net premiums under the policies were first allocated to the Fund. The gross return and the net return for the periods indicated are not annual rates of return. 7. Subsequent Event On September 19, 1996 the Board of Directors of Equitable Life approved an Agreement and Plan of Merger by and between Equitable Life and Equitable Variable Life (the "Merger Agreement"). The merger is expected to be effective on January 1, 1997, subject to receipt of all necessary regulatory approvals. On that date, and in accordance with the provisions of the Merger Agreement, the separate existence of Equitable Variable Life will cease and Equitable Life will survive the merger. From and after the effective date of the merger, Equitable Life will be liable in place of Equitable Variable Life for the liabilities and obligations of Equitable Variable Life, including liabilities under policies and contracts issued by Equitable Variable Life, and all of Equitable Variable Life's assets will become assets of Equitable Life. FSA-35 INDEX TO FINANCIAL STATEMENTS THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Independent Auditors' Report....................................................................................F-2 Consolidated Financial Statements: Consolidated Balance Sheets, December 31, 1995 and 1994...................................................F-3 Consolidated Statements of Earnings for the Years Ended December 31, 1995, 1994 and 1993...............................................................................................F-4 Consolidated Statements of Equity for the Years Ended December 31, 1995, 1994 and 1993...............................................................................................F-5 Consolidated Statements of Cash Flows for the Years Ended December 31, 1995, 1994 and 1993...............................................................................................F-6 Notes to Consolidated Financial Statements................................................................F-7 Unaudited Interim Consolidated Financial Statements: Consolidated Balance Sheets, September 30, 1996 and December 31, 1995....................................F-42 Consolidated Statements of Earnings for the Three and Nine Months Ended September 30, 1996 and 1995...........................................................................F-43 Consolidated Statements of Equity for the Nine Months Ended September 30, 1996 and 1995...........................................................................F-44 Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 1996 and 1995...........................................................................F-45 Notes to Consolidated Financial Statements...............................................................F-46
F-1 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholder of The Equitable Life Assurance Society of the United States In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of earnings, of shareholder's equity and of cash flows present fairly, in all material respects, the financial position of The Equitable Life Assurance Society of the United States and its subsidiaries ("Equitable Life") at December 31, 1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. These financial statements are the responsibility of Equitable Life's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. As discussed in Note 2 to the consolidated financial statements, Equitable Life changed its methods of accounting for loan impairments in 1995, for postemployment benefits in 1994 and for investment securities in 1993. PRICE WATERHOUSE LLP New York, New York February 7, 1996 F-2 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1995 AND 1994
1995 1994 ----------------- ----------------- (IN MILLIONS) ASSETS Investments: Fixed maturities: Available for sale, at estimated fair value............................. $ 15,899.9 $ 7,586.0 Held to maturity, at amortized cost..................................... - 5,223.0 Mortgage loans on real estate............................................. 3,638.3 4,018.0 Equity real estate........................................................ 3,916.2 4,446.4 Policy loans.............................................................. 1,976.4 1,731.2 Other equity investments.................................................. 621.1 678.5 Investment in and loans to affiliates..................................... 636.6 560.2 Other invested assets..................................................... 706.1 489.3 ----------------- ----------------- Total investments..................................................... 27,394.6 24,732.6 Cash and cash equivalents................................................... 774.7 693.6 Deferred policy acquisition costs........................................... 3,083.3 3,221.1 Amounts due from discontinued GIC Segment................................... 2,097.1 2,108.6 Other assets................................................................ 2,713.1 2,078.6 Closed Block assets......................................................... 8,612.8 8,105.5 Separate Accounts assets.................................................... 24,566.6 20,469.5 ----------------- ----------------- TOTAL ASSETS................................................................ $ 69,242.2 $ 61,409.5 ================= ================= LIABILITIES Policyholders' account balances............................................. $ 21,752.6 $ 21,238.0 Future policy benefits and other policyholders' liabilities................. 4,171.8 3,840.8 Short-term and long-term debt............................................... 1,899.3 1,337.4 Other liabilities........................................................... 3,379.5 2,300.1 Closed Block liabilities.................................................... 9,507.2 9,069.5 Separate Accounts liabilities............................................... 24,531.0 20,429.3 ----------------- ----------------- Total liabilities..................................................... 65,241.4 58,215.1 ----------------- ----------------- Commitments and contingencies (Notes 10, 12, 13, 14 and 15) SHAREHOLDER'S EQUITY Common stock, $1.25 par value 2.0 million shares authorized, issued and outstanding........................................................... 2.5 2.5 Capital in excess of par value.............................................. 2,913.6 2,913.6 Retained earnings........................................................... 781.6 484.0 Net unrealized investment gains (losses).................................... 338.2 (203.0) Minimum pension liability................................................... (35.1) (2.7) ----------------- ----------------- Total shareholder's equity............................................ 4,000.8 3,194.4 ----------------- ----------------- TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY.................................. $ 69,242.2 $ 61,409.5 ================= =================
See Notes to Consolidated Financial Statements. F-3 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES CONSOLIDATED STATEMENTS OF EARNINGS YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1995 1994 1993 ----------------- ----------------- ----------------- (IN MILLIONS) REVENUES Universal life and investment-type product policy fee income...................................................... $ 771.0 $ 715.0 $ 644.5 Premiums...................................................... 606.8 625.6 599.1 Net investment income......................................... 2,127.7 2,030.9 2,599.3 Investment gains, net......................................... 5.3 91.8 533.4 Commissions, fees and other income............................ 886.8 845.4 1,717.2 Contribution from the Closed Block............................ 124.4 151.0 128.3 ----------------- ----------------- ----------------- Total revenues.......................................... 4,522.0 4,459.7 6,221.8 ----------------- ----------------- ----------------- BENEFITS AND OTHER DEDUCTIONS Interest credited to policyholders' account balances.......... 1,244.2 1,201.3 1,330.0 Policyholders' benefits....................................... 1,011.3 920.6 1,003.9 Other operating costs and expenses............................ 1,856.5 1,943.1 3,584.2 ----------------- ----------------- ----------------- Total benefits and other deductions..................... 4,112.0 4,065.0 5,918.1 ----------------- ----------------- ----------------- Earnings before Federal income taxes and cumulative effect of accounting change................................. 410.0 394.7 303.7 Federal income taxes.......................................... 112.4 101.2 91.3 ----------------- ----------------- ----------------- Earnings before cumulative effect of accounting change........ 297.6 293.5 212.4 Cumulative effect of accounting change, net of Federal income taxes................................................ - (27.1) - ----------------- ----------------- ----------------- Net Earnings.................................................. $ 297.6 $ 266.4 $ 212.4 ================= ================= =================
See Notes to Consolidated Financial Statements. F-4 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1995 1994 1993 ----------------- ----------------- ----------------- (IN MILLIONS) Common stock, at par value, beginning of year................. $ 2.5 $ 2.5 $ 2.0 Increase in par value......................................... - - .5 ----------------- ----------------- ----------------- Common stock, at par value, end of year....................... 2.5 2.5 2.5 ----------------- ----------------- ----------------- Capital in excess of par value, beginning of year............. 2,913.6 2,613.6 2,273.9 Additional capital in excess of par value..................... - 300.0 340.2 Increase in par value......................................... - - (.5) ----------------- ----------------- ----------------- Capital in excess of par value, end of year................... 2,913.6 2,913.6 2,613.6 ----------------- ----------------- ----------------- Retained earnings, beginning of year.......................... 484.0 217.6 5.2 Net earnings.................................................. 297.6 266.4 212.4 ----------------- ----------------- ----------------- Retained earnings, end of year................................ 781.6 484.0 217.6 ----------------- ----------------- ----------------- Net unrealized investment (losses) gains, beginning of year... (203.0) 131.9 78.8 Change in unrealized investment gains (losses)................ 541.2 (334.9) (9.5) Effect of adopting new accounting standard.................... - - 62.6 ----------------- ----------------- ----------------- Net unrealized investment gains (losses), end of year......... 338.2 (203.0) 131.9 ----------------- ----------------- ----------------- Minimum pension liability, beginning of year.................. (2.7) (15.0) - Change in minimum pension liability........................... (32.4) 12.3 (15.0) ----------------- ----------------- ----------------- Minimum pension liability, end of year........................ (35.1) (2.7) (15.0) ----------------- ----------------- ----------------- TOTAL SHAREHOLDER'S EQUITY, END OF YEAR....................... $ 4,000.8 $ 3,194.4 $ 2,950.6 ================= ================= =================
See Notes to Consolidated Financial Statements. F-5 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1995 1994 1993 ----------------- ----------------- ----------------- (IN MILLIONS) Net earnings.................................................. $ 297.6 $ 266.4 $ 212.4 Adjustments to reconcile net earnings to net cash provided (used) by operating activities: Net change in trading activities and broker-dealer related receivables/payables.............................. - - (4,177.8) Increase in matched resale agreements....................... - - (2,900.5) Increase in matched repurchase agreements................... - - 2,900.5 Investment gains, net of dealer and trading gains........... (5.3) (91.8) (160.8) Change in amounts due from discontinued GIC Segment......... - 57.3 47.8 General Account policy charges.............................. (769.7) (711.9) (623.4) Interest credited to policyholders' account balances........ 1,244.2 1,201.3 1,330.0 Changes in Closed Block assets and liabilities, net......... (69.6) (95.1) (73.3) Other, net.................................................. 627.1 7.8 (416.1) ----------------- ----------------- ----------------- Net cash provided (used) by operating activities.............. 1,324.3 634.0 (3,861.2) ----------------- ----------------- ----------------- Cash flows from investing activities: Maturities and repayments................................... 1,863.1 2,319.7 3,479.6 Sales....................................................... 8,901.4 5,661.9 7,399.2 Return of capital from joint ventures and limited partnerships.............................................. 65.2 39.0 119.5 Purchases................................................... (11,675.5) (7,417.6) (11,184.2) Decrease (increase) in loans to discontinued GIC Segment.... 1,226.9 (40.0) (880.0) Cash received on sale of 61% interest in DLJ................ - - 346.7 Other, net.................................................. (625.5) (371.1) (317.0) ----------------- ----------------- ----------------- Net cash (used) provided by investing activities.............. (244.4) 191.9 (1,036.2) ----------------- ----------------- ----------------- Cash flows from financing activities: Policyholders' account balances: Deposits.................................................. 2,414.9 2,082.7 2,410.7 Withdrawals............................................... (2,692.7) (2,887.4) (2,433.5) Net (decrease) increase in short-term financings............ (16.4) (173.0) 4,717.2 Additions to long-term debt................................. 599.7 51.8 97.7 Repayments of long-term debt................................ (40.7) (199.8) (64.4) Proceeds from issuance of Alliance units.................... - 100.0 - Payment of obligation to fund accumulated deficit of discontinued GIC Segment.................................. (1,215.4) - - Capital contribution from the Holding Company............... - 300.0 - Other, net.................................................. (48.2) - - ----------------- ----------------- ----------------- Net cash (used) provided by financing activities.............. (998.8) (725.7) 4,727.7 ----------------- ----------------- ----------------- Change in cash and cash equivalents........................... 81.1 100.2 (169.7) Cash and cash equivalents, beginning of year.................. 693.6 593.4 763.1 ----------------- ----------------- ----------------- Cash and Cash Equivalents, End of Year........................ $ 774.7 $ 693.6 $ 593.4 ================= ================= ================= Supplemental cash flow information Interest Paid............................................... $ 89.6 $ 34.9 $ 1,437.2 ================= ================= ================= Income Taxes (Refunded) Paid................................ $ (82.7) $ 49.2 $ 41.0 ================= ================= =================
See Notes to Consolidated Financial Statements. F-6 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1) ORGANIZATION The Equitable Life Assurance Society of the United States ("Equitable Life") converted to a stock life insurance company on July 22, 1992 and became a wholly owned subsidiary of The Equitable Companies Incorporated (the "Holding Company"). Equitable Life's insurance business, which is comprised of an Individual Insurance and Annuities segment and a Group Pension segment is conducted principally by Equitable Life and its wholly owned life insurance subsidiary, Equitable Variable Life Insurance Company ("EVLICO"). Equitable Life's investment management business, which comprises the Investment Services segment, is conducted principally by Alliance Capital Management L.P. ("Alliance"), Equitable Real Estate Investment Management, Inc. ("EREIM") and Donaldson, Lufkin and Jenrette, Inc. ("DLJ"), an investment banking and brokerage affiliate. AXA, a French holding company for an international group of insurance and related financial services companies is the Holding Company's largest shareholder, owning approximately 60.6% at December 31, 1995 (63.5% assuming conversion of Series E Convertible Preferred Stock held by AXA and 54.2% if all securities convertible into, or options on, common stock were to be converted or exercised). 2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation and Principles of Consolidation ----------------------------------------------------- The accompanying consolidated financial statements are prepared in conformity with generally accepted accounting principles ("GAAP"). The accompanying consolidated financial statements include the accounts of Equitable Life and its wholly owned life insurance subsidiaries (collectively, the "Insurance Group"); non-insurance subsidiaries, principally Alliance, an investment advisory subsidiary and EREIM, a real estate investment management subsidiary; and those partnerships and joint ventures in which the Company has control and a majority economic interest (collectively, including its consolidated subsidiaries, the "Company"). The consolidated statement of earnings and cash flow for the year ended December 31, 1993 include the results of operations and cash flow of DLJ, an investment banking and brokerage affiliate, on a consolidated basis through December 15, 1993 (see Note 20). Subsequent to that date, DLJ is accounted for on the equity basis. The Closed Block assets and liabilities and results of operations are presented in the consolidated financial statements as single line items (see Note 6). Unless specifically stated, all disclosures contained herein supporting the consolidated financial statements exclude the Closed Block related amounts. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. All significant intercompany transactions and balances have been eliminated in consolidation other than intercompany transactions and balances with the Closed Block and the discontinued Guaranteed Interest Contract ("GIC") Segment (see Note 7). Certain reclassifications have been made in the amounts presented for prior periods to conform these periods with the 1995 presentation. F-7 Closed Block ------------ As of July 22, 1992, Equitable Life established the Closed Block for the benefit of certain classes of individual participating policies for which Equitable Life had a dividend scale payable in 1991 and which were in force on that date. Assets were allocated to the Closed Block in an amount which, together with anticipated revenues from policies included in the Closed Block, was reasonably expected to be sufficient to support such business, including provision for payment of claims, certain expenses and taxes, and for continuation of dividend scales payable in 1991, assuming the experience underlying such scales continues. Assets allocated to the Closed Block inure solely to the benefit of the holders of policies included in the Closed Block and will not revert to the benefit of the Holding Company. The plan of demutualization prohibits the reallocation, transfer, borrowing or lending of assets between the Closed Block and other portions of Equitable Life's General Account, any of its Separate Accounts or to any affiliate of Equitable Life without the approval of the New York Superintendent of Insurance. 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. If the actual contribution from the Closed Block in any given period equals or exceeds the expected contribution for such period as determined at the establishment of the Closed Block, the expected contribution would be recognized in income for that period. Any excess of the actual contribution over the expected contribution would also be recognized in income to the extent that the aggregate expected contribution for all prior periods exceeded the aggregate actual contribution. Any remaining excess of actual contribution over expected contributions would be accrued in the Closed Block as a liability for future dividends to be paid to the Closed Block policyholders. If, over the period the policies and contracts in the Closed Block remain in force, the actual contribution from the Closed Block is less than the expected contribution from the Closed Block, only such actual contribution would be recognized in income. Discontinued Operations ----------------------- In 1991, the Company's management adopted a plan to discontinue the business operations of the GIC Segment, consisting of the Guaranteed Interest Contract and Group Non-Participating Wind-Up Annuities lines of business. The Company established a pre-tax provision for the estimated future losses of the GIC line of business and a premium deficiency reserve for the Group Non-Participating Wind-Up Annuities. Subsequent losses incurred have been charged to the allowance for future losses and the premium deficiency reserve. Total allowances are based upon management's best judgment and there is no assurance that the ultimate losses will not differ. Accounting Changes ------------------ In the first quarter of 1995, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 114, "Accounting by Creditors for Impairment of a Loan". This statement applies to all loans, including loans restructured in a troubled debt restructuring involving a modification of terms. This statement addresses the accounting for impairment of a loan by specifying how allowances for credit losses should be determined. Impaired loans within the scope of this statement are measured based on the present value of expected future cash flows discounted at the loan's effective interest rate, at the loan's observable market price or the fair value of the collateral if the loan is collateral dependent. The Company provides for impairment of loans through an allowance for possible losses. The adoption of this statement did not have a material effect on the level of these allowances or on the Company's consolidated statements of earnings and shareholder's equity. F-8 In the fourth quarter of 1994 (effective as of January 1, 1994), the Company adopted SFAS No. 112, "Employers' Accounting for Postemployment Benefits," which required employers to recognize the obligation to provide postemployment benefits. Implementation of this statement resulted in a charge for the cumulative effect of accounting change of $27.1 million, net of a Federal income tax benefit of $14.6 million. At December 31, 1993, the Company adopted SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities," which expanded the use of fair value accounting for those securities that a company does not have positive intent and ability to hold to maturity. Implementation of this statement increased consolidated shareholder's equity by $62.6 million, net of deferred policy acquisition costs, amounts attributable to participating group annuity contracts and deferred Federal income tax. Beginning coincident with issuance of SFAS No. 115 implementation guidance in November 1995, the Financial Accounting Standards Board ("FASB") permitted companies a one-time opportunity, through December 31, 1995, to reassess the appropriateness of the classification of all securities held at that time. On December 1, 1995, the Company transferred $4,794.9 million of securities classified as held to maturity to the available for sale portfolio. As a result consolidated shareholder's equity increased by $126.2 million, net of deferred policy acquisition costs, amounts attributable to participating group annuity contracts and deferred Federal income tax. New Accounting Pronouncements ----------------------------- In January 1995, the FASB issued SFAS No. 120, "Accounting and Reporting by Mutual Life Insurance Enterprises and by Insurance Enterprises for Certain Long-Duration Participating Contracts," which permits, but does not require, stock life insurance companies with participating life contracts to account for those contracts in accordance with Statement of Position No. 95-1, "Accounting for Certain Insurance Activities of Mutual Life Insurance Enterprises". The Company has decided to retain the existing methodology to account for traditional participating policies and, therefore, will not adopt this statement. In March 1995, the FASB issued SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," which requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of such assets may not be recoverable. The Company will implement this statement as of January 1, 1996. The cumulative effect of this accounting change will be a charge of $23.4 million, net of a Federal income tax benefit of $12.1 million, due to the writedown to fair value of building improvements relating to facilities being vacated beginning in 1996. The Company currently provides allowances for possible losses for other assets under the scope of this statement. Management has not yet determined the impact of this statement on assets to be held and used. In May 1995, the FASB issued SFAS No. 122, "Accounting for Mortgage Servicing Rights," which requires a mortgage banking enterprise to recognize rights to service mortgage loans for others as separate assets however those servicing rights are acquired. It further requires capitalized mortgage servicing rights be assessed for impairment based on the fair value of those rights. The Company will implement this statement as of January 1, 1996. Implementation of this statement will not have a material effect on the Company's consolidated financial statements. In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based Compensation". This statement defines a fair value based method of accounting for stock-based employee compensation plans while continuing to allow an entity to measure compensation cost for such plans using the intrinsic value based method of accounting. Management has decided to retain the current compensation cost methodology prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees". F-9 Valuation of Investments ------------------------ Fixed maturities, which the Company has both the ability and the intent to hold to maturity, are stated principally at amortized cost. Fixed maturities identified as available for sale are reported at estimated fair value. The amortized cost of fixed maturities is adjusted for impairments in value deemed to be other than temporary. Mortgage loans on real estate are stated at unpaid principal balances, net of unamortized discounts and valuation allowances. Effective with the adoption of SFAS No. 114 on January 1, 1995, the valuation allowances are based on the present value of expected future cash flows discounted at the loan's original effective interest rate or the collateral value if the loan is collateral dependent. However, if foreclosure is or becomes probable, the measurement method used is collateral value. Prior to the adoption of SFAS No. 114, the valuation allowances were based on losses expected by management to be realized on transfers of mortgage loans to real estate (upon foreclosure or in-substance foreclosure), on the disposition or settlement of mortgage loans and on mortgage loans management believed may not be collectible in full. In establishing valuation allowances, management previously considered, among other things the estimated fair value of the underlying collateral. Real estate, including real estate acquired in satisfaction of debt, is stated at depreciated cost less valuation allowances. At the date of foreclosure (including in-substance foreclosure), real estate acquired in satisfaction of debt is valued at estimated fair value. Valuation allowances on real estate held for the production of income are computed using the forecasted cash flows of the respective properties discounted at a rate equal to the Company's cost of funds; valuation allowances on real estate available for sale are computed using the lower of current estimated fair value, net of disposition costs, or depreciated cost. Policy loans are stated at unpaid principal balances. Partnerships and joint venture interests in which the Company does not have control and a majority economic interest are reported on the equity basis of accounting and are included either with equity real estate or other equity investments, as appropriate. Common stocks are carried at estimated fair value and are included in other equity investments. Short-term investments are stated at amortized cost which approximates fair value and are included with other invested assets. Cash and cash equivalents includes cash on hand, amounts due from banks and highly liquid debt instruments purchased with an original maturity of three months or less. All securities are recorded in the consolidated financial statements on a trade date basis. Investment Results and Unrealized Investment Gains (Losses) ----------------------------------------------------------- Net investment income and realized investment gains and losses (collectively, "investment results") related to certain participating group annuity contracts are passed through to the contractholders as interest credited to policyholders' account balances. Realized investment gains and losses are determined by specific identification and are presented as a component of revenue. Valuation allowances are netted against the asset categories to which they apply and changes in the valuation allowances are included in investment gains or losses. Unrealized investment gains and losses on fixed maturities available for sale and equity securities held by the Company are accounted for as a separate component of shareholder's equity, net of related deferred Federal income taxes, amounts attributable to the discontinued GIC Segment, Closed Block, participating group annuity contracts and deferred policy acquisition costs related to universal life and investment-type products. F-10 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 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. Deferred policy acquisition costs are 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, deferred policy acquisition costs are amortized over the expected average life of the contracts (periods ranging from 15 to 35 years and 5 to 17 years, respectively) as a constant percentage of estimated gross profits arising principally from investment results, mortality and expense margins and surrender charges based on historical and anticipated future experience, updated at the end of each accounting period. The effect on the amortization of deferred policy acquisition costs of revisions to estimated gross profits is reflected in earnings in the period such estimated gross profits are revised. The effect on the deferred policy acquisition cost asset that would result from realization of unrealized gains (losses) is recognized with an offset to unrealized gains (losses) in consolidated shareholder's equity as of the balance sheet date. For traditional life and annuity policies with life contingencies, deferred policy acquisition costs are 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 estimated life of the policy. For individual health benefit insurance, deferred policy acquisition costs are amortized over the expected average life of the contracts (10 years for major medical policies and 20 years for disability income 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 represent an accumulation of gross premium payments plus credited interest less expense and mortality charges and withdrawals. F-11 For traditional life insurance policies, future policy benefit and dividend 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, provide 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, deferred policy acquisition costs are 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. Individual health benefit liabilities for active lives are estimated using the net level premium method, and assumptions as to future morbidity, withdrawals and interest which provide a margin for adverse deviation. Benefit liabilities for disabled lives are estimated using the present value of benefits method and experience assumptions as to claim terminations, expenses and interest. Claim reserves and associated liabilities for individual disability income and major medical policies were $639.6 million, $570.6 million at December 31, 1995 and 1994, respectively. Incurred benefits (benefits paid plus changes in claim reserves) and benefits paid for individual disability income and major medical policies are summarized as follows:
YEARS ENDED DECEMBER 31, -------------------------------------------------------- 1995 1994 1993 ----------------- ---------------- ----------------- (IN MILLIONS) Incurred benefits related to current year.......... $ 176.0 $ 188.6 $ 193.1 Incurred benefits related to prior years........... 67.8 28.7 106.1 ----------------- ---------------- ----------------- Total Incurred Benefits............................ $ 243.8 $ 217.3 $ 299.2 ================= ================ ================= Benefits paid related to current year.............. $ 37.0 $ 43.7 $ 48.9 Benefits paid related to prior years............... 137.8 132.3 123.1 ----------------- ---------------- ----------------- Total Benefits Paid................................ $ 174.8 $ 176.0 $ 172.0 ================= ================ =================
The amount of policyholders' dividends to be paid (including those on policies included in the Closed Block) is determined annually by Equitable Life's Board of Directors. The aggregate amount of policyholders' dividends is related to actual interest, mortality, morbidity and expense experience for the year and judgment as to the appropriate level of statutory surplus to be retained by Equitable Life. Equitable Life is subject to limitations on the amount of statutory profits which can be retained with respect to certain classes of individual participating policies that were in force on July 22, 1992 which are not included in the Closed Block and with respect to participating policies issued subsequent to July 22, 1992. Excess statutory profits, if any, will be distributed over time to such policyholders and will not be available to Equitable Life's shareholder. Earnings in excess of limitations are accrued as policyholders' dividends. At December 31, 1995, participating policies including those in the Closed Block represent approximately 27.2% ($58.4 billion) of directly written life insurance in force, net of amounts ceded. Participating policies represent primarily all of the premium income as reflected in the consolidated statements of earnings and in the results of the Closed Block. F-12 Federal Income Taxes -------------------- Equitable Life and its life insurance and non-life insurance subsidiaries file a consolidated Federal income tax return with the Holding Company and its non-life insurance 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 the Separate Accounts liabilities. 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 the years ended December 31, 1995, 1994 and 1993, investment results of such Separate Accounts were $1,956.3 million, $676.3 million and $1,676.5 million, respectively. Deposits to all Separate Accounts are reported as increases in Separate Accounts liabilities and are not reported in revenues. Mortality, policy administration and surrender charges on all Separate Accounts are included in revenues. F-13 3) INVESTMENTS The following tables provide additional information relating to fixed maturities and equity securities:
GROSS GROSS AMORTIZED UNREALIZED UNREALIZED ESTIMATED COST GAINS LOSSES FAIR VALUE ----------------- ----------------- ---------------- --------------- (IN MILLIONS) DECEMBER 31, 1995 ----------------- Fixed Maturities: Available for Sale: Corporate.......................... $ 10,910.7 $ 617.6 $ 118.1 $ 11,410.2 Mortgage-backed.................... 1,838.0 31.2 1.2 1,868.0 U.S. Treasury securities and U.S. government and agency securities................ 2,257.0 77.8 4.1 2,330.7 States and political subdivisions.. 45.7 5.2 - 50.9 Foreign governments................ 124.5 11.0 .2 135.3 Redeemable preferred stock......... 108.1 5.3 8.6 104.8 ----------------- ----------------- ---------------- --------------- Total Available for Sale............... $ 15,284.0 $ 748.1 $ 132.2 $ 15,899.9 ================= ================= ================ =============== Equity Securities: Common stock......................... $ 97.3 $ 49.1 $ 18.0 $ 128.4 ================= ================= ================ =============== December 31, 1994 ----------------- Fixed Maturities: Available for Sale: Corporate.......................... $ 5,663.4 $ 34.6 $ 368.0 $ 5,330.0 Mortgage-backed.................... 686.0 2.9 44.8 644.1 U.S. Treasury securities and U.S. government and agency securities................ 1,519.3 6.7 71.9 1,454.1 States and political subdivisions.. 23.4 .1 .7 22.8 Foreign governments................ 43.8 .3 4.2 39.9 Redeemable preferred stock......... 108.4 .4 13.7 95.1 ----------------- ----------------- ---------------- --------------- Total Available for Sale............... $ 8,044.3 $ 45.0 $ 503.3 $ 7,586.0 ================= ================= ================ =============== Held to Maturity: Corporate.......................... $ 4,661.0 $ 67.9 $ 233.8 $ 4,495.1 U.S. Treasury securities and U.S. government and agency securities................ 428.9 4.6 44.2 389.3 States and political subdivisions.. 63.4 .9 3.7 60.6 Foreign governments................ 69.7 4.2 2.0 71.9 ================= ================= ================ =============== Total Held to Maturity................. $ 5,223.0 $ 77.6 $ 283.7 $ 5,016.9 ================= ================= ================ =============== Equity Securities: Common stock......................... $ 126.4 $ 31.2 $ 23.5 $ 134.1 ================= ================= ================ ===============
F-14 For publicly traded fixed maturities and equity securities, estimated fair value is determined using quoted market prices. For fixed maturities without a readily ascertainable market value, the Company has determined an estimated fair value using a discounted cash flow approach, including provisions for credit risk, generally based upon the assumption that such securities will be held to maturity. Estimated fair value for equity securities, substantially all of which do not have a readily ascertainable market value, has been determined by the Company. Such estimated fair values do not necessarily represent the values for which these securities could have been sold at the dates of the consolidated balance sheets. At December 31, 1995 and 1994, securities without a readily ascertainable market value having an amortized cost of $3,748.9 million and $3,980.4 million, respectively, had estimated fair values of $3,981.8 million and $3,858.7 million, respectively. The contractual maturity of bonds at December 31, 1995 is shown below:
AVAILABLE FOR SALE ------------------------------------ AMORTIZED ESTIMATED COST FAIR VALUE ---------------- ----------------- (IN MILLIONS) Due in one year or less................................................ $ 357.9 $ 360.0 Due in years two through five.......................................... 3,773.1 3,847.1 Due in years six through ten........................................... 4,709.8 4,821.8 Due after ten years.................................................... 4,497.1 4,898.2 Mortgage-backed securities............................................. 1,838.0 1,868.0 ---------------- ----------------- Total.................................................................. $ 15,175.9 $ 15,795.1 ================ =================
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. Investment valuation allowances and changes thereto are shown below:
YEARS ENDED DECEMBER 31, -------------------------------------------------------- 1995 1994 1993 ----------------- ---------------- ----------------- (IN MILLIONS) Balances, beginning of year........................ $ 284.9 $ 355.6 $ 512.0 Additions charged to income........................ 136.0 51.0 92.8 Deductions for writedowns and asset dispositions... (95.6) (121.7) (249.2) ----------------- ---------------- ----------------- Balances, End of Year.............................. $ 325.3 $ 284.9 $ 355.6 ================= ================ ================= Balances, end of year comprise: Mortgage loans on real estate.................... $ 65.5 $ 64.2 $ 144.4 Equity real estate............................... 259.8 220.7 211.2 ----------------- ---------------- ----------------- Total.............................................. $ 325.3 $ 284.9 $ 355.6 ================= ================ =================
Deductions for writedowns and asset dispositions for 1993 include an $87.1 million writedown of fixed maturity investments at December 31, 1993 as a result of adopting a new accounting statement for the valuation of these investments that requires specific writedowns instead of valuation allowances. At December 31, 1995, the carrying values of investments held for the production of income which were non-income producing for the twelve months preceding the consolidated balance sheet date were $37.2 million of fixed maturities and $84.7 million of mortgage loans on real estate. F-15 The Insurance Group's fixed maturity investment portfolio includes corporate high yield securities consisting of public high yield bonds, redeemable preferred stocks and directly negotiated debt in leveraged buyout transactions. The Insurance Group seeks to minimize the higher than normal credit risks associated with such securities by monitoring the total investments in any single issuer or total investment in a particular industry group. Certain of these corporate high yield securities are classified as other than investment grade by the various rating agencies, i.e., a rating below Baa or National Association of Insurance Commissioners ("NAIC") designation of 3 (medium grade), 4 or 5 (below investment grade) or 6 (in or near default). At December 31, 1995, approximately 15.57% of the $15,139.9 million aggregate amortized cost of bonds held by the Insurance Group were considered to be other than investment grade. In addition to its holdings of corporate high yield securities, the Insurance Group is an equity investor in limited partnership interests which primarily invest in securities considered to be other than investment grade. The Company has restructured or modified the terms of certain fixed maturity investments. The fixed maturity portfolio, based on amortized cost, includes $15.9 million and $30.5 million at December 31, 1995 and 1994, respectively, of such restructured securities. These amounts include fixed maturities which are in default as to principal and/or interest payments, are to be restructured pursuant to commenced negotiations or where the borrowers went into bankruptcy subsequent to acquisition (collectively, "problem fixed maturities") of $1.6 million and $9.7 million as of December 31, 1995 and 1994, respectively. Gross interest income that would have been recorded in accordance with the original terms of restructured fixed maturities amounted to $3.0 million, $7.5 million and $11.7 million in 1995, 1994 and 1993, respectively. Gross interest income on these fixed maturities included in net investment income aggregated $2.9 million, $6.8 million and $9.7 million in 1995, 1994 and 1993, respectively. At December 31, 1995 and 1994, 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 $87.7 million (2.4% of total mortgage loans on real estate) and $96.9 million (2.3% 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 $531.5 million and $447.9 million at December 31, 1995 and 1994, respectively. These amounts include $3.8 million and $1.0 million of problem mortgage loans on real estate at December 31, 1995 and 1994, 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 $52.1 million, $44.9 million and $51.8 million in 1995, 1994 and 1993, respectively. Gross interest income on these loans included in net investment income aggregated $37.4 million, $32.8 million and $46.0 million in 1995, 1994 and 1993, respectively. Impaired mortgage loans (as defined under SFAS No. 114) along with the related provision for losses were as follows:
December 31, 1995 ------------------- (IN MILLIONS) Impaired mortgage loans with provision for losses....................................... $ 310.1 Impaired mortgage loans with no provision for losses.................................... 160.8 ------------------- Recorded investment in impaired mortgage loans.......................................... 470.9 Provision for losses.................................................................... 62.7 ------------------- Net Impaired Mortgage Loans............................................................. $ 408.2 ===================
F-16 Impaired mortgage loans with no provision for losses are loans where the fair value of the collateral or the net present value of 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 the year ended December 31, 1995, the Company's average recorded investment in impaired mortgage loans was $429.0 million. Interest income recognized on these impaired mortgage loans totaled $27.9 million for the year ended December 31, 1995, including $13.4 million recognized on a cash basis. At December 31, 1995, investments owned of any one issuer, including its affiliates, for which the aggregate carrying values are 10% or more of total shareholders' equity, were $508.3 million relating to Trammell Crow and affiliates (including holdings of the Closed Block and the discontinued GIC Segment). The amount includes restructured mortgage loans on real estate with an amortized cost of $152.4 million. A $294.0 million commercial loan package which was in bankruptcy at the beginning of the year was resolved in 1995, with part of the package reclassified as restructured and the remainder reclassified as equity real estate. The Insurance Group's investment in equity real estate is through direct ownership and through investments in real estate joint ventures. At December 31, 1995 and 1994, the carrying value of equity real estate available for sale amounted to $255.5 million and $447.8 million, respectively. For the years ended December 31, 1995, 1994 and 1993, respectively, real estate of $35.3 million, $189.8 million and $261.8 million was acquired in satisfaction of debt. At December 31, 1995 and 1994, the Company owned $862.7 million and $1,086.9 million, respectively, of real estate acquired in satisfaction of debt. Depreciation of real estate is computed using the straight-line method over the estimated useful lives of the properties, which generally range from 40 to 50 years. Accumulated depreciation on real estate was $662.4 million and $703.1 million at December 31, 1995 and 1994, respectively. Depreciation expense on real estate totaled $121.7 million, $117.0 million and $115.3 million for the years ended December 31, 1995, 1994 and 1993, respectively. F-17 4) JOINT VENTURES AND PARTNERSHIPS Summarized combined financial information of real estate joint ventures (38 and 47 individual ventures as of December 31, 1995 and 1994, respectively) and of limited partnership interests accounted for under the equity method, in which the Company has an investment of $10.0 million or greater and an equity interest of 10% or greater is as follows:
DECEMBER 31, ------------------------------------ 1995 1994 ---------------- ----------------- (IN MILLIONS) FINANCIAL POSITION Investments in real estate, at depreciated cost........................ $ 2,684.1 $ 2,786.7 Investments in securities, generally at estimated fair value........... 2,459.8 3,071.2 Cash and cash equivalents.............................................. 489.1 359.8 Other assets........................................................... 270.8 398.7 ---------------- ----------------- Total assets........................................................... 5,903.8 6,616.4 ---------------- ----------------- Borrowed funds - third party........................................... 1,782.3 1,759.6 Borrowed funds - the Company........................................... 220.5 238.0 Other liabilities...................................................... 593.9 987.7 ---------------- ----------------- Total liabilities...................................................... 2,596.7 2,985.3 ---------------- ----------------- Partners' Capital...................................................... $ 3,307.1 $ 3,631.1 ================ ================= Equity in partners' capital included above............................. $ 902.2 $ 964.2 Equity in limited partnership interests not included above............. 212.8 224.6 Excess (deficit) of equity in partners' capital over investment cost and equity earnings.................................................. 3.6 (1.8) Notes receivable from joint venture.................................... 5.3 6.1 ---------------- ----------------- Carrying Value......................................................... $ 1,123.9 $ 1,193.1 ================ =================
YEARS ENDED DECEMBER 31, -------------------------------------------------------- 1995 1994 1993 ----------------- ---------------- ----------------- (IN MILLIONS) STATEMENTS OF EARNINGS Revenues of real estate joint ventures............. $ 463.5 $ 537.7 $ 602.7 Revenues of other limited partnership interests.... 242.3 103.4 319.1 Interest expense - third party..................... (135.3) (114.9) (118.8) Interest expense - the Company..................... (41.0) (36.9) (52.1) Other expenses..................................... (397.7) (430.9) (531.7) ----------------- ---------------- ----------------- Net Earnings....................................... $ 131.8 $ 58.4 $ 219.2 ================= ================ ================= Equity in net earnings included above.............. $ 49.1 $ 18.9 $ 71.6 Equity in net earnings of limited partnerships interests not included above..................... 44.8 25.3 46.3 Excess of earnings in joint ventures over equity ownership percentage and amortization of differences in bases............................. .9 1.8 9.2 Interest on notes receivable....................... .1 - .5 ----------------- ---------------- ----------------- Total Equity in Net Earnings....................... $ 94.9 $ 46.0 $ 127.6 ================= ================ =================
F-18 5) NET INVESTMENT INCOME AND INVESTMENT GAINS (LOSSES) The sources of net investment income are summarized as follows:
YEARS ENDED DECEMBER 31, -------------------------------------------------------- 1995 1994 1993 ----------------- ---------------- ----------------- (IN MILLIONS) Fixed maturities................................... $ 1,151.0 $ 1,024.5 $ 981.7 Trading account securities......................... - - 709.3 Securities purchased under resale agreements....... - - 533.8 Mortgage loans on real estate...................... 329.0 384.3 457.4 Equity real estate................................. 560.4 561.8 539.1 Other equity investments........................... 76.9 35.7 110.4 Policy loans....................................... 144.4 122.7 117.0 Broker-dealer related receivables.................. - - 292.2 Other investment income............................ 279.7 336.3 304.9 ----------------- ---------------- ----------------- Gross investment income.......................... 2,541.4 2,465.3 4,045.8 ----------------- ---------------- ----------------- Interest expense to finance short-term trading instruments...................................... - - 983.4 Other investment expenses.......................... 413.7 434.4 463.1 ----------------- ---------------- ----------------- Investment expenses.............................. 413.7 434.4 1,446.5 ----------------- ---------------- ----------------- Net Investment Income.............................. $ 2,127.7 $ 2,030.9 $ 2,599.3 ================= ================ =================
Investment gains (losses), net, including changes in the valuation allowances, are summarized as follows:
YEARS ENDED DECEMBER 31, -------------------------------------------------------- 1995 1994 1993 ----------------- ---------------- ----------------- (IN MILLIONS) Fixed maturities................................... $ 119.9 $ (14.1) $ 123.1 Mortgage loans on real estate...................... (40.2) (43.1) (65.1) Equity real estate................................. (86.6) 20.6 (18.5) Other equity investments........................... 12.8 76.0 119.5 Dealer and trading gains........................... - - 372.5 Sales of newly issued Alliance Units............... - 52.4 - Other.............................................. (.6) - 1.9 ----------------- ---------------- ----------------- Investment Gains, Net.............................. $ 5.3 $ 91.8 $ 533.4 ================= ================ =================
Writedowns of fixed maturities amounted to $46.7 million, $30.8 million and $5.4 million for the years ended December 31, 1995, 1994 and 1993, respectively. For the years ended December 31, 1995 and 1994, respectively, proceeds received on sales of fixed maturities classified as available for sale amounted to $8,206.0 million and $5,253.9 million. Gross gains of $211.4 million and $65.2 million and gross losses of $64.2 million and $50.8 million, respectively, were realized on these sales. The change in unrealized investment gains (losses) related to fixed maturities classified as available for sale for the years ended December 31, 1995 and 1994 amounted to $1,077.2 million and $(742.2) million, respectively. Gross gains of $188.5 million and gross losses of $145.0 million were realized on sales of investments in fixed maturities held for investment and available for sale for the year ended December 31, 1993. F-19 During each of the years ended December 31, 1995 and 1994, one security classified as held to maturity was sold and during the eleven months ended November 30, 1995 and the year ended December 31, 1994, respectively, twelve and six securities so classified were transferred to the available for sale portfolio. All actions were taken as a result of a significant deterioration in creditworthiness. The aggregate amortized cost of the securities sold were $1.0 million and $19.9 million with a related investment gain of $-0- million and $.8 million recognized in 1995 and 1994, respectively; the aggregate amortized cost of the securities transferred was $116.0 million and $42.8 million with gross unrealized investment losses of $3.2 million and $3.1 million charged to consolidated shareholders' equity for the eleven months ended November 30, 1995 and the year ended December 31, 1994, respectively. On December 1, 1995, the Company transferred $4,794.9 million of securities classified as held to maturity to the available for sale portfolio. As a result, unrealized gains on fixed maturities increased $307.0 million, offset by deferred policy acquisition costs of $73.7 million, amounts attributable to participating group annuity contracts of $39.2 million and deferred Federal income tax of $67.9 million. Investment gains from other equity investments for the year ended December 31, 1993, included $79.9 million generated by DLJ's involvement in long-term corporate development investments. For the years ended December 31, 1995, 1994 and 1993, investment results passed through to certain participating group annuity contracts as interest credited to policyholders' account balances amounted to $131.2 million, $175.8 million and $243.2 million, respectively. During 1995, Alliance entered into an agreement to acquire the business of Cursitor-Eaton Asset Management Company and Cursitor Holdings Limited (collectively, "Cursitor") for approximately $141.5 million consisting of $84.9 million in cash, 1,764,115 of Alliance's publicly traded units ("Alliance Units"), 6% notes aggregating $21.5 million payable ratably over four years, and substantial additional consideration which will be determined at a later date. The transaction, which is expected to be completed during the first quarter of 1996, is subject to the receipt of consents, regulatory approvals, and certain other closing conditions, including client approval of the transfer of Cursitor accounts. Upon completion of this transaction, the Company's ownership percentage of Alliance will be reduced. In 1994, Alliance sold 4.96 million newly issued Alliance Units to third parties at prevailing market prices. The sales decreased the Company's ownership of Alliance's Units from 63.2% to 59.2%. In addition, the Company continues to hold its 1% general partnership interest in Alliance. The Company recognized an investment gain of $52.4 million as a result of these transactions. The Company's ownership interest in Alliance will be further reduced upon the exercise of options granted to certain Alliance employees. At December 31, 1995, Alliance had options outstanding to purchase an aggregate of 4.8 million Alliance Units at a price ranging from $6.0625 to $22.25 per unit. Options are exercisable at a rate of 20% on each of the first five anniversary dates from the date of grant. Net unrealized investment gains (losses), included in the consolidated balance sheets as a component of equity and the changes for the corresponding years, are summarized as follows:
YEARS ENDED DECEMBER 31, -------------------------------------------------------- 1995 1994 1993 ----------------- ---------------- ----------------- (IN MILLIONS) Balance, beginning of year......................... $ (203.0) $ 131.9 $ 78.8 Changes in unrealized investment (losses) gains.... 1,117.7 (823.8) (14.1) Effect of adopting SFAS No. 115.................... - - 283.9 Changes in unrealized investment (gains) losses attributable to: Participating group annuity contracts.......... (78.1) 40.8 (36.2) Deferred policy acquisition costs.............. (208.4) 269.5 (150.5) Deferred Federal income taxes.................. (290.0) 178.6 (30.0) ----------------- ---------------- ----------------- Balance, End of Year............................... $ 338.2 $ (203.0) $ 131.9 ================= ================ =================
F-20
YEARS ENDED DECEMBER 31, -------------------------------------------------------- 1995 1994 1993 ----------------- ---------------- ----------------- (IN MILLIONS) Balance, end of year comprises: Unrealized investment (losses) gains on: Fixed maturities............................... $ 615.9 $ (461.3) $ 283.9 Other equity investments....................... 31.1 7.7 75.8 Other.......................................... 31.6 14.5 25.0 ----------------- ---------------- ----------------- Total........................................ 678.6 (439.1) 384.7 Amounts of unrealized investment (gains) losses attributable to: Participating group annuity contracts........ (72.2) 5.9 (34.9) Deferred policy acquisition costs............ (89.4) 119.0 (150.5) Deferred Federal income taxes................ (178.8) 111.2 (67.4) ----------------- ---------------- ----------------- Total.............................................. $ 338.2 $ (203.0) $ 131.9 ================= ================ =================
6) CLOSED BLOCK Summarized financial information of the Closed Block follows:
DECEMBER 31, -------------------------------------- 1995 1994 ----------------- ----------------- (IN MILLIONS) Assets Fixed Maturities: Available for sale, at estimated fair value (amortized cost, $3,662.8 and $1,270.3)........................................... $ 3,896.2 $ 1,197.0 Held to maturity, at amortized cost (estimated fair value of $1,785.0 in 1994)................................................ - 1,927.8 Mortgage loans on real estate........................................ 1,368.8 1,543.7 Policy loans......................................................... 1,797.2 1,827.9 Cash and other invested assets....................................... 440.9 442.5 Deferred policy acquisition costs.................................... 823.6 878.1 Other assets......................................................... 286.1 288.5 ----------------- ----------------- Total Assets......................................................... $ 8,612.8 $ 8,105.5 ================= ================= Liabilities Future policy benefits and policyholders' account balances........... $ 9,346.7 $ 8,965.3 Other liabilities.................................................... 160.5 104.2 ----------------- ----------------- Total Liabilities.................................................... $ 9,507.2 $ 9,069.5 ================= =================
F-21
YEARS ENDED DECEMBER 31, -------------------------------------------------------- 1995 1994 1993 ----------------- ---------------- ----------------- (IN MILLIONS) Revenues Premiums and other revenue......................... $ 753.4 $ 798.1 $ 860.2 Investment income (net of investment expenses of $26.7, $19.0 and $17.3).............. 538.9 523.0 526.5 Investment losses, net............................. (20.2) (24.0) (15.0) ----------------- ---------------- ----------------- Total revenues............................... 1,272.1 1,297.1 1,371.7 ----------------- ---------------- ----------------- Benefits and Other Deductions Policyholders' benefits and dividends.............. 1,085.1 1,075.6 1,141.4 Other operating costs and expenses................. 62.6 70.5 102.0 ----------------- ---------------- ----------------- Total benefits and other deductions.......... 1,147.7 1,146.1 1,243.4 ----------------- ---------------- ----------------- Contribution from the Closed Block................. $ 124.4 $ 151.0 $ 128.3 ================= ================ =================
The fixed maturity portfolio, based on amortized cost, includes $4.3 million and $23.8 million at December 31, 1995 and 1994, respectively, of restructured securities which includes problem fixed maturities of $1.9 million and $6.4 million, respectively. During the eleven months ended November 30, 1995, one security classified as held to maturity was sold and ten securities classified as held to maturity were transferred to the available for sale portfolio. All actions resulted from a significant deterioration in creditworthiness. The amortized cost of the security sold was $4.2 million. The aggregate amortized cost of the securities transferred was $81.3 million with gross unrealized investment losses of $.1 million transferred to equity. At December 1, 1995, $1,750.7 million of securities classified as held to maturity were transferred to the available for sale portfolio. As a result, unrealized gains of $88.5 million on fixed maturities were recognized and offset by an increase to the deferred dividend liability. Implementation of SFAS No. 115 for the valuation of fixed maturities at December 31, 1993 resulted in the recognition of a deferred dividend liability of $49.6 million. At December 31, 1995 and 1994, problem mortgage loans on real estate had an amortized cost of $36.5 million and $27.6 million, respectively, and mortgage loans on real estate for which the payment terms have been restructured had an amortized cost of $137.7 million and $179.2 million, respectively. At December 31, 1995 and 1994, the restructured mortgage loans on real estate amount included $8.8 million and $.7 million, respectively, of problem mortgage loans on real estate. Valuation allowances amounted to $18.4 million and $46.2 million on mortgage loans on real estate and $4.3 million and $2.6 million on equity real estate at December 31, 1995 and 1994, respectively. Writedowns of fixed maturities amounted to $16.8 million and $15.9 million and $1.7 million for the years ended December 31, 1995, 1994 and 1993, respectively. 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 7) DISCONTINUED OPERATIONS Summarized financial information of the GIC Segment follows:
DECEMBER 31, -------------------------------------- 1995 1994 ----------------- ----------------- (IN MILLIONS) Assets Mortgage loans on real estate........................................ $ 1,485.8 $ 1,730.5 Equity real estate................................................... 1,122.1 1,194.8 Other invested assets................................................ 665.2 978.8 Other assets......................................................... 579.3 529.5 ----------------- ----------------- Total Assets......................................................... $ 3,852.4 $ 4,433.6 ================= ================= Liabilities Policyholders' liabilities........................................... $ 1,399.8 $ 1,924.0 Allowance for future losses.......................................... 164.2 185.6 Amounts due to continuing operations................................. 2,097.1 2,108.6 Other liabilities.................................................... 191.3 215.4 ----------------- ----------------- Total Liabilities.................................................... $ 3,852.4 $ 4,433.6 ================= =================
YEARS ENDED DECEMBER 31, -------------------------------------------------------- 1995 1994 1993 ----------------- ---------------- ----------------- (IN MILLIONS) Revenues Investment income (net of investment expenses of $143.8, $174.0 and $175.8).................... $ 325.1 $ 395.0 $ 535.1 Investment (losses) gains, net..................... (22.9) 26.8 (22.6) Policy fees, premiums and other income............. .7 .3 8.7 ----------------- ---------------- ----------------- Total revenues..................................... 302.9 422.1 521.2 Benefits and other deductions...................... 328.0 443.8 545.9 ----------------- ---------------- ----------------- Losses Charged to Allowance for Future Losses...... $ (25.1) $ (21.7) $ (24.7) ================= ================ =================
In 1991, the Company established a pre-tax provision of $396.7 million for the estimated future losses of the GIC Segment. At December 31, 1993, implementation of SFAS No. 115 for the valuation of fixed maturities resulted in a benefit of $13.1 million, offset by a corresponding addition to the allowance for future losses. The amounts due to continuing operations at December 31, 1994 consisted of $3,324.0 million borrowed by the GIC Segment from continuing operations, offset by $1,215.4 million representing an obligation of continuing operations to provide assets to fund the accumulated deficit of the GIC Segment. In January 1995, continuing operations transferred $1,215.4 million in cash to the GIC Segment in settlement of its obligation. Subsequently, the GIC Segment remitted $1,155.4 million in cash to continuing operations in partial repayment of borrowings by the GIC Segment. No gains or losses were recognized on these transactions. Amounts due to continuing operations at December 31, 1995, consisted of $2,097.1 million borrowed by the discontinued GIC Segment. F-23 Investment income included $88.2 million and $97.7 million of interest income for the years ended December 31, 1994 and 1993, respectively, on amounts due from continuing operations. Benefits and other deductions includes $154.6 million, $219.7 million and $197.1 million of interest expense related to amounts borrowed from continuing operations in 1995, 1994 and 1993, respectively. Valuation allowances amounted to $19.2 million and $50.2 million on mortgage loans on real estate and $77.9 million and $74.7 million on equity real estate at December 31, 1995 and 1994, respectively. Writedowns of fixed maturities amounted to $8.1 million, $17.8 million and $1.1 million for the years ended December 31, 1995, 1994 and 1993, respectively. The fixed maturity portfolio, based on amortized cost, includes $15.1 million and $43.3 million at December 31, 1995 and 1994, respectively, of restructured securities. These amounts include problem fixed maturities of $6.1 million and $9.7 million at December 31, 1995 and 1994, respectively. At December 31, 1995 and 1994, problem mortgage loans on real estate had amortized costs of $35.4 million and $14.9 million, respectively, and mortgage loans on real estate for which the payment terms have been restructured had amortized costs of $289.3 million and $371.2 million, respectively. At December 31, 1995 and 1994, the GIC Segment had $310.9 million and $312.2 million, respectively, of real estate acquired in satisfaction of debt. 8) SHORT-TERM AND LONG-TERM DEBT Short-term and long-term debt consists of the following:
DECEMBER 31, -------------------------------------- 1995 1994 ----------------- ----------------- (IN MILLIONS) Short-term debt...................................................... $ - $ 20.0 ----------------- ----------------- Long-term debt: Equitable Life: Surplus notes, 6.95%, scheduled to mature 2005..................... 399.3 - Surplus notes, 7.70%, scheduled to mature 2015..................... 199.6 - Eurodollar notes, 10.375% due 1995................................. - 34.6 Eurodollar notes, 10.5% due 1997................................... 76.2 76.2 Zero coupon note, 11.25% due 1997.................................. 120.1 107.8 Other.............................................................. 16.3 14.3 ----------------- ----------------- Total Equitable Life........................................... 811.5 232.9 ----------------- ----------------- Wholly Owned and Joint Venture Real Estate: Mortgage notes, 4.98% - 12.75% due through 2019.................... 1,084.4 1,080.6 ----------------- ----------------- Alliance: Other.............................................................. 3.4 3.9 ----------------- ----------------- Total long-term debt................................................. 1,899.3 1,317.4 ----------------- ----------------- Total Short-term and Long-term Debt.................................. $ 1,899.3 $ 1,337.4 ================= =================
Short-term Debt --------------- Equitable Life has a $350.0 million bank credit facility available to fund short-term working capital needs and to facilitate the securities settlement process. The credit facility consists of two types of borrowing options with varying interest rates. The interest rates are based on external indices dependent on the type of borrowing and at December 31, 1995 range from 5.8% (the London Interbank Offering Rate plus 22.5 basis points) to 8.5% (the prime rate). There were no borrowings outstanding under this bank credit facility at December 31, 1995. F-24 Equitable Life has a commercial paper program with an issue limit of $500.0 million. This program is available for general corporate purposes used to support Equitable Life's liquidity needs and is supported by Equitable Life's existing $350.0 million five-year bank credit facility. There were no borrowings outstanding under this program at December 31, 1995. In 1994, Alliance established a $100.0 million revolving credit facility with several banks. On March 31, 1997, the revolving credit facility converts into a term loan payable in quarterly installments through March 31, 1999. Outstanding borrowings generally bear interest at the Eurodollar rate plus .875% per annum through March 31, 1997 and at the Eurodollar rate plus 1.125% per annum after conversion through March 31, 1999. In addition, a quarterly commitment fee of .25% per annum is paid on the average daily unused amount. At December 31, 1995, there were no amounts outstanding under the facility. In 1994, Alliance also established a $100.0 million commercial paper program and entered into a three-year $100.0 million revolving credit facility with a group of commercial banks to support commercial paper to be issued under the program and for general corporate purposes. Amounts outstanding under the facility bear interest at an annual rate ranging from the Eurodollar rate plus .225% to the Eurodollar rate plus .2875%. A fee of .125% per annum is paid quarterly on the entire facility. At December 31, 1995, Alliance had not issued any commercial paper and there were no amounts outstanding under the revolving credit facility. During 1994, EREIM established two bank lines of credit totaling $30.0 million of which $20.0 million was outstanding at December 31, 1994. Long-term Debt -------------- Several of the long-term debt agreements have restrictive covenants related to the total amount of debt, net tangible assets and other matters. The Company is in compliance with all debt covenants. On December 18, 1995, Equitable Life issued, in accordance with Section 1307 of the New York Insurance Law, $400.0 million of surplus notes having an interest rate of 6.95% scheduled to mature in 2005 and $200.0 million of surplus notes having an interest rate of 7.70% scheduled to mature in 2015. Proceeds from the issuance of the surplus notes were $596.6 million, net of related issuance costs. The unamortized discount on the surplus notes was $1.1 million at December 31, 1995. Payments of interest on or principal of the surplus notes are subject to prior approval by the New York Insurance Department. The Company has pledged real estate, mortgage loans, cash and securities amounting to $1,629.7 million and $1,744.4 million at December 31, 1995 and 1994, respectively, as collateral for certain long-term debt. At December 31, 1995, aggregate maturities of the long-term debt based on required principal payments at maturity for 1996 and the succeeding four years are $124.0 million, $466.6 million, $309.5 million, $15.8 million, respectively, and $1,015.0 million thereafter. 9) FEDERAL INCOME TAXES A summary of the Federal income tax expense (benefit) in the consolidated statements of earnings is shown below:
YEARS ENDED DECEMBER 31, -------------------------------------------------------- 1995 1994 1993 ----------------- ---------------- ----------------- (IN MILLIONS) Federal income tax expense (benefit): Current.......................................... $ (11.7) $ 4.0 $ 115.8 Deferred......................................... 124.1 97.2 (24.5) ----------------- ---------------- ----------------- Total.............................................. $ 112.4 $ 101.2 $ 91.3 ================= ================ =================
F-25 The Federal income taxes attributable to consolidated operations are different from the amounts determined by multiplying the earnings before Federal income taxes and cumulative effect of accounting change by the expected Federal income tax rate of 35%. The sources of the difference and the tax effects of each are as follows:
YEARS ENDED DECEMBER 31, -------------------------------------------------------- 1995 1994 1993 ----------------- ---------------- ----------------- (IN MILLIONS) Expected Federal income tax expense................ $ 143.5 $ 138.1 $ 106.3 Differential earnings amount....................... - (16.8) (23.2) Adjustment of tax audit reserves................... 4.1 (4.6) 22.9 Tax rate adjustment................................ - - (5.0) Other.............................................. (35.2) (15.5) (9.7) ----------------- --------------- ----------------- Federal Income Tax Expense......................... $ 112.4 $ 101.2 $ 91.3 ================= ================ =================
Prior to the date of demutualization, Equitable Life reduced its deduction for policyholder dividends by the differential earnings amount. This amount was computed, for each tax year, by multiplying Equitable Life's average equity base, as determined for tax purposes, by an estimate of the excess of an imputed earnings rate for stock life insurance companies over the average mutual life insurance companies' earnings rate. The differential earnings amount for each tax year was subsequently recomputed when actual earnings rates were published by the Internal Revenue Service. As a stock life insurance company, Equitable Life is no longer required to reduce its policyholder dividend deduction by the differential earnings amount, but differential earnings amounts for pre-demutualization years were still being recomputed in 1994 and 1993. The components of the net deferred Federal income tax asset are as follows:
DECEMBER 31, 1995 December 31, 1994 --------------------------------- --------------------------------- ASSETS LIABILITIES Assets Liabilities --------------- ---------------- --------------- --------------- (IN MILLIONS) Deferred policy acquisition costs, reserves and reinsurance............. $ - $ 303.2 $ - $ 220.3 Investments............................ - 326.9 - 18.7 Compensation and related benefits...... 293.0 - 307.3 - Other.................................. - 32.3 - 5.8 --------------- ---------------- --------------- --------------- Total.................................. $ 293.0 $ 662.4 $ 307.3 $ 244.8 =============== ================ =============== ===============
The deferred Federal income tax expense (benefit) 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:
YEARS ENDED DECEMBER 31, -------------------------------------------------------- 1995 1994 1993 ----------------- ---------------- ----------------- (IN MILLIONS) Deferred policy acquisition costs, reserves and reinsurance.................................. $ 55.1 $ 13.0 $ (46.7) Investments........................................ 13.0 89.3 60.4 Compensation and related benefits.................. 30.8 10.0 (50.1) Other.............................................. 25.2 (15.1) 11.9 ----------------- ---------------- ----------------- Deferred Federal Income Tax Expense (Benefit)...... $ 124.1 $ 97.2 $ (24.5) ================= ================ =================
F-26 The Internal Revenue Service completed its audit of the Company's Federal income tax returns for the years 1984 through 1988. There was no material effect on the Company's consolidated results of operations. 10) REINSURANCE AGREEMENTS The Insurance Group assumes and cedes reinsurance with other insurance companies. The Insurance Group evaluates the financial condition of its reinsurers to minimize its exposure to significant losses from reinsurer insolvencies. The effect of reinsurance (excluding group life and health) is summarized as follows:
YEARS ENDED DECEMBER 31, -------------------------------------------------------- 1995 1994 1993 ----------------- ---------------- ----------------- (IN MILLIONS) Direct premiums.................................... $ 474.2 $ 476.7 $ 458.8 Reinsurance assumed................................ 171.3 180.5 169.9 Reinsurance ceded.................................. (38.7) (31.6) (29.6) ----------------- ---------------- ----------------- Premiums........................................... $ 606.8 $ 625.6 $ 599.1 ================= ================ ================= Universal Life and Investment-type Product Policy Fee Income Ceded.......................... $ 38.9 $ 27.5 $ 33.7 ================= ================ ================= Policyholders' Benefits Ceded...................... $ 48.2 $ 20.7 $ 72.3 ================= ================ ================= Interest Credited to Policyholders' Account Balances Ceded................................... $ 28.5 $ 25.4 $ 24.1 ================= ================ =================
In February 1993, management established a practice limiting the risk retention on new policies issued by the Insurance Group to a maximum of $5.0 million. In addition, 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 $260.6 million, $241.0 million and $895.1 million for the years ended December 31, 1995, 1994 and 1993, respectively. Ceded death and disability benefits totaled $188.1 million, $235.5 million and $787.8 million for the years ended December 31, 1995, 1994 and 1993, respectively. Insurance liabilities ceded totaled $724.2 million and $833.4 million at December 31, 1995 and 1994, respectively. 11) EMPLOYEE BENEFIT PLANS The Company sponsors qualified and non-qualified defined benefit plans covering substantially all employees (including certain qualified part-time employees), managers and certain agents. The pension plans are non-contributory and 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. The Company's funding policy is to make the minimum contribution required by the Employee Retirement Income Security Act of 1974. Components of net periodic pension (credit) cost for the qualified and non-qualified plans are as follows:
YEARS ENDED DECEMBER 31, -------------------------------------------------------- 1995 1994 1993 ----------------- ---------------- ----------------- (IN MILLIONS) Service cost....................................... $ 30.0 $ 30.3 $ 29.8 Interest cost on projected benefit obligations..... 122.0 111.0 108.0 Actual return on assets............................ (309.2) 24.4 (178.6) Net amortization and deferrals..................... 155.6 (142.5) 55.3 ----------------- ---------------- ----------------- Net Periodic Pension (Credit) Cost................. $ (1.6) $ 23.2 $ 14.5 ================= ================ =================
F-27 The funded status of the qualified and non-qualified pension plans is as follows:
DECEMBER 31, ------------------------------------ 1995 1994 ---------------- ----------------- (IN MILLIONS) Actuarial present value of obligations: Vested............................................................... $ 1,642.4 $ 1,295.5 Non-vested........................................................... 10.9 8.7 --------------- ----------------- Accumulated Benefit Obligation......................................... $ 1,653.3 $ 1,304.2 ================ ================= Plan assets at fair value.............................................. $ 1,503.8 $ 1,193.5 Projected benefit obligation........................................... 1,743.0 1,403.4 ---------------- ----------------- Projected benefit obligation in excess of plan assets.................. (239.2) (209.9) Unrecognized prior service cost........................................ (25.5) (33.2) Unrecognized net loss from past experience different from that assumed.............................................................. 368.2 298.9 Unrecognized net asset at transition................................... (7.3) (20.8) Additional minimum liability........................................... (51.9) (37.8) ---------------- ----------------- Prepaid (Accrued) Pension Cost......................................... $ 44.3 $ (2.8) ================ =================
The discount rate and rate of increase in future compensation levels used in determining the actuarial present value of projected benefit obligations were 7.25% and 4.50%, respectively, at December 31, 1995 and 8.75% and 4.88%, respectively, at December 31, 1994. As of January 1, 1995 and 1994, the expected long-term rate of return on assets for the retirement plan was 11% and 10%, respectively. The Company recorded, as a reduction of shareholder's equity, an additional minimum pension liability of $35.1 million and $2.7 million, net of Federal income taxes, at December 31, 1995 and 1994, respectively, representing the excess of the accumulated benefit obligation over the fair value of plan assets and accrued pension liability. The pension plan's assets include corporate and government debt securities, equity securities, equity real estate and shares of Group Trusts managed by Alliance. As of December 31, 1993, the Company changed the method of determining the market-related value of plan assets from fair value to a calculated value. This change in estimate had no material effect on the Company's consolidated statements of earnings. 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 $36.4 million, $38.1 million and $39.9 million for the years ended December 31, 1995, 1994 and 1993, respectively. The Company provides certain medical and life insurance benefits (collectively, "postretirement benefits") for qualifying employees, managers and agents retiring from the Company on or after attaining age 55 who have at least 10 years of service. The life insurance benefits are related to age and salary at retirement. The costs of postretirement benefits are recognized in accordance with the provisions of SFAS No. 106. The Company continues to fund postretirement benefits costs on a pay-as-you-go basis and, for the years ended December 31, 1995, 1994 and 1993, the Company made estimated postretirement benefits payments of $31.1 million, $29.8 million and $29.7 million, respectively. F-28 The following table sets forth the postretirement benefits plan's status, reconciled to amounts recognized in the Company's consolidated financial statements:
YEARS ENDED DECEMBER 31, -------------------------------------------------------- 1995 1994 1993 ----------------- ---------------- ----------------- (IN MILLIONS) Service cost....................................... $ 4.0 $ 3.9 $ 5.3 Interest cost on accumulated postretirement benefits obligation.............................. 34.7 28.6 29.2 Unrecognized prior service cost.................... (2.3) (3.9) (6.9) Net amortization and deferrals..................... - - 1.5 ----------------- ---------------- ----------------- Net Periodic Postretirement Benefits Costs......... $ 36.4 $ 28.6 $ 29.1 ================= ================ =================
DECEMBER 31, ------------------------------------ 1995 1994 ---------------- ----------------- (IN MILLIONS) Accumulated postretirement benefits obligation: Retirees............................................................. $ 391.8 $ 300.4 Fully eligible active plan participants.............................. 50.4 33.0 Other active plan participants....................................... 64.2 44.0 ---------------- ----------------- 506.4 377.4 Unrecognized benefit of plan amendments................................ - 3.2 Unrecognized prior service cost........................................ 56.3 61.9 Unrecognized net loss from past experience different from that assumed and from changes in assumptions.............................. (181.3) (64.7) ---------------- ----------------- Accrued Postretirement Benefits Cost................................... $ 381.4 $ 377.8 ================ =================
In 1993, the Company amended the cost sharing provisions of postretirement medical benefits. At January 1, 1994, medical benefits available to retirees under age 65 are the same as those offered to active employees and medical benefits will be limited to 200% of 1993 costs for all participants. The assumed health care cost trend rate used in measuring the accumulated postretirement benefits obligation was 10% in 1995, gradually declining to 3.5% in the year 2008 and in 1994 was 10%, gradually declining to 5% in the year 2004. The discount rate used in determining the accumulated postretirement benefits obligation was 7.25% and 8.75% at December 31, 1995 and 1994, respectively. If the health care cost trend rate assumptions were increased by 1%, the accumulated postretirement benefits obligation as of December 31, 1995 would be increased 6.5%. The effect of this change on the sum of the service cost and interest cost would be an increase of 6.7%. 12) DERIVATIVES AND FAIR VALUE OF FINANCIAL INSTRUMENTS Derivatives ----------- The Insurance Group primarily uses derivatives for asset/liability risk management and for hedging individual securities. Derivatives mainly are utilized to reduce the Insurance Group's exposure to interest rate fluctuations. Accounting for interest rate swap transactions is on an accrual basis. Gains and losses related to interest rate swap transactions are amortized as yield adjustments over the remaining life of the underlying hedged security. Income and expense resulting from interest rate swap activities are reflected in net investment income except for hedging transactions related to insurance liabilities. The notional amount of matched interest rate swaps outstanding at December 31, 1995 was $1,120.8 million. The average unexpired terms at December 31, 1995 range from 2.5 to 3.0 years. At December 31, 1995, the cost of terminating outstanding matched swaps in a loss position was $15.9 million and the unrealized gain on F-29 outstanding matched swaps in a gain position was $19.0 million. The Company has no intention of terminating these contracts prior to maturity. During 1995, 1994 and 1993, net gains (losses) of $1.4 million, $(.2) million and $-0- million, respectively, were recorded in connection with interest rate swap activity. Equitable Life has implemented an interest rate cap program designed to hedge crediting rates on interest-sensitive individual annuities contracts. The outstanding notional amounts at December 31, 1995 of contracts purchased and sold were $2,625.0 million and $300.0 million, respectively. The net premium paid by Equitable Life on these contracts was $12.5 million and is being amortized ratably over the contract periods ranging from 3 to 5 years. Income and expense resulting from this program are reflected as an adjustment to interest credited to policyholders' account balances. Substantially all of DLJ's business related derivatives is by its nature trading activities which are primarily for the purpose of customer accommodations. DLJ's derivative activities consist of option writing and trading in forward and futures contracts. Derivative financial instruments have both on-and-off balance sheet implications depending on the nature of the contracts. DLJ's involvement in swap contracts is not significant. Fair Value of Financial Instruments ----------------------------------- The Company defines fair value as the quoted market prices for those instruments that are actively traded in financial markets. In cases where quoted market prices are not available, fair values are estimated using present value or other valuation techniques. The fair value estimates are made at a specific point in time, based on available market information and judgments about the financial instrument, including estimates of timing, amount of expected future cash flows and the credit standing of counterparties. Such estimates do not reflect any premium or discount that could result from offering for sale at one time the Company's entire holdings of a particular financial instrument, nor do they consider the tax impact of the realization of unrealized gains or losses. In many cases, the fair value estimates cannot be substantiated by comparison to independent markets, nor can the disclosed value be realized in immediate settlement of the instrument. Certain financial instruments are excluded, particularly insurance liabilities other than financial guarantees and investment contracts. Fair market value of off-balance-sheet financial instruments of the Insurance Group was not material at December 31, 1995 and 1994. Fair value for mortgage loans on real estate are estimated by discounting future contractual cash flows using interest rates at which loans with similar characteristics and credit quality would be made. Fair values for foreclosed mortgage loans and problem mortgage loans are limited to the estimated fair value of the underlying collateral if lower. The estimated fair values for the Company's liabilities under GIC and association plan contracts are estimated using contractual cash flows discounted based on the T. Rowe Price GIC Index Rate for the appropriate duration. For durations in excess of the published index rate, the appropriate Treasury rate is used plus a spread equal to the longest duration GIC rate spread published. The estimated fair values for those group annuity contracts which are classified as investment contracts are measured at the estimated fair value of the underlying assets. Deposit administration contracts (included with group annuity contracts) classified as insurance contracts are measured at estimated fair value of the underlying assets. The estimated fair values for single premium deferred annuities ("SPDA") are estimated using projected cash flows discounted at current offering rates. The estimated fair values for supplementary contracts not involving life contingencies ("SCNILC") and annuities certain are derived using discounted cash flows based upon the estimated current offering rate. Fair value for long-term debt is determined using published market values, where available, or contractual cash flows discounted at market interest rates. The estimated fair values for non-recourse mortgage debt are determined by discounting contractual cash flows at a rate which takes into account the level of current market interest rates and collateral risk. The estimated fair values for recourse mortgage debt are determined by discounting contractual cash flows at a rate based upon current interest rates of other companies with credit ratings similar to the Company. The Company's fair value of short-term borrowings approximates their carrying value. F-30 The following table discloses carrying value and estimated fair value for financial instruments not otherwise disclosed in Notes 3, 6 and 7:
DECEMBER 31, -------------------------------------------------------------------- 1995 1994 --------------------------------- --------------------------------- CARRYING ESTIMATED Carrying Estimated VALUE FAIR VALUE Value Fair Value --------------- ---------------- --------------- --------------- (IN MILLIONS) Consolidated Financial Instruments: ----------------------------------- Mortgage loans on real estate.......... $ 3,638.3 $ 3,973.6 $ 4,018.0 $ 3,919.4 Other joint ventures................... 492.7 492.7 544.4 544.4 Policy loans........................... 1,976.4 2,057.5 1,731.2 1,676.6 Policyholders' account balances: Association plans.................... 101.0 100.0 141.0 141.0 Group annuity contracts.............. 2,335.0 2,395.0 2,450.0 2,469.0 SPDA................................. 1,265.8 1,272.0 1,744.3 1,732.7 Annuities certain and SCNILC......... 649.1 680.7 599.1 624.7 Long-term debt......................... 1,899.3 1,962.9 1,317.4 1,249.2 Closed Block Financial Instruments: ----------------------------------- Mortgage loans on real estate.......... 1,368.8 1,461.4 1,543.7 1,477.8 Other equity investments............... 151.6 151.6 179.5 179.5 Policy loans........................... 1,797.2 1,891.4 1,827.9 1,721.9 SCNILC liability....................... 34.8 34.5 39.5 37.0 GIC Segment Financial Instruments: ---------------------------------- Mortgage loans on real estate.......... 1,485.8 1,666.1 1,730.5 1,743.7 Fixed maturities....................... 107.4 107.4 219.3 219.3 Other equity investments............... 455.9 455.9 591.8 591.8 Guaranteed interest contracts.......... 329.0 352.0 835.0 855.0 Long-term debt......................... 135.1 136.0 134.8 127.9
13) COMMITMENTS AND CONTINGENT LIABILITIES The Company has provided, from time to time, certain guarantees or commitments to affiliates, investors and others. These arrangements include commitments by the Company, under certain conditions: to make liquidity advances to cover delinquent principal and interest and property protection expenses with respect to loan servicing agreements for securitized mortgage loans which at December 31, 1995 totaled $2.8 billion (as of December 31, 1995, $4.0 million have been advanced under these commitments); to make capital contributions of up to $246.7 million to affiliated real estate joint ventures; to provide equity financing to certain limited partnerships of $129.4 million at December 31, 1995, under existing loan or loan commitment agreements; and to provide short-term financing loans which at December 31, 1995 totaled $45.8 million. Management believes the Company will not incur any material losses as a result of these commitments. Equitable Life is the obligor under certain structured settlement agreements which it had entered into with unaffiliated insurance companies and beneficiaries. To satisfy its obligations under these agreements, Equitable Life owns single premium annuities issued by previously wholly owned life insurance subsidiaries. Equitable Life has directed payment under these annuities to be made directly to the beneficiaries under the structured settlement agreements. A contingent liability exists with respect to these agreements should the previously wholly owned subsidiaries be unable to meet their obligations. Management believes the satisfaction of those obligations by Equitable Life is remote. At December 31, 1995, the Insurance Group had $29.0 million of letters of credit outstanding. F-31 14) LITIGATION A number of lawsuits have been filed against life and health insurers in the jurisdictions in which Equitable Life and its subsidiaries do business involving insurers' sales practices, alleged agent misconduct, failure to properly supervise agents, and other matters. Some of the lawsuits have resulted in the award of substantial judgments against other insurers, including material amounts of punitive damages, or in substantial settlements. In some states juries have substantial discretion in awarding punitive damages. Equitable Life and its insurance subsidiaries, like other life and health insurers, from time to time are involved in such litigation. To date, no such lawsuit has resulted in an award or settlement of any material amount against the Company. Among litigations pending against Equitable Life and its insurance subsidiaries of the type referred to in this paragraph are the litigations described in the following two paragraphs. An action entitled Golomb et al. v. The Equitable Life Assurance Society of the United States was filed on January 20, 1995 in New York County Supreme Court. The action purports to be brought on behalf of a class of persons insured after 1983 under Lifetime Guaranteed Renewable Major Medical Insurance Policies issued by Equitable Life (the "policies"). The complaint alleges that premium increases for these policies after 1983, all of which were filed with and approved by the New York State Insurance Department and certain other state insurance departments, breached the terms of the insurance policies, and that statements in the policies and elsewhere concerning premium increases constituted fraudulent concealment, misrepresentations in violation of New York Insurance Law Section 4226 and deceptive practices under New York General Business Law Section 349. The complaint seeks a declaratory judgment, injunctive relief restricting the methods by which Equitable Life increases premiums on the policies in the future, a refund of premiums, and punitive damages. Plaintiffs also have indicated that they will seek damages in an unspecified amount. Equitable Life has moved to dismiss the complaint in its entirety on the grounds that it fails to state a claim and that uncontroverted documentary evidence establishes a complete defense to the claims. That motion is awaiting decision by the court. In January 1996, separate actions were filed in Pennsylvania and Texas state courts (entitled, respectively, Malvin et al. v. The Equitable Life Assurance Society of the United States and Bowler et al. v. The Equitable Life Assurance Society of the United States), making claims similar to those in the New York action described above. These new actions are asserted on behalf of proposed classes of Pennsylvania issued or renewed policyholders and Texas issued or renewed policyholders, insured under the policies. The Pennsylvania and Texas actions seek compensatory and punitive damages and injunctive relief restricting the methods by which Equitable Life increases premiums in the future based on the common law and statutes of those states. Although the outcome of any litigation cannot be predicted with certainty, particularly in the early stages of an action, Equitable Life's management believes that the ultimate resolution of those litigations should not have a material adverse effect on the financial position of the Company. Due to the early stage of such litigation, Equitable Life's management cannot make an estimate of loss, if any, or predict whether or not such litigation will have a material adverse effect on the Company's results of operations in any particular period. An action was instituted on April 6, 1995 against Equitable Life and its wholly owned subsidiary, The Equitable of Colorado, Inc. ("EOC"), in New York State Court, entitled Sidney C. Cole et al. v. The Equitable Life Assurance Society of the United States and The Equitable of Colorado, Inc., No. 95/108611 (N.Y. County). The action is brought by the holders of a joint survivorship whole life policy issued by EOC. The action purports to be on behalf of a class consisting of all persons who from January 1, 1984 purchased life insurance policies sold by Equitable Life and EOC based upon their allegedly uniform sales presentations and policy illustrations. The complaint puts in issue various alleged sales practices that plaintiffs assert, among other things, misrepresented the stated number of years that the annual premium would need to be paid. Plaintiffs seek damages in an unspecified amount, imposition of a constructive trust, and seek to enjoin Equitable Life and EOC from engaging in the challenged sales practices. Equitable Life and EOC intend to defend vigorously and believe that they have meritorious defenses which, if successful, would dispose of the action completely. Equitable Life and EOC further do not believe that this case is an appropriate class action. Although the outcome of any litigation cannot be predicted with certainty, particularly in the early stages of an action, Equitable Life's management believes that the ultimate F-32 resolution of this litigation should not have a material adverse effect on the financial position of the Company. Due to the early stage of such litigation, the Company's management cannot make an estimate of loss, if any, or predict whether or not such litigation will have a material adverse effect on the Company's results of operations in any particular period. Equitable Casualty Insurance Company ("Casualty"), a captive property and casualty insurance company organized under the laws of Vermont, which is an indirect wholly owned subsidiary of Equitable Life, is a party to an arbitration proceeding that commenced in August 1995 with the selection of three arbitrators. The arbitration will resolve a dispute among Casualty, Houston General Insurance Company ("Houston General"), and GEICO General Insurance Company ("GEICO General") regarding the interpretation of a reinsurance agreement that was entered into as part of a 1980 transaction whereby Equitable General Insurance Company ("Equitable General"), formerly an indirect subsidiary of Equitable Life and the predecessor of GEICO General, sold its commercial lines business along with the stock of Houston General to subsidiaries of Tokio Marine & Fire Insurance Company, Ltd. ("Tokio Marine"). Casualty and GEICO General maintain that, under the reinsurance agreement, Houston General assumed liability for all losses insured under commercial lines policies written by Equitable General and its predecessors in order to effect the transfer of that business to Tokio Marine's subsidiaries. Houston General contends that it did not assume reinsurance liability for losses insured under certain of those commercial lines policies. The arbitration panel determined to begin hearing evidence in the arbitration in June 1996. The result of the arbitration is expected to resolve two litigations that were commenced by Houston General and that have been stayed by the presiding courts pending the completion of the arbitration (in one case, Houston General named as a defendant only GEICO General but Casualty intervened as a defendant with GEICO General, and in the other case, Houston General named GEICO General and Equitable Life). The arbitration is expected to be completed during the second half of 1996. While the ultimate outcome of the arbitration cannot be predicted with certainty, the Company's management believes that the arbitrators will recognize that Houston General's position is without merit and contrary to the way in which the reinsurance industry operates and therefore the ultimate resolution of this matter should not have a material adverse effect on the Company's financial position or results of operations. On July 25, 1995, a Consolidated and Supplemental Class Action Complaint ("Complaint") was filed against the Alliance North American Government Income Trust, Inc. (the "Fund"), Alliance and certain other defendants affiliated with Alliance, including the Holding Company, alleging violations of Federal securities laws, fraud and breach of fiduciary duty in connection with the Fund's investments in Mexican and Argentine securities. A similar complaint was filed on November 7, 1995 and was subsequently consolidated with the Complaint. The Complaint, which seeks certification of a plaintiff class of persons who purchased or owned Class A, B or C shares of the Fund from March 27, 1992 through December 23, 1994, seeks an unspecified amount of damages, costs, attorneys' fees and punitive damages. The principal allegations of the Complaint are that the Fund purchased debt securities issued by the Mexican and Argentine governments in amounts that were not permitted by the Fund's investment objective, and that there was no shareholder vote to change the investment objective to permit purchases in such amounts. The Complaint further alleges that the decline in the value of the Mexican and Argentine securities held by the Fund caused the Fund's net asset value to decline to the detriment of the Fund's shareholders. On September 26, 1995, the defendants jointly filed a motion to dismiss the Complaint which has not yet been decided by the Court. Alliance believes that the allegations in the Complaint are without merit and intends to vigorously defend against these claims. While the ultimate results of this action cannot be determined, management of Alliance does not expect that this action will have a material adverse effect on Alliance's business. On January 26, 1996, a purported purchaser of certain notes and warrants to purchase shares of common stock of Rickel Home Centers, Inc. ("Rickel") filed a class action complaint against Donaldson, Lufkin & Jenrette Securities Corporation ("DLJSC"), a wholly owned subsidiary of DLJ, and certain other defendants for unspecified compensatory and punitive damages in the United States District Court for the Southern District of New York. The suit was brought on behalf of the purchasers of 126,457 units consisting of $126,457,000 aggregate principal amount of 13 1/2% senior notes due 2001 and 126,457 warrants to purchase shares of common stock of Rickel (the "Units") issued by Rickel in October 1994. The complaint alleges violations of Federal securities laws and common law fraud against DLJSC, as the underwriter of F-33 the Units and as an owner of 7.3% of the common stock of Rickel, Eos Partners, L.P., and General Electric Capital Corporation, each as owners of 44.2% of the common stock of Rickel, and members of the Board of Directors of Rickel, including a DLJSC Managing Director. The complaint seeks to hold DLJSC liable for alleged misstatements and omissions contained in the prospectus and registration statement filed in connection with the offering of the Units, alleging that the defendants knew of financial losses and a decline in value of Rickel in the months prior to the offering and did not disclose such information. The complaint also alleges that Rickel failed to pay its semi-annual interest payment due on the Units on December 15, 1995 and that Rickel filed a voluntary petition for reorganization pursuant to Chapter 11 of the United States Bankruptcy Code on January 10, 1996. DLJSC intends to defend itself vigorously against all of the allegations contained in the complaint. Although there can be no assurance, DLJ does not believe the outcome of this litigation will have a material adverse effect on its financial condition. Due to the early stage of this litigation, based on the information currently available to it, DLJ's management cannot make an estimate of loss or predict whether or not such litigation will have a material adverse effect on DLJ's results of operations in any particular period. On June 12, 1995, a purported purchaser of certain securities issued by Spectravision, Inc. ("Spectravision") filed a class action complaint against DLJSC and certain other defendants for unspecified damages in the U.S. District Court for the Northern District of Texas. The suit was brought on behalf of the purchasers of $260,795,000 of securities issued by Spectravision in November 1992, and alleges violations of the Federal securities laws and the Texas Securities Act, common law fraud and negligent misrepresentation. The securities were issued by Spectravision pursuant to a prepackaged bankruptcy reorganization plan. DLJSC served as financial advisor to Spectravision in its reorganization and as Dealer Manager for Spectravision's 1992 issuance of the securities. DLJSC is also being sued as a seller of certain notes of Spectravision acquired and resold by DLJSC. The complaint seeks to hold DLJSC liable for various alleged misstatements and omissions contained in prospectuses and other materials issued between July 1992 and June 1994. DLJSC intends to defend itself vigorously against all of the allegations contained in the complaint. On June 8, 1995, Spectravision filed a Chapter 11 petition in the United States Bankruptcy Court for the District of Delaware. On January 5, 1996, the district court in the litigation involving DLJSC ordered a partial stay of discovery until Spectravision has emerged from bankruptcy or six months from the date of the stipulated stay (whichever comes first). Accordingly, discovery of DLJSC has not yet occurred. Although there can be no assurance, DLJ does not believe that the ultimate outcome of this litigation will have a material adverse effect on its financial condition. Due to the early stage of such litigation, based upon information currently available to it, DLJ's management cannot make an estimate of loss or predict whether or not such litigation will have a material adverse effect on DLJ's results of operations in any particular period. Plaintiff's counsel in the class action against DLJSC described above has also filed another securities class action based on similar factual allegations. Such suit names as defendants Spectravision and its directors, and was brought on behalf of a class of purchasers of $209.0 million of stock and $77.0 million of notes issued by Spectravision in October 1993. DLJSC served as the managing underwriter for both of these issuances. DLJSC has not been named as a defendant in this suit, although it has been reported to DLJSC that plaintiff's counsel is contemplating seeking to amend the complaint to add DLJSC as a defendant in that action. In October 1995, DLJSC was named as a defendant in a purported class action filed in a Texas State Court on behalf of the holders of $550.0 million principal amount of subordinated redeemable discount debentures of National Gypsum Corporation ("NGC") canceled in connection with a Chapter 11 plan of reorganization for NGC consummated in July 1993. The named plaintiff in the State Court action also filed an adversary proceeding in the Bankruptcy Court for the Northern District of Texas seeking a declaratory judgment that the confirmed NGC plan of reorganization does not bar the class action claims. Subsequent to the consummation of NGC's plan of reorganization, NGC's shares traded for values substantially in excess of, and in 1995 NGC was acquired for a value substantially in excess of, the values upon which NGC's plan of reorganization was based. The two actions arise out of DLJSC's activities as financial advisor to NGC in the course of NGC's Chapter 11 reorganization proceedings. The class action complaint alleges that the plan of reorganization submitted by NGC was based upon projections by NGC and DLJSC which intentionally understated forecasts, and provided misleading and incorrect information in order to hide NGC's true value and that defendants breached their fiduciary duties by, among other things, providing false, misleading or incomplete information to deliberately understate the value of NGC. The class action complaint seeks compensatory and punitive damages purportedly sustained by the class. The Texas State F-34 Court action has subsequently been removed to the Bankruptcy Court, which removal is being opposed by the plaintiff. DLJSC intends to defend itself vigorously against all of the allegations contained in the complaint. Although there can be no assurance, DLJ does not believe that the ultimate outcome of this litigation will have a material adverse effect on its financial condition. Due to the early stage of such litigation, based upon the information currently available to it, DLJ's management cannot make an estimate of loss or predict whether or not such litigation will have a material adverse effect on DLJ's results of operations in any particular period. In November and December 1995, DLJSC, along with various other parties, was named as a defendant in a number of purported class actions filed in the U.S. District Court for the Eastern District of Louisiana. The complaints allege violations of the Federal securities laws arising out of a public offering in 1994 of $435.0 million of first mortgage notes of Harrah's Jazz Company and Harrah's Jazz Finance Corp. The complaints seek to hold DLJSC liable for various alleged misstatements and omissions contained in the prospectus dated November 9, 1994. DLJSC intends to defend itself vigorously against all of the allegations contained in the complaints. Although there can be no assurance, DLJ does not believe that the ultimate outcome of this litigation will have a material adverse effect on its financial condition. Due to the early stage of this litigation, based upon the information currently available to it, DLJ's management cannot make an estimate of loss or predict whether or not such litigation will have a material adverse effect on DLJ's results of operations in any particular period. In addition to the matters described above, Equitable Life and its subsidiaries and DLJ and its subsidiaries are involved in various legal actions and proceedings in connection with their businesses. Some of the actions and proceedings have been brought on behalf of various alleged classes of claimants and certain of these claimants seek damages of unspecified amounts. While the ultimate outcome of such matters cannot be predicted with certainty, in the opinion of management no such matter is likely to have a material adverse effect on the Company's consolidated financial position or results of operations. 15) LEASES The Company has entered into operating leases for office space and certain other assets, principally data processing equipment and office furniture and equipment. Future minimum payments under noncancelable leases for 1996 and the succeeding four years are $114.8 million, $101.8 million, $90.0 million, $73.6 million, $57.7 million and $487.0 million thereafter. Minimum future sublease rental income on these noncancelable leases for 1996 and the succeeding four years are $11.0 million, $8.7 million, $6.9 million, $4.6 million, $2.9 million and $1.1 million thereafter. At December 31, 1995, the minimum future rental income on noncancelable operating leases for wholly owned investments in real estate for 1996 and the succeeding four years are $292.9 million, $271.2 million, $248.1 million, $226.4 million, $195.5 million and $1,018.8 million thereafter. F-35 16) OTHER OPERATING COSTS AND EXPENSES Other operating costs and expenses consisted of the following:
YEARS ENDED DECEMBER 31, -------------------------------------------------------- 1995 1994 1993 ----------------- ---------------- ----------------- (IN MILLIONS) Compensation costs................................. $ 595.9 $ 690.0 $ 1,452.3 Commissions........................................ 314.3 313.0 551.1 Short-term debt interest expense................... 11.4 19.0 317.1 Long-term debt interest expense.................... 108.1 98.3 86.0 Amortization of policy acquisition costs........... 320.4 318.1 275.9 Capitalization of policy acquisition costs......... (391.0) (410.9) (397.8) Rent expense, net of sub-lease income.............. 124.8 128.9 159.5 Other.............................................. 772.6 786.7 1,140.1 ----------------- ---------------- ----------------- Total.............................................. $ 1,856.5 $ 1,943.1 $ 3,584.2 ================= ================ =================
During the years ended December 31, 1995, 1994 and 1993, the Company restructured certain operations in connection with cost reduction programs and recorded pre-tax provisions of $32.0 million, $20.4 million and $96.4 million, respectively. The amounts paid during 1995, associated with the 1995 and 1994 cost reduction programs, totaled $24.0 million. At December 31, 1995, the liabilities associated with the 1995 and 1994 cost reduction programs amounted to $37.8 million. The 1995 cost reduction program included relocation expenses, including the accelerated amortization of building improvements associated with the relocation of the home office. The 1994 cost reduction program included costs associated with the termination of operating leases and employee severance benefits in connection with the consolidation of 16 insurance agencies. The 1993 cost reduction program primarily reflected severance benefits of terminated employees in connection with the combination of a wholly owned subsidiary of the Company with Alliance. 17) INSURANCE GROUP STATUTORY FINANCIAL INFORMATION Equitable Life is restricted as to the amounts it may pay as dividends to the Holding Company. Under the New York Insurance Law, the New York Superintendent has broad discretion to determine whether the financia1 condition of a stock life insurance company would support the payment of dividends to its shareholders. For the years ended December 31, 1995, 1994 and 1993, statutory (loss) earnings totaled $(352.4) million, $67.5 million and $324.0 million, respectively. No amounts are expected to be available for dividends from Equitable Life to the Holding Company in 1996. At December 31, 1995, the Insurance Group, in accordance with various government and state regulations, had $18.9 million of securities deposited with such government or state agencies. F-36 Accounting practices used to prepare statutory financial statements for regulatory filings of stock life insurance companies differ in certain instances from GAAP. The following reconciles the Company's statutory change in surplus and capital stock and statutory surplus and capital stock determined in accordance with accounting practices prescribed by the New York Insurance Department with net earnings and equity on a GAAP basis.
YEARS ENDED DECEMBER 31, -------------------------------------------------------- 1995 1994 1993 ----------------- ---------------- ----------------- (IN MILLIONS) Net change in statutory surplus and capital stock.. $ 78.1 $ 292.4 $ 190.8 Change in asset valuation reserves................. 365.7 (285.2) 639.1 ----------------- ---------------- ----------------- Net change in statutory surplus, capital stock and asset valuation reserves..................... 443.8 7.2 829.9 Adjustments: Future policy benefits and policyholders' account balances............................... (67.9) (11.0) (171.0) Deferred policy acquisition costs................ 70.6 92.8 121.8 Deferred Federal income taxes.................... (150.0) (59.7) (57.5) Valuation of investments......................... 189.1 45.2 202.3 Valuation of investment subsidiary............... (188.6) 396.6 (464.9) Limited risk reinsurance......................... 416.9 74.9 85.2 Issuance of surplus notes........................ (538.9) - - Sale of subsidiary and joint venture............. - - (366.5) Contribution from the Holding Company............ - (300.0) - Postretirement benefits.......................... (26.7) 17.1 23.8 Other, net....................................... 115.1 (44.0) 60.3 GAAP adjustments of Closed Block................. (3.1) 4.5 (16.0) GAAP adjustments of discontinued GIC Segment........................................ 37.3 42.8 (35.0) ----------------- ---------------- ----------------- Net Earnings....................................... $ 297.6 $ 266.4 $ 212.4 ================= ================ =================
DECEMBER 31, -------------------------------------------------------- 1995 1994 1993 ----------------- ---------------- ----------------- (IN MILLIONS) Statutory surplus and capital stock................ $ 2,202.9 $ 2,124.8 $ 1,832.4 Asset valuation reserves........................... 1,345.9 980.2 1,265.4 ----------------- ---------------- ----------------- Statutory surplus, capital stock and asset valuation reserves............................... 3,548.8 3,105.0 3,097.8 Adjustments: Future policy benefits and policyholders' account balances............................... (1,017.4) (949.5) (938.5) Deferred policy acquisition costs................ 3,083.3 3,221.1 2,858.8 Deferred Federal income taxes.................... (450.8) (26.8) (137.8) Valuation of investments......................... 417.7 (794.1) (29.8) Valuation of investment subsidiary............... (665.1) (476.5) (873.1) Limited risk reinsurance......................... (429.0) (845.9) (920.8) Issuance of surplus notes........................ (538.9) - - Postretirement benefits.......................... (343.3) (316.6) (333.7) Other, net....................................... 4.4 (79.2) (81.9) GAAP adjustments of Closed Block................. 575.7 578.8 574.2 GAAP adjustments of discontinued GIC Segment........................................ (184.6) (221.9) (264.6) ----------------- ---------------- ----------------- Total Shareholder's Equity......................... $ 4,000.8 $ 3,194.4 $ 2,950.6 ================= ================ =================
F-37 18) BUSINESS SEGMENT INFORMATION The Company has three major business segments: Individual Insurance and Annuities; Investment Services and Group Pension. Consolidation/elimination principally includes debt not specific to any business segment. Attributed Insurance Capital represents net assets and related revenues and earnings of the Insurance Group not assigned to the insurance segments. Interest expense related to debt not specific to any business segment is presented within Corporate interest expense. Information for all periods is presented on a comparable basis. The Individual Insurance and Annuities segment offers a variety of traditional, variable and interest-sensitive life insurance products, disability income, annuity products and mutual fund and other investment products to individuals and small groups. This segment includes Separate Accounts for certain individual insurance and annuity products. The Investment Services segment provides investment fund management, primarily to institutional clients. This segment includes Separate Accounts which provide various investment options for group clients through pooled or single group accounts. Intersegment investment advisory and other fees of approximately $124.1 million, $135.3 million and $128.6 million for 1995, 1994 and 1993, respectively, are included in total revenues of the Investment Services segment. These fees, excluding amounts related to the discontinued GIC Segment of $14.7 million, $27.4 million and $17.0 million for 1995, 1994 and 1993, respectively, are eliminated in consolidation. The Group Pension segment 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.
YEARS ENDED DECEMBER 31, -------------------------------------------------------- 1995 1994 1993 ----------------- ---------------- ----------------- (IN MILLIONS) Revenues Individual insurance and annuities................. $ 3,254.6 $ 3,110.7 $ 2,981.5 Group pension...................................... 292.0 359.1 426.6 Attributed insurance capital....................... 61.2 79.4 61.6 ----------------- ---------------- ----------------- Insurance operations............................. 3,607.8 3,549.2 3,469.7 Investment services................................ 949.1 935.2 2,792.6 Consolidation/elimination.......................... (34.9) (24.7) (40.5) ----------------- ---------------- ----------------- Total.............................................. $ 4,522.0 $ 4,459.7 $ 6,221.8 ================= ================ ================= Earnings (loss) before Federal income taxes and cumulative effect of accounting change Individual insurance and annuities................. $ 274.4 $ 245.5 $ 76.2 Group pension...................................... (13.3) 15.8 2.0 Attributed insurance capital....................... 18.7 69.8 49.0 ----------------- ---------------- ----------------- Insurance operations............................. 279.8 331.1 127.2 Investment services................................ 161.2 177.5 302.1 Consolidation/elimination.......................... (3.1) .3 .5 ----------------- ---------------- ----------------- Subtotal..................................... 437.9 508.9 429.8 Corporate interest expense......................... (27.9) (114.2) (126.1) ----------------- ---------------- ----------------- Total.............................................. $ 410.0 $ 394.7 $ 303.7 ================= ================ =================
F-38
DECEMBER 31, ------------------------------------ 1995 1994 ---------------- ----------------- (IN MILLIONS) Assets Individual insurance and annuities..................................... $ 50,328.8 $ 44,063.4 Group pension.......................................................... 4,033.3 4,222.8 Attributed insurance capital........................................... 2,391.6 2,609.8 ---------------- ----------------- Insurance operations................................................. 56,753.7 50,896.0 Investment services.................................................... 12,842.9 12,127.9 Consolidation/elimination.............................................. (354.4) (1,614.4) ---------------- ----------------- Total.................................................................. $ 69,242.2 $ 61,409.5 ================ =================
19) QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) The quarterly results of operations for the years ended December 31, 1995, 1994 and 1993, are summarized below:
THREE MONTHS ENDED, ------------------------------------------------------------------------------ MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 ----------------- ----------------- ------------------ ------------------ (IN MILLIONS) 1995 ---- Total Revenues................ $ 1,074.7 $ 1,158.4 $ 1,127.1 $ 1,161.8 ================= ================= ================== ================== Net Earnings.................. $ 59.0 $ 94.3 $ 91.2 $ 53.1 ================= ================= ================== ================== 1994 ---- Total Revenues................ $ 1,107.4 $ 1,075.0 $ 1,153.8 $ 1,123.5 ================= ================= ================== ================== Earnings before Cumulative Effect of Accounting Change...................... $ 64.0 $ 68.4 $ 89.1 $ 72.0 ================= ================= ================== ================== Net Earnings.................. $ 36.9 $ 68.4 $ 89.1 $ 72.0 ================= ================= ================== ================== 1993 ---- Total Revenues................ $ 1,502.2 $ 1,539.7 $ 1,679.4 $ 1,500.5 ================= ================= ================== ================== Net Earnings.................. $ 32.3 $ 47.1 $ 68.8 $ 64.2 ================= ================= ================== ==================
20) INVESTMENT IN DLJ On December 15, 1993, the Company sold a 61% interest in DLJ to the Holding Company for $800.0 million in cash and securities. The excess of the proceeds over the book value in DLJ at the date of sale of $340.2 million has been reflected as a capital contribution. In 1995, DLJ completed the initial public offering ("IPO") of 10.58 million shares of its common stock, which included 7.28 million of the Holding Company's shares in DLJ, priced at $27 per share. Concurrent with the IPO, the Company contributed equity securities to DLJ having a market value of $21.2 million. Upon completion of the IPO, the Company's ownership percentage was reduced to 36.1%. The Company's ownership interest will be further reduced upon the issuance of common stock after the vesting of forfeitable restricted stock units acquired by and/or the exercise of options granted to certain DLJ employees. At December 31, 1995, DLJ had options F-39 outstanding to purchase approximately 9.2 million shares of DLJ common stock at $27.00 per share. Options are exercisable over a period of up to ten years. 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 and cash flows of DLJ through the date of sale are included in the consolidated statements of earnings and cash flow for the year ended December 31, 1993. For the period subsequent to the date of sale, 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:
DECEMBER 31, ------------------------------------ 1995 1994 ---------------- ----------------- (IN MILLIONS) Assets: Trading account securities, at market value............................ $ 10,911.4 $ 8,970.0 Securities purchased under resale agreements........................... 18,748.2 10,476.4 Broker-dealer related receivables...................................... 13,023.7 11,784.8 Other assets........................................................... 1,893.2 2,030.4 ---------------- ----------------- Total Assets........................................................... $ 44,576.5 $ 33,261.6 ================ ================= Liabilities: Securities sold under repurchase agreements............................ $ 26,744.8 $ 18,356.7 Broker-dealer related payables......................................... 12,915.5 10,618.0 Short-term and long-term debt.......................................... 1,717.5 1,956.5 Other liabilities...................................................... 1,775.0 1,285.1 ---------------- ----------------- Total liabilities...................................................... 43,152.8 32,216.3 Cumulative exchangeable preferred stock................................ 225.0 225.0 Total shareholders' equity............................................. 1,198.7 820.3 ---------------- ----------------- Total Liabilities, Cumulative Exchangeable Preferred Stock and Shareholders' Equity................................................. $ 44,576.5 $ 33,261.6 ================ ================= DLJ's equity as reported............................................... $ 1,198.7 $ 820.3 Unamortized cost in excess of net assets acquired in 1985 and other adjustments................................................ 40.5 50.8 The Holding Company's equity ownership in DLJ.......................... (499.0) (532.1) Minority interest in DLJ............................................... (324.3) - ---------------- ----------------- The Company's Carrying Value of DLJ.................................... $ 415.9 $ 339.0 ================ =================
F-40 Summarized statements of earnings information for DLJ reconciled to the Company's equity in earnings of DLJ is as follows:
YEARS ENDED DECEMBER 31, ------------------------------------ 1995 1994 ---------------- ----------------- (IN MILLIONS) Commission, fees and other income...................................... $ 1,325.9 $ 953.5 Net investment income.................................................. 904.1 791.9 Dealer, trading and investment gains, net.............................. 528.6 263.3 ---------------- ----------------- Total Revenues......................................................... 2,758.6 2,008.7 Total expenses including income taxes.................................. 2,579.5 1,885.7 ---------------- ----------------- Net earnings........................................................... 179.1 123.0 Dividends on preferred stock........................................... 19.9 20.9 ---------------- ----------------- Earnings Applicable to Common Shares................................... $ 159.2 $ 102.1 ================ ================= DLJ's earnings applicable to common shares as reported................. $ 159.2 $ 102.1 Amortization of cost in excess of net assets acquired in 1985.......... (3.9) (3.1) The Holding Company's equity in DLJ's earnings......................... (90.4) (60.9) Minority interest in DLJ............................................... (6.5) - ---------------- ----------------- The Company's Equity in DLJ's Earnings................................. $ 58.4 $ 38.1 ================ =================
21) RELATED PARTY TRANSACTIONS On August 31, 1993, the Company sold $661.0 million of primarily privately placed below investment grade fixed maturities to EQ Asset Trust 1993, a limited purpose business trust, wholly owned by the Holding Company. The Company recognized a $4.1 million gain net of related deferred policy acquisition costs, deferred Federal income tax and amounts attributable to participating group annuity contracts. In conjunction with this transaction, the Company received $200.0 million of Class B Notes issued by EQ Asset Trust 1993. These notes have interest rates ranging from 6.85% to 9.45%. The Class B Notes are reflected in investments in and loans to affiliates on the consolidated balance sheets. F-41 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES CONSOLIDATED BALANCE SHEETS (UNAUDITED)
SEPTEMBER 30, December 31, 1996 1995 ------------- ------------ (IN MILLIONS) ASSETS Investments: Fixed maturities: Available for sale, at estimated fair value ............ $ 17,117.5 $ 15,899.9 Mortgage loans on real estate ............................ 3,298.5 3,638.3 Equity real estate ....................................... 3,705.0 3,916.2 Policy loans ............................................. 2,167.3 1,976.4 Investment in and loans to affiliates .................... 686.8 636.6 Other equity investments ................................. 561.4 621.1 Other invested assets .................................... 358.4 706.1 ----------- ----------- Total investments .................................... 27,894.9 27,394.6 Cash and cash equivalents .................................. 528.2 774.7 Deferred policy acquisition costs .......................... 3,279.3 3,083.3 Amounts due from discontinued GIC Segment .................. 1,270.1 2,097.1 Other assets ............................................... 2,720.0 2,713.1 Closed Block assets ........................................ 8,345.7 8,612.8 Separate Accounts assets ................................... 28,242.3 24,566.6 ----------- ----------- TOTAL ASSETS ............................................... $ 72,280.5 $ 69,242.2 =========== ============ LIABILITIES Policyholders' account balances ............................ $ 21,795.3 $ 21,911.2 Future policy benefits and other policyholders' liabilities 4,155.9 4,013.2 Short-term and long-term debt .............................. 2,029.9 1,899.3 Other liabilities .......................................... 2,988.2 3,379.5 Closed Block liabilities ................................... 9,193.2 9,507.2 Separate Accounts liabilities .............................. 28,154.7 24,531.0 ----------- ----------- Total liabilities .................................... 68,317.2 65,241.4 ----------- ----------- Commitments and contingencies (Note 10) 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 ............................. 2,913.6 2,913.6 Retained earnings .......................................... 1,019.0 781.6 Net unrealized investment gains ............................ 63.3 338.2 Minimum pension liability .................................. (35.1) (35.1) ----------- ----------- Total shareholder's equity ........................... 3,963.3 4,000.8 ----------- ----------- TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY ................. $ 72,280.5 $ 69,242.2 =========== ===========
See Notes to Consolidated Financial Statements. F-42 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ---------------------- --------------------- 1996 1995 1996 1995 ----------- --------- --------- ---------- (IN MILLIONS) REVENUES Universal life and investment-type product policy fee income ..................... $ 220.7 $ 197.1 $ 651.4 $ 581.4 Premiums ........................................ 145.8 140.2 439.2 452.7 Net investment income ........................... 534.3 517.5 1,605.9 1,551.7 Investment (losses) gains, net .................. (5.5) 8.8 (21.5) 27.7 Commissions, fees and other income .............. 262.5 232.3 786.8 650.5 Contribution from the Closed Block .............. 23.7 28.2 73.8 85.4 ---------- --------- --------- -------- Total revenues ............................ 1,181.5 1,124.1 3,535.6 3,349.4 ---------- --------- --------- -------- BENEFITS AND OTHER DEDUCTIONS Interest credited to policyholders' account balances ...................................... 315.8 314.8 948.8 921.3 Policyholders' benefits ......................... 268.4 245.7 795.6 766.1 Other operating costs and expenses .............. 457.2 421.8 1,379.0 1,282.4 ---------- --------- --------- -------- Total benefits and other deductions ....... 1,041.4 982.3 3,123.4 2,969.8 ---------- --------- --------- -------- Earnings before Federal income taxes, minority interest and cumulative effect of accounting change ............................. 140.1 141.8 412.2 379.6 Federal income taxes ............................ 33.7 33.9 92.2 89.9 Minority interest in net income of consolidated subsidiaries .................................. 20.6 16.7 59.5 45.2 ---------- --------- --------- -------- Earnings before cumulative effect of accounting change ............................. 85.8 91.2 260.5 244.5 Cumulative effect of accounting change, net of Federal income taxes ................... - - (23.1) - ---------- --------- --------- -------- Net Earnings .................................... $ 85.8 $ 91.2 $ 237.4 $ 244.5 ========== ========== ======== ========
See Notes to Consolidated Financial Statements. F-43 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 (UNAUDITED)
1996 1995 ---------- ---------- (IN MILLIONS) Common stock, at par value, beginning of year and end of period .. $ 2.5 $ 2.5 ---------- ---------- Capital in excess of par value, beginning of year and end of period ............................................... 2,913.6 2,913.6 ---------- ---------- Retained earnings, beginning of year ............................. 781.6 484.0 Net earnings ..................................................... 237.4 244.5 ---------- ---------- Retained earnings, end of period ................................. 1,019.0 728.5 ---------- ---------- Net unrealized investment gains (losses), beginning of year ...... 338.2 (203.0) Change in unrealized investment (losses) gains ................... (274.9) 270.5 ---------- ---------- Net unrealized investment gains, end of period ................... 63.3 67.5 ---------- ---------- Minimum pension liability, beginning of year and end of period ... (35.1) (2.7) ---------- ---------- TOTAL SHAREHOLDER'S EQUITY, END OF PERIOD ........................ $ 3,963.3 $ 3,709.4 ========== ==========
See Notes to Consolidated Financial Statements. F-44 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES CONSOLIDATED STATEMENTS OF CASH FLOWS NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 (UNAUDITED)
1996 1995 ----------- ---------- (IN MILLIONS) Net earnings ......................................................... $ 237.4 $ 244.5 Adjustments to reconcile net earnings to net cash provided by operating activities: Interest credited to policyholders' account balances ............. 948.8 921.3 General Account policy charges ................................... (651.4) (581.4) Investment losses (gains) ........................................ 21.5 (27.7) Change in Federal income taxes payable ........................... (96.2) 110.8 Changes in Closed Block assets and liabilities, net .............. (46.9) (52.6) Other, net ....................................................... 33.8 102.2 ---------- ---------- Net cash provided by operating activities ............................ 447.0 717.1 ---------- ---------- Cash flows from investing activities: Maturities and repayments .......................................... 1,626.0 1,312.6 Sales .............................................................. 6,913.2 5,371.0 Return of capital from joint ventures and limited partnerships ..... 64.3 34.7 Purchases .......................................................... (9,646.9) (7,100.5) Decrease in loans to discontinued GIC Segment ...................... 827.0 1,155.4 Other, net ......................................................... (97.9) (176.7) ---------- ---------- Net cash (used) provided by investing activities ..................... (314.3) 596.5 ---------- ---------- Cash flows from financing activities: Policyholders' account balances: Deposits ......................................................... 1,402.2 2,034.3 Withdrawals ...................................................... (1,839.5) (2,078.9) Net increase in short-term financings .............................. 195.3 272.5 Repayments of long-term debt ....................................... (88.5) (5.3) Payment of obligation to fund accumulated deficit of discontinued GIC Segment ...................................................... - (1,215.4) Other, net ......................................................... (48.7) (33.8) ---------- ---------- Net cash used by financing activities ................................ (379.2) (1,026.6) ---------- ---------- Change in cash and cash equivalents .................................. (246.5) 287.0 Cash and cash equivalents, beginning of year ......................... 774.7 693.6 ---------- ---------- Cash and Cash Equivalents, End of Period ............................. $ 528.2 $ 980.6 ========== ========== Supplemental cash flow information Interest Paid ...................................................... $ 70.6 $ 61.2 ========== ========== Income Taxes (Refunded) Paid ....................................... $ (7.9) $ 4.1 ========== ==========
See Notes to Consolidated Financial Statements. F-45 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1) BASIS OF PRESENTATION The preparation of the accompanying consolidated financial statements in conformity with GAAP required management to make estimates and assumptions (including normal, recurring accruals) 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. These statements should be read in conjunction with the consolidated financial statements of the Company for the year ended December 31, 1995. The results of operations for the nine months ended September 30, 1996 are not necessarily indicative of the results to be expected for the full year. Certain reclassifications have been made in the amounts presented for prior periods to conform those periods with the current presentation. 2) ACCOUNTING CHANGES AND PRONOUNCEMENTS The Company implemented SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," as of January 1, 1996. The statement requires long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate the carrying value of such assets may not be recoverable. Impaired real estate is written down to fair value with the impairment loss being included in Investment gains, net. Before implementing SFAS No. 121, valuation allowances on real estate held for the production of income were computed using the forecasted cash flows of the respective properties discounted at a rate equal to the Company's cost of funds. The adoption of the statement resulted in the release of valuation allowances of $152.4 million and recognition of impairment losses of $144.0 million on real estate held and used. Real estate which management has committed to disposing of by sale or abandonment is classified as real estate to be disposed of. Valuation allowances on real estate to be disposed of continue to be computed using the lower of estimated fair value or depreciated cost, net of disposition costs. Implementation of the SFAS No. 121 impairment requirements relative to other assets to be disposed of resulted in a charge for the cumulative effect of an accounting change of $23.1 million, net of a Federal income tax benefit of $12.4 million, due to the writedown to fair value of building improvements relating to facilities being vacated beginning in 1996. In June 1996, the FASB issued SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities". SFAS No. 125 specifies the accounting and reporting requirements for transfers of financial assets, the recognition and measurement of servicing assets and liabilities and extinguishments of liabilities. SFAS No. 125 is effective for transactions occurring after December 31, 1996 and is to be applied prospectively. Management has not yet determined the effect of implementing SFAS No. 125. 3) FEDERAL INCOME TAXES Federal income taxes for interim periods have been computed using an estimated annual effective tax rate. This rate is revised, if necessary, at the end of each successive interim period to reflect the current estimate of the annual effective tax rate. F-46 4) INVESTMENTS Investment valuation allowances and changes thereto are shown below:
NINE MONTHS ENDED SEPTEMBER 30, --------------------- 1996 1995 --------- ---------- (IN MILLIONS) Balances, beginning of year ............................ $ 325.3 $ 284.9 SFAS No. 121 release ................................... (152.4) - Additions charged to income ............................ 88.7 67.8 Deductions for writedowns and asset dispositions ....... (105.2) (49.7) -------- -------- Balances, End of Period ................................ $ 156.4 $ 303.0 ======== ======== Balances, end of period: Mortgage loans on real estate ........................ $ 93.3 $ 66.8 Equity real estate ................................... 63.1 236.2 -------- -------- Total............................................. $ 156.4 $ 303.0 ======== ========
For the three months and nine months ended September 30, 1996 and 1995, investment income is shown net of investment expenses of $89.9 million, $272.1 million, $115.2 million and $343.3 million, respectively. As of September 30, 1996 and December 31, 1995, fixed maturities classified as available for sale had amortized costs of $17,001.8 million and $15,284.0 million, respectively. Other equity investments included equity securities with carrying values of $125.0 million and $128.4 million and costs of $101.3 million and $97.3 million as of September 30, 1996 and December 31, 1995, respectively. For the nine months ended September 30, 1996 and 1995, proceeds received on sales of fixed maturities classified as available for sale amounted to $6,645.1 million and $5,009.6 million, respectively. Gross gains of $94.0 million and $135.1 million and gross losses of $58.4 million and $49.8 million were realized on these sales for the nine months ended September 30, 1996 and 1995, respectively. The decrease in unrealized investment gains related to fixed maturities classified as available for sale for the nine months ended September 30, 1996 amounted to $500.1 million. During the nine months ended September 30, 1995, one security classified as held to maturity was sold and twelve securities classified as held to maturity were transferred to the available for sale portfolio. All actions were taken as a result of significant deterioration in creditworthiness. The amortized cost of the security sold was $4.2 million. The aggregate amortized cost of the securities transferred was $116.0 million with gross unrealized investment losses of $3.2 million transferred to equity for the nine months ended September 30, 1995. Impaired mortgage loans along with the related provision for losses follows:
SEPTEMBER 30, December 31, 1996 1995 ------------- ---------- (IN MILLIONS) Impaired mortgage loans with provision for losses ........ $ 428.6 $ 310.1 Impaired mortgage loans with no provision for losses ..... 148.3 160.8 -------- -------- Recorded investment in impaired mortgage loans ........... 576.9 470.9 Provision for losses ..................................... 88.0 62.7 -------- -------- Net Impaired Mortgage Loans .............................. $ 488.9 $ 408.2 ======== ========
F-47 Impaired mortgage loans with no provision for losses are loans where the fair value of the collateral or the net present value of the loans equals or exceeds the recorded investment. Interest income earned on loans where the collateral value is used to measure impairment is recorded using the cash basis method. 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 the nine months ended September 30, 1996 and 1995, respectively, the Company's average recorded investment in impaired mortgage loans was $548.7 million and $295.5 million. Interest income recognized on these impaired mortgage loans totaled $30.9 million and $20.3 million for the nine months ended September 30, 1996 and 1995, respectively, including $13.7 million and $10.8 million recognized on the cash basis method. 5) ALLIANCE - CURSITOR TRANSACTION On February 29, 1996, Alliance acquired the business of Cursitor-Eaton Asset Management Company and Cursitor Holdings Limited in exchange for approximately 1.8 million Alliance Units, $84.9 million in cash, $21.5 million in notes which are payable ratably over the next four years and substantial additional consideration which will be determined at a later date. The Company recognized an investment gain of $20.6 million as a result of the issuance of Units in this transaction. At September 30, 1996, the Company's ownership of Alliance Units was approximately 57.4%. 6) BUSINESS SEGMENT INFORMATION
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ----------------------- ---------------------- 1996 1995 1996 1995 ----------- ---------- ----------- ---------- (IN MILLIONS) Revenues Individual insurance and annuities .. $ 841.7 $ 793.5 $ 2,496.9 $ 2,436.6 Group pension ....................... 60.7 77.1 189.3 209.4 Attributed insurance capital ........ 17.9 17.0 49.2 45.6 ---------- ---------- ---------- ---------- Insurance operations .............. 920.3 887.6 2,735.4 2,691.6 Investment services ................. 267.0 243.7 818.3 681.1 Consolidation/elimination ........... (5.8) (7.2) (18.1) (23.3) ---------- ---------- ---------- ---------- Total ............................... $ 1,181.5 $ 1,124.1 $ 3,535.6 $ 3,349.4 ========== ========== ========== ========== EARNINGS (LOSS) BEFORE FEDERAL INCOME TAXES, MINORITY INTEREST AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE Individual insurance and annuities .. $ 86.8 $ 80.6 $ 240.3 $ 232.2 Group pension ....................... (8.3) (.9) (28.6) (12.7) Attributed insurance capital ........ 9.7 9.9 23.5 22.5 ---------- ---------- ---------- ---------- Insurance operations .............. 88.2 89.6 235.2 242.0 Investment services ................. 68.8 59.2 226.8 157.2 ---------- ---------- ---------- ---------- Subtotal .......................... 157.0 148.8 462.0 399.2 Corporate interest expense .......... (16.9) (7.0) (49.8) (19.6) ---------- ---------- ---------- ---------- Total ............................... $ 140.1 $ 141.8 $ 412.2 $ 379.6 ========== ========== ========== ==========
F-48
SEPTEMBER 30, December 31, 1996 1995 -------------- ------------ (IN MILLIONS) ASSETS Individual insurance and annuities ........... $ 53,559.8 $ 50,328.8 Group pension ................................ 3,601.0 4,033.3 Attributed insurance capital ................. 2,055.5 2,391.6 ----------- ----------- Insurance operations ....................... 59,216.3 56,753.7 Investment services .......................... 13,434.1 12,842.9 Consolidation/elimination .................... (369.9) (354.4) ----------- ----------- Total ........................................ $ 72,280.5 $ 69,242.2 =========== ===========
7) DISCONTINUED OPERATIONS Summarized financial information of the discontinued GIC Segment follows:
SEPTEMBER 30, DECEMBER 31, 1996 1995 -------------- ------------ (IN MILLIONS) ASSETS Mortgage loans on real estate .................... $ 1,285.0 $ 1,485.8 Equity real estate ............................... 1,057.1 1,122.1 Cash and other invested assets ................... 361.7 665.2 Other assets ..................................... 191.5 579.3 ---------- ---------- Total Assets ..................................... $ 2,895.3 $ 3,852.4 ========== ========== LIABILITIES Policyholders' liabilities ....................... $ 1,360.3 $ 1,399.8 Allowance for future losses ...................... 118.8 164.2 Amounts due to continuing operations ............. 1,270.1 2,097.1 Other liabilities ................................ 146.1 191.3 ---------- ---------- Total Liabilities ................................ $ 2,895.3 $ 3,852.4 ========== ==========
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------ ------------------ 1996 1995 1996 1995 ------- -------- ------- --------- (IN MILLIONS) REVENUES Investment income (net of investment expenses of $31.8, $40.5, $96.1 and $117.9) ............................ $ 50.2 $ 52.6 $ 182.4 $ 202.1 Investment (losses) gains, net ........... (6.2) 6.6 (23.8) (12.3) Policy fees, premiums and other income, net ............................ .1 .1 .2 .6 --------- -------- -------- -------- Total revenues ........................... 44.1 59.3 158.8 190.4 BENEFITS AND OTHER DEDUCTIONS ............ 56.9 76.6 196.2 253.9 --------- -------- -------- -------- Losses Charged to Allowance for Future Losses ...................... $ (12.8) $ (17.3) $ (37.4) $ (63.5) ======= ======= ======== ========
F-49 Investment valuation allowances amounted to $19.9 million on mortgage loans and $16.3 million on equity real estate for an aggregate of $36.2 million at September 30, 1996. As of January 1, 1996, the adoption of SFAS No. 121 resulted in a release of existing valuation allowances of $71.9 million on equity real estate and recognition of impairment losses of $69.8 million on real estate held and used. At December 31, 1995, valuation allowances amounted to $19.2 million on mortgage loans and $77.9 million on equity real estate for an aggregate of $97.1 million. Benefits and other deductions included $23.3 million, $94.8 million, $38.7 million and $116.0 million of interest expense related to amounts borrowed from continuing operations for the three months and nine months ended September 30, 1996 and 1995, respectively. The allowance for future losses is based upon management's best judgment and there can be no assurance ultimate losses will not differ. 8) CLOSED BLOCK Summarized financial information of the Closed Block follows:
SEPTEMBER 30, DECEMBER 31, 1996 1995 ------------- ------------ (IN MILLIONS) ASSETS Fixed maturities: Available for sale, at estimated fair value (amortized cost of $3,730.0 and $3,662.8) ...................... $ 3,736.2 $ 3,896.2 Mortgage loans on real estate ........................... 1,422.2 1,368.8 Policy loans ............................................ 1,778.8 1,797.2 Cash and other invested assets .......................... 321.8 440.9 Deferred policy acquisition costs ....................... 780.8 823.6 Other assets ............................................ 305.9 286.1 ---------- ---------- Total Assets ............................................ $ 8,345.7 $ 8,612.8 ========== ========== LIABILITIES Future policy benefits and other policyholders' account balances ....................................... $ 9,159.6 $ 9,346.7 Other liabilities ....................................... 33.6 160.5 --------- ---------- Total Liabilities ....................................... $ 9,193.2 $ 9,507.2 ========= ==========
F-50
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------ -------------------- 1996 1995 1996 1995 -------- -------- -------- ---------- (IN MILLIONS) REVENUES Premiums and other income ......... $ 171.3 $ 178.8 $ 539.1 $ 561.3 Investment income (net of investment expenses of $6.9, $6.6, $21.0 and $20.3) .......................... 140.2 133.3 408.4 400.7 Investment losses, net ............ (4.6) (.6) (13.2) (7.5) -------- -------- -------- -------- Total revenues .................... 306.9 311.5 934.3 954.5 -------- -------- -------- -------- BENEFITS AND OTHER DEDUCTIONS Policyholders' benefits and dividends 266.9 270.8 810.2 824.1 Other operating costs and expenses . 16.3 12.5 50.3 45.0 -------- -------- -------- -------- Total benefits and other deductions 283.2 283.3 860.5 869.1 -------- -------- -------- -------- Contribution from the Closed Block $ 23.7 $ 28.2 $ 73.8 $ 85.4 ======== ======== ======== ========
Investment valuation allowances amounted to $33.4 million and $18.4 million on mortgage loans and $2.5 million and $4.3 million on equity real estate for an aggregate of $35.9 million and $22.7 million at September 30, 1996 and December 31, 1995, respectively. As of January 1, 1996, the adoption of SFAS No. 121 resulted in the recognition of impairment losses of $5.6 million on real estate held and used. 9) RESTRUCTURE COSTS At September 30, 1996, liabilities associated with 1994 and 1995 cost reduction programs totaled $27.3 million. During the nine months ended September 30, 1996 and 1995, the Company restructured certain operations in connection with cost reduction programs and incurred costs of $2.6 million and $8.6 million, respectively, primarily associated with severance related benefits. Amounts paid during the nine months ended September 30, 1996 and charged against the liabilities for the 1994 and 1995 cost reduction programs totaled $13.1 million. 10) LITIGATION There have been no new material legal proceedings and no material developments in matters which were previously reported in the Company's Notes to Consolidated Financial Statements for the year ended December 31, 1995, except as follows: On May 29, 1996, the New York County Supreme Court entered a judgment dismissing the complaint with prejudice in the previously reported action Golomb, et al. v. The Equitable Life Assurance Society of the United States. Plaintiffs have filed a notice of appeal of that judgment. On February 9, 1996, Equitable Life removed the Pennsylvania action, Malvin v. The Equitable Life Assurance Society of the United States, to the United States District Court for the Middle District of Pennsylvania. Following the decision granting Equitable Life's motion to dismiss the New York action (Golomb), on the consent of the parties, the District Court ordered an indefinite stay of all proceedings in the Pennsylvania action, pending either party's right to reinstate the proceeding, and ordered that for administrative purposes the case be deemed administratively closed. On February 2, 1996, Equitable Life removed the Texas action, Bowler, et al. v. The Equitable Life Assurance Society of the United States, to the United States District Court for the Northern District of Texas. On July 1, 1996, Equitable Life filed a motion for summary judgment dismissing the complaint in its entirety. The Company's management has been advised that plaintiffs plan to oppose the motion for summary judgment. In August, 1996, the court granted plaintiffs leave to file a supplemental complaint on behalf of a proposed class of Texas policyholders claiming unfair discrimination, breach of contract and other claims arising out of alleged differences between premiums charged to Texas policyholders and premiums charged to F-51 similarly situated policyholders in New York and certain other states. Plaintiffs seek refunds of alleged overcharges, exemplary or additional damages citing Texas statutory provisions which among other things, permit two times the amount of actual damage plus additional penalties if the acts complained of are found to be knowingly committed, and injunctive relief. Equitable Life has also filed a motion for summary judgment dismissing the supplemental complaint in its entirety. Equitable Life's management has been advised that plaintiffs plan to oppose that motion. On May 22, 1996, a separate action entitled Bachman v. The Equitable Life Assurance Society of the United States, was filed in Florida state court making claims similar to those in the previously reported Golomb action. The Florida action is asserted on behalf of a proposed class of Florida issued or renewed policyholders, insured after 1983 under Lifetime Guaranteed Renewable Major Medical Insurance Policies issued by Equitable Life. The Florida action seeks compensatory and punitive damages and injunctive relief restricting the methods by which Equitable Life increases premiums in the future, based on various common law claims. On June 20, 1996, Equitable Life removed the Florida action to Federal court. Equitable Life has answered the complaint, denying the material allegations and asserting certain affirmative defenses. Although the outcome of any litigation cannot be predicted with certainty, particularly in the early stages of an action, The Equitable's management believes that the ultimate resolution of this litigation should not have a material adverse effect on the financial position of the Company. Due to the early stage of such litigation, the Company's management cannot make an estimate of loss, if any, or predict whether or not such litigation will have a material adverse effect on the Company's results of operations in any particular period. On November 6, 1996, a proposed class action entitled Fletcher, et al. v. The Equitable Life Assurance Society of the United States, was filed in California Superior Court for Fresno County, making substantially the same allegations concerning premium rates and premium rate increases on guaranteed renewable policies made in the Bowler action. The complaint alleges, among other things, that differentials between rates charged California policyholders and policyholders in New York and certain other states, and the methods used by Equitable Life to calculate premium increases, breached the terms of its policies and that Equitable Life misrepresented and concealed the facts pertaining to such differentials and methods in violation of California law. Plaintiffs seek compensatory damages in an unspecified amount, rescission, injunctive relief and attorneys fees. Although the outcome of any litigation cannot be predicted with certainty, particularly in the early stages of an action, Equitable Life's management believes that the ultimate resolution of this litigation should not have a material adverse effect on the financial position of Equitable Life. Due to the early stage of such litigation, Equitable Life's management cannot make an estimate of loss, if any, or predict whether or not such litigation will have a material adverse effect on Equitable Life's results of operations in any particular period. In connection with the previously reported action entitled Sidney C. Cole et al. v. The Equitable Life Assurance Society of the United States and The Equitable of Colorado, Inc., on June 28, 1996, the court issued a decision and order dismissing with prejudice plaintiff's causes of action for fraud, constructive fraud, breach of fiduciary duty, negligence, and unjust enrichment, and dismissing without prejudice plaintiff's cause of action under the New York State consumer protection statute. The only remaining causes of action are for breach of contract and negligent misrepresentation. Plaintiffs have made a motion for reargument with respect to this order, which was submitted to the court in October 1996. On May 21, 1996, an action entitled Elton F. Duncan, III v. The Equitable Life Assurance Society of the United States, was commenced against Equitable Life in the Civil District Court for the Parish of Orleans, State of Louisiana. The action is brought by an individual who purchased a whole life policy. Plaintiff alleges misrepresentations concerning the extent to which the policy was a proper replacement policy and the number of years that the annual premium would need to be paid. Plaintiff purports to represent a class consisting of all persons who purchased whole life or universal life insurance policies from Equitable Life from January 1, 1982 to the present. Plaintiff seeks damages, including punitive damages, in an unspecified amount. On June 21, 1996, Equitable Life removed the action to the United States District Court for the Eastern District of Louisiana. Plaintiff has made a motion to remand to the Louisiana Civil District Court, and Equitable Life will F-52 oppose such motion. On July 26, 1996, an action entitled Michael Bradley v. Equitable Variable Life Insurance Company, was commenced in New York state court. The action is brought by the holder of a variable life insurance policy issued by EVLICO. The plaintiff purports to represent a class consisting of all persons or entities who purchased one or more life insurance policies issued by EVLICO from January 1, 1980. The complaint puts at issue various alleged sales practices and alleges misrepresentations concerning the extent to which the policy was a proper replacement policy and the number of years that the annual premium would need to be paid. Plaintiff seeks damages, including punitive damages, in an unspecified amount and also seeks injunctive relief prohibiting EVLICO from canceling policies for failure to make premium payments beyond the alleged stated number of years that the annual premium would need to be paid. Equitable Life and EVLICO have made a motion to consolidate or jointly try this proceeding with the Cole action, which will not be heard until November 1996. Although the outcome of any litigation cannot be predicted with certainty, particularly in the early stages of an action, the Company's management believes that the ultimate resolution of the litigations discussed in this paragraph should not have a material adverse effect on the financial position of the Company. Due to the early stages of such litigation, the Company's management cannot make an estimate of loss, if any, or predict whether or not such litigation will have a material adverse effect on the Company's results of operations in any particular period. Equitable Life recently received a subpoena from the U.S. Department of Labor ("DOL") requesting copies of any third-party appraisals in Equitable Life's possession relating to the ten largest properties (by value) in the Prime Property Fund ("PPF"). PPF is an open-end, commingled real estate separate account of Equitable Life's for pension clients. Equitable Life serves as investment manager in PPF and has retained Equitable Real Estate Investment Management, Inc. ("Equitable Real Estate") as adviser. In early 1995, the DOL commenced a national investigation of commingled real estate funds with pension investors, including PPF. The investigation now appears to be focused principally on appraisal and valuation procedures in respect of fund properties. The most recent request from the DOL seems to reflect, at least in part, an interest in the relationship between the valuations for those properties reflected in appraisals prepared for local property tax proceedings and the valuations used by PPF for other purposes. At no time has the DOL made any specific allegation that Equitable Life or Equitable Real Estate has acted improperly and Equitable Life and Equitable Real Estate believe that any such allegation would be without foundation. While the outcome of this investigation cannot be predicted with certainty, in the opinion of management, the ultimate resolution of this matter should not have a material adverse effect on the Company's consolidated financial position or results of operations. In connection with the previously reported arbitration involving Equitable Casualty Insurance Company ("Casualty"), the arbitration panel issued a final award in favor of Casualty and GEICO General Insurance Company ("GEICO General") on June 17, 1996. The result of the arbitration is expected to resolve in favor of Casualty and GEICO General two litigations that were commenced by Houston General Insurance Company ("Houston General") and that have been stayed by the presiding courts pending the completion of the arbitration. Houston General has informed Casualty, through counsel, that it is considering whether to consent to entry of a judgment enforcing the arbitration award or whether to contest the award. The Company's management believes that Houston General has no valid basis for contesting the arbitration award and therefore the ultimate resolution of this matter should not have a material adverse effect on the Company's financial position or results of operations. With respect to the previously reported National Gypsum litigation, the Bankruptcy Court has remanded the Texas state court action to state court. With respect to the previously reported Spectravision litigation, plaintiffs have filed an amended complaint in which DLJSC is no longer named as a defendant. F-53 On September 26, 1996, the United States District Court for the Southern District of New York granted the defendants' motion to dismiss all counts of the complaint in the previously reported litigation involving Alliance and the Alliance North American Government Income Fund, Inc. The plaintiffs have filed motions requesting that the court reconsider its decision and for permission to file an amended complaint. While the ultimate outcome cannot be determined at this time, Alliance's management does not expect that it will have a material adverse effect on Alliance's consolidated financial position or results of operations. In addition to the matters previously reported and the matters described above, Equitable Life and its subsidiaries and DLJ and its subsidiaries are involved in various legal actions and proceedings in connection with their businesses. Some of the actions and proceedings have been brought on behalf of various alleged classes of claimants and certain of these claimants seek damages of unspecified amounts. While the ultimate outcome of such matters cannot be predicted with certainty, in the opinion of management no such matter is likely to have a material adverse effect on the Company's consolidated financial position or results of operations. F-54 APPENDIX A MANAGEMENT Here is a list of our directors and, to the extent they are responsible for variable life insurance operations, our principal officers and a brief statement of their business experience for the past five years. Unless otherwise noted, their address is 1290 Avenue of the Americas, New York, New York 10104.
NAME AND PRINCIPAL BUSINESS EXPERIENCE BUSINESS ADDRESS WITHIN PAST FIVE YEARS - ------------------- ------------------------ DIRECTORS Claude Bebear Director of Equitable since July 1991. Chairman of the Board of the Holding Company (February AXA S.A. 1996-present) and a Director of other affiliates of Equitable. Chairman and Chief Executive 23, Avenue Matignon Officer of AXA since February 1989. Chief Executive Officer of the AXA Group since 1974 and 75008 Paris, France Chairman or Director of numerous subsidiaries and affiliated companies of the AXA Group. Christopher J. Brocksom Director of Equitable since July 1992. Chief Executive Officer, AXA Equity & Law Life AXA Equity & Law Assurance Society ("AXA Equity & Law") and various directorships and officerships with AXA Amersham Road Equity & Law affiliated companies. High Wycombe Bucks HP 13 5 AL, England Francoise Colloc'h Director of Equitable since July 1992. Executive Vice President, Culture-- Management-- AXA S.A. Communications, AXA, and various positions with AXA affiliated companies. 23, Avenue Matignon 75008 Paris, France Henri de Castries Director of Equitable since September 1993. Vice Chairman of the Board of the Holding AXA S.A. Company since February 1996. Executive Vice President Financial Services and Life Insurance 23, Avenue Matignon Activities of AXA since 1993. Prior thereto, General Secretary from 1991 to 1993 and 75008 Paris, France Central Director of Finances from 1989 to 1991. Also Director or Officer of various subsidiaries and affiliates of the AXA Group. Director of the Holding Company and of other Equitable affiliates. Joseph L. Dionne Director of Equitable since May 1982. Chairman (since April 1988) and Chief Executive The McGraw-Hill Companies Officer (Since April 1983) of The McGraw-Hill Companies. Director of the Holding Company. 1221 Avenue of the Americas New York, NY 10020 William T. Esrey Director of Equitable since July 1986. Chairman (since April 1990) and Chief Executive Sprint Corporation Officer (since 1985) and President (1985 to February 1996) of Sprint Corporation. Director P.O. Box 11315 of the Holding Company. Kansas City, MO 64112 Jean-Rene Fourtou Director of Equitable since July 1992. Chairman and Chief Executive Officer, Rhone-Poulenc, Rhone-Poulenc S.A. S.A. since 1986. Director of the Holding Company and AXA. 25 Quai Paul Doumer 92408 Courbevoie Cedex, France Norman C. Francis Director of Equitable since March 1989. President, Xavier University of Louisiana. Xavier University of Louisiana 7325 Palmetto Street New Orleans, LA 70125 Donald J. Greene Director of Equitable since July 1991. Partner, LeBoeuf, Lamb, Greene & MacRae since 1965. LeBouef, Lamb, Greene & MacRae Director of the Holding Company. 125 West 55th Street New York, NY 10019-4513 John T. Hartley Director of Equitable since August 1987. Retired Chairman and Chief Executive Officer of Harris Corporation Harris Corporation (until July 1995); prior thereto, he held the positions of Chairman of 1025 NASA Boulevard Harris Corporation from 1987, Chief Executive Officer from 1986 and President from October Melbourne, FL 32919 1987 to April 1993. John H.F. Haskell, Jr. Director of Equitable since July 1992. Managing Director of Dillon, Read & Co., Inc. since Dillon, Read & Co., Inc. 1975 and member of its Board of Directors. 535 Madison Avenue New York, NY 10022
A-1
NAME AND PRINCIPAL BUSINESS EXPERIENCE BUSINESS ADDRESS WITHIN PAST FIVE YEARS - ------------------- ------------------------ DIRECTORS (continued) W. Edwin Jarmain Director of Equitable since July 1992. President of Jarmain Group Inc. since 1979; also an Jarmain Group Inc. Officer or Director of several affiliated companies. Chairman and Director of FCA 121 King Street West International Ltd.; served as President, CEO and Director from 1992 through 1993. Director of Suite 2525, Box 36 various AXA affiliated companies. Director of the Holding Company since July 1992. Toronto, Ontario M5H 3T9, Canada G. Donald Johnston, Jr. Director of Equitable since January 1986. Retired Chairman and Chief Executive Officer, JWT 184-400 Ocean Road Group, Inc. and J. Walter Thompson Company. John's Island Vero Beach, FL 32963 Winthrop Knowlton Director of Equitable since October 1973. Chairman of the Board of Knowlton Brothers, Inc. Knowlton Brothers, Inc. since May 1989; also President of Knowlton Associates, Inc. since September 1987; Director 530 Fifth Avenue of the Holding Company. New York, NY 10036 Arthur L. Liman Director of Equitable since March 1984. Partner, Paul, Weiss, Rifkind, Wharton & Garrison Paul, Weiss, Rifkind, Wharton since 1966. and Garrison 1285 Avenue of the Americas New York, NY 10019 George T. Lowy Director of Equitable since July 1992. Partner, Cravath, Swaine & Moore. Cravath, Swaine & Moore 825 Eighth Avenue New York, NY 10019 Didier Pineau-Valencienne Director of Equitable since February 1996. Chairman and Chief Executive Officer of Schneider S.A. Schneider S.A. since 1981 and Chairman or Director of numerous subsidiaries and affiliated 64-70 Avenue Jean-Baptiste companies of Schneider. Director of AXA and the Holding Company. Clament 96646 Boulogne-Billancourt Cedex France George J. Sella, Jr. Director of Equitable since May 1987. Retired Chairman and Chief Executive Officer of P.O. Box 397 American Cyanamid Company (until April 1993); prior thereto, Chairman from 1984, Chief Newton, NJ 07860 Executive Officer from 1983 and President from 1979 to 1991. Dave H. Williams Director of Equitable since March 1991. Chairman and Chief Executive Officer of Alliance Alliance Capital Management since 1977 and Chairman or Director of numerous subsidiaries and affiliated companies of Corporation Alliance. Director of the Holding Company. 1345 Avenue of the Americas New York, NY 10105 OFFICERS -- DIRECTORS James M. Benson Director of Equitable since February 1994. Chief Executive Officer (since February 1996) and President of Equitable (since February 1994); prior thereto, Chief Operating Officer (February 1994 to February 1996) and Senior Executive Vice President of Equitable (April 1993 to February 1994). Prior thereto, President, Management Compensation Group (1983 to February 1993). Previously, President, Chief Executive Officer and a Director of Equitable Variable Life Insurance Company ("EVLICO"). Senior Executive Vice President of the Holding Company since February 1994 and Chief Operating Officer since February 1996; Director of various Equitable affiliated companies; Director of the Holding Company since February 1994. William T. McCaffrey Director of Equitable since February 1996. Senior Executive Vice President and Chief Operating Officer of Equitable (all since February 1996). Prior thereto, Executive Vice President (from February 1986 to February 1996) and Chief Administrative Officer (from February 1988 to February 1996). Executive Vice President and Chief Administrative Officer (since February 1994) of the Holding Company. Director of various Equitable affiliated companies, including EVLICO.
A-2
NAME AND PRINCIPAL BUSINESS EXPERIENCE BUSINESS ADDRESS WITHIN PAST FIVE YEARS - ------------------- ------------------------ OFFICERS -- DIRECTORS (continued) Joseph J. Melone Chairman of Equitable since February 1994 and a Director of Equitable since November 1990. Chief Executive Officer of the Holding Company since February 1996 and President of the Holding Company since May 1992. Previously, Chief Executive Officer of Equitable from February 1994, to February 1996; prior to February 1994, President, Chief Executive Officer and Director of Equitable from September 1992 to February 1994 and President, Chief Operating Officer and a Director since November 1990. Former Chairman, Chief Executive Officer and Director of EVLICO. Director of various Equitable and AXA affiliated companies. OTHER OFFICERS A. Frank Beaz Senior Vice President, Equitable; prior thereto, Vice President, Equitable (until March 1995). Executive Vice President, EQ Financial Consultants, Inc. ("EQF") (May 1995-present). Leon B. Billis Senior Vice President, Equitable; prior thereto, Vice President, Equitable (until November 1994); Vice President, EVLICO (July 1996 to December 1996). Harvey Blitz Senior Vice President and Deputy Chief Financial Officer, Equitable. Senior Vice President, Holding Company; Director or Chairman of various Equitable affiliated companies; Director (October 1992 to December 1996) and Vice President, EVLICO (April 1995 to December 1996). Kevin R. Byrne Vice President and Treasurer, Equitable; Vice President and Treasurer, Holding Company; Treasurer, EVLICO (until December 1996) and Frontier Trust Company; Director or Officer of other Equitable affiliated companies. Jerry M. de St. Paer Executive Vice President, Equitable. Senior Executive Vice President (since May 1996) and Chief Financial Officer (since May 1992) of the Holding Company. Executive Vice President and Chief Operating Officer (since September 1994) of Equitable Investment Corporation. Previously held various officerships with Equitable and its affiliates. Director and Senior Investment Officer, EVLICO (until December 1996). Director of various Equitable affiliated companies. Gordon G. Dinsmore Senior Vice President and Corporate Actuary, Equitable. Executive Vice President, Equico. Director and Senior Vice President, EVLICO (until December 1996); Director of other Equitable affiliated companies. Alvin H. Fenichel Senior Vice President and Controller, Equitable. Senior Vice President and Controller, Holding Company. Vice President and Controller (until December 1996), EVLICO; Vice President, The Equitable of Colorado, Inc. ("Colorado"). Paul J. Flora Senior Vice President and Auditor, Equitable. Prior thereto, Vice President and Auditor (February 1994 to March 1996). Vice President and Auditor, Holding Company (September 1994 to present). Vice President/Auditor, National Westminster Bank (November 1984 to June 1994). Robert E. Garber Executive Vice President and General Counsel, Equitable; Executive Vice President and General Counsel, Holding Company. Prior thereto, Senior Vice President and General Counsel of Equitable and the Holding Company (September 1993 to September 1994) and Senior Vice President and Deputy General Counsel of Equitable (September 1989 to September 1993). Donald R. Kaplan Vice President and Acting Chief Compliance Officer, Equitable. Prior thereto, Vice President and Counsel (until June 1996). Michael S. Martin Senior Vice President, Equitable. Chairman, EQF; Chairman and Chief Executive Officer, EquiSource of New York (January 1992 to October 1994) and Frontier (April 1992 to October 1994); Vice President, Hudson River Trust ("HRT") (February 1993 to February 1995); Director, Vice President and Treasurer, Equitable Distributors, Inc. (August 1993 to February 1995), also Chairman, President, and Chief Executive Officer (December 1993 to February 1995); Director, Equitable Underwriting and Sales Agency (Bahamas), Ltd. (May 1996 to present) and Colorado (January 1995 to present).
A-3
NAME AND PRINCIPAL BUSINESS EXPERIENCE BUSINESS ADDRESS WITHIN PAST FIVE YEARS - ------------------- ------------------------ OTHER OFFICERS (continued) Peter D. Noris Executive Vice President and Chief Investment Officer, Equitable. Executive Vice President (since May 1995) and Chief Investment Officer (since July 1995), Holding Company. Prior thereto, Vice President/Manager, Insurance Companies Investment Strategies Group, Solomon Brothers, Inc. (November 1992 to May 1995). Prior thereto, with Morgan Stanley & Co., Inc., from October 1984 to November 1992 as Principal, Fixed Income Insurance Group. Former Director and Senior Vice President of EVLICO. Director of other Equitable affiliates. Anthony C. Pasquale Senior Vice President, Equitable. Chairman and President, Equitable Realty Assets Corporation (July 1995 to present). Director of other Equitable affiliates. Michael J. Rich Senior Vice President, Equitable, since October 1994; prior thereto, Vice President of Underwriting, John Hancock Mutual Life Insurance Co. since 1988. Director of EVLICO (May 1995 to December 1996). Pauline Sherman Vice President, Secretary and Associate General Counsel, Equitable; prior thereto, Vice President and Associate General Counsel (until September 1995). Vice President, Secretary and Associate General Counsel, Holding Company (September 1995 to present). Samuel Shlesinger Senior Vice President and Actuary, Equitable; prior thereto, Vice President and Actuary. Previously, Director and Senior Vice President, EVLICO (February 1988 to December 1996). Director, Chairman and Chief Executive Officer, Equitable of Colorado. Vice President, HRT. Jose S. Suquet Executive Vice President and Chief Agency Officer, Equitable, since August 1994; prior thereto, Agency Manager, Equitable (February 1985 to August 1994). Stanley B. Tulin Senior Executive Vice President and Chief Financial Officer, Equitable; prior thereto, Chairman, Insurance Consulting and Actuarial Practice, Coopers & Lybrand (until April 1996); Executive Vice President, Holding Company.
A-4 INCENTIVE LIFE PLUS(SM) Prospectus Dated January 1, 1997 Incentive Life Plus is a flexible premium variable life insurance policy issued by The Equitable Life Assurance Society of the United States (Equitable). The policy offers flexible premium payments, a choice of two death benefit options, increases and decreases to the policy's Face Amount of insurance and a choice of funding options, including a guaranteed interest option and the following thirteen investment portfolios:
Fixed Income Series: Equity Series: Asset Allocation Series: o Money Market o Growth & Income o Conservative Investors o Intermediate Government Securities o Equity Index o Balanced o Quality Bond o Common Stock o Growth Investors o High Yield o Global o International o Aggressive Stock
We do not guarantee the investment performance of these investment portfolios, which involve varying degrees of risk. Although premiums are flexible, additional premiums may be required to keep the policy in effect. The policy may terminate if its value (net of any policy loan and surrender charge) is too small to pay the policy's monthly charges. The policy can be guaranteed to stay in force regardless of investment performance through the death benefit guarantee provision (if available in your state). You can borrow against or withdraw money from the policy, within limits. Loans and withdrawals will reduce the policy's death benefit and cash surrender value. You can also surrender the policy. A surrender charge will apply if you surrender the policy during the first fifteen policy years or within fifteen years after certain Face Amount increases. This charge may also apply if you reduce the Face Amount or if the policy terminates. Your Equitable agent can provide you with information about all forms of life insurance available from us and help you decide which may best meet your needs. Replacing existing insurance with an Incentive Life Plus or other policy may not be to your advantage. You may examine the policy for a limited period and cancel it for a full refund of premiums paid. PLEASE READ THIS PROSPECTUS CAREFULLY AND KEEP IT FOR FUTURE REFERENCE. THIS PROSPECTUS CONTAINS INFORMATION THAT SHOULD BE KNOWN BEFORE INVESTING IN INCENTIVE LIFE PLUS. THIS PROSPECTUS IS NOT VALID UNLESS IT IS ATTACHED TO A CURRENT PROSPECTUS FOR THE HUDSON RIVER TRUST. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. Copyright 1996 The Equitable Life Assurance Society of the United States. All rights reserved. EVM-108 Cat. No. 127187 TABLE OF CONTENTS PAGE ---- SUMMARY OF INCENTIVE LIFE PLUS FEATURES.........................1 PART 1 -- DETAILED INFORMATION ABOUT EQUITABLE AND INCENTIVE LIFE PLUS INVESTMENT CHOICES.......................6 THE COMPANY THAT ISSUES INCENTIVE LIFE PLUS...........6 THE SEPARATE ACCOUNT AND THE TRUST....................6 The Separate Account................................6 The Trust...........................................6 The Trust's Investment Adviser......................6 Investment Policies Of The Trust's Portfolios.......7 THE GUARANTEED INTEREST ACCOUNT.......................8 Adding Interest In The Guaranteed Interest Account..8 Transfers Out Of The Guaranteed Interest Account....8 PART 2 -- DETAILED INFORMATION ABOUT INCENTIVE LIFE PLUS........9 FLEXIBLE PREMIUMS.....................................9 Planned Periodic Premiums And Specified Premiums....9 Premium And Monthly Charge Allocations..............9 DEATH BENEFITS.......................................10 Guaranteeing The Death Benefit.....................10 CHANGES IN INSURANCE PROTECTION......................11 Changing The Face Amount...........................11 Changing The Death Benefit Option..................11 Substitution Of Insured Person.....................12 When Policy Changes Go Into Effect.................12 MATURITY BENEFIT.....................................12 LIVING BENEFIT OPTION................................12 ADDITIONAL BENEFITS MAY BE AVAILABLE.................12 YOUR POLICY ACCOUNT VALUE............................13 Amounts In The Separate Account....................13 How We Determine The Unit Value....................13 Transfers Of Policy Account Value..................13 Automatic Transfer Service.........................13 Telephone Transfers................................14 Charge For Transfers...............................14 BORROWING FROM YOUR POLICY ACCOUNT...................14 How To Request A Loan..............................14 Policy Loan Interest...............................14 When Interest Is Due...............................15 Repaying The Loan..................................15 The Effects Of A Policy Loan.......................15 PARTIAL WITHDRAWALS AND SURRENDER....................15 Partial Withdrawals................................15 Surrender For Net Cash Surrender Value.............15 DEDUCTIONS AND CHARGES...............................16 Deductions From Premiums...........................16 Deductions From Your Policy Account................16 Charge Against The Separate Account................17 Trust Charges......................................18 Surrender Charges..................................18 ADDITIONAL INFORMATION ABOUT INCENTIVE LIFE PLUS.....19 Your Policy Can Terminate..........................19 You May Restore A Policy After It Terminates.......19 Policy Periods, Anniversaries, Dates And Ages......19 TAX EFFECTS..........................................20 Policy Proceeds....................................20 Policy Terminations................................21 Diversification....................................21 Policy Changes.....................................21 Tax Changes........................................21 Estate And Generation Skipping Taxes...............22 Pension And Profit-Sharing Plans...................22 Other Employee Benefit Programs....................22 Our Taxes..........................................22 When We Withhold Income Taxes......................22 PART 3 -- ADDITIONAL INFORMATION...............................22 YOUR VOTING PRIVILEGES...............................22 Trust Voting Privileges............................22 How We Determine Your Voting Shares................23 Separate Account Voting Rights.....................23 OUR RIGHT TO CHANGE HOW WE OPERATE...................23 OUR REPORTS TO POLICYOWNERS..........................23 LIMITS ON OUR RIGHT TO CHALLENGE THE POLICY..........23 YOUR PAYMENT OPTIONS.................................24 YOUR BENEFICIARY.....................................24 ASSIGNING YOUR POLICY................................24 WHEN WE PAY POLICY PROCEEDS..........................24 DIVIDENDS............................................24 REGULATION...........................................24 SPECIAL CIRCUMSTANCES................................25 DISTRIBUTION.........................................25 LEGAL PROCEEDINGS....................................25 ACCOUNTING AND ACTUARIAL EXPERTS.....................25 ADDITIONAL INFORMATION...............................25 MANAGEMENT...........................................26 PART 4 -- ILLUSTRATIONS OF POLICY BENEFITS.....................30 SEPARATE ACCOUNT FP FINANCIAL STATEMENTS..................FSA-1 EQUITABLE FINANCIAL STATEMENTS..............................F-1 APPENDIX A -- COMMUNICATING PERFORMANCE DATA................A-1 LONG-TERM MARKET TRENDS.......................A-1 - -------------------------------------------------------------------------------- In this prospectus "we," "our" and "us" mean Equitable, a New York stock life insurance company. "You" and "your" mean the owner of the policy. We refer to the person who is covered by the policy as the "insured person" because the insured person and the policyowner may not be the same. Unless indicated otherwise, the discussion in this prospectus assumes that there is no policy loan outstanding and that the policy is not in a grace period. THE POLICY IS NOT AVAILABLE IN ALL JURISDICTIONS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE. EQUITABLE DOES NOT AUTHORIZE ANY INFORMATION OR REPRESENTATIONS REGARDING THE OFFERING DESCRIBED IN THIS PROSPECTUS OTHER THAN AS CONTAINED IN THIS PROSPECTUS OR ANY ATTACHED SUPPLEMENT THERETO OR IN ANY SUPPLEMENTAL SALES MATERIAL AUTHORIZED BY EQUITABLE. WHAT IS VARIABLE LIFE INSURANCE? Variable life insurance is one kind of permanent cash value life insurance. Like other kinds of permanent cash value life insurance, such as whole life and universal life insurance, variable life insurance generally provides two benefits: an income tax-free death benefit and a cash value that grows tax-deferred. What sets variable life insurance apart from universal life and whole life is that variable life insurance allows the policyowner to direct premiums to different mutual fund options. This enables a policyowner to harness the growth potential of, for example, the equity markets, but the policyowner also bears the risk of investment losses. In contrast, whole life insurance provides a minimum guaranteed cash value and universal life applies a minimum guaranteed interest rate to premiums. Some variable life insurance policies offer some of the other features of universal or whole life such as premium flexibility (universal life), face amount increases (universal life) or death benefit guarantees (whole life). Equitable offers an array of permanent cash value insurance products and your Equitable agent can help you determine which product best suits your insurance needs. SUMMARY OF INCENTIVE LIFE PLUS FEATURES THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE TERMS OF THE POLICY WHEN ISSUED AND THE MORE DETAILED INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS (SEE TABLE OF CONTENTS ON OPPOSITE PAGE). PUTTING MONEY INTO THE POLICY FLEXIBLE PREMIUMS o Premiums may be invested whenever and in whatever amount you determine, within limits. Other than the minimum initial premium, there are no scheduled or required premium payments (however, under certain conditions, additional premiums may be needed to keep a policy in effect). See FLEXIBLE PREMIUMS on page 9. POLICY ACCOUNT o Net premiums are put in your Policy Account and can be allocated to a Guaranteed Interest Account and to one or more funds of Equitable's Separate Account FP (each a Fund, and together, the Funds or the Separate Account). The Funds invest in corresponding portfolios of The Hudson River Trust (Trust), a mutual fund. See THE SEPARATE ACCOUNT and THE TRUST, both on page 6. o Transfers can be made among the various funding options, BUT TRANSFERS OUT OF THE GUARANTEED INTEREST ACCOUNT CAN ONLY BE MADE DURING A LIMITED TIME AND IN LIMITED AMOUNTS. See TRANSFERS OUT OF THE GUARANTEED INTEREST ACCOUNT on page 8 for a description of these limitations. Transfers into the Guaranteed Interest Account and among the Funds may generally be made at any time and are subject to certain minimum transfer amounts. See TRANSFERS OF POLICY ACCOUNT VALUE on page 13. o There is no minimum guaranteed cash value for amounts allocated to the Funds. The value of amounts allocated to the Guaranteed Interest Account will depend on the interest rates declared and guaranteed each year by Equitable (4% minimum, before deductions). See THE GUARANTEED INTEREST ACCOUNT on page 8. TAKING MONEY OUT OF THE POLICY o Loans may be taken against 90% of a policy's Cash Surrender Value (Policy Account value less any applicable surrender charge) subject to certain conditions. Loan interest accrues daily at a rate determined annually. Currently, amounts set aside to secure the loan earn interest at a rate 1% lower than the rate charged for policy loan interest. See BORROWING FROM YOUR POLICY ACCOUNT on page 14. o Partial Withdrawals of Net Cash Surrender Value (Cash Surrender Value less any loan and accrued loan interest) may be taken after the first policy year, subject to our approval and certain conditions. See PARTIAL WITHDRAWALS on page 15. o The policy may be surrendered for its Net Cash Surrender Value, less any lien securing a Living Benefit payment, at which time insurance coverage will end. See SURRENDER FOR NET CASH SURRENDER VALUE on page 15. INSURANCE PROTECTION FEATURES DEATH BENEFITS o Option A, a fixed benefit equal to the policy's Face Amount. o Option B, a variable benefit equal to the Face Amount plus the Policy Account value. o In some cases a higher death benefit may apply in order to meet Federal income tax law requirements. See DEATH BENEFITS on page 10. o After the first policy year, you can increase the Face Amount. After the second policy year, you can decrease the Face Amount or change your death benefit option. Conditions apply to Face Amount and death benefit option changes. The minimum Face Amount is generally $50,000. See CHANGES IN INSURANCE PROTECTION on page 11. o After the second policy year, you may be able to substitute the insured person. See SUBSTITUTION OF INSURED PERSON on page 12. DEATH BENEFIT GUARANTEE o The death benefit guarantee provision guarantees that, under certain conditions, the policy will remain in force even if the Net Cash Surrender Value is insufficient to pay the monthly policy charges. The death benefit guarantee provision is not available in New York 1 and New Jersey. In those states a 3-Year no lapse guarantee provision will apply. See GUARANTEEING THE DEATH BENEFIT on page 10 for a description of these provisions and the conditions that apply. MATURITY BENEFIT o A maturity benefit equal to the amount in your Policy Account, less any policy loan, any lien securing a Living Benefit payment and accrued interest, is payable on the policy anniversary nearest the insured person's 100th birthday (Final Policy Date), if the insured person is still living on that date. See MATURITY BENEFIT on page 12. LIVING BENEFIT o The Living Benefit rider enables the policyowner to receive a portion of the policy's death benefit (excluding death benefits payable under certain riders) if the insured person has a terminal illness. The Living Benefit rider will be added to most policies at issue for no additional cost. See LIVING BENEFIT OPTION on page 12. ADDITIONAL BENEFITS o Disability waiver; accidental death; term insurance, including term insurance on an additional insured person, children's term insurance, and first-to-die term insurance; option to purchase additional insurance; and designated insured option riders are available. See ADDITIONAL BENEFITS MAY BE AVAILABLE on page 12. DEDUCTIONS AND CHARGES FROM PREMIUMS (See DEDUCTIONS FROM PREMIUMS on page 16.) o Charge for taxes imposed by states and other jurisdictions. Such charges currently range from .75% to 5% (Virgin Islands). o Premium Sales Charge ranging from 3% to 6% of premiums paid, depending upon the Face Amount. Equitable currently intends to stop deducting this charge once premiums paid equal a specified amount. FROM THE POLICY ACCOUNT (See DEDUCTIONS FROM YOUR POLICY ACCOUNT on page 16.) o Administrative charge during the first or first and second policy years ranging from $20 per month to $55 per month depending upon the initial Face Amount and the insured person's age. During subsequent years, the monthly administrative charge ranges from $6 to $8. We may increase this charge, but we guarantee that it will never exceed $10 per month. o Current monthly cost of insurance rates for preferred risk insureds range from $0.05 per thousand of net amount at risk at the younger ages to $50.00 per thousand of net amount at risk at the oldest age (99). The net amount at risk is the difference between the Policy Account value and the current death benefit. Guaranteed cost of insurance rates for preferred risk insureds range from $0.06 (younger ages) to $83.33 (age 99). o Monthly charge for any additional insurance benefits. o Certain policy transactions will result in the following charges: o Transfers -- Currently, we charge $25 per transfer after the twelfth transfer in a policy year. We reserve the right to charge $25 per transfer. o Partial Withdrawals -- An expense charge of $25 or 2% of the amount requested, whichever is less, is made for each partial withdrawal. o Face Amount Increases -- An administrative charge of $1.50 for each additional $1,000 of insurance (up to a maximum charge of $240) will be deducted from your Policy Account. o Substitution of Insured Person -- A $100 expense charge will be deducted for each substitution of insured person. o Monthly death benefit guarantee charge equal to $.01 per $1,000 of Face Amount including the face amount of any yearly renewable term rider on the insured person. This charge will not apply under certain circumstances. FROM THE SEPARATE ACCOUNT (See CHARGES AGAINST THE SEPARATE ACCOUNT on page 17.) o Current charge for certain mortality and expense risks equal to .60% per annum (guaranteed not to exceed .90% per annum). SURRENDER CHARGES (See SURRENDER CHARGES on page 18.) o An Administrative Surrender Charge will apply during the first eight policy years if you surrender the policy, reduce its Face Amount, or it terminates. The Administrative Surrender Charge varies by issue age of the insured person and the Face Amount, and will never be more than $3,000. o A Premium Surrender Charge applies if the policy terminates, is surrendered for its Net Cash Surrender Value or if the Face Amount is reduced during the first fifteen policy years. The maximum charge is equal to 66% of one "target premium." After the first nine policy years, the maximum charge declines on a monthly basis until it reaches zero at the end of the fifteenth policy year. o If you increase the policy's Face Amount, additional Surrender Charges will generally apply to the amount of the increase for fifteen years beginning on the effective date of increase. 2 FROM THE TRUST o The Separate Account Funds purchase shares of the Trust at net asset value. That price reflects investment management fees, indirect expenses, such as brokerage commissions, and certain direct operating expenses. The table below shows (i) the actual investment management fees paid by the Trust in 1995 and (ii) other expenses deducted from Trust assets in 1995. Investment management fees may increase or decrease based on the level of portfolio net assets. These fees are subject to maximum rates, as described under THE TRUST'S INVESTMENT ADVISER on page 6, and in the attached Trust prospectus. Other Trust expenses are likely to fluctuate from year to year. Both investment management fees and other Trust expenses are expressed in the table below as a percentage of each portfolio's daily average net assets:
PORTFOLIO ACTUAL 1995 MANAGEMENT FEE 1995 OTHER EXPENSES 1995 TOTAL EXPENSES --------------------------------------------------------------------------------------------------------------------- Money Market 0.40% 0.04% 0.44% Intermediate Govt. Securities 0.50% 0.07% 0.57% Quality Bond 0.55% 0.04% 0.59% High Yield 0.55% 0.05% 0.60% Growth & Income 0.55% 0.05% 0.60% Equity Index 0.35% 0.13% 0.48% Common Stock 0.35% 0.03% 0.38% Global 0.53% 0.08% 0.61% International 0.90% 0.13%* 1.03% Aggressive Stock 0.46% 0.03% 0.49% Conservative Investors 0.55% 0.04% 0.59% Balanced 0.37% 0.03% 0.40% Growth Investors 0.52% 0.04% 0.56% ------------------------- *Annualized
VARIATIONS o Equitable is subject to the insurance laws and regulations in every jurisdiction in which Incentive Life Plus is sold. As a result, various time periods and other terms and conditions described in this prospectus may vary from state to state. These variations will be reflected in the policy. o The terms of Incentive Life Plus may also vary where special circumstances result in a reduction in our costs. o A modified version of Incentive Life Plus may be offered where certain conditions are met. ADDITIONAL INFORMATION CANCELLATION RIGHT o You have a right to examine the policy. You may cancel the policy, within the time limit described below, by sending it to our Administrative Office with a written request to cancel. Insurance coverage ends when you send your request. o Your request to cancel the policy must be postmarked no later than 10 days after you receive the policy. o If you cancel the policy, we will refund the premiums you paid. In certain cases where the policy was purchased as a result of an exchange of one of our life insurance policies, we may reinstate the prior policy. o There may be income tax and withholding implications if you cancel. POLICY TERMINATION o The policy will go into default if the Net Cash Surrender Value is insufficient to cover monthly charges and the death benefit guarantee or the 3-Year no lapse guarantee provisions are not in effect. If this occurs, you will be notified and given the opportunity to maintain the policy in force by making additional payments. You may be able to restore a terminated policy within a limited time period, but this will require additional evidence of insurability. See YOUR POLICY CAN TERMINATE on page 19 and YOU MAY RESTORE A POLICY AFTER IT TERMINATES on page 19. TAX EFFECTS o Generally, under current Federal income tax law, death benefits are not subject to income tax and Policy Account earnings are not subject to income tax as long as they remain in the Policy Account. Loans, partial withdrawals, surrender, maturity, policy termination, or a substitution of insured may result in recognition of income for tax purposes. See TAX EFFECTS on page 20. HUDSON RIVER TRUST RATES OF RETURN The rates of return shown below are based on the actual investment performance of The Hudson River Trust portfolios, after deduction for investment management fees and direct operating expenses of the Trust, for periods ending September 30, 1996. The historical performance of the Common Stock and Money Market Portfolios for periods prior to March 22, 1985, when these funds were managed separate accounts and subject to a different fee structure, has been adjusted to reflect current investment management fees of .40% per annum and estimated direct operating expenses of the Trust of .10% per annum. The Common Stock Portfolio and its predecessors have been in existence since 1976. 3 The yields shown below are derived from the actual rate of return of the Trust portfolio for the period, which is then adjusted to omit capital changes in the portfolio during the period. We show the SEC standardized 7-day yield for the Money Market Portfolio and 30-day yield for the Intermediate Government Securities, Quality Bond and High Yield Portfolios. These rates of return and yields are not illustrative of how actual investment performance will affect the benefits under your policy. Moreover, these rates of return and yields are not an estimate or guarantee of future performance. THESE RATES OF RETURN AND YIELDS ARE FOR THE TRUST ONLY AND DO NOT REFLECT THE ADMINISTRATIVE AND COST OF INSURANCE CHARGES, SALES CHARGES, TAX CHARGES AND THE MORTALITY AND EXPENSE RISK CHARGE APPLICABLE UNDER AN INCENTIVE LIFE PLUS POLICY. SUCH CHARGES WOULD REDUCE THE RETURNS AND YIELDS SHOWN. SEE ILLUSTRATIONS OF INCENTIVE LIFE PLUS POLICY ACCOUNT AND CASH SURRENDER VALUES BASED ON HISTORICAL INVESTMENT RESULTS BELOW.
RATES OF RETURN FOR PERIODS ENDING SEPTEMBER 30, 1996 -------------------------------------------------------------------------- SEC SINCE PORTFOLIO YIELDS 1 YEAR 3 YEARS 5 YEARS 10 YEARS 20 YEARS INCEPTION(A) --------- ---------- --------- ---------- --------- ---------- --------- -------------- The Fixed Income Series: Money Market............................ 5.20% 5.35% 4.81% 4.31% 5.89% -- 7.31% Intermediate Government Securities...... 5.92 4.85 3.71 6.26 -- -- 6.89 Quality Bond............................ 5.92 5.48 -- -- -- -- 3.82 High Yield.............................. 10.23 23.99 13.97 15.12 -- -- 11.33 The Equity Series: Growth & Income......................... 13.84 -- -- -- -- 10.58 Equity Index............................ 19.69 -- -- -- -- 18.74 Common Stock............................ 17.31 15.49 14.65 14.91 15.16% 14.94 Global.................................. 11.59 11.36 13.15 -- -- 11.42 International........................... 11.32 -- -- -- -- 12.55 Aggressive Stock........................ 25.13 15.50 14.72 18.73 -- 20.49 The Asset Allocation Series: Conservative Investors.................. 5.80 5.04 7.86 -- -- 8.72 Balanced................................ 10.55 5.94 8.09 10.11 -- 11.86 Growth Investors........................ 11.57 9.74 12.68 -- -- 15.38 -------------
(a)The International Portfolio received its initial funding on April 3, 1995; the Equity Index Portfolio on March 1, 1994; the Growth & Income and Quality Bond Portfolios on October 1, 1993; the Intermediate Government Securities Portfolio on April 1, 1991; the Conservative Investors and the Growth Investors Portfolios on October 2, 1989; the Global Portfolio on August 27, 1987; the High Yield Portfolio on January 2, 1987; the Aggressive Stock and Balanced Portfolios on January 27, 1986; the predecessor of the Money Market Portfolio on July 13, 1981; and the predecessor of the Common Stock Portfolio on January 13, 1976. Additional investment performance information appears in the attached Trust prospectus. ILLUSTRATIONS OF POLICY ACCOUNT AND CASH SURRENDER VALUES BASED ON HISTORICAL INVESTMENT RESULTS. The table on the next page was developed to demonstrate how the actual investment experience of the Trust and its predecessors would have affected the Policy Account value and Cash Surrender Value of hypothetical Incentive Life Plus policies held for specified periods of time. The table illustrates premiums, Policy Account values and Cash Surrender Values of thirteen hypothetical Incentive Life Plus policies, each with a 100% premium allocation to a different Fund. The illustration also assumes that, in each case, the insured is a 40-year-old male, preferred non-tobacco user and that each policy has a level death benefit, a $300,000 face amount and a $4,000 annual premium. The table assumes that each policy was purchased on the first day of a calendar year. For Trust portfolios whose inception dates fall before June 30, the policy is assumed to have been purchased at the beginning of and earned the actual return over that entire calendar year of inception. For Trust portfolios whose inception dates fall after June 30, the policy is assumed to have been purchased at the beginning of the first full calendar year of that portfolio's operation. The table then illustrates what the Cash Surrender Value would have been after one policy year, after five policy years, after 10 policy years and as of September 30, 1996. 4 ILLUSTRATIONS OF INCENTIVE LIFE PLUS POLICY ACCOUNT AND CASH SURRENDER VALUES BASED ON HISTORICAL INVESTMENT RESULTS, $300,000 OF INITIAL INSURANCE PROTECTION AND CURRENT CHARGES(1) MALE AGE 40 PREFERRED RISK NON-TOBACCO USER
ASSUMED POLICY AT THE END OF AT THE END OF PURCHASE DATE(2) THE FIRST POLICY YEAR THE FIFTH POLICY YEAR ---------------- ------------------------------- ------------------------------- TOTAL POLICY CASH TOTAL POLICY CASH BEGINNING OF PREMIUM ACCOUNT SURRENDER PREMIUM ACCOUNT SURRENDER PORTFOLIO YEAR: PAID VALUE VALUE PAID VALUE VALUE - --------- --------------- ------------------------------- ------------------------------- THE FIXED INCOME SERIES: - ------------------------ Money Market................ 1982 $4,000 $2,783 $ 881 $20,000 $17,828 $15,486 Int. Gov't Securities....... 1991 4,000 2,764 862 20,000 16,825 14,483 Quality Bond................ 1994 4,000 2,221 319 -- -- -- High Yield.................. 1987 4,000 2,524 622 20,000 18,426 16,084 THE EQUITY SERIES: - ------------------ Growth & Income............. 1994 4,000 2,363 461 -- -- -- Equity Index................ 1994 4,000 2,432 530 -- -- -- Common Stock................ 1976 4,000 2,667 765 20,000 26,526 24,184 Global...................... 1988 4,000 2,722 820 20,000 18,762 16,420 International............... 1995 4,000 2,739 837 -- -- -- Aggressive Stock............ 1986 4,000 3,469 1,567 20,000 22,787 20,445 THE ASSET ALLOCATION SERIES: - ---------------------------- Conservative Investors...... 1990 4,000 2,585 683 20,000 16,322 13,980 Balanced.................... 1986 4,000 3,271 1,369 20,000 19,315 16,973 Growth Investors............ 1990 4,000 2,715 813 20,000 19,185 16,843 AT THE END OF FROM POLICY PURCHASE THROUGH THE TENTH POLICY YEAR SEPTEMBER 30, 1996 ------------------------------- ------------------------------- TOTAL POLICY CASH TOTAL POLICY CASH PREMIUM ACCOUNT SURRENDER PREMIUM ACCOUNT SURRENDER PORTFOLIO PAID VALUE VALUE PAID VALUE VALUE - --------- ------------------------------- ------------------------------- THE FIXED INCOME SERIES: - ------------------------ Money Market................ $40,000 $41,583 $39,758 $60,000 $64,496 $64,405 Int. Gov't Securities....... -- -- -- 24,000 20,088 17,681 Quality Bond................ -- -- -- 12,000 9,286 6,984 High Yield.................. -- -- -- 40,000 55,366 53,450 THE EQUITY SERIES: - ------------------ Growth & Income............. -- -- -- 12,000 10,722 8,420 Equity Index................ -- -- -- 12,000 11,946 9,644 Common Stock................ 40,000 68,804 66,979 84,000 389,708 389,708 Global...................... -- -- -- 36,000 48,543 46,354 International............... -- -- -- 8,000 6,316 4,214 Aggressive Stock............ 40,000 82,270 80,445 44,000 101,753 100,202 THE ASSET ALLOCATION SERIES: - ---------------------------- Conservative Investors...... -- -- -- 28,000 26,031 23,616 Balanced.................... 40,000 49,338 47,513 44,000 55,626 54,075 Growth Investors............ -- -- -- 28,000 32,834 30,419
THE DEATH BENEFIT GUARANTEE / THREE YEAR NO LAPSE GUARANTEE PREMIUM FOR THIS POLICY WOULD BE $3,533.96. SEE GUARANTEEING THE DEATH BENEFIT ON PAGE 10. THESE VALUES ARE NOT AN ESTIMATE OR GUARANTEE OF FUTURE PERFORMANCE. (1) Policy values reflect all charges assessed under the policy and by the Trust, including an assumed charge for taxes of 2%. Current non-guaranteed charges have been used for the cost of insurance charges, Premium Sales Charge and monthly administrative charge. Such charges may be increased in the future, but will never exceed the guaranteed maximum charges set forth in DEDUCTIONS AND CHANGES on page 16. If the guaranteed maximum cost of insurance charges, Premium Sales Charge and monthly administrative charge were used, the results would be lower. (2) Assumed Policy Purchase Date is based upon inception date of Trust portfolio. Please refer to the explanation of this table on page 4. 5 PART 1: DETAILED INFORMATION ABOUT EQUITABLE AND INCENTIVE LIFE PLUS INVESTMENT CHOICES THE COMPANY THAT ISSUES INCENTIVE LIFE PLUS EQUITABLE. Equitable, a New York stock life insurance company, has been in business since 1859. We are a wholly-owned subsidiary of The Equitable Companies Incorporated (the Holding Company). The largest stockholder of the Holding Company is AXA S.A. (AXA), a French insurance holding company. AXA beneficially owns 60.6% of the outstanding shares of common stock of the Holding Company plus convertible preferred stock. Under its investment arrangements with Equitable and the Holding Company, AXA is able to exercise significant influence over the operations and capital structure of the Holding Company and its subsidiaries, including Equitable. AXA is the holding company for an international group of insurance and related financial services companies. Equitable, the Holding Company and their subsidiaries managed approximately $195.3 billion of assets as of December 31, 1995, including third party assets of approximately $144.4 billion. Equitable's home office is 1290 Avenue of the Americas, New York, New York 10104. We are licensed to do business in all 50 states, Puerto Rico, the Virgin Islands and the District of Columbia. We maintain local offices throughout the United States. At December 31, 1995, we had approximately $132.8 billion face amount of variable life insurance in force. Prior to January 1, 1997, Incentive Life Plus policies were issued by Equitable's wholly-owned subsidiary, Equitable Variable Life Insurance Company (Equitable Variable). Equitable Variable was merged into Equitable as of January 1, 1997. THE SEPARATE ACCOUNT AND THE TRUST THE SEPARATE ACCOUNT. The Separate Account was established on September 21, 1995 under the Insurance Law of the State of New York. The Separate Account is a type of investment company called a unit investment trust and is registered with the Securities and Exchange Commission (SEC) under the Investment Company Act of 1940 (1940 Act). This registration does not involve any supervision by the SEC of the management or investment policies of the Separate Account. The Separate Account is a successor to a separate account that was established by Equitable Variable on April 19, 1985. The assets of that separate account became assets of the Separate Account on January 1, 1997 when Equitable Variable was merged into Equitable. Under New York law, we own the assets of the Separate Account and use them to support your policy and other variable life insurance policies. The portion of the Separate Account's assets supporting these policies may not be used to satisfy liabilities arising out of any other business we may conduct. This means that the assets supporting Policy Account values maintained in the Separate Account are not subject to the claims of our other creditors. We may also retain in the Separate Account amounts owed to us for charges or other permitted allocations. Because such retained amounts do not support Policy Account values, we may transfer them from the Separate Account to our general account at our discretion. THE TRUST. The Separate Account has several funds, each of which invests in shares of a corresponding portfolio of the Trust. The Trust is an open-end diversified management investment company, more commonly called a mutual fund. As a "series" type of mutual fund, it issues several different "series" of stock, each of which relates to a different Trust portfolio with a different investment policy. The Trust does not impose a sales charge or "load" for buying and selling its shares. The Trust's shares are bought and sold by our Separate Account at net asset value. The Trust's custodian is The Chase Manhattan Bank, N.A. The Trust sells its shares to separate accounts of insurance companies, both affiliated and not affiliated with Equitable. We currently do not foresee any disadvantages to our policyowners arising out of this. However, the Trust's Board of Trustees intends to monitor events in order to identify any material irreconcilable conflicts that possibly may arise and to determine what action, if any, should be taken in response. If we believe that the Trust's response to any of those events insufficiently protects our policyowners, we will see to it that appropriate action is taken to do so. Also, if we ever believe that any of the Trust's portfolios is so large as to materially impair the investment performance of a portfolio or the Trust, we will examine other investment options. THE TRUST'S INVESTMENT ADVISER. The Trust is advised by Alliance Capital Management L.P. (Alliance). Alliance is registered as an investment adviser under the Investment Advisers Act of 1940. Alliance, a publicly-traded limited partnership, is indirectly majority-owned by Equitable. Alliance's main office is 1345 Avenue of the Americas, New York, New York 10105. Alliance acts as an investment adviser to various separate accounts and general accounts of Equitable and other affiliated insurance companies. Alliance also provides management and consulting services to mutual funds, endowment funds, insurance companies, foreign entities, qualified and non-tax qualified corporate funds, public and private pension and profit-sharing plans, foundations and tax-exempt organizations. On December 31, 1995, Alliance was managing over $146.5 billion in assets. The advisory fee payable by the Trust is based on the following annual percentages of the value of each portfolio's daily average net assets:
- ------------------------------------------------------------------------------------------------------------------------------------ DAILY AVERAGE NET ASSETS ------------------------------------------ FIRST NEXT OVER PORTFOLIO $350 MILLION $400 MILLION $750 MILLION --------- ------------ ------------ ------------ Common Stock, Money Market and Balanced.......................................... .400% .375% .350% Aggressive Stock and Intermediate Government Securities.......................... .500% .475% .450% High Yield, Global, Conservative Investors and Growth Investors.............................................................. .550% .525% .500% - ------------------------------------------------------------------------------------------------------------------------------------
6
- ------------------------------------------------------------------------------------------------------------------------------------ DAILY AVERAGE NET ASSETS ------------------------------------------ FIRST NEXT OVER PORTFOLIO $500 MILLION $500 MILLION $1 BILLION --------- ------------ ------------ ---------- Quality Bond and Growth & Income................................................. .550% .525% .500% FIRST NEXT OVER PORTFOLIO $750 MILLION $750 MILLION $1.5 BILLION --------- ------------ ------------ ------------ Equity Index..................................................................... .350% .300% .250% FIRST NEXT OVER PORTFOLIO $500 MILLION $1 BILLION $1.5 BILLION --------- ------------ ---------- ------------ International.................................................................... .900% .850% .800% - ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT POLICIES OF THE TRUST'S PORTFOLIOS. Each portfolio has a different investment objective which it tries to achieve by following separate investment policies. The objectives and policies of each portfolio will affect its return and its risks. There is no guarantee that these objectives will be achieved. The policies and objectives of the Trust's portfolios are as follows:
- ------------------------------------------------------------------------------------------------------------------------------------ PORTFOLIO INVESTMENT POLICY OBJECTIVE --------- ----------------- --------- FIXED INCOME SERIES: MONEY MARKET............ Primarily high quality short-term money market High level of current income while instruments. preserving assets and maintaining liquidity. INTERMEDIATE............ Primarily debt securities issued or guaranteed by High current income consistent with GOVERNMENT the U.S. Government, its agencies and relative stability of principal. SECURITIES instrumentalities. Each investment will have a final maturity of not more than 10 years or a duration not exceeding that of a 10-year Treasury note. QUALITY BOND............ Primarily investment grade fixed-income securities. High current income consistent with preservation of capital. HIGH YIELD.............. Primarily a diversified mix of high yield, High return by maximizing current income fixed-income securities involving greater and, to the extent consistent with that volatility of price and risk of principal and objective, capital appreciation. income than high quality fixed-income securities. The medium and lower quality debt securities in which the Portfolio may invest are known as "junk bonds." EQUITY SERIES: GROWTH & INCOME......... Primarily income producing common stocks and High total return through a combination securities convertible into common stocks. of current income and capital appreciation. EQUITY INDEX............ Selected securities in the S&P's 500 Index (the Total return performance (before trust "Index") which the adviser believes will, in the expenses) that approximates the aggregate, approximate the performance results of investment performance of the Index the Index. (including reinvestment of dividends) at a risk level consistent with that of the Index. COMMON STOCK............ Primarily common stock and other equity-type Long-term growth of capital and instruments. increasing income. GLOBAL.................. Primarily equity securities of non-United States Long-term growth of capital. as well as United States companies. INTERNATIONAL........... Primarily equity securities selected principally Long-term growth of capital. to permit participation in non-United States companies with prospects for growth. AGGRESSIVE STOCK........ Primarily common stocks and other equity-type Long-term growth of capital. securities issued by medium and other smaller sized companies with strong growth potential. - ------------------------------------------------------------------------------------------------------------------------------------
7
- ------------------------------------------------------------------------------------------------------------------------------------ PORTFOLIO INVESTMENT POLICY OBJECTIVE --------- ----------------- --------- ASSET ALLOCATION SERIES: CONSERVATIVE............ Diversified mix of publicly-traded, fixed-income High total return without, in the INVESTORS and equity securities; asset mix and security adviser's opinion, undue risk to selection are primarily based upon factors principal. expected to reduce risk. The Portfolio is generally expected to hold approximately 70% of its assets in fixed income securities and 30% in equity securities. BALANCED................ Primarily common stocks, publicly-traded debt High return through a combination of securities and high quality money market current income and capital appreciation. instruments. The Portfolio is generally expected to hold 50% of its assets in equity securities and 50% in fixed income securities. GROWTH INVESTORS........ Diversified mix of publicly-traded, fixed-income High total return consistent with the and equity securities; asset mix and security adviser's determination of reasonable risk. selection based upon factors expected to increase possibility of high long-term return. The Portfolio is generally expected to hold approximately 70% of its assets in equity securities and 30% in fixed income securities. - ------------------------------------------------------------------------------------------------------------------------------------
Because Policy Account values may be invested in mutual fund options, Incentive Life Plus offers an opportunity for the Cash Surrender Value to appreciate more rapidly than it would under comparable fixed benefit whole life insurance. You must, however, accept the risk that if investment performance is unfavorable, the Cash Surrender Value may not appreciate as rapidly and, indeed, may decrease in value. More detailed information about the Trust, its investment policies, risks, expenses and all other aspects of its operations, including definitions of certain terms used herein, appears in its prospectus, which is attached to this prospectus, and in its Statement of Additional Information referred to therein. THE GUARANTEED INTEREST ACCOUNT You may allocate some or all of your Policy Account to the Guaranteed Interest Account, which is funded by our general account and pays interest at a declared rate guaranteed for each policy year. The principal, after deductions, is also guaranteed. The general account supports all of our insurance and annuity guarantees, including the Guaranteed Interest Account, as well as our general obligations. The general account is subject to regulation and supervision by the Insurance Department of the State of New York and to the insurance laws and regulations of all jurisdictions where we are authorized to do business. Because of applicable exemptive and exclusionary provisions, interests in the general account have not been registered under the Securities Act of 1933 (1933 Act), nor is the general account an investment company under the 1940 Act. Accordingly, neither the general account, the Guaranteed Interest Account nor any interests therein are subject to regulation under the 1933 Act or the 1940 Act. We have been advised that the staff of the SEC has not made a review of the disclosures that are included in the prospectus for your information and that relate to the general account and the Guaranteed Interest Account. These disclosures, however, may be subject to certain generally applicable provisions of the Federal securities laws relating to the accuracy and completeness of statements made in prospectuses. The amount you have in the Guaranteed Interest Account at any time is the sum of the amounts allocated or transferred to it, plus the interest credited to it, minus amounts deducted, transferred and withdrawn from it. In addition, any policy loan is secured by an amount in your Policy Account equal to the outstanding loan. This amount remains part of the Policy Account but is assigned to the Guaranteed Interest Account. We refer to this amount as the loaned amount in the Guaranteed Interest Account. A Living Benefit payment will also result in amounts being transferred to the Guaranteed Interest Account. See LIVING BENEFIT OPTION on page 12. ADDING INTEREST IN THE GUARANTEED INTEREST ACCOUNT. We pay a declared interest rate on all amounts that you have in the Guaranteed Interest Account. At policy issuance, and prior to each policy anniversary, we declare the rates that will apply to amounts in the Guaranteed Interest Account for the following policy year. These annual interest rates will never be less than the minimum guaranteed interest rate of 4% (before deductions). Interest is credited and compounds daily at an effective annual rate that equals the declared rate for each policy year. Different rates may apply to policies currently being issued and previously issued policies. Different rates are also paid on unloaned and loaned amounts in the Guaranteed Interest Account. See POLICY LOAN INTEREST on page 14. Amounts securing a Living Benefit payment are considered unloaned amounts for purposes of crediting interest. TRANSFERS OUT OF THE GUARANTEED INTEREST ACCOUNT. Transfers out of the Guaranteed Interest Account to the Separate Account are allowed once a year on or within 30 days after your policy anniversary. If we receive your transfer request up to 30 days before your policy anniversary, the transfer will be made on your policy anniversary. If we receive your request on or within 30 days after your policy anniversary, the transfer will be made as of the date we receive your request. You may transfer up to 25% of your unloaned value in the Guaranteed Interest Account as of the transfer date or the minimum transfer amount, whichever is more. The minimum 8 transfer amount is $500 or your total unloaned value in the Guaranteed Interest Account on the transfer date, whichever is less. Amounts securing a Living Benefit payment may not be transferred from the Guaranteed Interest Account. PART 2: DETAILED INFORMATION ABOUT INCENTIVE LIFE PLUS FLEXIBLE PREMIUMS You may choose the amount and frequency of premium payments, as long as they are within the limits described below. We determine the applicable minimum initial premium based on the age, sex, rating class and tobacco user status of the insured person, the initial Face Amount of the policy (the initial minimum Face Amount is $50,000) and any additional benefits selected. In certain situations, however, no distinction is made based on the sex of the insured person. See COST OF INSURANCE CHARGE on page 16. You may choose to pay a higher initial premium. The full initial premium shown on your application must be given to your agent or broker on or before the day the policy is delivered to you. No insurance under your policy will take effect (a) until a policy is delivered and the full initial premium is paid while the person proposed to be insured is living and (b) unless the information in the application continues to be true and complete, without material change, as of the time the initial premium is paid. If you have submitted the full initial premium with your application, we may, subject to certain conditions, provide a limited amount of temporary insurance on the proposed insured. You may review a copy of our Temporary Insurance Agreement on request. Premiums must be by check or money order drawn on a U.S. bank in U.S. dollars and made payable to Equitable. Premiums after the first must be sent directly to our Administrative Office. The minimum premium is $100 (policies issued in some states or automatic payment plans may have different minimums.) This minimum may be increased if we give you written notice. We may return premium payments if we determine based upon our interpretation of current tax rules that such premiums would cause your policy to become a modified endowment contract or to cease to qualify as life insurance under Federal income tax law. We may also make such changes to the policy as we deem necessary to continue to qualify the policy as life insurance. See TAX EFFECTS on page 20 for an explanation of modified endowment contracts, the special tax consequences of such contracts, and how your policy might become a modified endowment contract. PLANNED PERIODIC PREMIUMS AND SPECIFIED PREMIUMS. Although premiums are flexible, page 3 of your policy (the Policy Information Page) will show a "planned" periodic premium and "specified premiums." Specified premiums are called no-lapse guarantee premiums for policies issued in New York and New Jersey. We measure actual premiums against specified premiums to determine whether the death benefit guarantee provision or the 3-Year no lapse guarantee provision will prevent the policy from going into default. Specified premiums are actuarially determined at issue based on the age, sex, tobacco user status and rating class of the insured person, the Face Amount and any additional benefits. Specified premiums may change if you make policy changes that increase or decrease the Face Amount of the policy or a rider, add or eliminate a rider, or if there is a change in the insured person's rating or tobacco user classification. Certain additional benefit riders will cause specified premiums to increase each year. We reserve the right to limit the amount of any premium payments which are in excess of specified premiums. The planned periodic premium is an amount you determine (within limits set by us) when you apply for the policy. The planned premium may be more or less than the specified premiums. Neither the planned premium nor the specified premiums are required premiums. Failure to pay premiums could cause the policy to go into default and ultimately terminate. See YOUR POLICY CAN TERMINATE on page 19. PREMIUM AND MONTHLY CHARGE ALLOCATIONS. On your application you provide us with initial instructions as to how to allocate your net premiums and monthly charges among the Funds and the Guaranteed Interest Account. Allocation percentages may be any whole number from zero to 100, but the sum must equal 100. Allocations to a Fund take effect on the first business day that follows the 20th calendar day after the Issue Date of your policy. The Issue Date is shown on the Policy Information Page, and is the date we actually issue your policy. The date your allocation instructions take effect is called the Allocation Date. Our business days are described in HOW WE DETERMINE THE UNIT Value on page 13. Until the Allocation Date, any net premiums allocated to a Fund will be allocated to the Money Market Fund, and all monthly deductions allocated to a Fund will be deducted from the Money Market Fund. On the Allocation Date, amounts in the Money Market Fund will be allocated to the various Funds in accordance with your policy application. We may delay the Allocation Date for the same reasons that we would delay effecting a transfer request. There will be no charge for the transfer out of the Money Market Fund on the Allocation Date. You may change the allocation percentages for either your current premium payment or the current and future premium payments by writing to our Administrative Office and indicating the changes you wish to make. Your request must be signed. These changes will go into effect as of the date your request is received at our Administrative Office, but no earlier than the first business day following the Allocation Date, and will affect transactions on and after such date. 9 DEATH BENEFITS We pay a benefit to the beneficiary of the policy when the insured person dies. This benefit will be equal to the death benefit under your policy plus any additional benefits included in your policy and then due, less any policy loan, any lien securing a Living Benefit payment and accrued interest. If the insured person dies during a grace period, we will also deduct any overdue monthly charges. You may choose between two death benefit options: o OPTION A provides a death benefit equal to the policy's Face Amount. Except as described below, the Option A benefit is fixed. o OPTION B provides a death benefit equal to the policy's Face Amount PLUS the amount in your Policy Account on the day the insured person dies. Under Option B, the value of the benefit is variable and fluctuates with the amount in your Policy Account. Policyowners who prefer to have favorable investment experience reflected in increased insurance coverage should choose Option B. Policyowners who prefer to have insurance coverage that does not vary in amount and lower cost of insurance charges should choose Option A. Under both options, a higher death benefit may apply. This higher death benefit is a percentage multiple of the amount in your Policy Account. The percentage is generally based on provisions of Federal tax law which require a minimum death benefit in relation to cash value for your policy to qualify as life insurance. A higher percentage multiple than that required by Federal tax law will be applied at ages 91 and over. Since cost of insurance charges are assessed on the difference between the Policy Account value and the death benefit, these charges will increase if the higher death benefit takes effect. The higher death benefit will be the amount in your Policy Account on the day the insured person dies times the percentage for the insured person's age (nearest birthday) at the beginning of the policy year of the insured person's death. The percentage declines as the insured person gets older. For ages that are not shown on the following table, the percentage multiples will decrease by a ratable portion for each full year. - ------------------------------------------------------------------------------------------------------------------------------------ TABLE OF DEATH BENEFITS AS A PERCENTAGE MULTIPLE OF POLICY ACCOUNT VALUES INSURED 40 or 45 50 55 60 65 70 75 to 100 PERSON'S AGE under 95 250% 215% 185% 150% 130% 120% 115% 105% 100% - ------------------------------------------------------------------------------------------------------------------------------------
For example, if the insured person were 75 years old and your policy had a Policy Account value of $200,000, the higher death benefit would be 105% of $200,000 or $210,000. GUARANTEEING THE DEATH BENEFIT. We will guarantee your death benefit coverage, regardless of the policy's investment performance, if you have paid a certain amount of premiums into your policy and you have not withdrawn or borrowed those amounts. The death benefit guarantee period is either three years (under the 3-Year no lapse guarantee provision) or the period described in the following paragraphs (under the death benefit guarantee provision). Whether your policy has the 3-Year no lapse guarantee provision or the death benefit guarantee provision depends upon the state in which your policy is issued. Policies issued in New York and New Jersey have the 3-Year no lapse guarantee provision. The death benefit option you select (A or B) and the amount of your yearly renewable term rider for the insured person (YRT rider) can affect the length of time that the death benefit guarantee provision will last. If you have selected death benefit Option A, and you never change it to Option B, assuming no YRT rider, then the death benefit guarantee provision will terminate on the Final Policy Date. See MATURITY BENEFIT on page 12. If ever your policy, at any time, has an Option B death benefit, and assuming no YRT rider, the death benefit guarantee provision will terminate on the later of (1) the policy anniversary nearest the insured person's 80th birthday or (2) the 15th policy anniversary. However, if your death benefit first changes to an Option B after this time, the death benefit guarantee provision will terminate immediately. The death benefit option does not have any effect on the length of the 3-Year no lapse guarantee provision. If your policy is issued with a YRT rider (see ADDITIONAL BENEFITS MAY BE AVAILABLE on page 12), and your policy is issued in any state other than New York, New Jersey and Massachusetts, the length of time that the death benefit guarantee provision will last (the "DBG Period") may be shorter than the times set forth in the preceding paragraph. The DBG Period will depend on the proportion that the face amount of the YRT rider bears to the total face amount (base policy plus YRT rider) at the issue date of the policy and the death benefit option.
- --------------------------------------------------------------------------------------------------------------------------- % OF YRT RIDER TO TOTAL DBG PERIOD IF DEATH BENEFIT DBG PERIOD IF DEATH BENEFIT FACE AMOUNT OPTION IS ALWAYS A OPTION IS EVER B - --------------------------------------------------------------------------------------------------------------------------- Less than 25% To the later of policy anniversary To the later of policy anniversary nearest age 75 or 30 policy years* nearest age 75 or 15 policy years - --------------------------------------------------------------------------------------------------------------------------- 25% to less than 50% To the later of policy anniversary To the later of policy anniversary nearest age 65 or 20 policy years nearest age 65 or 15 policy years - --------------------------------------------------------------------------------------------------------------------------- 50% to less than 75% To the later of policy anniversary To the later of policy anniversary nearest age 55 or 10 policy years nearest age 55 or 10 policy years - --------------------------------------------------------------------------------------------------------------------------- 75% and greater 3 policy years 3 policy years - ---------------------------------------------------------------------------------------------------------------------------
* In no event will the DBG period extend beyond the Final Policy Date. 10 The DBG Period is determined at the issue date and is not affected by subsequent changes in the base policy face amount or the YRT rider face amount, or by dropping or exchanging the YRT rider after issue. The only time the DBG Period will change after issue is if the policy was originally Option A and is later changed to Option B. If your policy's Net Cash Surrender Value is insufficient to pay the monthly deductions, the death benefit guarantee provision can keep your policy from terminating if two conditions are satisfied. First, any outstanding policy loan plus accrued loan interest cannot exceed the policy's Cash Surrender Value. Second, the amount of your actual premium payments minus any withdrawals (each accumulated at 4% interest) must equal or exceed a benchmark premium amount. To determine this benchmark premium amount we accumulate the specified premiums (shown on the Policy Information Page) at 4% interest. CHANGES IN INSURANCE PROTECTION CHANGING THE FACE AMOUNT. You may request an increase in the Face Amount after the first policy year and a decrease after the second policy year. You must send your signed written request to our Administrative Office. See TAX EFFECTS on page 20 for the tax consequences of changing the Face Amount. If disability waiver goes into effect (see ADDITIONAL BENEFITS MAY BE AVAILABLE on page 12), we will not permit any Face Amount change. Any change will be subject to our approval and the following conditions: Face Amount Increases. To increase the Face Amount, you must provide satisfactory evidence that the insured person is still insurable. The cost of insurance rate for the amount of the increase will be based on the rating class, attained age and tobacco user status of the insured person on the date of the increase and on the insured person's sex. See COST OF INSURANCE CHARGE on page 16. We reserve the right to decline Face Amount increases if the insured person has become a more expensive risk. Any increase must be at least $10,000. Specified premiums as well as monthly deductions from your Policy Account for the cost of insurance and the death benefit guarantee provision will generally increase beginning on the date the increase takes effect. An administrative charge of $1.50 for each additional $1,000 of insurance (up to a maximum charge of $240) will be deducted from your Policy Account. See HOW POLICY ACCOUNT CHARGES ARE ALLOCATED on page 17. Surrender Charges will generally be applicable to a Face Amount increase for fifteen years from the effective date of the increase. The Premium Surrender Charge percentage may be higher than the percentage applied prior to the increase. Face Amount reductions will be applied against prior Face Amount increases, if any, in the reverse order in which such increases occurred, and then to the original Face Amount. See SURRENDER CHARGES on page 18. Following the increase, a portion of each premium payment will be deemed to be attributable to the Face Amount increase. The Premium Sales Charge will generally be deducted from this amount, even if we had previously stopped deducting the charge on the premiums paid before the increase in accordance with our current practice. The Premium Sales Charge percentage may be lower than the percentage applied prior to the increase. See DEDUCTIONS FROM PREMIUMS -- PREMIUM SALES CHARGE on page 16. You will have the right to cancel the Face Amount increase within 10 days after receipt of a new Policy Information Page showing the increase. If you cancel the increase we will reverse any charges attributable to the increase and recalculate the Policy Account value, Cash Surrender Value and Surrender Charges to what they would have been had the increase not taken place. No Premium or Administrative Surrender Charge will be incurred upon cancellation. We reserve the right not to offer the cancellation right for Face Amount increases if we are not required to do so under applicable law. Face Amount Decreases. You may reduce the Face Amount but not below the minimum we require to issue this policy at the time of the reduction. Any reduction must be at least $10,000. Specified premiums as well as monthly deductions from your Policy Account for the death benefit guarantee provision and the cost of insurance will generally decrease (even though the rates may increase), beginning on the date the decrease in Face Amount takes effect. Face Amount decreases that reduce the Face Amount below certain levels will result in higher monthly administrative charges. If you reduce the Face Amount during the first fifteen policy years or during the first fifteen years after a Face Amount increase, we may deduct a pro rata share of the applicable Surrender Charges from the Policy Account. Assuming you have not previously changed the Face Amount, the pro rata Surrender Charges for a partial surrender will be determined by dividing the amount of the Face Amount decrease by the initial Face Amount and multiplying that fraction by the Surrender Charges. Face Amount reductions will be applied against prior Face Amount increases, if any, in the reverse order in which such increases occurred, and then to the original Face Amount. See DEDUCTIONS FROM YOUR POLICY ACCOUNT on page 16 and SURRENDER CHARGES on page 18. CHANGING THE DEATH BENEFIT OPTION. At any time after the second policy year while your policy is in force, you may change the death benefit option by sending a signed written request to our Administrative Office. See TAX EFFECTS on page 20 for the tax consequences of changing the death benefit option. o If you change from OPTION A TO OPTION B, the Face Amount will be decreased by the amount in your Policy Account on the date of the change. This change may shorten the length of time the death benefit guarantee provision is available. See GUARANTEEING THE DEATH BENEFIT on page 10. We may not allow such a change if it would reduce the Face Amount below the minimum required to issue this policy at the time of the reduction. We may require evidence of insurability to make the change. o If you change from OPTION B TO OPTION A, the Face Amount will be increased by the amount in the Policy Account on the date of the change. 11 These increases and decreases in Face Amount are made so that the amount of the death benefit remains the same on the date of the change. When the death benefit remains the same, there is no change in the net amount at risk, which is the amount on which cost of insurance charges are based (see COST OF INSURANCE CHARGE on page 16). If your death benefit is determined by a percentage multiple of the Policy Account, however, the new Face Amount will be determined differently. A Face Amount change that results from a death benefit option change will not affect any expense or sales charge (including any Surrender Charge) which varies by Face Amount, and no Surrender Charges will be deducted or established at the time of the change. SUBSTITUTION OF INSURED PERSON. If you provide satisfactory evidence that the person proposed to be insured is insurable, then, subject to certain restrictions, you may, after the second policy year, substitute the insured person under your policy. The cost of insurance charges may change, but we will not change the Surrender Charges. Substituting the insured person is a taxable event and may, depending upon individual circumstances, have other adverse tax consequences as well, including classification of the policy as a modified endowment contract or disqualification of the policy as life insurance for Federal income tax purposes unless funds are distributed out of the policy. See TAX EFFECTS on page 20. You should consult your tax adviser prior to substituting the insured person. As a condition to substituting the insured person we may require you to sign a form acknowledging the potential tax consequences of making this change. A $100 charge will be deducted from the Policy Account for each substitution of insured person. WHEN POLICY CHANGES GO INTO EFFECT. A substitution of the insured person, or change in Face Amount or death benefit option, will go into effect at the beginning of the policy month that coincides with or follows the date we approve the request for the change. In some cases we may not approve a change because based upon our interpretation of current rules, the change might disqualify your policy as life insurance under applicable Federal tax law. In other cases there may be adverse tax consequences as a result of the change. See TAX EFFECTS on page 20. MATURITY BENEFIT If the insured person is still living on the policy anniversary nearest his or her 100th birthday (Final Policy Date), we will pay you the amount in the Policy Account net of any policy loan, any lien securing a Living Benefit payment and accrued interest. The policy will then terminate. You may choose to have this benefit paid in installments. See TAX EFFECTS on page 20 and YOUR PAYMENT OPTIONS on page 24. LIVING BENEFIT OPTION Subject to our underwriting guidelines and availability in your state, our Living Benefit rider will be added to your policy at issue. The Living Benefit rider enables the policyowner to receive a portion of the policy's death benefit (excluding death benefits payable under certain riders) if the insured person has a terminal illness. Certain eligibility requirements apply when you submit a Living Benefit claim (for example, satisfactory evidence of less than six month life expectancy). There is no additional charge for the rider, but we will deduct an administrative charge of up to $250 from the proceeds of the Living Benefit payment. In addition, if you tell us that you do not wish to have the rider added at issue, but you later ask to add it, additional underwriting will be required and there will be a $100 administrative charge. When a Living Benefit claim is paid, we establish a lien against the policy. The amount of the lien is the sum of the Living Benefit payment and any accrued interest on that payment. Interest will be charged at a rate equal to the greater of: (i) the yield on a 90-day Treasury bill and (ii) the maximum adjustable policy loan interest rate permitted in the state your policy is delivered. See BORROWING FROM YOUR POLICY ACCOUNT -- POLICY LOAN INTEREST on page 14. Until a death benefit is paid, or the policy is surrendered, a portion of the lien is allocated to the policy's Cash Surrender Value. This liened amount will be transferred to the Guaranteed Interest Account where it will earn interest at the same rate as unloaned amounts. See THE GUARANTEED INTEREST ACCOUNT on page 8. This liened amount will not be available for loans, transfers or partial withdrawals. Any death benefit, maturity benefit or Net Cash Surrender Value payable upon policy surrender will be reduced by the amount of the lien. The receipt of a Living Benefit payment may be able to qualify for exclusion from income tax. See TAX EFFECTS on page 20. Consult your tax adviser. Receipt of a Living Benefit payment may also affect a policyowner's eligibility for certain government benefits or entitlements. You should contact your Equitable agent if you wish to make a claim under the rider. ADDITIONAL BENEFITS MAY BE AVAILABLE Your policy may include additional benefits. A monthly charge will be deducted from your Policy Account for each additional benefit you choose. Eligibility for and changes in these benefits are subject to our underwriting and other rules. More details will be included in your policy if you choose any of these benefits. The following additional benefits are currently available: disability waiver benefits, accidental death benefit, term insurance riders for the insured person (including the YRT rider), children's term insurance, term insurance on an additional insured person, designated insured option rider, option to purchase additional insurance and first-to-die term insurance. The designated insured option rider permits the policyowner, upon the death of the insured person, to purchase insurance on the life of a "designated insured person" without evidence of insurability. The option to purchase additional insurance permits purchases of additional amounts of insurance on the insured person, without evidence of insurability, upon the occurrence of certain specified events. The first-to-die rider is yearly renewable term insurance that insures two lives and pays a death benefit upon the first death. The term insurance riders for the insured person allow you to purchase additional death benefit coverage. Choosing coverage under a term insurance rider for the insured person in lieu of coverage under the base policy will reduce total charges and increase Policy Account values on a current charge basis. The more term insurance coverage you elect, the greater will be the amount of reduction in charges and increase in Policy Account values on a current charge basis. Also, term coverage is not subject to a surrender charge. However, if the higher death benefit becomes applicable (see DEATH BENEFITS on page 10) or if term rider insurance charges increase in relation to cost of insurance charges on the 12 base policy, the combination coverage may ultimately become more costly and have lower Policy Account values than coverage under the base policy alone. Generally, the greater the proportion of term insurance coverage you elect, the greater the likelihood that the higher death benefit will apply. Also, the Living Benefit option discussed above does not apply to any term insurance coverage. Moreover, in New York, there are age restrictions on the final renewal period for term riders. If you later terminate your term rider coverage and also increase the Face Amount under the base policy, a new Surrender Charge period will commence. The amount of the specified or 3-Year no lapse guarantee premium will be affected by the term rider coverage. In addition, if your policy is issued with a YRT rider, the duration of the death benefit guarantee may be shorter. See GUARANTEEING THE DEATH BENEFIT on page 10. Your agent can provide further information and policy illustrations showing how the term riders can affect your policy values under different assumptions. YOUR POLICY ACCOUNT VALUE The amount in your Policy Account is the sum of the amounts you have in the Guaranteed Interest Account and in the Funds. Your Policy Account also reflects various charges. See DEDUCTIONS AND CHARGES on page 16. AMOUNTS IN THE SEPARATE ACCOUNT. Amounts allocated, transferred or added to a Fund are used to purchase units of that Fund. Units are redeemed from a Fund when amounts are withdrawn, transferred or deducted for charges or capitalized loan interest. The number of units purchased or redeemed in a Fund is calculated by dividing the dollar amount of the transaction by the Fund's unit value calculated after the close of business that day. On any given day, the value you have in a Fund is the unit value for that Fund times the number of units credited to you in that Fund. HOW WE DETERMINE THE UNIT VALUE. We determine unit values for the Funds at the end of each business day. The unit value that applies to a transaction taking effect on a business day will be the unit value calculated at the close of business on that day. Generally, a business day is any day we are open and the New York Stock Exchange is open for trading. We are closed for national business holidays, including Martin Luther King, Jr. Day, and also on the Friday after Thanksgiving. Additionally, we may choose to close on the day immediately preceding or following a national business holiday or due to emergency conditions. We will not process any policy transactions on those days other than a policy anniversary report and the payment of death benefit proceeds. The unit value for any business day is equal to the unit value for the preceding business day multiplied by the net investment factor for that Fund on that business day. A net investment factor is determined for each Fund of the Separate Account every business day as follows: first, we take the net asset value of a share in the corresponding Trust portfolio at the close of business that day, as reported by the Trust, and we add the per share amount of any dividends or capital gains distributions paid by the Trust on that day. We divide this amount by the per share net asset value on the preceding business day. Then, we subtract a daily mortality and expense risk charge for each calendar day between business days (for example, a Monday calculation may include charges for Saturday, Sunday and Monday). The daily mortality and expense risk charge is currently at an annual rate of .60% and is guaranteed not to exceed an annual rate of .90%. See CHARGES AGAINST THE SEPARATE ACCOUNT on page 17. Finally, we reserve the right to subtract any daily charge for taxes or amounts set aside as a reserve for taxes. For current Incentive Life Plus unit values, call (212) 314-3310. TRANSFERS OF POLICY ACCOUNT VALUE. You may request a transfer of amounts among Funds or to the Guaranteed Interest Account. Special rules apply to transfers out of the Guaranteed Interest Account. See TRANSFERS OUT OF THE GUARANTEED INTEREST ACCOUNT on page 8. You may make a transfer by telephone or by submitting a signed written transfer request to our Administrative Office. Transfer request forms are available from your Equitable agent or from our Administrative Office. Special rules apply to telephone transfers. See TELEPHONE TRANSFERS on page 14. The minimum amount which may be transferred is $500. This minimum need not come from any one Fund or be transferred to any one Fund as long as the total amount transferred that day, including any amounts transferred to or from the Guaranteed Interest Account, is at least equal to the minimum. However, we will transfer the entire amount in any Fund even if it is less than the minimum specified in your policy. A lower minimum amount applies to our Automatic Transfer Service which is described below. Transfers take effect on the date we receive your request, but no earlier than the first business day following the Allocation Date. When part of a transfer request cannot be processed, we will not process any part of the request. This could occur, for example, where the request does not comply with our transfer limitations, or where the request is for a transfer of an amount greater than that currently allocated to a Fund. We may delay making a transfer if the New York Stock Exchange is closed or the SEC has declared that an emergency exists. In addition, we may delay transfers where permitted under applicable law. AUTOMATIC TRANSFER SERVICE. The Automatic Transfer Service enables you to make automatic monthly transfers out of the Money Market Fund into the other Funds. To start using this service you must first complete a special election form that is available from your agent or our Administrative Office. You must also have a minimum of $5,000 in the Money Market Fund on the date the Automatic Transfer Service is scheduled to begin. You can elect up to eight Funds for monthly transfers, but the minimum amount that may be transferred to each Fund each month is $50. If you elect the Automatic Transfer Service with your policy application, the automatic transfers will begin in the second policy month following the Allocation Date. If you elect the Automatic Transfer Service after your application has been submitted, automatic transfers will begin on the next monthly processing date after we receive your election form at our Administrative Office. See POLICY PERIODS, ANNIVERSARIES, DATES AND AGES on page 19. 13 The Automatic Transfer Service will remain in effect until the earliest of the following events: (1) the amount in the Money Market Fund is insufficient to cover the automatic transfer amount; (2) the policy is in a grace period; (3) we receive at our Administrative Office your written instruction to cancel the Automatic Transfer Service; or (4) we receive notice of death under the policy. Using the Automatic Transfer Service does not guarantee a profit or protect against loss in a declining market. TELEPHONE TRANSFERS. In order to make transfers by telephone, you must first complete and return an authorization form. Authorization forms can be obtained from your Equitable agent or our Administrative Office. The completed signed form MUST be returned to our Administrative Office before requesting a telephone transfer. Telephone transfers may be requested on each day we are open to transact business. You will receive the Fund's unit value as of the close of business on the day you call. We do not accept telephone transfer requests after 4:00 p.m. Eastern Time. Only one telephone transfer request is permitted per day and it may not be revoked at any time. The telephone transfer requests are automatically recorded and are invalid if incomplete information is given, portions of the request are inaudible, no authorization form is on file, or the request does not comply with the transfer limitations described above. We have established reasonable procedures designed to confirm that instructions communicated by telephone are genuine. Such procedures include requiring certain personal identification information prior to acting on telephone instructions and providing written confirmation of instructions communicated by telephone. If we do not employ reasonable procedures to confirm that instructions communicated by telephone are genuine, we may be liable for any losses arising out of any act or any failure to act resulting from our own negligence, lack of good faith, or willful misconduct. In light of the procedures established, we will not be liable for following telephone instructions that we reasonably believe to be genuine. During times of extreme market activity it may be impossible to contact us to make a telephone transfer. If this occurs, you should submit a written transfer request to our Administrative Office. Our rules on telephone transfers are subject to change and we reserve the right to discontinue telephone transfers in the future. CHARGE FOR TRANSFERS. We have reserved the right under your policy to make a charge of up to $25 for transfers of Policy Account value. Currently, you will be able to make 12 free transfers in any policy year, but we will charge $25 per transfer after the twelfth transfer. All transfers made on one transfer request form will count as one transfer, and all transfers made in one telephone request will count as one transfer. Transfers made through the Automatic Transfer Service or on the Allocation Date will not count toward the twelve free transfers. No charge will apply to the transfer of all of your amounts in the Separate Account to the Guaranteed Interest Account. BORROWING FROM YOUR POLICY ACCOUNT You may borrow up to 90% of your policy's Cash Surrender Value using only your policy as security for the loan. Any new loan must be at least $500. If you request an additional loan, the additional amount will be added to the outstanding loan and accrued loan interest. Any amount that secures a loan remains part of your Policy Account but is assigned to the Guaranteed Interest Account. This loaned amount earns an interest rate expected to be different from the interest rate for unloaned amounts. Amounts securing a Living Benefit payment are not available for policy loans. HOW TO REQUEST A LOAN. You may request a loan by sending a signed written request to our Administrative Office. You should tell us how much of the loan you want taken from your unloaned amount in the Guaranteed Interest Account and how much you want taken from the Funds. If you request a loan from a Fund, we will redeem units sufficient to cover that part of the loan and transfer the amount to the loaned portion of the Guaranteed Interest Account. The amounts you have in each Fund or the Account will be determined as of the day your request for a loan is received at our Administrative Office. If you do not indicate how you wish to allocate it, the loan will be allocated according to the deduction allocation percentages applicable to your Policy Account. If the loan cannot be allocated based on these percentages, it will be allocated based on the proportions that your unloaned amount in the Guaranteed Interest Account and your values in the Funds bear to the unloaned value of your Policy Account. POLICY LOAN INTEREST. Interest on a policy loan accrues daily at an adjustable interest rate. We determine the rate at the beginning of each policy year. The same rate applies to any outstanding policy loans and any new amounts you borrow during the year. You will be notified of the current rate when you apply for a loan. The maximum rate is the greater of 5%, or the "Published Monthly Average" for the month that ends two months before the interest rate is set. The "Published Monthly Average" is the Monthly Average Corporates yield shown in Moody's Corporate Bond Yield Averages published by Moody's Investors Service, Inc. If this average is no longer published, we will use any successor or the average established by the insurance supervisory official of the jurisdiction in which the policy is delivered. We will not charge more than the maximum rate permitted by applicable law. We may also set a rate lower than the maximum. Any change in the rate from one year to the next will be at least 1/2%. The maximum loan interest rate will only change, therefore, if the Published Monthly Average differs from the previous interest rate by at least 1/2 of 1%. You will be notified in advance of any increase in the interest rate on any loan you have outstanding. When you borrow on your policy, the amount of your loan is set aside in the Guaranteed Interest Account where it earns a declared rate for loaned amounts. The interest rate we credit to the loaned portion of the Guaranteed Interest Account will be at an annual rate up to 2% less than the loan interest rate we charge. However, we reserve the right to credit a lower rate than this if in the future tax laws change such that our taxes on policy loans or policy loan interest are increased. Under our current rules, the rate we credit on loaned amounts for the first fifteen policy years is 1% less than the rate we charge for policy loan interest, and the rate difference drops from 1% to 1/4 of 1% beginning in the sixteenth policy year. Because Incentive Life Plus was offered for 14 the first time in 1995, no reduction in the rate difference has yet been attained. These rate differentials are those currently in effect and are not guaranteed. Interest credited on loaned amounts will never be less than 4%. Interest accrues daily on any loaned amount in the Guaranteed Interest Account. On each policy anniversary and any time you repay a policy loan in full, accrued interest on the loaned amount is allocated to the Separate Account Funds and to the unloaned portion of the Guaranteed Interest Account in accordance with your premium allocation percentages. WHEN INTEREST IS DUE. Interest is due on each policy anniversary. If you do not pay the interest when it is due, it will be added to your outstanding loan and allocated based on the deduction allocation percentages for your Policy Account which are then in effect. This means an additional loan is made to pay the interest and amounts are transferred from the Funds to make the loan. If the interest cannot be allocated on this basis, it will be allocated as described above for allocating your loan. REPAYING THE LOAN. You may repay all or part of a policy loan at any time. While you have a policy loan, we assume that any money you send us is a premium payment. If you wish to have any of these payments applied as a loan repayment, you must specifically so indicate in writing. Loan repayments are not subject to a charge for taxes or a Premium Sales Charge. Any amount not needed to repay a loan and accrued loan interest will be applied as a premium payment. We will first allocate loan repayments to our Guaranteed Interest Account until the amount of any loans originally allocated to that Account have been repaid. After you have repaid this amount, you may choose how you want us to allocate the balance of any additional repayments. If you do not provide specific instructions, repayments will be allocated on the basis of your premium allocation percentages. THE EFFECTS OF A POLICY LOAN. A loan will have a permanent effect on the value of your Policy Account and, therefore, on the benefits under your policy, even if the loan is repaid. The loaned amount set aside in the Guaranteed Interest Account will not be available for investment in the Funds or in the unloaned portion of the Guaranteed Interest Account. Whether you earn more or less with the loaned amount set aside depends on the investment experience of the Funds and the rates declared for the unloaned portion of the Guaranteed Interest Account. The amount of any policy loan and accrued loan interest will reduce the proceeds paid from your policy upon the death of the insured person, policy maturity or policy surrender. In addition, a loan will reduce the amount available for you to withdraw from your policy. See TAX EFFECTS on page 20 for the tax consequences of a policy loan. A loan may also affect the length of time that your insurance remains in force because the amount set aside to secure your loan cannot be used to cover monthly deductions or a loan may prevent the death benefit guarantee provision from keeping the policy out of default. See YOUR POLICY CAN TERMINATE on page 19. PARTIAL WITHDRAWALS AND SURRENDER PARTIAL WITHDRAWALS. At any time after the first policy year while the insured person is living, you may request a partial withdrawal of your Net Cash Surrender Value by sending a signed written request to our Administrative Office. When you make a partial withdrawal, an expense charge of $25 or 2% of the amount requested, whichever is less, will be deducted from your Policy Account. Any such withdrawal is subject to our approval and to certain conditions. Amounts securing a Living Benefit payment are not available for partial withdrawals. In addition, we reserve the right to decline a request for a partial withdrawal. Under our current rules, a withdrawal must: o be at least $500, o not cause the death benefit to fall below the minimum Face Amount for which we would issue the policy at the time, and o not cause the policy to fail to qualify as life insurance under applicable tax law. You may specify how much of the withdrawal you want taken from amounts you have in each Fund and the unloaned portion of the Guaranteed Interest Account. The related expense charge will also be deducted from the amount withdrawn. If you do not specifically indicate, we will make the withdrawal and deduct the related expense charge on the basis of your deduction allocation percentages. If we cannot make the withdrawal and deduct the expense charge in the manner discussed above, we will make the withdrawal and deduction based on the proportions that your unloaned amounts in the Guaranteed Interest Account and the Funds bear to the total unloaned value of your Policy Account. A partial withdrawal reduces the amount you have in your Policy Account and Cash Surrender Value on a dollar-for-dollar basis. Normally, it also reduces the death benefit on a dollar-for-dollar basis, but does not affect the net amount at risk, which is the difference between the current death benefit and the amount in your Policy Account. If you selected death benefit Option A, the Face Amount of your policy will generally be reduced so that there will be no change in the net amount at risk. However, under either option, if the death benefit is based on the Policy Account percentage multiple, the reduction in death benefit would be greater and the net amount at risk would be reduced. See DEATH BENEFITS on page 10. The withdrawal and these reductions will be effective as of the date your request is received at our Administrative Office. See TAX EFFECTS on page 20 for the tax consequences of a partial withdrawal and a reduction in benefits. SURRENDER FOR NET CASH SURRENDER VALUE. The Cash Surrender Value is the amount in your Policy Account minus the Surrender Charges described under SURRENDER CHARGES on page 18. The Net Cash Surrender Value equals the Cash Surrender Value minus any loan and accrued loan interest. You may surrender your policy for its Net Cash Surrender Value at any time while the insured person is living. See TAX EFFECTS on page 20 for the tax consequences of a surrender. We will deduct from the Net Cast Surrender Value any amount securing a Living Benefit payment. We will compute the Net Cash Surrender Value as of the date we receive your written surrender request and the policy at our Administrative Office. All insurance coverage under your policy will end on that date. 15 DEDUCTIONS AND CHARGES DEDUCTIONS FROM PREMIUMS. Charges for certain taxes are deducted from all premiums. In addition, a Premium Sales Charge will be deducted from your premiums as specified below. The balance of each premium (the net premium) is placed in your Policy Account. Charge for Taxes. We deduct a charge designed to approximate certain taxes and additional charges imposed upon us by states and other jurisdictions. Such charges currently range from .75% to 5% (Virgin Islands). This charge may be increased or decreased to reflect any changes in our taxes. In addition, if an insured person changes his or her place of residence, you should notify us to change our records so that the charge will reflect the new jurisdiction. Any change will take effect on the next policy anniversary, if received at least 60 days prior to the policy anniversary. Premium Sales Charge. A percentage of each premium will be deducted to compensate us in part for sales and promotional expenses in connection with selling Incentive Life Plus, such as commissions, the cost of preparing sales literature, other promotional activities and other direct and indirect expenses. We pay these expenses from our own resources, including the Premium Sales Charge, any Premium Surrender Charge we might collect and any profit we may earn on the charges deducted under the policy, such as the mortality and expense risk charge. See SURRENDER CHARGES on page 18. The Premium Sales Charge percentage depends upon the Face Amount of the Policy as follows:
FACE AMOUNT RANGE: $50,000 TO $99,999 $100,000 TO $499,999 $500,000 AND OVER --------------------------------------------------------------------------------------------------------- PERCENTAGE: 6% 4% 3%
Currently, we deduct the Premium Sales Charge from each premium payment until the cumulative premiums paid equals ten times the "sales load target premium." The sales load target premium varies by issue age, sex and tobacco user status of the insured person and the policy's Face Amount, and is generally less than or equal to 75% of one annual whole life premium calculated at 4% interest and guaranteed maximum cost of insurance and expense charges. We reserve the right, however, to deduct the Premium Sales Charge from each premium payment at any time. If you request a Face Amount increase above the previous highest Face Amount, we will establish a new sales load target premium attributable to the amount of the increase, and the Premium Sales Charge will be deducted from that portion of each subsequent premium payment deemed attributable to the increase until such premium payments have cumulatively reached ten times the new sales load target premium. Moreover, if the increase moves the policy into a higher Face Amount range, the Premium Sales Charge percentage applied to future premiums will be the lower percentage for that Face Amount range. Face Amount decreases do not change the Premium Sales Charge percentage. DEDUCTIONS FROM YOUR POLICY ACCOUNT. At the beginning of each policy month, the following charges are deducted from your Policy Account: Monthly Administrative Charge. The administrative charge is designed to compensate us for administrative activities in connection with issuing and maintaining your policy, such as billing, policy transactions and policyowner communications. The amount of the monthly administrative charge depends upon the initial Face Amount, the policy year and the issue age of the insured person as follows:
FACE AMOUNT RANGE FACE AMOUNT RANGE FACE AMOUNT RANGE ISSUE AGE $50,000 TO $99,999 $100,000 TO $499,999 $500,000 AND OVER ------------------------------------------------------------------------------------------------------- 0-29 $20 in years 1 & 2 $40 in year 1 $25 in year 1 $8 in years 3 and later* $6 in year 2 and later* $6 in year 2 and later* 30+ $30 in years 1 & 2 $55 in year 1 $25 in year 1 $8 in years 3 and later* $6 in year 2 and later* $6 in year 2 and later*
*WE MAY INCREASE THIS CHARGE, BUT WE GUARANTEE THAT IT WILL NEVER EXCEED $10 PER MONTH. The monthly administrative charge will increase from $6 to $8 if you request a Face Amount reduction that moves the policy into the lowest Face Amount range. The charge will decrease from $8 to $6 if you request a Face Amount increase after the second policy year that moves the policy out of the lowest Face Amount range (the $20 or $30 charge will continue through the second policy year). Cost Of Insurance Charge. The cost of insurance charge is calculated by multiplying the net amount at risk at the beginning of the policy month by the monthly cost of insurance rate applicable to the insured person at that time. The net amount at risk is the difference between the current death benefit (not including any term coverage on the insured person) and the amount in your Policy Account. See ADDITIONAL BENEFITS MAY BE AVAILABLE on page 12 for a description of term insurance riders. Your cost of insurance charge will vary from month to month with changes in the net amount at risk. For example, if the current death benefit for the month is increased because the death benefit is based on a percentage multiple of the Policy Account, then the net amount at risk for the month will increase. Assuming the percentage multiple is not in effect, increases or decreases to the Policy Account will result in a corresponding decrease or increase to the net amount at risk under Option A policies, but no change to the net amount at risk under Option B policies. Increases or decreases to the Policy Account can result from making premium payments, investment experience or the deduction of charges. 16 The monthly cost of insurance rate applicable to your policy will be based on our current monthly cost of insurance rates. The current monthly cost of insurance rates may be changed from time to time. However, the current rates will never be more than the guaranteed maximum rates set forth in your policy. The guaranteed rates are based on the Commissioner's 1980 Standard Ordinary Male and Female Smoker and Non-Smoker Mortality Tables. The current and guaranteed monthly cost of insurance rates are determined based on the sex, age, rating class and tobacco user status of the insured person. In addition, the current rates also vary depending on the duration of the policy (i.e., the length of time since a policy has been issued) and the Face Amount. Current cost of insurance rates are generally highest for Face Amounts less than $100,000 and generally lowest for Face Amounts of $200,000 and above. Beginning in the tenth policy year, current monthly cost of insurance charges are reduced by an amount equal to a percentage of your unloaned Policy Account value on the date such charges are assessed. This means that the larger your unloaned Policy Account value, the greater your potential reduction in current cost of insurance charges. This percentage begins at an annual rate of .05%, grading up to an annual rate of .65% in policy years 25 and later. This cost of insurance charge reduction applies on a current basis and is not guaranteed. We may in the future increase, decrease, change the duration of, or eliminate the amount of the current cost of insurance charge reduction without advance notice to you. Because Incentive Life Plus was offered for the first time in 1995, no reduction of cost of insurance charges in the tenth policy year has yet been attained. Lower current cost of insurance rates apply at most ages for insured persons who qualify as non-tobacco users. To qualify, an insured person must meet additional requirements that relate to tobacco use. In addition, the insured person must be age twenty or over. Insured persons who are under twenty years of age may ask us to review their current tobacco habits when they reach the policy anniversary nearest their twentieth birthday. There will be no distinctions based on sex in the cost of insurance rates for Incentive Life Plus policies sold in Montana. Cost of insurance rates applicable to a policy issued in Montana will not be greater than the comparable male rates set forth or illustrated in this prospectus. Similarly, illustrated policy values in Part 4 would be no less favorable for comparable policies issued in this state. The guaranteed cost of insurance rates for Incentive Life Plus policies in this state are based on the Commissioner's 1980 Standard Ordinary SB Smoker and NB Non-Smoker Mortality Table. Congress and the legislatures of various states have from time to time considered legislation that would require insurance rates to be the same for males and females of the same age, rating class and tobacco user status. In addition, employers and employee organizations should consider, in consultation with counsel, the impact of Title VII of the Civil Rights Act of 1964 on the purchase of Incentive Life Plus in connection with an employment-related insurance or benefit plan. In a 1983 decision, the United States Supreme Court held that, under Title VII, optional annuity benefits under a deferred compensation plan could not vary on the basis of sex. Death Benefit Guarantee Charge. One cent per $1,000 of Face Amount (including any amount of yearly renewable term insurance) is deducted monthly to compensate us for the risk we assume by guaranteeing the death benefit under the death benefit guarantee provision. This charge is deducted regardless of whether specified premiums are paid, but it will not be deducted after the death benefit guarantee provision terminates. This charge will not be deducted in states where the death benefit guarantee provision is not available. Charges For Additional Benefits. The charges for any additional benefits you choose will be deducted monthly. Your policy contains tables showing the guaranteed maximum charges for all of these benefits. Transaction Charges. In addition to the monthly deductions from your Policy Account described above, we charge fees for certain policy transactions: see PARTIAL WITHDRAWALS on page 15, CHANGING THE FACE AMOUNT on page 11, SUBSTITUTION OF INSURED PERSON on page 12, LIVING BENEFIT OPTION on page 12 and TRANSFERS OF POLICY ACCOUNT VALUE on page 13. Also, if, after your policy is issued, you request more than one illustration in a policy year, we may charge a fee. See ILLUSTRATIONS OF POLICY BENEFITS on page 30. How Policy Account Charges Are Allocated. Generally, deductions from your Policy Account for monthly charges are made from the Funds and the unloaned portion of our Guaranteed Interest Account in accordance with the deduction allocation percentages specified in your application unless you instruct us in writing to do otherwise. See PREMIUM AND MONTHLY CHARGE ALLOCATIONS on page 9. If a deduction cannot be made in accordance with these percentages, it will be made based on the proportions that your unloaned amounts in the Guaranteed Interest Account and your amounts in the Funds bear to the total unloaned value of your Policy Account. Changes. Any changes in the cost of insurance rates, charges for additional benefits, Premium Sales Charge, mortality and expense risk charge or administrative charges will be by class of insured person and will be based on changes in future expectations about such factors as investment earnings, mortality, the length of time policies will remain in effect, expenses and taxes. We reserve the right to make a charge in the future for taxes or reserves set aside for taxes, which would reduce the investment experience of the Funds. See TAX EFFECTS on page 20. CHARGE AGAINST THE SEPARATE ACCOUNT. This charge is reflected in the unit values for the Funds of the Separate Account. See HOW WE DETERMINE THE UNIT VALUE on page 13. A daily charge for assuming MORTALITY AND EXPENSE RISKS will be made. The annual current rate is .60%. The annual guaranteed rate is .90%. We are committed to fulfilling our obligations under the policy and providing service to you over the lifetime of your policy. Despite the uncertainty of future events, we guarantee that monthly administrative and cost of insurance deductions from your Policy Account will never be greater than the maximum amounts shown in your policy. In making this guarantee, we assume the mortality risk that insured persons will live for shorter periods than we estimated. When this happens, we have to pay a greater amount of death benefit than we expected to pay in relation to the cost of insurance charges we received. We also assume the expense risk that the cost of issuing and administering policies will be greater than we expected. If the amount collected from this charge exceeds losses from the risks assumed, it will be to our profit. 17 TRUST CHARGES. The Funds purchase shares of the Trust at net asset value. That price reflects investment management fees, indirect expenses, such as brokerage commissions, and certain direct operating expenses. The Trust does not impose a sales charge. See DEDUCTIONS AND CHARGES in the Summary on page 2 and THE TRUST'S INVESTMENT ADVISER on page 6. SURRENDER CHARGES. There will be a difference between the amount in your Policy Account and the Cash Surrender Value of your policy for at least the first fifteen policy years. This difference is the result of the Premium Surrender Charge (which is a contingent deferred sales load) and an Administrative Surrender Charge. See also PREMIUM SALES CHARGE on page 16. These charges are contingent because you pay them only if you surrender your policy, reduce its Face Amount or it terminates. They are deferred because we do not deduct them from your premiums. Because these Surrender Charges are contingent and deferred, the amount we might collect in a policy year is not related to the actual sales expenses for that year. A table of maximum Surrender Charges (maximum Premium Surrender Charge plus the maximum Administrative Surrender Charge) appears on the Policy Information Page. Assuming you have not previously changed the Face Amount, the pro rata Surrender Charges for a partial surrender will be determined by dividing the amount of the Face Amount decrease by the initial Face Amount and multiplying that fraction by the Surrender Charges. Face Amount reductions will be applied against prior Face Amount increases, if any, in the reverse order in which such increases occurred, and then to the original Face Amount. Premium Surrender Charge. To determine the Premium Surrender Charge, "target" premiums are used. Target premiums are not based on the "planned" premium you determine, but are actuarially determined based on the age, sex and tobacco user status of the insured person and the Face Amount. Target premiums are different from sales load target premiums that are used to determine the Premium Sales Charge. The maximum Premium Surrender Charge for the initial Face Amount of your policy (the "base policy") will equal 66% of one target premium. This maximum will not vary based on the amount of premiums you pay or when you pay them. After the first nine policy years, this maximum Premium Surrender Charge on the base policy begins to decrease by 11% per year on a monthly basis for policy years ten through fifteen. After fifteen years, the Premium Surrender Charge attributable to the base policy expires. Subject to the maximum, the Premium Surrender Charge is calculated based on your actual premium payments. The Premium Surrender Charge percentage depends upon the Face Amount and the policy year in which the premium payment is made as follows:
POLICY YEAR OF FACE AMOUNT RANGE FACE AMOUNT RANGE FACE AMOUNT RANGE PREMIUM PAYMENT $50,000 TO $99,999 $100,000 TO $499,999 $500,000 AND OVER ---------------------------------------------------------------------------------------------------------------- YEAR 1 (UP TO ONE SEC GUIDELINE 24% 26% 27% ANNUAL PREMIUM) ---------------------------------------------------------------------------------------------------------------- YEAR 1 (OVER ONE 3% 5% 6% SEC GUIDELINE ANNUAL PREMIUM) ---------------------------------------------------------------------------------------------------------------- YEAR 2 3% 5% 6% THROUGH 15 (ALL PREMIUMS)
The SEC Guideline Annual Premium is the level annual amount that would be payable in each policy year under certain assumptions, as defined by the SEC at the date of this prospectus. These assumptions include cost of insurance charges based on the 1980 Commissioner's Standard Ordinary Mortality Tables, net investment earnings at an annual rate of 5%, and the fees and charges associated with the policy. Attempting to structure the timing and amount of premium payments to reduce the potential surrender charge below the maximum is not recommended. Paying small amounts of premium in the policy's first fifteen years to reduce the potential surrender charge could increase the risk that your policy will terminate without value. If you increase the Face Amount above the previous highest Face Amount (computed without regard to changes in Face Amount resulting from changing the death benefit option), we will establish an additional Premium Surrender Charge corresponding to the increased amount. An additional target premium attributable to the increase will be established and the additional Premium Surrender Charge will be subject to the same maximum percentage of 66%. This maximum will start to decline in the tenth year after the increase in the same manner as the Premium Surrender Charge on the base policy. A portion of each premium payment made after a Face Amount increase will be deemed to be attributable to such increase, even if you do not increase the amount or frequency of your premium payments. The allocation of premiums between the base policy and Face Amount increases is actuarially determined in accordance with SEC regulations as in effect at the date of this prospectus. Moreover, if the increase moves the policy into a higher Face Amount range, the Premium Surrender Charge percentage applied to future premiums -- even those premiums allocated to the base policy -- will be the higher percentage for that Face Amount range. Face Amount decreases do not change the Premium Surrender Charge percentage. Administrative Surrender Charge. The Administrative Surrender Charge per $1,000 of Face Amount in the first three policy years (subject to a $3,000 maximum) is: ISSUE AGE: 0-34 35-44 45-49 50-54 55+ $2 $3 $4 $5 $6 18 After the first three policy years, the Administrative Surrender Charge grades down on a monthly basis to zero at the end of the eighth policy year. A Face Amount increase above the previous highest Face Amount will result in a new layer of Administrative Surrender Charges applicable to the increase. ADDITIONAL INFORMATION ABOUT INCENTIVE LIFE PLUS YOUR POLICY CAN TERMINATE. Your insurance coverage under Incentive Life Plus continues as long as the Net Cash Surrender Value of the policy is enough to pay the monthly deductions. The Net Cash Surrender Value equals the Cash Surrender Value minus any loan and accrued loan interest. If the Net Cash Surrender Value at the beginning of any policy month is less than the deductions for that month, your policy will go into default unless the operation of either the death benefit guarantee provision or the 3-Year no lapse guarantee provision is in effect. See GUARANTEEING THE DEATH BENEFIT on page 10. If your policy goes into default, we will notify you, and any assignees on our records, in writing, that a 61-day grace period has begun and indicate the payment that is needed to avoid policy termination at the end of the grace period. The required payment will not be more than an amount which would increase the Net Cash Surrender Value to cover total monthly deductions for three months (without regard to any investment performance in the Policy Account). The required payment and any residual Policy Account value will be used to cover the overdue deductions. However, if your Policy Account has unfavorable investment experience, the required payment may not be sufficient to cover the overdue deductions on the date we receive the payment. In this case, a new 61-day grace period will begin. While a policy is in a grace period, you may not transfer Policy Account value or make other policy changes. If we do not receive payment within the 61 days, your policy will terminate without value. We will withdraw any amount left in your Policy Account and apply this amount to the overdue deductions, any applicable Surrender Charges and any unpaid loan and accrued loan interest. We will inform you, and any assignee, at last known addresses that your policy has ended without value. See TAX EFFECTS on page 20 for the potential tax consequences of the termination of a policy. YOU MAY RESTORE A POLICY AFTER IT TERMINATES. Subject to certain state variations, you may restore a policy within six months after it terminates if you provide evidence that the insured person (and any other person insured under a rider) is still insurable, and you make the premium payment that we require to restore the policy. The required premium will not be more than an amount sufficient to cover (i) total monthly deductions for 3 months, calculated from the effective date of restoration; (ii) the monthly administrative charges from the date of default to the effective date of restoration; (iii) any excess of the applicable Surrender Charge on the date of restoration over the Surrender Charge that was deducted on the date of default; and (iv) the charge for taxes, the Premium Sales Charge, and any increase in Surrender Charge associated with this payment. We will determine the amount of this required premium as if no interest or investment performance were credited to, or charged against, your Policy Account. The policy will be restored as of the beginning of the policy month which coincides with or follows the date we approve your application. Your restored policy will not have any loan balance even if there was a loan outstanding under the terminated policy. From the required payment we will deduct the charge for applicable taxes and the Premium Sales Charge. On the effective date of restoration, the Policy Account will be equal to the balance of the required payment plus a Surrender Charge credit. This credit will be equal to the Surrender Charges that were deducted on the date of default, but not greater than the applicable Surrender Charges as of the effective date of restoration. We will start to make monthly deductions as of the effective date of restoration. On that date, the monthly administrative charges from the beginning of the grace period to the effective date of restoration will be deducted from the Policy Account. See TAX EFFECTS on page 20 for the potential tax consequences of restoring a terminated policy. Some states may vary the time period and conditions for policy restoration. POLICY PERIODS, ANNIVERSARIES, DATES AND AGES. When an application for an Incentive Life Plus policy is completed and submitted to us, we decide whether or not to issue the policy. This decision is made based on the information in the application and our standards for issuing insurance and classifying risks. If we decide not to issue a policy, any premium paid will be refunded. The Issue Date, shown on the Policy Information Page, is the date your policy is actually issued, but if we have advanced the Register Date, the Issue Date will be the same as the Register Date. Generally, contestability is measured from the Issue Date, as is the suicide exclusion. The Register Date, also shown on the Policy Information Page, is used to measure policy years and policy months. Charges and deductions are first made as of the Register Date. As to when coverage under the policy begins, see FLEXIBLE PREMIUMS on page 9. Generally, we determine the Register Date based upon when we receive your full minimum initial premium. In most cases: o If you submit the full minimum initial premium to your Equitable agent at the time you sign the application, and we issue the policy as it was applied for, then the Register Date will be the later of (a) the date part I of the policy application was signed or, (b) the date part II of the policy application was signed by a medical professional. o If we do not receive your full minimum initial premium at our Administrative Office before the Issue Date or, if the policy is not issued as applied for, the Register Date will be the same as the Issue Date. An early Register Date may be permitted for employer sponsored cases in order to accommodate a common Register Date for all employees. An early Register Date may also be permitted to provide a younger age at issue. We may also permit policyowners to delay a Register Date (up to three months) in employer sponsored cases. The investment start date is the date that your initial net premium begins to vary with the investment performance of the Funds or accrue interest in the Guaranteed Interest Account. Generally, the investment start date will be the same as the Register Date if the full minimum initial 19 premium is received at our Administrative Office before the Register Date. Otherwise, the investment start date will be the date the full minimum initial premium is received at our Administrative Office. Thus, to the extent that your first premium is received before the Register Date, there will be a period during which the initial premium will not be experiencing investment performance. The investment start date for policies with early Register Dates will be the date the full minimum initial premium is received at our Administrative Office. Any subsequent premium payment received after the investment start date will begin to experience investment performance as of the date such payment is received at our Administrative Office. Remember, the amount of your initial net premium allocated to the Funds may be temporarily allocated to the Money Market Fund prior to allocation in accordance with your instructions. See FLEXIBLE PREMIUMS on page 9. Age. Generally, when we refer to the age of the insured person, we mean his or her age on the birthday nearest to the beginning of the particular policy year. TAX EFFECTS This discussion is based on our understanding of the effect of the current Federal income tax laws as currently interpreted on Incentive Life Plus policies owned by U.S. resident individuals. The tax effects on corporate taxpayers subject to the Federal alternative minimum tax, non-U.S. residents or non-U.S. citizens, may be different. This discussion is general in nature, and should not be considered tax advice, for which you should consult your legal or tax adviser. POLICY PROCEEDS. An Incentive Life Plus policy will be treated as "life insurance" for Federal income tax purposes if it meets the definitional requirement of the Internal Revenue Code (the Code) and as long as the portfolios of the Trust satisfy the diversification requirements under the Code. We believe that Incentive Life Plus will meet these requirements, and that: o the death benefit received by the beneficiary under your Incentive Life Plus policy will not be subject to Federal income tax; and o as long as your policy remains in force, increases in the Policy Account value as a result of interest or investment experience will not be subject to Federal income tax unless and until there is a distribution from your policy, such as a loan or a partial withdrawal. SPECIAL TAX RULES MAY APPLY, HOWEVER, IF YOU TRANSFER YOUR OWNERSHIP OF THE POLICY. CONSULT YOUR TAX ADVISER BEFORE ANY TRANSFER OF YOUR POLICY. The Federal income tax consequences of a distribution from your policy will depend on whether your policy is determined to be a "modified endowment." The character of any income recognized will be ordinary income as opposed to capital gain. A MODIFIED ENDOWMENT IS a life insurance policy which fails to meet a "seven-pay" test. In general, a policy will fail the seven-pay test if the cumulative amount of premiums paid under the policy at any time during the first seven policy years exceeds a calculated premium level. The calculated seven-pay premium level is based on a hypothetical policy issued on the same insured person and for the same initial death benefit which, under specified conditions (which include the absence of expense, administrative and surrender charges), would be fully paid for after seven level annual payments. Your policy will be treated as a modified endowment unless the cumulative premiums paid under your policy, at all times during the first seven policy years, are less than or equal to the cumulative seven-pay premiums which would have been paid under the hypothetical policy on or before such times. Whenever there is a "material change" under a policy, it will generally be treated as a new contract for purposes of determining whether the policy is a modified endowment, and subjected to a new seven-pay period and a new seven-pay limit. The new seven-pay limit would be determined taking into account, under a downward adjustment formula, the Policy Account value of the policy at the time of such change. A materially changed policy would be considered a modified endowment if it failed to satisfy the new seven-pay limit. A material change would occur if there was a substitution of the insured person, and could also occur as a result of a change in death benefit option, the selection of additional benefits, an increase in Face Amount and certain other changes. If the benefits are reduced during the first seven policy years after entering into the policy (or within seven years after a material change), for example, by requesting a decrease in Face Amount or in some cases, by making a partial withdrawal or terminating additional benefits under a rider, the calculated seven-pay premium level will be redetermined based on the reduced level of benefits and applied retroactively for purposes of the seven-pay test. If the premiums previously paid are greater than the recalculated seven-pay premium level limit, the policy will become a modified endowment. Generally, a life insurance policy which is received in exchange for a modified endowment will also be considered a modified endowment. Changes made to a life insurance policy, for example, a decrease in benefits or the termination of or restoration of a terminated policy, may have other effects on your policy, including impacting the maximum amount of premiums that can be paid under the policy, as well as the maximum amount of Policy Account value that may be maintained under the policy. In some cases, this may cause us to take action in order to assure your policy continues to qualify as life insurance, including distribution of amounts that may be includable as income. See POLICY CHANGES on page 21. IF YOUR INCENTIVE LIFE PLUS POLICY IS NOT A MODIFIED ENDOWMENT, as long as it remains in force, a loan under your policy will be treated as indebtedness and no part of the loan will be subject to current Federal income tax. Interest on the loan will generally not be tax deductible. After the first 15 policy years, the proceeds from a partial withdrawal will not be subject to Federal income tax except to the extent such proceeds exceed your "Basis" in your policy. Your Basis in your policy generally will equal the premiums you have paid less any amounts previously recovered through tax-free policy distributions. During the first fifteen policy years, the proceeds from a partial withdrawal could be subject to Federal income tax to the extent your Policy Account value exceeds your Basis in your policy. The portion subject to tax will depend upon the ratio of your death benefit to the Policy Account value (or in some cases, the premiums paid) under your policy and the age of the insured person at the time of the withdrawal. In addition, if at any time your 20 policy is surrendered, the excess, if any, of your Cash Surrender Value (which includes the amount of policy loan and accrued loan interest) over your Basis will be subject to Federal income tax. IN ADDITION, IF A POLICY TERMINATES WHILE THERE IS A POLICY LOAN, THE CANCELLATION OF SUCH LOAN AND ACCRUED LOAN INTEREST WILL BE TREATED AS A DISTRIBUTION AND COULD BE SUBJECT TO TAX UNDER THE ABOVE RULES. On the Final Policy Date, the excess of the amount of any benefit paid, not taking into account any reduction for any loan and accrued loan interest, over your Basis in the policy, will be subject to Federal income tax. IF YOUR POLICY IS A MODIFIED ENDOWMENT, any distribution from your policy will be taxed on an "income-first" basis. Distributions for this purpose include a loan (including any increase in the loan amount to pay interest on an existing loan or an assignment or a pledge to secure a loan) or partial withdrawal. Any such distributions will be considered taxable income to you to the extent your Policy Account value exceeds your Basis in the policy. For modified endowments, your Basis would be increased by the amount of any prior loan under your policy that was considered taxable income to you. For purposes of determining the taxable portion of any distribution, all modified endowments issued by the same insurer or an affiliate to the same policyowner (excluding certain qualified plans) during any calendar year are to be aggregated. The Secretary of the Treasury has authority to prescribe additional rules to prevent avoidance of "income-first" taxation on distributions from modified endowments. A 10% penalty tax will apply to the taxable portion of a distribution from a modified endowment. The penalty tax will not, however, apply to distributions (i) to taxpayers 59 1/2 years of age or older, (ii) in the case of a disability (as defined in the Code) or (iii) received as part of a series of substantially equal periodic annuity payments for the life (or life expectancy) of the taxpayer or the joint lives (or joint life expectancies) of the taxpayer and his beneficiary. If your policy is surrendered, the excess, if any, of your Cash Surrender Value over your Basis will be subject to Federal income tax and, unless one of the above exceptions applies, the 10% penalty tax. If your policy terminates while there is a policy loan, the cancellation of such loan and accrued loan interest will be treated as a distribution to the extent not previously treated as such and could be subject to tax, including the penalty tax, as described under the above rules. In addition, upon the Final Policy Date the excess of the amount of any benefit paid, not taking into account any reduction for any loan and accrued loan interest, over your Basis in the policy, will be subject to Federal income tax and, unless an exception applies, a 10% penalty tax. If your policy becomes a modified endowment, distributions that occur during the policy year it becomes a modified endowment and any subsequent policy year will be taxed as described in the two preceding paragraphs. In addition distributions from a policy within two years before it becomes a modified endowment will be subject to tax in this manner. THIS MEANS THAT A DISTRIBUTION MADE FROM A POLICY THAT IS NOT A MODIFIED ENDOWMENT COULD LATER BECOME TAXABLE AS A DISTRIBUTION FROM A MODIFIED ENDOWMENT. The Secretary of the Treasury has been authorized to prescribe rules which would treat similarly other distributions made in anticipation of a policy becoming a modified endowment. POLICY TERMINATIONS. A policy which has terminated without value may have the tax consequences described above even though you may be able to reinstate your policy. For tax purposes, some reinstatements may be treated as the purchase of a new insurance contract. LIVING BENEFITS. Amounts received under a life insurance contract on the life of individuals who are terminally ill, as defined by the tax law, are generally excludable from gross income as amounts paid by reason of the death of the insured. We believe that the living benefit which may be payable under your policy meets the law's definition of terminally ill and can qualify for this exclusion. This exclusion does not apply, however, to amounts paid to someone other than the insured if the payee has an insurable interest in the insured's life because the insured is a director, officer or employee of the payee or by reason of the insured being financially interested in any trade or business carried on by the payee. DIVERSIFICATION. Under Section 817(h) of the Code, the Secretary of the Treasury has the authority to set standards for diversification of the investments underlying variable life insurance policies. The Treasury Department has issued final regulations regarding the diversification requirements. Failure by us to meet these requirements would disqualify your policy as a variable life insurance policy under Section 7702 of the Code. If this were to occur, you would be subject to Federal income tax on the income under the policy for the period of the disqualification and subsequent periods. The Separate Account, through the Trust, intends to comply with these requirements. In connection with the issuance of the then temporary diversification regulations, the Treasury Department stated that it anticipated the issuance of regulations or rulings prescribing the circumstances in which the ability of a policyowner to direct his investment to particular funds of a separate account may cause the policyowner, rather than the insurance company, to be treated as the owner of the assets in the account. If you were considered the owner of the assets of the Separate Account, income and gains from the account would be included in your gross income for Federal income tax purposes. Under current law we believe that Equitable, and not the owner of the policy, would be considered the owner of the assets of the Separate Account. POLICY CHANGES. To receive the tax treatment discussed above, your policy must initially qualify and continue to qualify as life insurance under Sections 7702 and 817(h) of the Code. We have reserved in the policy the right to decline to accept all or part of any premium payments, decline to change death benefit options, make face amount changes or decline to make partial withdrawals that based upon our interpretation of current tax rules would cause your policy to fail to qualify. We may also make changes in the policy or its riders or require additional premium payments or make distributions from the policy to the extent we deem necessary to qualify your policy as life insurance for tax purposes. Any such change will apply uniformly to all policies that are affected. You will be given written notice of such changes. TAX CHANGES. The United States Congress has in the past considered, is currently considering and may in the future consider legislation that, if enacted, could change the tax treatment of life insurance policies. In addition, the Treasury Department may amend existing regulations, issue regulations on the qualification of life insurance and modified endowment contracts, or adopt new interpretations of existing laws. State tax laws or, if you are not a United States resident, foreign tax laws, may also affect the tax consequences to you, the insured person or your 21 beneficiary. These laws may change from time to time without notice and, as a result, the tax consequences described above may be altered. There is no way of predicting whether, when or in what form any such change would be adopted. Any such change could have retroactive effect. We suggest you consult your legal or tax adviser. ESTATE AND GENERATION SKIPPING TAXES. If the insured person is the policyowner, the death benefit under Incentive Life Plus will generally be includable in the policyowner's estate for purposes of Federal estate tax. If the policyowner is not the insured person, under certain conditions only the Cash Surrender Value of the policy would be so includable. Federal estate tax is integrated with Federal gift tax under a unified rate schedule. In general, estates less than $600,000 will not incur a Federal estate tax liability. In addition, an unlimited marital deduction may be available for Federal estate tax purposes. As a general rule, if a "transfer" is made to a person two or more generations younger than the policyowner, a generation skipping tax may be payable at rates similar to the maximum estate tax rate in effect at the time. The generation skipping tax provisions generally apply to "transfers" which would be subject to the gift and estate tax rules. Individuals are generally allowed an aggregate generation skipping tax exemption of $1 million. Because these rules are complex, you should consult with your tax adviser for specific information, especially where benefits are passing to younger generations. The particular situation of each policyowner, insured or beneficiary will determine how ownership or receipt of policy proceeds will be treated for purposes of Federal estate and generation skipping taxes as well as state and local estate, inheritance and other taxes. PENSION AND PROFIT-SHARING PLANS. If Incentive Life Plus policies are purchased by a fund which forms part of a pension or profit-sharing plan qualified under Sections 401(a) or 403 of the Code for the benefit of participants covered under the plan, the Federal income tax treatment of such policies will be somewhat different from that described above. If purchased as part of a pension or profit-sharing plan, the current cost of insurance for the net amount at risk is treated as a "current fringe benefit" and is required to be included annually in the plan participant's gross income. This cost (generally referred to as the "P.S. 58" cost) is reported to the participant annually. If the plan participant dies while covered by the plan and the policy proceeds are paid to the participant's beneficiary, then the excess of the death benefit over the Policy Account value will not be subject to Federal income tax. However, the Policy Account value will generally be taxable to the extent it exceeds the sum of $5,000 plus the participant's cost basis in the policy. The participant's cost basis will generally include the costs of insurance previously reported as income to the participant. Special rules may apply if the participant had borrowed from his Policy Account or was an owner-employee under the plan. There are limits on the amounts of life insurance that may be purchased on behalf of a participant in a pension or profit-sharing plan. Complex rules, in addition to those discussed above, apply whenever life insurance is purchased by a tax qualified plan. You should consult your legal adviser. OTHER EMPLOYEE BENEFIT PROGRAMS. Complex rules may apply when a policy is held by an employer or a trust, or acquired by an employee, in connection with the provision of employee benefits. These policyowners also must consider whether the policy was applied for by or issued to a person having an insurable interest under applicable state law, as the lack of insurable interest may, among other things, affect the qualification of the policy as life insurance for Federal income tax purposes and the right of the beneficiary to death benefits. Employers and employer-created trusts may be subject to reporting, disclosure and fiduciary obligations under the Employee Retirement Income Security Act of 1974 (ERISA). You should consult your legal adviser. OUR TAXES. Under the life insurance company tax provisions of the Code, variable life insurance is treated in a manner consistent with fixed life insurance. The operations of the Separate Account are reported in our Federal income tax return but we currently pay no income tax on investment income and capital gains reflected in variable life insurance policy reserves. Therefore, no charge is currently being made to any Fund for taxes. We reserve the right to make a charge in the future for taxes incurred, for example, a charge to the Separate Account for income taxes incurred by us that are allocable to the policy. We may have to pay state, local or other taxes in addition to applicable taxes based on premiums. At present, these taxes are not substantial. If they increase, charges may be made for such taxes when they are attributable to the Separate Account or allocable to the policy. WHEN WE WITHHOLD INCOME TAXES. Generally, unless you provide us with a written election to the contrary before we make the distribution, we are required to withhold income tax from any portion of the money you receive if the withdrawal of money from your Policy Account or the surrender or the maturity of your policy is a taxable transaction. If you do not wish us to withhold tax from the payment, or if enough is not withheld, you may have to pay later. You may also have to pay penalties under the tax rules if your withholding and estimated tax payments are insufficient. In some cases, where generation skipping taxes may apply, we may also be required to withhold for such taxes unless we are provided satisfactory written notification that no such taxes are due. PART 3: ADDITIONAL INFORMATION YOUR VOTING PRIVILEGES TRUST VOTING PRIVILEGES. As explained in Part 1, we invest the assets in the Funds in shares of the corresponding Trust portfolios. Equitable is the legal owner of the shares and will attend, and has the right to vote at, any meeting of the Trust's shareholders. Among other things, we may vote on any matters described in the Trust's prospectus or requiring a vote by shareholders under the 1940 Act. Even though we own the shares, to the extent required by the 1940 Act, you will have the opportunity to tell us how to vote the number of shares that can be attributed to your policy. We will vote those shares at meetings of Trust shareholders according to your instructions. If we do not receive instructions in time from all policyowners, we will vote shares in a portfolio for which no instructions have been received in the same proportion as we vote shares for which we have received instructions in that portfolio. We will vote any Trust shares that we are entitled to 22 vote directly due to amounts we have accumulated in the Funds in the same proportions that all policyowners vote, including those who participate in other separate accounts. If the Federal securities laws or regulations or interpretations of them change so that we are permitted to vote shares of the Trust in our own right or to restrict policyowner voting, we may do so. HOW WE DETERMINE YOUR VOTING SHARES. You may participate in voting only on matters concerning the Trust portfolios corresponding to the Funds to which your Policy Account is allocated. The number of Trust shares in each Fund that are attributable to your policy is determined by dividing the amount in your Policy Account allocated to that Fund by the net asset value of one share of the corresponding Trust portfolio as of the record date set by the Trust's Board for the Trust's shareholders meeting. The record date for this purpose must be at least 10 and no more than 90 days before the meeting of the Trust. Fractional shares are counted. If you are entitled to give us voting instructions, we will send you proxy material and a form for providing voting instructions. In certain cases, we may disregard instructions relating to changes in the Trust's adviser or the investment policies of its portfolios. We will advise you if we do and detail the reasons in the next semiannual report to policyowners. SEPARATE ACCOUNT VOTING RIGHTS. Under the 1940 Act, certain actions (such as some of those described under OUR RIGHT TO CHANGE HOW WE OPERATE, below) may require policyowner approval. In that case, you will be entitled to one vote for every $100 of value you have in the Funds. We will cast votes attributable to amounts we have in the Funds in the same proportions as votes cast by policyowners. OUR RIGHT TO CHANGE HOW WE OPERATE In addition to changing or adding investment companies, we have the right to modify how we or the Separate Account operate. We intend to comply with applicable law in making any changes and, if necessary, we will seek policyowner approval. We have the right to: o add Funds to, or remove Funds from, the Separate Account, combine two or more Funds within the Separate Account, or withdraw assets relating to Incentive Life Plus from one Fund and put them into another; o register or end the registration of the Separate Account under the 1940 Act; o operate the Separate Account under the direction of a committee or discharge such a committee at any time (the committee may be composed entirely of persons who are "interested persons" of Equitable under the 1940 Act); o restrict or eliminate any voting rights of policyowners or other people who have voting rights that affect the Separate Account; o operate the Separate Account or one or more of the Funds in any other form the law allows, including a form that allows us to make direct investments. Our Separate Account may be charged an advisory fee if its investments are made directly rather than through an investment company. We may make any legal investments we wish. In choosing these investments, we will rely on our own or outside counsel for advice. In addition, we may disapprove any change in investment advisers or in investment policy unless a law or regulation provides differently. If any changes are made that result in a material change in the underlying investments of a Fund, you will be notified as required by law. We may, for example, cause the Fund to invest in a mutual fund other than, or in addition to, the Trust. If you then wish to transfer the amount you have in that Fund to another Fund of the Separate Account or to the Guaranteed Interest Account, you may do so, without charge, by contacting our Administrative Office. At the same time, you may also change how your net premiums and deductions are allocated. OUR REPORTS TO POLICYOWNERS Shortly after the end of each policy year you will receive a report that includes information about your policy's current death benefit, Policy Account value, Cash Surrender Value and policy loan. Notices will be sent to you to confirm premium payments (except premiums paid through an automated arrangement), transfers and certain other policy transactions. LIMITS ON OUR RIGHT TO CHALLENGE THE POLICY We can challenge the validity of your insurance policy based on material misstatements in your application and any application for change. However, there are some limits on how and when we can challenge the policy. o We cannot challenge the policy after it has been in effect, during the insured person's lifetime, for two years from the date the policy was issued or restored after termination. (Some states may require that we measure this time in some other way.) o We cannot challenge any policy change that requires evidence of insurability (such as an increase in Face Amount or a substitution of insured person) after the change has been in effect for two years during the insured person's lifetime. o We cannot challenge an additional benefit rider that provides benefits in the event that the insured person becomes totally disabled, after two years from the later of the Issue Date or the date as of which the additional benefit rider became effective. We can require proof of continuing disability while such a rider is in effect as specified in the rider. If the insured person dies within the time that we may challenge the validity of the policy, we may delay payment until we decide whether to challenge the policy. If the insured person's age or sex is misstated on any application, the death benefit and any additional benefits provided will be those which would be purchased by the most recent deduction for the cost of insurance and the cost of any additional benefits at the insured person's correct age and sex. If the insured person commits suicide within two years after the date on which the policy was issued, the death benefit will be limited to the total of all premiums that have been paid to the time of death minus any outstanding policy loan, accrued loan interest and any partial withdrawals of Net Cash Surrender Value. If the insured person commits suicide within two years after the effective date of an increase in Face Amount that 23 you requested, we will pay the death benefit based on the Face Amount which was in effect before the increase, plus the monthly cost of insurance deductions for the increase (including the transaction charge for the Face Amount increase). A new two-year suicide and contestability period will begin on the date of substitution following a substitution of insured. Some states require that we measure this time by some other date. YOUR PAYMENT OPTIONS Policy benefits or other payments, such as the Net Cash Surrender Value, may be paid immediately in one sum or you may choose another form of payment for all or part of the money. Payments under these options are not affected by the investment experience of any Fund. Instead, interest accrues pursuant to the options chosen. You will make a choice of payment option (or any later changes) and your choice will take effect in the same way as it would if you were changing a beneficiary. (See YOUR BENEFICIARY below.) If you do not arrange for a specific form of payment before the insured person dies, the beneficiary will be paid through the Equitable Access Account(TM). The Equitable Access Account is not available to corporate or other non-natural beneficiaries. See WHEN WE PAY POLICY PROCEEDS below. The beneficiary will then have a choice of payment options. However, if you do make an arrangement with us for how the money will be paid, the beneficiary cannot change the choice after the insured person dies. Different payment options may result in different tax consequences. The beneficiary or any other person who is entitled to receive payment may name a successor to receive any amount that we would otherwise pay to that person's estate if that person died. The person who is entitled to receive payment may change the successor at any time. We must approve any arrangements that involve more than one payment option, or a payee who is not a natural person (for example, a corporation), or a payee who is a fiduciary. Also, the details of all arrangements will be subject to our rules at the time the arrangements are selected and take effect. This includes rules on the minimum amount we will pay under an option, minimum amounts for installment payments, withdrawal or commutation rights (your rights to receive payments over time, for which we may offer a lump sum payment), the naming of people who are entitled to receive payment and their successors, and the ways of proving age and survival. YOUR BENEFICIARY You name your beneficiary when you apply for the policy. The beneficiary is entitled to the insurance benefits of the policy. You may change the beneficiary during the insured person's lifetime by writing to our Administrative Office. If no beneficiary is living when the insured person dies, we will pay the death benefit in equal shares to the insured person's surviving children. If there are no surviving children, we will pay the death benefit to the insured person's estate. ASSIGNING YOUR POLICY You may assign (transfer) your rights in the policy to someone else as collateral for a loan or for some other reason, if we agree. A copy of the assignment must be forwarded to our Administrative Office. We are not responsible for any payment we make or any action taken before we receive notice of the assignment or for the validity of the assignment. An absolute assignment is a change of ownership. BECAUSE THERE MAY BE TAX CONSEQUENCES, INCLUDING THE LOSS OF INCOME TAX-FREE TREATMENT FOR ANY DEATH BENEFIT PAYABLE TO THE BENEFICIARY, YOU SHOULD CONSULT YOUR TAX ADVISER PRIOR TO MAKING AN ASSIGNMENT. WHEN WE PAY POLICY PROCEEDS We will pay any death benefits, maturity benefit, Net Cash Surrender Value or loan proceeds within seven days after we receive the last required form or request (and other documents that may be required for payment of death benefits) at our Administrative Office. Death benefits are determined as of the date of death of the insured person and will not be affected by subsequent changes in the unit values of the Funds. Death benefits will generally be paid through the Equitable Access Account, an interest bearing checking account. A beneficiary will have immediate access to the proceeds by writing a check on the account. We pay interest from the date of death to the date the Equitable Access Account is closed. If an Equitable agent helps the beneficiary of a policy to prepare the documents that are required for payment of the death benefit, we will send the Equitable Access Account checkbook or check to the agent within seven days after we receive the required documents. Our agents will take reasonable steps to arrange for prompt delivery to the beneficiary. We may, however, delay payment if we contest the policy. We may also delay payment if we cannot determine the amount of the payment because the New York Stock Exchange is closed, because trading in securities has been restricted by the SEC, or because the SEC has declared that an emergency exists. In addition, if necessary to protect our policyowners, we may delay payment where permitted under applicable law. We may defer payment of any Net Cash Surrender Value or loan amount (except a loan to pay a premium to us) from the Guaranteed Interest Account for up to six months after we receive your request. We will pay interest of at least 3% a year from the date we receive your request if we delay more than 30 days in paying you such amounts from the Guaranteed Interest Account. DIVIDENDS No dividends are paid on the policy described in this prospectus. 24 REGULATION We are regulated and supervised by the New York State Insurance Department. In addition, we are subject to the insurance laws and regulations in every jurisdiction where we sell policies. The Incentive Life Plus policy (Plan No. 94-300) has been filed with and approved by insurance officials in 50 states, the District of Columbia, Puerto Rico and the Virgin Islands. We submit annual reports on our operations and finances to insurance officials in all the jurisdictions where we sell policies. The officials are responsible for reviewing our reports to be sure that we are financially sound. SPECIAL CIRCUMSTANCES Equitable may vary the charges and other terms of Incentive Life Plus where special circumstances result in sales or administrative expenses or mortality risks that are different than those normally associated with Incentive Life Plus policies. These variations will be made only in accordance with uniform rules that we establish. DISTRIBUTION EQ Financial Consultants, Inc., a wholly-owned subsidiary of Equitable, is the principal underwriter of the Trust under a Distribution Agreement. EQ Financial Consultants is also the distributor of our variable life insurance policies and variable annuity contracts under a Distribution and Servicing Agreement. EQ Financial Consultants' principal business address is 1755 Broadway, New York, NY 10019. EQ Financial Consultants is registered with the SEC as a broker-dealer under the Securities Exchange Act of 1934 (the Exchange Act) and is a member of the National Association of Securities Dealers, Inc. EQ Financial Consultants is paid a fee for its services as distributor of our policies. In 1994 and 1995, we paid EQ Financial Consultants a fee of $216,920 and $325,380, respectively, for its services under the Distribution and Servicing Agreement. We sell our policies through agents who are licensed by state insurance officials to sell our variable life policies. These agents are also registered representatives of EQ Financial Consultants. The agent who sells you this policy receives sales commissions from Equitable. We pay commissions from our own resources, including the Premium Sales Charge deducted from your premium and any Premium Surrender Charge we might collect. Generally, during the first policy year, the agent will receive an amount equal to a maximum of 50% of the premiums paid up to a certain amount and 3% of the premiums paid in excess of that amount. For policy years two through ten, the agent receives an amount up to a maximum of 6% of the premiums paid up to a certain amount and 3% of the premiums paid in excess of that amount; and, for years eleven and later, the agent receives an amount up to 3% of the premiums paid. Following a requested Face Amount increase, commissions on a portion of the premium will be calculated based on the same rates described above. Use of a term rider on the insured person in place of an equal amount of coverage under the base policy generally reduces commissions. Commissions paid to agents based upon refunded premiums will be recovered. Agents with limited years of service may be paid differently. We also sell our policies through independent brokers who are licensed by state insurance officials to sell our variable life policies. They will also be registered representatives either of EQ Financial Consultants or of another company registered with the SEC as a broker-dealer under the Exchange Act. The commissions for independent brokers will be no more than those for agents and the same policy for recovery of commissions applies. Commissions will be paid through the registered broker-dealer. LEGAL PROCEEDINGS We are not involved in any legal proceedings that would be considered material with respect to a policyowner's interest in the Separate Account. ACCOUNTING AND ACTUARIAL EXPERTS The financial statements of Separate Account FP and Equitable included in this prospectus have been audited for the years ended December 31, 1995, 1994 and 1993 by Price Waterhouse LLP, as stated in their reports. The financial statements of Separate Account FP and Equitable have been so included in reliance on the reports of Price Waterhouse LLP, independent accountants, given on the authority of such firm as experts in accounting and auditing. The financial statements of Separate Account FP and Equitable for the periods ended September 30, 1996 and 1995 included in this prospectus are unaudited. The financial statements of Equitable contained in this prospectus should be considered only as bearing upon the ability of Equitable to meet its obligations under the Incentive Life Plus policies. They should not be considered as bearing upon the investment experience of the funds of the Separate Account. The financial statements of Separate Account FP include periods when Separate Account FP was part of Equitable Variable, a wholly-owned subsidiary of Equitable. The assets of Separate Account FP were assumed by Equitable on January 1, 1997 when Equitable Variable was merged into Equitable. Actuarial matters in this prospectus have been examined by Barbara Fraser, F.S.A., M.A.A.A., who is a Vice President and Actuary of Equitable. Her opinion on actuarial matters is filed as an exhibit to the Registration Statement we filed with the SEC. ADDITIONAL INFORMATION We have filed a Registration Statement relating to the Separate Account and the variable life insurance policy described in this prospectus with the SEC. The Registration Statement, which is required by the Securities Act of 1933, includes additional information that is not required in this prospectus under the rules and regulations of the SEC. If you would like the additional information, you may obtain it from the SEC's main office in Washington, D.C. You will have to pay a fee for the material. 25 MANAGEMENT Here is a list of our directors and, to the extent they are responsible for variable life insurance operations, our principal officers and a brief statement of their business experience for the past five years. Unless otherwise noted, their address is 1290 Avenue of the Americas, New York, New York 10104.
NAME AND PRINCIPAL BUSINESS EXPERIENCE BUSINESS ADDRESS WITHIN PAST FIVE YEARS - ------------------- ------------------------ DIRECTORS Claude Bebear Director of Equitable since July 1991. Chairman of the Board of the Holding Company (February AXA S.A. 1996-present) and a Director of other affiliates of Equitable. Chairman and Chief Executive 23, Avenue Matignon Officer of AXA since February 1989. Chief Executive Officer of the AXA Group since 1974 and 75008 Paris, France Chairman or Director of numerous subsidiaries and affiliated companies of the AXA Group. Christopher J. Brocksom Director of Equitable since July 1992. Chief Executive Officer, AXA Equity & Law Life AXA Equity & Law Assurance Society ("AXA Equity & Law") and various directorships and officerships with AXA Amersham Road Equity & Law affiliated companies. High Wycombe Bucks HP 13 5 AL, England Francoise Colloc'h Director of Equitable since July 1992. Executive Vice President, Culture -- Management -- AXA S.A. Communications, AXA, and various positions with AXA affiliated companies. 23, Avenue Matignon 75008 Paris, France Henri de Castries Director of Equitable since September 1993. Vice Chairman of the Board of the Holding AXA S.A. Company since February 1996. Executive Vice President Financial Services and Life Insurance 23, Avenue Matignon Activities of AXA since 1993. Prior thereto, General Secretary from 1991 to 1993 and 75008 Paris, France Central Director of Finances from 1989 to 1991. Also Director or Officer of various subsidiaries and affiliates of the AXA Group. Director of the Holding Company and of other Equitable affiliates. Joseph L. Dionne Director of Equitable since May 1982. Chairman (since April 1988) and Chief Executive The McGraw-Hill Companies Officer (Since April 1983) of The McGraw-Hill Companies. Director of the Holding Company. 1221 Avenue of the Americas New York, NY 10020 William T. Esrey Director of Equitable since July 1986. Chairman (since April 1990) and Chief Executive Sprint Corporation Officer (since 1985) and President (1985 to February 1996) of Sprint Corporation. Director P.O. Box 11315 of the Holding Company. Kansas City, MO 64112 Jean-Rene Fourtou Director of Equitable since July 1992. Chairman and Chief Executive Officer, Rhone-Poulenc, Rhone-Poulenc S.A. S.A. since 1986. Director of the Holding Company and AXA. 25 Quai Paul Doumer 92408 Courbevoie Cedex, France Norman C. Francis Director of Equitable since March 1989. President, Xavier University of Louisiana. Xavier University of Louisiana 7325 Palmetto Street New Orleans, LA 70125 Donald J. Greene Director of Equitable since July 1991. Partner, LeBoeuf, Lamb, Greene & MacRae since 1965. LeBouef, Lamb, Greene & MacRae Director of the Holding Company. 125 West 55th Street New York, NY 10019-4513 John T. Hartley Director of Equitable since August 1987. Retired Chairman and Chief Executive Officer of Harris Corporation Harris Corporation (until July 1995); prior thereto, he held the positions of Chairman of 1025 NASA Boulevard Harris Corporation from 1987, Chief Executive Officer from 1986 and President from October Melbourne, FL 32919 1987 to April 1993. John H.F. Haskell, Jr. Director of Equitable since July 1992. Managing Director of Dillon, Read & Co., Inc. since Dillon, Read & Co., Inc. 1975 and member of its Board of Directors. 535 Madison Avenue New York, NY 10022
26
NAME AND PRINCIPAL BUSINESS EXPERIENCE BUSINESS ADDRESS WITHIN PAST FIVE YEARS - ------------------- ------------------------ DIRECTORS (continued) W. Edwin Jarmain Director of Equitable since July 1992. President of Jarmain Group Inc. since 1979; also an Jarmain Group Inc. Officer or Director of several affiliated companies. Chairman and Director of FCA 121 King Street West International Ltd.; served as President, CEO and Director from 1992 through 1993. Director of Suite 2525, Box 36 various AXA affiliated companies. Director of the Holding Company since July 1992. Toronto, Ontario M5H 3T9, Canada G. Donald Johnston, Jr. Director of Equitable since January 1986. Retired Chairman and Chief Executive Officer, JWT 184-400 Ocean Road Group, Inc. and J. Walter Thompson Company. John's Island Vero Beach, FL 32963 Winthrop Knowlton Director of Equitable since October 1973. Chairman of the Board of Knowlton Brothers, Inc. Knowlton Brothers, Inc. since May 1989; also President of Knowlton Associates, Inc. since September 1987; Director 530 Fifth Avenue of the Holding Company. New York, NY 10036 Arthur L. Liman Director of Equitable since March 1984. Partner, Paul, Weiss, Rifkind, Wharton & Garrison Paul, Weiss, Rifkind, Wharton since 1966. and Garrison 1285 Avenue of the Americas New York, NY 10019 George T. Lowy Director of Equitable since July 1992. Partner, Cravath, Swaine & Moore. Cravath, Swaine & Moore 825 Eighth Avenue New York, NY 10019 Didier Pineau-Valencienne Director of Equitable since February 1996. Chairman and Chief Executive Officer of Schneider S.A. Schneider S.A. since 1981 and Chairman or Director of numerous subsidiaries and affiliated 64-70 Avenue Jean-Baptiste companies of Schneider. Director of AXA and the Holding Company. Clament 96646 Boulogne-Billancourt Cedex France George J. Sella, Jr. Director of Equitable since May 1987. Retired Chairman and Chief Executive Officer of P.O. Box 397 American Cyanamid Company (until April 1993); prior thereto, Chairman from 1984, Chief Newton, NJ 07860 Executive Officer from 1983 and President from 1979 to 1991. Dave H. Williams Director of Equitable since March 1991. Chairman and Chief Executive Officer of Alliance Alliance Capital Management since 1977 and Chairman or Director of numerous subsidiaries and affiliated companies of Corporation Alliance. Director of the Holding Company. 1345 Avenue of the Americas New York, NY 10105 OFFICERS -- DIRECTORS James M. Benson Director of Equitable since February 1994. Chief Executive Officer (since February 1996) and President of Equitable (since February 1994); prior thereto, Chief Operating Officer (February 1994 to February 1996) and Senior Executive Vice President of Equitable (April 1993 to February 1994). Prior thereto, President, Management Compensation Group (1983 to February 1993). Previously, President, Chief Executive Officer and a Director of Equitable Variable Life Insurance Company ("EVLICO"). Senior Executive Vice President of the Holding Company since February 1994 and Chief Operating Officer since February 1996; Director of various Equitable affiliated companies; Director of the Holding Company since February 1994. William T. McCaffrey Director of Equitable since February 1996. Senior Executive Vice President and Chief Operating Officer of Equitable (all since February 1996). Prior thereto, Executive Vice President (from February 1986 to February 1996) and Chief Administrative Officer (from February 1988 to February 1996). Executive Vice President and Chief Administrative Officer (since February 1994) of the Holding Company. Director of various Equitable affiliated companies, including EVLICO.
27
NAME AND PRINCIPAL BUSINESS EXPERIENCE BUSINESS ADDRESS WITHIN PAST FIVE YEARS - ------------------- ------------------------ OFFICERS -- DIRECTORS (continued) Joseph J. Melone Chairman of Equitable since February 1994 and a Director of Equitable since November 1990. Chief Executive Officer of the Holding Company since February 1996 and President of the Holding Company since May 1992. Previously, Chief Executive Officer of Equitable from February 1994, to February 1996; prior to February 1994, President, Chief Executive Officer and Director of Equitable from September 1992 to February 1994 and President, Chief Operating Officer and a Director since November 1990. Former Chairman, Chief Executive Officer and Director of EVLICO. Director of various Equitable and AXA affiliated companies. OTHER OFFICERS A. Frank Beaz Senior Vice President, Equitable; prior thereto, Vice President, Equitable (until March 1995). Executive Vice President, EQ Financial Consultants, Inc. ("EQF") (May 1995-present). Leon B. Billis Senior Vice President, Equitable; prior thereto, Vice President, Equitable (until November 1994); Vice President, EVLICO (July 1996 to December 1996). Harvey Blitz Senior Vice President and Deputy Chief Financial Officer, Equitable. Senior Vice President, Holding Company; Director or Chairman of various Equitable affiliated companies; Director (October 1992 to December 1996) and Vice President, EVLICO (April 1995 to December 1996). Kevin R. Byrne Vice President and Treasurer, Equitable; Vice President and Treasurer, Holding Company; Treasurer, EVLICO (until December 1996) and Frontier Trust Company; Director or Officer of other Equitable affiliated companies. Jerry M. de St. Paer Executive Vice President, Equitable. Senior Executive Vice President (since May 1996) and Chief Financial Officer (since May 1992) of the Holding Company. Executive Vice President and Chief Operating Officer (since September 1994) of Equitable Investment Corporation. Previously held various officerships with Equitable and its affiliates. Director and Senior Investment Officer, EVLICO (until December 1996). Director of various Equitable affiliated companies. Gordon G. Dinsmore Senior Vice President and Corporate Actuary, Equitable. Executive Vice President, Equico. Director and Senior Vice President, EVLICO (until December 1996); Director of other Equitable affiliated companies. Alvin H. Fenichel Senior Vice President and Controller, Equitable. Senior Vice President and Controller, Holding Company. Vice President and Controller (until December 1996), EVLICO; Vice President, The Equitable of Colorado, Inc. ("Colorado"). Paul J. Flora Senior Vice President and Auditor, Equitable. Prior thereto, Vice President and Auditor (February 1994 to March 1996). Vice President and Auditor, Holding Company (September 1994 to present). Vice President/Auditor, National Westminster Bank (November 1984 to June 1994). Robert E. Garber Executive Vice President and General Counsel, Equitable; Executive Vice President and General Counsel, Holding Company. Prior thereto, Senior Vice President and General Counsel of Equitable and the Holding Company (September 1993 to September 1994) and Senior Vice President and Deputy General Counsel of Equitable (September 1989 to September 1993). Donald R. Kaplan Vice President and Acting Chief Compliance Officer, Equitable. Prior thereto, Vice President and Counsel (until June 1996). Michael S. Martin Senior Vice President, Equitable. Chairman, EQF; Chairman and Chief Executive Officer, EquiSource of New York (January 1992 to October 1994) and Frontier (April 1992 to October 1994); Vice President, Hudson River Trust ("HRT") (February 1993 to February 1995); Director, Vice President and Treasurer, Equitable Distributors, Inc. (August 1993 to February 1995), also Chairman, President, and Chief Executive Officer (December 1993 to February 1995); Director, Equitable Underwriting and Sales Agency (Bahamas), Ltd. (May 1996 to present) and Colorado (January 1995 to present).
28
NAME AND PRINCIPAL BUSINESS EXPERIENCE BUSINESS ADDRESS WITHIN PAST FIVE YEARS - ------------------- ------------------------ OTHER OFFICERS (continued) Peter D. Noris Executive Vice President and Chief Investment Officer, Equitable. Executive Vice President (since May 1995) and Chief Investment Officer (since July 1995), Holding Company. Prior thereto, Vice President/Manager, Insurance Companies Investment Strategies Group, Solomon Brothers, Inc. (November 1992 to May 1995). Prior thereto, with Morgan Stanley & Co., Inc., from October 1984 to November 1992 as Principal, Fixed Income Insurance Group. Former Director and Senior Vice President of EVLICO. Director of other Equitable affiliates. Anthony C. Pasquale Senior Vice President, Equitable. Chairman and President, Equitable Realty Assets Corporation (July 1995 to present). Director of other Equitable affiliates. Michael J. Rich Senior Vice President, Equitable, since October 1994; prior thereto, Vice President of Underwriting, John Hancock Mutual Life Insurance Co. since 1988. Director of EVLICO (May 1995 to December 1996). Pauline Sherman Vice President, Secretary and Associate General Counsel, Equitable; prior thereto, Vice President and Associate General Counsel (until September 1995). Vice President, Secretary and Associate General Counsel, Holding Company (September 1995 to present). Samuel Shlesinger Senior Vice President and Actuary, Equitable; prior thereto, Vice President and Actuary. Previously, Director and Senior Vice President, EVLICO (February 1988 to December 1996). Director, Chairman and Chief Executive Officer, Equitable of Colorado. Vice President, HRT. Jose S. Suquet Executive Vice President and Chief Agency Officer, Equitable, since August 1994; prior thereto, Agency Manager, Equitable (February 1985 to August 1994). Stanley B. Tulin Senior Executive Vice President and Chief Financial Officer, Equitable; prior thereto, Chairman, Insurance Consulting and Actuarial Practice, Coopers & Lybrand (until April 1996); Executive Vice President, Holding Company.
29 PART 4: ILLUSTRATIONS OF POLICY BENEFITS To help clarify how the key financial elements of the policy work, a series of tables has been prepared. The tables show how death benefits, Policy Account and Cash Surrender Values ("policy benefits") under a hypothetical Incentive Life Plus policy could vary over time if the Funds of our Separate Account had CONSTANT hypothetical gross annual investment returns of 0%, 6% or 12% over the years covered by each table. Actual investment results may be more or less than those shown. The tables are for a 40-year-old preferred risk male non-tobacco user. Planned premium payments of $4,000 for an initial Face Amount of $300,000 are assumed to be paid at the beginning of each policy year. The illustration assumes no policy loan has been taken. The differences between the Policy Account and the Cash Surrender Values in the first fifteen years are the Surrender Charges. See SURRENDER CHARGES on page 18. The tables illustrate both current and guaranteed charges. The current charges include reductions in cost of insurance charges beginning in the tenth policy year, which are not guaranteed, and daily charges against the Separate Account Funds of .60% per annum for mortality and expense risks (.90% for the guaranteed table). The tables also assume .51% per annum for investment management (the average of the effective annual advisory fees applicable to each Trust portfolio during 1995 and the maximum advisory fee for the International Portfolio) and .04% per annum for direct Trust expenses. The assumption for direct Trust expenses equals the weighted average of actual Trust expenses incurred by the portfolios of the Trust for the year ended December 31, 1995, as disclosed in the Trust's prospectus. The effect of these adjustments is that on a 0% gross rate of return the net rate of return would be -1.15%, on 6% it would be 4.78%, and on 12% it would be 10.72%. Remember, however, that investment management fees and direct Trust expenses vary by portfolio. See THE TRUST'S INVESTMENT ADVISER on page 6. The tables also assume a charge for taxes of 2% of premiums. There are tables for both death benefit Option A and death benefit Option B. The second column of each table shows the effect of an amount equal to the premiums invested to earn interest, after taxes, of 5% compounded annually. These tables show that if a policy is returned in its very early years for payment of its Cash Surrender Value, that Cash Surrender Value will be low in comparison to the amount of the premiums accumulated with interest. Thus, the cost of owning your policy for a relatively short time will be high. The internal rate of return on Cash Surrender Value is equivalent to an interest rate (after taxes) at which an amount equal to the illustrated premiums could have been invested outside the Policy to arrive at the Cash Surrender Value of the Policy. The internal rate of return on the death benefit is equivalent to an interest rate (after taxes) at which an amount equal to the illustrated premiums could have been invested outside the Policy to arrive at the death benefit of the Policy. The internal rate of return is compounded annually, and the premiums are assumed to be paid at the beginning of each policy year. INDIVIDUAL ILLUSTRATIONS. On request, we will furnish you with a comparable illustration based on your policy's factors. Upon request after issuance, we will also provide a comparable illustration reflecting your actual Policy Account value. If you request illustrations more than once in any policy year, we may charge for the illustration. 30 INCENTIVE LIFE PLUS THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE PLANNED PREMIUM $4,000 INITIAL FACE AMOUNT $300,000 MALE AGE 40 PREFERRED RISK NON-TOBACCO USER DEATH BENEFIT OPTION A ASSUMING CURRENT CHARGES
DEATH BENEFIT POLICY ACCOUNT ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS END OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF POLICY ACCUMULATED ------------------------------------- ------------------------------------- YEAR PREMIUMS(1) 0% 6% 12% 0% 6% 12% ---- ----------- -- -- --- -- -- --- 1 $ 4,200 $300,000 $300,000 $300,000 $ 2,376 $ 2,556 $ 2,737 2 8,610 300,000 300,000 300,000 5,265 5,793 6,344 3 13,241 300,000 300,000 300,000 8,079 9,142 10,294 4 18,103 300,000 300,000 300,000 10,807 12,598 14,615 5 23,208 300,000 300,000 300,000 13,454 16,172 19,353 6 28,568 300,000 300,000 300,000 16,011 19,858 24,544 7 34,196 300,000 300,000 300,000 18,474 23,659 30,235 8 40,106 300,000 300,000 300,000 20,843 27,581 36,483 9 46,312 300,000 300,000 300,000 23,139 31,653 43,375 10 52,827 300,000 300,000 300,000 25,501 36,033 51,149 15 90,630 300,000 300,000 300,000 36,234 60,836 104,559 20 138,877 300,000 300,000 300,000 44,801 91,397 195,136 25 (age 65) 200,454 300,000 300,000 432,451 51,450 131,371 354,468 INTERNAL RATE OF RETURN CASH SURRENDER VALUE ON CASH SURRENDER VALUES ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS END OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF POLICY ------------------------------------- ------------------------------------ YEAR 0% 6% 12% 0% 6% 12% ---- -- -- --- -- -- --- 1 $ 474 $ 654 $ 835 -88.15% -83.65% -79.12% 2 3,163 3,691 4,242 -47.98 -41.71 -35.53 3 5,777 6,840 7,992 -32.34 -25.58 -18.99 4 8,485 10,276 12,293 -23.82 -16.95 -10.27 5 11,112 13,830 17,011 -18.98 -12.05 -5.35 6 13,649 17,496 22,182 -15.95 -8.97 -2.25 7 16,104 21,290 27,866 -13.87 -6.85 -0.12 8 18,653 25,391 34,293 -12.16 -6.85 1.54 9 20,949 29,463 41,185 -11.08 -4.04 2.68 10 23,676 34,208 49,324 -9.81 -2.87 3.78 15 36,234 60,836 104,559 -6.62 0.17 6.67 20 44,801 91,397 195,136 -5.92 1.25 7.89 25 (age 65) 51,450 131,371 354,468 -5.60 2.04 8.74 INTERNAL RATE OF RETURN ON DEATH BENEFIT ASSUMING HYPOTHETICAL GROSS END OF ANNUAL INVESTMENT RETURN OF POLICY ----------------------------------------- YEAR 0% 6% 12% ---- -- -- --- 1 7,400.00% 7,400.00% 7,400.00% 2 717.47 717.47 717.47 3 283.61 283.61 283.61 4 162.42 162.42 162.42 5 109.30 109.30 109.30 6 80.35 80.35 80.35 7 62.43 62.43 62.43 8 50.35 50.35 50.35 9 41.74 41.74 41.74 10 35.51 35.31 35.31 15 18.45 18.45 18.45 20 11.41 11.41 11.41 25 (age 65) 7.67 7.67 10.00
(1) Assumes net interest of 5% compounded annually. THE VALUES WILL DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. THE DEATH BENEFIT GUARANTEE / THREE-YEAR NO LAPSE GUARANTEE PREMIUM FOR THIS POLICY WOULD BE $3,533.96. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN. 31 INCENTIVE LIFE PLUS THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE PLANNED PREMIUM $4,000 INITIAL FACE AMOUNT $300,000 MALE AGE 40 PREFERRED RISK NON-TOBACCO USER DEATH BENEFIT OPTION A ASSUMING GUARANTEED CHARGES
DEATH BENEFIT POLICY ACCOUNT ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS END OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF POLICY ACCUMULATED ------------------------------------- ------------------------------------- YEAR PREMIUMS(1) 0% 6% 12% 0% 6% 12% ---- ----------- -- -- --- -- -- --- 1 $ 4,200 $300,000 $300,000 $300,000 $ 2,340 $ 2,519 $ 2,699 2 8,610 300,000 300,000 300,000 5,136 5,656 6,199 3 13,241 300,000 300,000 300,000 7,846 8,888 10,017 4 18,103 300,000 300,000 300,000 10,464 12,211 14,179 5 23,208 300,000 300,000 300,000 12,991 15,631 18,724 6 28,568 300,000 300,000 300,000 15,419 19,143 23,683 7 34,196 300,000 300,000 300,000 17,744 22,748 29,097 8 40,106 300,000 300,000 300,000 19,963 26,446 35,013 9 46,312 300,000 300,000 300,000 22,074 30,238 41,484 10 52,827 300,000 300,000 300,000 24,067 34,120 48,563 15 90,630 300,000 300,000 300,000 31,891 54,693 95,448 20 138,877 300,000 300,000 300,000 34,637 76,267 170,592 25 (age 65) 200,454 300,000 300,000 360,893 29,267 97,092 295,814 INTERNAL RATE OF RETURN CASH SURRENDER VALUE ON CASH SURRENDER VALUES ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS END OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF POLICY ------------------------------------- ------------------------------------ YEAR 0% 6% 12% 0% 6% 12% ---- -- -- --- -- -- --- 1 $ 438 $ 617 $ 797 -89.04% -84.57% -80.09% 2 3,034 3,554 4,097 -49.57 -43.30 -37.12 3 5,544 6,586 7,715 -33.92 -27.13 -20.52 4 8,142 9,889 11,857 -25.26 -18.35 -11.63 5 10,649 13,289 16,382 -20.32 -13.33 -6.58 6 13,057 16,781 21,321 -17.19 -10.15 -3.37 7 15,374 20,378 26,727 -15.04 -7.95 -1.16 8 17,773 24,256 32,824 -13.27 -6.20 0.56 9 19,884 28,048 39,294 -12.18 -5.04 1.75 10 22,242 32,295 46,738 -11.03 -3.93 2.81 15 31,891 54,693 95,448 -8.41 -1.17 5.61 20 34,637 76,267 170,592 -8.89 -0.46 6.76 25 (age 65) 29,267 97,092 295,814 -11.53 -0.23 7.58 INTERNAL RATE OF RETURN ON DEATH BENEFIT ASSUMING HYPOTHETICAL GROSS END OF ANNUAL INVESTMENT RETURN OF POLICY ----------------------------------------- YEAR 0% 6% 12% ---- -- -- --- 1 7,400.00% 7,400.00% 7,400.00% 2 717.47 717.47 717.47 3 283.61 283.61 283.61 4 162.42 162.42 162.42 5 109.30 109.30 109.30 6 80.35 80.35 80.35 7 62.43 62.43 62.43 8 50.35 50.35 50.35 9 41.74 41.74 41.74 10 35.31 35.31 35.31 15 18.45 18.45 18.45 20 11.41 11.41 11.41 25 (age 65) 7.67 7.67 8.85
(1) Assumes net interest of 5% compounded annually. THE VALUES WILL DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. THE DEATH BENEFIT GUARANTEE / THREE-YEAR NO LAPSE GUARANTEE PREMIUM FOR THIS POLICY WOULD BE $3,533.96. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN. 32 INCENTIVE LIFE PLUS THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE PLANNED PREMIUM $4,000 INITIAL FACE AMOUNT $300,000 MALE AGE 40 PREFERRED RISK NON-TOBACCO USER DEATH BENEFIT OPTION B ASSUMING CURRENT CHARGES
DEATH BENEFIT POLICY ACCOUNT ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS END OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF POLICY ACCUMULATED ------------------------------------- ------------------------------------- YEAR PREMIUMS(1) 0% 6% 12% 0% 6% 12% ---- ----------- -- -- --- -- -- --- 1 $ 4,200 $302,369 $302,549 $302,729 $ 2,369 $ 2,549 $ 2,729 2 8,610 305,245 305,771 306,319 5,245 5,771 6,319 3 13,241 308,037 309,094 310,239 8,037 9,094 10,239 4 18,103 310,735 312,512 314,513 10,735 12,512 14,513 5 23,208 313,342 316,033 319,182 13,342 16,033 19,182 6 28,568 315,847 319,647 324,275 15,847 19,647 24,275 7 34,196 318,247 323,355 329,831 18,247 23,355 29,831 8 40,106 320,538 327,157 335,896 20,538 27,157 35,896 9 46,312 322,742 331,079 342,549 22,742 31,079 42,549 10 52,827 324,997 335,275 350,015 24,997 35,275 50,015 15 90,630 334,955 358,486 400,222 34,955 58,486 100,222 20 138,877 342,216 385,551 481,685 42,216 85,551 181,685 25 (age 65) 200,454 346,815 418,342 619,058 46,815 118,342 319,058 INTERNAL RATE OF RETURN CASH SURRENDER VALUE ON CASH SURRENDER VALUES ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS END OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF POLICY ------------------------------------- ------------------------------------ YEAR 0% 6% 12% 0% 6% 12% ---- -- -- --- -- -- --- 1 $ 467 $ 647 $ 827 -88.32% -83.82% -79.31% 2 3,143 3,669 4,217 -48.23 -41.96 -35.80 3 5,735 6,792 7,937 -32.62 -25.87 -19.29 4 8,413 10,190 12,191 -24.12 -17.25 -10.58 5 11,000 13,691 16,840 -19.30 -12.38 -5.68 6 13,485 17,285 21,913 -16.28 -9.31 -2.59 7 15,877 20,985 27,461 -14.23 -7.22 -0.49 8 18,348 24,967 33,706 -12.54 -5.55 1.15 9 20,552 28,889 40,359 -11.48 -4.44 2.28 10 23,173 33,450 48,190 -10.23 -3.28 3.36 15 34,955 58,486 100,222 -7.12 -0.32 6.18 20 42,216 85,551 181,685 -6.58 0.63 7.29 25 (age 65) 46,815 118,342 319,058 -6.50 1.27 8.07 INTERNAL RATE OF RETURN ON DEATH BENEFIT ASSUMING HYPOTHETICAL GROSS END OF ANNUAL INVESTMENT RETURN OF POLICY ----------------------------------------- YEAR 0% 6% 12% ---- -- -- --- 1 7,549.23% 7,463.73% 7,468.24% 2 724.99 725.74 726.53 3 287.38 287.87 288.40 4 165.08 165.52 166.01 5 111.47 111.90 112.40 6 82.24 82.68 83.21 7 64.13 64.59 65.17 8 51.93 52.42 53.05 9 43.22 43.73 44.43 10 36.72 37.27 38.03 15 19.65 20.39 21.59 20 12.47 13.42 15.17 25 (age 65) 8.60 9.79 12.22
(1) Assumes net interest of 5% compounded annually. THE VALUES WILL DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. THE DEATH BENEFIT GUARANTEE / THREE-YEAR NO LAPSE GUARANTEE PREMIUM FOR THIS POLICY WOULD BE $3,533.96. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN. 33 INCENTIVE LIFE PLUS THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE PLANNED PREMIUM $4,000 INITIAL FACE AMOUNT $300,000 MALE AGE 40 PREFERRED RISK NON-TOBACCO USER DEATH BENEFIT OPTION B ASSUMING GUARANTEED CHARGES
DEATH BENEFIT POLICY ACCOUNT ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS END OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF POLICY ACCUMULATED ------------------------------------- ------------------------------------- YEAR PREMIUMS(1) 0% 6% 12% 0% 6% 12% ---- ----------- -- -- --- -- -- --- 1 $ 4,200 $302,333 $302,512 $302,691 $ 2,333 $ 2,512 $ 2,691 2 8,610 305,115 305,633 306,174 5,115 5,633 6,174 3 13,241 307,804 308,839 309,961 7,804 8,839 9,961 4 18,103 310,390 312,124 314,076 10,390 12,124 14,076 5 23,208 312,877 315,490 318,551 12,877 15,490 18,551 6 28,568 315,254 318,931 323,411 15,254 18,931 23,411 7 34,196 317,515 322,442 328,690 17,515 22,442 28,690 8 40,106 319,658 326,021 334,426 19,658 26,021 34,426 9 46,312 321,677 329,664 340,659 21,677 29,664 40,659 10 52,827 323,563 333,363 347,428 23,563 33,363 47,428 15 90,630 330,545 352,216 390,873 30,545 52,216 90,873 20 138,877 331,720 369,572 455,066 31,720 69,572 155,066 25 (age 65) 200,454 323,921 380,973 548,579 23,921 80,973 248,579 INTERNAL RATE OF RETURN CASH SURRENDER VALUE ON CASH SURRENDER VALUES ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS END OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF POLICY ------------------------------------- ------------------------------------ YEAR 0% 6% 12% 0% 6% 12% ---- -- -- --- -- -- --- 1 $ 432 $ 610 $ 789 -89.21% -84.76% -80.28% 2 3,013 3,531 4,072 -49.83 -43.56 -37.40 3 5,502 6,537 7,659 -34.21 -27.44 -20.83 4 8,068 9,802 11,754 -25.58 -18.67 -11.96 5 10,535 13,148 16,209 -20.65 -13.67 -6.93 6 12,892 16,569 21,049 -17.54 -10.50 -3.74 7 15,145 20,072 26,320 -15.42 -8.33 -1.55 8 17,468 23,831 32,236 -13.67 -6.59 0.16 9 19,487 27,474 38,469 -12.60 -5.46 1.32 10 21,783 31,538 45,603 -11.47 -4.37 2.37 15 30,545 52,216 90,873 -9.03 -1.76 5.03 20 31,720 69,572 155,066 -9.96 -1.35 5.95 25 (age 65) 23,921 80,973 248,579 -14.05 -1.67 6.44 INTERNAL RATE OF RETURN ON DEATH BENEFIT ASSUMING HYPOTHETICAL GROSS END OF ANNUAL INVESTMENT RETURN OF POLICY ----------------------------------------- YEAR 0% 6% 12% ---- -- -- --- 1 7,458.34% 7,462.79% 7,467.27% 2 724.81 725.55 726.32 3 287.27 287.75 288.27 4 165.00 165.42 165.90 5 111.40 111.81 112.30 6 82.17 82.60 83.11 7 64.06 64.51 65.07 8 51.87 52.34 52.94 9 43.15 43.65 44.31 10 36.64 37.17 37.90 15 19.51 20.20 21.33 20 12.22 13.08 14.73 25 (age 65) 8.16 9.20 11.48
(1) Assumes net interest of 5% compounded annually. THE VALUES WILL DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. THE DEATH BENEFIT GUARANTEE / THREE-YEAR NO LAPSE GUARANTEE PREMIUM FOR THIS POLICY WOULD BE $3,533.96. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN. 34 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP INDEX TO FINANCIAL STATEMENTS Independent Auditor's Report.......................................................................................... FSA-2 Financial Statements: Statement of Assets and Liabilities, December 31, 1995.......................................................... FSA-3 Statement of Operations for the Years Ended December 31, 1995, 1994 and 1993.................................... FSA-4 Statement of Changes in Net Assets for the Years Ended December 31, 1995, 1994 and 1993......................... FSA-8 Notes to Financial Statements................................................................................... FSA-12 Interim Financial Statements: Statement of Assets and Liabilities, September 30, 1996 (unaudited)............................................. FSA-20 Statement of Operations for the Nine Months Ended September 30, 1996 and 1995 (unaudited)....................... FSA-21 Statement of Changes in Net Assets for the Nine Months Ended September 30, 1996 and 1995 (unaudited)............ FSA-24 Notes to Interim Financial Statements (unaudited)............................................................... FSA-27
FSA-1 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors of Equitable Variable Life Insurance Company and Policyowners of Separate Account FP of Equitable Variable Life Insurance Company 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 Money Market Division, Intermediate Government Securities Division, Quality Bond Division, High Yield Division, Growth and Income Division, Equity Index Division, Common Stock Division, Global Division, International Division, Aggressive Stock Division, Conservative Investors Division, Balanced Division and Growth Investors Division, separate investment divisions of Equitable Variable Life Insurance Company ("Equitable Variable Life") Separate Account FP at December 31, 1995 and the results of each of their operations and changes in each of their net assets for each of the periods indicated, in conformity with generally accepted accounting principles. These financial statements are the responsibility of Equitable Variable Life's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of shares in The Hudson River Trust at December 31, 1995 with the transfer agent, provide a reasonable basis for the opinion expressed above. PRICE WATERHOUSE LLP New York, NY February 7, 1996, except as to Note 8 which is as of September 19, 1996 FSA-2 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 1995
INTERMEDIATE MONEY GOVERNMENT QUALITY HIGH GROWTH & EQUITY MARKET SECURITIES BOND YIELD INCOME INDEX DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION ------------ ----------- ------------ ----------- ----------- ----------- ASSETS Investments in shares of The Hudson River Trust -- at market value (Notes 2 and 7) Cost: $207,548,119..... $207,638,095 37,536,467..... $37,681,989 141,011,715..... $138,906,039 68,700,148..... $72,524,129 17,021,456..... $19,144,802 59,443,291..... $71,895,056 Receivable for sales of shares of The Hudson River Trust........... -- -- -- -- -- -- Receivable for policy- related transactions.. 1,030,719 472,227 195,736 671,870 272,371 214,843 ------------ ----------- ------------ ----------- ----------- ----------- Total Assets............ 208,668,814 38,154,216 139,101,775 73,195,999 19,417,173 72,109,899 ------------ ----------- ------------ ----------- ----------- ----------- LIABILITIES Payable for purchases of shares of The Hudson River Trust................. 1,021,043 488,551 195,429 740,734 272,227 214,856 Payable for policy- related transactions.. -- -- -- -- -- -- Amount retained by Equitable Variable Life in Separate Account FP (Note 4)........... 514,240 516,621 618,900 524,303 526,633 271,428 ------------ ----------- ------------ ----------- ---------- ----------- Total Liabilities....... 1,535,283 1,005,172 814,329 1,265,037 798,860 486,284 ------------ ----------- ------------ ----------- ---------- ----------- NET ASSETS ATTRIBUTABLE TO POLICYOWNERS......... $207,133,531 $37,149,044 $138,287,446 $71,930,962 $18,618,313 $71,623,615 ============ =========== ============ =========== =========== ===========
See Notes to Financial Statements.
COMMON AGGRESSIVE STOCK GLOBAL INTERNATIONAL STOCK DIVISION DIVISION DIVISION DIVISION -------------- ------------ ----------- ------------ ASSETS Investments in shares of The Hudson River Trust -- at market value (Notes 2 and 7) Cost: $966,230,780...... $1,148,055,059 297,303,481...... $333,829,077 11,991,226...... $12,659,132 475,758,260...... $556,029,378 Receivable for sales of shares of The Hudson River Trust........... -- -- -- -- Receivable for policy- related transactions.. 233,000 421,042 137,166 800,569 -------------- ------------ ----------- ------------ Total Assets............ 1,148,288,059 334,250,119 12,796,298 556,829,947 -------------- ------------ ----------- ------------ LIABILITIES Payable for purchases of shares of The Hudson River Trust................. 679,729 246,368 143,511 1,121,615 Payable for policy- related transactions.. -- -- -- -- Amount retained by Equitable Variable Life in Separate Account FP (Note 4)........... 1,023,056 506,731 220,849 520,201 -------------- ------------ ----------- ------------ Total Liabilities....... 1,702,785 753,099 364,360 1,641,816 -------------- ------------ ----------- ------------ NET ASSETS ATTRIBUTABLE TO POLICYOWNERS....... $1,146,585,274 $333,497,020 $12,431,938 $555,188,131 ============== ============ =========== ============
See Notes to Financial Statements. ASSET ALLOCATION SERIES -------------------------------------------- CONSERVATIVE GROWTH INVESTORS BALANCED INVESTORS DIVISION DIVISION DIVISION ------------ ------------ ------------ ASSETS Investments in shares of The Hudson River Trust -- at market value (Notes 2 and 7) Cost: $162,300,470...... $172,662,590 356,282,500...... $399,379,687 474,917,898...... $556,703,771 Receivable for sales of shares of The Hudson River Trust........... 76,736 -- -- Receivable for policy- related transactions.. -- -- 191,779 ------------ ------------ ------------ Total Assets............ 172,739,326 399,379,687 556,895,550 ------------ ------------ ------------ LIABILITIES Payable for purchases of shares of The Hudson River Trust................. -- 179,701 414,996 Payable for policy- related transactions.. 81,465 47,918 -- Amount retained by Equitable Variable Life in Separate Account FP (Note 4)........... 570,762 586,859 602,888 ------------ ------------ ------------ Total Liabilities....... 652,227 814,478 1,017,884 ------------ ------------ ------------ NET ASSETS ATTRIBUTABLE TO POLICYOWNERS....... $172,087,099 $398,565,209 $555,877,666 ============ ============ ============ See Notes to Financial Statements. FSA-3 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP STATEMENTS OF OPERATIONS
MONEY MARKET DIVISION INTERMEDIATE GOVERNMENT SECURITIES DIVISION ------------------------------------ ------------------------------------------- YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, ------------------------------------ -------------------------------------- 1995 1994 1993 1995 1994 1993 ---------- ---------- ---------- ---------- ------------ ---------- INCOME AND EXPENSES: Income (Note 2): Dividends from The Hudson River Trust....... $9,225,401 $5,368,883 $4,163,389 $2,010,283 $ 5,671,984 $14,930,827 Expenses (Note 3): Mortality and expense risk charges.......... 954,556 826,379 834,113 197,721 527,675 1,470,325 ---------- ---------- ---------- ---------- ----------- ----------- NET INVESTMENT INCOME........................... 8,270,845 4,542,504 3,329,276 1,812,562 5,144,309 13,460,502 ---------- ---------- ---------- ---------- ----------- ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 2): Realized gain (loss) on investments......... (432,347) 95,530 (339,754) (810,768) (10,163,976) 3,999,846 Realized gain distribution from The Hudson River Trust.................... -- -- -- -- -- 11,449,074 ---------- ---------- ---------- ---------- ----------- ----------- NET REALIZED GAIN (LOSS)........................ (432,347) 95,530 (339,754) (810,768) (10,163,976) 15,448,920 Unrealized appreciation/depreciation on investments: Beginning of period......................... 32,760 (14,267) (224,885) (2,736,863) (1,617,237) 1,966,231 End of period............................... 89,976 32,760 (14,267) 145,522 (2,736,863) (1,617,237) ---------- ---------- ---------- ---------- ----------- ----------- Change in unrealized appreciation/depreciation during the period........................... 57,216 47,027 210,618 2,882,385 (1,119,626) (3,583,468) ---------- ---------- ---------- ---------- ----------- ----------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS................................ (375,131) 142,557 (129,136) 2,071,617 (11,283,602) 11,865,452 ---------- ---------- ---------- ---------- ----------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS............................... $7,895,714 $4,685,061 $3,200,140 $3,884,179 $(6,139,293) $25,325,954 ========== ========== ========== ========== =========== ===========
QUALITY BOND DIVISION ------------------------------------------- OCTOBER 1* TO YEAR ENDED DECEMBER 31, DECEMBER 31, --------------------------- ------------ 1995 1994 1993 ----------- ------------ ------------ INCOME AND EXPENSES: Income (Note 2): Dividends from The Hudson River Trust....... $ 7,958,285 $ 8,123,722 $ 1,221,840 Expenses (Note 3): Mortality and expense risk charges.......... 767,627 689,178 163,308 ----------- ------------ ------------ NET INVESTMENT INCOME........................... 7,190,658 7,434,544 1,058,532 ----------- ------------ ------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 2): Realized gain (loss) on investments......... (632,666) (410,697) (106) Realized gain distribution from The Hudson River Trust.................... -- -- 130,973 ----------- ------------ ------------ NET REALIZED GAIN (LOSS)........................ (632,666) (410,697) 130,867 Unrealized appreciation/depreciation on investments: Beginning of period......................... (15,521,200) (1,886,621) -- End of period............................... (2,105,676) (15,521,200) (1,886,621) ----------- ------------ ----------- Change in unrealized appreciation/depreciation during the period........................... 13,415,524 (13,634,579) (1,886,621) ----------- ------------ ----------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS................................ 12,782,858 (14,045,276) (1,755,754) ----------- ------------ ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS............................... $19,973,516 $ (6,610,732) $ (697,222) =========== ============ ===========
See Notes to Financial Statements. * Commencement of Operations FSA-4 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP STATEMENTS OF OPERATIONS (CONTINUED)
HIGH YIELD DIVISION ---------------------------------------- YEAR ENDED DECEMBER 31, ---------------------------------------- 1995 1994 1993 ----------- ----------- ---------- INCOME AND EXPENSES: Income (Note 2): Dividends from The Hudson River Trust................. $ 6,518,568 $ 4,578,946 $4,488,259 Expenses (Note 3): Mortality and expense risk charges.................... 371,369 305,522 285,992 ----------- ----------- ---------- NET INVESTMENT INCOME..................................... 6,147,199 4,273,424 4,202,267 ----------- ----------- ---------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 2): Realized gain (loss) on investments................... (179,454) (328,199) 107,852 Realized gain distribution from The Hudson River Trust.............................. -- -- 1,030,687 ----------- ----------- ---------- NET REALIZED GAIN (LOSS).................................. (179,454) (328,199) 1,138,539 Unrealized appreciation/depreciation on investments: Beginning of period................................... (873,103) 4,734,999 763,746 End of period......................................... 3,823,981 (873,103) 4,734,999 ----------- ----------- ---------- Change in unrealized appreciation/depreciation during the period..................................... 4,697,084 (5,608,102) 3,971,253 ----------- ----------- ---------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS.... 4,517,630 (5,936,301) 5,109,792 ----------- ----------- ---------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS......................................... $10,664,829 $(1,662,877) $9,312,059 =========== =========== ==========
See Notes to Financial Statements.
GROWTH & INCOME DIVISION EQUITY INDEX DIVISION --------------------------------------- -------------------------- OCTOBER 1* APRIL 1* TO YEAR ENDED TO YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, ------------------------ ------------- ----------- ------------- 1995 1994 1993 1995 1994 ---------- --------- ------------- ----------- ------------- INCOME AND EXPENSES: Income (Note 2): Dividends from The Hudson River Trust................. $ 380,677 $ 108,492 $ 3,394 $ 964,775 $ 596,180 Expenses (Note 3): Mortality and expense risk charges.................... 69,716 19,204 1,833 289,199 152,789 ---------- --------- ------- ----------- --------- NET INVESTMENT INCOME..................................... 310,961 89,288 1,561 675,576 443,391 ---------- --------- ------- ----------- --------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 2): Realized gain (loss) on investments................... 2,791 (11,709) (134) 3,060 (6,949) Realized gain distribution from The Hudson River Trust.............................. -- -- -- 536,890 134,154 ---------- --------- ------- ----------- --------- NET REALIZED GAIN (LOSS).................................. 2,791 (11,709) (134) 539,950 127,205 Unrealized appreciation/depreciation on investments: Beginning of period................................... (141,585) (904) -- (399,286) -- End of period......................................... 2,123,346 (141,585) (904) 12,451,765 (399,286) ---------- --------- ------- ----------- --------- Change in unrealized appreciation/depreciation during the period..................................... 2,264,931 (140,681) (904) 12,851,051 (399,286) ---------- --------- ------- ----------- --------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS.... 2,267,722 (152,390) (1,038) 13,391,001 (272,081) ---------- --------- ------- ----------- --------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS......................................... $2,578,683 $ (63,102) $ 523 $14,066,577 $ 171,310 ========== ========= ======= =========== =========
See Notes to Financial Statements. * Commencement of Operations FSA-5 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP STATEMENTS OF OPERATIONS (CONTINUED)
COMMON STOCK DIVISION GLOBAL STOCK DIVISION -------------------------------------------- ----------------------------------------- YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, -------------------------------------------- ----------------------------------------- 1995 1994 1993 1995 1994 1993 ------------ ------------ ------------ ----------- ----------- ----------- INCOME AND EXPENSES: Income (Note 2): Dividends from The Hudson River Trust.................... $ 14,259,262 $ 11,755,355 $ 10,311,886 $ 5,152,442 $ 2,768,605 $ 1,060,406 Expenses (Note 3): Mortality and expense risk charges........................ 6,050,368 4,741,008 4,005,102 1,743,898 1,211,620 466,897 ------------ ------------ ------------ ----------- ----------- ----------- NET INVESTMENT INCOME................ 8,208,894 7,014,347 6,306,784 3,408,544 1,556,985 593,509 ------------ ------------ ------------ ----------- ----------- ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 2): Realized gain (loss) on investments.................... 16,793,683 292,144 4,176,629 3,049,444 3,347,704 1,333,766 Realized gain distribution from The Hudson River Trust......... 63,838,178 43,936,280 85,777,775 9,214,950 4,821,242 11,642,904 ------------ ------------ ------------ ----------- ----------- ----------- NET REALIZED GAIN (LOSS)............. 80,631,861 44,228,424 89,954,404 12,264,394 8,168,946 12,976,670 Unrealized appreciation (depreciation) on investments: Beginning of period.............. (2,048,649) 71,350,568 22,647,989 3,130,280 7,062,877 2,783,724 End of period.................... 181,824,279 (2,048,649) 71,350,568 36,525,596 3,130,280 7,062,877 ------------ ------------ ------------ ----------- ----------- ----------- Change in unrealized appreciation/ depreciation during the period... 183,872,928 (73,399,217) 48,702,579 33,395,316 (3,932,597) 4,279,153 ------------ ------------ ------------ ----------- ----------- ----------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS.............. 264,504,789 (29,170,793) 138,656,983 45,659,710 4,236,349 17,255,823 ------------ ------------ ------------ ----------- ----------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS.......... $272,713,683 $(22,156,446) $144,963,767 $49,068,254 $ 5,793,334 $17,849,332 ============ ============ ============ =========== =========== ===========
See Notes to Financial Statements.
INTERNATIONAL DIVISION AGGRESSIVE STOCK DIVISION -------------- -------------------------------------------- APRIL 3* TO DECEMBER 31, YEAR ENDED DECEMBER 31, -------------- -------------------------------------------- 1995 1995 1994 1993 ---------- ------------ ------------ ------------ INCOME AND EXPENSES: Income (Note 2): Dividends from The Hudson River Trust.................... $195,500 $ 1,268,689 $ 400,102 $ 766,228 Expenses (Note 3): Mortality and expense risk charges........................ 36,471 2,702,978 1,944,639 1,757,109 -------- ------------ ------------ ------------ NET INVESTMENT INCOME................ 159,029 (1,434,289) (1,544,537) (990,881) -------- ------------ ------------ ------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 2): Realized gain (loss) on investments.................... (790) 11,560,966 (6,075,250) 35,696,507 Realized gain distribution from The Hudson River Trust......... 51,741 61,903,470 -- 25,339,962 -------- ------------ ------------ ------------ NET REALIZED GAIN (LOSS)............. 50,951 73,464,436 (6,075,250) 61,036,469 Unrealized appreciation (depreciation) on investments: Beginning of period.............. -- 30,761,318 35,185,988 53,885,737 End of period.................... 667,906 80,271,118 30,761,318 35,185,988 -------- ------------ ------------ ------------ Change in unrealized appreciation/ depreciation during the period... 667,906 49,509,800 (4,424,670) (18,699,749) -------- ------------ ------------ ------------ NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS.............. 718,857 122,974,236 (10,499,920) 42,336,720 -------- ------------ ------------ ------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS.......... $877,886 $121,539,947 $(12,044,457) $ 41,345,839 ======== ============ ============ ============
See Notes to Financial Statements. *Commencement of Operations FSA-6 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP STATEMENTS OF OPERATIONS (CONCLUDED)
ASSET ALLOCATION SERIES --------------------------------------------------------------------------------- CONSERVATIVE INVESTORS DIVISION BALANCED DIVISION -------------------------------------- ---------------------------------------- YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, -------------------------------------- ---------------------------------------- 1995 1994 1993 1995 1994 1993 ----------- ----------- ---------- ----------- ------------ ----------- INCOME AND EXPENSES: Income (Note 2): Dividends from The Hudson River Trust....... $ 8,169,109 $ 6,205,574 $4,088,977 $12,276,328 $ 10,557,487 $10,062,862 Expenses (Note 3): Mortality and expense risk charges.......... 921,294 750,164 551,610 2,237,982 2,103,510 2,047,811 ----------- ----------- ---------- ----------- ------------ ----------- NET INVESTMENT INCOME........................... 7,247,815 5,455,410 3,537,367 10,038,346 8,453,977 8,015,051 ----------- ----------- ---------- ----------- ------------ ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 2): Realized gain (loss) on investments......... (378,551) (421,501) 91,739 (2,466,524) 858,164 1,446,919 Realized gain distribution from The Hudson River Trust.................... 1,068,272 -- 4,651,717 10,894,130 -- 20,280,817 ----------- ----------- ---------- ----------- ------------ ----------- NET REALIZED GAIN (LOSS)........................ 689,721 (421,502) 4,743,456 8,427,606 858,164 21,727,736 Unrealized appreciation (depreciation) on investments: Beginning of period......................... (8,767,697) 1,915,037 2,223,612 (2,878,875) 37,960,661 30,072,900 End of period............................... 10,362,120 (8,767,697) 1,915,037 43,097,187 (2,878,875) 37,960,661 ----------- ----------- ---------- ----------- ------------ ----------- Change in unrealized appreciation/depreciation during the period........................... 19,129,817 (10,682,734) (308,575) 45,976,062 (40,839,536) 7,887,761 ----------- ----------- ---------- ----------- ------------ ----------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS................................ 19,819,538 (11,104,236) 4,434,881 54,403,668 (39,981,372) 29,615,497 ----------- ----------- ---------- ----------- ------------ ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS............................... $27,067,353 $(5,648,826) $7,972,248 $64,442,014 $(31,527,395) $37,630,548 =========== =========== ========== =========== ============ ===========
See Notes to Financial Statements.
ASSET ALLOCATION SERIES ------------------------------------------- GROWTH INVESTORS DIVISION ------------------------------------------- YEAR ENDED DECEMBER 31, ------------------------------------------- 1995 1994 1993 ------------ ------------ ----------- INCOME AND EXPENSES: Income (Note 2): Dividends from The Hudson River Trust......... $ 15,855,901 $ 10,663,204 $ 5,922,228 Expenses (Note 3): Mortality and expense risk charges............ 2,796,354 1,995,747 1,274,117 ------------ ------------ ----------- NET INVESTMENT INCOME............................. 13,059,547 8,667,457 4,648,111 ------------ ------------ ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 2): Realized gain (loss) on investments........... 1,752,185 241,591 52,392 Realized gain distribution from The Hudson River Trust...................... 7,421,853 -- 14,624,517 ------------ ------------ ----------- NET REALIZED GAIN (LOSS).......................... 9,174,038 241,591 14,676,909 Unrealized appreciation (depreciation) on investments: Beginning of period........................... (770,693) 20,567,604 12,746,740 End of period................................. 81,785,873 (770,693) 20,567,604 ------------ ------------ ----------- Change in unrealized appreciation/depreciation during the period............................. 82,556,566 (21,338,297) 7,820,864 ------------ ------------ ----------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS.................................. 91,730,604 (21,096,706) 22,497,773 ------------ ------------ ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS................................. $104,790,151 $(12,429,249) $27,145,884 ============ ============ ===========
See Notes to Financial Statements. FSA-7 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP STATEMENTS OF CHANGES IN NET ASSETS
INTERMEDIATE GOVERNMENT MONEY MARKET DIVISION SECURITIES DIVISION ------------------------------------------ ------------------------------------------- YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, ------------------------------------------ ------------------------------------------- 1995 1994 1993 1995 1994 1993 ------------ ------------ ------------ ----------- ------------- ------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income............. $ 8,270,845 $ 4,542,504 $ 3,329,276 $ 1,812,562 $ 5,144,309 $ 13,460,502 Net realized gain (loss).......... (432,347) 95,530 (339,754) (810,768) (10,163,976) 15,448,920 Change in unrealized appreciation/ depreciation on investments..... 57,216 47,027 210,618 2,882,385 (1,119,626) (3,583,468) ------------ ------------ ------------ ----------- ------------- ------------- Net increase (decrease) from operations................. 7,895,714 4,685,061 3,200,140 3,884,179 (6,139,293) 25,325,954 ------------ ------------ ------------ ----------- ------------- ------------- FROM POLICY-RELATED TRANSACTIONS: Net premiums (Note 3)............. 96,773,056 82,536,703 64,845,505 11,016,347 18,915,140 26,598,113 Benefits and other policy-related transactions (Note 3)........... (39,770,849) (32,432,771) (31,747,197) (6,286,070) (5,813,181) (7,539,335) Net transfers among divisions..... 4,776,165 (25,466,044) (50,510,704) 953,149 (125,116,319) (180,916,946) ------------ ------------ ------------ ----------- ------------- ------------- Net increase (decrease) from policy-related transactions..... 61,778,372 24,637,888 (17,412,396) 5,683,426 (112,014,360) (161,858,168) ------------ ------------ ------------ ----------- ------------- ------------- NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE VARIABLE IN SEPARATE ACCOUNT FP (Note 4)...... (36,640) (24,067) 92,890 (72,636) 15,335 (69,330) ------------ ------------ ------------ ----------- ------------- ------------- INCREASE (DECREASE) IN NET ASSETS... 69,637,446 29,298,882 (14,119,366) 9,494,969 (118,138,318) (136,601,544) NET ASSETS, BEGINNING OF PERIOD..... 137,496,085 108,197,203 122,316,569 27,654,075 145,792,393 282,393,937 ------------ ------------ ------------ ----------- ------------- ------------- NET ASSETS, END OF PERIOD........... $207,133,531 $137,496,085 $108,197,203 $37,149,044 $ 27,654,075 $ 145,792,393 ============ ============ ============ =========== ============= =============
See Notes to Financial Statements.
QUALITY BOND DIVISION ------------------------------------------- OCTOBER 1* TO YEAR ENDED DECEMBER 31, DECEMBER 31, ---------------------------- ----------- 1995 1994 1993 ------------ ------------ ----------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income............. $ 7,190,658 $ 7,434,544 $ 1,058,532 Net realized gain (loss).......... (632,666) (410,697) 130,867 Change in unrealized appreciation/ depreciation on investments..... 13,415,524 (13,634,579) (1,886,621) ------------ ------------ ----------- Net increase (decrease) from operations................. 19,973,516 (6,610,732) (697,222) ------------ ------------ ----------- FROM POLICY-RELATED TRANSACTIONS: Net premiums (Note 3)............. 2,516,135 850,240 181,283 Benefits and other policy-related transactions (Note 3)........... (3,189,044) (2,891,278) (441,626) Net transfers among divisions..... 2,462,969 25,765,197 100,786,909 ------------ ------------ ----------- Net increase (decrease) from policy-related transactions..... 1,790,060 23,724,159 100,526,566 ------------ ------------ ----------- NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE VARIABLE IN SEPARATE ACCOUNT FP (Note 4)...... (712,602) 255,654 38,047 ------------ ------------ ----------- INCREASE (DECREASE) IN NET ASSETS... 21,050,974 17,369,081 99,867,391 NET ASSETS, BEGINNING OF PERIOD..... 117,236,472 99,867,391 -- ------------ ------------ ----------- NET ASSETS, END OF PERIOD........... $138,287,446 $117,236,472 $99,867,391 ============ ============ ===========
See Notes to Financial Statements. *Commencement of Operations FSA-8 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
HIGH YIELD DIVISION ------------------------------------------ YEAR ENDED DECEMBER 31, ------------------------------------------ 1995 1994 1993 ----------- ------------ ----------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income................................... $ 6,147,199 $ 4,273,424 $ 4,202,267 Net realized gain (loss)................................ (179,454) (328,199) 1,138,539 Change in unrealized appreciation/ depreciation on investments........................... 4,697,084 (5,608,102) 3,971,253 ----------- ------------ ----------- Net increase (decrease) from operations................. 10,664,829 (1,662,877) 9,312,059 ----------- ------------ ----------- FROM POLICY-RELATED TRANSACTIONS: Net premiums (Note 3)................................... 15,333,474 14,287,345 10,787,763 Benefits and other policy-related transactions (Note 3)................................. (8,211,013) (7,162,537) (5,179,424) Net transfers among divisions........................... 4,789,450 (11,048,174) 1,006,671 ----------- ------------ ----------- Net increase (decrease) from policy-related transactions.......................................... 11,911,911 (3,923,366) 6,615,010 ----------- ------------ ----------- NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE VARIABLE IN SEPARATE ACCOUNT FP (Note 4)................ (100,679) 16,028 (31,889) ----------- ------------ ----------- INCREASE (DECREASE) IN NET ASSETS......................... 22,476,061 (5,570,215) 15,895,180 NET ASSETS, BEGINNING OF PERIOD........................... 49,454,901 55,025,116 39,129,936 ----------- ------------ ----------- NET ASSETS, END OF PERIOD................................. $71,930,962 $ 49,454,901 $55,025,116 =========== ============ ===========
See Notes to Financial Statements.
GROWTH & INCOME DIVISION EQUITY INDEX DIVISION ------------------------------------- -------------------------- OCTOBER 1* APRIL 1* TO YEAR ENDED TO YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, ------------------------- ----------- ----------- ----------- 1995 1994 1993 1995 1994 ----------- ---------- ----------- ----------- ----------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income................................... $ 310,961 $ 89,288 $ 1,561 $ 675,576 $ 443,391 Net realized gain (loss)................................ 2,791 (11,709) (134) 539,950 127,205 Change in unrealized appreciation/ depreciation on investments........................... 2,264,931 (140,681) (904) 12,851,051 (399,286) ----------- ---------- -------- ----------- ----------- Net increase (decrease) from operations................. 2,578,683 (63,102) 523 14,066,577 171,310 ----------- ---------- -------- ----------- ----------- FROM POLICY-RELATED TRANSACTIONS: Net premiums (Note 3)................................... 6,464,035 2,953,965 182,381 10,308,871 690,540 Benefits and other policy-related transactions (Note 3)................................. (1,385,132) (481,430) (6,581) (2,111,532) (472,818) Net transfers among divisions........................... 5,274,221 3,033,230 279,153 18,305,589 30,736,505 ----------- ---------- -------- ----------- ----------- Net increase (decrease) from policy-related transactions.......................................... 10,353,124 5,505,765 454,953 26,502,928 30,954,227 ----------- ---------- -------- ----------- ----------- NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE VARIABLE IN SEPARATE ACCOUNT FP (Note 4)................ (221,877) 6,113 4,131 (71,293) (134) ----------- ---------- -------- ----------- ----------- INCREASE (DECREASE) IN NET ASSETS......................... 12,709,930 5,448,776 459,607 40,498,212 31,125,403 NET ASSETS, BEGINNING OF PERIOD........................... 5,908,383 459,607 -- 31,125,403 -- ----------- ---------- -------- ----------- ----------- NET ASSETS, END OF PERIOD................................. $18,618,313 $5,908,383 $459,607 $71,623,615 $31,125,403 =========== ========== ======== =========== ===========
See Notes to Financial Statements. *Commencement of Operations FSA-9 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
COMMON STOCK DIVISION GLOBAL STOCK DIVISION -------------------------------------------- ------------------------------------------ YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, -------------------------------------------- ------------------------------------------ 1995 1994 1993 1995 1994 1993 -------------- ------------- ----------- ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income..... $ 8,208,894 $ 7,014,347 $ 6,306,784 $ 3,408,544 $ 1,556,985 $ 593,509 Net realized gain (loss).. 80,631,861 44,228,424 89,954,404 12,264,394 8,168,946 12,976,670 Change in unrealized appreciation/ depreciation on investments............. 183,872,928 (73,399,217) 48,702,579 33,395,316 (3,932,597) 4,279,153 -------------- ------------ ------------ ------------ ------------ ------------ Net increase (decrease) from operations......... 272,713,683 (22,156,446) 144,963,767 49,068,254 5,793,334 17,849,332 -------------- ------------ ------------ ------------ ------------ ------------ FROM POLICY-RELATED TRANSACTIONS: Net premiums (Note 3)..... 216,068,996 171,525,812 124,210,476 92,666,618 77,766,997 25,508,452 Benefits and other policy-related transactions (Note 3)... (118,456,643) (93,481,219) (77,837,895) (37,507,499) (23,371,745) (8,931,159) Net transfers among divisions............... (34,354,864) 19,730,410 (9,498,455) (12,472,104) 47,610,957 59,544,080 -------------- ------------ ------------ ------------ ------------ ------------ Net increase (decrease) from policy-related transactions............ 63,257,489 97,775,003 36,874,126 42,687,015 102,006,209 76,121,373 -------------- ------------ ------------ ------------ ------------ ------------ NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE VARIABLE IN SEPARATE ACCOUNT FP (Note 4).................. (392,099) 44,948 (124,376) (96,720) (17,737) 4,085 -------------- ------------ ------------ ------------ ------------ ------------ INCREASE IN NET ASSETS...... 335,579,073 75,663,505 181,713,517 91,658,549 107,781,806 93,974,790 NET ASSETS, BEGINNING OF PERIOD.................... 811,006,201 735,342,696 553,629,179 241,838,471 134,056,665 40,081,875 -------------- ------------ ------------ ------------ ------------ ------------ NET ASSETS, END OF PERIOD.................... $1,146,585,274 $811,006,201 $735,342,696 $333,497,020 $241,838,471 $134,056,665 ============== ============ ============ ============ ============ ============
See Notes to Financial Statements.
INTERNATIONAL DIVISION AGGRESSIVE STOCK DIVISION ----------- ------------------------------------------ APRIL 3* TO DECEMBER 31, YEAR ENDED DECEMBER 31, ----------- ------------------------------------------ 1995 1995 1994 1993 ----------- ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income..... $ 159,029 $ (1,434,289) $ (1,544,537) $ (990,881) Net realized gain (loss).. 50,951 73,464,436 (6,075,250) 61,036,469 Change in unrealized appreciation/ depreciation on investments............. 667,906 49,509,800 (4,424,670) (18,699,749) ----------- ------------ ------------ ------------ Net increase (decrease) from operations......... 877,886 121,539,947 (12,044,457) 41,345,839 ----------- ------------ ------------ ------------ FROM POLICY-RELATED TRANSACTIONS: Net premiums (Note 3)..... 2,028,670 121,962,483 101,932,221 77,930,596 Benefits and other policy-related transactions (Note 3)... (339,723) (63,165,185) (48,604,650) (39,462,340) Net transfers among divisions............... 9,885,952 19,367,834 4,346,636 (73,890,214) ----------- ------------ ------------ ------------ Net increase (decrease) from policy-related transactions............ 11,574,899 78,165,132 57,674,207 (35,421,958) ----------- ------------ ------------ ------------ NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE VARIABLE IN SEPARATE ACCOUNT FP (Note 4).................. (20,847) (188,813) 35,791 (2,220) ----------- ------------ ------------ ------------ INCREASE IN NET ASSETS...... 12,431,938 199,516,266 45,665,541 5,921,661 NET ASSETS, BEGINNING OF PERIOD.................... 0 355,671,865 310,006,324 304,084,663 ----------- ------------ ------------ ------------ NET ASSETS, END OF PERIOD.................... $12,431,938 $555,188,131 $355,671,865 $310,006,324 =========== ============ ============ ============
See Notes to Financial Statements. *Commencement of Operations FSA-10 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP STATEMENTS OF CHANGES IN NET ASSETS (CONCLUDED)
ASSET ALLOCATION SERIES ----------------------------------------------------------------------------------------- CONSERVATIVE INVESTORS DIVISION BALANCED DIVISION ------------------------------------------- ------------------------------------------ YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, ------------------------------------------- ------------------------------------------ 1995 1994 1993 1995 1994 1993 ------------- ------------ ------------ ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income.............. $ 7,247,815 $ 5,455,410 $ 3,537,367 $ 10,038,346 $ 8,453,977 $ 8,015,051 Net realized gain (loss)........... 689,721 (421,502) 4,743,456 8,427,606 858,164 21,727,736 Change in unrealized appreciation/ depreciation on investments...... 19,129,817 (10,682,734) (308,575) 45,976,062 (40,839,536) 7,887,761 ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) from operations.................. 27,067,353 (5,648,826) 7,972,248 64,442,014 (31,527,395) 37,630,548 ------------ ------------ ------------ ------------ ------------ ------------ FROM POLICY-RELATED TRANSACTIONS: Net premiums (Note 3).............. 41,419,959 48,492,315 43,782,002 63,451,955 70,116,900 67,351,402 Benefits and other policy-related transactions (Note 3)............ (22,866,003) (21,612,430) (17,644,077) (48,742,571) (45,655,363) (44,497,967) Net transfers among divisions...... (3,379,296) (2,076,793) 6,165,330 (18,908,540) (19,954,097) (6,834,099) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) from policy-related transactions...... 15,174,660 24,803,092 32,303,255 (4,199,156) 4,507,440 16,019,336 ------------ ------------ ------------ ------------ ------------ ------------ NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE VARIABLE IN SEPARATE ACCOUNT FP (Note 4).... (95,412) 22,600 18,535 (93,214) 47,322 256,506 ------------ ------------ ------------ ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS.... 42,146,601 19,176,866 40,294,038 60,149,644 (26,972,633) 53,906,390 NET ASSETS, BEGINNING OF PERIOD...... 129,940,498 110,763,632 70,469,594 338,415,565 365,388,198 311,481,808 ------------ ------------ ------------ ------------ ------------ ------------ NET ASSETS, END OF PERIOD............ $172,087,099 $129,940,498 $110,763,632 $398,565,209 $338,415,565 $365,388,198 ============ ============ ============ ============ ============ ============
See Notes to Financial Statements.
ASSET ALLOCATION SERIES -------------------------------------------- GROWTH INVESTORS DIVISION -------------------------------------------- YEAR ENDED DECEMBER 31, -------------------------------------------- 1995 1994 1993 ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income.............. $ 13,059,547 $ 8,667,457 $ 4,648,111 Net realized gain (loss)........... 9,174,038 241,591 14,676,909 Change in unrealized appreciation/ depreciation on investments...... 82,556,566 (21,338,297) 7,820,864 ------------ ------------ ------------ Net increase (decrease) from operations.................. 104,790,151 (12,429,249) 27,145,884 ------------ ------------ ------------ FROM POLICY-RELATED TRANSACTIONS: Net premiums (Note 3).............. 155,616,059 139,140,391 105,136,825 Benefits and other policy-related transactions (Note 3)............ (68,357,709) (54,863,821) (36,431,873) Net transfers among divisions...... (3,269,896) 20,294,785 30,908,183 ------------ ------------ ------------ Net increase (decrease) from policy-related transactions...... 83,988,454 104,571,355 99,613,135 ------------ ------------ ------------ NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE VARIABLE IN SEPARATE ACCOUNT FP (Note 4).... (120,493) 15,372 (27,455) ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS.... 188,658,112 92,157,478 126,731,564 NET ASSETS, BEGINNING OF PERIOD...... 367,219,554 275,062,076 148,330,512 ------------ ------------ ------------ NET ASSETS, END OF PERIOD............ $555,877,666 $367,219,554 $275,062,076 ============ ============ ============
See Notes to Financial Statements. FSA-11 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995 1. General Equitable Variable Life Insurance Company (Equitable Variable Life), a wholly-owned subsidiary of The Equitable Life Assurance Society of the United States (Equitable Life), established Separate Account FP (the Account) as a unit investment trust registered with the Securities and Exchange Commission under the Investment Company Act of 1940. The Account consists of thirteen investment divisions: the Money Market Division, the Intermediate Government Securities Division, the High Yield Division, the Balanced Division, the Common Stock Division, the Global Division, the Aggressive Stock Division, the Conservative Investors Division, the Growth Investors Division, the Growth & Income Division, the Quality Bond Division, the Equity Index Division and the International Division. The assets in each Division are invested in shares of a designated portfolio (Portfolio) of a mutual fund, The Hudson River Trust (the Trust). Each Portfolio has separate investment objectives. The Account supports the operations of Incentive Life,(TM) flexible premium variable life insurance policies, Incentive Life 2000,(TM) flexible premium variable life insurance policies, Champion 2000,(TM) modified premium variable whole life insurance policies, Survivorship 2000,(TM) flexible premium joint survivorship variable life insurance policies, Incentive Life Plus,(TM) flexible premium variable life insurance policies and SP-Flex,(TM) variable life insurance policies with additional premium option, collectively, the Policies, and the Incentive Life 2000, Champion 2000 and Survivorship 2000 policies are referred to as the Series 2000 Policies. Incentive Life policies offered with the prospectus dated September 15, 1995, are referred to as Incentive Life Plus Second Series. Incentive Life Plus policies issued with a prior prospectus are referred to as Incentive Life Plus Original Series. All Policies are issued by Equitable Variable. The assets of the Account are the property of Equitable Variable. However, the portion of the Account's assets attributable to the Policies will not be chargeable with liabilities arising out of any other business Equitable Variable may conduct. Policyowners may allocate amounts in their individual accounts to the Divisions of the Account and/or (except for SP-Flex policies) to the guaranteed interest division of Equitable Variable Life's General Account. Net transfers to the guaranteed interest division of the General Account and other Separate Accounts of $6,569,372, $35,120,632 and $125,668,098 for the years ended 1995, 1994 and 1993, respectively, are included in Net Transfers Among Divisions. The net assets of any Division of the Account may not be less than the aggregate of the policyowners' accounts allocated to that Division. Additional assets are set aside in Equitable Variable Life's General Account to provide for (1) the unearned portion of the monthly charges for mortality costs, and (2) other policy benefits, as required under the state insurance law. 2. Significant Accounting Policies The accompanying financial statements are prepared in conformity with generally accepted accounting principles (GAAP). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Investments are made in shares of the Trust and are valued at the net asset values per share of the respective Portfolios. The net asset value is determined by the Trust using the market or fair value of the underlying assets of the Portfolio. Investment transactions are recorded on the trade date. Realized gains and losses include gains and losses on redemptions of the Trust's shares (determined on the identified cost basis) and Trust distributions representing the net realized gains on Trust investment transactions. The operations of the Account are included in the consolidated Federal income tax return of Equitable Life. Under the provisions of the Policies, Equitable Variable Life has the right to charge the Account for Federal income tax attributable to the Account. No charge is currently being made against the Account for such tax since, under current tax law, Equitable Variable Life pays no tax on investment income and capital gains reflected in variable life insurance policy reserves. However, Equitable Variable Life retains the right to charge for any Federal income tax incurred which is attributable to the Account if the law is changed. Charges for state and local taxes, if any, attributable to the Account also may be made. Dividends are recorded as income at the end of each quarter on the ex-dividend date. Capital gains are distributed by the Trust at the end of each year. 3. Asset Charges Under the Policies, Equitable Variable Life assumes mortality and expense risks and, to cover these risks, deducts charges from the assets of the Account currently at annual rates of 0.60% of the net assets attributable to Incentive Life, Incentive Life 2000, Incentive Life Plus Second Series and Champion 2000 policyowners, 0.90% of net assets attributable to Survivorship 2000 policyowners, and 0.85% for SP-Flex policyowners. Incentive Life Plus Original Series deducts this charge from the Policy Account. Under SP-Flex, Equitable Variable Life also deducts charges from the assets of the Account for mortality and administrative costs of 0.60% and 0.35%, respectively, of net assets attributable to SP-Flex policies. FSA-12 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 1995 Under Incentive Life, Incentive Life Plus and the Series 2000 Policies, mortality and administrative costs are charged in a different manner than SP-Flex policies (see Notes 4 and 5). Before amounts are allocated to the Account for Incentive Life, Incentive Life Plus and the Series 2000 Policies, Equitable Variable Life deducts a charge for taxes and either an initial policy fee (Incentive Life) or a premium sales charge (Incentive Life Plus and Series 2000 Policies) from premiums. Under SP-Flex, the entire initial premium is allocated to the Account. Before any additional premiums under SP-Flex are allocated to the Account, an administrative charge is deducted. The amounts attributable to Incentive Life, Incentive Life Plus and the Series 2000 policyowners' accounts are charged monthly by Equitable Variable Life for mortality and administrative costs. These charges are withdrawn from the Account along with amounts for additional benefits. Under the Policies, amounts for certain policy-related transactions (such as policy loans and surrenders) are transferred out of the Separate Account. 4. Amounts Retained by Equitable Variable Life in Separate Account FP The amount retained by Equitable Variable Life in the Account arises principally from (1) contributions from Equitable Variable Life, and (2) that portion, determined ratably, of the Account's investment results applicable to those assets in the Account in excess of the net assets for the Policies. Amounts retained by Equitable Variable Life are not subject to charges for mortality and expense risks or mortality and administrative costs. Amounts retained by Equitable Variable Life in the Account may be transferred at any time by Equitable Variable Life to its General Account. The following table shows the surplus contributions (withdrawals) by Equitable Variable Life by investment division:
INVESTMENT DIVISION 1995 1994 1993 ------------------- ----------- ----------- ---------- Common Stock $ (630,000) -- -- Money Market (250,000) -- $1,145,000 Balanced -- -- -- Aggressive Stock (350,000) -- -- High Yield (100,000) -- 330,000 Global (130,000) -- (6,895,000) Conservative Investors -- -- 575,000 Growth Investors -- -- 130,000 Short-Term World Income -- $(5,165,329) -- Intermediate Government Securities (165,000) -- -- Growth & Income (685,000) -- 1,000,000 Quality Bond (4,800,000) -- 5,000,000 Equity Index -- 200,000 -- International 200,000 -- -- ----------- ----------- ---------- $(6,910,000) $(4,965,329) $1,285,000 =========== =========== ==========
5. Distribution and Servicing Agreements Equitable Variable Life has entered into a Distribution and Servicing Agreement with Equitable Life and Equico Securities Inc. (Equico), whereby registered representatives of Equico, authorized as variable life insurance agents under applicable state insurance laws, sell the Policies. The registered representatives are compensated on a commission basis by Equitable Life. Equitable Variable Life also has entered into an agreement with Equitable Life under which Equitable Life performs the administrative services related to the Policies, including underwriting and issuance, billings and collections, and policyowner services. There is no charge to the Account related to this agreement. 6. Share Substitution On February 22, 1994, Equitable Variable Life, the Account and the Trust substituted shares of the Trust's Intermediate Government Securities Portfolio for shares of the Trust's Short-Term World Income Portfolio. The amount transferred to Intermediate Government Securities Portfolio was $2,192,109. The statements of operations and statements of changes in net assets for the Intermediate Government Securities Portfolio is combined with the Short-Term World Income Portfolio for periods prior to the merger on February 22, 1994. The Short-Term World Income Division is not available for future investment. FSA-13 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 1995 7. Investment Returns The Separate Account rates of return attributable to Incentive Life, Incentive Life 2000, Incentive Life Plus Second Series and Champion 2000 policyowners are different than those attributable to Survivorship 2000, Incentive Life Plus Original Series and to SP-Flex policyowners because asset charges are deducted at different rates under each policy (see Note 3). The tables on this page and the following pages show the gross and net investment returns with respect to the Divisions for the periods shown. The net return for each Division is based upon net assets for a policy whose policy commences with the beginning date of such period and is not based on the average net assets in the Division during such period. Gross return is equal to the total return earned by the underlying Trust investment. RATES OF RETURN: INCENTIVE LIFE, - -------------- INCENTIVE LIFE 2000, - -------------------- INCENTIVE LIFE PLUS SECOND SERIES - --------------------------------- AND CHAMPION 2000* - -----------------
JANUARY 26(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, ---------------------------------------------------------------------------------------------------- MONEY MARKET DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 - --------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return.............. 5.74 % 4.02 % 3.00 % 3.56 % 6.18 % 8.24 % 9.18 % 7.32 % 6.63 % 6.05 % Net return................ 5.11 % 3.39 % 2.35 % 2.94 % 5.55 % 7.59 % 8.53 % 6.68 % 5.99 % 5.47 %
APRIL 1(A) TO INTERMEDIATE YEAR ENDED DECEMBER 31, DECEMBER 31, GOVERNMENT ----------------------------------------------- SECURITIES DIVISION 1995 1994 1993 1992 1991 - ------------------- ---- ---- ---- ---- ---- Gross return.............. 13.33 % (4.37)% 10.58 % 5.60 % 12.26 % Net return................ 12.65 % (4.95)% 9.88 % 4.96 % 11.60 % YEAR ENDED OCTOBER 1(A) DECEMBER 31, DECEMBER 31, ---------------------------------- QUALITY BOND DIVISION 1995 1994 1993 - --------------------- ---- ---- ---- Gross return.............. 17.02 % (5.10)% (0.51)% Net return................ 16.32 % (5.67)% (0.66)%
JANUARY 26(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, ---------------------------------------------------------------------------------------------------- HIGH YIELD DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 - ------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return.............. 19.92 % (2.79)% 23.15 % 12.31 % 24.46 % (1.12)% 5.13 % 9.73 % 4.68 % -- Net return................ 19.20 % (3.37)% 22.41 % 11.64 % 23.72 % (1.71)% 4.50 % 9.08 % 4.05 % --
YEAR ENDED OCTOBER 1(A) TO DECEMBER 31, DECEMBER 31, ---------------------------------- GROWTH & INCOME DIVISION 1995 1994 1993 - ------------------------- ---- ---- ---- Gross return.............. 24.07 % (0.58)% (0.25)% Net return................ 23.33 % (1.17)% (0.41)% YEAR ENDED MARCH 31(A) TO DECEMBER 31, DECEMBER 31, ----------------------------------- EQUITY INDEX DIVISION 1995 1994 - --------------------- ---- ---- Gross return.............. 36.48 % 1.08 % Net return................ 35.66 % 0.58 % - ------------------------------- * Sales of Incentive Life 2000 and Champion 2000 commenced on March 2, 1992. Sales of Incentive Life Plus Second Series commenced on September 15, 1995. (a) Date as of which net premiums under the policies were first allocated to the Division. The gross return and the net return for the periods indicated are not annual rates of return. FSA-14 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 1995
JANUARY 26(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, ---------------------------------------------------------------------------------------------------- COMMON STOCK DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 - --------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return.............. 32.45 % (2.14)% 24.84 % 3.22 % 37.88 % (8.12)% 25.59 % 22.43 % 7.49 % 15.65 % Net return................ 31.66 % (2.73)% 24.08 % 2.60 % 37.06 % (8.67)% 24.84 % 21.70 % 6.84 % 15.01 %
AUGUST 31(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, ------------------------------------------------------------------------------------------- GLOBAL DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 - --------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return.............. 18.81 % 5.23 % 32.09 % (0.50)% 30.55 % (6.07)% 26.93 % 10.88 % (13.27)% Net return................ 18.11 % 4.60 % 31.33 % (1.10)% 29.77 % (6.63)% 26.17 % 10.22 % (13.45)%
APRIL 3(A) TO DECEMBER 31, INTERNATIONAL DIVISION 1995 - ---------------------- ---------- Gross return.............. 11.29 % Net return................ 10.79 %
JANUARY 26(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, ---------------------------------------------------------------------------------------------------- AGGRESSIVE STOCK DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 - -------------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return.............. 31.63 % (3.81)% 16.77 % (3.16)% 86.86 % 8.17 % 43.50 % 1.17 % 7.31 % 35.88 % Net return................ 30.85 % (4.39)% 16.05 % (3.74)% 85.75 % 7.51 % 42.64 % 0.53 % 6.66 % 35.13 %
JANUARY 26(A) TO ASSET ALLOCATION SERIES YEAR ENDED DECEMBER 31, DECEMBER 31, ------------------------------------------------------------------------------------------------------ BALANCED DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 - ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return.............. 19.75 % (8.02)% 12.28 % (2.84)% 41.26 % 0.24 % 25.83 % 13.27 % (0.85)% 29.07 % Net return................ 19.03 % (8.57)% 11.64 % (3.42)% 40.42 % (0.36)% 25.08 % 12.59 % (1.45)% 28.34 %
OCTOBER 2(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, CONSERVATIVE -------------------------------------------------------------------------------- INVESTORS DIVISION 1995 1994 1993 1992 1991 1990 1989 - ------------------ ---- ---- ---- ---- ---- ---- ---- Gross return.............. 20.40 % (4.10)% 10.76 % 5.72 % 19.87 % 6.37 % 3.09 % Net return................ 19.68 % (4.67)% 10.15 % 5.09 % 19.16 % 5.73 % 2.94 %
GROWTH INVESTORS DIVISION 1995 1994 1993 1992 1991 1990 1989 - ------------------------- ---- ---- ---- ---- ---- ---- ---- Gross return.............. 26.37 % (3.15)% 15.26 % 4.90 % 48.89 % 10.66 % 3.98 % Net return................ 25.62 % (3.73)% 14.58 % 4.27 % 48.01 % 10.00 % 3.82 %
- ---------------------------- * Sales of Incentive Life 2000 and Champion 2000 commenced on March 2, 1992. (a) Date as of which net premiums under the policies were first allocated to the Division. The gross return and the net return for the periods indicated are not annual rates of return. RATES OF RETURN: SURVIVORSHIP 2000 - ----------------- AUGUST 17(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, --------------------------------------------------- MONEY MARKET DIVISION 1995 1994 1993 1992 - --------------------- ---- ---- ---- ---- Gross return.............. 5.74 % 4.02 % 3.00 % 1.11 % Net return................ 4.80 % 3.08 % 2.04 % 0.77 % INTERMEDIATE GOVERNMENT SECURITIES DIVISION 1995 1994 1993 1992 - ------------------- ---- ---- ---- ---- Gross return.............. 13.33 % (4.37)% 10.58 % 0.90 % Net return................ 12.31 % (5.23)% 9.55 % 0.56 % - ---------- (a) Date as of which net premiums under the policies were first allocated to the Division. The gross return and the net return for the periods indicated are not annual rates of return. FSA-15 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 1995 OCTOBER 1(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, ------------------------------------------------ QUALITY BOND DIVISION 1995 1994 1993 - --------------------- ---- ---- ---- Gross return.............. 17.02 % (5.10)% (0.51)% Net return................ 15.97 % (5.95)% (0.73)% AUGUST 17(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, --------------------------------------------------- HIGH YIELD DIVISION 1995 1994 1993 1992 - ------------------- ---- ---- ---- ---- Gross return.............. 19.92 % (2.79)% 23.15 % 1.84 % Net return................ 18.84 % (3.66)% 22.04 % 1.50 % OCTOBER 1(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, -------------------------------------------------- GROWTH & INCOME DIVISION 1995 1994 1993 - ------------------------ ---- ---- ---- Gross return.............. 24.07 % (0.58)% (0.25)% Net return................ 22.96 % (1.47)% (0.48)% YEAR ENDED MARCH 1(A) TO DECEMBER 31, DECEMBER 31, ------------------------------ EQUITY INDEX DIVISION 1995 1994 - --------------------- ---- ---- Gross return.............. 36.48 % 1.08 % Net return................ 35.26 % 0.33 % AUGUST 17(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, --------------------------------------------------- COMMON STOCK DIVISION 1995 1994 1993 1992 - --------------------- ---- ---- ---- ---- Gross return.............. 32.45 % (2.14)% 24.84 % 5.28 % Net return................ 31.26 % (3.02)% 23.70 % 4.93 % GLOBAL DIVISION - --------------- Gross return.............. 18.81 % 5.23 % 32.09 % 4.87 % Net return................ 17.75 % 4.29 % 30.93 % 4.52 % APRIL 3(A) TO DECEMBER 31, ---------------- INTERNATIONAL DIVISION 1995 - ---------------------- ---- Gross return.............. 11.29 % Net return................ 10.55 % AUGUST 17(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, --------------------------------------------------- AGGRESSIVE STOCK DIVISION 1995 1994 1993 1992 - ------------------------- ---- ---- ---- ---- Gross return.............. 31.63 % (3.81)% 16.77 % 11.49 % Net return................ 30.46 % (4.68)% 15.70 % 11.11 % ASSET ALLOCATION SERIES AUGUST 17(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, CONSERVATIVE INVESTORS -------------------------------------------------- DIVISION 1995 1994 1993 1992 - -------- ---- ---- ---- ---- Gross return.............. 20.40 % (4.10)% 10.76 % 1.38 % Net return................ 19.32 % (4.96)% 9.81 % 1.04 % BALANCED DIVISION 1995 1994 1993 1992 - ----------------- ---- ---- ---- ---- Gross return.............. 19.75 % (8.02)% 12.28 % 5.37 % Net return................ 18.68 % (8.84)% 11.30 % 5.02 % GROWTH INVESTORS DIVISION 1995 1994 1993 1992 - ------------------------- ---- ---- ---- ---- Gross return.............. 26.37 % (3.15)% 15.26 % 6.89 % Net return................ 25.24 % (4.02)% 14.24 % 6.53 % - ---------- (a) Date as of which net premiums under the policies were first allocated to the Division. The gross return and the net return for the periods indicated are not annual rates of return. FSA-16 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31,1995 RATES OF RETURN: INCENTIVE LIFE PLUS ORIGINAL SERIES*(B) - --------------------------------------- YEAR ENDED DECEMBER 31, ------------------------- 1995 ---- Money Market Division ........... 5.69% Intermediate Government Securities Division ............. 13.31% Quality Bond Division ........... 17.13% High Yield Division ............. 19.95% Growth & Income Division ........ 24.38% Equity Index Division ........... 36.53% Common Stock Division ........... 33.07% Global Division ................. 19.38% APRIL 30 TO DECEMBER 31, ------------------------ 1995 ---- International Division .......... 11.29% YEAR ENDED DECEMBER 31, ------------------------ 1995 ---- Aggressive Stock Division ....... 33.00% ASSET ALLOCATION SERIES ......... YEAR ENDED DECEMBER 31, ------------------------ 1995 ---- Conservative Investors Division . 20.59% Balanced Division ............... 20.32% Growth Investors Division ....... 26.92% - -------------------- *Sales of Incentive Life Plus Original Series commenced on January 6, 1995. (b) There are no Separate Account asset charges for this policy and therefore the gross and net rates of return are the same. The rate of return for the period indicated is not an annual rate of return. FSA-17 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31,1995 RATES OF RETURN: SP-FLEX - -------
AUGUST 31(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, ------------------------------------------------------------------------------------------- MONEY MARKET DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 - --------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return.............. 5.74 % 4.02 % 3.00 % 3.56 % 6.17 % 8.24 % 9.18 % 7.32 % 2.15 % Net return................ 3.86 % 2.17 % 1.13 % 1.71 % 4.29 % 6.30 % 7.24 % 5.41 % 1.62 %
APRIL 1(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, INTERMEDIATE GOVERNMENT -------------------------------------------------- SECURITIES DIVISION 1995 1994 1993 1992 1991 - ------------------- ---- ---- ---- ---- ---- Gross return.............. 13.33 % (4.37) % 10.58 % 5.60 % 12.10 % Net return................ 11.31 % (6.08) % 8.57 % 3.71 % 10.59 % YEAR ENDED SEPTEMBER 1(A) TO DECEMBER 31, DECEMBER 31, ------------------------------- QUALITY BOND DIVISION 1995 1994 - --------------------- ---- ---- Gross return.............. 17.02 % (2.20)% Net return................ 14.94 % (2.35)%
AUGUST 31(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, ------------------------------------------------------------------------------------------- HIGH YIELD DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 - ------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return.............. 19.92 % (2.79)% 23.15 % 12.31 % 24.46 % (1.12)% 5.13 % 9.73 % 1.95 % Net return................ 17.79 % (4.52)% 20.96 % 10.30 % 22.25 % (2.89)% 3.26 % 7.78 % 1.39 %
YEAR ENDED SEPTEMBER 1(A) TO DECEMBER 31, DECEMBER 31, --------------------------------- GROWTH & INCOME DIVISION 1995 1994 - ------------------------ ---- ---- Gross return.............. 24.07 % (3.40)% Net return................ 21.87 % (3.55)% EQUITY INDEX DIVISION 1995 1994 - --------------------- ---- ---- Gross return.............. 36.48 % (2.54)% Net return................ 34.06 % (2.69)%
AUGUST 31(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, -------------------------------------------------------------------------------------------- COMMON STOCK DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 - --------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return.............. 32.45 % 2.14 % 24.84 % 3.23 % 37.87 % (8.12)% 25.59 % 22.43 % (22.57)% Net return................ 30.10 % (3.88)% 22.60 % 1.38 % 35.43 % (9.76)% 23.36 % 20.26 % (23.00)% GLOBAL DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 - --------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return.............. 18.81 % 5.23 % 32.09 % (0.50)% 30.55 % (6.07)% 26.93 % 10.88 % (11.40)% Net return................ 16.70 % 3.36 % 29.77 % (2.28)% 28.23 % (7.75)% 24.67 % 8.90 % (11.86)%
APRIL 3(A) TO DECEMBER 31, ------------- INTERNATIONAL DIVISION 1995 - ---------------------- ---- Gross return.............. 11.29 % Net return................ 9.82 %
AUGUST 31(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, -------------------------------------------------------------------------------------------- AGGRESSIVE STOCK DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 - ------------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return.............. 31.63 % 3.81 % 16.77 % (3.16)% 86.86 % 8.17 % 43.50 % 1.17 % (24.28)% Net return................ 29.30 % (5.53)% 14.67 % (4.89)% 83.54 % 6.23 % 40.95 % (0.66)% (24.68)%
- ------------------------------ (a) Date as of which net premiums under the policies were first allocated to the Division. The gross return and the net return for the periods indicated are not annual rates of return. FSA-18 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 1995 ASSET ALLOCATION SERIES YEAR ENDED SEPTEMBER 1(A) TO DECEMBER 31, DECEMBER 31, CONSERVATIVE INVESTORS --------------------------------------- DIVISION 1995 1994 - -------- ---- ---- Gross return.......... 20.40 % (1.83)% Net return............ 18.26 % (1.98)%
AUGUST 31(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, ------------------------------------------------------------------------------------------------- BALANCED DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 - ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return.......... 19.75 % (8.02)% 12.28 % (2.83)% 41.27 % 0.24 % 25.83 % 13.27 % (20.26)% Net return............ 17.62 % (9.66)% 10.31 % (4.57)% 38.75 % (1.56)% 23.59 % 11.25 % (20.71)%
YEAR ENDED SEPTEMBER 1(A) TO DECEMBER 31, DECEMBER 31, GROWTH INVESTORS ------------------------------------ DIVISION 1995 1994 - -------- ---- ---- Gross return........... 26.37 % (3.16)% Net return............. 24.12 % (3.31)% - ------------------------- (a) Date as of which net premiums under the policies were first allocated to the Division. The gross return and the net return for the periods indicated are not annual rates of return. 8. Subsequent Event On September 19, 1996 the Board of Directors of Equitable Life approved an Agreement and Plan of Merger by and between Equitable Life and Equitable Variable Life (the "Merger Agreement"). The merger is expected to be effective on January 1, 1997, subject to receipt of all necessary regulatory approvals. On that date, and in accordance with the provisions of the Merger Agreement, the separate existence of Equitable Variable Life will cease and Equitable Life will survive the merger. From and after the effective date of the merger, Equitable Life will be liable in place of Equitable Variable Life for the liabilities and obligations of Equitable Variable Life, including liabilities under policies and contracts issued by Equitable Variable Life, and all of Equitable Variable Life's assets will become assets of Equitable Life. FSA-19 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP STATEMENTS OF ASSETS AND LIABILITIES SEPTEMBER 30, 1996 (UNAUDITED)
FIXED INCOME SERIES EQUITY SERIES ------------------------------------------------------------------ ------------------------------- INTERMEDIATE MONEY GOVERNMENT QUALITY HIGH GROWTH & EQUITY COMMON MARKET SECURITIES BOND YIELD INCOME INDEX STOCK FUND FUND FUND FUND FUND FUND FUND ------------ ------------ -------------- ------------ ------------- --------------- -------------- ASSETS Investments in shares of The Hudson River Trust -- at market value (Notes 2 and 6) Cost: $165,564,928....... $165,937,243 43,750,516....... $43,305,378 154,236,243....... $147,904,622 87,558,526....... $95,912,162 27,455,859....... $31,071,304 97,100,736....... $119,477,987 1,194,664,886....... $1,481,486,712 351,595,598....... 33,337,481....... 661,363,283....... 166,617,325....... 381,690,336....... 608,848,116....... Receivable for shares of The Hudson River Trust ................ -- 25,723 95,980 -- -- -- -- Receivable for policy- related transactions 3,827,870 -- -- -- 86,467 196,738 -- ------------ ----------- ------------ ----------- ----------- ------------ -------------- Total Assets ............. 169,765,113 43,331,101 148,000,602 95,912,162 31,157,771 119,674,725 1,481,486,712 ------------ ----------- ------------ ----------- ----------- ------------ -------------- LIABILITIES Payable for purchases of shares of The Hudson River Trust .......... 3,912,050 -- -- 43,386 93,070 199,909 197,381 Payable for policy- related transactions -- 43,270 154,723 3,328 -- -- 169,260 Amount retained by Equitable Variable in Separate Account FP (Note 4) .......... 574,980 528,646 633,857 688,420 579,643 313,444 1,309,288 ------------ ----------- ------------ ----------- ----------- ------------ -------------- Total Liabilities ........ 4,487,030 571,916 788,580 735,134 672,713 513,353 1,675,929 ------------ ----------- ------------ ----------- ----------- ------------ -------------- NET ASSETS ATTRIBUTABLE TO POLICYOWNERS ...... $165,278,083 $42,759,185 $147,212,022 $95,177,028 $30,485,058 $119,161,372 $1,479,810,783 ============ =========== ============ =========== =========== ============ ==============
See Notes to Financial Statements.
EQUITY SERIES ASSET ALLOCATION SERIES ------------------------------------------- ------------------------------------------- AGGRESSIVE CONSERVATIVE GROWTH GLOBAL INTERNATIONAL STOCK INVESTORS BALANCED INVESTORS FUND FUND FUND FUND FUND FUND -------------- ------------- ------------- ------------- -------------- -------------- ASSETS Investments in shares of The Hudson River Trust -- at market value (Notes 2 and 6) Cost: $165,564,928....... 43,750,516....... 154,236,243....... 87,558,526....... 27,455,859....... 97,100,736....... 1,194,664,886....... 351,595,598....... $403,967,887 33,337,481....... $35,007,334 661,363,283....... $745,660,006 166,617,325....... $170,418,342 381,690,336....... $415,550,419 608,848,116....... $659,684,627 Receivable for shares of The Hudson River Trust ................ -- -- 3,329,166 98,112 207,444 -- Receivable for policy- related transactions 368,849 120,728 -- -- -- -- ------------ ----------- ------------ ------------ ------------ ------------ Total Assets ............. 404,336,736 35,128,062 748,989,172 170,516,454 415,757,863 659,684,627 ------------ ----------- ------------ ------------ ------------ ------------ LIABILITIES Payable for purchases of shares of The Hudson River Trust .......... 181,369 96,161 -- -- -- 250,106 Payable for policy- related transactions -- -- 3,650,196 129,358 478,338 78,373 Amount retained by Equitable Variable in Separate Account FP (Note 4) .......... 576,659 237,480 715,086 584,802 690,475 677,559 ------------ ----------- ------------ ------------ ------------ ------------ Total Liabilities ........ 758,028 333,641 4,365,282 714,160 1,168,813 1,006,038 ------------ ----------- ------------ ------------ ------------ ------------ NET ASSETS ATTRIBUTABLE TO POLICYOWNERS ...... $403,578,708 $34,794,421 $744,623,890 $169,802,294 $414,589,050 $658,678,589 ============ =========== ============ ============ ============ ============ See Notes to Financial Statements.
FSA-20 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP STATEMENTS OF OPERATIONS FOR NINE MONTHS ENDED SEPTEMBER 30, (UNAUDITED)
INTERMEDIATE GOVERNMENT MONEY MARKET FUND SECURITIES FUND -------------------------- ------------------------- 1996 1995 1996 1995 ----------- ---------- ---------- ---------- INCOME AND EXPENSES: Income (Note 2): Dividends from The Hudson River Trust ............ $ 6,300,108 $6,517,222 $1,696,840 $1,479,090 Expenses (Note 3): Mortality and expense risk charges ............... 738,965 647,879 177,582 143,478 ----------- ---------- ---------- ---------- NET INVESTMENT INCOME .................................... 5,561,143 5,869,343 1,519,258 1,335,612 ----------- ---------- ---------- ---------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 2): Realized gain (loss) on investments .............. (149,139) (208,460) (408,620) (768,233) Realized gain distribution from The Hudson River Trust ........................ -- -- -- -- ----------- ---------- ---------- ---------- NET REALIZED GAIN (LOSS) ................................. (149,139) (208,460) (408,620) (768,233) ----------- ---------- ---------- ---------- Unrealized appreciation (depreciation) on investments: Beginning of period .............................. 89,976 32,760 145,522 2,736,863 End of period .................................... 372,315 (240,472) (445,138) (463,025) ----------- ---------- ---------- ---------- Change in unrealized appreciation (depreciation) during the period ................................ 282,339 (273,232) (590,660) 2,273,838 ----------- ---------- ---------- ---------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS ....................................... 133,200 (481,692) (999,280) 1,505,605 ----------- ---------- ---------- ---------- NET INCREASE IN NET ASSETS RESULTING ..................... FROM OPERATIONS ...................................... $ 5,694,343 $5,387,651 $ 519,978 $2,841,217 =========== ========== ========== ==========
See Notes to Financial Statements.
QUALITY BOND FUND HIGH YIELD FUND -------------------------- ------------------------- 1996 1995 1996 1995 ---------- ----------- ---------- ---------- INCOME AND EXPENSES: Income (Note 2): Dividends from The Hudson River Trust ............ $6,372,295 $ 6,057,328 $6,020,378 $4,515,142 Expenses (Note 3): Mortality and expense risk charges ............... 639,290 564,909 365,819 266,220 ---------- ----------- ---------- ---------- NET INVESTMENT INCOME .................................... 5,733,005 5,492,419 5,654,559 4,248,922 ---------- ----------- ---------- ---------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 2): Realized gain (loss) on investments .............. (220,874) (377,247) 372,478 (275,035) Realized gain distribution from The Hudson River Trust ........................ -- -- 3,227,791 -- ---------- ----------- ---------- ---------- NET REALIZED GAIN (LOSS) ................................. (220,874) (377,247) 3,600,269 (275,035) ---------- ----------- ---------- ---------- Unrealized appreciation (depreciation) on investments: Beginning of period .............................. (2,105,676) (15,521,200) 3,823,981 (873,103) End of period .................................... (6,331,621) (6,084,645) 8,353,636 2,942,319 ---------- ----------- ---------- ---------- Change in unrealized appreciation (depreciation) during the period ................................ (4,225,945) 9,436,555 4,529,655 3,815,422 ---------- ----------- ---------- ---------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS ....................................... (4,446,819) 9,059,308 8,129,924 3,540,387 ---------- ----------- ---------- ---------- NET INCREASE IN NET ASSETS RESULTING ..................... FROM OPERATIONS ...................................... $1,286,186 $14,551,727 $13,784,483 $7,789,309 ========== =========== =========== ==========
See Notes to Financial Statements. FSA-21 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP STATEMENTS OF OPERATIONS (CONTINUED) FOR NINE MONTHS ENDED SEPTEMBER 30, (UNAUDITED)
GROWTH & INCOME EQUITY INDEX FUND FUND ------------------------- ---------------------------- 1996 1995 1996 1995 ---------- ---------- ----------- ----------- INCOME AND EXPENSES: Income (Note 2): Dividends from The Hudson River Trust ............ $ 381,846 $ 257,323 $ 1,390,087 $ 651,968 Expenses (Note 3): Mortality and expense risk charges ............... 105,544 45,104 415,358 191,805 ---------- ---------- ----------- ----------- NET INVESTMENT INCOME .................................... 276,302 212,219 974,729 460,163 ---------- ---------- ----------- ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 2): Realized gain (loss) on investments .............. (4,941) (1,023) (21,227) (9) Realized gain distribution from The Hudson River Trust ........................ 568,408 -- 338,110 -- ---------- ---------- ----------- ----------- NET REALIZED GAIN (LOSS) ................................. 563,467 (1,023) 316,883 (9) ---------- ---------- ----------- ----------- Unrealized appreciation (depreciation) on investments: Beginning of period .............................. 2,123,346 (141,585) 12,451,765 (399,286) End of period .................................... 3,615,445 1,604,757 22,377,251 9,547,751 ---------- ---------- ----------- ----------- Change in unrealized appreciation (depreciation) during the period ................................ 1,492,099 1,746,342 9,925,486 9,947,037 ---------- ---------- ----------- ----------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS ....................................... 2,055,566 1,745,319 10,242,369 9,947,028 ---------- ---------- ----------- ----------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ...................................... $2,331,868 $1,957,538 $11,217,098 $10,407,191 ========== ========== =========== ===========
See Notes to Financial Statements. *Commencement of operations on April 3.
COMMON STOCK GLOBAL STOCK FUND FUND ----------------------------- ---------------------------- 1996 1995 1996 1995 ------------ ------------ ----------- ----------- INCOME AND EXPENSES: Income (Note 2): Dividends from The Hudson River Trust ............ $ 9,004,982 $ 9,752,460 $ 4,146,524 $ 4,033,348 Expenses (Note 3): Mortality and expense risk charges ............... 5,915,587 4,375,532 1,674,106 1,255,121 ------------ ------------ ----------- ----------- NET INVESTMENT INCOME .................................... 3,089,395 5,376,928 2,472,418 2,778,227 ------------ ------------ ----------- ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 2): Realized gain (loss) on investments .............. 5,062,716 14,917,528 2,370,310 2,236,458 Realized gain distribution from The Hudson River Trust ........................ 61,461,578 -- 9,397,912 -- ------------ ------------ ----------- ----------- NET REALIZED GAIN (LOSS) ................................. 66,524,294 14,917,528 11,768,222 2,236,458 ------------ ------------ ----------- ----------- Unrealized appreciation (depreciation) on investments: Beginning of period .............................. 181,824,279 (2,048,649) 36,525,596 3,049,444 End of period .................................... 286,821,826 222,292,389 52,372,289 39,743,464 ------------ ------------ ----------- ----------- Change in unrealized appreciation (depreciation) during the period ................................ 104,997,547 224,341,038 15,846,693 36,694,020 ------------ ------------ ----------- ----------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS ....................................... 171,521,841 239,258,566 27,614,915 38,930,478 ------------ ------------ ----------- ----------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ...................................... $174,611,236 $244,635,494 $30,087,333 $41,708,705 ============ ============ =========== ===========
See Notes to Financial Statements. *Commencement of operations on April 3.
INTERNATIONAL FUND ----------------------- 1996 1995* ---------- -------- INCOME AND EXPENSES: Income (Note 2): Dividends from The Hudson River Trust ............ $ 268,735 $ 56,215 Expenses (Note 3): Mortality and expense risk charges ............... 107,106 20,602 ---------- -------- NET INVESTMENT INCOME .................................... 161,629 35,613 ---------- -------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 2): Realized gain (loss) on investments .............. (17,105) (275) Realized gain distribution from The Hudson River Trust ........................ 312,086 -- ---------- -------- NET REALIZED GAIN (LOSS) ................................. 294,981 (275) ---------- -------- Unrealized appreciation (depreciation) on investments: Beginning of period .............................. 667,906 -- End of period .................................... 1,669,853 435,057 ---------- -------- Change in unrealized appreciation (depreciation) during the period ................................ 1,001,947 435,057 ---------- -------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS ....................................... 1,296,928 434,782 ---------- -------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ...................................... $1,458,557 $470,395 ========== ========
See Notes to Financial Statements. *Commencement of operations on April 3. FSA-22 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP STATEMENTS OF OPERATIONS (CONCLUDED) FOR NINE MONTHS ENDED SEPTEMBER 30, (UNAUDITED)
ASSET ALLOCATION SERIES ------------------------------ CONSERVATIVE INVESTORS AGGRESSIVE STOCK FUND FUND -------------------------------- ------------------------------ 1996 1995 1996 1995 ------------- ------------- ------------ ------------ INCOME AND EXPENSES: Income (Note 2): Dividends from The Hudson River Trust ............ $ 1,105,507 $ 1,083,866 $ 5,867,240 $ 6,040,445 Expenses (Note 3): Mortality and expense risk charges ............... 2,923,580 1,915,033 777,140 666,346 ------------- ------------- ------------ ------------ NET INVESTMENT INCOME .................................... (1,818,073) (831,167) 5,090,100 5,374,099 ------------- ------------- ------------ ------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 2): Realized gain (loss) on investments .............. 23,657,174 4,846,290 (560,234) (379,912) Realized gain distribution from The Hudson River Trust ........................ 85,627,087 -- 2,804,963 -- ------------- ------------- ------------ ------------ NET REALIZED GAIN (LOSS) ................................. 109,284,261 4,846,290 2,244,729 (379,912) ------------- ------------- ------------ ------------ Unrealized appreciation (depreciation) on investments: Beginning of period .............................. 80,271,118 11,560,966 10,362,120 (8,767,697) End of period .................................... 84,296,723 105,041,544 3,801,017 5,707,618 ------------- ------------- ------------ ------------ Change in unrealized appreciation (depreciation) during the period ................................ 4,025,605 93,480,578 (6,561,103) 14,475,315 ------------- ------------- ------------ ------------ NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS ....................................... 113,309,866 98,326,868 (4,316,374) 14,095,403 ------------- ------------- ------------ ------------ NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ...................................... $ 111,491,793 $ 97,495,701 $ 773,726 $ 19,469,502 ============= ============= ============ ============
See Notes to Financial Statements.
ASSET ALLOCATION SERIES ---------------------------------------------------------------- BALANCED FUND GROWTH INVESTORS FUND ------------------------------- ------------------------------ 1996 1995 1996 1995 ------------- ------------- ------------ ------------- INCOME AND EXPENSES: Income (Note 2): Dividends from The Hudson River Trust ............ $ 9,585,426 $ 9,067,337 $ 10,945,015 $ 11,331,010 Expenses (Note 3): Mortality and expense risk charges ............... 1,833,659 1,639,489 2,710,777 1,986,105 ------------ ------------ ------------ ------------ NET INVESTMENT INCOME .................................... 7,751,767 7,427,848 8,234,238 9,344,905 ------------ ------------ ------------ ------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 2): Realized gain (loss) on investments .............. (913,215) (1,988,151) 894,207 1,539,280 Realized gain distribution from The Hudson River Trust ........................ 26,596,466 -- 63,035,263 -- ------------ ------------ ------------ ------------ NET REALIZED GAIN (LOSS) ................................. 25,683,251 (1,988,151) 63,929,470 1,539,280 ------------ ------------ ------------ ------------ Unrealized appreciation (depreciation) on investments: Beginning of period .............................. 43,097,187 (2,878,875) 81,785,873 (770,693) End of period .................................... 33,860,083 42,508,029 50,836,511 73,394,942 ------------ ------------ ------------ ------------ Change in unrealized appreciation (depreciation) during the period ................................ (9,237,104) 45,386,904 (30,949,362) 74,165,635 ------------ ------------ ------------ ------------ NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS ....................................... 16,446,147 43,398,753 32,980,108 75,704,915 ------------ ------------ ------------ ------------ NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ...................................... $ 24,197,914 $ 50,826,601 $ 41,214,346 $ 85,049,820 ============ ============ ============ ============
See Notes to Financial Statements. FSA-23 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP STATEMENTS OF CHANGES IN NET ASSETS FOR NINE MONTHS ENDED SEPTEMBER 30, (UNAUDITED)
Intermediate Government MONEY MARKET FUND Securities Fund -------------------------------- ----------------------------- 1996 1995 1996 1995 -------------- ------------- ------------ ------------ INCREASE (DECREASE) IN NET ASSETS ATTRIBUTABLE TO POLICYOWNERS: FROM OPERATIONS: Net investment income .................... $ 5,561,143 $ 5,869,343 $ 1,519,258 $ 1,335,612 Net realized gain (loss) ................. (149,139) (208,460) (408,620) (768,233) Change in unrealized appreciation (depreciation) on investments ........ 282,339 (273,232) (590,660) 2,273,838 ------------- ------------- ------------ ------------ Net increase (decrease) from operations ...................... 5,694,343 5,387,651 519,978 2,841,217 ------------- ------------- ------------ ------------ FROM POLICY-RELATED TRANSACTIONS: Net premiums (Note 3) .................... 73,901,686 70,231,391 7,713,294 8,391,577 Benefits and other policy-related transactions (Note 3) ................ (27,123,574) (29,452,310) (5,367,810 (4,950,311) Net transfers among Funds ................ (94,267,163) 17,093,189 2,756,705 136,079 ------------- ------------- ------------ ------------ Net increase (decrease) from policy-related transactions .......... (47,489,051) 57,872,270 5,102,189 3,577,345 ------------- ------------- ------------ ------------ NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE VARIABLE IN SEPARATE ACCOUNT FP (Note 4) ............. (60,740) (30,797) (12,026) (55,730) ------------- ------------- ------------ ------------ INCREASE (DECREASE) IN NET ASSETS ATTRIBUTABLE TO POLICYHOLDERS ......................... (41,855,448) 63,229,124 5,610,141 6,362,832 NET ASSETS ATTRIBUTABLE TO POLICYOWNERS, BEGINNING OF PERIOD ...................... 207,133,531 137,496,085 37,149,044 27,654,075 ------------- ------------- ------------ ----------- NET ASSETS ATTRIBUTABLE TO POLICYOWNERS, END OF PERIOD ............................ $ 165,278,083 $ 200,725,209 $42,729,185 $34,016,907 ============= ============= ============ ===========
See Notes to Financial Statements.
QUALITY BOND FUND HIGH YIELD FUND ------------------------------- ------------------------------ 1996 1995 1996 1995 ------------ ------------- ------------ ------------ INCREASE (DECREASE) IN NET ASSETS ATTRIBUTABLE TO POLICYOWNERS: FROM OPERATIONS: Net investment income .................... $ 5,733,005 $ 5,492,419 $ 5,654,559 $ 4,248,922 Net realized gain (loss) ................. (220,874) (377,247) 3,600,269 (275,035) Change in unrealized appreciation (depreciation) on investments ........ (4,225,945) 9,436,555 4,529,655 3,815,422 ------------ ------------- ------------ ------------ Net increase (decrease) from operations ...................... 1,286,186 14,551,727 13,784,483 7,789,309 ------------- ------------- ------------ ------------ FROM POLICY-RELATED TRANSACTIONS: Net premiums (Note 3) .................... 4,698,961 1,895,869 13,765,625 11,553,599 Benefits and other policy-related transactions (Note 3) ................ (2,816,687) (2,565,098) (7,942,483) (5,852,984) Net transfers among Funds ................ 5,771,073 1,565,156 3,802,558 2,835,740 ------------- ------------- ------------ ------------ Net increase (decrease) from policy-related transactions .......... 7,653,347 895,927 9,625,700 8,536,355 ------------- ------------- ------------ ------------ NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE VARIABLE IN SEPARATE ACCOUNT FP (Note 4) ............. (14,957) (583,778) (164,117) (77,962) ------------- ------------- ------------ ------------ INCREASE (DECREASE) IN NET ASSETS ATTRIBUTABLE TO POLICYHOLDERS ......................... 8,924,576 14,863,876 23,246,066 16,247,702 NET ASSETS ATTRIBUTABLE TO POLICYOWNERS, BEGINNING OF PERIOD ...................... 138,287,446 117,236,472 71,930,962 49,454,901 ------------- ------------- ------------ ------------ NET ASSETS ATTRIBUTABLE TO POLICYOWNERS, END OF PERIOD ............................ $ 147,212,022 $ 132,100,348 $ 95,177,028 $ 65,702,603 ============= ============= ============ ============
See Notes to Financial Statements. FSA-24 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR NINE MONTHS ENDED SEPTEMBER 30, (UNAUDITED)
GROWTH & INCOME FUND EQUITY INDEX FUND ------------------------------ ------------------------------- 1996 1995 1996 1995* ------------ ------------ ------------- ------------ INCREASE (DECREASE) IN NET ASSETS ATTRIBUTABLE TO POLICYOWNERS: FROM OPERATIONS: Net investment income ............ $ 276,302 $ 212,219 $ 974,729 $ 460,163 Net realized gain (loss) ......... 563,467 (1,023) 316,883 (9) Change in unrealized appreciation (depreciation) on investments 1,492,099 1,746,342 9,925,486 9,947,037 ------------ ------------ ------------- ----------- Net increase (decrease) from operations .............. 2,331,868 1,957,538 11,217,098 10,407,191 ------------ ------------ ------------- ------------ FROM POLICY-RELATED TRANSACTIONS: Net premiums (Note 3) ............ 8,373,294 4,359,667 24,299,229 6,034,578 Benefits and other policy-related transactions (Note 3) ........ (2,102,400) (961,902) (5,365,898) (1,188,165) Net transfers among Funds ........ 3,316,994 3,789,319 17,429,345 13,078,752 ------------ ------------- ------------ ------------ Net increase from Assets policy-related transactions .. 9,587,888 7,187,084 36,362,676 17,925,165 ------------ ------------- ------------- ------------ NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE VARIABLE IN SEPARATE ACCOUNT FP (Note 4) ..... (53,011) (195,384) (42,017) (57,807) ------------ ------------ ------------- ------------ INCREASE IN NET ASSETS ATTRIBUTABLE TO POLICYHOLDERS ................. 11,866,745 8,949,238 47,537,757 28,274,549 NET ASSETS ATTRIBUTABLE TO POLICYOWNERS, BEGINNING OF PERIOD 18,618,313 5,908,383 71,623,615 31,125,403 ------------- ------------ ------------- ------------ NET ASSETS ATTRIBUTABLE TO POLICYOWNERS, END OF PERIOD ..... $ 30,485,058 $ 14,857,621 $ 119,161,372 $ 59,399,952 ============ ============ ============= ============
See Notes to Financial Statements. *Commencement of operations on April 3.
COMMON STOCK FUND GLOBAL STOCK FUND ------------------------------------ ------------------------------- 1996 1995 1996 1995 --------------- --------------- ------------- ------------- INCREASE (DECREASE) IN NET ASSETS ATTRIBUTABLE TO POLICYOWNERS: FROM OPERATIONS: Net investment income ............ $ 3,089,395 $ 5,376,928 $ 2,472,418 $ 2,778,227 Net realized gain (loss) ......... 66,524,294 14,917,528 11,768,222 2,236,458 Change in unrealized appreciation (depreciation) on investments 104,997,547 224,341,038 15,846,693 36,694,020 --------------- --------------- ------------- ------------- Net increase (decrease) from operations .............. 174,611,236 244,635,494 30,087,333 41,708,705 --------------- --------------- ------------- ------------- FROM POLICY-RELATED TRANSACTIONS: Net premiums (Note 3) ............ 202,074,526 160,014,740 73,729,435 72,248,903 Benefits and other policy-related transactions (Note 3) ........ (112,009,732) (86,608,436) (31,604,430) (26,985,045) Net transfers among Funds ........ 68,835,712 (38,614,310) (2,060,721) (10,330,932) --------------- --------------- ------------- ------------- Net increase from Assets policy-related transactions .. 158,900,506 34,791,994 40,064,284 34,932,926 --------------- --------------- ------------- ------------- NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE VARIABLE IN SEPARATE ACCOUNT FP (Note 4) ..... (286,233) (371,006) (69,929) (89,566) --------------- --------------- ------------- ------------- INCREASE IN NET ASSETS ATTRIBUTABLE TO POLICYHOLDERS ................. 333,225,509 279,056,482 70,081,688 76,552,065 NET ASSETS ATTRIBUTABLE TO POLICYOWNERS, BEGINNING OF PERIOD 1,146,585,274 811,006,200 333,497,020 241,838,471 ---------------- --------------- ------------- ------------- NET ASSETS ATTRIBUTABLE TO POLICYOWNERS, END OF PERIOD ..... $ 1,479,810,783 $ 1,090,062,682 $ 403,578,708 $ 318,390,536 =============== =============== ============= =============
See Notes to Financial Statements. *Commencement of operations on April 3. INTERNATIONAL FUND ----------------------------- 1996 1995* ------------ ----------- INCREASE (DECREASE) IN NET ASSETS ATTRIBUTABLE TO POLICYOWNERS: FROM OPERATIONS: Net investment income ............ $ 161,629 $ 35,613 Net realized gain (loss) ......... 294,981 (275) Change in unrealized appreciation (depreciation) on investments 1,001,947 435,057 ------------ ----------- Net increase (decrease) from operations .............. 1,458,557 470,395 ------------ ----------- FROM POLICY-RELATED TRANSACTIONS: Net premiums (Note 3) ............ 8,182,092 804,351 Benefits and other policy-related transactions (Note 3) ........ (1,516,547) (150,197) Net transfers among Funds ........ 14,255,013 7,399,293 ------------ ----------- Net increase from Assets policy-related transactions .. 20,920,558 8,053,447 ------------ ----------- NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE VARIABLE IN SEPARATE ACCOUNT FP (Note 4) ..... (16,632) (13,498) ------------ ----------- INCREASE IN NET ASSETS ATTRIBUTABLE TO POLICYHOLDERS ................. 22,362,483 8,510,344 NET ASSETS ATTRIBUTABLE TO POLICYOWNERS, BEGINNING OF PERIOD 12,431,938 0 ------------- ----------- NET ASSETS ATTRIBUTABLE TO POLICYOWNERS, END OF PERIOD ..... $ 34,794,421 $ 8,510,344 ============ =========== See Notes to Financial Statements. *Commencement of operations on April 3. FSA-25 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP STATEMENTS OF CHANGES IN NET ASSETS (CONCLUDED) FOR NINE MONTHS ENDED SEPTEMBER 30, (UNAUDITED)
ASSET ALLOCATION SERIES ------------------------------- AGGRESSIVE STOCK CONSERVATIVE INVESTORS FUND FUND -------------------------------- ------------------------------- 1996 1995 1996 1995 ------------- ------------- ------------- ------------- INCREASE (DECREASE) IN NET ASSETS ATTRIBUTABLE TO POLICYOWNERS: FROM OPERATIONS: Net investment income ............... $ (1,818,073) $ (831,167) $ 5,090,100 $ 5,374,099 Net realized gain (loss) ............ 109,284,261 4,846,290 2,244,729 (379,912) Change in unrealized appreciation (depreciation) on investments ... 4,025,605 93,480,578 (6,561,103) 14,475,315 ------------- ------------- ------------- ------------- Net increase (decrease) from operations ................. 111,491,793 97,495,701 773,726 19,469,502 ------------- ------------- ------------- ------------- FROM POLICY-RELATED TRANSACTIONS: Net premiums (Note 3) ............... 122,205,511 89,700,780 29,624,479 31,286,054 Benefits and other policy-related transactions (Note 3) ........... (61,714,088) (46,154,214) (19,045,888) (17,525,531) Net transfers among Funds ........... 17,647,426 15,707,464 (13,623,081) (2,274,604) ------------- ------------- ------------- ------------- Net increase (decrease) from policy-related transactions ..... 78,138,849 59,254,030 (3,044,490) 11,485,919 ------------- ----------- ------------- ------------- NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE VARIABLE IN SEPARATE ACCOUNT FP (Note 4) ........ (194,883) (172,982) (14,041) (72,273) ------------- ------------- ------------- ------------- INCREASE (DECREASE) IN NET ASSETS ATTRIBUTABLE TO POLICYHOLDERS ....... 189,435,759 156,576,749 (2,284,805) 30,883,148 NET ASSETS ATTRIBUTABLE TO POLICYOWNERS, BEGINNING OF PERIOD................. 555,188,131 355,671,865 172,087,099 129,940,498 ------------- ------------- ------------- ------------- NET ASSETS ATTRIBUTABLE TO POLICYOWNERS, END OF PERIOD ....................... $ 744,623,890 $ 512,248,614 $ 169,802,294 $ 160,823,646 ============= ============= ============= =============
See Notes to Financial Statements.
ASSET ALLOCATION SERIES ------------------------------------------------------------------- GROWTH INVESTORS BALANCED FUND FUND ------------------------------- ------------------------------- 1996 1995 1996 1995 ------------- ------------- ------------- ------------- INCREASE (DECREASE) IN NET ASSETS ATTRIBUTABLE TO POLICYOWNERS: FROM OPERATIONS: Net investment income ............... $ 7,751,767 $ 7,427,848 $ 8,234,238 $ 9,344,905 Net realized gain (loss) ............ 25,683,251 (1,988,151) 63,929,470 1,539,280 Change in unrealized appreciation (depreciation) on investments ... (9,237,104) 45,386,904 (30,949,362) 74,165,635 ------------- ------------- ------------- ------------- Net increase (decrease) from operations ................. 24,197,914 50,826,601 41,214,346 85,049,820 ------------- ------------- ------------- ------------- FROM POLICY-RELATED TRANSACTIONS: Net premiums (Note 3) ............... 47,887,117 49,301,601 122,316,625 118,766,910 Benefits and other policy-related transactions (Note 3) ........... (38,894,806) (37,166,454) (60,278,616) (49,995,250) Net transfers among Funds ........... (17,062,769) (13,985,044) (376,762) (4,344,785) ------------- ------------- ------------- ------------- Net increase (decrease) from policy-related transactions ..... (8,070,458) (1,849,897) 61,661,247 64,426,875 ------------- ------------- ------------- ------------- NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE VARIABLE IN SEPARATE ACCOUNT FP (Note 4) ........ (103,615) (79,293) (74,670) (107,675) ------------- ------------- ------------- ------------- INCREASE (DECREASE) IN NET ASSETS ATTRIBUTABLE TO POLICYHOLDERS ....... 16,023,841 48,897,411 102,800,923 149,369,020 NET ASSETS ATTRIBUTABLE TO POLICYOWNERS, BEGINNING OF PERIOD................. 398,565,209 338,415,565 555,877,666 367,219,554 ------------- ------------- ------------- ------------- NET ASSETS ATTRIBUTABLE TO POLICYOWNERS, END OF PERIOD ....................... $ 414,589,050 $ 387,312,976 $ 658,678,589 $ 516,588,574 ============= ============= ============= =============
See Notes to Financial Statements. FSA-26 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP NOTES TO FINANCIAL STATEMENTS (UNAUDITED) SEPTEMBER 30, 1996 1. General Equitable Variable Life Insurance Company (Equitable Variable Life), a wholly-owned subsidiary of The Equitable Life Assurance Society of the United States (Equitable Life), established Separate Account FP (the Account) as a unit investment trust registered with the Securities and Exchange Commission under the Investment Company Act of 1940. The Account consists of thirteen investment funds: the Money Market Fund, the Intermediate Government Securities Fund, the High Yield Fund, the Balanced Fund, the Common Stock Fund, the Global Fund, the Aggressive Stock Fund, the Conservative Investors Fund, the Growth Investors Fund, the Growth & Income Fund, the Quality Bond Fund, the Equity Index Fund and the International Fund. The assets in each Fund are invested in shares of a designated portfolio (Portfolio) of a mutual fund, The Hudson River Trust (the Trust). Each Portfolio has separate investment objectives. The Account supports the operations of Incentive Life, flexible premium variable life insurance policies, Incentive Life 2000, flexible premium variable life insurance policies, Champion 2000, modified premium variable whole life insurance policies, Survivorship 2000, flexible premium joint survivorship variable life insurance policies, Incentive Life Plus,(SM) flexible premium variable life insurance policies, IL Protector,(SM) flexible premium variable life insurance policies, IL COLI II, flexible premium variable life insurance policies, and SP-Flex, variable life insurance policies with additional premium option, collectively, the Policies, and the Incentive Life 2000, Champion 2000 and Survivorship 2000 policies are referred to as the Series 2000 Policies. Incentive Life Plus policies offered with a prospectus dated on or after September 15, 1995, are referred to as Incentive Life Plus Second Series. Incentive Life Plus policies issued with a prior prospectus are referred to as Incentive Life Plus Original Series. All Policies are issued by Equitable Variable. The assets of the Account are the property of Equitable Variable. However, the portion of the Account's assets attributable to the Policies will not be chargeable with liabilities arising out of any other business Equitable Variable may conduct. Policyowners may allocate amounts in their individual accounts to the Funds of the Account and/or (except for SP-Flex policies) to the guaranteed interest fund of Equitable Variable Life's General Account. Net transfers to (from) the guaranteed interest fund of the General Account and other Separate Accounts of ($6,424,330) and $7,944,683 for the nine months ended 1996 and 1995, respectively, are included in Net Transfers Among Funds. The net assets of any Fund of the Account may not be less than the aggregate of the policyowners' accounts allocated to that Fund. Additional assets are set aside in Equitable Variable Life's General Account to provide for (1) the unearned portion of the monthly charges for mortality costs, and (2) other policy benefits, as required under the state insurance law. 2. Significant Accounting Policies The accompanying financial statements are prepared in conformity with generally accepted accounting principles (GAAP). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. These statements should be read in conjunction with the financial statements of Separate Account FP for the year ended December 31, 1995. The results of operations for the nine months ended September 30, 1996 are not necessarily indicative of the results to be expected for the full year. Investments are made in shares of the Trust and are valued at the net asset values per share of the respective Portfolios. The net asset value is determined by the Trust using the market or fair value of the underlying assets of the Portfolio. Investment transactions are recorded on the trade date. Realized gains and losses include gains and losses on redemptions of the Trust's shares (determined on the identified cost basis) and Trust distributions representing the net realized gains on Trust investment transactions. The operations of the Account are included in the consolidated Federal income tax return of Equitable Life. Under the provisions of the Policies, Equitable Variable Life has the right to charge the Account for Federal income tax attributable to the Account. No charge is currently being made against the Account for such tax since, under current tax law, Equitable Variable Life pays no tax on investment income and capital gains reflected in variable life insurance policy reserves. However, Equitable Variable Life retains the right to charge for any Federal income tax incurred which is attributable to the Account if the law is changed. Charges for state and local taxes, if any, attributable to the Account also may be made. Dividends are recorded as income at the end of each quarter on the ex-dividend date. Capital gains are distributed by the Trust at the end of each year. FSA-27 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED) SEPTEMBER 30, 1996 3. Asset Charges Under the Policies, Equitable Variable Life assumes mortality and expense risks and, to cover these risks, deducts charges from the assets of the Account currently at annual rates of 0.60% of the net assets attributable to Incentive Life, Incentive Life 2000, Incentive Life Plus Second Series and Champion 2000 policyowners, 0.90% of net assets attributable to Survivorship 2000 policyowners, 0.80% for IL Protector policyowners, and 0.85% for SP-Flex policyowners. Incentive Life Plus Original Series, IL COLI, and IL COLI II deduct this charge from the Policy Account. Under SP-Flex, Equitable Variable Life also deducts charges from the assets of the Account for mortality and administrative costs of 0.60% and 0.35%, respectively, of net assets attributable to SP-Flex policies. Under Incentive Life, Incentive Life Plus, the Series 2000 Policies, IL Protector and IL COLI II mortality and administrative charges are assessed in a different manner than SP-Flex policies (see Notes 4 and 5). Before amounts are allocated to the Account for Incentive Life, Incentive Life Plus, IL COLI, IL COLI II and the Series 2000 Policies, Equitable Variable Life deducts a charge for taxes and either an initial policy fee (Incentive Life) or a premium sales charge (Incentive Life Plus, IL COLI II and Series 2000 Policies) from premiums. Under SP-Flex, the entire initial premium is allocated to the Account. Before any additional premiums under SP-Flex are allocated to the Account, an administrative charge is deducted. The amounts attributable to Incentive Life, Incentive Life Plus, IL Protector, IL COLI, IL COLI II, and the Series 2000 policyowners' accounts are assessed monthly by Equitable Variable Life with mortality and administrative charges. These charges are withdrawn from the Account along with amounts for additional benefits. Under the Policies, amounts for certain policy-related transactions (such as policy loans and surrenders) are transferred out of the Separate Account. 4. Amounts Retained by Equitable Variable Life in Separate Account FP The amount retained by Equitable Variable Life in the Account arises principally from (1) contributions from Equitable Variable Life, and (2) that portion, determined ratably, of the Account's investment results applicable to those assets in the Account in excess of the net assets for the Policies. Amounts retained by Equitable Variable Life are not subject to charges for mortality and expense risks or mortality and administrative costs. Amounts retained by Equitable Variable Life in the Account may be transferred at any time by Equitable Variable Life to its General Account. During the nine months ended September 30, 1995 surplus contribution of $200,000 were made by EVLICO into the International Fund. 5. Distribution and Servicing Agreements Equitable Variable Life has entered into a Distribution and Servicing Agreement with Equitable Life and EQ Financial Consultants Inc., whereby registered representatives of EQ Financial Consultants Inc., authorized as variable life insurance agents under applicable state insurance laws, sell the Policies. The registered representatives are compensated on a commission basis by Equitable Life. Equitable Variable Life also has entered into an agreement with Equitable Life under which Equitable Life performs the administrative services related to the Policies, including underwriting and issuance, billings and collections, and policyowner services. There is no charge to the Account related to this agreement. 6. Investment Returns The Separate Account rates of return attributable to Incentive Life, Incentive Life 2000, Incentive Life Plus Second Series and Champion 2000 policyowners are different than those attributable to Survivorship 2000, Incentive Life Plus Original Series, IL Protector, IL COLI, IL COLI II and to SP-Flex policyowners because asset charges are deducted at different rates under each policy (see Note 3). The tables on this page and the following pages show the gross and net investment returns with respect to the Funds for the periods shown. The net return for each Fund is based upon net assets for a policy whose policy commences with the beginning date of such period and is not based on the average net assets in the Fund during such period. Gross return is equal to the total return earned by the underlying Trust investment. FSA-28 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED) RATES OF RETURN: INCENTIVE LIFE - -------------- INCENTIVE LIFE 2000* - ------------------- INCENTIVE LIFE PLUS SECOND SERIES* - --------------------------------- AND CHAMPION 2000* - ------------------
NINE MONTHS ENDED(B) JANUARY 26(A)(B) TO SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31, ------------------- -------------------------------------------------------------- ------------------- MONEY MARKET FUND 1996 1995 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 - ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return......... 3.91% 4.30% 5.74% 4.02% 3.00% 3.56% 6.18% 8.24% 9.18% 7.32% 6.63% 6.05% Net return........... 3.44% 3.83% 5.11% 3.39% 2.35% 2.94% 5.55% 7.59% 8.53% 6.68% 5.99% 5.47%
INTERMEDIATE NINE MONTHS ENDED(B) APRIL 1(A)(B) TO GOVERNMENT SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31, SECURITIES FUND -------------------- -------------------------------------- ------------------ - --------------- 1996 1995 1995 1994 1993 1992 1991 ---- ---- ---- ---- ---- ---- ---- Gross return......... 1.71% 9.94% 13.33% (4.37)% 10.58% 5.60% 12.26% Net return........... 1.25% 9.45% 12.65% (4.95)% 9.88% 4.96% 11.60%
NINE MONTHS ENDED(B) YEARS ENDED OCTOBER 1(A)(B) TO SEPTEMBER 30, DECEMBER 31, DECEMBER 31, -------------------- -------------------- ------------------- QUALITY BOND FUND 1996 1995 1995 1994 1993 - ----------------- ---- ---- ---- ---- ---- Gross return......... 1.28% 12.37% 17.02% (5.10)% (0.51)% Net return........... 0.82% 11.86% 16.32% (5.67)% (0.66)%
NINE MONTHS ENDED(B) SEPTEMBER 30, YEARS ENDED DECEMBER 31, -------------------- ---------------------------------------------------------------------- HIGH YIELD FUND 1996 1995 1995 1994 1993 1992 1991 1990 1989 1988 1987 - --------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return......... 18.79% 14.89% 19.92% (2.79)% 23.15% 12.31% 24.46% (1.12)% 5.13% 9.73% 4.68% Net return........... 18.25% 14.37% 19.20% (3.37)% 22.41% 11.64% 23.72% (1.71)% 4.50% 9.08% 4.05%
NINE MONTHS ENDED(B) YEARS ENDED OCTOBER 1(A)(B) TO SEPTEMBER 30, DECEMBER 31, DECEMBER 31, -------------------- --------------------- ---------------------- GROWTH & INCOME FUND 1996 1995 1995 1994 1993 - -------------------- ---- ---- ---- ---- ---- Gross return......... 9.89% 19.76% 24.07% (0.58)% (0.25)% Net return........... 9.39% 19.23% 23.33% (1.17)% (0.41)%
SEPTEMBER 30(A)(B) NINE MONTHS ENDED(B) YEAR ENDED TO SEPTEMBER 30, DECEMBER 31, DECEMBER 31, ------------------------- ----------------------- ---------------------- EQUITY INDEX FUND 1996 1995 1995 1994 - ----------------- ---- ---- ---- ---- Gross return........ 13.10% 28.97% 36.48% 1.08% Net return.......... 12.59% 28.39% 35.66% 0.58%
NINE MONTHS ENDED(B) JANUARY 26(A)(B) TO SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31, -------------------- ----------------------------------------------------------------------- --------------- COMMON STOCK FUND 1996 1995 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 - ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return......... 14.25% 28.99% 32.45% (2.14)% 24.84% 3.22% 37.88% (8.12)% 25.59% 22.43% 7.49% 15.65% Net return........... 13.73% 28.42% 31.66% (2.73)% 24.08% 2.60% 37.06% (8.67)% 24.84% 21.70% 6.84% 15.01%
- ------------------ *Sales of Incentive Life 2000 and Champion 2000 commenced on March 2, 1992. Sales of Incentive Life Plus Second Series commenced on September 15, 1995. (a) Date as of which net premiums under the policies were first allocated to the Fund. (b) The gross return and the net return for the periods indicated are not annual rates of return. FSA-29 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED) RATES OF RETURN: INCENTIVE LIFE - -------------- INCENTIVE LIFE 2000* - ------------------- INCENTIVE LIFE PLUS SECOND SERIES* - --------------------------------- AND CHAMPION 2000* - ------------------
NINE MONTHS ENDED(B) AUGUST 31(A)(B) TO SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31, -------------------- ----------------------------------------------------------------- ----------------- GLOBAL FUND 1996 1995 1995 1994 1993 1992 1991 1990 1989 1988 1987 - ----------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return.......... 8.96% 16.02% 18.81% 5.23% 32.09% (0.50)% 30.55% (6.07)% 26.93% 10.88% (13.27)% Net return............ 8.47% 15.50% 18.11% 4.60% 31.33% (1.10)% 29.77% (6.63)% 26.17% 10.22% (13.45)%
NINE MONTHS ENDED(B) APRIL 3(A)(B) TO SEPTEMBER 30, DECEMBER 31, -------------------- ---------------- INTERNATIONAL FUND 1996 1995 1995 - ------------------ ---- ---- ---- Gross return.......... 7.29% 5.71% 11.29% Net return............ 6.80% 6.94% 10.79%
NINE MONTHS ENDED(B) JANUARY 26(A)(B) TO SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31, -------------------- --------------------------------------------------------------------- --------------- AGGRESSIVE STOCK FUND 1996 1995 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 - --------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return.......... 19.52% 25.74% 31.63% (3.81)% 16.77% (3.16)% 86.86% 8.17% 43.50% 1.17% 7.31% 35.88% Net return............ 18.98% 25.17% 30.85% (4.39)% 16.05% (3.74)% 85.75% 7.51% 42.64% 0.53% 6.66% 35.13%
ASSET ALLOCATION SERIES - -----------------------
NINE MONTHS ENDED(B) JANUARY 26(A)(B) TO SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31, -------------------- ------------------------------------------------------------------------ -------------- BALANCED FUND 1996 1995 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 - ------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return.......... 6.63% 15.50% 19.75% (8.02)% 12.28% (2.84)% 41.26% 0.24% 25.83% 13.27% (0.85)% 29.07% Net return............ 6.15% 14.98% 19.03% (8.57)% 11.64% (3.42)% 40.42% (0.36)% 25.08% 12.59% (1.45)% 28.34%
CONSERVATIVE NINE MONTHS ENDED(B) OCTOBER 2(A)(B) TO INVESTORS FUND SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31, - -------------- ------------------ ----------------------------------------------------- ------------------ 1996 1995 1995 1994 1993 1992 1991 1990 1989 ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return.......... 0.94% 14.87% 20.40% (4.10)% 10.76% 5.72% 19.87% 6.37% 3.09% Net return............ 0.48% 14.35% 19.68% (4.67)% 10.15% 5.09% 19.16% 5.73% 2.94%
NINE MONTHS ENDED(B) OCTOBER 2(A)(B) TO SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31, -------------------- ---------------------------------------------------- ----------------- GROWTH INVESTORS FUND 1996 1995 1995 1994 1993 1992 1991 1990 1989 - --------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return.......... 7.39% 21.63% 26.37% (3.15)% 15.26% 4.90% 48.89% 10.66% 3.98% Net return............ 6.90% 21.09% 25.62% (3.73)% 14.58% 4.27% 48.01% 10.00% 3.82%
- ---------- *Sales of Incentive Life 2000 and Champion 2000 commenced on March 2, 1992. Sales of Incentive Life Plus Second Series commenced on September 15, 1995. (a) Date as of which net premiums under the policies were first allocated to the Fund. (b) The gross return and the net return for the periods indicated are not annual rates of return. FSA-30 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED) RATES OF RETURN: SURVIVORSHIP 2000 - -----------------
NINE MONTHS ENDED(B) AUGUST 17(A)(B) TO SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31, ---------------------- -------------------------------- --------------------- MONEY MARKET FUND 1996 1995 1995 1994 1993 1992 - ----------------- ---- ---- ---- ---- ---- ---- Gross return..................... 3.91% 4.30% 5.74% 4.02% 3.00% 1.11% Net return....................... 3.20% 3.60% 4.80% 3.08% 2.04% 0.77% INTERMEDIATE GOVERNMENT SECURITIES FUND - --------------- Gross return..................... 1.71% 9.94% 13.33% (4.37)% 10.58% 0.90% Net return....................... 1.02% 9.20% 12.31% (5.23)% 9.55% 0.56%
NINE MONTHS ENDED(B) OCTOBER 1(A)(B) TO SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31, ---------------------- ------------------------ ------------------ QUALITY BOND FUND 1996 1995 1995 1994 1993 - ----------------- ---- ---- ---- ---- ---- Gross return..................... 1.28% 12.37% 17.02% (5.10)% (0.51)% Net return....................... 0.59% 11.61% 15.97% (5.95)% (0.73)%
NINE MONTHS ENDED(B) AUGUST 17(A)(B) TO SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31, --------------------- ----------------------------------------- ------------------- HIGH YIELD FUND 1996 1995 1995 1994 1993 1992 - --------------- ---- ---- ---- ---- ---- ---- Gross return..................... 18.79% 14.89% 19.92% (2.79)% 23.15% 1.84% Net return....................... 17.98% 14.12% 18.84% (3.66)% 22.04% 1.50%
NINE MONTHS ENDED(B) OCTOBER 1(A)(B) TO SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31, ---------------------- ------------------------- ----------------------- GROWTH & INCOME FUND 1996 1995 1995 1994 1993 - ----------- ---- ---- ---- ---- ---- Gross return..................... 9.89% 19.76% 24.07% (0.58)% (0.25)% Net return....................... 9.14% 18.96% 22.96% (1.47)% (0.48)%
NINE MONTHS ENDED(B) YEAR ENDED MARCH 1 (A)(B) TO SEPTEMBER 30, DECEMBER 31, DECEMBER 31, ---------------------- ------------------ ------------------- EQUITY INDEX FUND 1996 1995 1995 1994 - ----------------- ---- ---- ---- ---- Gross return..................... 13.10% 28.97% 36.48% 1.08% Net return....................... 12.33% 28.10% 35.26% 0.33%
NINE MONTHS ENDED(B) AUGUST 17(A)(B) TO SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31, ---------------------- -------------------------------------- ---------------------- COMMON STOCK FUND 1996 1995 1995 1994 1993 1992 - ----------------- ---- ---- ---- ---- ---- ---- Gross return..................... 14.25% 28.99% 32.45% (2.14)% 24.84% 5.28% Net return....................... 13.47% 28.13% 31.26% (3.02)% 23.70% 4.93% GLOBAL FUND - ----------- Gross return..................... 8.96% 16.02% 18.81% 5.23% 32.09% 4.87% Net return....................... 8.22% 15.25% 17.75% 4.29% 30.93% 4.52% AGGRESSIVE STOCK FUND - --------------------- Gross return..................... 19.52% 25.74% 31.63% (3.81)% 16.77% 11.49% Net return....................... 18.71% 24.89% 30.46% (4.68)% 15.70% 11.11%
NINE MONTHS ENDED(B) APRIL 3(A)(B) TO SEPTEMBER 30, DECEMBER 31, ---------------------- ------------------ INTERNATIONAL FUND 1996 1995 1995 - ------------------ ---- ---- ---- Gross return..................... 7.29% 5.71% 11.29% Net return....................... 6.56% 6.78% 10.55% ASSET ALLOCATION SERIES - -----------------------
NINE MONTHS ENDED(B) AUGUST 17(A)(B) TO SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31, CONSERVATIVE ----------------------- ---------------------------------------- ---------------------- INVESTORS FUND 1996 1995 1995 1994 1993 1992 - -------------- ---- ---- ---- ---- ---- ---- Gross return..................... 0.94% 14.87% 20.40% (4.10)% 10.76% 1.38% Net return....................... 0.25% 14.09% 19.32% (4.96)% 9.81% 1.04% BALANCED FUND - ------------- Gross return..................... 6.63% 15.50% 19.75% (8.02)% 12.28% 5.37% Net return....................... 5.90% 14.72% 18.68% (8.84)% 11.30% 5.02% GROWTH INVESTORS FUND - --------------------- Gross return..................... 7.39% 21.63% 26.37% (3.15)% 15.26% 6.89% Net return....................... 6.65% 20.81% 25.24% (4.02)% 14.24% 6.53%
- ---------- (a) Date as of which net premiums under the policies were first allocated to the Fund. (b) The gross return and the net return for the periods indicated are not annual rates of return. FSA-31 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED) RATES OF RETURN: INCENTIVE LIFE PLUS ORIGINAL SERIES*(A) - ----------------------------------- IL COLI**(A) - -------
INCENTIVE LIFE PLUS ORIGINAL SERIES IL COLI ---------------------------------------------- ------------------------------------------------- NINE MONTHS NINE MONTHS ENDED JANUARY 6 TO JANUARY 6 TO ENDED SEPTEMBER 15 TO SEPTEMBER 15 TO SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, --------------- -------------- ------------- --------------- --------------- --------------- 1996 1995 1995 1996 1995 1995 ---- ---- ---- ---- ---- ---- Money Market Fund........... 3.91% 4.25% 5.69% 3.91% 0.19% 1.58% Intermediate Government Securities Fund............. 1.71% 9.92% 13.31% 1.71% 0.00% 3.08% Quality Bond Fund........... 1.28% 12.47% 17.13% 1.28% 0.16% 4.31% High Yield Fund............. 18.79% 14.92% 19.95% 18.79% 0.31% 4.70% Growth & Income Fund........ 9.89% 20.05% 24.38% 9.89% 0.30% 3.91% Equity Index Fund........... 13.10% 29.01% 36.53% 13.10% 0.24% 6.08% Common Stock Fund........... 14.25% 29.60% 33.07% 14.25% (1.13)% 1.51% Global Fund................. 8.96% 16.57% 19.38% 8.96% 0.25% 2.67% NINE MONTHS NINE MONTHS ENDED APRIL 30 TO APRIL 30 TO ENDED APRIL 30 TO APRIL 30 TO SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, --------------- -------------- ------------- --------------- --------------- --------------- 1996 1995 1995 1996 1995 1995 ---- ---- ---- ---- ---- ---- International Fund.......... 7.29% 7.26% 11.29% 7.29% 0.71% 4.49% NINE MONTHS NINE MONTHS ENDED JANUARY 6 TO JANUARY 6 TO ENDED SEPTEMBER 15 TO SEPTEMBER 15 TO SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, --------------- -------------- ------------- --------------- --------------- --------------- 1996 1995 1995 1996 1995 1995 ---- ---- ---- ---- ---- ---- Aggressive Stock Fund....... 19.52% 27.02% 33.00% 19.52% (0.38)% 4.28% ASSET ALLOCATION SERIES NINE MONTHS NINE MONTHS ENDED JANUARY 6 TO JANUARY 6 TO ENDED SEPTEMBER 15 TO SEPTEMBER 15 SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, --------------- -------------- ------------- --------------- --------------- --------------- 1996 1995 1995 1996 1995 1995 ---- ---- ---- ---- ---- ---- Conservative Investors Fund.. 8.96% 15.05% 20.59% 8.96% 0.07% 4.91% Balanced Fund................ 6.63% 16.05% 20.32% 6.63% (0.47)% 3.18% Growth Investors Fund........ 7.39% 22.16% 26.92% 7.39% 0.90% 4.83%
- ---------------------------- *Sales of Incentive Life Plus Original Series commenced on January 6, 1995. **Sales of IL COLI commenced on September 15, 1995. (a)There are no Separate Account asset charges for this policy and therefore the gross and net rates of return are the same. The rates of return for the periods indicated are not annual rates of return. FSA-32 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED) RATES OF RETURN: SP-FLEX - -------
NINE MONTHS ENDED(B) AUGUST 31(A)(B) TO SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31, -------------------- ------------------------------------------------------------ ---------------- MONEY MARKET FUND 1996 1995 1995 1994 1993 1992 1991 1990 1989 1988 1987 - ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return................. 3.91% 4.30% 5.74% 4.02% 3.00% 3.56% 6.17% 8.24% 9.18% 7.32% 2.15% Net return................... 2.51% 2.91% 3.86% 2.17% 1.13% 1.71% 4.29% 6.30% 7.24% 5.41% 1.62%
NINE MONTHS ENDED(B) APRIL 1(A)(B) TO SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31, INTERMEDIATE GOVERNMENT -------------------- --------------------------------- ------------------ SECURITIES FUND 1996 1995 1995 1994 1993 1992 1991 - --------------- ---- ---- ---- ---- ---- ---- ---- Gross return................. 1.71% 9.94% 13.33% (4.37)% 10.58% 5.60% 12.10% Net return................... 0.34% 8.47% 11.31% (6.08)% 8.57% 3.71% 10.59%
NINE MONTHS ENDED(B) YEAR ENDED SEPTEMBER 1(A)(B) TO SEPTEMBER 30, DECEMBER 31, DECEMBER 31, -------------------- ----------------- ------------------- QUALITY BOND FUND 1996 1995 1995 1994 - ----------------- ---- ---- ---- ---- Gross return................. 1.28% 12.37% 17.02% (2.20)% Net return................... (0.09)% 10.86% 14.94% (2.35)%
NINE MONTHS ENDED(B) AUGUST 31(A)(B) TO SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31, -------------------- --------------------------------------------------------------- --------------- HIGH YIELD FUND 1996 1995 1995 1994 1993 1992 1991 1990 1989 1988 1987 - --------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return................. 18.79% 14.89% 19.92% (2.79)% 23.15% 12.31% 24.46% (1.12)% 5.13% 9.73% 1.95% Net return................... 17.19% 13.35% 17.79% (4.52)% 20.96% 10.30% 22.25% (2.89)% 3.26% 7.78% 1.39%
NINE MONTHS ENDED(B) YEAR ENDED SEPTEMBER 1(A)(B) TO SEPTEMBER 30, DECEMBER 31, DECEMBER 31, GROWTH & -------------------- ------------------------------------ INCOME FUND 1996 1995 1995 1994 - ----------- ---- ---- ---- ---- Gross return................. 9.89% 19.76% 24.07% (3.40)% Net return................... 8.40% 18.16% 21.87% (3.55)% EQUITY INDEX FUND - ----------------- Gross return................. 13.10% 28.97% 36.48% (2.54)% Net return................... 11.58% 27.25% 34.06% (2.69)%
NINE MONTHS ENDED(B) AUGUST 31(A)(B) TO SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31, -------------------- ---------------------------------------------------------------- -------------- COMMON STOCK FUND 1996 1995 1995 1994 1993 1992 1991 1990 1989 1988 1987 - ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return................. 14.25% 28.99% 32.45% (2.14)% 24.84% 3.23% 37.87% (8.12)% 25.59% 22.43% (22.57)% Net return................... 12.70% 27.27% 30.10% (3.88)% 22.60% 1.38% 35.43% (9.76)% 23.36% 20.26% (23.00)% GLOBAL FUND - ----------- Gross return................. 8.96% 16.02% 18.81% 5.23% 32.09% (0.50)% 30.55% (6.07)% 26.93% 10.88% (11.40)% Net return................... 7.49% 14.47% 16.70% 3.36% 29.77% (2.28)% 28.23% (7.75)% 24.67% 8.90% (11.86)%
NINE MONTHS ENDED(B) APRIL 3(A)(B) TO SEPTEMBER 30, DECEMBER 31, -------------------- --------------- INTERNATIONAL FUND 1996 1995 1995 - ------------------ ---- ---- ---- Gross return................ 7.29% 5.71% 11.29% Net return.................. 5.84% 6.31% 9.82%
NINE MONTHS ENDED(B) AUGUST 31(A)(B) TO SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31, -------------------- ---------------------------------------------------------------- ---------------- AGGRESSIVE STOCK FUND 1996 1995 1995 1994 1993 1992 1991 1990 1989 1988 1987 - --------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return................ 19.52% 25.74% 31.63% (3.81)% 16.77% (3.16)% 86.86% 8.17% 43.50% 1.17% (24.28)% Net return.................. 17.91% 24.06% 29.30% (5.53)% 14.67% (4.89)% 83.54% 6.23% 40.95% (0.66)% (24.68)%
- ---------- (a) Date as of which net premiums under the policies were first allocated to the Fund. (b) The gross return and the net return for the periods indicated are not annual rates of return. FSA-33 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONCLUDED) ASSET ALLOCATION SERIES
NINE MONTHS ENDED(B) YEAR ENDED SEPTEMBER 1(A)(B) TO SEPTEMBER 30, DECEMBER 31, DECEMBER 31, CONSERVATIVE -------------------- ------------------------------------- INVESTORS FUND 1996 1995 1995 1994 - -------------- ---- ---- ---- ---- Gross return................. 0.94% 14.87% 20.40% (1.83)% Net return................... (0.43)% 13.33% 18.26% (1.98)%
NINE MONTHS ENDED(B) AUGUST 31(A)(B) TO SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31, -------------------- ---------------------------------------------------------------- -------------- BALANCED FUND 1996 1995 1995 1994 1993 1992 1991 1990 1989 1988 1987 - ------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return................. 6.63% 15.50% 19.75% (8.02)% 12.28% (2.83)% 41.27% 0.24% 25.83% 13.27% (20.26)% Net return................... 5.19% 13.96% 17.62% (9.66)% 10.31% (4.57)% 38.75% (1.56)% 23.59% 11.25% (20.71)%
NINE MONTHS ENDED(B) YEAR ENDED SEPTEMBER 1(A)(B) TO SEPTEMBER 30, DECEMBER 31, DECEMBER 31, GROWTH -------------------- -------------------------------------- INVESTORS FUND 1996 1995 1995 1994 - -------------- ---- ---- ---- ---- Gross return................. 7.39% 21.63% 26.37% (3.16)% Net return................... 5.93% 20.01% 24.12% (3.31)%
- ---------- (a) Date as of which net premiums under the policies were first allocated to the Fund. (b) The gross return and the net return for the periods indicated are not annual rates of return. FSA-34 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED) RATES OF RETURN: IL PROTECTOR* - ---------------------------- AUGUST 22 TO SEPTEMBER 30,(A) ----------------- 1996 ------ Money Market Fund................. 1.80% Intermediate Government Securities Fund................... 2.62% Quality Bond...................... 3.89% High Yield Fund................... 10.33% Growth & Income Fund.............. 6.01% Equity Index Fund................. 7.65% Common Stock Fund................. 8.18% Global Fund....................... 1.73% International Fund................ (0.03)% Aggressive Stock Fund............. 4.10% ASSET ALLOCATION SERIES AUGUST 5 TO SEPTEMBER 30,(A) ----------------- 1996 ------ Conservative Investors Fund....... 3.77% Balanced Fund..................... 3.97% Growth Investors Fund............. 4.52% - ---------- *Sales of IL Protector commenced on August 22, 1996. (a) Date as of which net premiums under the policies were first allocated to the Fund. The gross return and the net return for the periods indicated are not annual rates of return. 7. Subsequent Event On September 19, 1996 the Board of Directors of Equitable Life approved an Agreement and Plan of Merger by and between Equitable Life and Equitable Variable Life (the "Merger Agreement"). The merger is expected to be effective on January 1, 1997, subject to receipt of all necessary regulatory approvals. On that date, and in accordance with the provisions of the Merger Agreement, the separate existence of Equitable Variable Life will cease and Equitable Life will survive the merger. From and after the effective date of the merger, Equitable Life will be liable in place of Equitable Variable Life for the liabilities and obligations of Equitable Variable Life, including liabilities under policies and contracts issued by Equitable Variable Life, and all of Equitable Variable Life's assets will become assets of Equitable Life. FSA-35 INDEX TO FINANCIAL STATEMENTS THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Independent Auditors' Report....................................................................................F-2 Consolidated Financial Statements: Consolidated Balance Sheets, December 31, 1995 and 1994...................................................F-3 Consolidated Statements of Earnings for the Years Ended December 31, 1995, 1994 and 1993...............................................................................................F-4 Consolidated Statements of Equity for the Years Ended December 31, 1995, 1994 and 1993...............................................................................................F-5 Consolidated Statements of Cash Flows for the Years Ended December 31, 1995, 1994 and 1993...............................................................................................F-6 Notes to Consolidated Financial Statements................................................................F-7 Unaudited Interim Consolidated Financial Statements: Consolidated Balance Sheets, September 30, 1996 and December 31, 1995....................................F-42 Consolidated Statements of Earnings for the Three and Nine Months Ended September 30, 1996 and 1995...........................................................................F-43 Consolidated Statements of Equity for the Nine Months Ended September 30, 1996 and 1995...........................................................................F-44 Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 1996 and 1995...........................................................................F-45 Notes to Consolidated Financial Statements...............................................................F-46
F-1 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholder of The Equitable Life Assurance Society of the United States In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of earnings, of shareholder's equity and of cash flows present fairly, in all material respects, the financial position of The Equitable Life Assurance Society of the United States and its subsidiaries ("Equitable Life") at December 31, 1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. These financial statements are the responsibility of Equitable Life's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. As discussed in Note 2 to the consolidated financial statements, Equitable Life changed its methods of accounting for loan impairments in 1995, for postemployment benefits in 1994 and for investment securities in 1993. PRICE WATERHOUSE LLP New York, New York February 7, 1996 F-2 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1995 AND 1994
1995 1994 ----------------- ----------------- (IN MILLIONS) ASSETS Investments: Fixed maturities: Available for sale, at estimated fair value............................. $ 15,899.9 $ 7,586.0 Held to maturity, at amortized cost..................................... - 5,223.0 Mortgage loans on real estate............................................. 3,638.3 4,018.0 Equity real estate........................................................ 3,916.2 4,446.4 Policy loans.............................................................. 1,976.4 1,731.2 Other equity investments.................................................. 621.1 678.5 Investment in and loans to affiliates..................................... 636.6 560.2 Other invested assets..................................................... 706.1 489.3 ----------------- ----------------- Total investments..................................................... 27,394.6 24,732.6 Cash and cash equivalents................................................... 774.7 693.6 Deferred policy acquisition costs........................................... 3,083.3 3,221.1 Amounts due from discontinued GIC Segment................................... 2,097.1 2,108.6 Other assets................................................................ 2,713.1 2,078.6 Closed Block assets......................................................... 8,612.8 8,105.5 Separate Accounts assets.................................................... 24,566.6 20,469.5 ----------------- ----------------- TOTAL ASSETS................................................................ $ 69,242.2 $ 61,409.5 ================= ================= LIABILITIES Policyholders' account balances............................................. $ 21,752.6 $ 21,238.0 Future policy benefits and other policyholders' liabilities................. 4,171.8 3,840.8 Short-term and long-term debt............................................... 1,899.3 1,337.4 Other liabilities........................................................... 3,379.5 2,300.1 Closed Block liabilities.................................................... 9,507.2 9,069.5 Separate Accounts liabilities............................................... 24,531.0 20,429.3 ----------------- ----------------- Total liabilities..................................................... 65,241.4 58,215.1 ----------------- ----------------- Commitments and contingencies (Notes 10, 12, 13, 14 and 15) SHAREHOLDER'S EQUITY Common stock, $1.25 par value 2.0 million shares authorized, issued and outstanding........................................................... 2.5 2.5 Capital in excess of par value.............................................. 2,913.6 2,913.6 Retained earnings........................................................... 781.6 484.0 Net unrealized investment gains (losses).................................... 338.2 (203.0) Minimum pension liability................................................... (35.1) (2.7) ----------------- ----------------- Total shareholder's equity............................................ 4,000.8 3,194.4 ----------------- ----------------- TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY.................................. $ 69,242.2 $ 61,409.5 ================= =================
See Notes to Consolidated Financial Statements. F-3 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES CONSOLIDATED STATEMENTS OF EARNINGS YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1995 1994 1993 ----------------- ----------------- ----------------- (IN MILLIONS) REVENUES Universal life and investment-type product policy fee income...................................................... $ 771.0 $ 715.0 $ 644.5 Premiums...................................................... 606.8 625.6 599.1 Net investment income......................................... 2,127.7 2,030.9 2,599.3 Investment gains, net......................................... 5.3 91.8 533.4 Commissions, fees and other income............................ 886.8 845.4 1,717.2 Contribution from the Closed Block............................ 124.4 151.0 128.3 ----------------- ----------------- ----------------- Total revenues.......................................... 4,522.0 4,459.7 6,221.8 ----------------- ----------------- ----------------- BENEFITS AND OTHER DEDUCTIONS Interest credited to policyholders' account balances.......... 1,244.2 1,201.3 1,330.0 Policyholders' benefits....................................... 1,011.3 920.6 1,003.9 Other operating costs and expenses............................ 1,856.5 1,943.1 3,584.2 ----------------- ----------------- ----------------- Total benefits and other deductions..................... 4,112.0 4,065.0 5,918.1 ----------------- ----------------- ----------------- Earnings before Federal income taxes and cumulative effect of accounting change................................. 410.0 394.7 303.7 Federal income taxes.......................................... 112.4 101.2 91.3 ----------------- ----------------- ----------------- Earnings before cumulative effect of accounting change........ 297.6 293.5 212.4 Cumulative effect of accounting change, net of Federal income taxes................................................ - (27.1) - ----------------- ----------------- ----------------- Net Earnings.................................................. $ 297.6 $ 266.4 $ 212.4 ================= ================= =================
See Notes to Consolidated Financial Statements. F-4 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1995 1994 1993 ----------------- ----------------- ----------------- (IN MILLIONS) Common stock, at par value, beginning of year................. $ 2.5 $ 2.5 $ 2.0 Increase in par value......................................... - - .5 ----------------- ----------------- ----------------- Common stock, at par value, end of year....................... 2.5 2.5 2.5 ----------------- ----------------- ----------------- Capital in excess of par value, beginning of year............. 2,913.6 2,613.6 2,273.9 Additional capital in excess of par value..................... - 300.0 340.2 Increase in par value......................................... - - (.5) ----------------- ----------------- ----------------- Capital in excess of par value, end of year................... 2,913.6 2,913.6 2,613.6 ----------------- ----------------- ----------------- Retained earnings, beginning of year.......................... 484.0 217.6 5.2 Net earnings.................................................. 297.6 266.4 212.4 ----------------- ----------------- ----------------- Retained earnings, end of year................................ 781.6 484.0 217.6 ----------------- ----------------- ----------------- Net unrealized investment (losses) gains, beginning of year... (203.0) 131.9 78.8 Change in unrealized investment gains (losses)................ 541.2 (334.9) (9.5) Effect of adopting new accounting standard.................... - - 62.6 ----------------- ----------------- ----------------- Net unrealized investment gains (losses), end of year......... 338.2 (203.0) 131.9 ----------------- ----------------- ----------------- Minimum pension liability, beginning of year.................. (2.7) (15.0) - Change in minimum pension liability........................... (32.4) 12.3 (15.0) ----------------- ----------------- ----------------- Minimum pension liability, end of year........................ (35.1) (2.7) (15.0) ----------------- ----------------- ----------------- TOTAL SHAREHOLDER'S EQUITY, END OF YEAR....................... $ 4,000.8 $ 3,194.4 $ 2,950.6 ================= ================= =================
See Notes to Consolidated Financial Statements. F-5 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1995 1994 1993 ----------------- ----------------- ----------------- (IN MILLIONS) Net earnings.................................................. $ 297.6 $ 266.4 $ 212.4 Adjustments to reconcile net earnings to net cash provided (used) by operating activities: Net change in trading activities and broker-dealer related receivables/payables.............................. - - (4,177.8) Increase in matched resale agreements....................... - - (2,900.5) Increase in matched repurchase agreements................... - - 2,900.5 Investment gains, net of dealer and trading gains........... (5.3) (91.8) (160.8) Change in amounts due from discontinued GIC Segment......... - 57.3 47.8 General Account policy charges.............................. (769.7) (711.9) (623.4) Interest credited to policyholders' account balances........ 1,244.2 1,201.3 1,330.0 Changes in Closed Block assets and liabilities, net......... (69.6) (95.1) (73.3) Other, net.................................................. 627.1 7.8 (416.1) ----------------- ----------------- ----------------- Net cash provided (used) by operating activities.............. 1,324.3 634.0 (3,861.2) ----------------- ----------------- ----------------- Cash flows from investing activities: Maturities and repayments................................... 1,863.1 2,319.7 3,479.6 Sales....................................................... 8,901.4 5,661.9 7,399.2 Return of capital from joint ventures and limited partnerships.............................................. 65.2 39.0 119.5 Purchases................................................... (11,675.5) (7,417.6) (11,184.2) Decrease (increase) in loans to discontinued GIC Segment.... 1,226.9 (40.0) (880.0) Cash received on sale of 61% interest in DLJ................ - - 346.7 Other, net.................................................. (625.5) (371.1) (317.0) ----------------- ----------------- ----------------- Net cash (used) provided by investing activities.............. (244.4) 191.9 (1,036.2) ----------------- ----------------- ----------------- Cash flows from financing activities: Policyholders' account balances: Deposits.................................................. 2,414.9 2,082.7 2,410.7 Withdrawals............................................... (2,692.7) (2,887.4) (2,433.5) Net (decrease) increase in short-term financings............ (16.4) (173.0) 4,717.2 Additions to long-term debt................................. 599.7 51.8 97.7 Repayments of long-term debt................................ (40.7) (199.8) (64.4) Proceeds from issuance of Alliance units.................... - 100.0 - Payment of obligation to fund accumulated deficit of discontinued GIC Segment.................................. (1,215.4) - - Capital contribution from the Holding Company............... - 300.0 - Other, net.................................................. (48.2) - - ----------------- ----------------- ----------------- Net cash (used) provided by financing activities.............. (998.8) (725.7) 4,727.7 ----------------- ----------------- ----------------- Change in cash and cash equivalents........................... 81.1 100.2 (169.7) Cash and cash equivalents, beginning of year.................. 693.6 593.4 763.1 ----------------- ----------------- ----------------- Cash and Cash Equivalents, End of Year........................ $ 774.7 $ 693.6 $ 593.4 ================= ================= ================= Supplemental cash flow information Interest Paid............................................... $ 89.6 $ 34.9 $ 1,437.2 ================= ================= ================= Income Taxes (Refunded) Paid................................ $ (82.7) $ 49.2 $ 41.0 ================= ================= =================
See Notes to Consolidated Financial Statements. F-6 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1) ORGANIZATION The Equitable Life Assurance Society of the United States ("Equitable Life") converted to a stock life insurance company on July 22, 1992 and became a wholly owned subsidiary of The Equitable Companies Incorporated (the "Holding Company"). Equitable Life's insurance business, which is comprised of an Individual Insurance and Annuities segment and a Group Pension segment is conducted principally by Equitable Life and its wholly owned life insurance subsidiary, Equitable Variable Life Insurance Company ("EVLICO"). Equitable Life's investment management business, which comprises the Investment Services segment, is conducted principally by Alliance Capital Management L.P. ("Alliance"), Equitable Real Estate Investment Management, Inc. ("EREIM") and Donaldson, Lufkin and Jenrette, Inc. ("DLJ"), an investment banking and brokerage affiliate. AXA, a French holding company for an international group of insurance and related financial services companies is the Holding Company's largest shareholder, owning approximately 60.6% at December 31, 1995 (63.5% assuming conversion of Series E Convertible Preferred Stock held by AXA and 54.2% if all securities convertible into, or options on, common stock were to be converted or exercised). 2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation and Principles of Consolidation ----------------------------------------------------- The accompanying consolidated financial statements are prepared in conformity with generally accepted accounting principles ("GAAP"). The accompanying consolidated financial statements include the accounts of Equitable Life and its wholly owned life insurance subsidiaries (collectively, the "Insurance Group"); non-insurance subsidiaries, principally Alliance, an investment advisory subsidiary and EREIM, a real estate investment management subsidiary; and those partnerships and joint ventures in which the Company has control and a majority economic interest (collectively, including its consolidated subsidiaries, the "Company"). The consolidated statement of earnings and cash flow for the year ended December 31, 1993 include the results of operations and cash flow of DLJ, an investment banking and brokerage affiliate, on a consolidated basis through December 15, 1993 (see Note 20). Subsequent to that date, DLJ is accounted for on the equity basis. The Closed Block assets and liabilities and results of operations are presented in the consolidated financial statements as single line items (see Note 6). Unless specifically stated, all disclosures contained herein supporting the consolidated financial statements exclude the Closed Block related amounts. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. All significant intercompany transactions and balances have been eliminated in consolidation other than intercompany transactions and balances with the Closed Block and the discontinued Guaranteed Interest Contract ("GIC") Segment (see Note 7). Certain reclassifications have been made in the amounts presented for prior periods to conform these periods with the 1995 presentation. F-7 Closed Block ------------ As of July 22, 1992, Equitable Life established the Closed Block for the benefit of certain classes of individual participating policies for which Equitable Life had a dividend scale payable in 1991 and which were in force on that date. Assets were allocated to the Closed Block in an amount which, together with anticipated revenues from policies included in the Closed Block, was reasonably expected to be sufficient to support such business, including provision for payment of claims, certain expenses and taxes, and for continuation of dividend scales payable in 1991, assuming the experience underlying such scales continues. Assets allocated to the Closed Block inure solely to the benefit of the holders of policies included in the Closed Block and will not revert to the benefit of the Holding Company. The plan of demutualization prohibits the reallocation, transfer, borrowing or lending of assets between the Closed Block and other portions of Equitable Life's General Account, any of its Separate Accounts or to any affiliate of Equitable Life without the approval of the New York Superintendent of Insurance. 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. If the actual contribution from the Closed Block in any given period equals or exceeds the expected contribution for such period as determined at the establishment of the Closed Block, the expected contribution would be recognized in income for that period. Any excess of the actual contribution over the expected contribution would also be recognized in income to the extent that the aggregate expected contribution for all prior periods exceeded the aggregate actual contribution. Any remaining excess of actual contribution over expected contributions would be accrued in the Closed Block as a liability for future dividends to be paid to the Closed Block policyholders. If, over the period the policies and contracts in the Closed Block remain in force, the actual contribution from the Closed Block is less than the expected contribution from the Closed Block, only such actual contribution would be recognized in income. Discontinued Operations ----------------------- In 1991, the Company's management adopted a plan to discontinue the business operations of the GIC Segment, consisting of the Guaranteed Interest Contract and Group Non-Participating Wind-Up Annuities lines of business. The Company established a pre-tax provision for the estimated future losses of the GIC line of business and a premium deficiency reserve for the Group Non-Participating Wind-Up Annuities. Subsequent losses incurred have been charged to the allowance for future losses and the premium deficiency reserve. Total allowances are based upon management's best judgment and there is no assurance that the ultimate losses will not differ. Accounting Changes ------------------ In the first quarter of 1995, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 114, "Accounting by Creditors for Impairment of a Loan". This statement applies to all loans, including loans restructured in a troubled debt restructuring involving a modification of terms. This statement addresses the accounting for impairment of a loan by specifying how allowances for credit losses should be determined. Impaired loans within the scope of this statement are measured based on the present value of expected future cash flows discounted at the loan's effective interest rate, at the loan's observable market price or the fair value of the collateral if the loan is collateral dependent. The Company provides for impairment of loans through an allowance for possible losses. The adoption of this statement did not have a material effect on the level of these allowances or on the Company's consolidated statements of earnings and shareholder's equity. F-8 In the fourth quarter of 1994 (effective as of January 1, 1994), the Company adopted SFAS No. 112, "Employers' Accounting for Postemployment Benefits," which required employers to recognize the obligation to provide postemployment benefits. Implementation of this statement resulted in a charge for the cumulative effect of accounting change of $27.1 million, net of a Federal income tax benefit of $14.6 million. At December 31, 1993, the Company adopted SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities," which expanded the use of fair value accounting for those securities that a company does not have positive intent and ability to hold to maturity. Implementation of this statement increased consolidated shareholder's equity by $62.6 million, net of deferred policy acquisition costs, amounts attributable to participating group annuity contracts and deferred Federal income tax. Beginning coincident with issuance of SFAS No. 115 implementation guidance in November 1995, the Financial Accounting Standards Board ("FASB") permitted companies a one-time opportunity, through December 31, 1995, to reassess the appropriateness of the classification of all securities held at that time. On December 1, 1995, the Company transferred $4,794.9 million of securities classified as held to maturity to the available for sale portfolio. As a result consolidated shareholder's equity increased by $126.2 million, net of deferred policy acquisition costs, amounts attributable to participating group annuity contracts and deferred Federal income tax. New Accounting Pronouncements ----------------------------- In January 1995, the FASB issued SFAS No. 120, "Accounting and Reporting by Mutual Life Insurance Enterprises and by Insurance Enterprises for Certain Long-Duration Participating Contracts," which permits, but does not require, stock life insurance companies with participating life contracts to account for those contracts in accordance with Statement of Position No. 95-1, "Accounting for Certain Insurance Activities of Mutual Life Insurance Enterprises". The Company has decided to retain the existing methodology to account for traditional participating policies and, therefore, will not adopt this statement. In March 1995, the FASB issued SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," which requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of such assets may not be recoverable. The Company will implement this statement as of January 1, 1996. The cumulative effect of this accounting change will be a charge of $23.4 million, net of a Federal income tax benefit of $12.1 million, due to the writedown to fair value of building improvements relating to facilities being vacated beginning in 1996. The Company currently provides allowances for possible losses for other assets under the scope of this statement. Management has not yet determined the impact of this statement on assets to be held and used. In May 1995, the FASB issued SFAS No. 122, "Accounting for Mortgage Servicing Rights," which requires a mortgage banking enterprise to recognize rights to service mortgage loans for others as separate assets however those servicing rights are acquired. It further requires capitalized mortgage servicing rights be assessed for impairment based on the fair value of those rights. The Company will implement this statement as of January 1, 1996. Implementation of this statement will not have a material effect on the Company's consolidated financial statements. In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based Compensation". This statement defines a fair value based method of accounting for stock-based employee compensation plans while continuing to allow an entity to measure compensation cost for such plans using the intrinsic value based method of accounting. Management has decided to retain the current compensation cost methodology prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees". F-9 Valuation of Investments ------------------------ Fixed maturities, which the Company has both the ability and the intent to hold to maturity, are stated principally at amortized cost. Fixed maturities identified as available for sale are reported at estimated fair value. The amortized cost of fixed maturities is adjusted for impairments in value deemed to be other than temporary. Mortgage loans on real estate are stated at unpaid principal balances, net of unamortized discounts and valuation allowances. Effective with the adoption of SFAS No. 114 on January 1, 1995, the valuation allowances are based on the present value of expected future cash flows discounted at the loan's original effective interest rate or the collateral value if the loan is collateral dependent. However, if foreclosure is or becomes probable, the measurement method used is collateral value. Prior to the adoption of SFAS No. 114, the valuation allowances were based on losses expected by management to be realized on transfers of mortgage loans to real estate (upon foreclosure or in-substance foreclosure), on the disposition or settlement of mortgage loans and on mortgage loans management believed may not be collectible in full. In establishing valuation allowances, management previously considered, among other things the estimated fair value of the underlying collateral. Real estate, including real estate acquired in satisfaction of debt, is stated at depreciated cost less valuation allowances. At the date of foreclosure (including in-substance foreclosure), real estate acquired in satisfaction of debt is valued at estimated fair value. Valuation allowances on real estate held for the production of income are computed using the forecasted cash flows of the respective properties discounted at a rate equal to the Company's cost of funds; valuation allowances on real estate available for sale are computed using the lower of current estimated fair value, net of disposition costs, or depreciated cost. Policy loans are stated at unpaid principal balances. Partnerships and joint venture interests in which the Company does not have control and a majority economic interest are reported on the equity basis of accounting and are included either with equity real estate or other equity investments, as appropriate. Common stocks are carried at estimated fair value and are included in other equity investments. Short-term investments are stated at amortized cost which approximates fair value and are included with other invested assets. Cash and cash equivalents includes cash on hand, amounts due from banks and highly liquid debt instruments purchased with an original maturity of three months or less. All securities are recorded in the consolidated financial statements on a trade date basis. Investment Results and Unrealized Investment Gains (Losses) ----------------------------------------------------------- Net investment income and realized investment gains and losses (collectively, "investment results") related to certain participating group annuity contracts are passed through to the contractholders as interest credited to policyholders' account balances. Realized investment gains and losses are determined by specific identification and are presented as a component of revenue. Valuation allowances are netted against the asset categories to which they apply and changes in the valuation allowances are included in investment gains or losses. Unrealized investment gains and losses on fixed maturities available for sale and equity securities held by the Company are accounted for as a separate component of shareholder's equity, net of related deferred Federal income taxes, amounts attributable to the discontinued GIC Segment, Closed Block, participating group annuity contracts and deferred policy acquisition costs related to universal life and investment-type products. F-10 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 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. Deferred policy acquisition costs are 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, deferred policy acquisition costs are amortized over the expected average life of the contracts (periods ranging from 15 to 35 years and 5 to 17 years, respectively) as a constant percentage of estimated gross profits arising principally from investment results, mortality and expense margins and surrender charges based on historical and anticipated future experience, updated at the end of each accounting period. The effect on the amortization of deferred policy acquisition costs of revisions to estimated gross profits is reflected in earnings in the period such estimated gross profits are revised. The effect on the deferred policy acquisition cost asset that would result from realization of unrealized gains (losses) is recognized with an offset to unrealized gains (losses) in consolidated shareholder's equity as of the balance sheet date. For traditional life and annuity policies with life contingencies, deferred policy acquisition costs are 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 estimated life of the policy. For individual health benefit insurance, deferred policy acquisition costs are amortized over the expected average life of the contracts (10 years for major medical policies and 20 years for disability income 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 represent an accumulation of gross premium payments plus credited interest less expense and mortality charges and withdrawals. F-11 For traditional life insurance policies, future policy benefit and dividend 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, provide 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, deferred policy acquisition costs are 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. Individual health benefit liabilities for active lives are estimated using the net level premium method, and assumptions as to future morbidity, withdrawals and interest which provide a margin for adverse deviation. Benefit liabilities for disabled lives are estimated using the present value of benefits method and experience assumptions as to claim terminations, expenses and interest. Claim reserves and associated liabilities for individual disability income and major medical policies were $639.6 million, $570.6 million at December 31, 1995 and 1994, respectively. Incurred benefits (benefits paid plus changes in claim reserves) and benefits paid for individual disability income and major medical policies are summarized as follows:
YEARS ENDED DECEMBER 31, -------------------------------------------------------- 1995 1994 1993 ----------------- ---------------- ----------------- (IN MILLIONS) Incurred benefits related to current year.......... $ 176.0 $ 188.6 $ 193.1 Incurred benefits related to prior years........... 67.8 28.7 106.1 ----------------- ---------------- ----------------- Total Incurred Benefits............................ $ 243.8 $ 217.3 $ 299.2 ================= ================ ================= Benefits paid related to current year.............. $ 37.0 $ 43.7 $ 48.9 Benefits paid related to prior years............... 137.8 132.3 123.1 ----------------- ---------------- ----------------- Total Benefits Paid................................ $ 174.8 $ 176.0 $ 172.0 ================= ================ =================
The amount of policyholders' dividends to be paid (including those on policies included in the Closed Block) is determined annually by Equitable Life's Board of Directors. The aggregate amount of policyholders' dividends is related to actual interest, mortality, morbidity and expense experience for the year and judgment as to the appropriate level of statutory surplus to be retained by Equitable Life. Equitable Life is subject to limitations on the amount of statutory profits which can be retained with respect to certain classes of individual participating policies that were in force on July 22, 1992 which are not included in the Closed Block and with respect to participating policies issued subsequent to July 22, 1992. Excess statutory profits, if any, will be distributed over time to such policyholders and will not be available to Equitable Life's shareholder. Earnings in excess of limitations are accrued as policyholders' dividends. At December 31, 1995, participating policies including those in the Closed Block represent approximately 27.2% ($58.4 billion) of directly written life insurance in force, net of amounts ceded. Participating policies represent primarily all of the premium income as reflected in the consolidated statements of earnings and in the results of the Closed Block. F-12 Federal Income Taxes -------------------- Equitable Life and its life insurance and non-life insurance subsidiaries file a consolidated Federal income tax return with the Holding Company and its non-life insurance 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 the Separate Accounts liabilities. 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 the years ended December 31, 1995, 1994 and 1993, investment results of such Separate Accounts were $1,956.3 million, $676.3 million and $1,676.5 million, respectively. Deposits to all Separate Accounts are reported as increases in Separate Accounts liabilities and are not reported in revenues. Mortality, policy administration and surrender charges on all Separate Accounts are included in revenues. F-13 3) INVESTMENTS The following tables provide additional information relating to fixed maturities and equity securities:
GROSS GROSS AMORTIZED UNREALIZED UNREALIZED ESTIMATED COST GAINS LOSSES FAIR VALUE ----------------- ----------------- ---------------- --------------- (IN MILLIONS) DECEMBER 31, 1995 ----------------- Fixed Maturities: Available for Sale: Corporate.......................... $ 10,910.7 $ 617.6 $ 118.1 $ 11,410.2 Mortgage-backed.................... 1,838.0 31.2 1.2 1,868.0 U.S. Treasury securities and U.S. government and agency securities................ 2,257.0 77.8 4.1 2,330.7 States and political subdivisions.. 45.7 5.2 - 50.9 Foreign governments................ 124.5 11.0 .2 135.3 Redeemable preferred stock......... 108.1 5.3 8.6 104.8 ----------------- ----------------- ---------------- --------------- Total Available for Sale............... $ 15,284.0 $ 748.1 $ 132.2 $ 15,899.9 ================= ================= ================ =============== Equity Securities: Common stock......................... $ 97.3 $ 49.1 $ 18.0 $ 128.4 ================= ================= ================ =============== December 31, 1994 ----------------- Fixed Maturities: Available for Sale: Corporate.......................... $ 5,663.4 $ 34.6 $ 368.0 $ 5,330.0 Mortgage-backed.................... 686.0 2.9 44.8 644.1 U.S. Treasury securities and U.S. government and agency securities................ 1,519.3 6.7 71.9 1,454.1 States and political subdivisions.. 23.4 .1 .7 22.8 Foreign governments................ 43.8 .3 4.2 39.9 Redeemable preferred stock......... 108.4 .4 13.7 95.1 ----------------- ----------------- ---------------- --------------- Total Available for Sale............... $ 8,044.3 $ 45.0 $ 503.3 $ 7,586.0 ================= ================= ================ =============== Held to Maturity: Corporate.......................... $ 4,661.0 $ 67.9 $ 233.8 $ 4,495.1 U.S. Treasury securities and U.S. government and agency securities................ 428.9 4.6 44.2 389.3 States and political subdivisions.. 63.4 .9 3.7 60.6 Foreign governments................ 69.7 4.2 2.0 71.9 ================= ================= ================ =============== Total Held to Maturity................. $ 5,223.0 $ 77.6 $ 283.7 $ 5,016.9 ================= ================= ================ =============== Equity Securities: Common stock......................... $ 126.4 $ 31.2 $ 23.5 $ 134.1 ================= ================= ================ ===============
F-14 For publicly traded fixed maturities and equity securities, estimated fair value is determined using quoted market prices. For fixed maturities without a readily ascertainable market value, the Company has determined an estimated fair value using a discounted cash flow approach, including provisions for credit risk, generally based upon the assumption that such securities will be held to maturity. Estimated fair value for equity securities, substantially all of which do not have a readily ascertainable market value, has been determined by the Company. Such estimated fair values do not necessarily represent the values for which these securities could have been sold at the dates of the consolidated balance sheets. At December 31, 1995 and 1994, securities without a readily ascertainable market value having an amortized cost of $3,748.9 million and $3,980.4 million, respectively, had estimated fair values of $3,981.8 million and $3,858.7 million, respectively. The contractual maturity of bonds at December 31, 1995 is shown below:
AVAILABLE FOR SALE ------------------------------------ AMORTIZED ESTIMATED COST FAIR VALUE ---------------- ----------------- (IN MILLIONS) Due in one year or less................................................ $ 357.9 $ 360.0 Due in years two through five.......................................... 3,773.1 3,847.1 Due in years six through ten........................................... 4,709.8 4,821.8 Due after ten years.................................................... 4,497.1 4,898.2 Mortgage-backed securities............................................. 1,838.0 1,868.0 ---------------- ----------------- Total.................................................................. $ 15,175.9 $ 15,795.1 ================ =================
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. Investment valuation allowances and changes thereto are shown below:
YEARS ENDED DECEMBER 31, -------------------------------------------------------- 1995 1994 1993 ----------------- ---------------- ----------------- (IN MILLIONS) Balances, beginning of year........................ $ 284.9 $ 355.6 $ 512.0 Additions charged to income........................ 136.0 51.0 92.8 Deductions for writedowns and asset dispositions... (95.6) (121.7) (249.2) ----------------- ---------------- ----------------- Balances, End of Year.............................. $ 325.3 $ 284.9 $ 355.6 ================= ================ ================= Balances, end of year comprise: Mortgage loans on real estate.................... $ 65.5 $ 64.2 $ 144.4 Equity real estate............................... 259.8 220.7 211.2 ----------------- ---------------- ----------------- Total.............................................. $ 325.3 $ 284.9 $ 355.6 ================= ================ =================
Deductions for writedowns and asset dispositions for 1993 include an $87.1 million writedown of fixed maturity investments at December 31, 1993 as a result of adopting a new accounting statement for the valuation of these investments that requires specific writedowns instead of valuation allowances. At December 31, 1995, the carrying values of investments held for the production of income which were non-income producing for the twelve months preceding the consolidated balance sheet date were $37.2 million of fixed maturities and $84.7 million of mortgage loans on real estate. F-15 The Insurance Group's fixed maturity investment portfolio includes corporate high yield securities consisting of public high yield bonds, redeemable preferred stocks and directly negotiated debt in leveraged buyout transactions. The Insurance Group seeks to minimize the higher than normal credit risks associated with such securities by monitoring the total investments in any single issuer or total investment in a particular industry group. Certain of these corporate high yield securities are classified as other than investment grade by the various rating agencies, i.e., a rating below Baa or National Association of Insurance Commissioners ("NAIC") designation of 3 (medium grade), 4 or 5 (below investment grade) or 6 (in or near default). At December 31, 1995, approximately 15.57% of the $15,139.9 million aggregate amortized cost of bonds held by the Insurance Group were considered to be other than investment grade. In addition to its holdings of corporate high yield securities, the Insurance Group is an equity investor in limited partnership interests which primarily invest in securities considered to be other than investment grade. The Company has restructured or modified the terms of certain fixed maturity investments. The fixed maturity portfolio, based on amortized cost, includes $15.9 million and $30.5 million at December 31, 1995 and 1994, respectively, of such restructured securities. These amounts include fixed maturities which are in default as to principal and/or interest payments, are to be restructured pursuant to commenced negotiations or where the borrowers went into bankruptcy subsequent to acquisition (collectively, "problem fixed maturities") of $1.6 million and $9.7 million as of December 31, 1995 and 1994, respectively. Gross interest income that would have been recorded in accordance with the original terms of restructured fixed maturities amounted to $3.0 million, $7.5 million and $11.7 million in 1995, 1994 and 1993, respectively. Gross interest income on these fixed maturities included in net investment income aggregated $2.9 million, $6.8 million and $9.7 million in 1995, 1994 and 1993, respectively. At December 31, 1995 and 1994, 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 $87.7 million (2.4% of total mortgage loans on real estate) and $96.9 million (2.3% 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 $531.5 million and $447.9 million at December 31, 1995 and 1994, respectively. These amounts include $3.8 million and $1.0 million of problem mortgage loans on real estate at December 31, 1995 and 1994, 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 $52.1 million, $44.9 million and $51.8 million in 1995, 1994 and 1993, respectively. Gross interest income on these loans included in net investment income aggregated $37.4 million, $32.8 million and $46.0 million in 1995, 1994 and 1993, respectively. Impaired mortgage loans (as defined under SFAS No. 114) along with the related provision for losses were as follows:
December 31, 1995 ------------------- (IN MILLIONS) Impaired mortgage loans with provision for losses....................................... $ 310.1 Impaired mortgage loans with no provision for losses.................................... 160.8 ------------------- Recorded investment in impaired mortgage loans.......................................... 470.9 Provision for losses.................................................................... 62.7 ------------------- Net Impaired Mortgage Loans............................................................. $ 408.2 ===================
F-16 Impaired mortgage loans with no provision for losses are loans where the fair value of the collateral or the net present value of 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 the year ended December 31, 1995, the Company's average recorded investment in impaired mortgage loans was $429.0 million. Interest income recognized on these impaired mortgage loans totaled $27.9 million for the year ended December 31, 1995, including $13.4 million recognized on a cash basis. At December 31, 1995, investments owned of any one issuer, including its affiliates, for which the aggregate carrying values are 10% or more of total shareholders' equity, were $508.3 million relating to Trammell Crow and affiliates (including holdings of the Closed Block and the discontinued GIC Segment). The amount includes restructured mortgage loans on real estate with an amortized cost of $152.4 million. A $294.0 million commercial loan package which was in bankruptcy at the beginning of the year was resolved in 1995, with part of the package reclassified as restructured and the remainder reclassified as equity real estate. The Insurance Group's investment in equity real estate is through direct ownership and through investments in real estate joint ventures. At December 31, 1995 and 1994, the carrying value of equity real estate available for sale amounted to $255.5 million and $447.8 million, respectively. For the years ended December 31, 1995, 1994 and 1993, respectively, real estate of $35.3 million, $189.8 million and $261.8 million was acquired in satisfaction of debt. At December 31, 1995 and 1994, the Company owned $862.7 million and $1,086.9 million, respectively, of real estate acquired in satisfaction of debt. Depreciation of real estate is computed using the straight-line method over the estimated useful lives of the properties, which generally range from 40 to 50 years. Accumulated depreciation on real estate was $662.4 million and $703.1 million at December 31, 1995 and 1994, respectively. Depreciation expense on real estate totaled $121.7 million, $117.0 million and $115.3 million for the years ended December 31, 1995, 1994 and 1993, respectively. F-17 4) JOINT VENTURES AND PARTNERSHIPS Summarized combined financial information of real estate joint ventures (38 and 47 individual ventures as of December 31, 1995 and 1994, respectively) and of limited partnership interests accounted for under the equity method, in which the Company has an investment of $10.0 million or greater and an equity interest of 10% or greater is as follows:
DECEMBER 31, ------------------------------------ 1995 1994 ---------------- ----------------- (IN MILLIONS) FINANCIAL POSITION Investments in real estate, at depreciated cost........................ $ 2,684.1 $ 2,786.7 Investments in securities, generally at estimated fair value........... 2,459.8 3,071.2 Cash and cash equivalents.............................................. 489.1 359.8 Other assets........................................................... 270.8 398.7 ---------------- ----------------- Total assets........................................................... 5,903.8 6,616.4 ---------------- ----------------- Borrowed funds - third party........................................... 1,782.3 1,759.6 Borrowed funds - the Company........................................... 220.5 238.0 Other liabilities...................................................... 593.9 987.7 ---------------- ----------------- Total liabilities...................................................... 2,596.7 2,985.3 ---------------- ----------------- Partners' Capital...................................................... $ 3,307.1 $ 3,631.1 ================ ================= Equity in partners' capital included above............................. $ 902.2 $ 964.2 Equity in limited partnership interests not included above............. 212.8 224.6 Excess (deficit) of equity in partners' capital over investment cost and equity earnings.................................................. 3.6 (1.8) Notes receivable from joint venture.................................... 5.3 6.1 ---------------- ----------------- Carrying Value......................................................... $ 1,123.9 $ 1,193.1 ================ =================
YEARS ENDED DECEMBER 31, -------------------------------------------------------- 1995 1994 1993 ----------------- ---------------- ----------------- (IN MILLIONS) STATEMENTS OF EARNINGS Revenues of real estate joint ventures............. $ 463.5 $ 537.7 $ 602.7 Revenues of other limited partnership interests.... 242.3 103.4 319.1 Interest expense - third party..................... (135.3) (114.9) (118.8) Interest expense - the Company..................... (41.0) (36.9) (52.1) Other expenses..................................... (397.7) (430.9) (531.7) ----------------- ---------------- ----------------- Net Earnings....................................... $ 131.8 $ 58.4 $ 219.2 ================= ================ ================= Equity in net earnings included above.............. $ 49.1 $ 18.9 $ 71.6 Equity in net earnings of limited partnerships interests not included above..................... 44.8 25.3 46.3 Excess of earnings in joint ventures over equity ownership percentage and amortization of differences in bases............................. .9 1.8 9.2 Interest on notes receivable....................... .1 - .5 ----------------- ---------------- ----------------- Total Equity in Net Earnings....................... $ 94.9 $ 46.0 $ 127.6 ================= ================ =================
F-18 5) NET INVESTMENT INCOME AND INVESTMENT GAINS (LOSSES) The sources of net investment income are summarized as follows:
YEARS ENDED DECEMBER 31, -------------------------------------------------------- 1995 1994 1993 ----------------- ---------------- ----------------- (IN MILLIONS) Fixed maturities................................... $ 1,151.0 $ 1,024.5 $ 981.7 Trading account securities......................... - - 709.3 Securities purchased under resale agreements....... - - 533.8 Mortgage loans on real estate...................... 329.0 384.3 457.4 Equity real estate................................. 560.4 561.8 539.1 Other equity investments........................... 76.9 35.7 110.4 Policy loans....................................... 144.4 122.7 117.0 Broker-dealer related receivables.................. - - 292.2 Other investment income............................ 279.7 336.3 304.9 ----------------- ---------------- ----------------- Gross investment income.......................... 2,541.4 2,465.3 4,045.8 ----------------- ---------------- ----------------- Interest expense to finance short-term trading instruments...................................... - - 983.4 Other investment expenses.......................... 413.7 434.4 463.1 ----------------- ---------------- ----------------- Investment expenses.............................. 413.7 434.4 1,446.5 ----------------- ---------------- ----------------- Net Investment Income.............................. $ 2,127.7 $ 2,030.9 $ 2,599.3 ================= ================ =================
Investment gains (losses), net, including changes in the valuation allowances, are summarized as follows:
YEARS ENDED DECEMBER 31, -------------------------------------------------------- 1995 1994 1993 ----------------- ---------------- ----------------- (IN MILLIONS) Fixed maturities................................... $ 119.9 $ (14.1) $ 123.1 Mortgage loans on real estate...................... (40.2) (43.1) (65.1) Equity real estate................................. (86.6) 20.6 (18.5) Other equity investments........................... 12.8 76.0 119.5 Dealer and trading gains........................... - - 372.5 Sales of newly issued Alliance Units............... - 52.4 - Other.............................................. (.6) - 1.9 ----------------- ---------------- ----------------- Investment Gains, Net.............................. $ 5.3 $ 91.8 $ 533.4 ================= ================ =================
Writedowns of fixed maturities amounted to $46.7 million, $30.8 million and $5.4 million for the years ended December 31, 1995, 1994 and 1993, respectively. For the years ended December 31, 1995 and 1994, respectively, proceeds received on sales of fixed maturities classified as available for sale amounted to $8,206.0 million and $5,253.9 million. Gross gains of $211.4 million and $65.2 million and gross losses of $64.2 million and $50.8 million, respectively, were realized on these sales. The change in unrealized investment gains (losses) related to fixed maturities classified as available for sale for the years ended December 31, 1995 and 1994 amounted to $1,077.2 million and $(742.2) million, respectively. Gross gains of $188.5 million and gross losses of $145.0 million were realized on sales of investments in fixed maturities held for investment and available for sale for the year ended December 31, 1993. F-19 During each of the years ended December 31, 1995 and 1994, one security classified as held to maturity was sold and during the eleven months ended November 30, 1995 and the year ended December 31, 1994, respectively, twelve and six securities so classified were transferred to the available for sale portfolio. All actions were taken as a result of a significant deterioration in creditworthiness. The aggregate amortized cost of the securities sold were $1.0 million and $19.9 million with a related investment gain of $-0- million and $.8 million recognized in 1995 and 1994, respectively; the aggregate amortized cost of the securities transferred was $116.0 million and $42.8 million with gross unrealized investment losses of $3.2 million and $3.1 million charged to consolidated shareholders' equity for the eleven months ended November 30, 1995 and the year ended December 31, 1994, respectively. On December 1, 1995, the Company transferred $4,794.9 million of securities classified as held to maturity to the available for sale portfolio. As a result, unrealized gains on fixed maturities increased $307.0 million, offset by deferred policy acquisition costs of $73.7 million, amounts attributable to participating group annuity contracts of $39.2 million and deferred Federal income tax of $67.9 million. Investment gains from other equity investments for the year ended December 31, 1993, included $79.9 million generated by DLJ's involvement in long-term corporate development investments. For the years ended December 31, 1995, 1994 and 1993, investment results passed through to certain participating group annuity contracts as interest credited to policyholders' account balances amounted to $131.2 million, $175.8 million and $243.2 million, respectively. During 1995, Alliance entered into an agreement to acquire the business of Cursitor-Eaton Asset Management Company and Cursitor Holdings Limited (collectively, "Cursitor") for approximately $141.5 million consisting of $84.9 million in cash, 1,764,115 of Alliance's publicly traded units ("Alliance Units"), 6% notes aggregating $21.5 million payable ratably over four years, and substantial additional consideration which will be determined at a later date. The transaction, which is expected to be completed during the first quarter of 1996, is subject to the receipt of consents, regulatory approvals, and certain other closing conditions, including client approval of the transfer of Cursitor accounts. Upon completion of this transaction, the Company's ownership percentage of Alliance will be reduced. In 1994, Alliance sold 4.96 million newly issued Alliance Units to third parties at prevailing market prices. The sales decreased the Company's ownership of Alliance's Units from 63.2% to 59.2%. In addition, the Company continues to hold its 1% general partnership interest in Alliance. The Company recognized an investment gain of $52.4 million as a result of these transactions. The Company's ownership interest in Alliance will be further reduced upon the exercise of options granted to certain Alliance employees. At December 31, 1995, Alliance had options outstanding to purchase an aggregate of 4.8 million Alliance Units at a price ranging from $6.0625 to $22.25 per unit. Options are exercisable at a rate of 20% on each of the first five anniversary dates from the date of grant. Net unrealized investment gains (losses), included in the consolidated balance sheets as a component of equity and the changes for the corresponding years, are summarized as follows:
YEARS ENDED DECEMBER 31, -------------------------------------------------------- 1995 1994 1993 ----------------- ---------------- ----------------- (IN MILLIONS) Balance, beginning of year......................... $ (203.0) $ 131.9 $ 78.8 Changes in unrealized investment (losses) gains.... 1,117.7 (823.8) (14.1) Effect of adopting SFAS No. 115.................... - - 283.9 Changes in unrealized investment (gains) losses attributable to: Participating group annuity contracts.......... (78.1) 40.8 (36.2) Deferred policy acquisition costs.............. (208.4) 269.5 (150.5) Deferred Federal income taxes.................. (290.0) 178.6 (30.0) ----------------- ---------------- ----------------- Balance, End of Year............................... $ 338.2 $ (203.0) $ 131.9 ================= ================ =================
F-20
YEARS ENDED DECEMBER 31, -------------------------------------------------------- 1995 1994 1993 ----------------- ---------------- ----------------- (IN MILLIONS) Balance, end of year comprises: Unrealized investment (losses) gains on: Fixed maturities............................... $ 615.9 $ (461.3) $ 283.9 Other equity investments....................... 31.1 7.7 75.8 Other.......................................... 31.6 14.5 25.0 ----------------- ---------------- ----------------- Total........................................ 678.6 (439.1) 384.7 Amounts of unrealized investment (gains) losses attributable to: Participating group annuity contracts........ (72.2) 5.9 (34.9) Deferred policy acquisition costs............ (89.4) 119.0 (150.5) Deferred Federal income taxes................ (178.8) 111.2 (67.4) ----------------- ---------------- ----------------- Total.............................................. $ 338.2 $ (203.0) $ 131.9 ================= ================ =================
6) CLOSED BLOCK Summarized financial information of the Closed Block follows:
DECEMBER 31, -------------------------------------- 1995 1994 ----------------- ----------------- (IN MILLIONS) Assets Fixed Maturities: Available for sale, at estimated fair value (amortized cost, $3,662.8 and $1,270.3)........................................... $ 3,896.2 $ 1,197.0 Held to maturity, at amortized cost (estimated fair value of $1,785.0 in 1994)................................................ - 1,927.8 Mortgage loans on real estate........................................ 1,368.8 1,543.7 Policy loans......................................................... 1,797.2 1,827.9 Cash and other invested assets....................................... 440.9 442.5 Deferred policy acquisition costs.................................... 823.6 878.1 Other assets......................................................... 286.1 288.5 ----------------- ----------------- Total Assets......................................................... $ 8,612.8 $ 8,105.5 ================= ================= Liabilities Future policy benefits and policyholders' account balances........... $ 9,346.7 $ 8,965.3 Other liabilities.................................................... 160.5 104.2 ----------------- ----------------- Total Liabilities.................................................... $ 9,507.2 $ 9,069.5 ================= =================
F-21
YEARS ENDED DECEMBER 31, -------------------------------------------------------- 1995 1994 1993 ----------------- ---------------- ----------------- (IN MILLIONS) Revenues Premiums and other revenue......................... $ 753.4 $ 798.1 $ 860.2 Investment income (net of investment expenses of $26.7, $19.0 and $17.3).............. 538.9 523.0 526.5 Investment losses, net............................. (20.2) (24.0) (15.0) ----------------- ---------------- ----------------- Total revenues............................... 1,272.1 1,297.1 1,371.7 ----------------- ---------------- ----------------- Benefits and Other Deductions Policyholders' benefits and dividends.............. 1,085.1 1,075.6 1,141.4 Other operating costs and expenses................. 62.6 70.5 102.0 ----------------- ---------------- ----------------- Total benefits and other deductions.......... 1,147.7 1,146.1 1,243.4 ----------------- ---------------- ----------------- Contribution from the Closed Block................. $ 124.4 $ 151.0 $ 128.3 ================= ================ =================
The fixed maturity portfolio, based on amortized cost, includes $4.3 million and $23.8 million at December 31, 1995 and 1994, respectively, of restructured securities which includes problem fixed maturities of $1.9 million and $6.4 million, respectively. During the eleven months ended November 30, 1995, one security classified as held to maturity was sold and ten securities classified as held to maturity were transferred to the available for sale portfolio. All actions resulted from a significant deterioration in creditworthiness. The amortized cost of the security sold was $4.2 million. The aggregate amortized cost of the securities transferred was $81.3 million with gross unrealized investment losses of $.1 million transferred to equity. At December 1, 1995, $1,750.7 million of securities classified as held to maturity were transferred to the available for sale portfolio. As a result, unrealized gains of $88.5 million on fixed maturities were recognized and offset by an increase to the deferred dividend liability. Implementation of SFAS No. 115 for the valuation of fixed maturities at December 31, 1993 resulted in the recognition of a deferred dividend liability of $49.6 million. At December 31, 1995 and 1994, problem mortgage loans on real estate had an amortized cost of $36.5 million and $27.6 million, respectively, and mortgage loans on real estate for which the payment terms have been restructured had an amortized cost of $137.7 million and $179.2 million, respectively. At December 31, 1995 and 1994, the restructured mortgage loans on real estate amount included $8.8 million and $.7 million, respectively, of problem mortgage loans on real estate. Valuation allowances amounted to $18.4 million and $46.2 million on mortgage loans on real estate and $4.3 million and $2.6 million on equity real estate at December 31, 1995 and 1994, respectively. Writedowns of fixed maturities amounted to $16.8 million and $15.9 million and $1.7 million for the years ended December 31, 1995, 1994 and 1993, respectively. 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 7) DISCONTINUED OPERATIONS Summarized financial information of the GIC Segment follows:
DECEMBER 31, -------------------------------------- 1995 1994 ----------------- ----------------- (IN MILLIONS) Assets Mortgage loans on real estate........................................ $ 1,485.8 $ 1,730.5 Equity real estate................................................... 1,122.1 1,194.8 Other invested assets................................................ 665.2 978.8 Other assets......................................................... 579.3 529.5 ----------------- ----------------- Total Assets......................................................... $ 3,852.4 $ 4,433.6 ================= ================= Liabilities Policyholders' liabilities........................................... $ 1,399.8 $ 1,924.0 Allowance for future losses.......................................... 164.2 185.6 Amounts due to continuing operations................................. 2,097.1 2,108.6 Other liabilities.................................................... 191.3 215.4 ----------------- ----------------- Total Liabilities.................................................... $ 3,852.4 $ 4,433.6 ================= =================
YEARS ENDED DECEMBER 31, -------------------------------------------------------- 1995 1994 1993 ----------------- ---------------- ----------------- (IN MILLIONS) Revenues Investment income (net of investment expenses of $143.8, $174.0 and $175.8).................... $ 325.1 $ 395.0 $ 535.1 Investment (losses) gains, net..................... (22.9) 26.8 (22.6) Policy fees, premiums and other income............. .7 .3 8.7 ----------------- ---------------- ----------------- Total revenues..................................... 302.9 422.1 521.2 Benefits and other deductions...................... 328.0 443.8 545.9 ----------------- ---------------- ----------------- Losses Charged to Allowance for Future Losses...... $ (25.1) $ (21.7) $ (24.7) ================= ================ =================
In 1991, the Company established a pre-tax provision of $396.7 million for the estimated future losses of the GIC Segment. At December 31, 1993, implementation of SFAS No. 115 for the valuation of fixed maturities resulted in a benefit of $13.1 million, offset by a corresponding addition to the allowance for future losses. The amounts due to continuing operations at December 31, 1994 consisted of $3,324.0 million borrowed by the GIC Segment from continuing operations, offset by $1,215.4 million representing an obligation of continuing operations to provide assets to fund the accumulated deficit of the GIC Segment. In January 1995, continuing operations transferred $1,215.4 million in cash to the GIC Segment in settlement of its obligation. Subsequently, the GIC Segment remitted $1,155.4 million in cash to continuing operations in partial repayment of borrowings by the GIC Segment. No gains or losses were recognized on these transactions. Amounts due to continuing operations at December 31, 1995, consisted of $2,097.1 million borrowed by the discontinued GIC Segment. F-23 Investment income included $88.2 million and $97.7 million of interest income for the years ended December 31, 1994 and 1993, respectively, on amounts due from continuing operations. Benefits and other deductions includes $154.6 million, $219.7 million and $197.1 million of interest expense related to amounts borrowed from continuing operations in 1995, 1994 and 1993, respectively. Valuation allowances amounted to $19.2 million and $50.2 million on mortgage loans on real estate and $77.9 million and $74.7 million on equity real estate at December 31, 1995 and 1994, respectively. Writedowns of fixed maturities amounted to $8.1 million, $17.8 million and $1.1 million for the years ended December 31, 1995, 1994 and 1993, respectively. The fixed maturity portfolio, based on amortized cost, includes $15.1 million and $43.3 million at December 31, 1995 and 1994, respectively, of restructured securities. These amounts include problem fixed maturities of $6.1 million and $9.7 million at December 31, 1995 and 1994, respectively. At December 31, 1995 and 1994, problem mortgage loans on real estate had amortized costs of $35.4 million and $14.9 million, respectively, and mortgage loans on real estate for which the payment terms have been restructured had amortized costs of $289.3 million and $371.2 million, respectively. At December 31, 1995 and 1994, the GIC Segment had $310.9 million and $312.2 million, respectively, of real estate acquired in satisfaction of debt. 8) SHORT-TERM AND LONG-TERM DEBT Short-term and long-term debt consists of the following:
DECEMBER 31, -------------------------------------- 1995 1994 ----------------- ----------------- (IN MILLIONS) Short-term debt...................................................... $ - $ 20.0 ----------------- ----------------- Long-term debt: Equitable Life: Surplus notes, 6.95%, scheduled to mature 2005..................... 399.3 - Surplus notes, 7.70%, scheduled to mature 2015..................... 199.6 - Eurodollar notes, 10.375% due 1995................................. - 34.6 Eurodollar notes, 10.5% due 1997................................... 76.2 76.2 Zero coupon note, 11.25% due 1997.................................. 120.1 107.8 Other.............................................................. 16.3 14.3 ----------------- ----------------- Total Equitable Life........................................... 811.5 232.9 ----------------- ----------------- Wholly Owned and Joint Venture Real Estate: Mortgage notes, 4.98% - 12.75% due through 2019.................... 1,084.4 1,080.6 ----------------- ----------------- Alliance: Other.............................................................. 3.4 3.9 ----------------- ----------------- Total long-term debt................................................. 1,899.3 1,317.4 ----------------- ----------------- Total Short-term and Long-term Debt.................................. $ 1,899.3 $ 1,337.4 ================= =================
Short-term Debt --------------- Equitable Life has a $350.0 million bank credit facility available to fund short-term working capital needs and to facilitate the securities settlement process. The credit facility consists of two types of borrowing options with varying interest rates. The interest rates are based on external indices dependent on the type of borrowing and at December 31, 1995 range from 5.8% (the London Interbank Offering Rate plus 22.5 basis points) to 8.5% (the prime rate). There were no borrowings outstanding under this bank credit facility at December 31, 1995. F-24 Equitable Life has a commercial paper program with an issue limit of $500.0 million. This program is available for general corporate purposes used to support Equitable Life's liquidity needs and is supported by Equitable Life's existing $350.0 million five-year bank credit facility. There were no borrowings outstanding under this program at December 31, 1995. In 1994, Alliance established a $100.0 million revolving credit facility with several banks. On March 31, 1997, the revolving credit facility converts into a term loan payable in quarterly installments through March 31, 1999. Outstanding borrowings generally bear interest at the Eurodollar rate plus .875% per annum through March 31, 1997 and at the Eurodollar rate plus 1.125% per annum after conversion through March 31, 1999. In addition, a quarterly commitment fee of .25% per annum is paid on the average daily unused amount. At December 31, 1995, there were no amounts outstanding under the facility. In 1994, Alliance also established a $100.0 million commercial paper program and entered into a three-year $100.0 million revolving credit facility with a group of commercial banks to support commercial paper to be issued under the program and for general corporate purposes. Amounts outstanding under the facility bear interest at an annual rate ranging from the Eurodollar rate plus .225% to the Eurodollar rate plus .2875%. A fee of .125% per annum is paid quarterly on the entire facility. At December 31, 1995, Alliance had not issued any commercial paper and there were no amounts outstanding under the revolving credit facility. During 1994, EREIM established two bank lines of credit totaling $30.0 million of which $20.0 million was outstanding at December 31, 1994. Long-term Debt -------------- Several of the long-term debt agreements have restrictive covenants related to the total amount of debt, net tangible assets and other matters. The Company is in compliance with all debt covenants. On December 18, 1995, Equitable Life issued, in accordance with Section 1307 of the New York Insurance Law, $400.0 million of surplus notes having an interest rate of 6.95% scheduled to mature in 2005 and $200.0 million of surplus notes having an interest rate of 7.70% scheduled to mature in 2015. Proceeds from the issuance of the surplus notes were $596.6 million, net of related issuance costs. The unamortized discount on the surplus notes was $1.1 million at December 31, 1995. Payments of interest on or principal of the surplus notes are subject to prior approval by the New York Insurance Department. The Company has pledged real estate, mortgage loans, cash and securities amounting to $1,629.7 million and $1,744.4 million at December 31, 1995 and 1994, respectively, as collateral for certain long-term debt. At December 31, 1995, aggregate maturities of the long-term debt based on required principal payments at maturity for 1996 and the succeeding four years are $124.0 million, $466.6 million, $309.5 million, $15.8 million, respectively, and $1,015.0 million thereafter. 9) FEDERAL INCOME TAXES A summary of the Federal income tax expense (benefit) in the consolidated statements of earnings is shown below:
YEARS ENDED DECEMBER 31, -------------------------------------------------------- 1995 1994 1993 ----------------- ---------------- ----------------- (IN MILLIONS) Federal income tax expense (benefit): Current.......................................... $ (11.7) $ 4.0 $ 115.8 Deferred......................................... 124.1 97.2 (24.5) ----------------- ---------------- ----------------- Total.............................................. $ 112.4 $ 101.2 $ 91.3 ================= ================ =================
F-25 The Federal income taxes attributable to consolidated operations are different from the amounts determined by multiplying the earnings before Federal income taxes and cumulative effect of accounting change by the expected Federal income tax rate of 35%. The sources of the difference and the tax effects of each are as follows:
YEARS ENDED DECEMBER 31, -------------------------------------------------------- 1995 1994 1993 ----------------- ---------------- ----------------- (IN MILLIONS) Expected Federal income tax expense................ $ 143.5 $ 138.1 $ 106.3 Differential earnings amount....................... - (16.8) (23.2) Adjustment of tax audit reserves................... 4.1 (4.6) 22.9 Tax rate adjustment................................ - - (5.0) Other.............................................. (35.2) (15.5) (9.7) ----------------- --------------- ----------------- Federal Income Tax Expense......................... $ 112.4 $ 101.2 $ 91.3 ================= ================ =================
Prior to the date of demutualization, Equitable Life reduced its deduction for policyholder dividends by the differential earnings amount. This amount was computed, for each tax year, by multiplying Equitable Life's average equity base, as determined for tax purposes, by an estimate of the excess of an imputed earnings rate for stock life insurance companies over the average mutual life insurance companies' earnings rate. The differential earnings amount for each tax year was subsequently recomputed when actual earnings rates were published by the Internal Revenue Service. As a stock life insurance company, Equitable Life is no longer required to reduce its policyholder dividend deduction by the differential earnings amount, but differential earnings amounts for pre-demutualization years were still being recomputed in 1994 and 1993. The components of the net deferred Federal income tax asset are as follows:
DECEMBER 31, 1995 December 31, 1994 --------------------------------- --------------------------------- ASSETS LIABILITIES Assets Liabilities --------------- ---------------- --------------- --------------- (IN MILLIONS) Deferred policy acquisition costs, reserves and reinsurance............. $ - $ 303.2 $ - $ 220.3 Investments............................ - 326.9 - 18.7 Compensation and related benefits...... 293.0 - 307.3 - Other.................................. - 32.3 - 5.8 --------------- ---------------- --------------- --------------- Total.................................. $ 293.0 $ 662.4 $ 307.3 $ 244.8 =============== ================ =============== ===============
The deferred Federal income tax expense (benefit) 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:
YEARS ENDED DECEMBER 31, -------------------------------------------------------- 1995 1994 1993 ----------------- ---------------- ----------------- (IN MILLIONS) Deferred policy acquisition costs, reserves and reinsurance.................................. $ 55.1 $ 13.0 $ (46.7) Investments........................................ 13.0 89.3 60.4 Compensation and related benefits.................. 30.8 10.0 (50.1) Other.............................................. 25.2 (15.1) 11.9 ----------------- ---------------- ----------------- Deferred Federal Income Tax Expense (Benefit)...... $ 124.1 $ 97.2 $ (24.5) ================= ================ =================
F-26 The Internal Revenue Service completed its audit of the Company's Federal income tax returns for the years 1984 through 1988. There was no material effect on the Company's consolidated results of operations. 10) REINSURANCE AGREEMENTS The Insurance Group assumes and cedes reinsurance with other insurance companies. The Insurance Group evaluates the financial condition of its reinsurers to minimize its exposure to significant losses from reinsurer insolvencies. The effect of reinsurance (excluding group life and health) is summarized as follows:
YEARS ENDED DECEMBER 31, -------------------------------------------------------- 1995 1994 1993 ----------------- ---------------- ----------------- (IN MILLIONS) Direct premiums.................................... $ 474.2 $ 476.7 $ 458.8 Reinsurance assumed................................ 171.3 180.5 169.9 Reinsurance ceded.................................. (38.7) (31.6) (29.6) ----------------- ---------------- ----------------- Premiums........................................... $ 606.8 $ 625.6 $ 599.1 ================= ================ ================= Universal Life and Investment-type Product Policy Fee Income Ceded.......................... $ 38.9 $ 27.5 $ 33.7 ================= ================ ================= Policyholders' Benefits Ceded...................... $ 48.2 $ 20.7 $ 72.3 ================= ================ ================= Interest Credited to Policyholders' Account Balances Ceded................................... $ 28.5 $ 25.4 $ 24.1 ================= ================ =================
In February 1993, management established a practice limiting the risk retention on new policies issued by the Insurance Group to a maximum of $5.0 million. In addition, 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 $260.6 million, $241.0 million and $895.1 million for the years ended December 31, 1995, 1994 and 1993, respectively. Ceded death and disability benefits totaled $188.1 million, $235.5 million and $787.8 million for the years ended December 31, 1995, 1994 and 1993, respectively. Insurance liabilities ceded totaled $724.2 million and $833.4 million at December 31, 1995 and 1994, respectively. 11) EMPLOYEE BENEFIT PLANS The Company sponsors qualified and non-qualified defined benefit plans covering substantially all employees (including certain qualified part-time employees), managers and certain agents. The pension plans are non-contributory and 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. The Company's funding policy is to make the minimum contribution required by the Employee Retirement Income Security Act of 1974. Components of net periodic pension (credit) cost for the qualified and non-qualified plans are as follows:
YEARS ENDED DECEMBER 31, -------------------------------------------------------- 1995 1994 1993 ----------------- ---------------- ----------------- (IN MILLIONS) Service cost....................................... $ 30.0 $ 30.3 $ 29.8 Interest cost on projected benefit obligations..... 122.0 111.0 108.0 Actual return on assets............................ (309.2) 24.4 (178.6) Net amortization and deferrals..................... 155.6 (142.5) 55.3 ----------------- ---------------- ----------------- Net Periodic Pension (Credit) Cost................. $ (1.6) $ 23.2 $ 14.5 ================= ================ =================
F-27 The funded status of the qualified and non-qualified pension plans is as follows:
DECEMBER 31, ------------------------------------ 1995 1994 ---------------- ----------------- (IN MILLIONS) Actuarial present value of obligations: Vested............................................................... $ 1,642.4 $ 1,295.5 Non-vested........................................................... 10.9 8.7 --------------- ----------------- Accumulated Benefit Obligation......................................... $ 1,653.3 $ 1,304.2 ================ ================= Plan assets at fair value.............................................. $ 1,503.8 $ 1,193.5 Projected benefit obligation........................................... 1,743.0 1,403.4 ---------------- ----------------- Projected benefit obligation in excess of plan assets.................. (239.2) (209.9) Unrecognized prior service cost........................................ (25.5) (33.2) Unrecognized net loss from past experience different from that assumed.............................................................. 368.2 298.9 Unrecognized net asset at transition................................... (7.3) (20.8) Additional minimum liability........................................... (51.9) (37.8) ---------------- ----------------- Prepaid (Accrued) Pension Cost......................................... $ 44.3 $ (2.8) ================ =================
The discount rate and rate of increase in future compensation levels used in determining the actuarial present value of projected benefit obligations were 7.25% and 4.50%, respectively, at December 31, 1995 and 8.75% and 4.88%, respectively, at December 31, 1994. As of January 1, 1995 and 1994, the expected long-term rate of return on assets for the retirement plan was 11% and 10%, respectively. The Company recorded, as a reduction of shareholder's equity, an additional minimum pension liability of $35.1 million and $2.7 million, net of Federal income taxes, at December 31, 1995 and 1994, respectively, representing the excess of the accumulated benefit obligation over the fair value of plan assets and accrued pension liability. The pension plan's assets include corporate and government debt securities, equity securities, equity real estate and shares of Group Trusts managed by Alliance. As of December 31, 1993, the Company changed the method of determining the market-related value of plan assets from fair value to a calculated value. This change in estimate had no material effect on the Company's consolidated statements of earnings. 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 $36.4 million, $38.1 million and $39.9 million for the years ended December 31, 1995, 1994 and 1993, respectively. The Company provides certain medical and life insurance benefits (collectively, "postretirement benefits") for qualifying employees, managers and agents retiring from the Company on or after attaining age 55 who have at least 10 years of service. The life insurance benefits are related to age and salary at retirement. The costs of postretirement benefits are recognized in accordance with the provisions of SFAS No. 106. The Company continues to fund postretirement benefits costs on a pay-as-you-go basis and, for the years ended December 31, 1995, 1994 and 1993, the Company made estimated postretirement benefits payments of $31.1 million, $29.8 million and $29.7 million, respectively. F-28 The following table sets forth the postretirement benefits plan's status, reconciled to amounts recognized in the Company's consolidated financial statements:
YEARS ENDED DECEMBER 31, -------------------------------------------------------- 1995 1994 1993 ----------------- ---------------- ----------------- (IN MILLIONS) Service cost....................................... $ 4.0 $ 3.9 $ 5.3 Interest cost on accumulated postretirement benefits obligation.............................. 34.7 28.6 29.2 Unrecognized prior service cost.................... (2.3) (3.9) (6.9) Net amortization and deferrals..................... - - 1.5 ----------------- ---------------- ----------------- Net Periodic Postretirement Benefits Costs......... $ 36.4 $ 28.6 $ 29.1 ================= ================ =================
DECEMBER 31, ------------------------------------ 1995 1994 ---------------- ----------------- (IN MILLIONS) Accumulated postretirement benefits obligation: Retirees............................................................. $ 391.8 $ 300.4 Fully eligible active plan participants.............................. 50.4 33.0 Other active plan participants....................................... 64.2 44.0 ---------------- ----------------- 506.4 377.4 Unrecognized benefit of plan amendments................................ - 3.2 Unrecognized prior service cost........................................ 56.3 61.9 Unrecognized net loss from past experience different from that assumed and from changes in assumptions.............................. (181.3) (64.7) ---------------- ----------------- Accrued Postretirement Benefits Cost................................... $ 381.4 $ 377.8 ================ =================
In 1993, the Company amended the cost sharing provisions of postretirement medical benefits. At January 1, 1994, medical benefits available to retirees under age 65 are the same as those offered to active employees and medical benefits will be limited to 200% of 1993 costs for all participants. The assumed health care cost trend rate used in measuring the accumulated postretirement benefits obligation was 10% in 1995, gradually declining to 3.5% in the year 2008 and in 1994 was 10%, gradually declining to 5% in the year 2004. The discount rate used in determining the accumulated postretirement benefits obligation was 7.25% and 8.75% at December 31, 1995 and 1994, respectively. If the health care cost trend rate assumptions were increased by 1%, the accumulated postretirement benefits obligation as of December 31, 1995 would be increased 6.5%. The effect of this change on the sum of the service cost and interest cost would be an increase of 6.7%. 12) DERIVATIVES AND FAIR VALUE OF FINANCIAL INSTRUMENTS Derivatives ----------- The Insurance Group primarily uses derivatives for asset/liability risk management and for hedging individual securities. Derivatives mainly are utilized to reduce the Insurance Group's exposure to interest rate fluctuations. Accounting for interest rate swap transactions is on an accrual basis. Gains and losses related to interest rate swap transactions are amortized as yield adjustments over the remaining life of the underlying hedged security. Income and expense resulting from interest rate swap activities are reflected in net investment income except for hedging transactions related to insurance liabilities. The notional amount of matched interest rate swaps outstanding at December 31, 1995 was $1,120.8 million. The average unexpired terms at December 31, 1995 range from 2.5 to 3.0 years. At December 31, 1995, the cost of terminating outstanding matched swaps in a loss position was $15.9 million and the unrealized gain on F-29 outstanding matched swaps in a gain position was $19.0 million. The Company has no intention of terminating these contracts prior to maturity. During 1995, 1994 and 1993, net gains (losses) of $1.4 million, $(.2) million and $-0- million, respectively, were recorded in connection with interest rate swap activity. Equitable Life has implemented an interest rate cap program designed to hedge crediting rates on interest-sensitive individual annuities contracts. The outstanding notional amounts at December 31, 1995 of contracts purchased and sold were $2,625.0 million and $300.0 million, respectively. The net premium paid by Equitable Life on these contracts was $12.5 million and is being amortized ratably over the contract periods ranging from 3 to 5 years. Income and expense resulting from this program are reflected as an adjustment to interest credited to policyholders' account balances. Substantially all of DLJ's business related derivatives is by its nature trading activities which are primarily for the purpose of customer accommodations. DLJ's derivative activities consist of option writing and trading in forward and futures contracts. Derivative financial instruments have both on-and-off balance sheet implications depending on the nature of the contracts. DLJ's involvement in swap contracts is not significant. Fair Value of Financial Instruments ----------------------------------- The Company defines fair value as the quoted market prices for those instruments that are actively traded in financial markets. In cases where quoted market prices are not available, fair values are estimated using present value or other valuation techniques. The fair value estimates are made at a specific point in time, based on available market information and judgments about the financial instrument, including estimates of timing, amount of expected future cash flows and the credit standing of counterparties. Such estimates do not reflect any premium or discount that could result from offering for sale at one time the Company's entire holdings of a particular financial instrument, nor do they consider the tax impact of the realization of unrealized gains or losses. In many cases, the fair value estimates cannot be substantiated by comparison to independent markets, nor can the disclosed value be realized in immediate settlement of the instrument. Certain financial instruments are excluded, particularly insurance liabilities other than financial guarantees and investment contracts. Fair market value of off-balance-sheet financial instruments of the Insurance Group was not material at December 31, 1995 and 1994. Fair value for mortgage loans on real estate are estimated by discounting future contractual cash flows using interest rates at which loans with similar characteristics and credit quality would be made. Fair values for foreclosed mortgage loans and problem mortgage loans are limited to the estimated fair value of the underlying collateral if lower. The estimated fair values for the Company's liabilities under GIC and association plan contracts are estimated using contractual cash flows discounted based on the T. Rowe Price GIC Index Rate for the appropriate duration. For durations in excess of the published index rate, the appropriate Treasury rate is used plus a spread equal to the longest duration GIC rate spread published. The estimated fair values for those group annuity contracts which are classified as investment contracts are measured at the estimated fair value of the underlying assets. Deposit administration contracts (included with group annuity contracts) classified as insurance contracts are measured at estimated fair value of the underlying assets. The estimated fair values for single premium deferred annuities ("SPDA") are estimated using projected cash flows discounted at current offering rates. The estimated fair values for supplementary contracts not involving life contingencies ("SCNILC") and annuities certain are derived using discounted cash flows based upon the estimated current offering rate. Fair value for long-term debt is determined using published market values, where available, or contractual cash flows discounted at market interest rates. The estimated fair values for non-recourse mortgage debt are determined by discounting contractual cash flows at a rate which takes into account the level of current market interest rates and collateral risk. The estimated fair values for recourse mortgage debt are determined by discounting contractual cash flows at a rate based upon current interest rates of other companies with credit ratings similar to the Company. The Company's fair value of short-term borrowings approximates their carrying value. F-30 The following table discloses carrying value and estimated fair value for financial instruments not otherwise disclosed in Notes 3, 6 and 7:
DECEMBER 31, -------------------------------------------------------------------- 1995 1994 --------------------------------- --------------------------------- CARRYING ESTIMATED Carrying Estimated VALUE FAIR VALUE Value Fair Value --------------- ---------------- --------------- --------------- (IN MILLIONS) Consolidated Financial Instruments: ----------------------------------- Mortgage loans on real estate.......... $ 3,638.3 $ 3,973.6 $ 4,018.0 $ 3,919.4 Other joint ventures................... 492.7 492.7 544.4 544.4 Policy loans........................... 1,976.4 2,057.5 1,731.2 1,676.6 Policyholders' account balances: Association plans.................... 101.0 100.0 141.0 141.0 Group annuity contracts.............. 2,335.0 2,395.0 2,450.0 2,469.0 SPDA................................. 1,265.8 1,272.0 1,744.3 1,732.7 Annuities certain and SCNILC......... 649.1 680.7 599.1 624.7 Long-term debt......................... 1,899.3 1,962.9 1,317.4 1,249.2 Closed Block Financial Instruments: ----------------------------------- Mortgage loans on real estate.......... 1,368.8 1,461.4 1,543.7 1,477.8 Other equity investments............... 151.6 151.6 179.5 179.5 Policy loans........................... 1,797.2 1,891.4 1,827.9 1,721.9 SCNILC liability....................... 34.8 34.5 39.5 37.0 GIC Segment Financial Instruments: ---------------------------------- Mortgage loans on real estate.......... 1,485.8 1,666.1 1,730.5 1,743.7 Fixed maturities....................... 107.4 107.4 219.3 219.3 Other equity investments............... 455.9 455.9 591.8 591.8 Guaranteed interest contracts.......... 329.0 352.0 835.0 855.0 Long-term debt......................... 135.1 136.0 134.8 127.9
13) COMMITMENTS AND CONTINGENT LIABILITIES The Company has provided, from time to time, certain guarantees or commitments to affiliates, investors and others. These arrangements include commitments by the Company, under certain conditions: to make liquidity advances to cover delinquent principal and interest and property protection expenses with respect to loan servicing agreements for securitized mortgage loans which at December 31, 1995 totaled $2.8 billion (as of December 31, 1995, $4.0 million have been advanced under these commitments); to make capital contributions of up to $246.7 million to affiliated real estate joint ventures; to provide equity financing to certain limited partnerships of $129.4 million at December 31, 1995, under existing loan or loan commitment agreements; and to provide short-term financing loans which at December 31, 1995 totaled $45.8 million. Management believes the Company will not incur any material losses as a result of these commitments. Equitable Life is the obligor under certain structured settlement agreements which it had entered into with unaffiliated insurance companies and beneficiaries. To satisfy its obligations under these agreements, Equitable Life owns single premium annuities issued by previously wholly owned life insurance subsidiaries. Equitable Life has directed payment under these annuities to be made directly to the beneficiaries under the structured settlement agreements. A contingent liability exists with respect to these agreements should the previously wholly owned subsidiaries be unable to meet their obligations. Management believes the satisfaction of those obligations by Equitable Life is remote. At December 31, 1995, the Insurance Group had $29.0 million of letters of credit outstanding. F-31 14) LITIGATION A number of lawsuits have been filed against life and health insurers in the jurisdictions in which Equitable Life and its subsidiaries do business involving insurers' sales practices, alleged agent misconduct, failure to properly supervise agents, and other matters. Some of the lawsuits have resulted in the award of substantial judgments against other insurers, including material amounts of punitive damages, or in substantial settlements. In some states juries have substantial discretion in awarding punitive damages. Equitable Life and its insurance subsidiaries, like other life and health insurers, from time to time are involved in such litigation. To date, no such lawsuit has resulted in an award or settlement of any material amount against the Company. Among litigations pending against Equitable Life and its insurance subsidiaries of the type referred to in this paragraph are the litigations described in the following two paragraphs. An action entitled Golomb et al. v. The Equitable Life Assurance Society of the United States was filed on January 20, 1995 in New York County Supreme Court. The action purports to be brought on behalf of a class of persons insured after 1983 under Lifetime Guaranteed Renewable Major Medical Insurance Policies issued by Equitable Life (the "policies"). The complaint alleges that premium increases for these policies after 1983, all of which were filed with and approved by the New York State Insurance Department and certain other state insurance departments, breached the terms of the insurance policies, and that statements in the policies and elsewhere concerning premium increases constituted fraudulent concealment, misrepresentations in violation of New York Insurance Law Section 4226 and deceptive practices under New York General Business Law Section 349. The complaint seeks a declaratory judgment, injunctive relief restricting the methods by which Equitable Life increases premiums on the policies in the future, a refund of premiums, and punitive damages. Plaintiffs also have indicated that they will seek damages in an unspecified amount. Equitable Life has moved to dismiss the complaint in its entirety on the grounds that it fails to state a claim and that uncontroverted documentary evidence establishes a complete defense to the claims. That motion is awaiting decision by the court. In January 1996, separate actions were filed in Pennsylvania and Texas state courts (entitled, respectively, Malvin et al. v. The Equitable Life Assurance Society of the United States and Bowler et al. v. The Equitable Life Assurance Society of the United States), making claims similar to those in the New York action described above. These new actions are asserted on behalf of proposed classes of Pennsylvania issued or renewed policyholders and Texas issued or renewed policyholders, insured under the policies. The Pennsylvania and Texas actions seek compensatory and punitive damages and injunctive relief restricting the methods by which Equitable Life increases premiums in the future based on the common law and statutes of those states. Although the outcome of any litigation cannot be predicted with certainty, particularly in the early stages of an action, Equitable Life's management believes that the ultimate resolution of those litigations should not have a material adverse effect on the financial position of the Company. Due to the early stage of such litigation, Equitable Life's management cannot make an estimate of loss, if any, or predict whether or not such litigation will have a material adverse effect on the Company's results of operations in any particular period. An action was instituted on April 6, 1995 against Equitable Life and its wholly owned subsidiary, The Equitable of Colorado, Inc. ("EOC"), in New York State Court, entitled Sidney C. Cole et al. v. The Equitable Life Assurance Society of the United States and The Equitable of Colorado, Inc., No. 95/108611 (N.Y. County). The action is brought by the holders of a joint survivorship whole life policy issued by EOC. The action purports to be on behalf of a class consisting of all persons who from January 1, 1984 purchased life insurance policies sold by Equitable Life and EOC based upon their allegedly uniform sales presentations and policy illustrations. The complaint puts in issue various alleged sales practices that plaintiffs assert, among other things, misrepresented the stated number of years that the annual premium would need to be paid. Plaintiffs seek damages in an unspecified amount, imposition of a constructive trust, and seek to enjoin Equitable Life and EOC from engaging in the challenged sales practices. Equitable Life and EOC intend to defend vigorously and believe that they have meritorious defenses which, if successful, would dispose of the action completely. Equitable Life and EOC further do not believe that this case is an appropriate class action. Although the outcome of any litigation cannot be predicted with certainty, particularly in the early stages of an action, Equitable Life's management believes that the ultimate F-32 resolution of this litigation should not have a material adverse effect on the financial position of the Company. Due to the early stage of such litigation, the Company's management cannot make an estimate of loss, if any, or predict whether or not such litigation will have a material adverse effect on the Company's results of operations in any particular period. Equitable Casualty Insurance Company ("Casualty"), a captive property and casualty insurance company organized under the laws of Vermont, which is an indirect wholly owned subsidiary of Equitable Life, is a party to an arbitration proceeding that commenced in August 1995 with the selection of three arbitrators. The arbitration will resolve a dispute among Casualty, Houston General Insurance Company ("Houston General"), and GEICO General Insurance Company ("GEICO General") regarding the interpretation of a reinsurance agreement that was entered into as part of a 1980 transaction whereby Equitable General Insurance Company ("Equitable General"), formerly an indirect subsidiary of Equitable Life and the predecessor of GEICO General, sold its commercial lines business along with the stock of Houston General to subsidiaries of Tokio Marine & Fire Insurance Company, Ltd. ("Tokio Marine"). Casualty and GEICO General maintain that, under the reinsurance agreement, Houston General assumed liability for all losses insured under commercial lines policies written by Equitable General and its predecessors in order to effect the transfer of that business to Tokio Marine's subsidiaries. Houston General contends that it did not assume reinsurance liability for losses insured under certain of those commercial lines policies. The arbitration panel determined to begin hearing evidence in the arbitration in June 1996. The result of the arbitration is expected to resolve two litigations that were commenced by Houston General and that have been stayed by the presiding courts pending the completion of the arbitration (in one case, Houston General named as a defendant only GEICO General but Casualty intervened as a defendant with GEICO General, and in the other case, Houston General named GEICO General and Equitable Life). The arbitration is expected to be completed during the second half of 1996. While the ultimate outcome of the arbitration cannot be predicted with certainty, the Company's management believes that the arbitrators will recognize that Houston General's position is without merit and contrary to the way in which the reinsurance industry operates and therefore the ultimate resolution of this matter should not have a material adverse effect on the Company's financial position or results of operations. On July 25, 1995, a Consolidated and Supplemental Class Action Complaint ("Complaint") was filed against the Alliance North American Government Income Trust, Inc. (the "Fund"), Alliance and certain other defendants affiliated with Alliance, including the Holding Company, alleging violations of Federal securities laws, fraud and breach of fiduciary duty in connection with the Fund's investments in Mexican and Argentine securities. A similar complaint was filed on November 7, 1995 and was subsequently consolidated with the Complaint. The Complaint, which seeks certification of a plaintiff class of persons who purchased or owned Class A, B or C shares of the Fund from March 27, 1992 through December 23, 1994, seeks an unspecified amount of damages, costs, attorneys' fees and punitive damages. The principal allegations of the Complaint are that the Fund purchased debt securities issued by the Mexican and Argentine governments in amounts that were not permitted by the Fund's investment objective, and that there was no shareholder vote to change the investment objective to permit purchases in such amounts. The Complaint further alleges that the decline in the value of the Mexican and Argentine securities held by the Fund caused the Fund's net asset value to decline to the detriment of the Fund's shareholders. On September 26, 1995, the defendants jointly filed a motion to dismiss the Complaint which has not yet been decided by the Court. Alliance believes that the allegations in the Complaint are without merit and intends to vigorously defend against these claims. While the ultimate results of this action cannot be determined, management of Alliance does not expect that this action will have a material adverse effect on Alliance's business. On January 26, 1996, a purported purchaser of certain notes and warrants to purchase shares of common stock of Rickel Home Centers, Inc. ("Rickel") filed a class action complaint against Donaldson, Lufkin & Jenrette Securities Corporation ("DLJSC"), a wholly owned subsidiary of DLJ, and certain other defendants for unspecified compensatory and punitive damages in the United States District Court for the Southern District of New York. The suit was brought on behalf of the purchasers of 126,457 units consisting of $126,457,000 aggregate principal amount of 13 1/2% senior notes due 2001 and 126,457 warrants to purchase shares of common stock of Rickel (the "Units") issued by Rickel in October 1994. The complaint alleges violations of Federal securities laws and common law fraud against DLJSC, as the underwriter of F-33 the Units and as an owner of 7.3% of the common stock of Rickel, Eos Partners, L.P., and General Electric Capital Corporation, each as owners of 44.2% of the common stock of Rickel, and members of the Board of Directors of Rickel, including a DLJSC Managing Director. The complaint seeks to hold DLJSC liable for alleged misstatements and omissions contained in the prospectus and registration statement filed in connection with the offering of the Units, alleging that the defendants knew of financial losses and a decline in value of Rickel in the months prior to the offering and did not disclose such information. The complaint also alleges that Rickel failed to pay its semi-annual interest payment due on the Units on December 15, 1995 and that Rickel filed a voluntary petition for reorganization pursuant to Chapter 11 of the United States Bankruptcy Code on January 10, 1996. DLJSC intends to defend itself vigorously against all of the allegations contained in the complaint. Although there can be no assurance, DLJ does not believe the outcome of this litigation will have a material adverse effect on its financial condition. Due to the early stage of this litigation, based on the information currently available to it, DLJ's management cannot make an estimate of loss or predict whether or not such litigation will have a material adverse effect on DLJ's results of operations in any particular period. On June 12, 1995, a purported purchaser of certain securities issued by Spectravision, Inc. ("Spectravision") filed a class action complaint against DLJSC and certain other defendants for unspecified damages in the U.S. District Court for the Northern District of Texas. The suit was brought on behalf of the purchasers of $260,795,000 of securities issued by Spectravision in November 1992, and alleges violations of the Federal securities laws and the Texas Securities Act, common law fraud and negligent misrepresentation. The securities were issued by Spectravision pursuant to a prepackaged bankruptcy reorganization plan. DLJSC served as financial advisor to Spectravision in its reorganization and as Dealer Manager for Spectravision's 1992 issuance of the securities. DLJSC is also being sued as a seller of certain notes of Spectravision acquired and resold by DLJSC. The complaint seeks to hold DLJSC liable for various alleged misstatements and omissions contained in prospectuses and other materials issued between July 1992 and June 1994. DLJSC intends to defend itself vigorously against all of the allegations contained in the complaint. On June 8, 1995, Spectravision filed a Chapter 11 petition in the United States Bankruptcy Court for the District of Delaware. On January 5, 1996, the district court in the litigation involving DLJSC ordered a partial stay of discovery until Spectravision has emerged from bankruptcy or six months from the date of the stipulated stay (whichever comes first). Accordingly, discovery of DLJSC has not yet occurred. Although there can be no assurance, DLJ does not believe that the ultimate outcome of this litigation will have a material adverse effect on its financial condition. Due to the early stage of such litigation, based upon information currently available to it, DLJ's management cannot make an estimate of loss or predict whether or not such litigation will have a material adverse effect on DLJ's results of operations in any particular period. Plaintiff's counsel in the class action against DLJSC described above has also filed another securities class action based on similar factual allegations. Such suit names as defendants Spectravision and its directors, and was brought on behalf of a class of purchasers of $209.0 million of stock and $77.0 million of notes issued by Spectravision in October 1993. DLJSC served as the managing underwriter for both of these issuances. DLJSC has not been named as a defendant in this suit, although it has been reported to DLJSC that plaintiff's counsel is contemplating seeking to amend the complaint to add DLJSC as a defendant in that action. In October 1995, DLJSC was named as a defendant in a purported class action filed in a Texas State Court on behalf of the holders of $550.0 million principal amount of subordinated redeemable discount debentures of National Gypsum Corporation ("NGC") canceled in connection with a Chapter 11 plan of reorganization for NGC consummated in July 1993. The named plaintiff in the State Court action also filed an adversary proceeding in the Bankruptcy Court for the Northern District of Texas seeking a declaratory judgment that the confirmed NGC plan of reorganization does not bar the class action claims. Subsequent to the consummation of NGC's plan of reorganization, NGC's shares traded for values substantially in excess of, and in 1995 NGC was acquired for a value substantially in excess of, the values upon which NGC's plan of reorganization was based. The two actions arise out of DLJSC's activities as financial advisor to NGC in the course of NGC's Chapter 11 reorganization proceedings. The class action complaint alleges that the plan of reorganization submitted by NGC was based upon projections by NGC and DLJSC which intentionally understated forecasts, and provided misleading and incorrect information in order to hide NGC's true value and that defendants breached their fiduciary duties by, among other things, providing false, misleading or incomplete information to deliberately understate the value of NGC. The class action complaint seeks compensatory and punitive damages purportedly sustained by the class. The Texas State F-34 Court action has subsequently been removed to the Bankruptcy Court, which removal is being opposed by the plaintiff. DLJSC intends to defend itself vigorously against all of the allegations contained in the complaint. Although there can be no assurance, DLJ does not believe that the ultimate outcome of this litigation will have a material adverse effect on its financial condition. Due to the early stage of such litigation, based upon the information currently available to it, DLJ's management cannot make an estimate of loss or predict whether or not such litigation will have a material adverse effect on DLJ's results of operations in any particular period. In November and December 1995, DLJSC, along with various other parties, was named as a defendant in a number of purported class actions filed in the U.S. District Court for the Eastern District of Louisiana. The complaints allege violations of the Federal securities laws arising out of a public offering in 1994 of $435.0 million of first mortgage notes of Harrah's Jazz Company and Harrah's Jazz Finance Corp. The complaints seek to hold DLJSC liable for various alleged misstatements and omissions contained in the prospectus dated November 9, 1994. DLJSC intends to defend itself vigorously against all of the allegations contained in the complaints. Although there can be no assurance, DLJ does not believe that the ultimate outcome of this litigation will have a material adverse effect on its financial condition. Due to the early stage of this litigation, based upon the information currently available to it, DLJ's management cannot make an estimate of loss or predict whether or not such litigation will have a material adverse effect on DLJ's results of operations in any particular period. In addition to the matters described above, Equitable Life and its subsidiaries and DLJ and its subsidiaries are involved in various legal actions and proceedings in connection with their businesses. Some of the actions and proceedings have been brought on behalf of various alleged classes of claimants and certain of these claimants seek damages of unspecified amounts. While the ultimate outcome of such matters cannot be predicted with certainty, in the opinion of management no such matter is likely to have a material adverse effect on the Company's consolidated financial position or results of operations. 15) LEASES The Company has entered into operating leases for office space and certain other assets, principally data processing equipment and office furniture and equipment. Future minimum payments under noncancelable leases for 1996 and the succeeding four years are $114.8 million, $101.8 million, $90.0 million, $73.6 million, $57.7 million and $487.0 million thereafter. Minimum future sublease rental income on these noncancelable leases for 1996 and the succeeding four years are $11.0 million, $8.7 million, $6.9 million, $4.6 million, $2.9 million and $1.1 million thereafter. At December 31, 1995, the minimum future rental income on noncancelable operating leases for wholly owned investments in real estate for 1996 and the succeeding four years are $292.9 million, $271.2 million, $248.1 million, $226.4 million, $195.5 million and $1,018.8 million thereafter. F-35 16) OTHER OPERATING COSTS AND EXPENSES Other operating costs and expenses consisted of the following:
YEARS ENDED DECEMBER 31, -------------------------------------------------------- 1995 1994 1993 ----------------- ---------------- ----------------- (IN MILLIONS) Compensation costs................................. $ 595.9 $ 690.0 $ 1,452.3 Commissions........................................ 314.3 313.0 551.1 Short-term debt interest expense................... 11.4 19.0 317.1 Long-term debt interest expense.................... 108.1 98.3 86.0 Amortization of policy acquisition costs........... 320.4 318.1 275.9 Capitalization of policy acquisition costs......... (391.0) (410.9) (397.8) Rent expense, net of sub-lease income.............. 124.8 128.9 159.5 Other.............................................. 772.6 786.7 1,140.1 ----------------- ---------------- ----------------- Total.............................................. $ 1,856.5 $ 1,943.1 $ 3,584.2 ================= ================ =================
During the years ended December 31, 1995, 1994 and 1993, the Company restructured certain operations in connection with cost reduction programs and recorded pre-tax provisions of $32.0 million, $20.4 million and $96.4 million, respectively. The amounts paid during 1995, associated with the 1995 and 1994 cost reduction programs, totaled $24.0 million. At December 31, 1995, the liabilities associated with the 1995 and 1994 cost reduction programs amounted to $37.8 million. The 1995 cost reduction program included relocation expenses, including the accelerated amortization of building improvements associated with the relocation of the home office. The 1994 cost reduction program included costs associated with the termination of operating leases and employee severance benefits in connection with the consolidation of 16 insurance agencies. The 1993 cost reduction program primarily reflected severance benefits of terminated employees in connection with the combination of a wholly owned subsidiary of the Company with Alliance. 17) INSURANCE GROUP STATUTORY FINANCIAL INFORMATION Equitable Life is restricted as to the amounts it may pay as dividends to the Holding Company. Under the New York Insurance Law, the New York Superintendent has broad discretion to determine whether the financia1 condition of a stock life insurance company would support the payment of dividends to its shareholders. For the years ended December 31, 1995, 1994 and 1993, statutory (loss) earnings totaled $(352.4) million, $67.5 million and $324.0 million, respectively. No amounts are expected to be available for dividends from Equitable Life to the Holding Company in 1996. At December 31, 1995, the Insurance Group, in accordance with various government and state regulations, had $18.9 million of securities deposited with such government or state agencies. F-36 Accounting practices used to prepare statutory financial statements for regulatory filings of stock life insurance companies differ in certain instances from GAAP. The following reconciles the Company's statutory change in surplus and capital stock and statutory surplus and capital stock determined in accordance with accounting practices prescribed by the New York Insurance Department with net earnings and equity on a GAAP basis.
YEARS ENDED DECEMBER 31, -------------------------------------------------------- 1995 1994 1993 ----------------- ---------------- ----------------- (IN MILLIONS) Net change in statutory surplus and capital stock.. $ 78.1 $ 292.4 $ 190.8 Change in asset valuation reserves................. 365.7 (285.2) 639.1 ----------------- ---------------- ----------------- Net change in statutory surplus, capital stock and asset valuation reserves..................... 443.8 7.2 829.9 Adjustments: Future policy benefits and policyholders' account balances............................... (67.9) (11.0) (171.0) Deferred policy acquisition costs................ 70.6 92.8 121.8 Deferred Federal income taxes.................... (150.0) (59.7) (57.5) Valuation of investments......................... 189.1 45.2 202.3 Valuation of investment subsidiary............... (188.6) 396.6 (464.9) Limited risk reinsurance......................... 416.9 74.9 85.2 Issuance of surplus notes........................ (538.9) - - Sale of subsidiary and joint venture............. - - (366.5) Contribution from the Holding Company............ - (300.0) - Postretirement benefits.......................... (26.7) 17.1 23.8 Other, net....................................... 115.1 (44.0) 60.3 GAAP adjustments of Closed Block................. (3.1) 4.5 (16.0) GAAP adjustments of discontinued GIC Segment........................................ 37.3 42.8 (35.0) ----------------- ---------------- ----------------- Net Earnings....................................... $ 297.6 $ 266.4 $ 212.4 ================= ================ =================
DECEMBER 31, -------------------------------------------------------- 1995 1994 1993 ----------------- ---------------- ----------------- (IN MILLIONS) Statutory surplus and capital stock................ $ 2,202.9 $ 2,124.8 $ 1,832.4 Asset valuation reserves........................... 1,345.9 980.2 1,265.4 ----------------- ---------------- ----------------- Statutory surplus, capital stock and asset valuation reserves............................... 3,548.8 3,105.0 3,097.8 Adjustments: Future policy benefits and policyholders' account balances............................... (1,017.4) (949.5) (938.5) Deferred policy acquisition costs................ 3,083.3 3,221.1 2,858.8 Deferred Federal income taxes.................... (450.8) (26.8) (137.8) Valuation of investments......................... 417.7 (794.1) (29.8) Valuation of investment subsidiary............... (665.1) (476.5) (873.1) Limited risk reinsurance......................... (429.0) (845.9) (920.8) Issuance of surplus notes........................ (538.9) - - Postretirement benefits.......................... (343.3) (316.6) (333.7) Other, net....................................... 4.4 (79.2) (81.9) GAAP adjustments of Closed Block................. 575.7 578.8 574.2 GAAP adjustments of discontinued GIC Segment........................................ (184.6) (221.9) (264.6) ----------------- ---------------- ----------------- Total Shareholder's Equity......................... $ 4,000.8 $ 3,194.4 $ 2,950.6 ================= ================ =================
F-37 18) BUSINESS SEGMENT INFORMATION The Company has three major business segments: Individual Insurance and Annuities; Investment Services and Group Pension. Consolidation/elimination principally includes debt not specific to any business segment. Attributed Insurance Capital represents net assets and related revenues and earnings of the Insurance Group not assigned to the insurance segments. Interest expense related to debt not specific to any business segment is presented within Corporate interest expense. Information for all periods is presented on a comparable basis. The Individual Insurance and Annuities segment offers a variety of traditional, variable and interest-sensitive life insurance products, disability income, annuity products and mutual fund and other investment products to individuals and small groups. This segment includes Separate Accounts for certain individual insurance and annuity products. The Investment Services segment provides investment fund management, primarily to institutional clients. This segment includes Separate Accounts which provide various investment options for group clients through pooled or single group accounts. Intersegment investment advisory and other fees of approximately $124.1 million, $135.3 million and $128.6 million for 1995, 1994 and 1993, respectively, are included in total revenues of the Investment Services segment. These fees, excluding amounts related to the discontinued GIC Segment of $14.7 million, $27.4 million and $17.0 million for 1995, 1994 and 1993, respectively, are eliminated in consolidation. The Group Pension segment 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.
YEARS ENDED DECEMBER 31, -------------------------------------------------------- 1995 1994 1993 ----------------- ---------------- ----------------- (IN MILLIONS) Revenues Individual insurance and annuities................. $ 3,254.6 $ 3,110.7 $ 2,981.5 Group pension...................................... 292.0 359.1 426.6 Attributed insurance capital....................... 61.2 79.4 61.6 ----------------- ---------------- ----------------- Insurance operations............................. 3,607.8 3,549.2 3,469.7 Investment services................................ 949.1 935.2 2,792.6 Consolidation/elimination.......................... (34.9) (24.7) (40.5) ----------------- ---------------- ----------------- Total.............................................. $ 4,522.0 $ 4,459.7 $ 6,221.8 ================= ================ ================= Earnings (loss) before Federal income taxes and cumulative effect of accounting change Individual insurance and annuities................. $ 274.4 $ 245.5 $ 76.2 Group pension...................................... (13.3) 15.8 2.0 Attributed insurance capital....................... 18.7 69.8 49.0 ----------------- ---------------- ----------------- Insurance operations............................. 279.8 331.1 127.2 Investment services................................ 161.2 177.5 302.1 Consolidation/elimination.......................... (3.1) .3 .5 ----------------- ---------------- ----------------- Subtotal..................................... 437.9 508.9 429.8 Corporate interest expense......................... (27.9) (114.2) (126.1) ----------------- ---------------- ----------------- Total.............................................. $ 410.0 $ 394.7 $ 303.7 ================= ================ =================
F-38
DECEMBER 31, ------------------------------------ 1995 1994 ---------------- ----------------- (IN MILLIONS) Assets Individual insurance and annuities..................................... $ 50,328.8 $ 44,063.4 Group pension.......................................................... 4,033.3 4,222.8 Attributed insurance capital........................................... 2,391.6 2,609.8 ---------------- ----------------- Insurance operations................................................. 56,753.7 50,896.0 Investment services.................................................... 12,842.9 12,127.9 Consolidation/elimination.............................................. (354.4) (1,614.4) ---------------- ----------------- Total.................................................................. $ 69,242.2 $ 61,409.5 ================ =================
19) QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) The quarterly results of operations for the years ended December 31, 1995, 1994 and 1993, are summarized below:
THREE MONTHS ENDED, ------------------------------------------------------------------------------ MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 ----------------- ----------------- ------------------ ------------------ (IN MILLIONS) 1995 ---- Total Revenues................ $ 1,074.7 $ 1,158.4 $ 1,127.1 $ 1,161.8 ================= ================= ================== ================== Net Earnings.................. $ 59.0 $ 94.3 $ 91.2 $ 53.1 ================= ================= ================== ================== 1994 ---- Total Revenues................ $ 1,107.4 $ 1,075.0 $ 1,153.8 $ 1,123.5 ================= ================= ================== ================== Earnings before Cumulative Effect of Accounting Change...................... $ 64.0 $ 68.4 $ 89.1 $ 72.0 ================= ================= ================== ================== Net Earnings.................. $ 36.9 $ 68.4 $ 89.1 $ 72.0 ================= ================= ================== ================== 1993 ---- Total Revenues................ $ 1,502.2 $ 1,539.7 $ 1,679.4 $ 1,500.5 ================= ================= ================== ================== Net Earnings.................. $ 32.3 $ 47.1 $ 68.8 $ 64.2 ================= ================= ================== ==================
20) INVESTMENT IN DLJ On December 15, 1993, the Company sold a 61% interest in DLJ to the Holding Company for $800.0 million in cash and securities. The excess of the proceeds over the book value in DLJ at the date of sale of $340.2 million has been reflected as a capital contribution. In 1995, DLJ completed the initial public offering ("IPO") of 10.58 million shares of its common stock, which included 7.28 million of the Holding Company's shares in DLJ, priced at $27 per share. Concurrent with the IPO, the Company contributed equity securities to DLJ having a market value of $21.2 million. Upon completion of the IPO, the Company's ownership percentage was reduced to 36.1%. The Company's ownership interest will be further reduced upon the issuance of common stock after the vesting of forfeitable restricted stock units acquired by and/or the exercise of options granted to certain DLJ employees. At December 31, 1995, DLJ had options F-39 outstanding to purchase approximately 9.2 million shares of DLJ common stock at $27.00 per share. Options are exercisable over a period of up to ten years. 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 and cash flows of DLJ through the date of sale are included in the consolidated statements of earnings and cash flow for the year ended December 31, 1993. For the period subsequent to the date of sale, 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:
DECEMBER 31, ------------------------------------ 1995 1994 ---------------- ----------------- (IN MILLIONS) Assets: Trading account securities, at market value............................ $ 10,911.4 $ 8,970.0 Securities purchased under resale agreements........................... 18,748.2 10,476.4 Broker-dealer related receivables...................................... 13,023.7 11,784.8 Other assets........................................................... 1,893.2 2,030.4 ---------------- ----------------- Total Assets........................................................... $ 44,576.5 $ 33,261.6 ================ ================= Liabilities: Securities sold under repurchase agreements............................ $ 26,744.8 $ 18,356.7 Broker-dealer related payables......................................... 12,915.5 10,618.0 Short-term and long-term debt.......................................... 1,717.5 1,956.5 Other liabilities...................................................... 1,775.0 1,285.1 ---------------- ----------------- Total liabilities...................................................... 43,152.8 32,216.3 Cumulative exchangeable preferred stock................................ 225.0 225.0 Total shareholders' equity............................................. 1,198.7 820.3 ---------------- ----------------- Total Liabilities, Cumulative Exchangeable Preferred Stock and Shareholders' Equity................................................. $ 44,576.5 $ 33,261.6 ================ ================= DLJ's equity as reported............................................... $ 1,198.7 $ 820.3 Unamortized cost in excess of net assets acquired in 1985 and other adjustments................................................ 40.5 50.8 The Holding Company's equity ownership in DLJ.......................... (499.0) (532.1) Minority interest in DLJ............................................... (324.3) - ---------------- ----------------- The Company's Carrying Value of DLJ.................................... $ 415.9 $ 339.0 ================ =================
F-40 Summarized statements of earnings information for DLJ reconciled to the Company's equity in earnings of DLJ is as follows:
YEARS ENDED DECEMBER 31, ------------------------------------ 1995 1994 ---------------- ----------------- (IN MILLIONS) Commission, fees and other income...................................... $ 1,325.9 $ 953.5 Net investment income.................................................. 904.1 791.9 Dealer, trading and investment gains, net.............................. 528.6 263.3 ---------------- ----------------- Total Revenues......................................................... 2,758.6 2,008.7 Total expenses including income taxes.................................. 2,579.5 1,885.7 ---------------- ----------------- Net earnings........................................................... 179.1 123.0 Dividends on preferred stock........................................... 19.9 20.9 ---------------- ----------------- Earnings Applicable to Common Shares................................... $ 159.2 $ 102.1 ================ ================= DLJ's earnings applicable to common shares as reported................. $ 159.2 $ 102.1 Amortization of cost in excess of net assets acquired in 1985.......... (3.9) (3.1) The Holding Company's equity in DLJ's earnings......................... (90.4) (60.9) Minority interest in DLJ............................................... (6.5) - ---------------- ----------------- The Company's Equity in DLJ's Earnings................................. $ 58.4 $ 38.1 ================ =================
21) RELATED PARTY TRANSACTIONS On August 31, 1993, the Company sold $661.0 million of primarily privately placed below investment grade fixed maturities to EQ Asset Trust 1993, a limited purpose business trust, wholly owned by the Holding Company. The Company recognized a $4.1 million gain net of related deferred policy acquisition costs, deferred Federal income tax and amounts attributable to participating group annuity contracts. In conjunction with this transaction, the Company received $200.0 million of Class B Notes issued by EQ Asset Trust 1993. These notes have interest rates ranging from 6.85% to 9.45%. The Class B Notes are reflected in investments in and loans to affiliates on the consolidated balance sheets. F-41 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES CONSOLIDATED BALANCE SHEETS (UNAUDITED)
SEPTEMBER 30, December 31, 1996 1995 ------------- ------------ (IN MILLIONS) ASSETS Investments: Fixed maturities: Available for sale, at estimated fair value ............ $ 17,117.5 $ 15,899.9 Mortgage loans on real estate ............................ 3,298.5 3,638.3 Equity real estate ....................................... 3,705.0 3,916.2 Policy loans ............................................. 2,167.3 1,976.4 Investment in and loans to affiliates .................... 686.8 636.6 Other equity investments ................................. 561.4 621.1 Other invested assets .................................... 358.4 706.1 ----------- ----------- Total investments .................................... 27,894.9 27,394.6 Cash and cash equivalents .................................. 528.2 774.7 Deferred policy acquisition costs .......................... 3,279.3 3,083.3 Amounts due from discontinued GIC Segment .................. 1,270.1 2,097.1 Other assets ............................................... 2,720.0 2,713.1 Closed Block assets ........................................ 8,345.7 8,612.8 Separate Accounts assets ................................... 28,242.3 24,566.6 ----------- ----------- TOTAL ASSETS ............................................... $ 72,280.5 $ 69,242.2 =========== ============ LIABILITIES Policyholders' account balances ............................ $ 21,795.3 $ 21,911.2 Future policy benefits and other policyholders' liabilities 4,155.9 4,013.2 Short-term and long-term debt .............................. 2,029.9 1,899.3 Other liabilities .......................................... 2,988.2 3,379.5 Closed Block liabilities ................................... 9,193.2 9,507.2 Separate Accounts liabilities .............................. 28,154.7 24,531.0 ----------- ----------- Total liabilities .................................... 68,317.2 65,241.4 ----------- ----------- Commitments and contingencies (Note 10) 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 ............................. 2,913.6 2,913.6 Retained earnings .......................................... 1,019.0 781.6 Net unrealized investment gains ............................ 63.3 338.2 Minimum pension liability .................................. (35.1) (35.1) ----------- ----------- Total shareholder's equity ........................... 3,963.3 4,000.8 ----------- ----------- TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY ................. $ 72,280.5 $ 69,242.2 =========== ===========
See Notes to Consolidated Financial Statements. F-42 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ---------------------- --------------------- 1996 1995 1996 1995 ----------- --------- --------- ---------- (IN MILLIONS) REVENUES Universal life and investment-type product policy fee income ..................... $ 220.7 $ 197.1 $ 651.4 $ 581.4 Premiums ........................................ 145.8 140.2 439.2 452.7 Net investment income ........................... 534.3 517.5 1,605.9 1,551.7 Investment (losses) gains, net .................. (5.5) 8.8 (21.5) 27.7 Commissions, fees and other income .............. 262.5 232.3 786.8 650.5 Contribution from the Closed Block .............. 23.7 28.2 73.8 85.4 ---------- --------- --------- -------- Total revenues ............................ 1,181.5 1,124.1 3,535.6 3,349.4 ---------- --------- --------- -------- BENEFITS AND OTHER DEDUCTIONS Interest credited to policyholders' account balances ...................................... 315.8 314.8 948.8 921.3 Policyholders' benefits ......................... 268.4 245.7 795.6 766.1 Other operating costs and expenses .............. 457.2 421.8 1,379.0 1,282.4 ---------- --------- --------- -------- Total benefits and other deductions ....... 1,041.4 982.3 3,123.4 2,969.8 ---------- --------- --------- -------- Earnings before Federal income taxes, minority interest and cumulative effect of accounting change ............................. 140.1 141.8 412.2 379.6 Federal income taxes ............................ 33.7 33.9 92.2 89.9 Minority interest in net income of consolidated subsidiaries .................................. 20.6 16.7 59.5 45.2 ---------- --------- --------- -------- Earnings before cumulative effect of accounting change ............................. 85.8 91.2 260.5 244.5 Cumulative effect of accounting change, net of Federal income taxes ................... - - (23.1) - ---------- --------- --------- -------- Net Earnings .................................... $ 85.8 $ 91.2 $ 237.4 $ 244.5 ========== ========== ======== ========
See Notes to Consolidated Financial Statements. F-43 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 (UNAUDITED)
1996 1995 ---------- ---------- (IN MILLIONS) Common stock, at par value, beginning of year and end of period .. $ 2.5 $ 2.5 ---------- ---------- Capital in excess of par value, beginning of year and end of period ............................................... 2,913.6 2,913.6 ---------- ---------- Retained earnings, beginning of year ............................. 781.6 484.0 Net earnings ..................................................... 237.4 244.5 ---------- ---------- Retained earnings, end of period ................................. 1,019.0 728.5 ---------- ---------- Net unrealized investment gains (losses), beginning of year ...... 338.2 (203.0) Change in unrealized investment (losses) gains ................... (274.9) 270.5 ---------- ---------- Net unrealized investment gains, end of period ................... 63.3 67.5 ---------- ---------- Minimum pension liability, beginning of year and end of period ... (35.1) (2.7) ---------- ---------- TOTAL SHAREHOLDER'S EQUITY, END OF PERIOD ........................ $ 3,963.3 $ 3,709.4 ========== ==========
See Notes to Consolidated Financial Statements. F-44 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES CONSOLIDATED STATEMENTS OF CASH FLOWS NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 (UNAUDITED)
1996 1995 ----------- ---------- (IN MILLIONS) Net earnings ......................................................... $ 237.4 $ 244.5 Adjustments to reconcile net earnings to net cash provided by operating activities: Interest credited to policyholders' account balances ............. 948.8 921.3 General Account policy charges ................................... (651.4) (581.4) Investment losses (gains) ........................................ 21.5 (27.7) Change in Federal income taxes payable ........................... (96.2) 110.8 Changes in Closed Block assets and liabilities, net .............. (46.9) (52.6) Other, net ....................................................... 33.8 102.2 ---------- ---------- Net cash provided by operating activities ............................ 447.0 717.1 ---------- ---------- Cash flows from investing activities: Maturities and repayments .......................................... 1,626.0 1,312.6 Sales .............................................................. 6,913.2 5,371.0 Return of capital from joint ventures and limited partnerships ..... 64.3 34.7 Purchases .......................................................... (9,646.9) (7,100.5) Decrease in loans to discontinued GIC Segment ...................... 827.0 1,155.4 Other, net ......................................................... (97.9) (176.7) ---------- ---------- Net cash (used) provided by investing activities ..................... (314.3) 596.5 ---------- ---------- Cash flows from financing activities: Policyholders' account balances: Deposits ......................................................... 1,402.2 2,034.3 Withdrawals ...................................................... (1,839.5) (2,078.9) Net increase in short-term financings .............................. 195.3 272.5 Repayments of long-term debt ....................................... (88.5) (5.3) Payment of obligation to fund accumulated deficit of discontinued GIC Segment ...................................................... - (1,215.4) Other, net ......................................................... (48.7) (33.8) ---------- ---------- Net cash used by financing activities ................................ (379.2) (1,026.6) ---------- ---------- Change in cash and cash equivalents .................................. (246.5) 287.0 Cash and cash equivalents, beginning of year ......................... 774.7 693.6 ---------- ---------- Cash and Cash Equivalents, End of Period ............................. $ 528.2 $ 980.6 ========== ========== Supplemental cash flow information Interest Paid ...................................................... $ 70.6 $ 61.2 ========== ========== Income Taxes (Refunded) Paid ....................................... $ (7.9) $ 4.1 ========== ==========
See Notes to Consolidated Financial Statements. F-45 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1) BASIS OF PRESENTATION The preparation of the accompanying consolidated financial statements in conformity with GAAP required management to make estimates and assumptions (including normal, recurring accruals) 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. These statements should be read in conjunction with the consolidated financial statements of the Company for the year ended December 31, 1995. The results of operations for the nine months ended September 30, 1996 are not necessarily indicative of the results to be expected for the full year. Certain reclassifications have been made in the amounts presented for prior periods to conform those periods with the current presentation. 2) ACCOUNTING CHANGES AND PRONOUNCEMENTS The Company implemented SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," as of January 1, 1996. The statement requires long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate the carrying value of such assets may not be recoverable. Impaired real estate is written down to fair value with the impairment loss being included in Investment gains, net. Before implementing SFAS No. 121, valuation allowances on real estate held for the production of income were computed using the forecasted cash flows of the respective properties discounted at a rate equal to the Company's cost of funds. The adoption of the statement resulted in the release of valuation allowances of $152.4 million and recognition of impairment losses of $144.0 million on real estate held and used. Real estate which management has committed to disposing of by sale or abandonment is classified as real estate to be disposed of. Valuation allowances on real estate to be disposed of continue to be computed using the lower of estimated fair value or depreciated cost, net of disposition costs. Implementation of the SFAS No. 121 impairment requirements relative to other assets to be disposed of resulted in a charge for the cumulative effect of an accounting change of $23.1 million, net of a Federal income tax benefit of $12.4 million, due to the writedown to fair value of building improvements relating to facilities being vacated beginning in 1996. In June 1996, the FASB issued SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities". SFAS No. 125 specifies the accounting and reporting requirements for transfers of financial assets, the recognition and measurement of servicing assets and liabilities and extinguishments of liabilities. SFAS No. 125 is effective for transactions occurring after December 31, 1996 and is to be applied prospectively. Management has not yet determined the effect of implementing SFAS No. 125. 3) FEDERAL INCOME TAXES Federal income taxes for interim periods have been computed using an estimated annual effective tax rate. This rate is revised, if necessary, at the end of each successive interim period to reflect the current estimate of the annual effective tax rate. F-46 4) INVESTMENTS Investment valuation allowances and changes thereto are shown below:
NINE MONTHS ENDED SEPTEMBER 30, --------------------- 1996 1995 --------- ---------- (IN MILLIONS) Balances, beginning of year ............................ $ 325.3 $ 284.9 SFAS No. 121 release ................................... (152.4) - Additions charged to income ............................ 88.7 67.8 Deductions for writedowns and asset dispositions ....... (105.2) (49.7) -------- -------- Balances, End of Period ................................ $ 156.4 $ 303.0 ======== ======== Balances, end of period: Mortgage loans on real estate ........................ $ 93.3 $ 66.8 Equity real estate ................................... 63.1 236.2 -------- -------- Total............................................. $ 156.4 $ 303.0 ======== ========
For the three months and nine months ended September 30, 1996 and 1995, investment income is shown net of investment expenses of $89.9 million, $272.1 million, $115.2 million and $343.3 million, respectively. As of September 30, 1996 and December 31, 1995, fixed maturities classified as available for sale had amortized costs of $17,001.8 million and $15,284.0 million, respectively. Other equity investments included equity securities with carrying values of $125.0 million and $128.4 million and costs of $101.3 million and $97.3 million as of September 30, 1996 and December 31, 1995, respectively. For the nine months ended September 30, 1996 and 1995, proceeds received on sales of fixed maturities classified as available for sale amounted to $6,645.1 million and $5,009.6 million, respectively. Gross gains of $94.0 million and $135.1 million and gross losses of $58.4 million and $49.8 million were realized on these sales for the nine months ended September 30, 1996 and 1995, respectively. The decrease in unrealized investment gains related to fixed maturities classified as available for sale for the nine months ended September 30, 1996 amounted to $500.1 million. During the nine months ended September 30, 1995, one security classified as held to maturity was sold and twelve securities classified as held to maturity were transferred to the available for sale portfolio. All actions were taken as a result of significant deterioration in creditworthiness. The amortized cost of the security sold was $4.2 million. The aggregate amortized cost of the securities transferred was $116.0 million with gross unrealized investment losses of $3.2 million transferred to equity for the nine months ended September 30, 1995. Impaired mortgage loans along with the related provision for losses follows:
SEPTEMBER 30, December 31, 1996 1995 ------------- ---------- (IN MILLIONS) Impaired mortgage loans with provision for losses ........ $ 428.6 $ 310.1 Impaired mortgage loans with no provision for losses ..... 148.3 160.8 -------- -------- Recorded investment in impaired mortgage loans ........... 576.9 470.9 Provision for losses ..................................... 88.0 62.7 -------- -------- Net Impaired Mortgage Loans .............................. $ 488.9 $ 408.2 ======== ========
F-47 Impaired mortgage loans with no provision for losses are loans where the fair value of the collateral or the net present value of the loans equals or exceeds the recorded investment. Interest income earned on loans where the collateral value is used to measure impairment is recorded using the cash basis method. 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 the nine months ended September 30, 1996 and 1995, respectively, the Company's average recorded investment in impaired mortgage loans was $548.7 million and $295.5 million. Interest income recognized on these impaired mortgage loans totaled $30.9 million and $20.3 million for the nine months ended September 30, 1996 and 1995, respectively, including $13.7 million and $10.8 million recognized on the cash basis method. 5) ALLIANCE - CURSITOR TRANSACTION On February 29, 1996, Alliance acquired the business of Cursitor-Eaton Asset Management Company and Cursitor Holdings Limited in exchange for approximately 1.8 million Alliance Units, $84.9 million in cash, $21.5 million in notes which are payable ratably over the next four years and substantial additional consideration which will be determined at a later date. The Company recognized an investment gain of $20.6 million as a result of the issuance of Units in this transaction. At September 30, 1996, the Company's ownership of Alliance Units was approximately 57.4%. 6) BUSINESS SEGMENT INFORMATION
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ----------------------- ---------------------- 1996 1995 1996 1995 ----------- ---------- ----------- ---------- (IN MILLIONS) Revenues Individual insurance and annuities .. $ 841.7 $ 793.5 $ 2,496.9 $ 2,436.6 Group pension ....................... 60.7 77.1 189.3 209.4 Attributed insurance capital ........ 17.9 17.0 49.2 45.6 ---------- ---------- ---------- ---------- Insurance operations .............. 920.3 887.6 2,735.4 2,691.6 Investment services ................. 267.0 243.7 818.3 681.1 Consolidation/elimination ........... (5.8) (7.2) (18.1) (23.3) ---------- ---------- ---------- ---------- Total ............................... $ 1,181.5 $ 1,124.1 $ 3,535.6 $ 3,349.4 ========== ========== ========== ========== EARNINGS (LOSS) BEFORE FEDERAL INCOME TAXES, MINORITY INTEREST AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE Individual insurance and annuities .. $ 86.8 $ 80.6 $ 240.3 $ 232.2 Group pension ....................... (8.3) (.9) (28.6) (12.7) Attributed insurance capital ........ 9.7 9.9 23.5 22.5 ---------- ---------- ---------- ---------- Insurance operations .............. 88.2 89.6 235.2 242.0 Investment services ................. 68.8 59.2 226.8 157.2 ---------- ---------- ---------- ---------- Subtotal .......................... 157.0 148.8 462.0 399.2 Corporate interest expense .......... (16.9) (7.0) (49.8) (19.6) ---------- ---------- ---------- ---------- Total ............................... $ 140.1 $ 141.8 $ 412.2 $ 379.6 ========== ========== ========== ==========
F-48
SEPTEMBER 30, December 31, 1996 1995 -------------- ------------ (IN MILLIONS) ASSETS Individual insurance and annuities ........... $ 53,559.8 $ 50,328.8 Group pension ................................ 3,601.0 4,033.3 Attributed insurance capital ................. 2,055.5 2,391.6 ----------- ----------- Insurance operations ....................... 59,216.3 56,753.7 Investment services .......................... 13,434.1 12,842.9 Consolidation/elimination .................... (369.9) (354.4) ----------- ----------- Total ........................................ $ 72,280.5 $ 69,242.2 =========== ===========
7) DISCONTINUED OPERATIONS Summarized financial information of the discontinued GIC Segment follows:
SEPTEMBER 30, DECEMBER 31, 1996 1995 -------------- ------------ (IN MILLIONS) ASSETS Mortgage loans on real estate .................... $ 1,285.0 $ 1,485.8 Equity real estate ............................... 1,057.1 1,122.1 Cash and other invested assets ................... 361.7 665.2 Other assets ..................................... 191.5 579.3 ---------- ---------- Total Assets ..................................... $ 2,895.3 $ 3,852.4 ========== ========== LIABILITIES Policyholders' liabilities ....................... $ 1,360.3 $ 1,399.8 Allowance for future losses ...................... 118.8 164.2 Amounts due to continuing operations ............. 1,270.1 2,097.1 Other liabilities ................................ 146.1 191.3 ---------- ---------- Total Liabilities ................................ $ 2,895.3 $ 3,852.4 ========== ==========
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------ ------------------ 1996 1995 1996 1995 ------- -------- ------- --------- (IN MILLIONS) REVENUES Investment income (net of investment expenses of $31.8, $40.5, $96.1 and $117.9) ............................ $ 50.2 $ 52.6 $ 182.4 $ 202.1 Investment (losses) gains, net ........... (6.2) 6.6 (23.8) (12.3) Policy fees, premiums and other income, net ............................ .1 .1 .2 .6 --------- -------- -------- -------- Total revenues ........................... 44.1 59.3 158.8 190.4 BENEFITS AND OTHER DEDUCTIONS ............ 56.9 76.6 196.2 253.9 --------- -------- -------- -------- Losses Charged to Allowance for Future Losses ...................... $ (12.8) $ (17.3) $ (37.4) $ (63.5) ======= ======= ======== ========
F-49 Investment valuation allowances amounted to $19.9 million on mortgage loans and $16.3 million on equity real estate for an aggregate of $36.2 million at September 30, 1996. As of January 1, 1996, the adoption of SFAS No. 121 resulted in a release of existing valuation allowances of $71.9 million on equity real estate and recognition of impairment losses of $69.8 million on real estate held and used. At December 31, 1995, valuation allowances amounted to $19.2 million on mortgage loans and $77.9 million on equity real estate for an aggregate of $97.1 million. Benefits and other deductions included $23.3 million, $94.8 million, $38.7 million and $116.0 million of interest expense related to amounts borrowed from continuing operations for the three months and nine months ended September 30, 1996 and 1995, respectively. The allowance for future losses is based upon management's best judgment and there can be no assurance ultimate losses will not differ. 8) CLOSED BLOCK Summarized financial information of the Closed Block follows:
SEPTEMBER 30, DECEMBER 31, 1996 1995 ------------- ------------ (IN MILLIONS) ASSETS Fixed maturities: Available for sale, at estimated fair value (amortized cost of $3,730.0 and $3,662.8) ...................... $ 3,736.2 $ 3,896.2 Mortgage loans on real estate ........................... 1,422.2 1,368.8 Policy loans ............................................ 1,778.8 1,797.2 Cash and other invested assets .......................... 321.8 440.9 Deferred policy acquisition costs ....................... 780.8 823.6 Other assets ............................................ 305.9 286.1 ---------- ---------- Total Assets ............................................ $ 8,345.7 $ 8,612.8 ========== ========== LIABILITIES Future policy benefits and other policyholders' account balances ....................................... $ 9,159.6 $ 9,346.7 Other liabilities ....................................... 33.6 160.5 --------- ---------- Total Liabilities ....................................... $ 9,193.2 $ 9,507.2 ========= ==========
F-50
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------ -------------------- 1996 1995 1996 1995 -------- -------- -------- ---------- (IN MILLIONS) REVENUES Premiums and other income ......... $ 171.3 $ 178.8 $ 539.1 $ 561.3 Investment income (net of investment expenses of $6.9, $6.6, $21.0 and $20.3) .......................... 140.2 133.3 408.4 400.7 Investment losses, net ............ (4.6) (.6) (13.2) (7.5) -------- -------- -------- -------- Total revenues .................... 306.9 311.5 934.3 954.5 -------- -------- -------- -------- BENEFITS AND OTHER DEDUCTIONS Policyholders' benefits and dividends 266.9 270.8 810.2 824.1 Other operating costs and expenses . 16.3 12.5 50.3 45.0 -------- -------- -------- -------- Total benefits and other deductions 283.2 283.3 860.5 869.1 -------- -------- -------- -------- Contribution from the Closed Block $ 23.7 $ 28.2 $ 73.8 $ 85.4 ======== ======== ======== ========
Investment valuation allowances amounted to $33.4 million and $18.4 million on mortgage loans and $2.5 million and $4.3 million on equity real estate for an aggregate of $35.9 million and $22.7 million at September 30, 1996 and December 31, 1995, respectively. As of January 1, 1996, the adoption of SFAS No. 121 resulted in the recognition of impairment losses of $5.6 million on real estate held and used. 9) RESTRUCTURE COSTS At September 30, 1996, liabilities associated with 1994 and 1995 cost reduction programs totaled $27.3 million. During the nine months ended September 30, 1996 and 1995, the Company restructured certain operations in connection with cost reduction programs and incurred costs of $2.6 million and $8.6 million, respectively, primarily associated with severance related benefits. Amounts paid during the nine months ended September 30, 1996 and charged against the liabilities for the 1994 and 1995 cost reduction programs totaled $13.1 million. 10) LITIGATION There have been no new material legal proceedings and no material developments in matters which were previously reported in the Company's Notes to Consolidated Financial Statements for the year ended December 31, 1995, except as follows: On May 29, 1996, the New York County Supreme Court entered a judgment dismissing the complaint with prejudice in the previously reported action Golomb, et al. v. The Equitable Life Assurance Society of the United States. Plaintiffs have filed a notice of appeal of that judgment. On February 9, 1996, Equitable Life removed the Pennsylvania action, Malvin v. The Equitable Life Assurance Society of the United States, to the United States District Court for the Middle District of Pennsylvania. Following the decision granting Equitable Life's motion to dismiss the New York action (Golomb), on the consent of the parties, the District Court ordered an indefinite stay of all proceedings in the Pennsylvania action, pending either party's right to reinstate the proceeding, and ordered that for administrative purposes the case be deemed administratively closed. On February 2, 1996, Equitable Life removed the Texas action, Bowler, et al. v. The Equitable Life Assurance Society of the United States, to the United States District Court for the Northern District of Texas. On July 1, 1996, Equitable Life filed a motion for summary judgment dismissing the complaint in its entirety. The Company's management has been advised that plaintiffs plan to oppose the motion for summary judgment. In August, 1996, the court granted plaintiffs leave to file a supplemental complaint on behalf of a proposed class of Texas policyholders claiming unfair discrimination, breach of contract and other claims arising out of alleged differences between premiums charged to Texas policyholders and premiums charged to F-51 similarly situated policyholders in New York and certain other states. Plaintiffs seek refunds of alleged overcharges, exemplary or additional damages citing Texas statutory provisions which among other things, permit two times the amount of actual damage plus additional penalties if the acts complained of are found to be knowingly committed, and injunctive relief. Equitable Life has also filed a motion for summary judgment dismissing the supplemental complaint in its entirety. Equitable Life's management has been advised that plaintiffs plan to oppose that motion. On May 22, 1996, a separate action entitled Bachman v. The Equitable Life Assurance Society of the United States, was filed in Florida state court making claims similar to those in the previously reported Golomb action. The Florida action is asserted on behalf of a proposed class of Florida issued or renewed policyholders, insured after 1983 under Lifetime Guaranteed Renewable Major Medical Insurance Policies issued by Equitable Life. The Florida action seeks compensatory and punitive damages and injunctive relief restricting the methods by which Equitable Life increases premiums in the future, based on various common law claims. On June 20, 1996, Equitable Life removed the Florida action to Federal court. Equitable Life has answered the complaint, denying the material allegations and asserting certain affirmative defenses. Although the outcome of any litigation cannot be predicted with certainty, particularly in the early stages of an action, The Equitable's management believes that the ultimate resolution of this litigation should not have a material adverse effect on the financial position of the Company. Due to the early stage of such litigation, the Company's management cannot make an estimate of loss, if any, or predict whether or not such litigation will have a material adverse effect on the Company's results of operations in any particular period. On November 6, 1996, a proposed class action entitled Fletcher, et al. v. The Equitable Life Assurance Society of the United States, was filed in California Superior Court for Fresno County, making substantially the same allegations concerning premium rates and premium rate increases on guaranteed renewable policies made in the Bowler action. The complaint alleges, among other things, that differentials between rates charged California policyholders and policyholders in New York and certain other states, and the methods used by Equitable Life to calculate premium increases, breached the terms of its policies and that Equitable Life misrepresented and concealed the facts pertaining to such differentials and methods in violation of California law. Plaintiffs seek compensatory damages in an unspecified amount, rescission, injunctive relief and attorneys fees. Although the outcome of any litigation cannot be predicted with certainty, particularly in the early stages of an action, Equitable Life's management believes that the ultimate resolution of this litigation should not have a material adverse effect on the financial position of Equitable Life. Due to the early stage of such litigation, Equitable Life's management cannot make an estimate of loss, if any, or predict whether or not such litigation will have a material adverse effect on Equitable Life's results of operations in any particular period. In connection with the previously reported action entitled Sidney C. Cole et al. v. The Equitable Life Assurance Society of the United States and The Equitable of Colorado, Inc., on June 28, 1996, the court issued a decision and order dismissing with prejudice plaintiff's causes of action for fraud, constructive fraud, breach of fiduciary duty, negligence, and unjust enrichment, and dismissing without prejudice plaintiff's cause of action under the New York State consumer protection statute. The only remaining causes of action are for breach of contract and negligent misrepresentation. Plaintiffs have made a motion for reargument with respect to this order, which was submitted to the court in October 1996. On May 21, 1996, an action entitled Elton F. Duncan, III v. The Equitable Life Assurance Society of the United States, was commenced against Equitable Life in the Civil District Court for the Parish of Orleans, State of Louisiana. The action is brought by an individual who purchased a whole life policy. Plaintiff alleges misrepresentations concerning the extent to which the policy was a proper replacement policy and the number of years that the annual premium would need to be paid. Plaintiff purports to represent a class consisting of all persons who purchased whole life or universal life insurance policies from Equitable Life from January 1, 1982 to the present. Plaintiff seeks damages, including punitive damages, in an unspecified amount. On June 21, 1996, Equitable Life removed the action to the United States District Court for the Eastern District of Louisiana. Plaintiff has made a motion to remand to the Louisiana Civil District Court, and Equitable Life will F-52 oppose such motion. On July 26, 1996, an action entitled Michael Bradley v. Equitable Variable Life Insurance Company, was commenced in New York state court. The action is brought by the holder of a variable life insurance policy issued by EVLICO. The plaintiff purports to represent a class consisting of all persons or entities who purchased one or more life insurance policies issued by EVLICO from January 1, 1980. The complaint puts at issue various alleged sales practices and alleges misrepresentations concerning the extent to which the policy was a proper replacement policy and the number of years that the annual premium would need to be paid. Plaintiff seeks damages, including punitive damages, in an unspecified amount and also seeks injunctive relief prohibiting EVLICO from canceling policies for failure to make premium payments beyond the alleged stated number of years that the annual premium would need to be paid. Equitable Life and EVLICO have made a motion to consolidate or jointly try this proceeding with the Cole action, which will not be heard until November 1996. Although the outcome of any litigation cannot be predicted with certainty, particularly in the early stages of an action, the Company's management believes that the ultimate resolution of the litigations discussed in this paragraph should not have a material adverse effect on the financial position of the Company. Due to the early stages of such litigation, the Company's management cannot make an estimate of loss, if any, or predict whether or not such litigation will have a material adverse effect on the Company's results of operations in any particular period. Equitable Life recently received a subpoena from the U.S. Department of Labor ("DOL") requesting copies of any third-party appraisals in Equitable Life's possession relating to the ten largest properties (by value) in the Prime Property Fund ("PPF"). PPF is an open-end, commingled real estate separate account of Equitable Life's for pension clients. Equitable Life serves as investment manager in PPF and has retained Equitable Real Estate Investment Management, Inc. ("Equitable Real Estate") as adviser. In early 1995, the DOL commenced a national investigation of commingled real estate funds with pension investors, including PPF. The investigation now appears to be focused principally on appraisal and valuation procedures in respect of fund properties. The most recent request from the DOL seems to reflect, at least in part, an interest in the relationship between the valuations for those properties reflected in appraisals prepared for local property tax proceedings and the valuations used by PPF for other purposes. At no time has the DOL made any specific allegation that Equitable Life or Equitable Real Estate has acted improperly and Equitable Life and Equitable Real Estate believe that any such allegation would be without foundation. While the outcome of this investigation cannot be predicted with certainty, in the opinion of management, the ultimate resolution of this matter should not have a material adverse effect on the Company's consolidated financial position or results of operations. In connection with the previously reported arbitration involving Equitable Casualty Insurance Company ("Casualty"), the arbitration panel issued a final award in favor of Casualty and GEICO General Insurance Company ("GEICO General") on June 17, 1996. The result of the arbitration is expected to resolve in favor of Casualty and GEICO General two litigations that were commenced by Houston General Insurance Company ("Houston General") and that have been stayed by the presiding courts pending the completion of the arbitration. Houston General has informed Casualty, through counsel, that it is considering whether to consent to entry of a judgment enforcing the arbitration award or whether to contest the award. The Company's management believes that Houston General has no valid basis for contesting the arbitration award and therefore the ultimate resolution of this matter should not have a material adverse effect on the Company's financial position or results of operations. With respect to the previously reported National Gypsum litigation, the Bankruptcy Court has remanded the Texas state court action to state court. With respect to the previously reported Spectravision litigation, plaintiffs have filed an amended complaint in which DLJSC is no longer named as a defendant. F-53 On September 26, 1996, the United States District Court for the Southern District of New York granted the defendants' motion to dismiss all counts of the complaint in the previously reported litigation involving Alliance and the Alliance North American Government Income Fund, Inc. The plaintiffs have filed motions requesting that the court reconsider its decision and for permission to file an amended complaint. While the ultimate outcome cannot be determined at this time, Alliance's management does not expect that it will have a material adverse effect on Alliance's consolidated financial position or results of operations. In addition to the matters previously reported and the matters described above, Equitable Life and its subsidiaries and DLJ and its subsidiaries are involved in various legal actions and proceedings in connection with their businesses. Some of the actions and proceedings have been brought on behalf of various alleged classes of claimants and certain of these claimants seek damages of unspecified amounts. While the ultimate outcome of such matters cannot be predicted with certainty, in the opinion of management no such matter is likely to have a material adverse effect on the Company's consolidated financial position or results of operations. F-54 APPENDIX A COMMUNICATING PERFORMANCE DATA In reports or other communications to policyowners or in advertising material, we may describe general economic and market conditions affecting the Separate Account and the Trust and may compare the performance or ranking of the Separate Account Funds and Trust portfolios with (1) that of other insurance company separate accounts or mutual funds included in the rankings prepared by Lipper Analytical Services, Inc., Morningstar, Inc. or similar investment services that monitor the performance of insurance company separate accounts or mutual funds, (2) other appropriate indices of investment securities and averages for peer universes of funds, or (3) data developed by us derived from such indices or averages. Advertisements or other communications furnished to present or prospective policyowners may also include evaluations of a Separate Account Fund or Trust portfolio by financial publications that are nationally recognized such as Barron's, Morningstar's Variable Annuities / Life, Business Week, Forbes, Fortune, Institutional Investor, Money, Kiplinger's Personal Finance, Financial Planning, Investment Adviser, Investment Management Weekly, Money Management Letter, Investment Dealers Digest, National Underwriter, Pension & Investments, USA Today, Investor's Daily, The New York Times, The Wall Street Journal, the Los Angeles Times and the Chicago Tribune. Performance data for peer universes of funds with similar investment objectives are compiled by Lipper Analytical Services, Inc. (Lipper) in its Lipper Variable Insurance Products Performance Analysis Service (Lipper Survey) and Morningstar, Inc. in the Morningstar Variable Annuity / Life Report (Morningstar Report). The Lipper Survey records performance data as reported to it by over 800 funds underlying variable annuity and life insurance products. The Lipper Survey divides these actively managed funds into 25 categories by portfolio objectives. The Lipper Survey contains two different universes, which differ in terms of the types of fees reflected in performance data. The "Separate Account" universe reports performance data net of investment management fees, direct operating expenses and asset-based charges applicable under variable insurance and annuity contracts. The "Mutual Fund" universe reports performance net only of investment management fees and direct operating expenses, and therefore reflects asset-based charges that relate only to the underlying mutual fund. The Morningstar Report consists of over 700 variable life and annuity funds, all of which report their data net of investment management fees, direct operating expenses and separate account level charges. LONG-TERM MARKET TRENDS As a tool for understanding how different investment strategies may affect long-term results, it may be useful to consider the historical returns on different types of assets. The following chart presents historical return trends for various types of securities. The information presented, while not directly related to the performance of the Funds of the Separate Account or the Trust portfolios, may help to provide a perspective on the potential returns of different asset classes over different periods of time. By combining this information with your knowledge of your own financial needs, you may be able to better determine how you wish to allocate your Incentive Life Plus premiums. Historically, the investment performance of common stocks over the long term has generally been superior to that of long or short-term debt securities, although common stocks have been subject to more dramatic changes in value over short periods of time. The Common Stock Fund of the Separate Account may, therefore, be a desirable selection for policyowners who are willing to accept such risks. Policyowners who have a need to limit short-term risk, may find it preferable to allocate a smaller percentage of their net premiums to those funds that invest primarily in common stock. Any investment in securities, whether equity or debt, involves varying degrees of potential risk, in addition to offering varying degrees of potential reward. The chart on page A-2 illustrates the average annual compound rates of return over selected time periods between December 31, 1925 and December 31, 1995 for common stocks, long-term government bonds, long-term corporate bonds, intermediate-term government bonds and Treasury Bills. The Consumer Price Index is shown as a measure of inflation for comparison purposes. The average annual returns assume the reinvestment of dividends, capital gains and interest. The information presented is an historical record of unmanaged groups of securities and is neither an estimate nor a guarantee of future results. In addition, investment management fees and expenses and charges associated with a variable life insurance policy, are not reflected. The rates of return illustrated do not represent returns of the Separate Account or the Trust and do not constitute a representation that the performance of the Separate Account funds or the Trust portfolios will correspond to rates of return such as those illustrated in the chart. For a comparative illustration of performance results of The Hudson River Trust, see page A-1 of the Trust's prospectus. A-1 AVERAGE ANNUAL RATES OF RETURN
FOR THE FOLLOWING LONG-TERM LONG-TERM INTERMEDIATE- U.S. CONSUMER PERIODS ENDING COMMON GOVERNMENT CORPORATE TERM GOV'T TREASURY PRICE 12/31/95: STOCKS BONDS BONDS BONDS BILLS INDEX - -------- ------ ----- ----- ----- ----- ----- 1 year.................. 37.43 31.67 26.39 16.80 5.60 2.74 3 years................. 15.26 12.82 10.47 7.22 4.13 2.72 5 years................. 16.57 13.10 12.07 8.81 4.29 2.83 10 years................. 14.84 11.92 11.25 9.08 5.55 3.48 20 years................. 14.59 10.45 10.54 9.69 7.28 5.23 30 years................. 10.68 7.92 8.17 8.36 6.72 5.39 40 years................. 10.78 6.38 6.75 7.02 5.73 4.46 50 years................. 11.94 5.35 5.75 5.87 4.80 4.36 60 years................. 11.34 5.20 5.46 5.34 4.01 4.10 Since 1926............... 10.54 5.17 5.69 5.25 3.72 3.12 Inflation Adjusted Since 1926............... 7.20 1.99 2.49 2.07 0.58 0.00 - ----------------------------
*Source: Ibbotson, Roger G. and Rex A. Sinquefield, STOCKS, BONDS, BILLS, AND INFLATION (SBBI), 1982, updated in STOCKS, BONDS, BILLS, AND INFLATION 1996 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 1969-1995, represented by the Salomon Brothers Long-Term, High-Grade Corporate Bond Index; for the period 1946-1968, the Salomon Brothers' Index was backdated using Salomon Brothers' monthly yield data and a methodology similar to that used by Salomon for 1969-1995; for the period 1926-1945, the Standard and Poor's monthly High-Grade Corporate Composite yield data were used, assuming a 4 percent coupon and a twenty year maturity. Intermediate-term Government Bonds -- Measured by a one-bond portfolio constructed each year containing a bond with approximately a five year maturity. U.S. Treasury Bills-- Measured by rolling over each month a one-bill portfolio containing, at the beginning of each month, the bill having the shortest maturity not less than one month. Inflation -- Measured by the Consumer Price Index for all Urban Consumers (CPI-U), not seasonally adjusted. A-2 VARIABLE LIFE INSURANCE POLICIES FUNDED THROUGH SEPARATE ACCOUNT FP PROSPECTUS SUPPLEMENT DATED MAY 1, 1996 Incentive Life Plus(TM) Survivorship 2000(TM) Champion 2000(TM) Incentive Life(TM) Incentive Life 2000(TM) SP-Flex(TM) Issued By EQUITABLE VARIABLE LIFE INSURANCE COMPANY Principal Office Located at: 787 Seventh Avenue New York, NY 10019 VM 521 - -------------------------------------------------------------------------------- THE HUDSON RIVER TRUST PROSPECTUS DATED MAY 1, 1996 HRT 596 - -------------------------------------------------------------------------------- VARIABLE LIFE INSURANCE POLICIES FUNDED THROUGH SEPARATE ACCOUNT FP INCENTIVE LIFE PLUS (94-300) CHAMPION 2000(TM) (90-400) ISSUED BY INCENTIVE LIFE 2000(TM) (90-300) EQUITABLE VARIABLE SURVIVORSHIP 2000(TM) (92-500) LIFE INSURANCE COMPANY INCENTIVE LIFE(TM) (85-300 & 88-300) SP-FLEX(TM) (87-500) PROSPECTUS SUPPLEMENT DATED MAY 1, 1996 INTRODUCTION. This Supplement updates certain information contained in the prospectuses for: o INCENTIVE LIFE PLUS dated December 19, 1994, May 1, 1995 and September 15, 1995; o CHAMPION 2000 dated May 1, 1994, May 1, 1993, and November 27, 1991; o INCENTIVE LIFE 2000 dated May 1, 1994, May 1, 1993 and November 27, 1991; o SURVIVORSHIP 2000 dated May 1, 1995, May 1, 1994, May 1, 1993 and August 18, 1992; o INCENTIVE LIFE dated May 1, 1994, May 1, 1993, February 27, 1991, May 1, 1990 and August 29, 1989; and o SP-FLEX dated September 30, 1987 and August 24, 1987. For your convenience, we have consolidated the prior updating supplements that have been previously distributed. For this reason, you may already be familiar with some of the information in this prospectus supplement, but we encourage you to read it anyway. You can find the information about your policy by referring to one or more of the following headings: PAGE INFORMATION RELATED TO ALL POLICIES 2 INFORMATION ABOUT ALL POLICIES EXCEPT SP-FLEX 6 INFORMATION ABOUT INCENTIVE LIFE PLUS 7 INFORMATION ABOUT INCENTIVE LIFE 2000 AND CHAMPION 2000 7 INFORMATION ABOUT INCENTIVE LIFE 7 INFORMATION ABOUT SP-FLEX 8 You should attach this Supplement to your prospectus and retain it for future reference. Equitable Variable Life Insurance Company (Equitable Variable) will send you an additional copy of any prospectus or supplement, without charge, on written request. Except as otherwise noted, terms used in this supplement have the same meaning as in the prospectus. However, we now refer to the Guaranteed Interest Division as the Guaranteed Interest Account and to divisions of Separate Account FP as "Funds." Champion 2000, Incentive Life 2000, Incentive Life and SP-Flex policies are no longer offered for sale. INFORMATION RELATED TO ALL POLICIES: 1. EQUITABLE VARIABLE. The information under the heading EQUITABLE VARIABLE is updated as follows: Equitable Variable was organized in 1972 in New York State as a stock life insurance company. We are licensed to do business in all 50 states, Puerto Rico, the Virgin Islands and the District of Columbia. At December 31, 1995, we had approximately $132.8 billion face amount of variable life insurance in force. - ------------------------------------------------------------------------------- THIS SUPPLEMENT SHOULD BE RETAINED FOR FUTURE REFERENCE. VM 521 Copyright 1996 Equitable Variable Life Insurance Company. All rights reserved. 2 2. EQUITABLE. The information under the heading OUR PARENT, EQUITABLE is updated as follows: Equitable is a wholly-owned subsidiary of The Equitable Companies Incorporated (the Holding Company). The largest stockholder of the Holding Company is AXA S.A. (AXA), a French insurance holding company. AXA beneficially owns 60.6% of the outstanding shares of common stock of the Holding Company plus convertible preferred stock. Under its investment arrangements with Equitable and the Holding Company, AXA is able to exercise significant influence over the operations and capital structure of the Holding Company and its subsidiaries, including Equitable and Equitable Variable. AXA is the principal holding company for most of the companies in one of the largest insurance groups in Europe. The majority of AXA's stock is controlled by a group of five French mutual insurance companies. Equitable, the Holding Company and their subsidiaries managed approximately $195.3 billion in assets as of December 31, 1995. 3. HUDSON RIVER TRUST INVESTMENT POLICIES. Net premiums can be allocated to the Separate Account Funds or to the Guaranteed Interest Account (except for SP-Flex policyowners). The Funds of Separate Account FP in turn invest those net premiums in corresponding portfolios of The Hudson River Trust, a mutual fund. Each portfolio has a different investment objective which it tries to achieve by following separate investment policies. The objectives and policies of each portfolio will affect its return and its risks. There is no guarantee that these objectives will be achieved. The policies and objectives of the Trust's portfolios are as follows:
- ------------------------------------------------------------------------------------------------------------------------------- PORTFOLIO INVESTMENT POLICY OBJECTIVE --------- ----------------- --------- THE FIXED INCOME SERIES: MONEY MARKET ........... Primarily high quality short-term money market High level of current income while instruments. preserving assets and maintaining liquidity. INTERMEDIATE ........... Primarily debt securities issued or guaranteed High current income consistent with GOVERNMENT by the U.S. Government, its agencies and relative stability of principal. SECURITIES instrumentalities. Each investment will have a final maturity of not more than 10 years or a duration not exceeding that of a 10-year Treasury note. QUALITY BOND ........... Primarily investment grade fixed income High current income consistent with securities. preservation of capital. HIGH YIELD ............. Primarily a diversified mix of high yield, High return by maximizing current fixed-income securities involving greater income and, to the extent volatility of price and risk of principal and consistent with that objective, income than high quality fixed-income capital appreciation. securities. The medium and lower quality debt securities in which the Portfolio may invest are known as "junk bonds." THE EQUITY SERIES: GROWTH & INCOME ........ Primarily common stocks and securities High return through a combination convertible into common stocks. of current income and capital appreciation. EQUITY INDEX ........... Selected securities in the S&P's 500 Index (the Total return performance (before "Index") which the adviser believes will, in the trust expenses) that approximates aggregate, approximate the performance results the investment performance of the of the Index. Index (including reinvestment of dividends) at a risk level consistent with that of the Index. COMMON STOCK ........... Primarily common stock and other equity-type Long-term growth of capital and instruments. increasing income. GLOBAL ................. Primarily equity securities of non-United States Long-term growth of capital. as well as United States companies. INTERNATIONAL .......... Primarily equity securities selected principally Long-term growth of capital. to permit participation in non-United States companies with prospects for growth. - -------------------------------------------------------------------------------------------------------------------------------
3
- ------------------------------------------------------------------------------------------------------------------------------- PORTFOLIO INVESTMENT POLICY OBJECTIVE --------- ----------------- --------- AGGRESSIVE STOCK .......... Primarily common stock and other equity-type Long-term growth of capital. securities issued by medium and other smaller sized companies with strong growth potential. ASSET ALLOCATION SERIES: CONSERVATIVE INVESTORS .... Diversified mix of publicly-traded, fixed-income High total return without, in the and equity securities; asset mix and security adviser's opinion, undue risk to selection are primarily based upon factors principal. expected to reduce risk. The Portfolio is generally expected to hold approximately 70% of its assets in fixed income securities and 30% in equity securities. BALANCED .................. Primarily common stocks, publicly-traded debt High return through a combination securities and high quality money market of current income and capital instruments. The portfolio is generally expected appreciation. to hold 50% of its assets in equity securities and 50% in fixed income securities. GROWTH INVESTORS .......... Diversified mix of publicly-traded, fixed-income High total return consistent with and equity securities; asset mix and security the adviser's determination of selection based upon factors expected to reasonable risk. increase possibility of high long-term return. The Portfolio is generally expected to hold approximately 70% of its assets in equity securities and 30% in fixed income securities. - -------------------------------------------------------------------------------------------------------------------------------
Subject to the terms described in your prospectus, you may transfer cash values between Separate Account Funds and/or change how your net premiums are allocated among Funds. See TRANSFERS OF POLICY ACCOUNT VALUE in your prospectus and CHARGE FOR TRANSFERS below. 4. INVESTMENT PERFORMANCE. Footnote 7 to the Separate Account FP financial statements included herein contains information about the net return for each Fund. The attached prospectus supplement for The Hudson River Trust contains rates of return and other portfolio performance information of the Trust for various periods ended December 31, 1995. Remember, the changes in the Policy Account value of your policy depend not only on the performance of the Trust portfolios, but also on the deductions and charges under your policy. To obtain the current unit values of the Separate Account Funds, call (212) 714-5015. The values reported in footnote 7 for all Policies are computed using the net rates of return for the corresponding portfolios of the Trust. The SP-Flex returns are net of charges for cost of insurance, administrative expense, and mortality and expense risks. The returns reported in footnote 7 for each of the other policy forms are reduced only by any mortality and expense risk charge deducted from Separate Account assets. 5. THE TRUST'S INVESTMENT ADVISER. The information about Alliance Capital Management L.P. (Alliance), the Trust's investment adviser, is updated as follows: As of December 31, 1995, Alliance was managing approximately $146.5 billion in assets. Alliance, a publicly traded limited partnership, is indirectly majority-owned by Equitable. For your convenience, we are restating that the advisory fee payable by the Trust to Alliance, which is based on the following annual percentages of the value of each portfolio's daily average net assets:
- ------------------------------------------------------------------------------------------------------------------------------- DAILY AVERAGE NET ASSETS ------------------------------------------------- FIRST NEXT OVER PORTFOLIO $350 MILLION $400 MILLION $750 MILLION --------- ------------ ------------ ------------ Common Stock, Money Market and Balanced................................... .400% .375% .350% Aggressive Stock and Intermediate Government Securities................... .500% .475% .450% High Yield, Global, Conservative Investors and Growth Investors........... .550% .525% .500% - -------------------------------------------------------------------------------------------------------------------------------
4
- ------------------------------------------------------------------------------------------------------------------------------- DAILY AVERAGE NET ASSETS ------------------------------------------------- FIRST NEXT OVER PORTFOLIO $500 MILLION $500 MILLION $1 BILLION --------- ------------ ------------ ---------- Quality Bond and Growth & Income.......................................... .550% .525% .500%
FIRST NEXT OVER PORTFOLIO $750 MILLION $750 MILLION $1.5 BILLION --------- ------------ ------------ ------------ Equity Index.............................................................. .350% .300% .250%
FIRST NEXT OVER PORTFOLIO $500 MILLION $1 BILLION $1.5 BILLION --------- ------------ ---------- ------------ International............................................................. .900 .850 .800 - -------------------------------------------------------------------------------------------------------------------------------
6. LIVING BENEFIT OPTION AVAILABLE. Subject to regulatory approval in your state and our underwriting guidelines, you may now be eligible for a Living Benefit payment under your policy. The Living Benefit enables the policyowner to receive a portion of the policy's death benefit (excluding death benefits payable under certain riders) if the insured has a terminal illness. Certain eligibility requirements will apply when you submit a Living Benefit claim (for example, satisfactory evidence of less than six month life expectancy). We will deduct an administrative charge of up to $250 from the proceeds of the Living Benefit payment. This charge may be less in some states. When a Living Benefit claim is paid, Equitable Variable establishes a lien against the policy. The amount of the lien is the sum of the Living Benefit payment, any accrued interest on that payment and any unpaid scheduled premium (if applicable under your policy). Interest will be charged at a rate equal to the greater of: (i) the yield on a 90-day Treasury bill and (ii) the maximum adjustable policy loan interest rate permitted in the state in which your policy is delivered. Until a death benefit is paid, or the policy is surrendered, a portion of the lien is allocated to the policy's Cash Surrender Value. This portion of the liened amount will be transferred to the Guaranteed Interest Account where it will earn interest at the same rate credited to unloaned amounts (in the case of SP-Flex policies, this portion of the liened amount will be transferred to the Money Market Fund). This portion of the liened amount will not be available for loans or partial withdrawals (if permitted under your policy). Any death benefit or Cash Surrender Value payable upon policy surrender will be reduced by the amount of the lien. Unlike a death benefit received by a beneficiary after the death of an insured, receipt of a Living Benefit payment may be taxable as a distribution under the policy. See TAX EFFECTS in your prospectus or, for SP-Flex policyowners, in this supplement, for a discussion of the tax treatment of distributions under the policy. Consult your tax adviser. Receipt of a Living Benefit payment may also affect a policyowner's eligibility for certain government benefits or entitlements. To submit a claim for this benefit and receive a copy of the Living Benefit rider, please contact your Equitable agent. 7. TELEPHONE TRANSFERS. The information under the heading Telephone Transfers is updated, as follows: In order to make a transfer by telephone, each policyowner must first complete and return an authorization form. Authorization forms can be obtained from your Equitable agent or our Administrative Office. The completed form MUST be returned to our Administrative Office before requesting a telephone transfer. Telephone transfers may be requested on each day we are open to transact business. You will receive the Fund's unit value as of the close of business on the day you call. We do not accept telephone transfer requests after 4:00 p.m. Eastern Time. Only one telephone transfer request is permitted per day and it may not be revoked at any time. Telephone transfer requests are automatically recorded and are invalid if incomplete information is given, portions of the request are inaudible, no authorization form is on file, or the request does not comply with the transfer limitations described in your policy. We have established reasonable procedures designed to confirm that instructions communicated by telephone are genuine. Such procedures include requiring certain personal identification information prior to acting on telephone instructions and providing written confirmation of instructions communicated by telephone. If we do not employ reasonable procedures to confirm that instructions communicated by telephone are genuine, we may be liable for any losses arising out of any act or any failure to act resulting from our own negligence, lack of good faith, or willful misconduct. In light of the procedures established, we will not be liable for following telephone instructions that we reasonably believe to be genuine. During times of extreme market activity it may be impossible to contact us to make a telephone transfer. If this occurs, you should submit a written transfer request to our Administrative Office. Our rules on telephone transfers are subject to change and we reserve the right to discontinue telephone transfers in the future. 8. TAX CHANGES. The United States Congress may in the future enact legislation that could change the tax treatment of life insurance policies. In addition, the Treasury Department may amend existing regulations, issue new regulations, or adopt new interpretations of existing laws. There is no way of predicting whether, when or in what form any such change 5 would be adopted. Any such change could have a retroactive effect regardless of the date of enactment. State tax laws or, if you are not a United States resident, foreign tax laws, may affect the tax consequences to you, the insured person or your beneficiary. These laws may change from time to time without notice. The discussion of the tax effects on policy proceeds contained in your prospectus and this supplement is based on our understanding of Federal income tax laws as of the date of such prospectus or supplement, as applied to policies owned by U.S. resident individuals. The tax effects on corporate taxpayers, subject to the Federal alternative minimum tax, other non-natural owners such as trusts, non-U.S. residents or non-U.S. citizens, may be different. This discussion is general in nature, and should not be considered tax advice, for which you should consult your legal or tax adviser. 9. DISTRIBUTION. Equico Securities Inc. ("Equico"), a wholly-owned subsidiary of Equitable, is the principal underwriter of the Trust under a Distribution Agreement. Equico is also the distributor of our variable life insurance policies and Equitable's variable annuity contracts under a Distribution and Servicing Agreement. Equico is registered with the SEC as a broker-dealer under the Securities Exchange Act of 1934 and is a member of the National Association of Securities Dealers, Inc. Equico's principal business address is 1755 Broadway, New York, NY 10019. Equico is paid a fee for its services as distributor of our policies. In 1994 and 1995, Equitable and Equitable Variable paid Equico a fee of $216,920 and $325,380, respectively, for its services under the Distribution and Servicing Agreement. On or about May 1, 1996, Equico will change its name to EQ Financial Consultants, Inc. The amounts paid and accrued to Equitable by us under our sales and services agreements with Equitable totaled approximately $377.2 million in 1995, $380.5 million in 1994 and $355.7 million in 1993. 10. MANAGEMENT. A list of our directors and principal officers and a brief statement of their business experience for the past five years is contained in Appendix A to this supplement. 11. LONG-TERM MARKET TRENDS. Appendix B to this supplement presents historical return trends for various types of securities which may be useful for understanding how different investment strategies may affect long term results. 12. FINANCIAL STATEMENTS. The financial statements of Separate Account FP and Equitable Variable included in this prospectus supplement have been audited for the years ended December 31, 1995, 1994 and 1993 by the accounting firm of Price Waterhouse LLP, our independent auditors, to the extent stated in their report. The financial statements of Separate Account FP and Equitable Variable for the years ended December 31, 1995, 1994 and 1993 included in this prospectus supplement have been so included in reliance on the reports of Price Waterhouse LLP, given on the authority of such firm as experts in accounting and auditing. The financial statements of Equitable Variable contained in this prospectus supplement should be considered only as bearing upon the ability of Equitable Variable to meet its obligations under the policies. They should not be considered as bearing upon the investment experience of the Separate Account Funds. INFORMATION ABOUT ALL POLICIES EXCEPT SP-FLEX 1. AUTOMATIC TRANSFER SERVICE. We offer an Automatic Transfer Service. This service enables you to make automatic monthly transfers out of the Money Market Fund into the other Separate Account Funds. To start using this service you must first complete a special election form that is available from your agent or our Administrative Office. You must also have a minimum of $5,000 in the Money Market Fund on the date the Automatic Transfer Service is scheduled to begin. You can elect up to eight Separate Account Funds for monthly transfers, but the minimum amount that may be transferred to each Fund each month is $50. Automatic transfers will begin on the next monthly processing date after we receive your election form at our Administrative Office. The Automatic Transfer Service will remain in effect until the earliest of the following events: (1) the funds in the Money Market Fund are insufficient to cover the automatic transfer amount; (2) the policy is in a grace period; (3) we receive at our Administrative Office your written instruction to cancel the Automatic Transfer Service; (4) we receive a death claim under the policy; or (5) you elect to use your Net Cash Surrender Value to purchase a fixed-benefit insurance option (if available under your policy). Using the Automatic Transfer Service does not guarantee a profit or protect against loss in a declining market. 2. CHARGE FOR TRANSFERS. We have reserved the right under your policy to make a charge of $25 for transfers of Policy Account value. You are currently able to make twelve free transfers in any policy year but we will charge $25 per transfer after the twelfth transfer. All transfers made on the same effective date (either written or by telephone) will count as one transfer. Transfers 6 made through the Automatic Transfer Service do not count toward the twelve free transfers. There will be no charge for a transfer of all of your amounts in the Separate Account to the Guaranteed Interest Account. INFORMATION ABOUT INCENTIVE LIFE PLUS DEDUCTIONS AND CHARGES. Cost of Insurance Charge. The information under Cost of Insurance Charge is updated as follows: Beginning in the tenth policy year, current monthly cost of insurance charges are reduced by an amount equal to a percentage of your unloaned Policy Account value on the date such charges are assessed. This means that the larger your unloaned Policy Account value, the greater your potential reduction in current cost of insurance charges. This percentage begins at an annual rate of .05%, grading up to an annual rate of .50% in policy years 26 and later. Effective on or about July 1, 1996, we intend to increase this cost of insurance charge reduction to grade up to .65% in policy years 25 and later. This cost of insurance charge reduction applies on a current basis and is not guaranteed. We may in the future increase, decrease, change the duration of, or eliminate the amount of the current cost of insurance charge reduction without advance notice to you. Because Incentive Life Plus was offered for the first time in 1995, no reduction of cost of insurance charges in the tenth policy year has yet been attained. INFORMATION ABOUT INCENTIVE LIFE 2000 AND CHAMPION 2000 1. PROSPECTUS SUMMARY. On page 1 of the prospectus, under the heading INVESTMENT FEATURES -- POLICY ACCOUNT the bold face text in the second bullet point is replaced by the following: REQUESTS FOR TRANSFERS OUT OF THE GUARANTEED INTEREST ACCOUNT CAN ONLY BE MADE ON OR WITHIN 30 DAYS OF A POLICY ANNIVERSARY. SUCH TRANSFERS WILL BE EFFECTIVE AS OF THE DATE WE RECEIVE YOUR REQUEST, BUT NO EARLIER THAN THE POLICY ANNIVERSARY. TRANSFERS INTO THE GUARANTEED INTEREST ACCOUNT AND AMONG ALL SEPARATE ACCOUNT FUNDS MAY BE REQUESTED AT ANY TIME. 2. BORROWING FROM YOUR POLICY ACCOUNT. We will first allocate loan repayments to our Guaranteed Interest Account until the amount of any loan originally allocated to that account has been repaid. After you have repaid this amount, you may choose how you want us to allocate the balance of any additional repayments. If you do not provide specific instructions, repayments will be allocated on the basis of your premium allocation percentages. 3. MINIMUM FACE AMOUNT (INCENTIVE LIFE 2000 ONLY). The minimum Face Amount for Incentive Life 2000 is $50,000 for issue ages 65 and below. This is also the minimum Face Amount for the "designated insured option" rider described under ADDITIONAL BENEFITS MAY BE AVAILABLE in your Incentive Life 2000 prospectus. INFORMATION ABOUT INCENTIVE LIFE 1. MONTHLY ADMINISTRATIVE CHARGE. We deduct a monthly administrative charge from your Policy Account, which covers the costs associated with administering Incentive Life policies. The current administrative charge is $6 per month. This administrative charge is guaranteed never to exceed $8 per month. 2. COST OF INSURANCE CHARGE. The tables under "Cost of Insurance Charge" in prospectuses dated February 27, 1991 and earlier are updated as follows:
ILLUSTRATIVE TABLE OF MONTHLY COST OF INSURANCE RATES (ROUNDED) FACE AMOUNT $50,000-$199,000 FACE AMOUNT $200,000 AND OVER -------------------------------------------------- --------------------------------------------------- MALE GUARANTEED CURRENT GUARANTEED CURRENT ISSUE AGE MAXIMUM RATE (NON-SMOKER) RATE MAXIMUM RATE (NON-SMOKER) RATE - --------------------- ---------------------- ------------------------- ---------------------- ------------------------- 5 $ .08 $ .08 $ .08 $ .08 15 .11 .11 .11 .11 25 .15 .13 .15 .12 35 .18 .14 .18 .13 45 .38 .25 .38 .22 55 .88 .54 .88 .46 65 2.14 1.41 2.14 1.19
3. EMPLOYEE BENEFIT PROGRAMS. Complex rules may apply when a policy is held by an employee or a trust, or acquired by an employee, in connection with the provision of employee benefits. These policyowners also must consider whether the policy was applied for by or issued to a person having an insurable interest under applicable state law, as the lack of insurable interest may, among other things, affect the qualification of the policy as life insurance for federal income tax purposes and the right of the beneficiary to death benefits. Employers and employer-created trusts may be subject to 7 reporting, disclosure, and fiduciary obligations under the Employee Retirement Income Security Act of 1974 (ERISA). For information on these matters, we suggest that you consult your tax and legal advisers. 4. UNISEX RATES. Incentive Life policies were issued on a unisex basis in Montana and, after February 2, 1990, in Massachusetts. Unisex means that there is no distinction based on sex in determining the cost of insurance rates. Cost of insurance rates applicable to a policy issued on a unisex basis would not be greater than the comparable male rates set forth or illustrated in the prospectus. Similarly, illustrated policy values in the prospectus would be no less favorable for comparable policies issued on a unisex basis. The guaranteed cost of insurance rates for our Incentive Life policy are based on the Commissioner's 1980 Standard Ordinary "B" Mortality Table. INFORMATION ABOUT SP-FLEX 1. TAX EFFECTS. This discussion supersedes the discussion of the tax effects on policy proceeds contained in the prospectus. The Technical and Miscellaneous Revenue Act of 1988 changed the tax consequences of distributions from "modified endowments", a category of life insurance policies. For this purpose, "distributions" include policy loans and amounts received on lapse, maturity or surrender of a policy. POLICY PROCEEDS. An SP-Flex Policy will be treated as "life insurance" for Federal income tax purposes if it meets the definitional requirement of the Internal Revenue Code (Code) and for as long as the portfolios of the Trust satisfy the diversification requirements under the Code. We believe that SP-Flex will meet these requirements, and that under Federal income tax law: o the death benefit received by the beneficiary under your policy will not be subject to Federal income tax; and o as long as your policy remains in force, increases in the value of your policy as a result of investment experience will not be subject to Federal income tax unless and until there is a distribution from your policy. SPECIAL TAX RULES MAY APPLY, HOWEVER, IF YOU TRANSFER YOUR OWNERSHIP OF THE POLICY. CONSULT YOUR TAX ADVISER BEFORE ANY TRANSFER OF YOUR POLICY. The Federal income tax consequences of a distribution from your policy will depend on whether your policy is determined to be a "modified endowment." SP-Flex policies entered into prior to June 21, 1988 will not be considered modified endowments, unless an additional premium is paid. Generally, SP-Flex policies entered into after June 20, 1988 will be considered modified endowments. However, SP-Flex policies acquired as a result of an exchange from a policy that is not a modified endowment, will generally not be considered a modified endowment as long as no additional premiums are paid and the death benefit of the new policy is not reduced below that of the old policy. IF YOUR POLICY IS NOT A MODIFIED ENDOWMENT, as long as it remains in force, a loan under your policy will be treated as indebtedness and no part of the loan will be subject to Federal income tax. Interest on the loan will not be tax deductible. If your policy lapses, matures or is surrendered, the excess, if any, of your Cash Surrender Value (which includes the amount of any unpaid policy loan and loan interest) over your Basis will be subject to Federal income tax. Your Basis in your policy generally will equal the premiums you have paid. IF YOUR POLICY IS A MODIFIED ENDOWMENT, any loan from your policy will be taxed in a manner comparable to distributions from annuities (i.e., on an "income-first" basis). A loan for this purpose also includes any increase in the loan amount to pay interest on an existing loan or an assignment or a pledge to secure a loan. A loan will be considered taxable income to you to the extent your Policy Account Value exceeds your Basis in the policy at the time you make the loan. For modified endowments, your Basis would be increased by the amount of any prior loan under your policy that was considered taxable income to you. A 10% penalty tax will also apply to the taxable portion of a loan under a modified endowment. The penalty tax will not, however, apply to loans (i) to taxpayers 59 1/2 years of age or older, (ii) in the case of a disability (as defined in the Code) or (iii) received as part of a series of substantially equal periodic annuity payments for the life (or life expectancy) of the taxpayer or the joint lives (or joint life expectancies) of the taxpayer and his beneficiary. In addition, if your policy lapses, matures or is surrendered, the excess, if any, of your Cash Surrender Value over your Basis will be subject to Federal income tax and, unless one of the above exceptions applies, the 10% penalty tax. If your policy becomes a modified endowment, a distribution during the policy year it becomes a modified endowment and any subsequent policy year will be taxed as described in the two preceding paragraphs. In addition, a distribution from a policy within two years before it becomes a modified endowment will be subject to tax in this manner. As referred to above, if additional premiums are paid under an SP-Flex policy entered into prior to June 21, 1988, it will become a modified endowment. THIS MEANS THAT A DISTRIBUTION MADE AFTER JUNE 20, 1988 FROM AN SP-FLEX POLICY ENTERED INTO PRIOR TO JUNE 21, 1988 COULD LATER BECOME TAXABLE AS A DISTRIBUTION FROM A MODIFIED ENDOWMENT. The Secretary of the Treasury has been authorized to prescribe rules which would treat similarly other distributions made in anticipation of a policy becoming a modified endowment. DIVERSIFICATION. Under Section 817(h) of the Code, the Secretary of the Treasury has the authority to set standards for diversification of the investments underlying variable life insurance policies. The Treasury Department has issued regulations regarding the 8 diversification requirements. Failure by us to meet these requirements would disqualify your policy as a life insurance policy under Section 7702 of the Code. If this were to occur, you would be subject to Federal income tax on the income under the policy. Equitable Variable Separate Account FP, through the Trust, intends to comply with these requirements. In connection with the issuance of the temporary diversification regulations, the Treasury Department stated that it anticipates the issuance of regulations or rulings prescribing the circumstances in which the ability of a policyowner to direct his investment to particular funds of a separate account may cause the policyowner, rather than the insurance company, to be treated as the owner of the assets in the account. If you were considered the owner of the assets of the Separate Account, income and gains from the account would be included in your gross income for Federal income tax purposes. For purposes of determining the taxable income to you resulting from a loan under your policy or a distribution on its lapse, maturity or surrender, all modified endowment contracts issued to you by the same insurer or an affiliate during any calendar year will be aggregated and treated as one contract. This provision applies to policies entered into after June 20, 1988, but does not affect contracts purchased by certain qualified plans. Under prior law, a "twelve-month period" rather than a calendar year standard was used. POLICY CHANGES. For you and your beneficiary to receive the tax treatment discussed above, your policy must initially qualify and continue to qualify as life insurance under Sections 7702 and 817(h) of the Code. We have reserved in the SP-Flex policy the right to decline to accept all or part of any premium payments that would cause the policy to fail to qualify. We may also make changes in the SP-Flex policy or its riders or make distributions from the policy to the extent we deem necessary to qualify the policy as life insurance for tax purposes. Any such change will apply uniformly to all policies that are affected. SP-Flex policyowners will be given advance written notice of such changes. 9 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors of Equitable Variable Life Insurance Company and Policyowners of Separate Account FP of Equitable Variable Life Insurance Company 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 Money Market Division, Intermediate Government Securities Division, Quality Bond Division, High Yield Division, Growth and Income Division, Equity Index Division, Common Stock Division, Global Division, International Division, Aggressive Stock Division, Conservative Investors Division, Balanced Division and Growth Investors Division, separate investment divisions of Equitable Variable Life Insurance Company ("Equitable Variable Life") Separate Account FP at December 31, 1995 and the results of each of their operations and changes in each of their net assets for each of the periods indicated, in conformity with generally accepted accounting principles. These financial statements are the responsibility of Equitable Variable Life's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of shares in The Hudson River Trust at December 31, 1995 with the transfer agent, provide a reasonable basis for the opinion expressed above. PRICE WATERHOUSE LLP New York, NY February 7, 1996 FSA-1 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 1995
INTERMEDIATE MONEY GOVERNMENT QUALITY HIGH GROWTH & EQUITY MARKET SECURITIES BOND YIELD INCOME INDEX DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION ------------ ----------- ------------ ----------- ----------- ----------- ASSETS Investments in shares of The Hudson River Trust -- at market value (Notes 2 and 7) Cost: $207,548,119..... $207,638,095 37,536,467..... $37,681,989 141,011,715..... $138,906,039 68,700,148..... $72,524,129 17,021,456..... $19,144,802 59,443,291..... $71,895,056 Receivable for sales of shares of The Hudson River Trust........... -- -- -- -- -- -- Receivable for policy- related transactions.. 1,030,719 472,227 195,736 671,870 272,371 214,843 ------------ ----------- ------------ ----------- ----------- ----------- Total Assets............ 208,668,814 38,154,216 139,101,775 73,195,999 19,417,173 72,109,899 ------------ ----------- ------------ ----------- ----------- ----------- LIABILITIES Payable for purchases of shares of The Hudson River Trust................. 1,021,043 488,551 195,429 740,734 272,227 214,856 Payable for policy- related transactions.. -- -- -- -- -- -- Amount retained by Equitable Variable Life in Separate Account FP (Note 4)........... 514,240 516,621 618,900 524,303 526,633 271,428 ------------ ----------- ------------ ----------- ---------- ----------- Total Liabilities....... 1,535,283 1,005,172 814,329 1,265,037 798,860 486,284 ------------ ----------- ------------ ----------- ---------- ----------- NET ASSETS ATTRIBUTABLE TO POLICYOWNERS......... $207,133,531 $37,149,044 $138,287,446 $71,930,962 $18,618,313 $71,623,615 ============ =========== ============ =========== =========== ===========
See Notes to Financial Statements.
COMMON AGGRESSIVE STOCK GLOBAL INTERNATIONAL STOCK DIVISION DIVISION DIVISION DIVISION -------------- ------------ ----------- ------------ ASSETS Investments in shares of The Hudson River Trust -- at market value (Notes 2 and 7) Cost: 966,230,780...... $1,148,055,059 297,303,481...... $333,829,077 11,991,226...... $12,659,132 475,758,260...... $556,029,378 Receivable for sales of shares of The Hudson River Trust........... -- -- -- -- Receivable for policy- related transactions.. 233,000 421,042 137,166 800,569 -------------- ------------ ----------- ------------ Total Assets............ 1,148,288,059 334,250,119 12,796,298 556,829,947 -------------- ------------ ----------- ------------ LIABILITIES Payable for purchases of shares of The Hudson River Trust................. 679,729 246,368 143,511 1,121,615 Payable for policy- related transactions.. -- -- -- -- Amount retained by Equitable Variable Life in Separate Account FP (Note 4)........... 1,023,056 506,731 220,849 520,201 -------------- ------------ ----------- ------------ Total Liabilities....... 1,702,785 753,099 364,360 1,641,816 -------------- ------------ ----------- ------------ NET ASSETS ATTRIBUTABLE TO POLICYOWNERS....... $1,146,585,274 $333,497,020 $12,431,938 $555,188,131 ============== ============ =========== ============
See Notes to Financial Statements. ASSET ALLOCATION SERIES -------------------------------------------- CONSERVATIVE GROWTH INVESTORS BALANCED INVESTORS DIVISION DIVISION DIVISION ------------ ------------ ------------ ASSETS Investments in shares of The Hudson River Trust -- at market value (Notes 2 and 7) Cost: 162,300,470...... $172,662,590 356,282,500...... $399,379,687 474,917,898...... $556,703,771 Receivable for sales of shares of The Hudson River Trust........... 76,736 -- -- Receivable for policy- related transactions.. -- -- 191,779 ------------ ------------ ------------ Total Assets............ 172,739,326 399,379,687 556,895,550 ------------ ------------ ------------ LIABILITIES Payable for purchases of shares of The Hudson River Trust................. -- 179,701 414,996 Payable for policy- related transactions.. 81,465 47,918 -- Amount retained by Equitable Variable Life in Separate Account FP (Note 4)........... 570,762 586,859 602,888 ------------ ------------ ------------ Total Liabilities....... 652,227 814,478 1,017,884 ------------ ------------ ------------ NET ASSETS ATTRIBUTABLE TO POLICYOWNERS....... $172,087,099 $398,565,209 $555,877,666 ============ ============ ============ See Notes to Financial Statements. FSA-2 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP STATEMENTS OF OPERATIONS
INTERMEDIATE GOVERNMENT MONEY MARKET DIVISION SECURITIES DIVISION ------------------------------------ -------------------------------------- YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, ------------------------------------ -------------------------------------- 1995 1994 1993 1995 1994 1993 ---------- ---------- ---------- ---------- ------------ ---------- INCOME AND EXPENSES: Income (Note 2): Dividends from The Hudson River Trust......... $9,225,401 $5,368,883 $4,163,389 $2,010,283 $ 5,671,984 $14,930,827 Expenses (Note 3): Mortality and expense risk charges............ 954,556 826,379 834,113 197,721 527,675 1,470,325 ---------- ---------- ---------- ---------- ----------- ----------- NET INVESTMENT INCOME............................. 8,270,845 4,542,504 3,329,276 1,812,562 5,144,309 13,460,502 ---------- ---------- ---------- ---------- ----------- ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 2): Realized gain (loss) on investments........... (432,347) 95,530 (339,754) (810,768) (10,163,976) 3,999,846 Realized gain distribution from The Hudson River Trust...................... -- -- -- -- -- 11,449,074 ---------- ---------- ---------- ---------- ----------- ----------- NET REALIZED GAIN (LOSS).......................... (432,347) 95,530 (339,754) (810,768) (10,163,976) 15,448,920 Unrealized appreciation/depreciation on investments: Beginning of period........................... 32,760 (14,267) (224,885) (2,736,863) (1,617,237) 1,966,231 End of period................................. 89,976 32,760 (14,267) 145,522 (2,736,863) (1,617,237) ---------- ---------- ---------- ---------- ----------- ----------- Change in unrealized appreciation/depreciation during the period............................. 57,216 47,027 210,618 2,882,385 (1,119,626) (3,583,468) ---------- ---------- ---------- ---------- ----------- ----------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS.................................. (375,131) 142,557 (129,136) 2,071,617 (11,283,602) 11,865,452 ---------- ---------- ---------- ---------- ----------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS................................. $7,895,714 $4,685,061 $3,200,140 $3,884,179 $(6,139,293) $25,325,954 ========== ========== ========== ========== =========== ===========
QUALITY BOND DIVISION ------------------------------------------- OCTOBER 1* TO YEAR ENDED DECEMBER 31, DECEMBER 31, --------------------------- ------------ 1995 1994 1993 ----------- ------------ ------------ INCOME AND EXPENSES: Income (Note 2): Dividends from The Hudson River Trust......... $ 7,958,285 $ 8,123,722 $ 1,221,840 Expenses (Note 3): Mortality and expense risk charges............ 767,627 689,178 163,308 ----------- ------------ ------------ NET INVESTMENT INCOME............................. 7,190,658 7,434,544 1,058,532 ----------- ------------ ------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 2): Realized gain (loss) on investments........... (632,666) (410,697) (106) Realized gain distribution from The Hudson River Trust...................... -- -- 130,973 ----------- ------------ ------------ NET REALIZED GAIN (LOSS).......................... (632,666) (410,697) 130,867 Unrealized appreciation/depreciation on investments: Beginning of period........................... (15,521,200) (1,886,621) -- End of period................................. (2,105,676) (15,521,200) (1,886,621) ----------- ------------ ----------- Change in unrealized appreciation/depreciation during the period............................. 13,415,524 (13,634,579) (1,886,621) ----------- ------------ ----------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS.................................. 12,782,858 (14,045,276) (1,755,754) ----------- ------------ ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS................................. $19,973,516 $ (6,610,732) $ (697,222) =========== ============ =========== See Notes to Financial Statements. * Commencement of Operations
FSA-3 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP STATEMENTS OF OPERATIONS (CONTINUED)
HIGH YIELD DIVISION ---------------------------------------- YEAR ENDED DECEMBER 31, ---------------------------------------- 1995 1994 1993 ----------- ----------- ---------- INCOME AND EXPENSES: Income (Note 2): Dividends from The Hudson River Trust................. $ 6,518,568 $ 4,578,946 $4,488,259 Expenses (Note 3): Mortality and expense risk charges.................... 371,369 305,522 285,992 ----------- ----------- ---------- NET INVESTMENT INCOME..................................... 6,147,199 4,273,424 4,202,267 ----------- ----------- ---------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 2): Realized gain (loss) on investments................... (179,454) (328,199) 107,852 Realized gain distribution from The Hudson River Trust.............................. -- -- 1,030,687 ----------- ----------- ---------- NET REALIZED GAIN (LOSS).................................. (179,454) (328,199) 1,138,539 Unrealized appreciation/depreciation on investments: Beginning of period................................... (873,103) 4,734,999 763,746 End of period......................................... 3,823,981 (873,103) 4,734,999 ----------- ----------- ---------- Change in unrealized appreciation/depreciation during the period..................................... 4,697,084 (5,608,102) 3,971,253 ----------- ----------- ---------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS.... 4,517,630 (5,936,301) 5,109,792 ----------- ----------- ---------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS......................................... $10,664,829 $(1,662,877) $9,312,059 =========== =========== ==========
See Notes to Financial Statements.
GROWTH & INCOME DIVISION EQUITY INDEX DIVISION --------------------------------------- -------------------------- OCTOBER 1* APRIL 1* TO YEAR ENDED TO YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, ------------------------ ------------- ----------- ------------- 1995 1994 1993 1995 1994 ---------- --------- ------------- ----------- ------------- INCOME AND EXPENSES: Income (Note 2): Dividends from The Hudson River Trust................. $ 380,677 $ 108,492 $ 3,394 $ 964,775 $ 596,180 Expenses (Note 3): Mortality and expense risk charges.................... 69,716 19,204 1,833 289,199 152,789 ---------- --------- ------- ----------- --------- NET INVESTMENT INCOME..................................... 310,961 89,288 1,561 675,576 443,391 ---------- --------- ------- ----------- --------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 2): Realized gain (loss) on investments................... 2,791 (11,709) (134) 3,060 (6,949) Realized gain distribution from The Hudson River Trust.............................. -- -- -- 536,890 134,154 ---------- --------- ------- ----------- --------- NET REALIZED GAIN (LOSS).................................. 2,791 (11,709) (134) 539,950 127,205 Unrealized appreciation/depreciation on investments: Beginning of period................................... (141,585) (904) -- (399,286) -- End of period......................................... 2,123,346 (141,585) (904) 12,451,765 (399,286) ---------- --------- ------- ----------- --------- Change in unrealized appreciation/depreciation during the period..................................... 2,264,931 (140,681) (904) 12,851,051 (399,286) ---------- --------- ------- ----------- --------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS.... 2,267,722 (152,390) (1,038) 13,391,001 (272,081) ---------- --------- ------- ----------- --------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS......................................... $2,578,683 $ (63,102) $ 523 $14,066,577 $ 171,310 ========== ========= ======= =========== ========= See Notes to Financial Statements. * Commencement of Operations
FSA-4 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP STATEMENTS OF OPERATIONS (CONTINUED)
COMMON STOCK DIVISION GLOBAL STOCK DIVISION -------------------------------------------- ----------------------------------------- YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, -------------------------------------------- ----------------------------------------- 1995 1994 1993 1995 1994 1993 ------------ ------------ ------------ ----------- ----------- ----------- INCOME AND EXPENSES: Income (Note 2): Dividends from The Hudson River Trust.................... $ 14,259,262 $ 11,755,355 $ 10,311,886 $ 5,152,442 $ 2,768,605 $ 1,060,406 Expenses (Note 3): Mortality and expense risk charges........................ 6,050,368 4,741,008 4,005,102 1,743,898 1,211,620 466,897 ------------ ------------ ------------ ----------- ----------- ----------- NET INVESTMENT INCOME................ 8,208,894 7,014,347 6,306,784 3,408,544 1,556,985 593,509 ------------ ------------ ------------ ----------- ----------- ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 2): Realized gain (loss) on investments.................... 16,793,683 292,144 4,176,629 3,049,444 3,347,704 1,333,766 Realized gain distribution from The Hudson River Trust......... 63,838,178 43,936,280 85,777,775 9,214,950 4,821,242 11,642,904 ------------ ------------ ------------ ----------- ----------- ----------- NET REALIZED GAIN (LOSS)............. 80,631,861 44,228,424 89,954,404 12,264,394 8,168,946 12,976,670 Unrealized appreciation (depreciation) on investments: Beginning of period.............. (2,048,649) 71,350,568 22,647,989 3,130,280 7,062,877 2,783,724 End of period.................... 181,824,279 (2,048,649) 71,350,568 36,525,596 3,130,280 7,062,877 ------------ ------------ ------------ ----------- ----------- ----------- Change in unrealized appreciation/ depreciation during the period... 183,872,928 (73,399,217) 48,702,579 33,395,316 (3,932,597) 4,279,153 ------------ ------------ ------------ ----------- ----------- ----------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS.............. 264,504,789 (29,170,793) 138,656,983 45,659,710 4,236,349 17,255,823 ------------ ------------ ------------ ----------- ----------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS.......... $272,713,683 $(22,156,446) $144,963,767 $49,068,254 $ 5,793,334 $17,849,332 ============ ============ ============ =========== =========== ===========
See Notes to Financial Statements.
INTERNATIONAL DIVISION AGGRESSIVE STOCK DIVISION -------------- -------------------------------------------- APRIL 3* TO DECEMBER 31, YEAR ENDED DECEMBER 31, -------------- -------------------------------------------- 1995 1995 1994 1993 ---------- ------------ ------------ ------------ INCOME AND EXPENSES: Income (Note 2): Dividends from The Hudson River Trust.................... $195,500 $ 1,268,689 $ 400,102 $ 766,228 Expenses (Note 3): Mortality and expense risk charges........................ 36,471 2,702,978 1,944,639 1,757,109 -------- ------------ ------------ ------------ NET INVESTMENT INCOME................ 159,029 (1,434,289) (1,544,537) (990,881) -------- ------------ ------------ ------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 2): Realized gain (loss) on investments.................... (790) 11,560,966 (6,075,250) 35,696,507 Realized gain distribution from The Hudson River Trust......... 51,741 61,903,470 -- 25,339,962 -------- ------------ ------------ ------------ NET REALIZED GAIN (LOSS)............. 50,951 73,464,436 (6,075,250) 61,036,469 Unrealized appreciation (depreciation) on investments: Beginning of period.............. -- 30,761,318 35,185,988 53,885,737 End of period.................... 667,906 80,271,118 30,761,318 35,185,988 -------- ------------ ------------ ------------ Change in unrealized appreciation/ depreciation during the period... 667,906 49,509,800 (4,424,670) (18,699,749) -------- ------------ ------------ ------------ NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS.............. 718,857 122,974,236 (10,499,920) 42,336,720 -------- ------------ ------------ ------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS.......... $877,886 $121,539,947 $(12,044,457) $ 41,345,839 ======== ============ ============ ============ See Notes to Financial Statements. *Commencement of Operations
FSA-5 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP STATEMENTS OF OPERATIONS (CONCLUDED)
ASSET ALLOCATION SERIES --------------------------------------------------------------------------------- CONSERVATIVE INVESTORS DIVISION BALANCED DIVISION -------------------------------------- ---------------------------------------- YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, -------------------------------------- ---------------------------------------- 1995 1994 1993 1995 1994 1993 ----------- ----------- ---------- ----------- ------------ ----------- INCOME AND EXPENSES: Income (Note 2): Dividends from The Hudson River Trust....... $ 8,169,109 $ 6,205,574 $4,088,977 $12,276,328 $ 10,557,487 $10,062,862 Expenses (Note 3): Mortality and expense risk charges.......... 921,294 750,164 551,610 2,237,982 2,103,510 2,047,811 ----------- ----------- ---------- ----------- ------------ ----------- NET INVESTMENT INCOME........................... 7,247,815 5,455,410 3,537,367 10,038,346 8,453,977 8,015,051 ----------- ----------- ---------- ----------- ------------ ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 2): Realized gain (loss) on investments......... (378,551) (421,501) 91,739 (2,466,524) 858,164 1,446,919 Realized gain distribution from The Hudson River Trust.................... 1,068,272 -- 4,651,717 10,894,130 -- 20,280,817 ----------- ----------- ---------- ----------- ------------ ----------- NET REALIZED GAIN (LOSS)........................ 689,721 (421,502) 4,743,456 8,427,606 858,164 21,727,736 Unrealized appreciation (depreciation) on investments: Beginning of period......................... (8,767,697) 1,915,037 2,223,612 (2,878,875) 37,960,661 30,072,900 End of period............................... 10,362,120 (8,767,697) 1,915,037 43,097,187 (2,878,875) 37,960,661 ----------- ----------- ---------- ----------- ------------ ----------- Change in unrealized appreciation/depreciation during the period........................... 19,129,817 (10,682,734) (308,575) 45,976,062 (40,839,536) 7,887,761 ----------- ----------- ---------- ----------- ------------ ----------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS................................ 19,819,538 (11,104,236) 4,434,881 54,403,668 (39,981,372) 29,615,497 ----------- ----------- ---------- ----------- ------------ ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS............................... $27,067,353 $(5,648,826) $7,972,248 $64,442,014 $(31,527,395) $37,630,548 =========== =========== ========== =========== ============ ===========
See Notes to Financial Statements.
ASSET ALLOCATION SERIES ------------------------------------------- GROWTH INVESTORS DIVISION ------------------------------------------- YEAR ENDED DECEMBER 31, ------------------------------------------- 1995 1994 1993 ------------ ------------ ----------- INCOME AND EXPENSES: Income (Note 2): Dividends from The Hudson River Trust......... $ 15,855,901 $ 10,663,204 $ 5,922,228 Expenses (Note 3): Mortality and expense risk charges............ 2,796,354 1,995,747 1,274,117 ------------ ------------ ----------- NET INVESTMENT INCOME............................. 13,059,547 8,667,457 4,648,111 ------------ ------------ ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 2): Realized gain (loss) on investments........... 1,752,185 241,591 52,392 Realized gain distribution from The Hudson River Trust...................... 7,421,853 -- 14,624,517 ------------ ------------ ----------- NET REALIZED GAIN (LOSS).......................... 9,174,038 241,591 14,676,909 Unrealized appreciation (depreciation) on investments: Beginning of period........................... (770,693) 20,567,604 12,746,740 End of period................................. 81,785,873 (770,693) 20,567,604 ------------ ------------ ----------- Change in unrealized appreciation/depreciation during the period............................. 82,556,566 (21,338,297) 7,820,864 ------------ ------------ ----------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS.................................. 91,730,604 (21,096,706) 22,497,773 ------------ ------------ ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS................................. $104,790,151 $(12,429,249) $27,145,884 ============ ============ ===========
See Notes to Financial Statements. FSA-6 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP STATEMENTS OF CHANGES IN NET ASSETS
INTERMEDIATE GOVERNMENT MONEY MARKET DIVISION SECURITIES DIVISION ------------------------------------------ ------------------------------------------- YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, ------------------------------------------ ------------------------------------------- 1995 1994 1993 1995 1994 1993 ------------ ------------ ------------ ----------- ------------- ------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income............. $ 8,270,845 $ 4,542,504 $ 3,329,276 $ 1,812,562 $ 5,144,309 $ 13,460,502 Net realized gain (loss).......... (432,347) 95,530 (339,754) (810,768) (10,163,976) 15,448,920 Change in unrealized appreciation/ depreciation on investments..... 57,216 47,027 210,618 2,882,385 (1,119,626) (3,583,468) ------------ ------------ ------------ ----------- ------------- ------------- Net increase (decrease) from operations................. 7,895,714 4,685,061 3,200,140 3,884,179 (6,139,293) 25,325,954 ------------ ------------ ------------ ----------- ------------- ------------- FROM POLICY-RELATED TRANSACTIONS: Net premiums (Note 3)............. 96,773,056 82,536,703 64,845,505 11,016,347 18,915,140 26,598,113 Benefits and other policy-related transactions (Note 3)........... (39,770,849) (32,432,771) (31,747,197) (6,286,070) (5,813,181) (7,539,335) Net transfers among divisions..... 4,776,165 (25,466,044) (50,510,704) 953,149 (125,116,319) (180,916,946) ------------ ------------ ------------ ----------- ------------- ------------- Net increase (decrease) from policy-related transactions..... 61,778,372 24,637,888 (17,412,396) 5,683,426 (112,014,360) (161,858,168) ------------ ------------ ------------ ----------- ------------- ------------- NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE VARIABLE IN SEPARATE ACCOUNT FP (Note 4)...... (36,640) (24,067) 92,890 (72,636) 15,335 (69,330) ------------ ------------ ------------ ----------- ------------- ------------- INCREASE (DECREASE) IN NET ASSETS... 69,637,446 29,298,882 (14,119,366) 9,494,969 (118,138,318) (136,601,544) NET ASSETS, BEGINNING OF PERIOD..... 137,496,085 108,197,203 122,316,569 27,654,075 145,792,393 282,393,937 ------------ ------------ ------------ ----------- ------------- ------------- NET ASSETS, END OF PERIOD........... $207,133,531 $137,496,085 $108,197,203 $37,149,044 $ 27,654,075 $ 145,792,393 ============ ============ ============ =========== ============= =============
See Notes to Financial Statements.
QUALITY BOND DIVISION ------------------------------------------- OCTOBER 1* TO YEAR ENDED DECEMBER 31, DECEMBER 31, ---------------------------- ----------- 1995 1994 1993 ------------ ------------ ----------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income............. $ 7,190,658 $ 7,434,544 $ 1,058,532 Net realized gain (loss).......... (632,666) (410,697) 130,867 Change in unrealized appreciation/ depreciation on investments..... 13,415,524 (13,634,579) (1,886,621) ------------ ------------ ----------- Net increase (decrease) from operations................. 19,973,516 (6,610,732) (697,222) ------------ ------------ ----------- FROM POLICY-RELATED TRANSACTIONS: Net premiums (Note 3)............. 2,516,135 850,240 181,283 Benefits and other policy-related transactions (Note 3)........... (3,189,044) (2,891,278) (441,626) Net transfers among divisions..... 2,462,969 25,765,197 100,786,909 ------------ ------------ ----------- Net increase (decrease) from policy-related transactions..... 1,790,060 23,724,159 100,526,566 ------------ ------------ ----------- NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE VARIABLE IN SEPARATE ACCOUNT FP (Note 4)...... (712,602) 255,654 38,047 ------------ ------------ ----------- INCREASE (DECREASE) IN NET ASSETS... 21,050,974 17,369,081 99,867,391 NET ASSETS, BEGINNING OF PERIOD..... 117,236,472 99,867,391 -- ------------ ------------ ----------- NET ASSETS, END OF PERIOD........... $138,287,446 $117,236,472 $99,867,391 ============ ============ =========== See Notes to Financial Statements. *Commencement of Operations
FSA-7 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
HIGH YIELD DIVISION ------------------------------------------ YEAR ENDED DECEMBER 31, ------------------------------------------ 1995 1994 1993 ----------- ------------ ----------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income................................... $ 6,147,199 $ 4,273,424 $ 4,202,267 Net realized gain (loss)................................ (179,454) (328,199) 1,138,539 Change in unrealized appreciation/ depreciation on investments........................... 4,697,084 (5,608,102) 3,971,253 ----------- ------------ ----------- Net increase (decrease) from operations................. 10,664,829 (1,662,877) 9,312,059 ----------- ------------ ----------- FROM POLICY-RELATED TRANSACTIONS: Net premiums (Note 3)................................... 15,333,474 14,287,345 10,787,763 Benefits and other policy-related transactions (Note 3)................................. (8,211,013) (7,162,537) (5,179,424) Net transfers among divisions........................... 4,789,450 (11,048,174) 1,006,671 ----------- ------------ ----------- Net increase (decrease) from policy-related transactions.......................................... 11,911,911 (3,923,366) 6,615,010 ----------- ------------ ----------- NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE VARIABLE IN SEPARATE ACCOUNT FP (Note 4)................ (100,679) 16,028 (31,889) ----------- ------------ ----------- INCREASE (DECREASE) IN NET ASSETS......................... 22,476,061 (5,570,215) 15,895,180 NET ASSETS, BEGINNING OF PERIOD........................... 49,454,901 55,025,116 39,129,936 ----------- ------------ ----------- NET ASSETS, END OF PERIOD................................. $71,930,962 $ 49,454,901 $55,025,116 =========== ============ ===========
See Notes to Financial Statements.
GROWTH & INCOME DIVISION EQUITY INDEX DIVISION ------------------------------------- -------------------------- OCTOBER 1* APRIL 1* TO YEAR ENDED TO YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, ------------------------- ----------- ----------- ----------- 1995 1994 1993 1995 1994 ----------- ---------- ----------- ----------- ----------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income................................... $ 310,961 $ 89,288 $ 1,561 $ 675,576 $ 443,391 Net realized gain (loss)................................ 2,791 (11,709) (134) 539,950 127,205 Change in unrealized appreciation/ depreciation on investments........................... 2,264,931 (140,681) (904) 12,851,051 (399,286) ----------- ---------- -------- ----------- ----------- Net increase (decrease) from operations................. 2,578,683 (63,102) 523 14,066,577 171,310 ----------- ---------- -------- ----------- ----------- FROM POLICY-RELATED TRANSACTIONS: Net premiums (Note 3)................................... 6,464,035 2,953,965 182,381 10,308,871 690,540 Benefits and other policy-related transactions (Note 3)................................. (1,385,132) (481,430) (6,581) (2,111,532) (472,818) Net transfers among divisions........................... 5,274,221 3,033,230 279,153 18,305,589 30,736,505 ----------- ---------- -------- ----------- ----------- Net increase (decrease) from policy-related transactions.......................................... 10,353,124 5,505,765 454,953 26,502,928 30,954,227 ----------- ---------- -------- ----------- ----------- NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE VARIABLE IN SEPARATE ACCOUNT FP (Note 4)................ (221,877) 6,113 4,131 (71,293) (134) ----------- ---------- -------- ----------- ----------- INCREASE (DECREASE) IN NET ASSETS......................... 12,709,930 5,448,776 459,607 40,498,212 31,125,403 NET ASSETS, BEGINNING OF PERIOD........................... 5,908,383 459,607 -- 31,125,403 -- ----------- ---------- -------- ----------- ----------- NET ASSETS, END OF PERIOD................................. $18,618,313 $5,908,383 $459,607 $71,623,615 $31,125,403 =========== ========== ======== =========== =========== See Notes to Financial Statements. *Commencement of Operations
FSA-8 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
COMMON STOCK DIVISION GLOBAL STOCK DIVISION -------------------------------------------- ------------------------------------------ YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, -------------------------------------------- ------------------------------------------ 1995 1994 1993 1995 1994 1993 -------------- ------------- ----------- ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income..... $ 8,208,894 $ 7,014,347 $ 6,306,784 $ 3,408,544 $ 1,556,985 $ 593,509 Net realized gain (loss).. 80,631,861 44,228,424 89,954,404 12,264,394 8,168,946 12,976,670 Change in unrealized appreciation/ depreciation on investments............. 183,872,928 (73,399,217) 48,702,579 33,395,316 (3,932,597) 4,279,153 -------------- ------------ ------------ ------------ ------------ ------------ Net increase (decrease) from operations......... 272,713,683 (22,156,446) 144,963,767 49,068,254 5,793,334 17,849,332 -------------- ------------ ------------ ------------ ------------ ------------ FROM POLICY-RELATED TRANSACTIONS: Net premiums (Note 3)..... 216,068,996 171,525,812 124,210,476 92,666,618 77,766,997 25,508,452 Benefits and other policy-related transactions (Note 3)... (118,456,643) (93,481,219) (77,837,895) (37,507,499) (23,371,745) (8,931,159) Net transfers among divisions............... (34,354,864) 19,730,410 (9,498,455) (12,472,104) 47,610,957 59,544,080 -------------- ------------ ------------ ------------ ------------ ------------ Net increase (decrease) from policy-related transactions............ 63,257,489 97,775,003 36,874,126 42,687,015 102,006,209 76,121,373 -------------- ------------ ------------ ------------ ------------ ------------ NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE VARIABLE IN SEPARATE ACCOUNT FP (Note 4).................. (392,099) 44,948 (124,376) (96,720) (17,737) 4,085 -------------- ------------ ------------ ------------ ------------ ------------ INCREASE IN NET ASSETS...... 335,579,073 75,663,505 181,713,517 91,658,549 107,781,806 93,974,790 NET ASSETS, BEGINNING OF PERIOD.................... 811,006,201 735,342,696 553,629,179 241,838,471 134,056,665 40,081,875 -------------- ------------ ------------ ------------ ------------ ------------ NET ASSETS, END OF PERIOD.................... $1,146,585,274 $811,006,201 $735,342,696 $333,497,020 $241,838,471 $134,056,665 ============== ============ ============ ============ ============ ============
See Notes to Financial Statements.
INTERNATIONAL DIVISION AGGRESSIVE STOCK DIVISION ----------- ------------------------------------------ APRIL 3* TO DECEMBER 31, YEAR ENDED DECEMBER 31, ----------- ------------------------------------------ 1995 1995 1994 1993 ----------- ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income..... $ 159,029 $ (1,434,289) $ (1,544,537) $ (990,881) Net realized gain (loss).. 50,951 73,464,436 (6,075,250) 61,036,469 Change in unrealized appreciation/ depreciation on investments............. 667,906 49,509,800 (4,424,670) (18,699,749) ----------- ------------ ------------ ------------ Net increase (decrease) from operations......... 877,886 121,539,947 (12,044,457) 41,345,839 ----------- ------------ ------------ ------------ FROM POLICY-RELATED TRANSACTIONS: Net premiums (Note 3)..... 2,028,670 121,962,483 101,932,221 77,930,596 Benefits and other policy-related transactions (Note 3)... (339,723) (63,165,185) (48,604,650) (39,462,340) Net transfers among divisions............... 9,885,952 19,367,834 4,346,636 (73,890,214) ----------- ------------ ------------ ------------ Net increase (decrease) from policy-related transactions............ 11,574,899 78,165,132 57,674,207 (35,421,958) ----------- ------------ ------------ ------------ NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE VARIABLE IN SEPARATE ACCOUNT FP (Note 4).................. (20,847) (188,813) 35,791 (2,220) ----------- ------------ ------------ ------------ INCREASE IN NET ASSETS...... 12,431,938 199,516,266 45,665,541 5,921,661 NET ASSETS, BEGINNING OF PERIOD.................... 0 355,671,865 310,006,324 304,084,663 ----------- ------------ ------------ ------------ NET ASSETS, END OF PERIOD.................... $12,431,938 $555,188,131 $355,671,865 $310,006,324 =========== ============ ============ ============ See Notes to Financial Statements. *Commencement of Operations
FSA-9 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP STATEMENTS OF CHANGES IN NET ASSETS (CONCLUDED)
ASSET ALLOCATION SERIES ----------------------------------------------------------------------------------------- CONSERVATIVE INVESTORS DIVISION BALANCED DIVISION ------------------------------------------- ------------------------------------------ YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, ------------------------------------------- ------------------------------------------ 1995 1994 1993 1995 1994 1993 ------------- ------------ ------------ ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income.............. $ 7,247,815 $ 5,455,410 $ 3,537,367 $ 10,038,346 $ 8,453,977 $ 8,015,051 Net realized gain (loss)........... 689,721 (421,502) 4,743,456 8,427,606 858,164 21,727,736 Change in unrealized appreciation/ depreciation on investments...... 19,129,817 (10,682,734) (308,575) 45,976,062 (40,839,536) 7,887,761 ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) from operations.................. 27,067,353 (5,648,826) 7,972,248 64,442,014 (31,527,395) 37,630,548 ------------ ------------ ------------ ------------ ------------ ------------ FROM POLICY-RELATED TRANSACTIONS: Net premiums (Note 3).............. 41,419,959 48,492,315 43,782,002 63,451,955 70,116,900 67,351,402 Benefits and other policy-related transactions (Note 3)............ (22,866,003) (21,612,430) (17,644,077) (48,742,571) (45,655,363) (44,497,967) Net transfers among divisions...... (3,379,296) (2,076,793) 6,165,330 (18,908,540) (19,954,097) (6,834,099) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) from policy-related transactions...... 15,174,660 24,803,092 32,303,255 (4,199,156) 4,507,440 16,019,336 ------------ ------------ ------------ ------------ ------------ ------------ NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE VARIABLE IN SEPARATE ACCOUNT FP (Note 4).... (95,412) 22,600 18,535 (93,214) 47,322 256,506 ------------ ------------ ------------ ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS.... 42,146,601 19,176,866 40,294,038 60,149,644 (26,972,633) 53,906,390 NET ASSETS, BEGINNING OF PERIOD...... 129,940,498 110,763,632 70,469,594 338,415,565 365,388,198 311,481,808 ------------ ------------ ------------ ------------ ------------ ------------ NET ASSETS, END OF PERIOD............ $172,087,099 $129,940,498 $110,763,632 $398,565,209 $338,415,565 $365,388,198 ============ ============ ============ ============ ============ ============
See Notes to Financial Statements.
ASSET ALLOCATION SERIES -------------------------------------------- GROWTH INVESTORS DIVISION -------------------------------------------- YEAR ENDED DECEMBER 31, -------------------------------------------- 1995 1994 1993 ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income.............. $ 13,059,547 $ 8,667,457 $ 4,648,111 Net realized gain (loss)........... 9,174,038 241,591 14,676,909 Change in unrealized appreciation/ depreciation on investments...... 82,556,566 (21,338,297) 7,820,864 ------------ ------------ ------------ Net increase (decrease) from operations.................. 104,790,151 (12,429,249) 27,145,884 ------------ ------------ ------------ FROM POLICY-RELATED TRANSACTIONS: Net premiums (Note 3).............. 155,616,059 139,140,391 105,136,825 Benefits and other policy-related transactions (Note 3)............ (68,357,709) (54,863,821) (36,431,873) Net transfers among divisions...... (3,269,896) 20,294,785 30,908,183 ------------ ------------ ------------ Net increase (decrease) from policy-related transactions...... 83,988,454 104,571,355 99,613,135 ------------ ------------ ------------ NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE VARIABLE IN SEPARATE ACCOUNT FP (Note 4).... (120,493) 15,372 (27,455) ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS.... 188,658,112 92,157,478 126,731,564 NET ASSETS, BEGINNING OF PERIOD...... 367,219,554 275,062,076 148,330,512 ------------ ------------ ------------ NET ASSETS, END OF PERIOD............ $555,877,666 $367,219,554 $275,062,076 ============ ============ ============
See Notes to Financial Statements. FSA-10 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995 1. General Equitable Variable Life Insurance Company (Equitable Variable Life), a wholly-owned subsidiary of The Equitable Life Assurance Society of the United States (Equitable Life), established Separate Account FP (the Account) as a unit investment trust registered with the Securities and Exchange Commission under the Investment Company Act of 1940. The Account consists of thirteen investment divisions: the Money Market Division, the Intermediate Government Securities Division, the High Yield Division, the Balanced Division, the Common Stock Division, the Global Division, the Aggressive Stock Division, the Conservative Investors Division, the Growth Investors Division, the Growth & Income Division, the Quality Bond Division, the Equity Index Division and the International Division. The assets in each Division are invested in shares of a designated portfolio (Portfolio) of a mutual fund, The Hudson River Trust (the Trust). Each Portfolio has separate investment objectives. The Account supports the operations of Incentive Life,(TM) flexible premium variable life insurance policies, Incentive Life 2000,(TM) flexible premium variable life insurance policies, Champion 2000,(TM) modified premium variable whole life insurance policies, Survivorship 2000,(TM) flexible premium joint survivorship variable life insurance policies, Incentive Life Plus,(TM) flexible premium variable life insurance policies and SP-Flex,(TM) variable life insurance policies with additional premium option, collectively, the Policies, and the Incentive Life 2000, Champion 2000 and Survivorship 2000 policies are referred to as the Series 2000 Policies. Incentive Life policies offered with the prospectus dated September 15, 1995, are referred to as Incentive Life Plus Second Series. Incentive Life Plus policies issued with a prior prospectus are referred to as Incentive Life Plus Original Series. All Policies are issued by Equitable Variable. The assets of the Account are the property of Equitable Variable. However, the portion of the Account's assets attributable to the Policies will not be chargeable with liabilities arising out of any other business Equitable Variable may conduct. Policyowners may allocate amounts in their individual accounts to the Divisions of the Account and/or (except for SP-Flex policies) to the guaranteed interest division of Equitable Variable Life's General Account. Net transfers to the guaranteed interest division of the General Account and other Separate Accounts of $6,569,372, $35,120,632 and $125,668,098 for the years ended 1995, 1994 and 1993, respectively, are included in Net Transfers Among Divisions. The net assets of any Division of the Account may not be less than the aggregate of the policyowners' accounts allocated to that Division. Additional assets are set aside in Equitable Variable Life's General Account to provide for (1) the unearned portion of the monthly charges for mortality costs, and (2) other policy benefits, as required under the state insurance law. 2. Significant Accounting Policies The accompanying financial statements are prepared in conformity with generally accepted accounting principles (GAAP). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Investments are made in shares of the Trust and are valued at the net asset values per share of the respective Portfolios. The net asset value is determined by the Trust using the market or fair value of the underlying assets of the Portfolio. Investment transactions are recorded on the trade date. Realized gains and losses include gains and losses on redemptions of the Trust's shares (determined on the identified cost basis) and Trust distributions representing the net realized gains on Trust investment transactions. The operations of the Account are included in the consolidated Federal income tax return of Equitable Life. Under the provisions of the Policies, Equitable Variable Life has the right to charge the Account for Federal income tax attributable to the Account. No charge is currently being made against the Account for such tax since, under current tax law, Equitable Variable Life pays no tax on investment income and capital gains reflected in variable life insurance policy reserves. However, Equitable Variable Life retains the right to charge for any Federal income tax incurred which is attributable to the Account if the law is changed. Charges for state and local taxes, if any, attributable to the Account also may be made. Dividends are recorded as income at the end of each quarter on the ex-dividend date. Capital gains are distributed by the Trust at the end of each year. 3. Asset Charges Under the Policies, Equitable Variable Life assumes mortality and expense risks and, to cover these risks, deducts charges from the assets of the Account currently at annual rates of 0.60% of the net assets attributable to Incentive Life, Incentive Life 2000, Incentive Life Plus Second Series and Champion 2000 policyowners, 0.90% of net assets attributable to Survivorship 2000 policyowners, and 0.85% for SP-Flex policyowners. Incentive Life Plus Original Series deducts this charge from the Policy Account. Under SP-Flex, Equitable Variable Life also deducts charges from the assets of the Account for mortality and administrative costs of 0.60% and 0.35%, respectively, of net assets attributable to SP-Flex policies. FSA-11 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 1995 Under Incentive Life, Incentive Life Plus and the Series 2000 Policies, mortality and administrative costs are charged in a different manner than SP-Flex policies (see Notes 4 and 5). Before amounts are allocated to the Account for Incentive Life, Incentive Life Plus and the Series 2000 Policies, Equitable Variable Life deducts a charge for taxes and either an initial policy fee (Incentive Life) or a premium sales charge (Incentive Life Plus and Series 2000 Policies) from premiums. Under SP-Flex, the entire initial premium is allocated to the Account. Before any additional premiums under SP-Flex are allocated to the Account, an administrative charge is deducted. The amounts attributable to Incentive Life, Incentive Life Plus and the Series 2000 policyowners' accounts are charged monthly by Equitable Variable Life for mortality and administrative costs. These charges are withdrawn from the Account along with amounts for additional benefits. Under the Policies, amounts for certain policy-related transactions (such as policy loans and surrenders) are transferred out of the Separate Account. 4. Amounts Retained by Equitable Variable Life in Separate Account FP The amount retained by Equitable Variable Life in the Account arises principally from (1) contributions from Equitable Variable Life, and (2) that portion, determined ratably, of the Account's investment results applicable to those assets in the Account in excess of the net assets for the Policies. Amounts retained by Equitable Variable Life are not subject to charges for mortality and expense risks or mortality and administrative costs. Amounts retained by Equitable Variable Life in the Account may be transferred at any time by Equitable Variable Life to its General Account. The following table shows the surplus contributions (withdrawals) by Equitable Variable Life by investment division:
INVESTMENT DIVISION 1995 1994 1993 ------------------- ----------- ----------- ---------- Common Stock $ (630,000) -- -- Money Market (250,000) -- $1,145,000 Balanced -- -- -- Aggressive Stock (350,000) -- -- High Yield (100,000) -- 330,000 Global (130,000) -- (6,895,000) Conservative Investors -- -- 575,000 Growth Investors -- -- 130,000 Short-Term World Income -- $(5,165,329) -- Intermediate Government Securities (165,000) -- -- Growth & Income (685,000) -- 1,000,000 Quality Bond (4,800,000) -- 5,000,000 Equity Index -- 200,000 -- International 200,000 -- -- ----------- ----------- ---------- $(6,910,000) $(4,965,329) $1,285,000 =========== =========== ==========
5. Distribution and Servicing Agreements Equitable Variable Life has entered into a Distribution and Servicing Agreement with Equitable Life and Equico Securities Inc. (Equico), whereby registered representatives of Equico, authorized as variable life insurance agents under applicable state insurance laws, sell the Policies. The registered representatives are compensated on a commission basis by Equitable Life. Equitable Variable Life also has entered into an agreement with Equitable Life under which Equitable Life performs the administrative services related to the Policies, including underwriting and issuance, billings and collections, and policyowner services. There is no charge to the Account related to this agreement. 6. Share Substitution On February 22, 1994, Equitable Variable Life, the Account and the Trust substituted shares of the Trust's Intermediate Government Securities Portfolio for shares of the Trust's Short-Term World Income Portfolio. The amount transferred to Intermediate Government Securities Portfolio was $2,192,109. The statements of operations and statements of changes in net assets for the Intermediate Government Securities Portfolio is combined with the Short-Term World Income Portfolio for periods prior to the merger on February 22, 1994. The Short-Term World Income Division is not available for future investment. FSA-12 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 1995 7. Investment Returns The Separate Account rates of return attributable to Incentive Life, Incentive Life 2000, Incentive Life Plus Second Series and Champion 2000 policyowners are different than those attributable to Survivorship 2000, Incentive Life Plus Original Series and to SP-Flex policyowners because asset charges are deducted at different rates under each policy (see Note 3). The tables on this page and the following pages show the gross and net investment returns with respect to the Divisions for the periods shown. The net return for each Division is based upon net assets for a policy whose policy commences with the beginning date of such period and is not based on the average net assets in the Division during such period. Gross return is equal to the total return earned by the underlying Trust investment. RATES OF RETURN: INCENTIVE LIFE, - -------------- INCENTIVE LIFE 2000, - -------------------- INCENTIVE LIFE PLUS SECOND SERIES - --------------------------------- AND CHAMPION 2000* - -----------------
JANUARY 26(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, ---------------------------------------------------------------------------------------------------- MONEY MARKET DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 - --------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return.............. 5.74 % 4.02 % 3.00 % 3.56 % 6.18 % 8.24 % 9.18 % 7.32 % 6.63 % 6.05 % Net return................ 5.11 % 3.39 % 2.35 % 2.94 % 5.55 % 7.59 % 8.53 % 6.68 % 5.99 % 5.47 %
APRIL 1(A) TO INTERMEDIATE YEAR ENDED DECEMBER 31, DECEMBER 31, GOVERNMENT ----------------------------------------------- SECURITIES DIVISION 1995 1994 1993 1992 1991 - ------------------- ---- ---- ---- ---- ---- Gross return.............. 13.33 % (4.37)% 10.58 % 5.60 % 12.26 % Net return................ 12.65 % (4.95)% 9.88 % 4.96 % 11.60 % YEAR ENDED OCTOBER 1(A) DECEMBER 31, DECEMBER 31, ---------------------------------- QUALITY BOND DIVISION 1995 1994 1993 - --------------------- ---- ---- ---- Gross return.............. 17.02 % (5.10)% (0.51)% Net return................ 16.32 % (5.67)% (0.66)%
JANUARY 26(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, ---------------------------------------------------------------------------------------------------- HIGH YIELD DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 - ------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return.............. 19.92 % (2.79)% 23.15 % 12.31 % 24.46 % (1.12)% 5.13 % 9.73 % 4.68 % -- Net return................ 19.20 % (3.37)% 22.41 % 11.64 % 23.72 % (1.71)% 4.50 % 9.08 % 4.05 % --
YEAR ENDED OCTOBER 1(A) TO DECEMBER 31, DECEMBER 31, ---------------------------------- GROWTH & INCOME DIVISION 1995 1994 1993 - ------------------------- ---- ---- ---- Gross return.............. 24.07 % (0.58)% (0.25)% Net return................ 23.33 % (1.17)% (0.41)% YEAR ENDED MARCH 31(A) TO DECEMBER 31, DECEMBER 31, ----------------------------------- EQUITY INDEX DIVISION 1995 1994 - --------------------- ---- ---- Gross return.............. 36.48 % 1.08 % Net return................ 35.66 % 0.58 % - ------------------------------- * Sales of Incentive Life 2000 and Champion 2000 commenced on March 2, 1992. Sales of Incentive Life Plus Second Series commenced on September 15, 1995. (a) Date as of which net premiums under the policies were first allocated to the Division. The gross return and the net return for the periods indicated are not annual rates of return. FSA-13 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 1995
JANUARY 26(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, ---------------------------------------------------------------------------------------------------- COMMON STOCK DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 - --------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return.............. 32.45 % (2.14)% 24.84 % 3.22 % 37.88 % (8.12)% 25.59 % 22.43 % 7.49 % 15.65 % Net return................ 31.66 % (2.73)% 24.08 % 2.60 % 37.06 % (8.67)% 24.84 % 21.70 % 6.84 % 15.01 %
AUGUST 31(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, ------------------------------------------------------------------------------------------- GLOBAL DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 - --------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return.............. 18.81 % 5.23 % 32.09 % (0.50)% 30.55 % (6.07)% 26.93 % 10.88 % (13.27)% Net return................ 18.11 % 4.60 % 31.33 % (1.10)% 29.77 % (6.63)% 26.17 % 10.22 % (13.45)%
APRIL 3(A) TO DECEMBER 31, INTERNATIONAL DIVISION 1995 - ---------------------- ---------- Gross return.............. 11.29 % Net return................ 10.79 %
JANUARY 26(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, ---------------------------------------------------------------------------------------------------- AGGRESSIVE STOCK DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 - -------------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return.............. 31.63 % (3.81)% 16.77 % (3.16)% 86.86 % 8.17 % 43.50 % 1.17 % 7.31 % 35.88 % Net return................ 30.85 % (4.39)% 16.05 % (3.74)% 85.75 % 7.51 % 42.64 % 0.53 % 6.66 % 35.13 %
JANUARY 26(A) TO ASSET ALLOCATION SERIES YEAR ENDED DECEMBER 31, DECEMBER 31, ------------------------------------------------------------------------------------------------------ BALANCED DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 - ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return.............. 19.75 % (8.02)% 12.28 % (2.84)% 41.26 % 0.24 % 25.83 % 13.27 % (0.85)% 29.07 % Net return................ 19.03 % (8.57)% 11.64 % (3.42)% 40.42 % (0.36)% 25.08 % 12.59 % (1.45)% 28.34 %
OCTOBER 2(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, CONSERVATIVE -------------------------------------------------------------------------------- INVESTORS DIVISION 1995 1994 1993 1992 1991 1990 1989 - ------------------ ---- ---- ---- ---- ---- ---- ---- Gross return.............. 20.40 % (4.10)% 10.76 % 5.72 % 19.87 % 6.37 % 3.09 % Net return................ 19.68 % (4.67)% 10.15 % 5.09 % 19.16 % 5.73 % 2.94 %
GROWTH INVESTORS DIVISION 1995 1994 1993 1992 1991 1990 1989 - ------------------------- ---- ---- ---- ---- ---- ---- ---- Gross return.............. 26.37 % (3.15)% 15.26 % 4.90 % 48.89 % 10.66 % 3.98 % Net return................ 25.62 % (3.73)% 14.58 % 4.27 % 48.01 % 10.00 % 3.82 % - ---------------------------- * Sales of Incentive Life 2000 and Champion 2000 commenced on March 2, 1992. (a) Date as of which net premiums under the policies were first allocated to the Division. The gross return and the net return for the periods indicated are not annual rates of return.
RATES OF RETURN: SURVIVORSHIP 2000 - ----------------- AUGUST 17(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, --------------------------------------------------- MONEY MARKET DIVISION 1995 1994 1993 1992 - --------------------- ---- ---- ---- ---- Gross return.............. 5.74 % 4.02 % 3.00 % 1.11 % Net return................ 4.80 % 3.08 % 2.04 % 0.77 % INTERMEDIATE GOVERNMENT SECURITIES DIVISION 1995 1994 1993 1992 - ------------------- ---- ---- ---- ---- Gross return.............. 13.33 % (4.37)% 10.58 % 0.90 % Net return................ 12.31 % (5.23)% 9.55 % 0.56 % - ---------- (a) Date as of which net premiums under the policies were first allocated to the Division. The gross return and the net return for the periods indicated are not annual rates of return. FSA-14 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 1995 OCTOBER 1(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, ------------------------------------------------ QUALITY BOND DIVISION 1995 1994 1993 - --------------------- ---- ---- ---- Gross return.............. 17.02 % (5.10)% (0.51)% Net return................ 15.97 % (5.95)% (0.73)% AUGUST 17(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, --------------------------------------------------- HIGH YIELD DIVISION 1995 1994 1993 1992 - ------------------- ---- ---- ---- ---- Gross return.............. 19.92 % (2.79)% 23.15 % 1.84 % Net return................ 18.84 % (3.66)% 22.04 % 1.50 % OCTOBER 1(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, -------------------------------------------------- GROWTH & INCOME DIVISION 1995 1994 1993 - ------------------------ ---- ---- ---- Gross return.............. 24.07 % (0.58)% (0.25)% Net return................ 22.96 % (1.47)% (0.48)% YEAR ENDED MARCH 1(A) TO DECEMBER 31, DECEMBER 31, ------------------------------ EQUITY INDEX DIVISION 1995 1994 - --------------------- ---- ---- Gross return.............. 36.48 % 1.08 % Net return................ 35.26 % 0.33 % AUGUST 17(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, --------------------------------------------------- COMMON STOCK DIVISION 1995 1994 1993 1992 - --------------------- ---- ---- ---- ---- Gross return.............. 32.45 % (2.14)% 24.84 % 5.28 % Net return................ 31.26 % (3.02)% 23.70 % 4.93 % GLOBAL DIVISION - --------------- Gross return.............. 18.81 % 5.23 % 32.09 % 4.87 % Net return................ 17.75 % 4.29 % 30.93 % 4.52 % APRIL 3(A) TO DECEMBER 31, ---------------- INTERNATIONAL DIVISION 1995 - ---------------------- ---- Gross return.............. 11.29 % Net return................ 10.55 % AUGUST 17(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, --------------------------------------------------- AGGRESSIVE STOCK DIVISION 1995 1994 1993 1992 - ------------------------- ---- ---- ---- ---- Gross return.............. 31.63 % (3.81)% 16.77 % 11.49 % Net return................ 30.46 % (4.68)% 15.70 % 11.11 % ASSET ALLOCATION SERIES AUGUST 17(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, CONSERVATIVE INVESTORS -------------------------------------------------- DIVISION 1995 1994 1993 1992 - -------- ---- ---- ---- ---- Gross return.............. 20.40 % (4.10)% 10.76 % 1.38 % Net return................ 19.32 % (4.96)% 9.81 % 1.04 % BALANCED DIVISION 1995 1994 1993 1992 - ----------------- ---- ---- ---- ---- Gross return.............. 19.75 % (8.02)% 12.28 % 5.37 % Net return................ 18.68 % (8.84)% 11.30 % 5.02 % GROWTH INVESTORS DIVISION 1995 1994 1993 1992 - ------------------------- ---- ---- ---- ---- Gross return.............. 26.37 % (3.15)% 15.26 % 6.89 % Net return................ 25.24 % (4.02)% 14.24 % 6.53 % - ---------- (a) Date as of which net premiums under the policies were first allocated to the Division. The gross return and the net return for the periods indicated are not annual rates of return. FSA-15 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31,1995 RATES OF RETURN: INCENTIVE LIFE PLUS ORIGINAL SERIES(B)* - --------------------------------------- YEAR ENDED DECEMBER 31, ------------------------- 1995 ---- Money Market Division........ 5.69% Intermediate Government Securities Division.......... 13.31% Quality Bond Division........ 17.13% High Yield Division.......... 19.95% Growth & Income Division..... 24.38% Equity Index Division........ 36.53% Common Stock Division........ 33.07% Global Division.............. 19.38% APRIL 30 TO DECEMBER 31, ------------------------ 1995 ---- International Division....... 11.29% YEAR ENDED DECEMBER 31, ------------------------ 1995 ---- Aggressive Stock Division.... 33.00% ASSET ALLOCATION SERIES YEAR ENDED DECEMBER 31, ------------------------ 1995 ---- Conservative Investors Division... 20.59% Balanced Division................ 20.32% Growth Investors Division......... 26.92% - -------------------- *Sales of Incentive Life Plus Original Series commenced on January 6, 1995. (b) There are no Separate Account asset charges for this policy and therefore the gross and net rates of return are the same. The rate of return for the period indicated is not an annual rate of return. FSA-16 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31,1995 RATES OF RETURN: SP-FLEX - -------
AUGUST 31(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, ------------------------------------------------------------------------------------------- MONEY MARKET DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 - --------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return.............. 5.74 % 4.02 % 3.00 % 3.56 % 6.17 % 8.24 % 9.18 % 7.32 % 2.15 % Net return................ 3.86 % 2.17 % 1.13 % 1.71 % 4.29 % 6.30 % 7.24 % 5.41 % 1.62 %
APRIL 1(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, INTERMEDIATE GOVERNMENT -------------------------------------------------- SECURITIES DIVISION 1995 1994 1993 1992 1991 - ------------------- ---- ---- ---- ---- ---- Gross return.............. 13.33 % (4.37) % 10.58 % 5.60 % 12.10 % Net return................ 11.31 % (6.08) % 8.57 % 3.71 % 10.59 % YEAR ENDED SEPTEMBER 1(A) TO DECEMBER 31, DECEMBER 31, ------------------------------- QUALITY BOND DIVISION 1995 1994 - --------------------- ---- ---- Gross return.............. 17.02 % (2.20)% Net return................ 14.94 % (2.35)%
AUGUST 31(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, ------------------------------------------------------------------------------------------- HIGH YIELD DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 - ------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return.............. 19.92 % (2.79)% 23.15 % 12.31 % 24.46 % (1.12)% 5.13 % 9.73 % 1.95 % Net return................ 17.79 % (4.52)% 20.96 % 10.30 % 22.25 % (2.89)% 3.26 % 7.78 % 1.39 %
YEAR ENDED SEPTEMBER 1(A) TO DECEMBER 31, DECEMBER 31, --------------------------------- GROWTH & INCOME DIVISION 1995 1994 - ------------------------ ---- ---- Gross return.............. 24.07 % (3.40)% Net return................ 21.87 % (3.55)% EQUITY INDEX DIVISION 1995 1994 - --------------------- ---- ---- Gross return.............. 36.48 % (2.54)% Net return................ 34.06 % (2.69)%
AUGUST 31(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, -------------------------------------------------------------------------------------------- COMMON STOCK DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 - --------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return.............. 32.45 % 2.14 % 24.84 % 3.23 % 37.87 % (8.12)% 25.59 % 22.43 % (22.57)% Net return................ 30.10 % (3.88)% 22.60 % 1.38 % 35.43 % (9.76)% 23.36 % 20.26 % (23.00)% GLOBAL DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 - --------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return.............. 18.81 % 5.23 % 32.09 % (0.50)% 30.55 % (6.07)% 26.93 % 10.88 % (11.40)% Net return................ 16.70 % 3.36 % 29.77 % (2.28)% 28.23 % (7.75)% 24.67 % 8.90 % (11.86)%
APRIL 3(A) TO DECEMBER 31, ------------- INTERNATIONAL DIVISION 1995 - ---------------------- ---- Gross return.............. 11.29 % Net return................ 9.82 %
AUGUST 31(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, -------------------------------------------------------------------------------------------- AGGRESSIVE STOCK DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 - ------------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return.............. 31.63 % 3.81 % 16.77 % (3.16)% 86.86 % 8.17 % 43.50 % 1.17 % (24.28)% Net return................ 29.30 % (5.53)% 14.67 % (4.89)% 83.54 % 6.23 % 40.95 % (0.66)% (24.68)% - ------------------------------ (a) Date as of which net premiums under the policies were first allocated to the Division. The gross return and the net return for the periods indicated are not annual rates of return.
FSA-17 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 1995 ASSET ALLOCATION SERIES YEAR ENDED SEPTEMBER 1(A) TO DECEMBER 31, DECEMBER 31, CONSERVATIVE INVESTORS --------------------------------------- DIVISION 1995 1994 - -------- ---- ---- Gross return.......... 20.40 % (1.83)% Net return............ 18.26 % (1.98)%
AUGUST 31(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, ------------------------------------------------------------------------------------------------- BALANCED DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 - ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return.......... 19.75 % (8.02)% 12.28 % (2.83)% 41.27 % 0.24 % 25.83 % 13.27 % (20.26)% Net return............ 17.62 % (9.66)% 10.31 % (4.57)% 38.75 % (1.56)% 23.59 % 11.25 % (20.71)%
YEAR ENDED SEPTEMBER 1(A) TO DECEMBER 31, DECEMBER 31, GROWTH INVESTORS ------------------------------------ DIVISION 1995 1994 - -------- ---- ---- Gross return........... 26.37 % (3.16)% Net return............. 24.12 % (3.31)% - ------------------------- (a) Date as of which net premiums under the policies were first allocated to the Division. The gross return and the net return for the periods indicated are not annual rates of return. FSA-18 EQUITABLE VARIABLE LIFE INSURANCE COMPANY CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1995 AND 1994
1995 1994 ----------------- ---------------- ASSETS (IN MILLIONS) Investments: Fixed maturities: Available for sale, at estimated fair value........................................ $ 4,366.3 $ 2,138.8 Held to maturity, at amortized cost................................................ -- 2,008.5 Policy loans......................................................................... 1,300.1 1,185.2 Mortgage loans on real estate........................................................ 771.5 888.5 Equity real estate................................................................... 525.4 641.0 Other equity investments............................................................. 200.5 239.1 Other invested assets................................................................ 120.9 107.8 ----------------- ---------------- Total investments.................................................................. 7,284.7 7,208.9 Cash and cash equivalents............................................................... 277.6 182.3 Deferred policy acquisition costs....................................................... 2,037.8 2,077.1 Other assets............................................................................ 250.6 240.7 Separate Accounts assets................................................................ 4,611.6 3,345.3 ----------------- ---------------- TOTAL ASSETS............................................................................ $ 14,462.3 $ 13,054.3 ================= ================ LIABILITIES Policyholders' account balances......................................................... $ 7,045.9 $ 7,340.0 Future policy benefits and other policyholders' liabilities............................. 570.8 509.4 Other liabilities....................................................................... 521.4 441.1 Separate Accounts liabilities........................................................... 4,586.5 3,314.9 ----------------- ---------------- Total liabilities.................................................................. 12,724.6 11,605.4 ----------------- ---------------- Commitments and contingencies (Notes 7, 9, 10 and 11) SHAREHOLDER'S EQUITY Common stock, par value $1 per share; 5.0 million shares authorized, 1.5 million shares issued and outstanding............. 1.5 1.5 Capital in excess of par value.......................................................... 1,480.7 1,355.7 Retained earnings....................................................................... 221.6 165.5 Net unrealized investment gains (losses)................................................ 44.6 (72.6) Minimum pension liability............................................................... (10.7) (1.2) ----------------- ---------------- Total shareholder's equity......................................................... 1,737.7 1,448.9 ----------------- ---------------- TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY.............................................. $ 14,462.3 $ 13,054.3 ================= ================ See Notes to Consolidated Financial Statements.
F-1 EQUITABLE VARIABLE LIFE INSURANCE COMPANY CONSOLIDATED STATEMENTS OF EARNINGS YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1995 1994 1993 ----------------- ---------------- ----------------- (IN MILLIONS) REVENUES Universal life and investment-type product policy fee income...... $ 584.5 $ 552.6 $ 485.2 Premiums.......................................................... 33.7 40.1 46.9 Net investment income............................................. 529.1 526.8 557.6 Investment (losses) gains, net.................................... (.5) (4.6) 1.5 Other income...................................................... 2.1 2.9 3.0 ----------------- ---------------- ----------------- Total revenues.................................................. 1,148.9 1,117.8 1,094.2 ----------------- ---------------- ----------------- BENEFITS AND OTHER DEDUCTIONS Interest credited to policyholders' account balances.............. 376.1 389.3 439.2 Policyholders' benefits........................................... 267.5 242.3 251.0 Other operating costs and expenses................................ 419.5 413.8 356.7 ----------------- ---------------- ----------------- Total benefits and other deductions............................. 1,063.1 1,045.4 1,046.9 ----------------- ---------------- ----------------- Earnings before Federal income taxes and cumulative effect of accounting change....................................... 85.8 72.4 47.3 Federal income tax expense........................................... 29.7 25.0 20.5 ----------------- ---------------- ----------------- Earnings before cumulative effect of accounting change............... 56.1 47.4 26.8 Cumulative effect of accounting change, net of Federal income taxes. -- (11.4) -- ----------------- ---------------- ----------------- Net Earnings......................................................... $ 56.1 $ 36.0 $ 26.8 ================= ================ ================= See Notes to Consolidated Financial Statements.
F-2 EQUITABLE VARIABLE LIFE INSURANCE COMPANY CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1995 1994 1993 ----------------- ---------------- ----------------- (IN MILLIONS) COMMON STOCK AT PAR VALUE, beginning and end of year................. $ 1.5 $ 1.5 $ 1.5 ----------------- ---------------- ----------------- CAPITAL IN EXCESS OF PAR VALUE, beginning of year.................... 1,355.7 1,305.7 1,055.7 Additional capital in excess of par value............................ 125.0 50.0 250.0 ----------------- ---------------- ----------------- Capital in excess of par value, end of year.......................... 1,480.7 1,355.7 1,305.7 ----------------- ---------------- ----------------- RETAINED EARNINGS, beginning of year................................. 165.5 129.5 102.7 Net earnings......................................................... 56.1 36.0 26.8 ----------------- ---------------- ----------------- Retained earnings, end of year....................................... 221.6 165.5 129.5 ----------------- ---------------- ----------------- NET UNREALIZED INVESTMENT (LOSSES) GAINS, beginning of year.......... (72.6) 22.3 11.1 Change in unrealized investment gains (losses)....................... 117.2 (94.9) 11.2 ----------------- ---------------- ----------------- Net unrealized investment gains (losses), end of year................ 44.6 (72.6) 22.3 ----------------- ---------------- ----------------- MINIMUM PENSION LIABILITY, beginning of year......................... (1.2) (6.3) -- Change in minimum pension liability.................................. (9.5) 5.1 (6.3) ----------------- ---------------- ----------------- Minimum pension liability, end of year............................... (10.7) (1.2) (6.3) ----------------- ---------------- ----------------- TOTAL SHAREHOLDER'S EQUITY, END OF YEAR.............................. $ 1,737.7 $ 1,448.9 $ 1,452.7 ================= ================ ================= See Notes to Consolidated Financial Statements.
F-3 EQUITABLE VARIABLE LIFE INSURANCE COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1995 1994 1993 ----------------- ---------------- ----------------- (IN MILLIONS) NET EARNINGS......................................................... $ 56.1 $ 36.0 $ 26.8 ADJUSTMENTS TO RECONCILE NET EARNINGS TO NET CASH (USED) PROVIDED BY OPERATING ACTIVITIES: Interest credited to policyholders' account balances.............. 376.1 389.3 439.2 General Account policy charges.................................... (618.7) (572.8) (496.7) Investment losses (gains), net.................................... .5 4.6 (1.5) Other, net........................................................ 63.8 (17.2) 117.2 ----------------- ---------------- ----------------- Net cash (used) provided by operating activities..................... (122.2) (160.1) 85.0 ----------------- ---------------- ----------------- CASH FLOWS FROM INVESTING ACTIVITIES: Maturities and repayments......................................... 640.7 511.8 1,165.8 Sales............................................................. 2,667.0 2,119.0 2,844.2 Return of capital from joint ventures and limited partnerships.... 23.9 14.2 56.3 Purchases......................................................... (3,065.9) (2,251.7) (4,414.0) Other, net........................................................ (114.8) (102.2) (98.8) ----------------- ---------------- ----------------- Net cash provided (used) by investing activities..................... 150.9 291.1 (446.5) ----------------- ---------------- ----------------- CASH FLOWS FROM FINANCING ACTIVITIES: Policyholders' account balances: Deposits........................................................ 581.1 602.8 612.9 Withdrawals..................................................... (636.6) (697.7) (506.2) Capital contribution from Equitable Life.......................... 125.0 50.0 250.0 Other, net........................................................ (2.9) (1.8) 2.0 ----------------- ---------------- ----------------- Net cash provided (used) by financing activities..................... 66.6 (46.7) 358.7 ----------------- ---------------- ----------------- Change in cash and cash equivalents.................................. 95.3 84.3 (2.8) Cash and cash equivalents, beginning of year......................... 182.3 98.0 100.8 ----------------- ---------------- ----------------- Cash and Cash Equivalents, End of Year............................... $ 277.6 $ 182.3 $ 98.0 ================= ================ ================= Supplemental cash flow information Interest Paid..................................................... $ -- $ 5.7 $ 2.1 ================= ================ ================= Income Taxes Refunded............................................. $ -- $ 8.4 $ .3 ================= ================ ================= See Notes to Consolidated Financial Statements.
F-4 EQUITABLE VARIABLE LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION Equitable Variable Life Insurance Company ("Equitable Variable Life") was incorporated on September 11, 1972 as a wholly owned subsidiary of The Equitable Life Assurance Society of the United States ("Equitable Life"). Equitable Variable Life's operations consist principally of the sale of interest-sensitive life insurance and annuity products. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation and Principles of Consolidation The accompanying consolidated financial statements are prepared in conformity with generally accepted accounting principles ("GAAP"). The accompanying consolidated financial statements include the accounts of Equitable Variable Life and its subsidiaries, (collectively "EVLICO"). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. All significant intercompany transactions and balances have been eliminated in consolidation. Certain reclassifications have been made in the amounts presented for prior periods to conform these periods with the 1995 presentation. Accounting Changes In the first quarter of 1995, EVLICO adopted Statement of Financial Accounting Standards ("SFAS") No. 114, "Accounting by Creditors for Impairment of a Loan." This statement applies to all loans, including loans restructured in a troubled debt restructuring involving a modification of terms. This statement addresses the accounting for impairment of a loan by specifying how allowances for credit losses should be determined. Impaired loans within the scope of this statement are measured based on the present value of expected future cash flows discounted at the loan's effective interest rate, at the loan's observable market price or the fair value of the collateral if the loan is collateral dependent. EVLICO provides for impairment of loans through an allowance for possible losses. The adoption of this statement did not have a material effect on the level of these allowances or on EVLICO's consolidated statements of earnings and shareholder's equity. In the fourth quarter of 1994 (effective as of January 1, 1994), EVLICO adopted SFAS No. 112, "Employers' Accounting for Postemployment Benefits," which required employers to recognize the obligation to provide postemployment benefits. Implementation of this statement resulted in a charge for the cumulative effect of accounting change of $11.4 million, net of a Federal income tax benefit of $6.2 million. At December 31, 1993, EVLICO adopted SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities," which expanded the use of fair value accounting for those securities that a company does not have positive intent and ability to hold to maturity. Implementation of this statement increased consolidated shareholder's equity by $7.2 million, net of deferred policy acquisition costs and deferred Federal income tax. Beginning coincident with issuance of SFAS No. 115 implementation guidance in November 1995, the Financial Accounting Standards Board ("FASB") permitted companies a one-time opportunity, through December 31, 1995, to reassess the appropriateness of the classification of all securities held at that time. On December 1, 1995, EVLICO transferred $1,806.7 million of securities classified as held to maturity to the available for sale portfolio. As a result, consolidated shareholder's equity increased by $17.9 million, net of deferred policy acquisition costs and deferred Federal income tax. New Accounting Pronouncements In March 1995, the FASB issued SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," which requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of such assets may not be recoverable. EVLICO will implement this statement as of January 1, 1996. EVLICO currently provides allowances for possible losses for assets under the scope of this statement. Management has not yet determined the impact of this statement on these assets. Valuation of Investments Fixed maturities which have been identified as available for sale are reported at estimated fair value. At December 31, 1994, fixed maturities which EVLICO had both the ability and the intent to hold to maturity, were stated principally at amortized cost. The amortized cost of fixed maturities is adjusted for impairments in value deemed to be other than temporary. F-5 Mortgage loans on real estate are stated at unpaid principal balances, net of unamortized discounts and valuation allowances. Effective with the adoption of SFAS No. 114 on January 1, 1995, the valuation allowances are based on the present value of expected future cash flows discounted at the loan's original effective interest rate or the collateral value if the loan is collateral dependent. However, if foreclosure is or becomes probable, the measurement method used is collateral value. Prior to the adoption of SFAS No. 114, the valuation allowances were based on losses expected by management to be realized on transfers of mortgage loans to real estate (upon foreclosure or in-substance foreclosure), on the disposition or settlement of mortgage loans and on mortgage loans management believed may not be collectible in full. In establishing valuation allowances, management previously considered, among other things, the estimated fair value of the underlying collateral. Real estate, including real estate acquired in satisfaction of debt, is stated at depreciated cost less valuation allowances. At the date of foreclosure (including in-substance foreclosure), real estate acquired in satisfaction of debt is valued at estimated fair value. Valuation allowances on real estate held for the production of income are computed using the forecasted cash flows of the respective properties discounted at a rate equal to EVLICO's cost of funds; valuation allowances on real estate available for sale are computed using the lower of current estimated fair value, net of disposition costs, or depreciated cost. Policy loans are stated at unpaid principal balances. Partnerships and joint venture interests in which EVLICO does not have control and a majority economic interest are reported on the equity basis of accounting and are included with either equity real estate or other equity investments, as appropriate. Common stocks are carried at estimated fair value and are included in other equity investments. Short-term investments are stated at amortized cost which approximates fair value and are included with other invested assets. Cash and cash equivalents includes cash on hand, amounts due from banks and highly liquid debt instruments purchased with an original maturity of three months or less. All securities are recorded in the consolidated financial statements on a trade date basis. Investment Results and Unrealized Investment Gains (Losses) Realized investment gains and losses are determined by specific identification and are presented as a component of revenue. Valuation allowances are netted against the asset categories to which they apply and changes in the valuation allowances are included in investment gains or losses. Unrealized investment gains and losses on fixed maturities available for sale and equity securities held by EVLICO are accounted for as a separate component of shareholder's equity, net of related deferred Federal income taxes and deferred policy acquisition costs related to universal life and investment-type products. 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 expenses include benefit claims incurred in the period in excess of related policyholders' account balances. Premiums from 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. 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. Deferred policy acquisition costs are 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, deferred policy acquisition costs are amortized over the expected average life of the contracts (periods ranging from 15 to 35 years and 5 to 17 years, respectively) as a constant percentage of estimated gross profits arising principally from investment results, mortality and expense margins and surrender charges based on historical and anticipated future experience, updated at the end of each accounting period. The effect on the amortization of deferred policy acquisition costs of revisions to estimated gross profits is reflected in earnings in the period such estimated gross profits are revised. The effect on the deferred policy acquisition cost asset that would result from realization of unrealized gains (losses) is recognized with an offset to unrealized gains (losses) in consolidated shareholder's equity as of the balance sheet date. Amortization charged to income amounted to $199.0 million, $200.2 million and $135.5 million for the years ended December 31, 1995, 1994 and 1993, respectively. F-6 Policyholders' Account Balances and Future Policy Benefits EVLICO's insurance contracts primarily are universal life and investment-type contracts. Policyholders' account balances are equal to the policy account values. The policy account values represent an accumulation of gross premium payments plus credited interest less expense and mortality charges and withdrawals. The future policy benefit liabilities for the remainder of EVLICO's insurance contracts, consisting primarily of supplementary contracts with life contingencies and various policy riders, are computed by various valuation methods based on assumed interest rates and mortality and morbidity assumptions reflecting EVLICO's experience and industry standards. Federal Income Taxes EVLICO is included in a consolidated Federal income tax return with Equitable Life and its other eligible subsidiaries. In accordance with an agreement between EVLICO and Equitable Life, the amount of current income taxes as determined on a separate return basis will be paid to, or received from, Equitable Life. Benefits for losses, which are paid to EVLICO to the extent they are utilized by Equitable Life, may not have been received in the absence of such agreement. 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 the 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 EVLICO. Separate Accounts assets are subject to General Account claims only to the extent the value of such assets exceeds the Separate Accounts liabilities. Assets and liabilities of the Separate Accounts, representing net deposits and accumulated net investment earnings less fees, held primarily for the benefit of contractholders are shown as separate captions in the consolidated balance sheets. Assets held in the Separate Accounts are carried at quoted market values or, where quoted values are not available, at estimated fair values as determined by management. The investment results of Separate Accounts are reflected directly in Separate Accounts liabilities. For the years ended December 31, 1995, 1994 and 1993, investment results of Separate Accounts were $342.2 million, $135.9 million and $344.1 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 of the Separate Accounts are included in revenues. F-7 3. INVESTMENTS The following tables provide additional information relating to fixed maturities and equity securities:
GROSS GROSS AMORTIZED UNREALIZED UNREALIZED ESTIMATED COST GAINS LOSSES FAIR VALUE ---------------- ----------------- ----------------- --------------- (IN MILLIONS) December 31, 1995 ----------------- Fixed Maturities: Available for Sale: Corporate................................. $ 3,053.5 $ 101.0 $ 22.0 $ 3,132.5 Mortgage-backed........................... 573.9 7.7 .4 581.2 U.S. Treasury securities and U.S. government and agency securities.................. 569.2 9.2 2.6 575.8 States and political subdivisions......... 4.3 .1 -- 4.4 Foreign governments....................... 16.2 .8 -- 17.0 Redeemable preferred stock................ 56.8 3.7 5.1 55.4 ---------------- ----------------- ----------------- --------------- Total Available for Sale.................... $ 4,273.9 $ 122.5 $ 30.1 $ 4,366.3 ================ ================= ================= =============== Equity Securities: Common stock................................ $ 36.2 $ 10.3 $ 4.7 $ 41.8 ================ ================= ================= =============== December 31, 1994 ----------------- Fixed Maturities: Available for Sale: Corporate................................. $ 1,622.3 $ 5.1 $ 112.6 $ 1,514.8 Mortgage-backed........................... 221.9 .5 16.4 206.0 U.S. Treasury securities and U.S. government and agency securities.................. 365.4 1.4 20.7 346.1 States and political subdivisions......... 4.8 -- .6 4.2 Foreign governments....................... 14.8 .2 -- 15.0 Redeemable preferred stock................ 58.0 .1 5.4 52.7 ---------------- ----------------- ----------------- --------------- Total Available for Sale.................... $ 2,287.2 $ 7.3 $ 155.7 $ 2,138.8 ================ ================= ================= =============== Held to Maturity: Corporate................................. $ 1,812.4 $ 11.9 $ 93.1 $ 1,731.2 U.S. Treasury securities and U.S. government and agency securities.................. 180.4 -- 21.7 158.7 States and political subdivisions......... 14.4 -- .9 13.5 Foreign governments....................... 1.3 .1 -- 1.4 ---------------- ----------------- ----------------- --------------- Total Held to Maturity...................... $ 2,008.5 $ 12.0 $ 115.7 $ 1,904.8 ================ ================= ================= =============== Equity Securities: Common stock................................ $ 42.0 $ 10.1 $ 9.4 $ 42.7 ================ ================= ================= ===============
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, EVLICO has determined an estimated fair value using a discounted cash flow approach, including provisions for credit risk, generally based upon the assumption that such securities will be held to maturity. Estimated fair value for equity securities, substantially all of which do not have a readily ascertainable market value, has been determined by EVLICO. 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, 1995 and 1994, respectively, securities without a readily ascertainable market value having an amortized cost of $1,233.7 million and $1,571.5 million, respectively, had estimated fair values of $1,291.1 million and $1,512.2 million, respectively. F-8 The contractual maturity of bonds at December 31, 1995 are shown below:
AVAILABLE FOR SALE ------------------------------------ AMORTIZED ESTIMATED COST FAIR VALUE ----------------- ---------------- (IN MILLIONS) Due in one year or less............................................................. $ 133.3 $ 133.4 Due in years two through five....................................................... 1,416.4 1,444.9 Due in years six through ten........................................................ 1,361.5 1,391.8 Due after ten years................................................................. 732.0 759.6 Mortgage-backed securities.......................................................... 573.9 581.2 ----------------- ---------------- Total............................................................................... $ 4,217.1 $ 4,310.9 ================= ================
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. Investment valuation allowances and changes thereto are shown below:
YEARS ENDED DECEMBER 31, -------------------------------------------------------- 1995 1994 1993 ----------------- ----------------- ----------------- (IN MILLIONS) Balances, beginning of year.................................... $ 68.5 $ 87.3 $ 147.2 Additions charged to income.................................... 31.0 12.7 44.4 Deductions for writedowns and asset dispositions............... (33.8) (31.5) (104.3) ----------------- ----------------- ----------------- Balances, End of Year.......................................... $ 65.7 $ 68.5 $ 87.3 ================= ================= ================= Balances, end of year comprise: Mortgage loans on real estate............................... $ 15.9 $ 24.0 $ 46.7 Equity real estate.......................................... 49.8 44.5 40.6 ----------------- ----------------- ----------------- Total.......................................................... $ 65.7 $ 68.5 $ 87.3 ================= ================= =================
Deductions for writedowns and asset dispositions for 1993 include a $20.2 million writedown of fixed maturity investments at December 31, 1993 as a result of adopting a new accounting statement for the valuation of these investments that requires specific writedowns instead of valuation allowances. At December 31, 1995, the carrying values of investments held for the production of income which were non-income producing for the twelve months preceding the consolidated balance sheet date were $21.5 million of fixed maturities and $29.1 million of mortgage loans on real estate. EVLICO'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. EVLICO seeks to minimize the higher than normal credit risks associated with such securities by monitoring the total investments in any single issuer or total investment in a particular industry group. Certain of these corporate high yield securities are classified as other than investment grade by the various rating agencies, i.e., a rating below Baa or an NAIC (National Association of Insurance Commissioners) designation of 3 (medium grade), 4 or 5 (below investment grade) or 6 (in or near default). At December 31, 1995, approximately 11.0% of the $4,217.2 million aggregate amortized cost of bonds held by EVLICO were considered to be other than investment grade. In addition to its holding of corporate high yield securities, EVLICO is an equity investor in limited partnership interests which primarily invest in securities considered to be other than investment grade. EVLICO has restructured or modified the terms of certain fixed maturity investments. The fixed maturity portfolio, based on amortized cost, includes $13.7 million and $13.3 million at December 31, 1995 and 1994, respectively, of such restructured securities. The December 31, 1994 amount includes fixed maturities which are in default as to principal and/or interest payments, are to be restructured pursuant to commenced negotiations or where the borrowers went into bankruptcy subsequent to acquisition (collectively, "problem fixed maturities") of $5.6 million. Gross interest income that would have been recorded in accordance with the original terms of restructured fixed maturities amounted to $1.4 million, $1.1 million and $2.2 million in 1995, 1994 and 1993, respectively. Gross interest income on these fixed maturities included in net investment income aggregated $1.4 million, $1.0 million and $1.5 million in 1995, 1994 and 1993, respectively. F-9 At December 31, 1995 and 1994, 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 $36.0 million (4.6% of total mortgage loans on real estate) and $35.2 million (3.9% 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 $173.5 million and $130.8 million at December 31, 1995 and 1994, 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 $16.1 million, $12.3 million and $13.9 million in 1995, 1994 and 1993, respectively. Gross interest income on these loans included in net investment income aggregated $14.0 million, $11.4 million and $11.5 million in 1995, 1994 and 1993, respectively. Impaired mortgage loans (as defined under SFAS No. 114) along with the related provision for losses were as follows: DECEMBER 31, 1995 ------------------ (IN MILLIONS) Impaired mortgage loans with provision for losses.... $ 99.0 Impaired mortgage loans with no provision for losses. 24.5 ------------------ Recorded investment in impaired mortgage loans....... 123.5 Provision for losses................................. 14.5 ------------------ Net Impaired Mortgage Loans.......................... $ 109.0 ================== Impaired mortgage loans with no provision for losses are loans where the fair value of the collateral or the net present value of 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 the year ended December 31, 1995, EVLICO's average recorded investment in impaired mortgage loans was $99.2 million. Interest income recognized on these impaired mortgage loans totaled $8.2 million for the year ended December 31, 1995, including $2.2 million recognized on a cash basis. EVLICO's investment in equity real estate is through direct ownership and through investments in real estate joint ventures. At December 31, 1995 and 1994, the carrying value of equity real estate available for sale amounted to $55.6 million and $138.4 million, respectively. For the years ended December 31, 1995, 1994 and 1993, respectively, real estate of $12.2 million, $59.0 million and $92.1 million was acquired in satisfaction of debt. At December 31, 1995 and 1994, EVLICO owned $196.6 million and $230.5 million, respectively, of real estate acquired in satisfaction of debt. Depreciation on real estate is computed using the straight-line method over the estimated useful lives of the properties, which generally range from 40 to 50 years. Accumulated depreciation on real estate was $51.0 million and $51.1 million at December 31, 1995 and 1994, respectively. Depreciation expense on real estate totaled $12.8 million, $12.7 million and $11.6 million for the years ended December 31, 1995, 1994 and 1993, respectively. F-10 4. JOINT VENTURES AND PARTNERSHIPS Summarized combined financial information of real estate joint ventures (10 and 12 individual ventures as of December 31, 1995 and 1994, respectively) and of other limited partnership interests accounted for under the equity method, in which EVLICO has an investment of $10.0 million or greater and an equity interest of 10% or greater is as follows:
DECEMBER 31, ------------------------------------------ 1995 1994 ------------------- ------------------ (IN MILLIONS) FINANCIAL POSITION Investments in real estate, at depreciated cost............................... $ 966.3 $ 1,047.0 Investments in securities, generally at estimated fair value.................. 648.5 3,061.2 Cash and cash equivalents..................................................... 99.2 46.4 Other assets.................................................................. 90.8 261.9 ------------------- ------------------ Total assets.................................................................. 1,804.8 4,416.5 ------------------- ------------------ Borrowed funds -- third party.................................................. 74.4 1,233.6 Other liabilities............................................................. 132.4 611.0 ------------------- ------------------ Total liabilities............................................................. 206.8 1,844.6 ------------------- ------------------ Partners' Capital............................................................. $ 1,598.0 $ 2,571.9 =================== ================== Equity in partners' capital included above.................................... $ 243.8 $ 327.3 Equity in limited partnership interests not included above.................... 82.3 50.4 (Deficit) excess of equity in partners' capital over investment cost and equity earnings........................................ (.4) 3.7 ------------------- ------------------ Carrying Value................................................................ $ 325.7 $ 381.4 =================== ==================
YEARS ENDED DECEMBER 31, -------------------------------------------------------- 1995 1994 1993 ----------------- ---------------- ----------------- (IN MILLIONS) STATEMENTS OF EARNINGS Revenues of real estate joint ventures............................ $ 152.3 $ 180.1 $ 136.6 Revenues of other limited partnership interests................... 86.9 102.5 318.9 Interest expense -- third party.................................... (23.1) (88.1) (79.7) Interest expense -- The Equitable.................................. (5.6) -- -- Other expenses.................................................... (131.8) (172.4) (132.7) ----------------- ---------------- ----------------- Net Earnings...................................................... $ 78.7 $ 22.1 $ 243.1 ================= ================ ================= Equity in net earnings included above............................. $ 14.4 $ 11.7 $ 34.0 Equity in net earnings of limited partnership interests not included above................................... 12.9 6.3 12.0 Reduction of earnings in joint ventures over equity ownership percentage and amortization of differences in bases........................... -- (1.1) (.1) ----------------- ----------------- ----------------- Total Equity in Net Earnings...................................... $ 27.3 $ 16.9 $ 45.9 ================= ================ =================
F-11 5. NET INVESTMENT INCOME AND INVESTMENT (LOSSES) GAINS The sources of net investment income are summarized as follows:
YEARS ENDED DECEMBER 31, -------------------------------------------------------- 1995 1994 1993 ----------------- ---------------- ----------------- (IN MILLIONS) Fixed maturities................................................. $ 319.5 $ 331.4 $ 319.9 Mortgage loans on real estate.................................... 70.3 86.7 105.7 Equity real estate............................................... 66.2 67.0 69.8 Policy loans..................................................... 86.8 79.5 76.1 Other equity investments......................................... 22.4 13.4 38.5 Other investment income.......................................... 30.5 24.5 17.0 ----------------- ---------------- ----------------- Gross investment income.......................................... 595.7 602.5 627.0 Investment expenses.............................................. 66.6 75.7 69.4 ----------------- ---------------- ----------------- Net Investment Income............................................ $ 529.1 $ 526.8 $ 557.6 ================= ================ =================
Investment (losses) gains, net, including changes in valuation allowances, are summarized as follows:
YEARS ENDED DECEMBER 31, -------------------------------------------------------- 1995 1994 1993 ----------------- ---------------- ----------------- (IN MILLIONS) Fixed maturities................................................. $ 23.7 $ (6.8) $ 45.1 Mortgage loans on real estate.................................... (7.0) (13.3) (32.0) Equity real estate............................................... (18.9) (5.3) (13.4) Other equity investments......................................... 1.7 20.8 1.8 ----------------- ---------------- ----------------- Investment (Losses) Gains, Net................................... $ (.5) $ (4.6) $ 1.5 ================= ================ =================
Writedowns of fixed maturities amounted to $11.1 million, $8.2 million and $1.4 million for the years ended December 31, 1995, 1994 and 1993, respectively. For the years ended December 31, 1995 and 1994, respectively, proceeds received on sales of fixed maturities classified as available for sale amounted to $2,551.6 million and $2,065.1 million. Gross gains of $49.6 million and $22.1 million and gross losses of $18.7 million and $24.4 million, respectively, were realized on these sales. The change in unrealized investment gains (losses) related to fixed maturities classified as available for sale for the years ended December 31, 1995 and 1994, amounted to $240.8 million and $(215.2) million, respectively. Gross gains of $66.2 million and gross losses of $66.5 million were realized on sales of investments in fixed maturities held for investment and available for sale for the year ended December 31, 1993. F-12 Net unrealized investment gains (losses), included in the consolidated balance sheets as a component of equity, and the changes for the corresponding years are summarized as follows:
YEARS ENDED DECEMBER 31, -------------------------------------------------------- 1995 1994 1993 ----------------- ---------------- ----------------- (IN MILLIONS) Balance, beginning of year....................................... $ (72.6) $ 22.3 $ 11.1 Changes in unrealized investment gains (losses).................. 244.7 (241.8) 3.4 Effect of adopting SFAS No. 115.................................. -- -- 72.2 Changes in unrealized investment (gains) losses attributable to: Deferred policy acquisition costs............................. (64.4) 95.8 (58.2) Deferred Federal income taxes................................. (63.1) 51.1 (6.2) ----------------- ---------------- ----------------- Balance, End of Year............................................. $ 44.6 $ (72.6) $ 22.3 ================= ================ ================= Balance, end of year comprises: Unrealized investment gains (losses) on: Fixed maturities............................................ $ 92.4 $ (148.4) $ 66.8 Other equity investments.................................... 5.6 .7 25.6 Other....................................................... (2.7) (1.7) -- ----------------- ---------------- ----------------- Total......................................................... 95.3 (149.4) 92.4 Amounts of unrealized investment (gains) losses attributable to: Deferred policy acquisition costs........................... (26.8) 37.6 (58.2) Deferred Federal income taxes............................... (23.9) 39.2 (11.9) ----------------- ---------------- ----------------- Total............................................................ $ 44.6 $ (72.6) $ 22.3 ================= ================ =================
6. FEDERAL INCOME TAXES A summary of the Federal income tax expense in the consolidated statements of earnings is shown below:
YEARS ENDED DECEMBER 31, -------------------------------------------------------- 1995 1994 1993 ----------------- ---------------- ----------------- (IN MILLIONS) Federal income tax expense (benefit): Current....................................................... $ -- $ (1.4) $ (3.4) Deferred...................................................... 29.7 26.4 23.9 ----------------- ---------------- ----------------- Total............................................................ $ 29.7 $ 25.0 $ 20.5 ================= ================ =================
The Federal income taxes attributable to consolidated operations are different from the amounts determined by multiplying the earnings before Federal income taxes and cumulative effect of accounting change by the expected Federal income tax rate of 35%. The sources of the difference and the tax effects of each are as follows:
YEARS ENDED DECEMBER 31, -------------------------------------------------------- 1995 1994 1993 ----------------- ---------------- ----------------- (IN MILLIONS) Expected Federal income tax expense.............................. $ 30.0 $ 25.3 $ 16.6 Tax rate adjustment.............................................. -- -- 4.0 Other............................................................ (.3) (.3) (.1) ----------------- ---------------- ----------------- Federal Income Tax Expense....................................... $ 29.7 $ 25.0 $ 20.5 ================= ================ =================
F-13 The components of the net deferred Federal income tax account are as follows:
DECEMBER 31, 1995 DECEMBER 31, 1994 --------------------------------- --------------------------------- ASSETS LIABILITIES ASSETS LIABILITIES --------------- --------------- --------------- --------------- (IN MILLIONS) Deferred policy acquisition costs, reserves and reinsurance....................................... $ -- $ 253.8 $ -- $ 250.6 Investments.......................................... -- 20.5 38.4 -- Compensation and related benefits.................... 44.3 -- 52.2 -- Other................................................ 7.9 -- 25.6 -- --------------- --------------- --------------- --------------- Total................................................ $ 52.2 $ 274.3 $ 116.2 $ 250.6 =============== =============== =============== ===============
The deferred Federal income tax expense (benefit) 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:
YEARS ENDED DECEMBER 31, -------------------------------------------------------- 1995 1994 1993 ----------------- ---------------- ----------------- (IN MILLIONS) Deferred policy acquisition costs, reserves and reinsurance................................................... $ 3.2 $ (11.4) $ (6.8) Investments...................................................... (4.2) 26.1 11.4 Compensation and related benefits................................ 13.0 (2.8) 1.9 Other............................................................ 17.7 14.5 17.4 ----------------- ---------------- ----------------- Deferred Federal Income Tax Expense.............................. $ 29.7 $ 26.4 $ 23.9 ================= ================ =================
At December 31, 1995, EVLICO had net operating loss carryforwards of approximately $10.2 million. These loss carryforwards are available to offset future tax payments to Equitable Life under the tax sharing agreement. 7. REINSURANCE AGREEMENTS EVLICO cedes reinsurance to other insurance companies. EVLICO evaluates the financial condition of its reinsurers to minimize its exposure to significant losses from reinsurer insolvencies. The effect of reinsurance is summarized as follows:
DECEMBER 31, ------------------------------------ 1995 1994 ----------------- ---------------- (IN MILLIONS) Direct premiums..................................................................... $ 34.1 $ 40.2 Reinsurance ceded................................................................... (.4) (.1) ----------------- ---------------- Premiums............................................................................ $ 33.7 $ 40.1 ================= ================ Universal Life and Investment-type Product Policy Fee Income Ceded.................. $ 31.0 $ 24.9 ================= ================ Policyholders' Benefits Ceded....................................................... $ 18.7 $ 8.3 ================= ================
EVLICO reinsures mortality risks in excess of $5.0 million on any single life. EVLICO also reinsures the entire risk on certain substandard underwriting risks as well as in certain other cases. F-14 8. RELATED PARTY TRANSACTIONS Under a cost sharing agreement, EVLICO reimburses Equitable Life for its use of Equitable Life's personnel, property and facilities in carrying out certain of its operations. Reimbursement for intercompany services is based on the allocated cost of the services provided. The incurred balances of these intercompany transactions, which are included in other operating costs and expenses are as follows:
YEARS ENDED DECEMBER 31, -------------------------------------------------------- 1995 1994 1993 ----------------- ---------------- ----------------- (IN MILLIONS) Personnel and facilities......................................... $ 249.8 $ 257.9 $ 252.7 Agent commissions and fees....................................... 127.4 122.6 103.0
These cost allocations include various employee related obligations for pensions and postretirement benefits. At December 31, 1995 and 1994, EVLICO recorded as a reduction of shareholder's equity its allocated portion of an additional minimum pension liability of $10.7 million and $1.2 million, net of Federal income taxes, respectively, representing the excess of the accumulated benefit obligation over the fair value of plan assets and accrued pension liability. During 1995, 1994 and 1993, Equitable Life restructured certain operations in connection with cost reduction programs. EVLICO recorded provisions of $6.7 million, $6.9 million and $17.3 million in 1995, 1994 and 1993, respectively, relating primarily to allocated lease obligations (net of sub-lease rentals) and severance liabilities. EVLICO incurred investment advisory and asset management fee expenses of $17.6 million, $19.2 million and $16.0 million during 1995, 1994 and 1993, respectively. EVLICO and Equitable Life have an agreement whereby certain Equitable Life policyholders may purchase EVLICO's policies without presenting evidence of insurability. Under the agreement, Equitable Life pays EVLICO a conversion charge for the extra mortality risk associated with issuing these policies. EVLICO received payments of $2.9 million, $3.0 million and $3.1 million in 1995, 1994 and 1993, respectively, which were reported as other income. On August 31, 1993, EVLICO sold $250.0 million of primarily privately placed below investment grade fixed maturities to EQ Asset Trust 1993 (the "Trust"). EVLICO realized a $1.1 million gain, net of related deferred policy acquisition costs and deferred Federal income taxes. In conjunction with this transaction, EVLICO received $75.4 million of Class B notes issued by the Trust. These notes have interest rates ranging from 6.85% to 9.45%. The Class B notes are classified as other invested assets on the consolidated balance sheets. Net amounts payable to Equitable Life were $190.2 million and $226.7 million at December 31, 1995 and 1994, respectively. 9. DERIVATIVES AND FAIR VALUE OF FINANCIAL INSTRUMENTS Derivatives EVLICO primarily uses derivatives for asset/liability risk management and for hedging individual securities. Derivatives mainly are utilized to reduce EVLICO'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, 1995 was $444.8 million. The average unexpired terms at December 31, 1995 is 3.0 years. At December 31, 1995, the cost of terminating outstanding matched swaps in a loss position was $10.1 million and the unrealized gain on outstanding matched swaps in a gain position was $3.4 million. EVLICO has no intention of terminating these contracts prior to maturity. Fair Value of Financial Instruments EVLICO defines fair value as the quoted market prices for those instruments that are actively traded in financial markets. In cases where quoted market prices are not available, fair values are estimated using present value or other valuation techniques. The fair value estimates are made at a specific point in time, based on available market information and judgments about the financial instrument, including estimates of timing, amount of expected future cash flows and the credit standing of counterparties. Such estimates do not reflect any premium or discount that could result from offering for sale at one time EVLICO'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 EVLICO was not material at December 31, 1995 and 1994. F-15 Fair value for mortgage loans on real estate are estimated by discounting future contractual cash flows using interest rates at which loans with similar characteristics and credit quality would be made. Fair values for foreclosed mortgage loans and problem mortgage loans are limited to the estimated fair value of the underlying collateral if lower. The estimated fair values for single premium deferred annuities ("SPDA") are estimated using projected cash flows discounted at current offering rates. The estimated fair values for supplementary contracts not involving life contingencies ("SCNILC") and annuities certain are derived using discounted cash flows based upon the estimated current offering rate. The following table discloses carrying value and estimated fair value for financial instruments not otherwise disclosed in Note 3:
DECEMBER 31, ------------------------------------------------------------------- 1995 1994 -------------------------------- -------------------------------- CARRYING ESTIMATED CARRYING ESTIMATED VALUE FAIR VALUE VALUE FAIR VALUE --------------- --------------- --------------- --------------- (IN MILLIONS) Consolidated Financial Instruments: Mortgage loans on real estate....................... $ 771.5 $ 809.4 $ 888.5 $ 865.3 Other joint ventures................................ 158.7 158.7 196.4 196.4 Policy loans........................................ 1,300.1 1,374.0 1,185.2 1,138.7 Policyholders' account balances: SPDA............................................. 1,265.8 1,272.0 1,744.3 1,732.7 Annuities certain and SCNILC..................... 188.0 188.1 159.0 151.3
10. COMMITMENTS AND CONTINGENT LIABILITIES EVLICO 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, EVLICO has purchased single premium annuities from Equitable Life and directed Equitable Life to make payments directly to the beneficiaries. A contingent liability exists with respect to these agreements should Equitable Life be unable to meet its obligations. Management believes the need to satisfy such obligations is remote. 11. LITIGATION A number of lawsuits have been filed against life and health insurers in the jurisdictions in which EVLICO does business involving insurers' sales practices, alleged agent misconduct, failure to properly supervise agents, and other matters. Some of the lawsuits have resulted in the award of substantial judgments against other insurers, including material amounts of punitive amounts, or in substantial settlements. In some states juries have substantial discretion in awarding punitive damages. EVLICO, like other life and health insurers, from time to time is involved in such litigation as well as other legal actions and proceedings in connection with its businesses. Some of these litigations 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 EVLICO's financial position or results of operations. 12. STATUTORY FINANCIAL INFORMATION EVLICO is restricted as to the amounts it may pay as dividends to Equitable Life. Under the New York Insurance Law, the New York 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 the years ended December 31, 1995, 1994 and 1993, statutory (loss) earnings totaled $(102.5) million, $27.3 million and $(88.4) million, respectively. No amounts are expected to be available for dividends from EVLICO to Equitable Life in 1996. At December 31, 1995, EVLICO, in accordance with various government and state regulations, had $4.2 million of securities deposited with such government or state agencies. Accounting practices used to prepare statutory financial statements for regulatory filings of stock life insurance companies differ in certain instances from GAAP. The following reconciles EVLICO's net change in statutory surplus and capital stock and statutory surplus and capital stock determined in accordance with accounting practices prescribed by the New York Insurance Department with net earnings and equity on a GAAP basis. F-16
YEARS ENDED DECEMBER 31, -------------------------------------------------------- 1995 1994 1993 ----------------- ---------------- ----------------- (IN MILLIONS) Net change in statutory surplus and capital stock................ $ (56.6) $ 64.8 $ 184.4 Change in asset valuation reserves............................... 57.8 18.5 26.0 ----------------- ---------------- ----------------- Net change in statutory surplus, capital stock and asset valuation reserves.................................. 1.2 83.3 210.4 Adjustments: Future policy benefits and policyholders' account balances.... (12.9) (13.5) (22.5) Initial fee liability......................................... (34.2) (20.3) (11.6) Deferred policy acquisition costs............................. 25.1 34.7 62.2 Deferred Federal income taxes................................. (29.7) (20.2) (23.9) Valuation of investments...................................... 38.3 19.9 25.9 Limited risk reinsurance...................................... 146.9 .1 (5.4) Contribution from Equitable Life.............................. (125.0) (50.0) (250.0) Other, net.................................................... 46.4 2.0 41.7 ----------------- ---------------- ----------------- Net Earnings..................................................... $ 56.1 $ 36.0 $ 26.8 ================= ================ =================
DECEMBER 31, -------------------------------------------------------- 1995 1994 1993 ----------------- ---------------- ----------------- (IN MILLIONS) Statutory surplus and capital stock.............................. $ 720.9 $ 777.6 $ 712.7 Asset valuation reserves......................................... 146.1 88.3 69.8 ----------------- ---------------- ----------------- Statutory surplus, capital stock and asset valuation reserves.... 867.0 865.9 782.5 Adjustments: Future policy benefits and policyholders' account balances.... (367.4) (354.5) (341.1) Initial fee liability......................................... (234.7) (200.5) (180.3) Deferred policy acquisition costs............................. 2,037.8 2,077.1 1,946.7 Deferred Federal income taxes................................. (222.1) (134.4) (159.5) Valuation of investments...................................... 68.4 (219.2) 4.4 Limited risk reinsurance...................................... (231.7) (378.6) (378.7) Postretirement and other pension liabilities.................. (111.6) (105.8) (122.7) Other, net.................................................... (68.0) (101.1) (98.6) ----------------- ---------------- ----------------- Shareholder's Equity............................................. $ 1,737.7 $ 1,448.9 $ 1,452.7 ================= ================ =================
F-17 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders of Equitable Variable Life Insurance Company In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of earnings, of shareholder's equity and of cash flows present fairly, in all material respects, the financial position of Equitable Variable Life Insurance Company and its subsidiaries ("EVLICO") at December 31, 1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. These financial statements are the responsibility of EVLICO'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, EVLICO changed its methods of accounting for loan impairments in 1995, for postemployment benefits in 1994 and for investment securities in 1993. PRICE WATERHOUSE LLP New York, New York February 7, 1996 F-18 APPENDIX A MANAGEMENT Here is a list of our directors and principal officers and a brief statement of their business experience for the past five years. Unless otherwise noted, the following persons have been involved in the management of Equitable and its subsidiaries in various positions for the last five years. Unless otherwise noted, their address is 787 Seventh Avenue, New York, New York 10019.
NAME AND PRINCIPAL BUSINESS EXPERIENCE BUSINESS ADDRESS WITHIN PAST FIVE YEARS - -------------------- ------------------------ DIRECTORS Michel Beaulieu...................... Director of Equitable Variable since February 1992. Senior Vice President, Equitable, since September 1991; prior thereto, Chief Life Actuary AXA group 1989 to 1991; Managing Director Blondeau & CIE (France) 1986 to 1989. Director, Equity & Law (London). Laurent Clamagirand.................. Director of Equitable Variable since February 1995; Vice President, Financial Reporting, Equitable, since March 1996; prior thereto, Director from November 1994 to March 1996; prior thereto, International Controller, AXA, January 1990 to October 1994; Director, Equitable of Colorado, since March 1995. William T. McCaffrey................. Director of Equitable Variable since February 1987; Senior Executive Vice President and Chief Operating Officer, Equitable Life, since February 1996; prior thereto, Executive Vice President, since February 1986 and Chief Administrative Officer since February 1988; Director, Equitable Life, since February 1996 and Equitable Foundation since September 1986. Michael J. Rich...................... Director of Equitable Variable since May 1995. Senior Vice President, Equitable, since October 1994; prior thereto, Vice President of Underwriting, John Hancock Mutual Life Insurance Co. since 1988. Jose S. Suquet....................... Director of Equitable Variable since January 1995. Executive Vice President and Chief Agency Officer, Equitable, since August 1994; prior thereto, Agency Manager, Equitable, since February 1985. OFFICERS -- DIRECTORS James M. Benson...................... President and Chief Executive Officer, Equitable Variable since March 1996; prior thereto, President from December 1993 to March 1996; Vice Chairman of the Board, Equitable Variable, July 1993 to December 1993. President & Chief Executive Officer, Equitable Life, since February 1996; President and Chief Operating Officer, Equitable, February 1994 to present; Senior Executive Vice President, April 1993 to February 1994. Prior thereto, President, Management Compensation Group, 1983 to February 1993. Director, Alliance Capital, October 1993 to present; National Mutual Association of Australasia, September 1995 to present and AXA Re Life Insurance Co., January 1995 to present. Harvey Blitz......................... Vice President, Equitable Variable since April 1995; Director of Equitable Variable since October 1992. Senior Vice President, Equitable, since September 1987. Senior Vice President, The Equitable Companies Incorporated, since July 1992. Director, Equico Securities, Inc., since September 1992; Equitable of Colorado, since September 1992; Equisource and its subsidiaries since October 1992, and Chairman of the Board Frontier Trust since September 1995 and Director of Equitable Distributors, Inc. since February 1995. Gordon Dinsmore...................... Senior Vice President, Equitable Variable, since February 1991. Senior Vice President, Equitable, since September 1989; prior thereto, various other Equitable positions. Director and Senior Vice President, March 1991 to present, Equitable of Colorado; Director, FHJV Holdings, Inc., December 1990 to present; Director, Equitable Distributors, Inc., August 1993 to present, and Director, Equitable Foundation, May 1991 to present. Jerry de St. Paer.................... Senior Investment Officer, Equitable Variable, since April 1995; Director of Equitable Variable since April 1992. Senior Executive Vice President & Chief Financial Officer, Equitable Life, since February 1996; prior thereto, Executive Vice President & Chief Financial Officer, Equitable, since April 1992; Executive Vice President since December 1990; Senior Vice President & Treasurer June 1990 to December 1990; Senior Vice President, Equitable Investment Corporation, January 1987 to January 1991; Executive Vice President & Chief Financial Officer, The Equitable Companies Incorporated, since May 1992; Director, Economic Services Corporation & various Equitable subsidiaries.
A-1
NAME AND PRINCIPAL BUSINESS EXPERIENCE BUSINESS ADDRESS WITHIN PAST FIVE YEARS - ----------------------- ------------------------- OFFICERS -- DIRECTORS (Continued) Joseph J. Melone..................... Chairman of the Board, Equitable Variable since March 1996; Chairman of the Board and Chief Executive Officer, Equitable Variable, November 1990 to March 1996; Chairman of the Board, Equitable Life, since February 1996; prior thereto, Chairman of the Board and Chief Executive Officer, Equitable, February 1994 to February 1996; President and Chief Executive Officer, September 1992 to February 1994; President and Chief Operating Officer from November 1990 to September 1992. President & Chief Executive Officer of The Equitable Companies Incorporated since February 1996; prior thereto, President and Chief Operating Officer since July 1992. Prior thereto, President, The Prudential Insurance Company of America, since December 1984. Director, Equity & Law (United Kingdom) and various other Equitable subsidiaries. Peter D. Noris....................... Executive Vice President and Chief Investment Officer, Equitable Variable, since September 1995. Director of Equitable Variable since June 1995. Executive Vice President and Chief Investment Officer, Equitable, since May 1995; prior thereto, Vice President, Salomon Brothers, Inc., 1992 to 1995; Principal of Equity Division, Morgan Stanley & Co. Inc., from 1984 to 1992. Director, various Equitable subsidiaries. Samuel B. Shlesinger................. Senior Vice President, Equitable Variable, since February 1988. Senior Vice President and Actuary, Equitable; prior thereto, Vice President and Actuary. Director, Chairman and CEO, Equitable of Colorado. Dennis D. Witte...................... Senior Vice President, Equitable Variable, since February 1991; Senior Vice President, Equitable, since July 1990; prior thereto, various other Equitable positions; Director, Equitable Distributors, Inc. since February 1995. OFFICERS Kevin R. Byrne....................... Treasurer, Equitable Variable, since September 1990; Vice President and Treasurer, Equitable, since September 1993; prior thereto, Vice President from March 1989 to September 1993. Vice President and Treasurer, The Equitable Companies Incorporated, September 1993 to present; Frontier Trust since August 1990; Equisource and its subsidiaries, October 1990 to present. Stephen Hogan........................ Vice President and Controller, Equitable Variable, February 1994 to present. Vice President, 135 West 50th Street Equitable, January 1994 to present; prior thereto, Controller, John Hancock subsidiaries, New York, New York 10020 from 1987 to December 1993. J. Thomas Liddle, Jr................. Senior Vice President and Chief Financial Officer, Equitable Variable, since February 1986. Senior Vice President, Equitable, since April 1991; prior thereto, Vice President and Actuary, Equitable; Director, Equitable of Colorado since December 1985. William A. Narducci.................. Vice President and Chief Claims Officer, Equitable Variable, since February 1989. Vice 200 Plaza Drive President, Equitable, since February 1988; prior thereto, Assistant Vice President. Secaucus, New Jersey 07096 John P. Natoli....................... Vice President and Chief Underwriting Officer, Equitable Variable, since February 1988. Vice President, Equitable.
A-2 APPENDIX B COMMUNICATING PERFORMANCE DATA In reports or other communications to policyowners or in advertising material, we may describe general economic and market conditions affecting the Separate Account and the Trust and may compare the performance or ranking of the Separate Account Funds and Trust portfolios with (1) that of other insurance company separate accounts or mutual funds included in the rankings prepared by Lipper Analytical Services, Inc., Morningstar, Inc. or similar investment services that monitor the performance of insurance company separate accounts or mutual funds, (2) other appropriate indices of investment securities and averages for peer universes of funds, or (3) data developed by us derived from such indices or averages. Advertisements or other communications furnished to present or prospective policyowners may also include evaluations of a Separate Account Fund or Trust portfolio by financial publications that are nationally recognized such as Barron's, Morningstar's Variable Annuities/Life, Business Week, Forbes, Fortune, Institutional Investor, Money, Kiplinger's Personal Finance, Financial Planning, Investment Adviser, Investment Management Weekly, Money Management Letter, Investment Dealers Digest, National Underwriter, Pension & Investments, USA Today, Investor's Daily, The New York Times, The Wall Street Journal, the Los Angeles Times and the Chicago Tribune. Performance data for peer universes of funds with similar investment objectives are compiled by Lipper Analytical Services, Inc. (Lipper) in its Lipper Variable Insurance Products Performance Analysis Service (Lipper Survey) and Morningstar, Inc. in the Morningstar Variable Annuity/Life Report (Morningstar Report). The Lipper Survey records performance data as reported to it by over 800 funds underlying variable annuity and life insurance products. The Lipper Survey divides these actively managed funds into 25 categories by portfolio objectives. The Lipper Survey contains two different universes, which differ in terms of the types of fees reflected in performance data. The "Separate Account" universe reports performance data net of investment management fees, direct operating expenses and asset-based charges applicable under variable insurance and annuity contracts. The "Mutual Fund" universe reports performance net only of investment management fees and direct operating expenses, and therefore reflects asset-based charges that relate only to the underlying mutual fund. The Morningstar Report consists of over 700 variable life and annuity funds, all of which report their data net of investment management fees, direct operating expenses and separate account level charges. LONG-TERM MARKET TRENDS As a tool for understanding how different investment strategies may affect long-term results, it may be useful to consider the historical returns on different types of assets. The following chart presents historical return trends for various types of securities. The information presented, while not directly related to the performance of the Funds of the Separate Account or the Trust portfolios, may help to provide a perspective on the potential returns of different asset classes over different periods of time. By combining this information with your knowledge of your own financial needs, you may be able to better determine how you wish to allocate your Incentive Life Plus premiums. Historically, the investment performance of common stocks over the long term has generally been superior to that of long or short-term debt securities, although common stocks have been subject to more dramatic changes in value over short periods of time. The Common Stock Fund of the Separate Account may, therefore, be a desirable selection for policyowners who are willing to accept such risks. Policyowners who have a need to limit short-term risk, may find it preferable to allocate a smaller percentage of their net premiums to those funds that invest primarily in common stock. Any investment in securities, whether equity or debt, involves varying degrees of potential risk, in addition to offering varying degrees of potential reward. The chart on page A-2 illustrates the average annual compound rates of return over selected time periods between December 31, 1925 and December 31, 1995 for common stocks, long-term government bonds, long-term corporate bonds, intermediate-term government bonds and Treasury Bills. The Consumer Price Index is shown as a measure of inflation for comparison purposes. The average annual returns assume the reinvestment of dividends, capital gains and interest. The information presented is an historical record of unmanaged groups of securities and is neither an estimate nor a guarantee of future results. In addition, investment management fees and expenses and charges associated with a variable life insurance policy, are not reflected. The rates of return illustrated do not represent returns of the Separate Account or the Trust and do not constitute a representation that the performance of the Separate Account funds or the Trust portfolios will correspond to rates of return such as those illustrated in the chart. For a comparative illustration of performance results of The Hudson River Trust, see page A-1 of the Trust's prospectus. B-1
AVERAGE ANNUAL RATES OF RETURN FOR THE FOLLOWING LONG-TERM LONG-TERM INTERMEDIATE- U.S. CONSUMER PERIODS ENDING COMMON GOVERNMENT CORPORATE TERM GOV'T TREASURY PRICE 12/31/95: STOCKS BONDS BONDS BONDS BILLS INDEX - -------- ------ ----- ----- ------ ----- ----- 1 year.................. 37.43 31.67 26.39 16.80 5.60 2.74 3 years................. 15.26 12.82 10.47 7.22 4.13 2.72 5 years................. 16.57 13.10 12.07 8.81 4.29 2.83 10 years................. 14.84 11.92 11.25 9.08 5.55 3.48 20 years................. 14.59 10.45 10.54 9.69 7.28 5.23 30 years................. 10.68 7.92 8.17 8.36 6.72 5.39 40 years................. 10.78 6.38 6.75 7.02 5.73 4.46 50 years................. 11.94 5.35 5.75 5.87 4.80 4.36 60 years................. 11.34 5.20 5.46 5.34 4.01 4.10 Since 1926............... 10.54 5.17 5.69 5.25 3.72 3.12 Inflation Adjusted Since 1926............... 7.20 1.99 2.49 2.07 0.58 0.00 - ----------------------------
*Source: Ibbotson, Roger G. and Rex A. Sinquefield, STOCKS, BONDS, BILLS, AND INFLATION (SBBI), 1982, updated in STOCKS, BONDS, BILLS, AND INFLATION 1996 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 1969-1995, represented by the Salomon Brothers Long-Term, High-Grade Corporate Bond Index; for the period 1946-1968, the Salomon Brothers' Index was backdated using Salomon Brothers' monthly yield data and a methodology similar to that used by Salomon for 1969-1995; for the period 1926-1945, the Standard and Poor's monthly High-Grade Corporate Composite yield data were used, assuming a 4 percent coupon and a twenty year maturity. Intermediate-term Government Bonds -- Measured by a one-bond portfolio constructed each year containing a bond with approximately a five year maturity. U.S. Treasury Bills -- Measured by rolling over each month a one-bill portfolio containing, at the beginning of each month, the bill having the shortest maturity not less than one month. Inflation -- Measured by the Consumer Price Index for all Urban Consumers (CPI-U), not seasonally adjusted. B-2 VM-521 - -------------------------------------------------------------------------------- -------------- EQUITABLE VARIABLE LIFE Bulk Rate INSURANCE COMPANY U.S. Postage Mailing Address: Paid 2 Penn Plaza Permit No. 148 New York, New York 10121 Brooklyn, N.Y. -------------- -------------------------------------------------------------------- PROSPECTUS -------------------------------------------------------------------- Incentive Life Plus -------------------------------------------------------------------- MAY 1, 1996 EQUITABLE VARIABLE LIFE INSURANCE COMPANY INCENTIVE LIFE PLUS(TM) Prospectus Dated May 1, 1996 Incentive Life Plus is a flexible premium variable life insurance policy issued by Equitable Variable Life Insurance Company (Equitable Variable), a wholly-owned subsidiary of The Equitable Life Assurance Society of the United States (Equitable). The policy offers flexible premium payments, a choice of two death benefit options, increases and decreases to the policy's Face Amount of insurance and a choice of funding options, including a guaranteed interest option and the following thirteen investment portfolios:
Fixed Income Series: Equity Series: Asset Allocation Series: o Money Market o Growth & Income o Conservative Investors o Intermediate Government Securities o Equity Index o Balanced o Quality Bond o Common Stock o Growth Investors o High Yield o Global o International o Aggressive Stock
We do not guarantee the investment performance of these investment portfolios, which involve varying degrees of risk. Although premiums are flexible, additional premiums may be required to keep the policy in effect. The policy may terminate if its value (net of any policy loan and surrender charge) is too small to pay the policy's monthly charges. The policy can be guaranteed to stay in force regardless of investment performance through the death benefit guarantee provision (if available in your state). You can borrow against or withdraw money from the policy, within limits. Loans and withdrawals will reduce the policy's death benefit and cash surrender value. You can also surrender the policy. A surrender charge will apply if you surrender the policy during the first fifteen policy years or within fifteen years after certain Face Amount increases. This charge may also apply if you reduce the Face Amount or if the policy terminates. Your Equitable agent can provide you with information about all forms of life insurance available from us and Equitable and help you decide which may best meet your needs. Replacing existing insurance with an Incentive Life Plus or other policy may not be to your advantage. You may examine the policy for a limited period and cancel it for a full refund of premiums paid. PLEASE READ THIS PROSPECTUS CAREFULLY AND KEEP IT FOR FUTURE REFERENCE. THIS PROSPECTUS CONTAINS INFORMATION THAT SHOULD BE KNOWN BEFORE INVESTING IN INCENTIVE LIFE PLUS. THIS PROSPECTUS IS NOT VALID UNLESS IT IS ATTACHED TO A CURRENT PROSPECTUS FOR THE HUDSON RIVER TRUST. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. Copyright 1996 Equitable Variable Life Insurance Company. All rights reserved. VM 522 TABLE OF CONTENTS PAGE ---- SUMMARY OF INCENTIVE LIFE PLUS FEATURES .............................1 PART 1 -- DETAILED INFORMATION ABOUT EQUITABLE VARIABLE AND INCENTIVE LIFE PLUS INVESTMENT CHOICES ...........................6 THE COMPANY THAT ISSUES INCENTIVE LIFE PLUS ...............6 Equitable Variable ......................................6 Our Parent, Equitable ...................................6 THE SEPARATE ACCOUNT AND THE TRUST ........................6 The Separate Account ....................................6 The Trust ...............................................6 The Trust's Investment Adviser ..........................6 Investment Policies Of The Trust's Portfolios ...........7 THE GUARANTEED INTEREST ACCOUNT ...........................8 Adding Interest In The Guaranteed Interest Account ......8 Transfers Out Of The Guaranteed Interest Account ........8 PART 2 -- DETAILED INFORMATION ABOUT INCENTIVE LIFE PLUS ............9 FLEXIBLE PREMIUMS .........................................9 Planned Periodic Premiums And Specified Premiums ........9 Premium And Monthly Charge Allocations ..................9 DEATH BENEFITS ...........................................10 Guaranteeing The Death Benefit .........................10 CHANGES IN INSURANCE PROTECTION ..........................10 Changing The Face Amount ...............................10 Changing The Death Benefit Option ......................11 Substitution Of Insured Person .........................11 When Policy Changes Go Into Effect .....................12 MATURITY BENEFIT .........................................12 LIVING BENEFIT OPTION ....................................12 ADDITIONAL BENEFITS MAY BE AVAILABLE .....................12 YOUR POLICY ACCOUNT VALUE ................................12 Amounts In The Separate Account ........................13 How We Determine The Unit Value ........................13 Transfers Of Policy Account Value ......................13 Automatic Transfer Service .............................13 Telephone Transfers ....................................13 Charge For Transfers ...................................14 BORROWING FROM YOUR POLICY ACCOUNT .......................14 How To Request A Loan ..................................14 Policy Loan Interest ...................................14 When Interest Is Due ...................................14 Repaying The Loan ......................................15 The Effects Of A Policy Loan ...........................15 PARTIAL WITHDRAWALS AND SURRENDER ........................15 Partial Withdrawals ....................................15 Surrender For Net Cash Surrender Value .................15 DEDUCTIONS AND CHARGES ...................................15 Deductions From Premiums ...............................15 Deductions From Your Policy Account ....................16 Charges Against The Separate Account ...................17 Trust Charges ..........................................18 Surrender Charges ......................................18 ADDITIONAL INFORMATION ABOUT INCENTIVE LIFE PLUS..........19 Your Policy Can Terminate ..............................19 You May Restore A Policy After It Terminates ...........19 Policy Periods, Anniversaries, Dates And Ages ..........19 TAX EFFECTS ..............................................20 Policy Proceeds ........................................20 Policy Terminations ....................................21 Diversification ........................................21 Policy Changes .........................................21 Tax Changes ............................................21 Estate And Generation Skipping Taxes ...................21 Pension And Profit-Sharing Plans .......................22 Other Employee Benefit Programs ........................22 Our Taxes ..............................................22 When We Withhold Income Taxes ..........................22 PART 3 -- ADDITIONAL INFORMATION ...................................22 YOUR VOTING PRIVILEGES ...................................22 Trust Voting Privileges ................................22 How We Determine Your Voting Shares ....................22 Separate Account Voting Rights .........................23 OUR RIGHT TO CHANGE HOW WE OPERATE .......................23 OUR REPORTS TO POLICYOWNERS ..............................23 LIMITS ON OUR RIGHT TO CHALLENGE THE POLICY ..............23 YOUR PAYMENT OPTIONS .....................................23 YOUR BENEFICIARY .........................................24 ASSIGNING YOUR POLICY ....................................24 WHEN WE PAY POLICY PROCEEDS ..............................24 DIVIDENDS ................................................24 REGULATION ...............................................24 SPECIAL CIRCUMSTANCES ....................................24 DISTRIBUTION .............................................25 LEGAL PROCEEDINGS ........................................25 ACCOUNTING AND ACTUARIAL EXPERTS .........................25 ADDITIONAL INFORMATION ...................................25 MANAGEMENT ...............................................26 PART 4 -- ILLUSTRATIONS OF POLICY BENEFITS .........................28 SEPARATE ACCOUNT FP FINANCIAL STATEMENTS ........................FSA-1 EQUITABLE VARIABLE FINANCIAL STATEMENTS ...........................F-1 APPENDIX A -- COMMUNICATING PERFORMANCE DATA ......................A-1 LONG-TERM MARKET TRENDS .............................A-1 - -------------------------------------------------------------------------------- In this prospectus "we," "our" and "us" mean Equitable Variable, a New York stock life insurance company. "You" and "your" mean the owner of the policy. We refer to the person who is covered by the policy as the "insured person" because the insured person and the policyowner may not be the same. Unless indicated otherwise, the discussion in this prospectus assumes that there is no policy loan outstanding and that the policy is not in a grace period. THE POLICY IS NOT AVAILABLE IN ALL JURISDICTIONS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE. EQUITABLE VARIABLE DOES NOT AUTHORIZE ANY INFORMATION OR REPRESENTATIONS REGARDING THE OFFERING DESCRIBED IN THIS PROSPECTUS OTHER THAN AS CONTAINED IN THIS PROSPECTUS OR ANY ATTACHED SUPPLEMENT THERETO OR IN ANY SUPPLEMENTAL SALES MATERIAL AUTHORIZED BY EQUITABLE VARIABLE. WHAT IS VARIABLE LIFE INSURANCE? Variable life insurance is one kind of permanent cash value life insurance. Like other kinds of permanent cash value life insurance, such as whole life and universal life insurance, variable life insurance generally provides two benefits: an income tax-free death benefit and a cash value that grows tax-deferred. What sets variable life insurance apart from universal life and whole life is that variable life insurance allows the policyowner to direct premiums to different mutual fund options. This enables a policyowner to harness the growth potential of, for example, the equity markets, but the policyowner also bears the risk of investment losses. In contrast, whole life insurance provides a minimum guaranteed cash value and universal life applies a minimum guaranteed interest rate to premiums. Some variable life insurance policies offer some of the other features of universal or whole life such as premium flexibility (universal life), face amount increases (universal life) or death benefit guarantees (whole life). Equitable Variable and its parent, Equitable, offer an array of permanent cash value insurance products and your Equitable agent can help you determine which product best suits your insurance needs. SUMMARY OF INCENTIVE LIFE PLUS FEATURES THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE TERMS OF THE POLICY WHEN ISSUED AND THE MORE DETAILED INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS (SEE TABLE OF CONTENTS ON OPPOSITE PAGE). PUTTING MONEY INTO THE POLICY FLEXIBLE PREMIUMS o Premiums may be invested whenever and in whatever amount you determine, within limits. Other than the minimum initial premium, there are no scheduled or required premium payments (however, under certain conditions, additional premiums may be needed to keep a policy in effect). See FLEXIBLE PREMIUMS on page 9. POLICY ACCOUNT o Net premiums are put in your Policy Account and can be allocated to a Guaranteed Interest Account and to one or more funds of Equitable Variable's Separate Account FP (each a Fund, and together, the Funds or the Separate Account). The Funds invest in corresponding portfolios of The Hudson River Trust (Trust), a mutual fund. See THE SEPARATE ACCOUNT and THE TRUST, both on page 6. o Transfers can be made among the various funding options, BUT TRANSFERS OUT OF THE GUARANTEED INTEREST ACCOUNT CAN ONLY BE MADE DURING A LIMITED TIME AND IN LIMITED AMOUNTS. See TRANSFERS OUT OF THE GUARANTEED INTEREST ACCOUNT on page 8 for a description of these limitations. Transfers into the Guaranteed Interest Account and among the Funds may generally be made at any time and are subject to certain minimum transfer amounts. See TRANSFERS OF POLICY ACCOUNT VALUE on page 13. o There is no minimum guaranteed cash value for amounts allocated to the Funds. The value of amounts allocated to the Guaranteed Interest Account will depend on the interest rates declared and guaranteed each year by Equitable Variable (4% minimum before deductions). See THE GUARANTEED INTEREST ACCOUNT on page 8. TAKING MONEY OUT OF THE POLICY o Loans may be taken against 90% of a policy's Cash Surrender Value (Policy Account value less any applicable surrender charge) subject to certain conditions. Loan interest accrues daily at a rate determined annually. Currently, amounts set aside to secure the loan earn interest at a rate 1% lower than the rate charged for policy loan interest. See BORROWING FROM YOUR POLICY ACCOUNT on page 14. o Partial Withdrawals of Net Cash Surrender Value (Cash Surrender Value less any loan and accrued loan interest) may be taken after the first policy year, subject to our approval and certain conditions. See PARTIAL WITHDRAWALS on page 15. o The policy may be surrendered for its Net Cash Surrender Value, less any lien securing a Living Benefit payment, at which time insurance coverage will end. See SURRENDER FOR NET CASH SURRENDER VALUE on page 15. INSURANCE PROTECTION FEATURES DEATH BENEFITS o Option A, a fixed benefit equal to the policy's Face Amount. o Option B, a variable benefit equal to the Face Amount plus the Policy Account value. o In some cases a higher death benefit may apply in order to meet Federal income tax law requirements. See DEATH BENEFITS on page 10. o After the first policy year, you can increase the Face Amount. After the second policy year, you can decrease the Face Amount or change your death benefit option. Conditions apply to Face Amount and death benefit option changes. The minimum Face Amount is generally $50,000. See CHANGES IN INSURANCE PROTECTION on page 10. o After the second policy year, you may be able to substitute the insured person. See SUBSTITUTION OF INSURED PERSON on page 11. DEATH BENEFIT GUARANTEE o The death benefit guarantee provision guarantees that, under certain conditions, the policy will remain in force even if the Net Cash Surrender Value is insufficient to pay the monthly policy charges. The death benefit guarantee provision is not available in some states, including New York. In those states a 3-Year no lapse guarantee provision will apply. See GUARANTEEING THE DEATH BENEFIT on page 10 for a description of these provisions and the conditions that apply. 1 MATURITY BENEFIT o A maturity benefit equal to the amount in your Policy Account, less any policy loan, any lien securing a Living Benefit payment and accrued interest, is payable on the policy anniversary nearest the insured person's 100th birthday (Final Policy Date), if the insured person is still living on that date. See MATURITY BENEFIT on page 12. LIVING BENEFIT o The Living Benefit rider enables the policyowner to receive a portion of the policy's death benefit (excluding death benefits payable under certain riders) if the insured person has a terminal illness. The Living Benefit rider will be added to most policies at issue for no additional cost. See LIVING BENEFIT OPTION on page 12. ADDITIONAL BENEFITS o Disability waiver; accidental death; term insurance, including term insurance on an additional insured person, children's term insurance, and first-to-die term insurance; option to purchase additional insurance; and designated insured option riders are available. See ADDITIONAL BENEFITS MAY BE AVAILABLE on page 12. DEDUCTIONS AND CHARGES FROM PREMIUMS (See DEDUCTIONS FROM PREMIUMS on page 15.) o Applicable charges for taxes imposed by states and other jurisdictions. Such charges currently range from .75% to 5% (Virgin Islands). o Premium Sales Charge ranging from 3% to 6% of premiums paid, depending upon the Face Amount. Equitable Variable currently intends to stop deducting this charge once premiums paid equal a specified amount. FROM THE POLICY ACCOUNT (See DEDUCTIONS FROM YOUR POLICY ACCOUNT on page 16.) o Administrative charge during the first or first and second policy years ranging from $20 per month to $55 per month depending upon the initial Face Amount and the insured person's age. During subsequent years, the monthly administrative charge ranges from $6 to $8 (subject to $10 per month maximum). o Monthly cost of insurance charge and monthly charge for any additional benefits. o Transaction charges (for partial withdrawals, Face Amount increases, substitution of insured person and certain transfers). o Monthly death benefit guarantee charge equal to $.01 per $1,000 of Face Amount including the face amount of any yearly renewable term rider on the insured person. This charge will not apply under certain circumstances. FROM THE SEPARATE ACCOUNT o Current charge for certain mortality and expense risks equal to .60% per annum (guaranteed not to exceed .90% per annum). For a period of time, this charge will be deducted differently for policies issued in New York. SURRENDER CHARGES (See SURRENDER CHARGES on page 18.) o An Administrative Surrender Charge will apply during the first eight policy years if you surrender the policy, reduce its Face Amount, or it terminates. The Administrative Surrender Charge varies by issue age of the insured person and the Face Amount, and will never be more than $3,000. o A Premium Surrender Charge applies if the policy terminates, is surrendered for its Net Cash Surrender Value or if the Face Amount is reduced during the first fifteen policy years. The maximum charge is equal to 66% of one "target premium." After the first nine policy years, the maximum charge declines on a monthly basis until it reaches zero at the end of the fifteenth policy year. o If you increase the policy's Face Amount, additional Surrender Charges will generally apply to the amount of the increase for fifteen years beginning on the effective date of increase. FROM THE TRUST (See THE TRUST'S INVESTMENT ADVISER on page 6.) o Trust shares are purchased by the Separate Account at net asset value which reflects investment management fees and other direct expenses. Investment management fees are charged at the maximum annual rates of .35% of net assets for the Equity Index Portfolio, .40% for Common Stock, Money Market and Balanced Portfolios; .50% for Aggressive Stock and Intermediate Government Securities Portfolios; .55% for High Yield, Global, Conservative Investors, Growth Investors, Quality Bond and the Growth & Income Portfolios; and .90% for the International Portfolio. These charges decrease as portfolio net assets reach certain levels. See THE TRUST'S INVESTMENT ADVISER on page 6. VARIATIONS o Equitable Variable is subject to the insurance laws and regulations in every jurisdiction in which Incentive Life Plus is sold. As a result, various time periods and other terms and conditions described in this prospectus may vary from state to state. These variations will be reflected in the policy. o The terms of Incentive Life Plus may also vary where special circumstances result in a reduction in our costs. o A modified version of Incentive Life Plus may be offered where certain conditions are met. 2 ADDITIONAL INFORMATION CANCELLATION RIGHT o You have a right to examine the policy. You may cancel the policy, within the time limits described below, by sending it to our Administrative Office with a written request to cancel. Insurance coverage ends when you send your request. o Your request to cancel the policy must be postmarked no later than the later of: (i) 10 days after you receive the policy, (ii) 10 days after we mail a written notice telling you about your rights to cancel, or (iii) 45 days after you sign Part I of the policy application. o If you cancel the policy, we will refund the premiums you paid. In certain cases where the policy was purchased as a result of an exchange of one of our life insurance policies, we may reinstate the prior policy. o There may be income tax and withholding implications if you cancel. POLICY TERMINATION o The policy will go into default if the Net Cash Surrender Value is insufficient to cover monthly charges and the death benefit guarantee or the 3-Year no lapse guarantee provisions are not in effect. If this occurs, you will be notified and given the opportunity to maintain the policy in force by making additional payments. You may be able to restore a terminated policy within a limited time period, but this will require additional evidence of insurability. See YOUR POLICY CAN TERMINATE on page 19 and YOU MAY RESTORE A POLICY AFTER IT TERMINATES on page 19. TAX EFFECTS o Generally, under current Federal income tax law, death benefits are not subject to income tax and Policy Account earnings are not subject to income tax as long as they remain in the Policy Account. Loans, partial withdrawals, surrender, maturity, policy termination, or a substitution of insured may result in recognition of income for tax purposes. See TAX EFFECTS on page 20. HUDSON RIVER TRUST RATES OF RETURN The rates of return shown below are based on the actual investment performance of The Hudson River Trust portfolios, after deduction for investment management fees and direct operating expenses of the Trust, for periods ending December 31, 1995. The historical performance of the Common Stock and Money Market Portfolios for periods prior to March 22, 1985 has been adjusted to reflect current investment management fees of .40% per annum and estimated direct operating expenses of the Trust of .10% per annum. The Common Stock Portfolio and its predecessors have been in existence since 1976. The yields shown below are derived from the actual rate of return of the Trust portfolio for the period, which is then adjusted to omit capital changes in the portfolio during the period. We show the SEC standardized 7-day yield for the Money Market Portfolio and 30-day yield for the Intermediate Government Securities, Quality Bond and High Yield Portfolios. These rates of return and yields are not illustrative of how actual investment performance will affect the benefits under your policy. Moreover, these rates of return and yields are not an estimate or guarantee of future performance. THESE RATES OF RETURN AND YIELDS ARE FOR THE TRUST ONLY AND DO NOT REFLECT THE ADMINISTRATIVE AND COST OF INSURANCE CHARGES, SALES CHARGES, TAX CHARGES AND THE MORTALITY AND EXPENSE RISK CHARGE APPLICABLE UNDER AN INCENTIVE LIFE PLUS POLICY. SUCH CHARGES WOULD REDUCE THE RETURNS AND YIELDS SHOWN. SEE ILLUSTRATIONS OF INCENTIVE LIFE PLUS POLICY ACCOUNT AND CASH SURRENDER VALUES BASED ON HISTORICAL INVESTMENT RESULTS BELOW.
RATES OF RETURN FOR PERIODS ENDING DECEMBER 31, 1995 ------------------------------------------------------------------------- SINCE PORTFOLIO YIELDS 1 YEAR 3 YEARS 5 YEARS 10 YEARS 15 YEARS INCEPTION(A) - --------- ------ ------ ------- ------- -------- -------- ----------- The Fixed Income Series: Money Market .................................... 5.44% 5.74% 4.24% 4.48% 6.02% -- 7.42% Intermediate Government Securities .............. 6.28 13.33 6.22 -- -- -- 7.63 Quality Bond .................................... 5.31 17.02 -- -- -- -- 4.54 High Yield ...................................... 10.57 19.92 12.81 14.95 -- -- 10.20 The Equity Series: Growth & Income ................................. 24.07 -- -- -- -- 9.66 Equity Index .................................... 36.48 -- -- -- -- 19.11 Common Stock .................................... 32.45 17.40 18.16 15.16 14.37% 14.78 Global .......................................... 18.81 18.20 16.49 -- -- 11.36 International(b) ................................ -- -- -- -- -- 11.29 Aggressive Stock ................................ 31.63 13.92 21.75 -- -- 20.02 The Asset Allocation Series: Conservative Investors .......................... 20.40 8.55 10.15 -- -- 9.65 Balanced ........................................ 19.75 7.34 11.17 -- -- 12.08 Growth Investors ................................ 26.37 12.15 17.13 -- -- 16.05 - ------------- (a) The International Portfolio received its initial funding on April 3, 1995; the Equity Index Portfolio on March 1, 1994; the Growth & Income and Quality Bond Portfolios on October 1, 1993; the Intermediate Government Securities Portfolio on April 1, 1991; the Conservative Investors and the Growth Investors Portfolios on October 2, 1989; the Global Portfolio on August 27, 1987; the High Yield Portfolio on January 2, 1987; the Aggressive Stock and Balanced Portfolios on January 27, 1986; the predecessor of the Money Market Portfolio on July 13, 1981; and the predecessor of the Common Stock Portfolio on January 13, 1976. (b) Unannualized.
3 Additional investment performance information appears in the attached Trust prospectus. ILLUSTRATIONS OF POLICY ACCOUNT AND CASH SURRENDER VALUES BASED ON HISTORICAL INVESTMENT RESULTS. The table on the next page was developed to demonstrate how the actual investment experience of the Trust and its predecessors would have affected the Policy Account value and Cash Surrender Value of hypothetical Incentive Life Plus policies held for specified periods of time. The table illustrates premiums, Policy Account values and Cash Surrender Values of twelve hypothetical Incentive Life Plus policies, each with a 100% premium allocation to a different Fund. The illustration also assumes that, in each case, the insured is a 40-year-old male, preferred non-tobacco user and that each policy has a level death benefit, a $300,000 face amount and a $4,000 annual premium. The table assumes that each policy was purchased on the first day of a calendar year. For Trust portfolios whose inception dates fall before June 30, the policy is assumed to have been purchased at the beginning of and earned the actual return over that entire calendar year of inception. For Trust portfolios whose inception dates fall after June 30, the policy is assumed to have been purchased at the beginning of the first full calendar year of that portfolio's operation. The table then illustrates what the Cash Surrender Value would have been after one policy year, after five policy years, after 10 policy years and as of December 31, 1995. Policy values reflect all charges assessed under the policy and by the Trust including an assumed charge for taxes of 2%. Where applicable, current charges have been used to determine policy values; if guaranteed charges were used, the results would be lower. 4 ILLUSTRATIONS OF INCENTIVE LIFE PLUS POLICY ACCOUNT AND CASH SURRENDER VALUES BASED ON HISTORICAL INVESTMENT RESULTS, $300,000 OF INITIAL INSURANCE PROTECTION AND CURRENT CHARGES
AT THE END OF THE FIRST YEAR AT THE END OF THE FIFTH YEAR ----------------------------------------- ------------------------------------------- TOTAL POLICY CASH TOTAL POLICY CASH PREMIUM ACCOUNT SURRENDER PREMIUM ACCOUNT SURRENDER PORTFOLIO PAID VALUE VALUE PAID VALUE VALUE - ------------ ----------------------------------------- ------------------------------------------- Money Market.......................... $4,000 $2,783 $ 881 $20,000 $17,828 $15,486 Int. Gov't Securities................. 4,000 2,764 862 QualityBond........................... 4,000 2,221 319 High Yield............................ 4,000 2,524 622 20,000 18,426 16,084 Growth & Income....................... 4,000 2,363 461 Equity Index.......................... 4,000 2,432 530 Common Stock.......................... 4,000 2,667 765 20,000 26,526 24,184 Global................................ 4,000 2,722 820 20,000 18,762 16,420 International......................... Aggressive Stock...................... 4,000 3,469 1,567 20,000 22,787 20,445 THE ASSET ALLOCATION SERIES: - -------------------------------------- Conservative Investors................ 4,000 2,585 683 20,000 16,322 13,980 Balanced.............................. 4,000 3,271 1,369 20,000 19,315 16,973 Growth Investors...................... 4,000 2,715 813 20,000 19,185 16,843
AT THE END OF THE TENTH YEAR DECEMBER 31, 1995 ----------------------------------------- ------------------------------------------- TOTAL POLICY CASH TOTAL POLICY CASH PREMIUM ACCOUNT SURRENDER PREMIUM ACCOUNT SURRENDER PORTFOLIO PAID VALUE VALUE PAID VALUE VALUE - ------------ ----------------------------------------- ------------------------------------------- Money Market.......................... $40,000 $41,583 $39,758 $52,000 $ 59,406 $ 59,041 Int. Gov't Securities................. 16,000 16,825 14,483 QualityBond........................... 4,000 6,083 3,981 High Yield............................ 32,000 43,697 41,507 Growth & Income....................... 4,000 6,649 4,547 Equity Index.......................... 4,000 7,449 5,347 Common Stock.......................... 40,000 68,804 66,979 76,000 338,694 338,694 Global................................ 28,000 41,782 39,592 International......................... 4,000 2,739 837 Aggressive Stock...................... 36,000 82,270 80,445 THE ASSET ALLOCATION SERIES: - -------------------------------------- Conservative Investors................ 20,000 22,934 20,572 Balanced.............................. 36,000 49,338 47,513 Growth Investors...................... 20,000 27,705 25,343 THE DEATH BENEFIT GUARANTEE / THREE YEAR NO LAPSE GUARANTEE PREMIUM FOR THIS POLICY WOULD BE $3,533.96. THESE VALUES ARE NOT AN ESTIMATE OR GUARANTEE OF FUTURE PERFORMANCE.
5 PART 1: DETAILED INFORMATION ABOUT EQUITABLE VARIABLE AND INCENTIVE LIFE PLUS INVESTMENT CHOICES THE COMPANY THAT ISSUES INCENTIVE LIFE PLUS EQUITABLE VARIABLE. Equitable Variable was organized in 1972 in New York State as a stock life insurance company. We are a wholly-owned subsidiary of The Equitable Life Assurance Society of the United States. We are licensed to do business in all 50 states, Puerto Rico, the Virgin Islands and the District of Columbia. At December 31, 1995, we had approximately $132.8 billion face amount of variable life insurance in force. OUR PARENT, EQUITABLE. Equitable, a New York stock life insurance company, has been in business since 1859. Equitable is a wholly-owned subsidiary of The Equitable Companies Incorporated (the Holding Company). The largest stockholder of the Holding Company is AXA S.A. (AXA), a French insurance holding company. AXA beneficially owns 60.6% of the outstanding shares of common stock of the Holding Company plus convertible preferred stock. Under its investment arrangements with Equitable and the Holding Company, AXA is able to exercise significant influence over the operations and capital structure of the Holding Company and its subsidiaries, including Equitable and Equitable Variable. AXA is the principal holding company for most of the companies in one of the largest insurance groups in Europe. The majority of AXA's stock is controlled by a group of five French mutual insurance companies. Equitable, the Holding Company and their subsidiaries managed approximately $195.3 billion of assets as of December 31, 1995. Equitable's assets do not back the benefits that we pay under our policies. Equitable's home office is 787 Seventh Avenue, New York, New York 10019. THE SEPARATE ACCOUNT AND THE TRUST THE SEPARATE ACCOUNT. The Separate Account was established on April 19, 1985 under the Insurance Law of the State of New York. The Separate Account is a type of investment company called a unit investment trust and is registered with the Securities and Exchange Commission (SEC) under the Investment Company Act of 1940 (1940 Act). This registration does not involve any supervision by the SEC of the management or investment policies of the Separate Account. Under New York law, we own the assets of the Separate Account and use them to support your policy and other variable life insurance policies. The portion of the Separate Account's assets supporting these policies may not be used to satisfy liabilities arising out of any other business we may conduct. This means that the assets supporting Policy Account values maintained in the Separate Account are not subject to the claims of our other creditors. We may also retain in the Separate Account amounts owed to us for charges or other permitted allocations. Because such retained amounts do not support Policy Account values, we may transfer them from the Separate Account to our general account at our discretion. THE TRUST. The Separate Account has several funds, each of which invests in shares of a corresponding portfolio of the Trust. The Trust is an open-end diversified management investment company, more commonly called a mutual fund. As a "series" type of mutual fund, it issues several different "series" of stock, each of which relates to a different Trust portfolio with a different investment policy. The Trust does not impose a sales charge or "load" for buying and selling its shares. The Trust's shares are bought and sold by our Separate Account at net asset value. The Trust's custodian is The Chase Manhattan Bank, N.A. The Trust sells its shares to separate accounts of insurance companies, both affiliated and not affiliated with Equitable. We currently do not foresee any disadvantages to our policyowners arising out of this. However, the Trust's Board of Trustees intends to monitor events in order to identify any material irreconcilable conflicts that possibly may arise and to determine what action, if any, should be taken in response. If we believe that the Trust's response to any of those events insufficiently protects our policyowners, we will see to it that appropriate action is taken to do so. Also, if we ever believe that any of the Trust's portfolios is so large as to materially impair the investment performance of a portfolio or the Trust, we will examine other investment options. THE TRUST'S INVESTMENT ADVISER. The Trust is advised by Alliance Capital Management L.P. (Alliance). Alliance is registered as an investment adviser under the Investment Advisers Act of 1940. Alliance, a publicly-traded limited partnership, is indirectly majority-owned by Equitable. Alliance's main office is 1345 Avenue of the Americas, New York, New York 10105. Alliance acts as an investment adviser to various separate accounts and general accounts of Equitable and other affiliated insurance companies. Alliance also provides management and consulting services to mutual funds, endowment funds, insurance companies, foreign entities, qualified and non-tax qualified corporate funds, public and private pension and profit-sharing plans, foundations and tax-exempt organizations. On December 31, 1995, Alliance was managing over $146.5 billion in assets. The advisory fee payable by the Trust is based on the following annual percentages of the value of each portfolio's daily average net assets:
- ----------------------------------------------------------------------------------------------------------------- DAILY AVERAGE NET ASSETS ------------------------------------------ FIRST NEXT OVER $350 $400 $750 PORTFOLIO MILLION MILLION MILLION - --------- ------------ ------------ ------------ Common Stock, Money Market and Balanced............................ .400% .375% .350% Aggressive Stock and Intermediate Government Securities............ .500% .475% .450% High Yield, Global, Conservative Investors and Growth Investors................................................ .550% .525% .500% - -----------------------------------------------------------------------------------------------------------------
6
- ----------------------------------------------------------------------------------------------------------------- DAILY AVERAGE NET ASSETS ------------------------------------------ FIRST NEXT $500 $500 OVER PORTFOLIO MILLION MILLION $1 BILLION - --------- ------------ ------------ ------------ Quality Bond and Growth & Income................................ .550% .525% .500% - -----------------------------------------------------------------------------------------------------------------
FIRST NEXT OVER $750 $750 $1.5 PORTFOLIO MILLION MILLION BILLION - --------- ------------ ------------ ------------ Equity Index.................................................... .350% .300% .250% - -----------------------------------------------------------------------------------------------------------------
FIRST OVER $500 NEXT $1.5 PORTFOLIO MILLION $1 BILLION BILLION - --------- ------------ ------------ ------------ International................................................... .900% .850% .800% - -----------------------------------------------------------------------------------------------------------------
INVESTMENT POLICIES OF THE TRUST'S PORTFOLIOS. Each portfolio has a different investment objective which it tries to achieve by following separate investment policies. The objectives and policies of each portfolio will affect its return and its risks. There is no guarantee that these objectives will be achieved. The policies and objectives of the Trust's portfolios are as follows:
- ---------------------------------------------------------------------------------------------------------------------------------- PORTFOLIO INVESTMENT POLICY OBJECTIVE - ----------- -------------------- ----------- FIXED INCOME SERIES: MONEY MARKET............ Primarily high quality short-term money market High level of current income while instruments. preserving assets and maintaining liquidity. INTERMEDIATE............ Primarily debt securities issued or guaranteed by High current income consistent with GOVERNMENT the U.S. Government, its agencies and relative stability of principal. SECURITIES instrumentalities. Each investment will have a final maturity of not more than 10 years or a duration not exceeding that of a 10-year Treasury note. QUALITY BOND............ Primarily investment grade fixed-income securities. High current income consistent with preservation of capital. HIGH YIELD.............. Primarily a diversified mix of high yield, High return by maximizing current income fixed-income securities involving greater and, to the extent consistent with that volatility of price and risk of principal and objective, capital appreciation. income than high quality fixed-income securities. The medium and lower quality debt securities in which the Portfolio may invest are known as "junk bonds." EQUITY SERIES: GROWTH & INCOME......... Primarily income producing common stocks and High total return through a combination securities convertible into common stocks. of current income and capital appreciation. EQUITY INDEX............ Selected securities in the S&P's 500 Index (the Total return performance (before trust "Index") which the adviser believes will, in the expenses) that approximates the aggregate, approximate the performance results of investment performance of the Index the Index. (including reinvestment of dividends) at a risk level consistent with that of the Index. COMMON STOCK............ Primarily common stock and other equity-type Long-term growth of capital and instruments. increasing income. GLOBAL.................. Primarily equity securities of non-United States Long-term growth of capital. as well as United States companies. INTERNATIONAL........... Primarily equity securities selected principally Long-term growth of capital. to permit participation in non-United States companies with prospects for growth. AGGRESSIVE STOCK........ Primarily common stocks and other equity-type Long-term growth of capital. securities issued by medium and other smaller sized companies with strong growth potential. - ----------------------------------------------------------------------------------------------------------------------------------
7
- ---------------------------------------------------------------------------------------------------------------------------------- PORTFOLIO INVESTMENT POLICY OBJECTIVE - ----------- -------------------- ----------- ASSET ALLOCATION SERIES: CONSERVATIVE............ Diversified mix of publicly-traded, fixed-income High total return without, in the adviser's INVESTORS and equity securities; asset mix and security opinion, undue risk to principal. selection are primarily based upon factors expected to reduce risk. The Portfolio is generally expected to hold approximately 70% of its assets in fixed income securities and 30% in equity securities. BALANCED................ Primarily common stocks, publicly-traded debt High return through a combination of current securities and high quality money market income and capital appreciation. instruments. The Portfolio is generally expected to hold 50% of its assets in equity securities and 50% in fixed income securities. GROWTH INVESTORS........ Diversified mix of publicly-traded, fixed-income High total return consistent with the and equity securities; asset mix and security adviser's determination of reasonable risk. selection based upon factors expected to increase possibility of high long-term return. The Portfolio is generally expected to hold approximately 70% of its assets in equity securities and 30% in fixed income securities. - ----------------------------------------------------------------------------------------------------------------------------------
Because Policy Account values may be invested in mutual fund options, Incentive Life Plus offers an opportunity for the Cash Surrender Value to appreciate more rapidly than it would under comparable fixed benefit whole life insurance. You must, however, accept the risk that if investment performance is unfavorable, the Cash Surrender Value may not appreciate as rapidly and, indeed, may decrease in value. More detailed information about the Trust, its investment policies, risks, expenses and all other aspects of its operations, appears in its prospectus, which is attached to this prospectus, and in its Statement of Additional Information referred to therein. THE GUARANTEED INTEREST ACCOUNT You may allocate some or all of your Policy Account to the Guaranteed Interest Account, which is funded by our general account and pays interest at a declared rate guaranteed for each policy year. The principal, after deductions, is also guaranteed. The general account supports all of our insurance and annuity guarantees, including the Guaranteed Interest Account, as well as our general obligations. The general account is subject to regulation and supervision by the Insurance Department of the State of New York and to the insurance laws and regulations of all jurisdictions where we are authorized to do business. Because of applicable exemptive and exclusionary provisions, interests in the general account have not been registered under the Securities Act of 1933 (1933 Act), nor is the general account an investment company under the 1940 Act. Accordingly, neither the general account, the Guaranteed Interest Account nor any interests therein are subject to regulation under the 1933 Act or the 1940 Act. We have been advised that the staff of the SEC has not made a review of the disclosures that are included in the prospectus for your information and that relate to the general account and the Guaranteed Interest Account. These disclosures, however, may be subject to certain generally applicable provisions of the Federal securities laws relating to the accuracy and completeness of statements made in prospectuses. The amount you have in the Guaranteed Interest Account at any time is the sum of the amounts allocated or transferred to it, plus the interest credited to it, minus amounts deducted, transferred and withdrawn from it. In addition, any policy loan is secured by an amount in your Policy Account equal to the outstanding loan. This amount remains part of the Policy Account but is assigned to the Guaranteed Interest Account. We refer to this amount as the loaned amount in the Guaranteed Interest Account. A Living Benefit payment will also result in amounts being transferred to the Guaranteed Interest Account. See LIVING BENEFIT OPTION on page 12. ADDING INTEREST IN THE GUARANTEED INTEREST ACCOUNT. We pay a declared interest rate on all amounts that you have in the Guaranteed Interest Account. At policy issuance, and prior to each policy anniversary, we declare the rates that will apply to amounts in the Guaranteed Interest Account for the following policy year. These annual interest rates will never be less than the minimum guaranteed interest rate of 4% (before deductions). Interest is credited and compounds daily at an effective annual rate that equals the declared rate for each policy year. Different rates may apply to policies currently being issued and previously issued policies. Different rates are also paid on unloaned and loaned amounts in the Guaranteed Interest Account. See POLICY LOAN INTEREST on page 14. Amounts securing a Living Benefit payment are considered unloaned amounts for purposes of crediting interest. TRANSFERS OUT OF THE GUARANTEED INTEREST ACCOUNT. Transfers out of the Guaranteed Interest Account to the Separate Account are allowed once a year on or within 30 days after your policy anniversary. If we receive your transfer request up to 30 days before your policy anniversary, the transfer will be made on your policy anniversary. If we receive your request on or within 30 days after your policy anniversary, the transfer will be made as of the date we receive your request. You may transfer up to 25% of your unloaned value in the Guaranteed Interest Account as of the transfer date or the minimum transfer amount, whichever is more. The minimum 8 transfer amount is $500 or your total unloaned value in the Guaranteed Interest Account on the transfer date, whichever is less. Amounts securing a Living Benefit payment may not be transferred from the Guaranteed Interest Account. PART 2: DETAILED INFORMATION ABOUT INCENTIVE LIFE PLUS FLEXIBLE PREMIUMS You may choose the amount and frequency of premium payments, as long as they are within the limits described below. We determine the applicable minimum initial premium based on the age, sex, rating class and tobacco user status of the insured person, the initial Face Amount of the policy (the initial minimum Face Amount is $50,000) and any additional benefits selected. In certain situations, however, no distinction is made based on the sex of the insured person. See COST OF INSURANCE CHARGE on page 16. You may choose to pay a higher initial premium. The full initial premium shown on your application must be given to your agent or broker on or before the day the policy is delivered to you. No insurance under your policy will take effect (a) until a policy is delivered and the full initial premium is paid while the person proposed to be insured is living and (b) unless the information in the application continues to be true and complete, without material change, as of the time the initial premium is paid. If you have submitted the full initial premium with your application, we may, subject to certain conditions, provide a limited amount of temporary insurance on the proposed insured. You may review a copy of our Temporary Insurance Agreement on request. Premiums must be by check or money order drawn on a U.S. bank in U.S. dollars and made payable to Equitable Variable. Premiums after the first must be sent directly to our Administrative Office. The minimum premium is $100 (policies issued in some states or automatic payment plans may have different minimums.) This minimum may be increased if we give you written notice. We may return premium payments if we determine based upon our interpretation of current tax rules that such premiums would cause your policy to become a modified endowment contract or to cease to qualify as life insurance under Federal income tax law. We may also make such changes to the policy as we deem necessary to continue to qualify the policy as life insurance. See TAX EFFECTS on page 20 for an explanation of modified endowment contracts, the special tax consequences of such contracts, and how your policy might become a modified endowment contract. PLANNED PERIODIC PREMIUMS AND SPECIFIED PREMIUMS. Although premiums are flexible, the Policy Information Page will show a "planned" periodic premium and "specified premiums." Specified premiums are called no-lapse guarantee premiums for policies issued in New York and New Jersey. We measure actual premiums against specified premiums to determine whether the death benefit guarantee provision (or the 3-Year no lapse guarantee provision) will prevent the policy from going into default. Specified premiums are actuarially determined at issue based on the age, sex, tobacco user status and rating class of the insured person, the Face Amount and any additional benefits. Specified premiums may change if you make policy changes that increase or decrease the Face Amount of the policy or a rider, add or eliminate a rider, or if there is a change in the insured person's rating or tobacco user classification. Certain additional benefit riders will cause specified premiums to increase each year. We reserve the right to limit the amount of any premium payments which are in excess of specified premiums. The planned periodic premium is an amount you determine (within limits set by us) when you apply for the policy. The planned premium may be more or less than the specified premiums. Neither the planned premium nor the specified premiums are required premiums. Failure to pay premiums could cause the policy to go into default and ultimately terminate. See YOUR POLICY CAN TERMINATE on page 19. PREMIUM AND MONTHLY CHARGE ALLOCATIONS. On your application you provide us with initial instructions as to how to allocate your net premiums and monthly charges among the Funds and the Guaranteed Interest Account. Allocation percentages may be any whole number from zero to 100, but the sum must equal 100. Allocations to a Fund take effect on the first business day that follows the 20th calendar day after the Issue Date of your policy. The Issue Date is shown on the Policy Information Page, and is the date we actually issue your policy. The date your allocation instructions take effect is called the Allocation Date. Our business days are described in HOW WE DETERMINE THE UNIT VALUE on page 13. Until the Allocation Date, any net premiums allocated to a Fund will be allocated to the Money Market Fund, and all monthly deductions allocated to a Fund will be deducted from the Money Market Fund. On the Allocation Date, amounts in the Money Market Fund will be allocated to the various Funds in accordance with your policy application. We may delay the Allocation Date for the same reasons that we would delay effecting a transfer request. There will be no charge for the transfer out of the Money Market Fund on the Allocation Date. You may change the allocation percentages for either your current premium payment or the current and future premium payments by writing to our Administrative Office and indicating the changes you wish to make. Your request must be signed. These changes will go into effect as of the date your request is received at our Administrative Office, but no earlier than the first business day following the Allocation Date, and will affect transactions on and after such date. 9 DEATH BENEFITS We pay a benefit to the beneficiary of the policy when the insured person dies. This benefit will be equal to the death benefit under your policy plus any additional benefits included in your policy and then due, less any policy loan, any lien securing a Living Benefit payment and accrued interest. If the insured person dies during a grace period, we will also deduct any overdue monthly charges. You may choose between two death benefit options: o OPTION A provides a death benefit equal to the policy's Face Amount. Except as described below, the Option A benefit is fixed. o OPTION B provides a death benefit equal to the policy's Face Amount PLUS the amount in your Policy Account on the day the insured person dies. Under Option B, the value of the benefit is variable and fluctuates with the amount in your Policy Account. Policyowners who prefer to have favorable investment experience reflected in increased insurance coverage should choose Option B. Policyowners who prefer to have insurance coverage that does not vary in amount and lower cost of insurance charges should choose Option A. Under both options, a higher death benefit may apply. This higher death benefit is a percentage multiple of the amount in your Policy Account. The percentage is generally based on provisions of Federal tax law which require a minimum death benefit in relation to cash value for your policy to qualify as life insurance. A higher percentage multiple than that required by Federal tax law will be applied at ages 91 and over. Since cost of insurance charges are assessed on the difference between the Policy Account value and the death benefit, these charges will increase if the higher death benefit takes effect. The higher death benefit will be the amount in your Policy Account on the day the insured person dies times the percentage for the insured person's age (nearest birthday) at the beginning of the policy year of the insured person's death. The percentage declines as the insured person gets older. For ages that are not shown on the following table, the percentage multiples will decrease by a ratable portion for each full year.
- --------------------------------------------------------------------------------------------------------------------------------- TABLE OF DEATH BENEFITS AS A PERCENTAGE MULTIPLE OF POLICY ACCOUNT VALUES INSURED 40 or 45 50 55 60 65 70 75 to 100 PERSON'S AGE under 95 250% 215% 185% 150% 130% 120% 115% 105% 100% - ---------------------------------------------------------------------------------------------------------------------------------
For example, if the insured person were 75 years old and your policy had a Policy Account value of $200,000, the higher death benefit would be 105% of $200,000 or $210,000. GUARANTEEING THE DEATH BENEFIT. We will guarantee your death benefit coverage, regardless of the policy's investment performance, if you have paid a certain amount of premiums into your policy and you have not withdrawn or borrowed those amounts. The death benefit guarantee period is either three years (under the 3-Year no lapse guarantee provision) or the longer period described in the next paragraph (under the death benefit guarantee provision). Whether your policy has the 3-Year no lapse guarantee provision or the death benefit guarantee provision depends upon the state in which your policy is issued. The death benefit option you select (A or B) can affect the length of time that the death benefit guarantee provision will last. If you have selected death benefit Option A, and you never change it to Option B, then the death benefit guarantee provision will terminate on the Final Policy Date. See MATURITY BENEFIT on page 12. If ever your policy, at any time, has an Option B death benefit, the death benefit guarantee provision will terminate on the later of (1) the policy anniversary nearest the insured person's 80th birthday or (2) the 15th policy anniversary. However, if your death benefit first changes to an Option B after this time, the death benefit guarantee provision will terminate immediately. The death benefit option does not have any effect on the length of the 3-Year no lapse guarantee provision. Under both the 3-Year no lapse guarantee provision and the death benefit guarantee provision, we compare the specified premium fund with the actual premium fund in order to determine whether your coverage remains in effect. Your policy will not go into default if the actual premium fund is equal to or greater than the specified premium fund and any policy loan plus accrued interest does not exceed the Cash Surrender Value. The specified premium fund for any policy month is the accumulation of all the specified premiums shown on the Policy Information Page up to that month, at 4% interest. The actual premium fund for any policy month is the accumulation of all the premiums actually paid under the policy at 4% interest, less all withdrawals accumulated at 4% interest. CHANGES IN INSURANCE PROTECTION CHANGING THE FACE AMOUNT. You may request an increase in the Face Amount after the first policy year and a decrease after the second policy year. You must send your signed written request to our Administrative Office. See TAX EFFECTS on page 20 for the tax consequences of changing the Face Amount. If disability waiver goes into effect (see ADDITIONAL BENEFITS MAY BE AVAILABLE on page 12), we will not permit any Face Amount change. Any change will be subject to our approval and the following conditions: 10 Face Amount Increases. To increase the Face Amount, you must provide satisfactory evidence that the insured person is still insurable. The cost of insurance rate for the amount of the increase will be based on the rating class, attained age and tobacco user status of the insured person on the date of the increase and on the insured person's sex. See COST OF INSURANCE CHARGE on page 16. We reserve the right to decline Face Amount increases if the insured person has become a more expensive risk. Any increase must be at least $10,000. Specified premiums as well as monthly deductions from your Policy Account for the cost of insurance and the death benefit guarantee provision will generally increase beginning on the date the increase takes effect. An administrative charge of $1.50 for each additional $1,000 of insurance (up to a maximum charge of $240) will be deducted from your Policy Account. See HOW POLICY ACCOUNT CHARGES ARE ALLOCATED on page 17. Surrender Charges will generally be applicable to a Face Amount increase for fifteen years from the effective date of the increase. The Premium Surrender Charge percentage may be higher than the percentage applied prior to the increase. Face Amount reductions will be applied against prior Face Amount increases, if any, in the reverse order in which such increases occurred, and then to the original Face Amount. See SURRENDER CHARGES on page 18. Following the increase, a portion of each premium payment will be deemed to be attributable to the Face Amount increase. The Premium Sales Charge will generally be deducted from this amount, even if we had previously stopped deducting the charge on the premiums paid before the increase in accordance with our current practice. The Premium Sales Charge percentage may be lower than the percentage applied prior to the increase. See DEDUCTIONS FROM PREMIUMS -- PREMIUM SALES CHARGE on page 16. You will have the right to cancel the Face Amount increase within the later of (1) 45 days after the application for the increase is signed, (2) 10 days after receipt of a new Policy Information Page showing the increase and (3) 10 days after we mail or personally deliver a Notice of Cancellation Right. If you cancel the increase we will reverse any charges attributable to the increase and recalculate the Policy Account value, Cash Surrender Value and Surrender Charges to what they would have been had the increase not taken place. No Premium or Administrative Surrender Charge will be incurred upon cancellation. We reserve the right not to offer the cancellation right for Face Amount increases if we are no longer required to do so under applicable law. Face Amount Decreases. You may reduce the Face Amount but not below the minimum we require to issue this policy at the time of the reduction. Any reduction must be at least $10,000. Specified premiums as well as monthly deductions from your Policy Account for the death benefit guarantee provision and the cost of insurance will generally decrease (even though the rates may increase), beginning on the date the decrease in Face Amount takes effect. Face Amount decreases that reduce the Face Amount below certain levels will result in higher monthly administrative charges. If you reduce the Face Amount during the first fifteen policy years or during the first fifteen years after a Face Amount increase, we may deduct a pro rata share of the applicable Surrender Charges from the Policy Account. Assuming you have not previously changed the Face Amount, the pro rata Surrender Charges for a partial surrender will be determined by dividing the amount of the Face Amount decrease by the initial Face Amount and multiplying that fraction by the Surrender Charges. Face Amount reductions will be applied against prior Face Amount increases, if any, in the reverse order in which such increases occurred, and then to the original Face Amount. See DEDUCTIONS FROM YOUR POLICY ACCOUNT on page 16 and SURRENDER CHARGES on page 18. CHANGING THE DEATH BENEFIT OPTION. At any time after the second policy year while your policy is in force, you may change the death benefit option by sending a signed written request to our Administrative Office. See TAX EFFECTS on page 20 for the tax consequences of changing the death benefit option. o If you change from OPTION A TO OPTION B, the Face Amount will be decreased by the amount in your Policy Account on the date of the change. This change will shorten the length of time the death benefit guarantee provision is available. See GUARANTEEING THE DEATH BENEFIT on page 10. We may not allow such a change if it would reduce the Face Amount below the minimum required to issue this policy at the time of the reduction. We may require evidence of insurability to make the change. o If you change from OPTION B TO OPTION A, the Face Amount will be increased by the amount in the Policy Account on the date of the change. These increases and decreases in Face Amount are made so that the amount of the death benefit remains the same on the date of the change. When the death benefit remains the same, there is no change in the net amount at risk, which is the amount on which cost of insurance charges are based (see COST OF INSURANCE CHARGE on page 16). If your death benefit is determined by a percentage multiple of the Policy Account, however, the new Face Amount will be determined differently. A Face Amount change that results from a death benefit option change will not affect any expense or sales charge (including any Surrender Charge) which varies by Face Amount, and no Surrender Charges will be deducted or established at the time of the change. SUBSTITUTION OF INSURED PERSON. If you provide satisfactory evidence that the person proposed to be insured is insurable, then, subject to certain restrictions, you may, after the second policy year, substitute the insured person under your policy. The cost of insurance charges may change, but we will not change the Surrender Charges. Since substituting the insured person is a taxable event and may have other adverse tax consequences as well, you should consult your tax adviser prior to substituting the insured person. As a condition to substituting the insured person we may require you to sign a form acknowledging the potential tax consequences of making this change. A $100 charge will be deducted from the Policy Account for each substitution of insured person. 11 WHEN POLICY CHANGES GO INTO EFFECT. A substitution of the insured person, or change in Face Amount or death benefit option, will go into effect at the beginning of the policy month that coincides with or follows the date we approve the request for the change. In some cases we may not approve a change because based upon our interpretation of current rules, the change might disqualify your policy as life insurance under applicable Federal tax law. In other cases there may be adverse tax consequences as a result of the change. See TAX EFFECTS on page 20. MATURITY BENEFIT If the insured person is still living on the policy anniversary nearest his or her 100th birthday (Final Policy Date), we will pay you the amount in the Policy Account net of any policy loan, any lien securing a Living Benefit payment and accrued interest. The policy will then terminate. You may choose to have this benefit paid in installments. See TAX EFFECTS on page 20 and YOUR PAYMENT OPTIONS on page 23. LIVING BENEFIT OPTION Subject to our underwriting guidelines and availability in your state, our Living Benefit rider will be added to your policy at issue. The Living Benefit rider enables the policyowner to receive a portion of the policy's death benefit (excluding death benefits payable under certain riders) if the insured person has a terminal illness. Certain eligibility requirements apply when you submit a Living Benefit claim (for example, satisfactory evidence of less than six month life expectancy). There is no additional charge for the rider, but we will deduct an administrative charge of up to $250 from the proceeds of the Living Benefit payment. In addition, if you tell us that you do not wish to have the rider added at issue, but you later ask to add it, additional underwriting will be required and there will be a $100 administrative charge. When a Living Benefit claim is paid, we establish a lien against the policy. The amount of the lien is the sum of the Living Benefit payment and any accrued interest on that payment. Interest will be charged at a rate equal to the greater of: (i) the yield on a 90-day Treasury bill and (ii) the maximum adjustable policy loan interest rate permitted in the state your policy is delivered. See BORROWING FROM YOUR POLICY ACCOUNT -- POLICY LOAN INTEREST on page 14. Until a death benefit is paid, or the policy is surrendered, a portion of the lien is allocated to the policy's Cash Surrender Value. This liened amount will be transferred to the Guaranteed Interest Account where it will earn interest at the same rate as unloaned amounts. See THE GUARANTEED INTEREST ACCOUNT on page 8. This liened amount will not be available for loans, transfers or partial withdrawals. Any death benefit, maturity benefit or Net Cash Surrender Value payable upon policy surrender will be reduced by the amount of the lien. Unlike a death benefit received by a beneficiary after the death of an insured, receipt of a Living Benefit payment may be taxable as a distribution under the policy. See TAX EFFECTS on page 20 for a discussion of the tax treatment of distributions under the policy. Consult your tax adviser. Receipt of a Living Benefit payment may also affect a policyowner's eligibility for certain government benefits or entitlements. You should contact your Equitable agent if you wish to make a claim under the rider. ADDITIONAL BENEFITS MAY BE AVAILABLE Your policy may include additional benefits. A monthly charge will be deducted from your Policy Account for each additional benefit you choose. Eligibility for and changes in these benefits are subject to our underwriting and other rules. More details will be included in your policy if you choose any of these benefits. The following additional benefits are currently available: disability waiver benefits, accidental death benefit, term insurance riders for the insured person, children's term insurance, term insurance on an additional insured person, designated insured option rider, option to purchase additional insurance and first-to-die term insurance. The designated insured option rider permits the policyowner, upon the death of the insured person, to purchase insurance on the life of a "designated insured person" without evidence of insurability. The option to purchase additional insurance permits you to purchase additional amounts of insurance on the insured person, without evidence of insurability, upon the occurrence of certain specified events. The first-to-die rider is yearly renewable term insurance that insures two lives and pays a death benefit upon the first death. The term insurance riders for the insured person allow you to purchase additional death benefit coverage. Choosing coverage under the term insurance rider for the insured person in lieu of coverage under the base policy will reduce total charges and increase Policy Account values on a current charge basis. The more term insurance coverage you elect, the greater will be the amount of reduction in charges and increase in Policy Account values on a current charge basis. Also, term coverage is not subject to a surrender charge. However, if the higher death benefit becomes applicable (see DEATH BENEFITS on page 10) or if term rider insurance charges increase in relation to cost of insurance charges on the base policy, the combination coverage may ultimately become more costly and have lower Policy Account values than coverage under the base policy alone. Generally, the greater the proportion of term insurance coverage you elect, the greater the likelihood that the higher death benefit will apply. Also, the Living Benefit option discussed above does not apply to any term insurance coverage. Moreover, in New York, there are age restrictions on the final renewal period for term riders. If you later terminate your term rider coverage and also increase the Face Amount under the base policy, a new Surrender Charge period will commence. The amount of the death benefit guarantee premium will be affected by the term rider coverage. Your agent can provide further information and policy illustrations showing how the term riders can affect your policy values under different assumptions. YOUR POLICY ACCOUNT VALUE The amount in your Policy Account is the sum of the amounts you have in the Guaranteed Interest Account and in the Funds. Your Policy Account also reflects various charges. See DEDUCTIONS AND CHARGES on page 15. 12 AMOUNTS IN THE SEPARATE ACCOUNT. Amounts allocated, transferred or added to a Fund are used to purchase units of that Fund. Units are redeemed from a Fund when amounts are withdrawn, transferred or deducted for charges or capitalized loan interest. The number of units purchased or redeemed in a Fund is calculated by dividing the dollar amount of the transaction by the Fund's unit value calculated after the close of business that day. On any given day, the value you have in a Fund is the unit value for that Fund times the number of units credited to you in that Fund. HOW WE DETERMINE THE UNIT VALUE. We determine unit values for the Funds at the end of each business day. The unit value that applies to a transaction taking effect on a business day will be the unit value calculated at the close of business on that day. Generally, a business day is any day we are open and the New York Stock Exchange is open for trading. We are closed for national business holidays, including Martin Luther King, Jr. Day, and also on the Friday after Thanksgiving. Additionally, we may choose to close on the day immediately preceding or following a national business holiday or due to emergency conditions. We will not process any policy transactions on those days other than a policy anniversary report and the payment of death benefit proceeds. The unit value for any business day is equal to the unit value for the preceding business day multiplied by the net investment factor for that Fund on that business day. A net investment factor is determined for each Fund of the Separate Account every business day as follows: first, we take the net asset value of a share in the corresponding Trust portfolio at the close of business that day, as reported by the Trust, and we add the per share amount of any dividends or capital gains distributions paid by the Trust on that day. We divide this amount by the per share net asset value on the preceding business day. Then, we subtract a daily asset charge for each calendar day between business days (for example, a Monday calculation may include charges for Saturday, Sunday and Monday). The daily charge is currently at an annual rate of .60% and is guaranteed not to exceed an annual rate of .90%. See CHARGES AGAINST THE SEPARATE ACCOUNT on page 17. For a period of time, this charge will be deducted differently for policies issued in New York. See DEDUCTIONS FROM YOUR POLICY ACCOUNT -- Mortality & Expense Risk Charge For New York Policyowners on page 17. Finally, we reserve the right to subtract any daily charge for taxes or amounts set aside as a reserve for taxes. For current Incentive Life Plus unit values, call (212) 714-5015. TRANSFERS OF POLICY ACCOUNT VALUE. You may request a transfer of amounts among Funds or to the Guaranteed Interest Account. Special rules apply to transfers out of the Guaranteed Interest Account. See TRANSFERS OUT OF THE GUARANTEED INTEREST ACCOUNT on page 8. You may make a transfer by telephone or by submitting a signed written transfer request to our Administrative Office. Transfer request forms are available from your Equitable agent or from our Administrative Office. Special rules apply to telephone transfers. See TELEPHONE TRANSFERS below. The minimum amount which may be transferred is $500. This minimum need not come from any one Fund or be transferred to any one Fund as long as the total amount transferred that day, including any amounts transferred to or from the Guaranteed Interest Account, is at least equal to the minimum. However, we will transfer the entire amount in any Fund even if it is less than the minimum specified in your policy. A lower minimum amount applies to our Automatic Transfer Service which is described below. Transfers take effect on the date we receive your request, but no earlier than the first business day following the Allocation Date. When part of a transfer request cannot be processed, we will not process any part of the request. This could occur, for example, where the request does not comply with our transfer limitations, or where the request is for a transfer of an amount greater than that currently allocated to a Fund. We may delay making a transfer if the New York Stock Exchange is closed or the SEC has declared that an emergency exists. In addition, we may delay transfers where permitted under applicable law. AUTOMATIC TRANSFER SERVICE. The Automatic Transfer Service enables you to make automatic monthly transfers out of the Money Market Fund into the other Funds. To start using this service you must first complete a special election form that is available from your agent or our Administrative Office. You must also have a minimum of $5,000 in the Money Market Fund on the date the Automatic Transfer Service is scheduled to begin. You can elect up to eight Funds for monthly transfers, but the minimum amount that may be transferred to each Fund each month is $50. If you elect the Automatic Transfer Service with your policy application, the automatic transfers will begin in the second policy month following the Allocation Date. If you elect the Automatic Transfer Service after your application has been submitted, automatic transfers will begin on the next monthly processing date after we receive your election form at our Administrative Office. See POLICY PERIODS, ANNIVERSARIES, DATES AND AGES on page 19. The Automatic Transfer Service will remain in effect until the earliest of the following events: (1) the amount in the Money Market Fund is insufficient to cover the automatic transfer amount; (2) the policy is in a grace period; (3) we receive at our Administrative Office your written instruction to cancel the Automatic Transfer Service; or (4) we receive notice of death under the policy. Using the Automatic Transfer Service does not guarantee a profit or protect against loss in a declining market. TELEPHONE TRANSFERS. In order to make transfers by telephone, you must first complete and return an authorization form. Authorization forms can be obtained from your Equitable agent or our Administrative Office. The completed signed form MUST be returned to our Administrative Office before requesting a telephone transfer. Telephone transfers may be requested on each day we are open to transact business. You will receive the Fund's unit values as of the close of business on the day you call. We do not accept telephone transfer requests after 4:00 p.m. Eastern Time. Only one telephone transfer request is permitted per day and it may not be revoked at any time. The telephone transfer requests are automatically recorded and are invalid if incomplete information is given, portions of the request are inaudible, no authorization form is on file, or the request does not comply with the transfer limitations described above. 13 We have established reasonable procedures designed to confirm that instructions communicated by telephone are genuine. Such procedures include requiring certain personal identification information prior to acting on telephone instructions and providing written confirmation of instructions communicated by telephone. If we do not employ reasonable procedures to confirm that instructions communicated by telephone are genuine, we may be liable for any losses arising out of any act or any failure to act resulting from our own negligence, lack of good faith, or willful misconduct. In light of the procedures established, we will not be liable for following telephone instructions that we reasonably believe to be genuine. During times of extreme market activity it may be impossible to contact us to make a telephone transfer. If this occurs, you should submit a written transfer request to our Administrative Office. Our rules on telephone transfers are subject to change and we reserve the right to discontinue telephone transfers in the future. CHARGE FOR TRANSFERS. We have reserved the right under your policy to make a charge of up to $25 for transfers of Policy Account value. Currently, you will be able to make 12 free transfers in any policy year, but we will charge $25 per transfer after the twelfth transfer. All transfers made on one transfer request form will count as one transfer, and all transfers made in one telephone request will count as one transfer. Transfers made through the Automatic Transfer Service or on the Allocation Date will not count toward the twelve free transfers. No charge will apply to the transfer of all of your amounts in the Separate Account to the Guaranteed Interest Account. BORROWING FROM YOUR POLICY ACCOUNT You may borrow up to 90% of your policy's Cash Surrender Value using only your policy as security for the loan. Any new loan must be at least $500. If you request an additional loan, the additional amount will be added to the outstanding loan and accrued loan interest. Any amount that secures a loan remains part of your Policy Account but is assigned to the Guaranteed Interest Account. This loaned amount earns an interest rate expected to be different from the interest rate for unloaned amounts. Amounts securing a Living Benefit payment are not available for policy loans. HOW TO REQUEST A LOAN. You may request a loan by sending a signed written request to our Administrative Office. You should tell us how much of the loan you want taken from your unloaned amount in the Guaranteed Interest Account and how much you want taken from the Funds. If you request a loan from a Fund, we will redeem units sufficient to cover that part of the loan and transfer the amount to the loaned portion of the Guaranteed Interest Account. The amounts you have in each Fund or the Account will be determined as of the day your request for a loan is received at our Administrative Office. If you do not indicate how you wish to allocate it, the loan will be allocated according to the deduction allocation percentages applicable to your Policy Account. If the loan cannot be allocated based on these percentages, it will be allocated based on the proportions of your unloaned amount in the Guaranteed Interest Account and your values in the Separate Account to the unloaned value of your Policy Account. POLICY LOAN INTEREST. Interest on a policy loan accrues daily at an adjustable interest rate. We determine the rate at the beginning of each policy year. The same rate applies to any outstanding policy loans and any new amounts you borrow during the year. You will be notified of the current rate when you apply for a loan. The maximum rate is the greater of 5%, or the "Published Monthly Average" for the month that ends two months before the interest rate is set. The "Published Monthly Average" is the Monthly Average Corporates yield shown in Moody's Corporate Bond Yield Averages published by Moody's Investors Service, Inc. If this average is no longer published, we will use any successor or the average established by the insurance supervisory official of the jurisdiction in which the policy is delivered. We will not charge more than the maximum rate permitted by applicable law. We may also set a rate lower than the maximum. Any change in the rate from one year to the next will be at least 1/2%. The maximum loan interest rate will only change, therefore, if the Published Monthly Average differs from the previous interest rate by at least 1/2 of 1%. You will be notified in advance of any increase in the interest rate on any loan you have outstanding. When you borrow on your policy, the amount of your loan is set aside in the Guaranteed Interest Account where it earns a declared rate for loaned amounts. The interest rate we credit to the loaned portion of the Guaranteed Interest Account will be at an annual rate up to 2% less than the loan interest rate we charge. However, we reserve the right to credit a lower rate than this if in the future tax laws change such that our taxes on policy loans or policy loan interest are increased. Under our current rules, the rate we credit on loaned amounts for the first fifteen policy years is 1% less than the rate we charge for policy loan interest, and, except for policies issued in New York, the rate difference drops from 1% to 1/4 of 1% beginning in the sixteenth policy year. For policies issued in New York, beginning in the twenty-first policy year, the current rate we credit on loaned amounts is 1/2 of 1% less than the rate we charge for loan interest, and this spread decreases to zero beginning in the thirty-first policy year. However, policies issued in New York on or about July 1, 1996, and after, will have the same loan spread as policies issued in other states (as described above). If your policy will be issued in New York, ask your agent which loan spread will apply to your policy. Because Incentive Life Plus was offered for the first time in 1995, no reduction in the rate difference has yet been attained. These rate differentials are those currently in effect and are not guaranteed. Interest credited on loaned amounts will never be less than 4%. Interest is credited on any loaned amount in the Guaranteed Interest Account on each policy anniversary and any time you repay a policy loan in full. Credited interest on the loaned amount is allocated to the Separate Account funds and to the unloaned portion of the Guaranteed Interest Account in accordance with your premium allocation percentages. WHEN INTEREST IS DUE. Interest is due on each policy anniversary. If you do not pay the interest when it is due, it will be added to your outstanding loan and allocated based on the deduction allocation percentages for your Policy Account which are then in effect. This means an additional loan is made to pay the interest and amounts are transferred from the investment funds to make the loan. If the interest cannot be allocated on this basis, it will be allocated as described above for allocating your loan. 14 REPAYING THE LOAN. You may repay all or part of a policy loan at any time. While you have a policy loan, we assume that any money you send us is a premium payment. If you wish to have any of these payments applied as a loan repayment, you must specifically so indicate in writing. Loan repayments are not subject to a charge for taxes or a Premium Sales Charge. Any amount not needed to repay a loan and accrued loan interest will be applied as a premium payment. We will first allocate loan repayments to our Guaranteed Interest Account until the amount of any loans originally allocated to that Account have been repaid. After you have repaid this amount, you may choose how you want us to allocate the balance of any additional repayments. If you do not provide specific instructions, repayments will be allocated on the basis of your premium allocation percentages. THE EFFECTS OF A POLICY LOAN. A loan will have a permanent effect on the value of your Policy Account and, therefore, on the benefits under your policy, even if the loan is repaid. The loaned amount set aside in the Guaranteed Interest Account will not be available for investment in the Funds or in the unloaned portion of the Guaranteed Interest Account. Whether you earn more or less with the loaned amount set aside depends on the investment experience of the Funds and the rates declared for the unloaned portion of the Guaranteed Interest Account. The amount of any policy loan and accrued loan interest will reduce the proceeds paid from your policy upon the death of the insured person, policy maturity or policy surrender. In addition, a loan will reduce the amount available for you to withdraw from your policy. See TAX EFFECTS on page 20 for the tax consequences of a policy loan. A loan may also affect the length of time that your insurance remains in force because the amount set aside to secure your loan cannot be used to cover monthly deductions or a loan may prevent the death benefit guarantee provision from keeping the policy out of default. See YOUR POLICY CAN TERMINATE on page 19. PARTIAL WITHDRAWALS AND SURRENDER PARTIAL WITHDRAWALS. At any time after the first policy year while the insured person is living, you may request a partial withdrawal of your Net Cash Surrender Value by writing to our Administrative Office. Your request must be signed. When you make a partial withdrawal, an expense charge of $25 or 2% of the amount requested, whichever is less, will be deducted from your Policy Account. Any such withdrawal is subject to our approval and to certain conditions. Amounts securing a Living Benefit payment are not available for partial withdrawals. In addition, we reserve the right to decline a request for a partial withdrawal. Under our current rules, a withdrawal must: o be at least $500, o not cause the death benefit to fall below the minimum Face Amount for which we would issue the policy at the time, and o not cause the policy to fail to qualify as life insurance under applicable tax law. You may specify how much of the withdrawal you want taken from amounts you have in each Fund and the unloaned portion of the Guaranteed Interest Account. The related expense charge will also be deducted from the amount withdrawn. If you do not specifically indicate, we will make the withdrawal and deduct the related expense charge on the basis of your deduction allocation percentages. If we cannot make the withdrawal and deduct the expense charge in the manner discussed above, we will make the withdrawal and deduction based on the proportions of your unloaned amounts in the Guaranteed Interest Account and the Funds to the total unloaned value of your Policy Account. A partial withdrawal reduces the amount you have in your Policy Account and Cash Surrender Value on a dollar-for-dollar basis. Normally, it also reduces the death benefit on a dollar-for-dollar basis, but does not affect the net amount at risk, which is the difference between the current death benefit and the amount in your Policy Account. If you selected death benefit Option A, the Face Amount of your policy will generally be reduced so that there will be no change in the net amount at risk. However, under either option, if the death benefit is based on the Policy Account percentage multiple, the reduction in death benefit would be greater and the net amount at risk would be reduced. See DEATH BENEFITS on page 10. The withdrawal and these reductions will be effective as of the date your request is received at our Administrative Office. See TAX EFFECTS on page 20 for the tax consequences of a partial withdrawal and a reduction in benefits. SURRENDER FOR NET CASH SURRENDER VALUE. The Cash Surrender Value is the amount in your Policy Account minus the Surrender Charges described under SURRENDER CHARGES on page 18. The Net Cash Surrender Value equals the Cash Surrender Value minus any loan and accrued loan interest. You may surrender your policy for its Net Cash Surrender Value at any time while the insured person is living. See TAX EFFECTS on page 20 for the tax consequences of a surrender. We will deduct from the Net Cast Surrender Value any amount securing a Living Benefit payment. We will compute the Net Cash Surrender Value as of the date we receive your written surrender request and the policy at our Administrative Office. All insurance coverage under your policy will end on that date. DEDUCTIONS AND CHARGES DEDUCTIONS FROM PREMIUMS. Charges for certain taxes are deducted from all premiums and a Premium Sales Charge will be deducted from your premiums as specified below. The balance of each premium (the net premium) is placed in your Policy Account. Charge for Taxes. We deduct a charge designed to approximate certain taxes and additional charges imposed upon us by states and other jurisdictions. The amount of this charge is expressed as a percentage of each premium payment and generally varies depending on the jurisdiction in which the insured person resides. Such charges currently range from .75% to 5% (Virgin Islands). This charge may be increased or decreased to reflect any changes in our taxes. In addition, if an insured person changes his or her place of residence, you should notify us to change our records so that the charge will reflect the new jurisdiction. Any change will take effect on the next policy anniversary. 15 Premium Sales Charge. A percentage of each premium will be deducted to compensate us in part for sales and promotional expenses in connection with selling Incentive Life Plus, such as commissions, the cost of preparing sales literature, other promotional activities and other direct and indirect expenses. We pay these expenses from our own resources, including the Premium Sales Charge, any Premium Surrender Charge we might collect and any profit we may earn on the charges deducted under the policy. See SURRENDER CHARGES on page 18. The Premium Sales Charge percentage depends upon the Face Amount of the Policy as follows: FACE AMOUNT RANGE: $50,000 TO $99,999 $100,000 TO $499,999 $500,000 AND OVER - ------------------------------------------------------------------------------------------------- PERCENTAGE: 6% 4% 3%
Currently, we deduct the Premium Sales Charge from each premium payment until the cumulative premiums paid equals ten times the "sales load target premium." The sales load target premium varies by issue age, sex and tobacco user status of the insured person and the policy's Face Amount, and is generally less than or equal to 75% of one annual whole life premium calculated at 4% interest and guaranteed maximum cost of insurance and expense charges. We reserve the right, however, to deduct the Premium Sales Charge from each premium payment at any time. If you request a Face Amount increase above the previous highest Face Amount, we will establish a new sales load target premium attributable to the amount of the increase, and the Premium Sales Charge will be deducted from that portion of each subsequent premium payment deemed attributable to the increase until such premium payments have cumulatively reached ten times the new sales load target premium. Moreover, if the increase moves the policy into a higher Face Amount range, the Premium Sales Charge percentage applied to future premiums will be the lower percentage for that Face Amount range. Face Amount decreases do not change the Premium Sales Charge percentage. DEDUCTIONS FROM YOUR POLICY ACCOUNT. At the beginning of each policy month, the following charges are deducted from your Policy Account: Monthly Administrative Charge. The administrative charge is designed to cover the costs of issuing your policy and the costs of maintaining your policy, such as billing, policy transactions and policyowner communications. This charge is designed to reimburse us for expenses and we do not expect to profit from it. The amount of the monthly administrative charge depends upon the initial Face Amount, the policy year and the issue age of the insured person as follows:
FACE AMOUNT RANGE FACE AMOUNT RANGE FACE AMOUNT RANGE ISSUE AGE $50,000 TO $99,999 $100,000 TO $499,999 $500,000 AND OVER - ------------------------------------------------------------------------------------------------------------ 0-29 $20 in years 1 & 2 $40 in year 1 $25 in year 1 $8 in years 3 and later* $6 in year 2 and later* $6 in year 2 and later* 30+ $30 in years 1 & 2 $55 in year 1 $25 in year 1 $8 in years 3 and later* $6 in year 2 and later* $6 in year 2 and later* *GUARANTEED NEVER TO BE MORE THAN $10.
The monthly administrative charge will increase from $6 to $8 if you request a Face Amount reduction that moves the policy into the lowest Face Amount range. The charge will decrease from $8 to $6 if you request a Face Amount increase after the second policy year that moves the policy out of the lowest Face Amount range (the $20 or $30 charge will continue through the second policy year). Cost Of Insurance Charge. The cost of insurance charge is calculated by multiplying the net amount at risk at the beginning of the policy month by the monthly cost of insurance rate applicable to the insured person at that time. The net amount at risk is the difference between the current death benefit (not including any term coverage on the insured person) and the amount in your Policy Account. See ADDITIONAL BENEFITS MAY BE AVAILABLE on page 12 for a description of term insurance riders. Your cost of insurance charge will vary from month to month with changes in the net amount at risk. For example, if the current death benefit for the month is increased because the death benefit is based on a percentage multiple of the Policy Account, then the net amount at risk for the month will increase. Assuming the percentage multiple is not in effect, increases or decreases to the Policy Account will result in a corresponding decrease or increase to the net amount at risk under Option A policies, but no change to the net amount at risk under Option B policies. Increases or decreases to the Policy Account can result from making premium payments, investment experience or the deduction of charges. The monthly cost of insurance rate applicable to your policy will be based on our current monthly cost of insurance rates. The current monthly cost of insurance rates may be changed from time to time. However, the current rates will never be more than the guaranteed maximum rates set forth in your policy. The guaranteed rates are based on the Commissioner's 1980 Standard Ordinary Male and Female Smoker and Non-Smoker Mortality Tables. The current and guaranteed monthly cost of insurance rates are determined based on the sex, age, rating class and tobacco user status of the insured person. In addition, the current rates also vary depending on the duration of the policy (i.e., the length of time since a policy has been issued) and the Face Amount. Current cost of insurance rates are generally highest for Face Amounts less than $100,000 and generally lowest for Face Amounts of $200,000 and above. 16 Beginning in the tenth policy year, current monthly cost of insurance charges are reduced by an amount equal to a percentage of your unloaned Policy Account value on the date such charges are assessed. This means that the larger your unloaned Policy Account value, the greater your potential reduction in current cost of insurance charges. This percentage begins at an annual rate of .05%, grading up to an annual rate of .50% in policy years 26 and later. Effective on or about July 1, 1996, we intend to increase this cost of insurance charge reduction to grade up to .65% in policy years 25 and later. This cost of insurance charge reduction applies on a current basis and is not guaranteed. We may in the future increase, decrease, change the duration of, or eliminate the amount of the current cost of insurance charge reduction without advance notice to you. Because Incentive Life Plus was offered for the first time in 1995, no reduction of cost of insurance charges in the tenth policy year has yet been attained. Lower current cost of insurance rates apply at most ages for insured persons who qualify as non-tobacco users. To qualify, an insured person must meet additional requirements that relate to tobacco use. In addition, the insured person must be age twenty or over. Insured persons who are under twenty years of age may ask us to review their current tobacco habits when they reach the policy anniversary nearest their twentieth birthday. There will be no distinctions based on sex in the cost of insurance rates for Incentive Life Plus policies sold in Montana. Cost of insurance rates applicable to a policy issued in Montana will not be greater than the comparable male rates set forth or illustrated in this prospectus. Similarly, illustrated policy values in Part 4 would be no less favorable for comparable policies issued in this state. The guaranteed cost of insurance rates for Incentive Life Plus policies in this state are based on the Commissioner's 1980 Standard Ordinary SB Smoker and NB Non-Smoker Mortality Table. Congress and the legislatures of various states have from time to time considered legislation that would require insurance rates to be the same for males and females of the same age, rating class and tobacco user status. In addition, employers and employee organizations should consider, in consultation with counsel, the impact of Title VII of the Civil Rights Act of 1964 on the purchase of Incentive Life Plus in connection with an employment-related insurance or benefit plan. In a 1983 decision, the United States Supreme Court held that, under Title VII, optional annuity benefits under a deferred compensation plan could not vary on the basis of sex. Death Benefit Guarantee Charge. One cent per $1,000 of Face Amount (including any amount of yearly renewable term insurance) is deducted monthly to compensate us for the risk we assume by guaranteeing the death benefit under the death benefit guarantee provision. This charge is deducted regardless of whether specified premiums are paid, but it will not be deducted after the death benefit guarantee provision terminates. This charge will not be deducted in states where the death benefit guarantee provision is not available. Charges For Additional Benefits. The cost of any additional benefits you choose will be deducted monthly. Your policy contains tables showing the guaranteed maximum charges for all of these insurance costs. Transaction Charges. In addition to the monthly deductions from your Policy Account described above, we charge fees for certain policy transactions: see PARTIAL WITHDRAWALS on page 15, CHANGING THE FACE AMOUNT on page 10, SUBSTITUTION OF INSURED PERSON on page 11, LIVING BENEFIT OPTION on page 12 and TRANSFERS OF POLICY ACCOUNT VALUE on page 13. Also, if, after your policy is issued, you request more than one illustration in a policy year, we may charge a fee. See ILLUSTRATIONS OF POLICY BENEFITS on page 28. Mortality And Expense Risk Charge For New York Policyowners. We make a monthly charge for certain mortality and expense risks that we assume. For policies issued in New York, this charge will be made at an annual current rate of .60% of the unloaned Policy Account value on the date this charge is assessed. The guaranteed rate is .90%. However, policies issued in New York on or about July 1, 1996, and after, will have this charge deducted against the assets of our Separate Account. See CHARGES AGAINST THE SEPARATE ACCOUNT below. If your policy will be issued in New York, ask your agent which method of deducting this charge will apply to your policy. How Policy Account Charges Are Allocated. Generally, deductions from your Policy Account for monthly charges are made from the Funds and the unloaned portion of our Guaranteed Interest Account in accordance with the deduction allocation percentages specified in your application unless you instruct us in writing to do otherwise. See PREMIUM AND MONTHLY CHARGE ALLOCATIONS on page 9. If a deduction cannot be made in accordance with these percentages, it will be made based on the proportions that your unloaned amounts in the Guaranteed Interest Account and your amounts in the Funds bear to the total unloaned value of your Policy Account. Changes. Any changes in the cost of insurance rates, charges for additional benefits, Premium Sales Charge, mortality and expense risk charge or administrative charges will be by class of insured person and will be based on changes in future expectations about such factors as investment earnings, mortality, the length of time policies will remain in effect, expenses and taxes. We reserve the right to make a charge in the future for taxes or reserves set aside for taxes, which would reduce the investment experience of the Funds. See TAX EFFECTS on page 20. CHARGES AGAINST THE SEPARATE ACCOUNT. These charges are reflected in the unit values for the Funds of the Separate Account. See HOW WE DETERMINE THE UNIT VALUE on page 13. A charge for assuming MORTALITY AND EXPENSE RISKS will be made. The annual current rate is .60%. The annual guaranteed rate is .90%. We are committed to fulfilling our obligations under the policy and providing service to you over the lifetime of your policy. Despite the uncertainty of future events, we guarantee that monthly administrative and cost of insurance deductions from your Policy Account will never be greater than the maximum amounts shown in your policy. In making this guarantee, we assume the mortality risk that insured persons will live for shorter periods than we estimated. When this happens, we have to pay a greater amount of death benefit than we expected to pay in relation to the cost of insurance charges we received. We also assume the expense risk that the cost of issuing and administering policies will be greater than we expected. If the amount collected from this charge exceeds losses from the risks assumed, it will be to our profit. 17 TRUST CHARGES. The Funds purchase shares of the Trust at net asset value. That price reflects investment management fees and other direct expenses that have already been deducted from the assets of the Trust. The Trust does not impose a sales charge. See THE TRUST'S INVESTMENT ADVISER on page 6. SURRENDER CHARGES. There will be a difference between the amount in your Policy Account and the Cash Surrender Value of your policy for at least the first fifteen policy years. This difference is the result of the Premium Surrender Charge (which is a contingent deferred sales load) and an Administrative Surrender Charge. See also PREMIUM SALES CHARGE on page 16. These charges are contingent because you pay them only if you surrender your policy, reduce its Face Amount or it terminates. They are deferred because we do not deduct them from your premiums. Because these Surrender Charges are contingent and deferred, the amount we might collect in a policy year is not related to the actual sales expenses for that year. A table of maximum Surrender Charges (maximum Premium Surrender Charge plus the maximum Administrative Surrender Charge) appears on the Policy Information Page. Assuming you have not previously changed the Face Amount, the pro rata Surrender Charges for a partial surrender will be determined by dividing the amount of the Face Amount decrease by the initial Face Amount and multiplying that fraction by the Surrender Charges. Face Amount reductions will be applied against prior Face Amount increases, if any, in the reverse order in which such increases occurred, and then to the original Face Amount. Premium Surrender Charge. To determine the Premium Surrender Charge, "target" premiums are used. Target premiums are not based on the "planned" premium you determine, but are actuarially determined based on the age, sex and tobacco user status of the insured person and the Face Amount. Target premiums are different from sales load target premiums that are used to determine the Premium Sales Charge. The maximum Premium Surrender Charge for the initial Face Amount of your policy (the "base policy") will equal 66% of one target premium. This maximum will not vary based on the amount of premiums you pay or when you pay them. After the first nine policy years, this maximum Premium Surrender Charge on the base policy begins to decrease by 11% per year on a monthly basis for policy years ten through fifteen. After fifteen years, the Premium Surrender Charge attributable to the base policy expires. Subject to the maximum, the Premium Surrender Charge is calculated based on your actual premium payments. The Premium Surrender Charge percentage depends upon the Face Amount and the policy year in which the premium payment is made as follows:
POLICY YEAR OF FACE AMOUNT RANGE FACE AMOUNT RANGE FACE AMOUNT RANGE PREMIUM PAYMENT $50,000 TO $99,999 $100,000 TO $499,999 $500,000 AND OVER - ------------------------------------------------------------------------------------------------------------------- YEAR 1 (UP TO ONE SEC GUIDELINE 24% 26% 27% ANNUAL PREMIUM) - ------------------------------------------------------------------------------------------------------------------- YEAR 1 (OVER ONE 3% 5% 6% SEC GUIDELINE ANNUAL PREMIUM) - ------------------------------------------------------------------------------------------------------------------- YEAR 2 3% 5% 6% THROUGH 15 (ALL PREMIUMS)
The SEC Guideline Annual Premium is the level annual amount that would be payable in each policy year under certain assumptions defined by the SEC. These assumptions include cost of insurance charges based on the 1980 Commissioner's Standard Ordinary Mortality Tables, net investment earnings at an annual rate of 5%, and the fees and charges associated with the policy. Attempting to structure the timing and amount of premium payments to reduce the potential surrender charge below the maximum is not recommended. Paying small amounts of premium in the policy's first fifteen years to reduce the potential surrender charge could increase the risk that your policy will terminate without value. If you increase the Face Amount above the previous highest Face Amount (computed without regard to changes in Face Amount resulting from changing the death benefit option), we will establish an additional Premium Surrender Charge corresponding to the increased amount. An additional target premium attributable to the increase will be established and the additional Premium Surrender Charge will be subject to the same maximum percentage of 66%. This maximum will start to decline in the tenth year after the increase in the same manner as the Premium Surrender Charge on the base policy. A portion of each premium payment made after a Face Amount increase will be deemed to be attributable to such increase, even if you do not increase the amount or frequency of your premium payments. The allocation of premiums between the base policy and Face Amount increases is actuarially determined in accordance with SEC regulations. Moreover, if the increase moves the policy into a higher Face Amount range, the Premium Surrender Charge percentage applied to future premiums -- even those premiums allocated to the base policy -- will be the higher percentage for that Face Amount range. Face Amount decreases do not change the Premium Surrender Charge percentage. Administrative Surrender Charge. The Administrative Surrender Charge per $1,000 of Face Amount in the first three policy years (subject to a $3,000 maximum) is: ISSUE AGE: 0-34 35-44 45-49 50-54 55+ $2 $3 $4 $5 $6 18 After the first three policy years, the Administrative Surrender Charge grades down on a monthly basis to zero at the end of the eighth policy year. A Face Amount increase above the previous highest Face Amount will result in a new layer of Administrative Surrender Charges applicable to the increase. ADDITIONAL INFORMATION ABOUT INCENTIVE LIFE PLUS YOUR POLICY CAN TERMINATE. Your insurance coverage under Incentive Life Plus continues as long as the Net Cash Surrender Value of the policy is enough to pay the monthly deductions. The Net Cash Surrender Value equals the Cash Surrender Value minus any loan and accrued loan interest. If the Net Cash Surrender Value at the beginning of any policy month is less than the deductions for that month, your policy will go into default unless the operation of either the death benefit guarantee provision or the 3-Year no lapse guarantee provision is in effect. See GUARANTEEING THE DEATH BENEFIT on page 10. If your policy goes into default, we will notify you, and any assignees on our records, in writing, that a 61-day grace period has begun and indicate the payment that is needed to avoid policy termination at the end of the grace period. The required payment will not be more than an amount which would increase the Net Cash Surrender Value to cover total monthly deductions for three months (without regard to any investment performance in the Policy Account). The required payment and any residual Policy Account value will be used to cover the overdue deductions. However, if your Policy Account has unfavorable investment experience, the required payment may not be sufficient to cover the overdue deductions on the date we receive the payment. In this case, a new 61-day grace period will begin. While a policy is in a grace period, you may not transfer Policy Account value or make other policy changes. If we do not receive payment within the 61 days, your policy will terminate without value. We will withdraw any amount left in your Policy Account and apply this amount to the overdue deductions, any applicable Surrender Charges and any unpaid loan and accrued loan interest. We will inform you, and any assignee, at last known addresses that your policy has ended without value. See TAX EFFECTS on page 20 for the potential tax consequences of the termination of a policy. YOU MAY RESTORE A POLICY AFTER IT TERMINATES. You may restore a policy within six months after it terminates if you provide evidence that the insured person (and any other person insured under a rider) is still insurable, and you make the premium payment that we require to restore the policy. The policy will be restored as of the beginning of the policy month which coincides with or follows the date we approve your application. Previous loans will not be reactivated. From the required payment we will deduct the charge for applicable taxes and the Premium Sales Charge. On the effective date of restoration, the Policy Account will be equal to the balance of the required payment plus a Surrender Charge credit. This credit will be equal to the Surrender Charges that were deducted on the date of default, but not greater than the applicable Surrender Charges as of the effective date of restoration. We will start to make monthly deductions as of the effective date of restoration. On that date, the monthly administrative charges from the beginning of the grace period to the effective date of restoration will be deducted from the Policy Account. See TAX EFFECTS on page 20 for the potential tax consequences of restoring a terminated policy. Some states may vary the time period and conditions for policy restoration. POLICY PERIODS, ANNIVERSARIES, DATES AND AGES. When an application for an Incentive Life Plus policy is completed and submitted to us, we decide whether or not to issue the policy. This decision is made based on the information in the application and our standards for issuing insurance and classifying risks. If we decide not to issue a policy, any premium paid will be refunded. The Issue Date, shown on the Policy Information Page, is the date your policy is actually issued, but if we have advanced the Register Date, the Issue Date will be the same as the Register Date. Generally, contestability is measured from the Issue Date, as is the suicide exclusion. The Register Date, also shown on the Policy Information Page, is used to measure policy years and policy months. Charges and deductions are first made as of the Register Date. As to when coverage under the policy begins, see FLEXIBLE PREMIUMS on page 9. Generally, we determine the Register Date based upon when we receive your full initial premium. In most cases: o If you submit the full initial premium to your Equitable agent at the time you sign the application, and we issue the policy as it was applied for, then the Register Date will be the later of (a) the date part I of the policy application was signed or, (b) the date part II of the policy application was signed by a medical professional. o If we do not receive your full initial premium at our Administrative Office before the Issue Date or, if the policy is not issued as applied for, the Register Date will be the same as the Issue Date. An early Register Date may be permitted for employer sponsored cases in order to accommodate a common Register Date for all employees. We may also permit policyowners to advance a Register Date (up to three months) in employer sponsored cases. An early Register Date may also be permitted to provide a younger age at issue. The investment start date is the date that your initial net premium begins to vary with the investment performance of the Funds or accrue interest in the Guaranteed Interest Account. Generally, the investment start date will be the same as the Register Date if the full initial premium is received at our Administrative Office before the Register Date. Otherwise, the investment start date will be the date the full initial premium is received at our Administrative Office. Thus, to the extent that your first premium is received before the Register Date, there will be a period during which the initial premium will not be experiencing investment performance. The investment start date for policies with early Register Dates will be the date the premium is received at our Administrative Office. Any subsequent premium payment received after the investment start date will begin to experience investment performance as of the date such payment is received at our Administrative Office. Remember, the 19 amount of your initial net premium allocated to the Funds may be temporarily allocated to the Money Market Fund prior to allocation in accordance with your instructions. See FLEXIBLE PREMIUMS on page 9. Age. Generally, when we refer to the age of the insured person, we mean his or her age on the birthday nearest to the beginning of the particular policy year. TAX EFFECTS This discussion is based on our understanding of the effect of the current Federal income tax laws as currently interpreted on Incentive Life Plus policies owned by U.S. resident individuals. The tax effects on corporate taxpayers subject to the Federal alternative minimum tax, non-U.S. residents or non-U.S. citizens, may be different. This discussion is general in nature, and should not be considered tax advice, for which you should consult your legal or tax adviser. POLICY PROCEEDS. An Incentive Life Plus policy will be treated as "life insurance" for Federal income tax purposes if it meets the definitional requirement of the Internal Revenue Code (the Code) and as long as the portfolios of the Trust satisfy the diversification requirements under the Code. We believe that Incentive Life Plus will meet these requirements, and that under Federal income tax law: o the death benefit received by the beneficiary under your Incentive Life Plus policy will not be subject to Federal income tax; and o as long as your policy remains in force, increases in the Policy Account value as a result of interest or investment experience will not be subject to Federal income tax unless and until there is a distribution from your policy, such as a loan or a partial withdrawal. SPECIAL TAX RULES MAY APPLY, HOWEVER, IF YOU TRANSFER YOUR OWNERSHIP OF THE POLICY. CONSULT YOUR TAX ADVISER BEFORE ANY TRANSFER OF YOUR POLICY. The Federal income tax consequences of a distribution from your policy will depend on whether your policy is determined to be a "modified endowment." The character of any income recognized will be ordinary income as opposed to capital gain. A MODIFIED ENDOWMENT IS a life insurance policy which fails to meet a "seven-pay" test. In general, a policy will fail the seven-pay test if the cumulative amount of premiums paid under the policy at any time during the first seven policy years exceeds a calculated premium level. The calculated seven-pay premium level is based on a hypothetical policy issued on the same insured person and for the same initial death benefit which, under specified conditions (which include the absence of expense, administrative and surrender charges), would be fully paid for after seven level annual payments. Your policy will be treated as a modified endowment unless the cumulative premiums paid under your policy, at all times during the first seven policy years, are less than or equal to the cumulative seven-pay premiums which would have been paid under the hypothetical policy on or before such times. Whenever there is a "material change" under a policy, it will generally be treated as a new contract for purposes of determining whether the policy is a modified endowment, and subjected to a new seven-pay period and a new seven-pay limit. The new seven-pay limit would be determined taking into account, under a downward adjustment formula, the Policy Account value of the policy at the time of such change. A materially changed policy would be considered a modified endowment if it failed to satisfy the new seven-pay limit. A material change would occur if there was a substitution of the insured person, and could also occur as a result of a change in death benefit option, the selection of additional benefits, an increase in Face Amount and certain other changes. If the benefits are reduced during the first seven policy years after entering into the policy (or within seven years after a material change), for example, by requesting a decrease in Face Amount or in some cases, by making a partial withdrawal or terminating additional benefits under a rider, the calculated seven-pay premium level will be redetermined based on the reduced level of benefits and applied retroactively for purposes of the seven-pay test. If the premiums previously paid are greater than the recalculated seven-pay premium level limit, the policy will become a modified endowment. Generally, a life insurance policy which is received in exchange for a modified endowment will also be considered a modified endowment. Changes made to a life insurance policy, for example, a decrease in benefits or the termination of or restoration of a terminated policy, may have other effects on your policy, including impacting the maximum amount of premiums that can be paid under the policy, as well as the maximum amount of Policy Account value that may be maintained under the policy. In some cases, this may cause us to take action in order to assure your policy continues to qualify as life insurance, including distribution of amounts that may be includable as income. See POLICY CHANGES on page 21. IF YOUR INCENTIVE LIFE PLUS POLICY IS NOT A MODIFIED ENDOWMENT, as long as it remains in force, a loan under your policy will be treated as indebtedness and no part of the loan will be subject to current Federal income tax. Interest on the loan will generally not be tax deductible. After the first 15 policy years, the proceeds from a partial withdrawal will not be subject to Federal income tax except to the extent such proceeds exceed your "Basis" in your policy. Your Basis in your policy generally will equal the premiums you have paid less any amounts previously recovered through tax-free policy distributions. During the first fifteen policy years, the proceeds from a partial withdrawal could be subject to Federal income tax to the extent your Policy Account value exceeds your Basis in your policy. The portion subject to tax will depend upon the ratio of your death benefit to the Policy Account value (or in some cases, the premiums paid) under your policy and the age of the insured person at the time of the withdrawal. In addition, if at any time your policy is surrendered, the excess, if any, of your Cash Surrender Value (which includes the amount of policy loan and accrued loan interest) over your Basis will be subject to Federal income tax. IN ADDITION, IF A POLICY TERMINATES WHILE THERE IS A POLICY LOAN, THE CANCELLATION OF SUCH LOAN AND ACCRUED LOAN INTEREST WILL BE TREATED AS A DISTRIBUTION AND COULD BE SUBJECT TO TAX UNDER THE ABOVE RULES. On the Final Policy Date, the excess of the amount of any benefit paid, not taking into account any reduction for any loan and accrued loan interest, over your Basis in the policy, will be subject to Federal income tax. 20 IF YOUR POLICY IS A MODIFIED ENDOWMENT, any distribution from your policy will be taxed on an "income-first" basis. Distributions for this purpose include a loan (including any increase in the loan amount to pay interest on an existing loan or an assignment or a pledge to secure a loan) or partial withdrawal. Any such distributions will be considered taxable income to you to the extent your Policy Account value exceeds your Basis in the policy. For modified endowments, your Basis would be increased by the amount of any prior loan under your policy that was considered taxable income to you. For purposes of determining the taxable portion of any distribution, all modified endowments issued by the same insurer or an affiliate to the same policyowner (excluding certain qualified plans) during any calendar year are to be aggregated. The Secretary of the Treasury has authority to prescribe additional rules to prevent avoidance of "income-first" taxation on distributions from modified endowments. A 10% penalty tax will also apply to the taxable portion of a distribution from a modified endowment. The penalty tax will not, however, apply to distributions (i) to taxpayers 59 1/2 years of age or older, (ii) in the case of a disability (as defined in the Code) or (iii) received as part of a series of substantially equal periodic annuity payments for the life (or life expectancy) of the taxpayer or the joint lives (or joint life expectancies) of the taxpayer and his beneficiary. If your policy is surrendered, the excess, if any, of your Cash Surrender Value over your Basis will be subject to Federal income tax and, unless one of the above exceptions applies, the 10% penalty tax. If your policy terminates while there is a policy loan, the cancellation of such loan and accrued loan interest will be treated as a distribution to the extent not previously treated as such and could be subject to tax, including the penalty tax, as described under the above rules. In addition, upon the Final Policy Date the excess of the amount of any benefit paid, not taking into account any reduction for any loan and accrued loan interest, over your Basis in the policy, will be subject to Federal income tax and, unless an exception applies, a 10% penalty tax. If your policy becomes a modified endowment, distributions that occur during the policy year it becomes a modified endowment and any subsequent policy year will be taxed as described in the two preceding paragraphs. In addition distributions from a policy within two years before it becomes a modified endowment will be subject to tax in this manner. THIS MEANS THAT A DISTRIBUTION MADE FROM A POLICY THAT IS NOT A MODIFIED ENDOWMENT COULD LATER BECOME TAXABLE AS A DISTRIBUTION FROM A MODIFIED ENDOWMENT. The Secretary of the Treasury has been authorized to prescribe rules which would treat similarly other distributions made in anticipation of a policy becoming a modified endowment. POLICY TERMINATIONS. A policy which has terminated without value may have the tax consequences described above even though you may be able to reinstate your policy. For tax purposes, some reinstatements may be treated as the purchase of a new insurance contract. DIVERSIFICATION. Under Section 817(h) of the Code, the Secretary of the Treasury has the authority to set standards for diversification of the investments underlying variable life insurance policies. The Treasury Department has issued final regulations regarding the diversification requirements. Failure by us to meet these requirements would disqualify your policy as a variable life insurance policy under Section 7702 of the Code. If this were to occur, you would be subject to Federal income tax on the income under the policy for the period of the disqualification and subsequent periods. The Separate Account, through the Trust, intends to comply with these requirements. In connection with the issuance of the then temporary diversification regulations, the Treasury Department stated that it anticipated the issuance of regulations or rulings prescribing the circumstances in which the ability of a policyowner to direct his investment to particular funds of a separate account may cause the policyowner, rather than the insurance company, to be treated as the owner of the assets in the account. If you were considered the owner of the assets of the Separate Account, income and gains from the account would be included in your gross income for Federal income tax purposes. Under current law we believe that Equitable Variable, and not the owner of the policy, would be considered the owner of the assets of the Separate Account. POLICY CHANGES. For you and your beneficiary to receive the tax treatment discussed above, your policy must initially qualify and continue to qualify as life insurance under Sections 7702 and 817(h) of the Code. We have reserved in the policy the right to decline to accept all or part of any premium payments, decline to change death benefit options, make face amount changes or decline to make partial withdrawals that based upon our interpretation of current tax rules would cause your policy to fail to qualify. We may also make changes in the policy or its riders or require additional premium payments or make distributions from the policy to the extent we deem necessary to qualify your policy as life insurance for tax purposes. Any such change will apply uniformly to all policies that are affected. You will be given written notice of such changes. TAX CHANGES. The United States Congress has in the past considered, is currently considering and may in the future consider legislation that, if enacted, could change the tax treatment of life insurance policies. In addition, the Treasury Department may amend existing regulations, issue regulations on the qualification of life insurance and modified endowment contracts, or adopt new interpretations of existing laws. State tax laws or, if you are not a United States resident, foreign tax laws, may also affect the tax consequences to you, the insured person or your beneficiary. These laws may change from time to time without notice and, as a result, the tax consequences described above may be altered. There is no way of predicting whether, when or in what form any such change would be adopted. Any such change could have retroactive effect. We suggest you consult your legal or tax adviser. ESTATE AND GENERATION SKIPPING TAXES. If the insured person is the policyowner, the death benefit under Incentive Life Plus will generally be includable in the policyowner's estate for purposes of Federal estate tax. If the policyowner is not the insured person, under certain conditions only the Cash Surrender Value of the policy would be so includable. Federal estate tax is integrated with Federal gift tax under a unified rate schedule. In general, estates less than $600,000 will not incur a Federal estate tax liability. In addition, an unlimited marital deduction may be available for Federal estate tax purposes. As a general rule, if a "transfer" is made to a person two or more generations younger than the policyowner, a generation skipping tax may be payable at rates similar to the maximum estate tax rate in effect at the time. The generation skipping tax provisions generally apply to 21 "transfers" which would be subject to the gift and estate tax rules. Individuals are generally allowed an aggregate generation skipping tax exemption of $1 million. Because these rules are complex, you should consult with your tax adviser for specific information, especially where benefits are passing to younger generations. The particular situation of each policyowner or beneficiary will determine how ownership or receipt of policy proceeds will be treated for purposes of Federal estate and generation skipping taxes as well as state and local estate, inheritance and other taxes. PENSION AND PROFIT-SHARING PLANS. If Incentive Life Plus policies are purchased by a fund which forms part of a pension or profit-sharing plan qualified under Sections 401(a) or 403 of the Code for the benefit of participants covered under the plan, the Federal income tax treatment of such policies will be somewhat different from that described above. If purchased as part of a pension or profit-sharing plan, the current cost of insurance for the net amount at risk is treated as a "current fringe benefit" and is required to be included annually in the plan participant's gross income. This cost (generally referred to as the "P.S. 58" cost) is reported to the participant annually. If the plan participant dies while covered by the plan and the policy proceeds are paid to the participant's beneficiary, then the excess of the death benefit over the Policy Account value will not be subject to Federal income tax. However, the Policy Account value will generally be taxable to the extent it exceeds the sum of $5,000 plus the participant's cost basis in the policy. The participant's cost basis will generally include the costs of insurance previously reported as income to the participant. Special rules may apply if the participant had borrowed from his Policy Account or was an owner-employee under the plan. There are limits on the amounts of life insurance that may be purchased on behalf of a participant in a pension or profit-sharing plan. Complex rules, in addition to those discussed above, apply whenever life insurance is purchased by a tax qualified plan. You should consult your legal adviser. OTHER EMPLOYEE BENEFIT PROGRAMS. Complex rules may apply when a policy is held by an employer or a trust, or acquired by an employee, in connection with the provision of employee benefits. These policyowners also must consider whether the policy was applied for by or issued to a person having an insurable interest under applicable state law, as the lack of insurable interest may, among other things, affect the qualification of the policy as life insurance for Federal income tax purposes and the right of the beneficiary to death benefits. Employers and employer-created trusts may be subject to reporting, disclosure and fiduciary obligations under the Employee Retirement Income Security Act of 1974 (ERISA). You should consult your legal adviser. OUR TAXES. Under the life insurance company tax provisions of the Code, variable life insurance is treated in a manner consistent with fixed life insurance. The operations of the Separate Account are reported in our Federal income tax return but we currently pay no income tax on investment income and capital gains reflected in variable life insurance policy reserves. Therefore, no charge is currently being made to any Fund for taxes. We reserve the right to make a charge in the future for taxes incurred, for example, a charge to the Separate Account for income taxes incurred by us that are allocable to the policy. We may have to pay state, local or other taxes in addition to applicable taxes based on premiums. At present, these taxes are not substantial. If they increase, charges may be made for such taxes when they are attributable to the Separate Account or allocable to the policy. WHEN WE WITHHOLD INCOME TAXES. Generally, unless you provide us with a written election to the contrary before we make the distribution, we are required to withhold income tax from any portion of the money you receive if the withdrawal of money from your Policy Account or the surrender or the maturity of your policy is a taxable transaction. If you do not wish us to withhold tax from the payment, or if enough is not withheld, you may have to pay later. You may also have to pay penalties under the tax rules if your withholding and estimated tax payments are insufficient. In some cases, where generation skipping taxes may apply, we may also be required to withhold for such taxes unless we are provided satisfactory written notification that no such taxes are due. PART 3: ADDITIONAL INFORMATION YOUR VOTING PRIVILEGES TRUST VOTING PRIVILEGES. As explained in Part 1, we invest the assets in the Funds in shares of the corresponding Trust portfolios. Equitable Variable is the legal owner of the shares and will attend, and has the right to vote at, any meeting of the Trust's shareholders. Among other things, we may vote on any matters described in the Trust's prospectus or requiring a vote by shareholders under the 1940 Act. Even though we own the shares, to the extent required by the 1940 Act, you will have the opportunity to tell us how to vote the number of shares that can be attributed to your policy. We will vote those shares at meetings of Trust shareholders according to your instructions. If we do not receive instructions in time from all policyowners, we will vote shares in a portfolio for which no instructions have been received in the same proportion as we vote shares for which we have received instructions in that portfolio. We will vote any Trust shares that we are entitled to vote directly due to amounts we have accumulated in the Funds in the same proportions that all policyowners vote, including those who participate in other separate accounts. If the Federal securities laws or regulations or interpretations of them change so that we are permitted to vote shares of the Trust in our own right or to restrict policyowner voting, we may do so. HOW WE DETERMINE YOUR VOTING SHARES. You may participate in voting only on matters concerning the Trust portfolios corresponding to the Funds to which your Policy Account is allocated. The number of Trust shares in each Fund that are attributable to your policy is determined by dividing the amount in your Policy Account allocated to that Fund by the net asset value of one share of the corresponding Trust portfolio as of the record date set by the Trust's Board for the Trust's shareholders meeting. The record date for this purpose must be at least 10 and no more than 90 days before the meeting of the Trust. Fractional shares are counted. 22 If you are entitled to give us voting instructions, we will send you proxy material and a form for providing voting instructions. In certain cases, we may disregard instructions relating to changes in the Trust's adviser or the investment policies of its portfolios. We will advise you if we do and detail the reasons in the next semiannual report to policyowners. SEPARATE ACCOUNT VOTING RIGHTS. Under the 1940 Act, certain actions (such as some of those described under OUR RIGHT TO CHANGE HOW WE OPERATE, below) may require policyowner approval. In that case, you will be entitled to one vote for every $100 of value you have in the Funds. We will cast votes attributable to amounts we have in the Funds in the same proportions as votes cast by policyowners. OUR RIGHT TO CHANGE HOW WE OPERATE In addition to changing or adding investment companies, we have the right to modify how we or the Separate Account operate. We intend to comply with applicable law in making any changes and, if necessary, we will seek policyowner approval. We have the right to: o add Funds to, or remove Funds from, the Separate Account, combine two or more Funds within the Separate Account, or withdraw assets relating to Incentive Life Plus from one Fund and put them into another; o register or end the registration of the Separate Account under the 1940 Act; o operate the Separate Account under the direction of a committee or discharge such a committee at any time (the committee may be composed entirely of persons who are "interested persons" of Equitable Variable under the 1940 Act); o restrict or eliminate any voting rights of policyowners or other people who have voting rights that affect the Separate Account; o operate the Separate Account or one or more of the Funds in any other form the law allows, including a form that allows us to make direct investments. Our Separate Account may be charged an advisory fee if its investments are made directly rather than through an investment company. We may make any legal investments we wish. In choosing these investments, we will rely on our own or outside counsel for advice. In addition, we may disapprove any change in investment advisers or in investment policy unless a law or regulation provides differently. If any changes are made that result in a material change in the underlying investments of a Fund, you will be notified as required by law. We may, for example, cause the Fund to invest in a mutual fund other than, or in addition to, the Trust. If you then wish to transfer the amount you have in that Fund to another Fund of the Separate Account or to the Guaranteed Interest Account, you may do so, without charge, by contacting our Administrative Office. At the same time, you may also change how your net premiums and deductions are allocated. OUR REPORTS TO POLICYOWNERS Shortly after the end of each policy year you will receive a report that includes information about your policy's current death benefit, Policy Account value, Cash Surrender Value and policy loan. Notices will be sent to you to confirm premium payments (except premiums paid through an automated arrangement), transfers and certain other policy transactions. LIMITS ON OUR RIGHT TO CHALLENGE THE POLICY We can challenge the validity of your insurance policy based on material misstatements in your application and any application for change. However, there are some limits on how and when we can challenge the policy. o We cannot challenge the policy after it has been in effect, during the insured person's lifetime, for two years from the date the policy was issued or restored after termination. (Some states may require that we measure this time in some other way.) o We cannot challenge any policy change that requires evidence of insurability (such as an increase in Face Amount or a substitution of insured person) after the change has been in effect for two years during the insured person's lifetime. o We cannot challenge an additional benefit rider that provides benefits in the event that the insured person becomes totally disabled, after two years from the later of the Issue Date or the date as of which the additional benefit rider became effective. We can require proof of continuing disability while such a rider is in effect as specified in the rider. If the insured person dies within the time that we may challenge the validity of the policy, we may delay payment until we decide whether to challenge the policy. If the insured person's age or sex is misstated on any application, the death benefit and any additional benefits provided will be those which would be purchased by the most recent deduction for the cost of insurance and the cost of any additional benefits at the insured person's correct age and sex. If the insured person commits suicide within two years after the date on which the policy was issued, the death benefit will be limited to the total of all premiums that have been paid to the time of death minus any outstanding policy loan, accrued loan interest and any partial withdrawals of Net Cash Surrender Value. If the insured person commits suicide within two years after the effective date of an increase in Face Amount that you requested, we will pay the death benefit based on the Face Amount which was in effect before the increase, plus the monthly cost of insurance deductions for the increase (including the transaction charge for the Face Amount increase). A new two-year suicide and contestability period will begin on the date of substitution following a substitution of insured. Some states require that we measure this time by some other date. YOUR PAYMENT OPTIONS Policy benefits or other payments, such as the Net Cash Surrender Value, may be paid immediately in one sum or you may choose another form of payment for all or part of the money. Payments under these options are not affected by the investment experience of any Fund. Instead, interest accrues pursuant to the options chosen. 23 You will make a choice of payment option (or any later changes) and your choice will take effect in the same way as it would if you were changing a beneficiary. (See YOUR BENEFICIARY below.) If you do not arrange for a specific form of payment before the insured person dies, the beneficiary will be paid through the Equitable Access Account(TM). See WHEN WE PAY POLICY PROCEEDS below. The beneficiary will then have a choice of payment options. However, if you do make an arrangement with us for how the money will be paid, the beneficiary cannot change the choice after the insured person dies. Different payment options may result in different tax consequences. The beneficiary or any other person who is entitled to receive payment may name a successor to receive any amount that we would otherwise pay to that person's estate if that person died. The person who is entitled to receive payment may change the successor at any time. We must approve any arrangements that involve more than one payment option, or a payee who is not a natural person (for example, a corporation), or a payee who is a fiduciary. Also, the details of all arrangements will be subject to our rules at the time the arrangements are selected and take effect. This includes rules on the minimum amount we will pay under an option, minimum amounts for installment payments, withdrawal or commutation rights (your rights to receive payments over time, for which we may offer a lump sum payment), the naming of people who are entitled to receive payment and their successors, and the ways of proving age and survival. YOUR BENEFICIARY You name your beneficiary when you apply for the policy. The beneficiary is entitled to the insurance benefits of the policy. You may change the beneficiary during the insured person's lifetime by writing to our Administrative Office. If no beneficiary is living when the insured person dies, we will pay the death benefit in equal shares to the insured person's surviving children. If there are no surviving children, we will pay the death benefit to the insured person's estate. ASSIGNING YOUR POLICY You may assign (transfer) your rights in the policy to someone else as collateral for a loan or for some other reason, if we agree. A copy of the assignment must be forwarded to our Administrative Office. We are not responsible for any payment we make or any action taken before we receive notice of the assignment or for the validity of the assignment. An absolute assignment is a change of ownership. BECAUSE THERE MAY BE TAX CONSEQUENCES, INCLUDING THE LOSS OF INCOME TAX-FREE TREATMENT FOR ANY DEATH BENEFIT PAYABLE TO THE BENEFICIARY, YOU SHOULD CONSULT YOUR TAX ADVISER PRIOR TO MAKING AN ASSIGNMENT. WHEN WE PAY POLICY PROCEEDS We will pay any death benefits, maturity benefit, Net Cash Surrender Value or loan proceeds within seven days after we receive the last required form or request (and other documents that may be required for payment of death benefits) at our Administrative Office. Death benefits are determined as of the date of death of the insured person and will not be affected by subsequent changes in the unit values of the Funds. Death benefits will generally be paid through the Equitable Access Account, an interest bearing checking account. A beneficiary will have immediate access to the proceeds by writing a check on the account. We pay interest from the date of death to the date the Equitable Access Account is closed. If an Equitable agent helps the beneficiary of a policy to prepare the documents that are required for payment of the death benefit, we will send the Equitable Access Account checkbook or check to the agent within seven days after we receive the required documents. Our agents will take reasonable steps to arrange for prompt delivery to the beneficiary. We may, however, delay payment if we contest the policy. We may also delay payment if we cannot determine the amount of the payment because the New York Stock Exchange is closed, because trading in securities has been restricted by the SEC, or because the SEC has declared that an emergency exists. In addition, if necessary to protect our policyowners, we may delay payment where permitted under applicable law. We may defer payment of any Net Cash Surrender Value or loan amount (except a loan to pay a premium to us) from the Guaranteed Interest Account for up to six months after we receive your request. We will pay interest of at least 3% a year from the date we receive your request if we delay more than 30 days in paying you such amounts from the Guaranteed Interest Account. DIVIDENDS No dividends are paid on the policy described in this prospectus. REGULATION We are regulated and supervised by the New York State Insurance Department. In addition, we are subject to the insurance laws and regulations in every jurisdiction where we sell policies. The Incentive Life Plus policy (Plan No. 94-300) has been filed with and approved by insurance officials in 50 states, the District of Columbia, Puerto Rico and the Virgin Islands. We submit annual reports on our operations and finances to insurance officials in all the jurisdictions where we sell policies. The officials are responsible for reviewing our reports to be sure that we are financially sound. SPECIAL CIRCUMSTANCES Equitable Variable may vary the charges and other terms of Incentive Life Plus where special circumstances result in sales or administrative expenses or mortality risks that are different than those normally associated with Incentive Life Plus policies. These variations will be made only in accordance with uniform rules that we establish. DISTRIBUTION Equico Securities, Inc. (Equico), a wholly-owned subsidiary of Equitable, is the principal underwriter of the Trust under a Distribution Agreement. Equico is also the distributor of our variable life insurance policies and Equitable's variable annuity contracts under a Distribution 24 and Servicing Agreement. Equico's principal business address is 1755 Broadway, New York, NY 10019. Equico is registered with the SEC as a broker-dealer under the Securities Exchange Act of 1934 (the Exchange Act) and is a member of the National Association of Securities Dealers, Inc. Equico is paid a fee for its services as distributor of our policies. In 1994 and 1995, Equitable and Equitable Variable paid Equico a fee of $216,920 and $325,380, respectively, for its services under the Distribution and Servicing Agreement. Effective on or about May 1, 1996 Equico will change its name to EQ Financial Consultants, Inc. We sell our policies through agents who are licensed by state insurance officials to sell our variable life policies. These agents are also registered representatives of Equico. The agent who sells you this policy receives sales commissions from Equitable. We reimburse Equitable from our own resources, including the Premium Sales Charge deducted from your premium and any Premium Surrender Charge we might collect. Generally, during the first policy year, the agent will receive an amount equal to a maximum of 50% of the premiums paid up to a certain amount and 3% of the premiums paid in excess of that amount. For policy years two through ten, the agent receives an amount up to a maximum of 6% of the premiums paid up to a certain amount and 3% of the premiums paid in excess of that amount; and, for years eleven and later, the agent receives an amount up to 3% of the premiums paid. Following a requested Face Amount increase, commissions on a portion of the premium will be calculated based on the same rates described above. Use of a term rider on the insured person in place of an equal amount of coverage under the base policy generally reduces commissions. Commissions paid to agents based upon refunded premiums will be recovered. Agents with limited years of service may be paid differently. We also sell our policies through independent brokers who are licensed by state insurance officials to sell our variable life policies. They will also be registered representatives either of Equico or of another company registered with the SEC as a broker-dealer under the Exchange Act. The commissions for independent brokers will be no more than those for agents and the same policy for recovery of commissions applies. Commissions will be paid through the registered broker-dealer. Equitable performs certain sales and administrative duties for us pursuant to a written agreement which is automatically renewed each year, unless either party terminates. Under this agreement, we pay Equitable for salary costs and other services and an amount for indirect costs incurred through our use of Equitable personnel and facilities. We also reimburse Equitable for sales expenses related to business other than variable life insurance policies. The amounts paid and accrued to Equitable by us under the sales and services agreements totalled approximately $377.2 million in 1995, $380.5 million in 1994 and $355.7 million in 1993. LEGAL PROCEEDINGS We are not involved in any material legal proceedings. ACCOUNTING AND ACTUARIAL EXPERTS The financial statements of Separate Account FP and Equitable Variable included in this prospectus have been audited for the years ended December 31, 1995, 1994 and 1993 by the accounting firm of Price Waterhouse LLP, our independent auditors, as stated in their report. The financial statements of Separate Account FP and Equitable Variable for the years ended December 31, 1995, 1994 and 1993 included in this prospectus have been so included in reliance on the reports of Price Waterhouse LLP, independent accountants, given on the authority of such firm as experts in accounting and auditing. The financial statements of Equitable Variable contained in this prospectus should be considered only as bearing upon the ability of Equitable Variable to meet its obligations under the Incentive Life Plus policies. They should not be considered as bearing upon the investment experience of the funds of the Separate Account. Actuarial matters in this prospectus have been examined by Barbara Fraser, F.S.A., M.A.A.A., who is a Vice President and Actuary of Equitable. Her opinion on actuarial matters is filed as an exhibit to the Registration Statement we filed with the SEC. ADDITIONAL INFORMATION We have filed a Registration Statement relating to the Separate Account and the variable life insurance policy described in this prospectus with the SEC. The Registration Statement, which is required by the Securities Act of 1933, includes additional information that is not required in this prospectus under the rules and regulations of the SEC. If you would like the additional information, you may obtain it from the SEC's main office in Washington, D.C. You will have to pay a fee for the material. 25 MANAGEMENT Here is a list of our directors and principal officers and a brief statement of their business experience for the past five years. Unless otherwise noted, the following persons have been involved in the management of Equitable and its subsidiaries in various positions for the last five years. Unless otherwise noted, their address is 787 Seventh Avenue, New York, New York 10019.
NAME AND PRINCIPAL BUSINESS EXPERIENCE BUSINESS ADDRESS WITHIN PAST FIVE YEARS - ----------------------- ------------------------- DIRECTORS Michel Beaulieu...................... Director of Equitable Variable since February 1992. Senior Vice President, Equitable, since September 1991; prior thereto, Chief Life Actuary AXA group 1989 to 1991; Managing Director Blondeau & CIE (France) 1986 to 1989. Director, Equity & Law (London). Laurent Clamagirand.................. Director of Equitable Variable since February 1995; Vice President, Financial Reporting, Equitable, since March 1996; prior thereto, Director from November 1994 to March 1996; prior thereto, International Controller, AXA, January 1990 to October 1994; Director, Equitable of Colorado, since March 1995. William T. McCaffrey................. Director of Equitable Variable since February 1987; Senior Executive Vice President and Chief Operating Officer, Equitable Life, since February 1996; prior thereto, Executive Vice President, since February 1986 and Chief Administrative Officer since February 1988; Director, Equitable Life, since February 1996 and Equitable Foundation since September 1986. Michael J. Rich...................... Director of Equitable Variable since May 1995. Senior Vice President, Equitable, since October 1994; prior thereto, Vice President of Underwriting, John Hancock Mutual Life Insurance Co. since 1988. Jose S. Suquet....................... Director of Equitable Variable since January 1995. Executive Vice President and Chief Agency Officer, Equitable, since August 1994; prior thereto, Agency Manager, Equitable, since February 1985. OFFICERS -- DIRECTORS James M. Benson...................... President and Chief Executive Officer, Equitable Variable since March 1996; prior thereto, President from December 1993 to March 1996; Vice Chairman of the Board, Equitable Variable, July 1993 to December 1993. President & Chief Executive Officer, Equitable Life, since February 1996; President and Chief Operating Officer, Equitable, February 1994 to present; Senior Executive Vice President, April 1993 to February 1994. Prior thereto, President, Management Compensation Group, 1983 to February 1993. Director, Alliance Capital, October 1993 to present; National Mutual Association of Australasia, September 1995 to present and AXA Re Life Insurance Co., January 1995 to present. Harvey Blitz......................... Vice President, Equitable Variable since April 1995; Director of Equitable Variable since October 1992. Senior Vice President, Equitable, since September 1987. Senior Vice President, The Equitable Companies Incorporated, since July 1992. Director, Equico Securities, Inc., since September 1992; Equitable of Colorado, since September 1992; Equisource and its subsidiaries since October 1992, and Chairman of the Board Frontier Trust since September 1995 and Director of Equitable Distributors, Inc. since February 1995. Gordon Dinsmore...................... Senior Vice President, Equitable Variable, since February 1991. Senior Vice President, Equitable, since September 1989; prior thereto, various other Equitable positions. Director and Senior Vice President, March 1991 to present, Equitable of Colorado; Director, FHJV Holdings, Inc., December 1990 to present; Director, Equitable Distributors, Inc., August 1993 to present, and Director Equitable Foundation, May 1991 to present. Jerry de St. Paer.................... Senior Investment Officer, Equitable Variable, since April 1995; Director of Equitable Variable since April 1992. Senior Executive Vice President & Chief Financial Officer, Equitable Life, since February 1996; prior thereto, Executive Vice President & Chief Financial Officer, Equitable, since April 1992; Executive Vice President since December 1990; Senior Vice President & Treasurer June 1990 to December 1990; Senior Vice President, Equitable Investment Corporation, January 1987 to January 1991; Executive Vice President & Chief Financial Officer, The Equitable Companies Incorporated, since May 1992; Director, Economic Services Corporation & various Equitable subsidiaries.
26
NAME AND PRINCIPAL BUSINESS EXPERIENCE BUSINESS ADDRESS WITHIN PAST FIVE YEARS - ----------------------- ------------------------- OFFICERS -- DIRECTORS (Continued) Joseph J. Melone..................... Chairman of the Board, Equitable Variable since March 1996; Chairman of the Board and Chief Executive Officer, Equitable Variable, November 1990 to March 1996; Chairman of the Board, Equitable Life, since February 1996; prior thereto, Chairman of the Board and Chief Executive Officer, Equitable, February 1994 to February 1996; President and Chief Executive Officer, September 1992 to February 1994; President and Chief Operating Officer from November 1990 to September 1992. President & Chief Executive Officer of The Equitable Companies Incorporated since February 1996; prior thereto, President and Chief Operating Officer since July 1992. Prior thereto, President, The Prudential Insurance Company of America, since December 1984. Director, Equity & Law (United Kingdom) and various other Equitable subsidiaries. Peter D. Noris....................... Executive Vice President and Chief Investment Officer, Equitable Variable, since September 1995. Director of Equitable Variable since June 1995. Executive Vice President and Chief Investment Officer, Equitable, since May 1995; prior thereto, Vice President, Salomon Brothers, Inc., 1992 to 1995; Principal of Equity Division, Morgan Stanley & Co. Inc., from 1984 to 1992. Director, various Equitable subsidiaries. Samuel B. Shlesinger................. Senior Vice President, Equitable Variable, since February 1988. Senior Vice President and Actuary, Equitable; prior thereto, Vice President and Actuary. Director, Chairman and CEO, Equitable of Colorado. Dennis D. Witte...................... Senior Vice President, Equitable Variable, since February 1991; Senior Vice President, Equitable, since July 1990; prior thereto, various other Equitable positions. Director, Equitable Distributors, Inc. since February 1995. OFFICERS Kevin R. Byrne....................... Treasurer, Equitable Variable, since September 1990; Vice President and Treasurer, Equitable, since September 1993; prior thereto, Vice President from March 1989 to September 1993. Vice President and Treasurer, The Equitable Companies Incorporated, September 1993 to present; Frontier Trust since August 1990; Equisource and its subsidiaries October 1990 to present. Stephen Hogan........................ Vice President and Controller, Equitable Variable, February 1994 to present. Vice President, 135 West 50th Street Equitable, January 1994 to present; prior thereto, Controller, John Hancock subsidiaries, New York, New York 10020 from 1987 to December 1993. J. Thomas Liddle, Jr................. Senior Vice President and Chief Financial Officer, Equitable Variable, since February 1986. Senior Vice President, Equitable, since April 1991; prior thereto, Vice President and Actuary, Equitable. Director, Equitable of Colorado since December 1985. William A. Narducci.................. Vice President and Chief Claims Officer, Equitable Variable, since February 1989. Vice 200 Plaza Drive President, Equitable, since February 1988; prior thereto, Assistant Vice President. Secaucus, New Jersey 07096 John P. Natoli....................... Vice President and Chief Underwriting Officer, Equitable Variable, since February 1988. Vice President, Equitable.
27 PART 4: ILLUSTRATIONS OF POLICY BENEFITS To help clarify how the key financial elements of the policy work, a series of tables has been prepared. The tables show how death benefits, Policy Account and Cash Surrender Values ("policy benefits") under a hypothetical Incentive Life Plus policy could vary over time if the Funds of our Separate Account had CONSTANT hypothetical gross annual investment returns of 0%, 6% or 12% over the years covered by each table. Actual investment results may be more or less than those shown. The tables are for a 40-year-old preferred risk male non-tobacco user. Planned premium payments of $4,000 for an initial Face Amount of $300,000 are assumed to be paid at the beginning of each policy year. The illustration assumes no policy loan has been taken. The differences between the Policy Account and the Cash Surrender Values in the first fifteen years are the Surrender Charges. See SURRENDER CHARGES on page 18. The tables illustrate both current and guaranteed charges. The current charges include reductions in cost of insurance charges beginning in the tenth policy year, which are not guaranteed, and daily charges against the Separate Account Funds of .60% per annum for mortality and expense risks (.90% for the guaranteed table). The tables also assume .51% per annum for investment management (the average of the effective annual advisory fees applicable to each Trust portfolio during 1995 and the maximum advisory fee for the International Portfolio) and .04% per annum for direct Trust expenses. The charge reflected for direct Trust expenses exceeds the aggregate actual charges incurred by the portfolios of the Trust as a percentage of aggregate average daily Trust net assets during 1995. The effect of these adjustments is that on a 0% gross rate of return the net rate of return would be -1.15%, on 6% it would be 4.78%, and on 12% it would be 10.72%. Remember, however, that investment management fees and direct Trust expenses vary by portfolio. See THE TRUST'S INVESTMENT ADVISER on page 6. The tables also assume a charge for taxes of 2% of premiums. There are tables for both death benefit Option A and death benefit Option B. The second column of each table shows the effect of an amount equal to the premiums invested to earn interest, after taxes, of 5% compounded annually. These tables show that if a policy is returned in its very early years for payment of its Cash Surrender Value, that Cash Surrender Value will be low in comparison to the amount of the premiums accumulated with interest. Thus, the cost of owning your policy for a relatively short time will be high. The internal rate of return on Cash Surrender Value is equivalent to an interest rate (after taxes) at which an amount equal to the illustrated premiums could have been invested outside the Policy to arrive at the Cash Surrender Value of the Policy. The internal rate of return on the death benefit is equivalent to an interest rate (after taxes) at which an amount equal to the illustrated premiums could have been invested outside the Policy to arrive at the death benefit of the Policy. The internal rate of return is compounded annually, and the premiums are assumed to be paid at the beginning of each policy year. INDIVIDUAL ILLUSTRATIONS. On request, we will furnish you with a comparable illustration based on your policy's factors. Upon request after issuance, we will also provide a comparable illustration reflecting your actual Policy Account value. If you request illustrations more than once in any policy year, we may charge for the illustration. 28
INCENTIVE LIFE PLUS EQUITABLE VARIABLE LIFE INSURANCE COMPANY FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE PLANNED PREMIUM $4,000 INITIAL FACE AMOUNT $300,000 MALE AGE 40 PREFERRED RISK NON-TOBACCO USER DEATH BENEFIT OPTION A ASSUMING CURRENT CHARGES DEATH BENEFIT POLICY ACCOUNT CASH SURRENDER VALUE ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS END OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF POLICY ACCUMULATED -------------------------------- -------------------------------- -------------------------------- YEAR PREMIUMS(1) 0% 6% 12% 0% 6% 12% 0% 6% 12% - -------- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- 1 $ 4,200 $300,000 $300,000 $300,000 $ 2,376 $ 2,556 $ 2,737 $ 474 $ 654 $ 835 2 8,610 300,000 300,000 300,000 5,265 5,793 6,344 3,163 3,691 4,242 3 13,241 300,000 300,000 300,000 8,079 9,142 10,294 5,777 6,840 7,992 4 18,103 300,000 300,000 300,000 10,807 12,598 14,615 8,485 10,276 12,293 5 23,208 300,000 300,000 300,000 13,454 16,172 19,353 11,112 13,830 17,011 6 28,568 300,000 300,000 300,000 16,011 19,858 24,544 13,649 17,496 22,182 7 34,196 300,000 300,000 300,000 18,474 23,659 30,235 16,104 21,290 27,866 8 40,106 300,000 300,000 300,000 20,843 27,581 36,483 18,653 25,391 34,293 9 46,312 300,000 300,000 300,000 23,139 31,653 43,375 20,949 29,463 41,185 10 52,827 300,000 300,000 300,000 25,501 36,033 51,149 23,676 34,208 49,324 15 90,630 300,000 300,000 300,000 36,234 60,836 104,559 36,234 60,836 104,559 20 138,877 300,000 300,000 300,000 44,801 91,397 195,136 44,801 91,397 195,136 25 (age 65) 200,454 300,000 300,000 432,451 51,450 131,371 354,468 51,450 131,371 354,468
INTERNAL RATE OF RETURN INTERNAL RATE OF RETURN ON CASH SURRENDER VALUES ON DEATH BENEFIT ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS END OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF POLICY ---------------------------- --------------------------------- YEAR 0% 6% 12% 0% 6% 12% - -------- -------- ------- ------- --------- --------- --------- 1 -88.15% -83.65% -79.12% 7,400.00% 7,400.00% 7,400.00% 2 -47.98 -41.71 -35.53 717.47 717.47 717.47 3 -32.34 -25.58 -18.99 283.61 283.61 283.61 4 -23.82 -16.95 -10.27 162.42 162.42 162.42 5 -18.98 -12.05 -5.35 109.30 109.30 109.30 6 -15.95 -8.97 -2.25 80.35 80.35 80.35 7 -13.87 -6.85 -0.12 62.43 62.43 62.43 8 -12.16 -6.85 1.54 50.35 50.35 50.35 9 -11.08 -4.04 2.68 41.74 41.74 41.74 10 -9.81 -2.87 3.78 35.51 35.31 35.31 15 -6.62 0.17 6.67 18.45 18.45 18.45 20 -5.92 1.25 7.89 11.41 11.41 11.41 25 (age 65) -5.60 2.04 8.74 7.67 7.67 10.00 (1) Assumes net interest of 5% compounded annually. THE VALUES WILL DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. THE DEATH BENEFIT GUARANTEE / THREE-YEAR NO LAPSE GUARANTEE PREMIUM FOR THIS POLICY WOULD BE $3,533.96. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN. 29
INCENTIVE LIFE PLUS EQUITABLE VARIABLE LIFE INSURANCE COMPANY FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE PLANNED PREMIUM $4,000 INITIAL FACE AMOUNT $300,000 MALE AGE 40 PREFERRED RISK NON-TOBACCO USER DEATH BENEFIT OPTION A ASSUMING GUARANTEED CHARGES DEATH BENEFIT POLICY ACCOUNT CASH SURRENDER VALUE ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS END OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF POLICY ACCUMULATED -------------------------------- -------------------------------- -------------------------------- YEAR PREMIUMS(1) 0% 6% 12% 0% 6% 12% 0% 6% 12% - -------- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- 1 $ 4,200 $300,000 $300,000 $300,000 $ 2,340 $ 2,519 $ 2,699 $ 438 $ 617 $ 797 2 8,610 300,000 300,000 300,000 5,136 5,656 6,199 3,034 3,554 4,097 3 13,241 300,000 300,000 300,000 7,846 8,888 10,017 5,544 6,586 7,715 4 18,103 300,000 300,000 300,000 10,464 12,211 14,179 8,142 9,889 11,857 5 23,208 300,000 300,000 300,000 12,991 15,631 18,724 10,649 13,289 16,382 6 28,568 300,000 300,000 300,000 15,419 19,143 23,683 13,057 16,781 21,321 7 34,196 300,000 300,000 300,000 17,744 22,748 29,097 15,374 20,378 26,727 8 40,106 300,000 300,000 300,000 19,963 26,446 35,013 17,773 24,256 32,824 9 46,312 300,000 300,000 300,000 22,074 30,238 41,484 19,884 28,048 39,294 10 52,827 300,000 300,000 300,000 24,067 34,120 48,563 22,242 32,295 46,738 15 90,630 300,000 300,000 300,000 31,891 54,693 95,448 31,891 54,693 95,448 20 138,877 300,000 300,000 300,000 34,637 76,267 170,592 34,637 76,267 170,592 25 (age 65) 200,454 300,000 300,000 360,893 29,267 97,092 295,814 29,267 97,092 295,814
INTERNAL RATE OF RETURN INTERNAL RATE OF RETURN ON CASH SURRENDER VALUES ON DEATH BENEFIT ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS END OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF POLICY ---------------------------- --------------------------------- YEAR 0% 6% 12% 0% 6% 12% - -------- -------- ------- ------- --------- --------- --------- 1 -89.04% -84.57% -80.09% 7,400.00% 7,400.00% 7,400.00% 2 -49.57 -43.30 -37.12 717.47 717.47 717.47 3 -33.92 -27.13 -20.52 283.61 283.61 283.61 4 -25.26 -18.35 -11.63 162.42 162.42 162.42 5 -20.32 -13.33 -6.58 109.30 109.30 109.30 6 -17.19 -10.15 -3.37 80.35 80.35 80.35 7 -15.04 -7.95 -1.16 62.43 62.43 62.43 8 -13.27 -6.20 0.56 50.35 50.35 50.35 9 -12.18 -5.04 1.75 41.74 41.74 41.74 10 -11.03 -3.93 2.81 35.31 35.31 35.31 15 -8.41 -1.17 5.61 18.45 18.45 18.45 20 -8.89 -0.46 6.76 11.41 11.41 11.41 25 (age 65) -11.53 -0.23 7.58 7.67 7.67 8.85 (1) Assumes net interest of 5% compounded annually. THE VALUES WILL DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. THE DEATH BENEFIT GUARANTEE / THREE-YEAR NO LAPSE GUARANTEE PREMIUM FOR THIS POLICY WOULD BE $3,533.96. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN. 30
INCENTIVE LIFE PLUS EQUITABLE VARIABLE LIFE INSURANCE COMPANY FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE PLANNED PREMIUM $4,000 INITIAL FACE AMOUNT $300,000 MALE AGE 40 PREFERRED RISK NON-TOBACCO USER DEATH BENEFIT OPTION B ASSUMING CURRENT CHARGES DEATH BENEFIT POLICY ACCOUNT CASH SURRENDER VALUE ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS END OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF POLICY ACCUMULATED -------------------------------- -------------------------------- -------------------------------- YEAR PREMIUMS(1) 0% 6% 12% 0% 6% 12% 0% 6% 12% - -------- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- 1 $ 4,200 $302,369 $302,549 $302,729 $ 2,369 $ 2,549 $ 2,729 $ 467 $ 647 $ 827 2 8,610 305,245 305,771 306,319 5,245 5,771 6,319 3,143 3,669 4,217 3 13,241 308,037 309,094 310,239 8,037 9,094 10,239 5,735 6,792 7,937 4 18,103 310,735 312,512 314,513 10,735 12,512 14,513 8,413 10,190 12,191 5 23,208 313,342 316,033 319,182 13,342 16,033 19,182 11,000 13,691 16,840 6 28,568 315,847 319,647 324,275 15,847 19,647 24,275 13,485 17,285 21,913 7 34,196 318,247 323,355 329,831 18,247 23,355 29,831 15,877 20,985 27,461 8 40,106 320,538 327,157 335,896 20,538 27,157 35,896 18,348 24,967 33,706 9 46,312 322,742 331,079 342,549 22,742 31,079 42,549 20,552 28,889 40,359 10 52,827 324,997 335,275 350,015 24,997 35,275 50,015 23,173 33,450 48,190 15 90,630 334,955 358,486 400,222 34,955 58,486 100,222 34,955 58,486 100,222 20 138,877 342,216 385,551 481,685 42,216 85,551 181,685 42,216 85,551 181,685 25 (age 65) 200,454 346,815 418,342 619,058 46,815 118,342 319,058 46,815 118,342 319,058
INTERNAL RATE OF RETURN INTERNAL RATE OF RETURN ON CASH SURRENDER VALUES ON DEATH BENEFIT ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS END OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF POLICY ---------------------------- --------------------------------- YEAR 0% 6% 12% 0% 6% 12% - -------- -------- ------- ------- --------- --------- --------- 1 -88.32% -83.82% -79.31% 7,549.23% 7,463.73% 7,468.24% 2 -48.23 -41.96 -35.80 724.99 725.74 726.53 3 -32.62 -25.87 -19.29 287.38 287.87 288.40 4 -24.12 -17.25 -10.58 165.08 165.52 166.01 5 -19.30 -12.38 -5.68 111.47 111.90 112.40 6 -16.28 -9.31 -2.59 82.24 82.68 83.21 7 -14.23 -7.22 -0.49 64.13 64.59 65.17 8 -12.54 -5.55 1.15 51.93 52.42 53.05 9 -11.48 -4.44 2.28 43.22 43.73 44.43 10 -10.23 -3.28 3.36 36.72 37.27 38.03 15 -7.12 -0.32 6.18 19.65 20.39 21.59 20 -6.58 0.63 7.29 12.47 13.42 15.17 25 (age 65) -6.50 1.27 8.07 8.60 9.79 12.22 (1) Assumes net interest of 5% compounded annually. THE VALUES WILL DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. THE DEATH BENEFIT GUARANTEE / THREE-YEAR NO LAPSE GUARANTEE PREMIUM FOR THIS POLICY WOULD BE $3,533.96. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN. 31
INCENTIVE LIFE PLUS EQUITABLE VARIABLE LIFE INSURANCE COMPANY FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE PLANNED PREMIUM $4,000 INITIAL FACE AMOUNT $300,000 MALE AGE 40 PREFERRED RISK NON-TOBACCO USER DEATH BENEFIT OPTION B ASSUMING GUARANTEED CHARGES DEATH BENEFIT POLICY ACCOUNT CASH SURRENDER VALUE ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS END OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF POLICY ACCUMULATED -------------------------------- -------------------------------- -------------------------------- YEAR PREMIUMS(1) 0% 6% 12% 0% 6% 12% 0% 6% 12% - -------- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- 1 $ 4,200 $302,333 $302,512 $302,691 $ 2,333 $ 2,512 $ 2,691 $ 432 $ 610 $ 789 2 8,610 305,115 305,633 306,174 5,115 5,633 6,174 3,013 3,531 4,072 3 13,241 307,804 308,839 309,961 7,804 8,839 9,961 5,502 6,537 7,659 4 18,103 310,390 312,124 314,076 10,390 12,124 14,076 8,068 9,802 11,754 5 23,208 312,877 315,490 318,551 12,877 15,490 18,551 10,535 13,148 16,209 6 28,568 315,254 318,931 323,411 15,254 18,931 23,411 12,892 16,569 21,049 7 34,196 317,515 322,442 328,690 17,515 22,442 28,690 15,145 20,072 26,320 8 40,106 319,658 326,021 334,426 19,658 26,021 34,426 17,468 23,831 32,236 9 46,312 321,677 329,664 340,659 21,677 29,664 40,659 19,487 27,474 38,469 10 52,827 323,563 333,363 347,428 23,563 33,363 47,428 21,783 31,538 45,603 15 90,630 330,545 352,216 390,873 30,545 52,216 90,873 30,545 52,216 90,873 20 138,877 331,720 369,572 455,066 31,720 69,572 155,066 31,720 69,572 155,066 25 (age 65) 200,454 323,921 380,973 548,579 23,921 80,973 248,579 23,921 80,973 248,579
INTERNAL RATE OF RETURN INTERNAL RATE OF RETURN ON CASH SURRENDER VALUES ON DEATH BENEFIT ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS END OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF POLICY ---------------------------- --------------------------------- YEAR 0% 6% 12% 0% 6% 12% - -------- -------- ------- ------- --------- --------- --------- 1 -89.21% -84.76% -80.28% 7,458.34% 7,462.79% 7,467.27% 2 -49.83 -43.56 -37.40 724.81 725.55 726.32 3 -34.21 -27.44 -20.83 287.27 287.75 288.27 4 -25.58 -18.67 -11.96 165.00 165.42 165.90 5 -20.65 -13.67 -6.93 111.40 111.81 112.30 6 -17.54 -10.50 -3.74 82.17 82.60 83.11 7 -15.42 -8.33 -1.55 64.06 64.51 65.07 8 -13.67 -6.59 0.16 51.87 52.34 52.94 9 -12.60 -5.46 1.32 43.15 43.65 44.31 10 -11.47 -4.37 2.37 36.64 37.17 37.90 15 -9.03 -1.76 5.03 19.51 20.20 21.33 20 -9.96 -1.35 5.95 12.22 13.08 14.73 25 (age 65) -14.05 -1.67 6.44 8.16 9.20 11.48 (1) Assumes net interest of 5% compounded annually. THE VALUES WILL DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. THE DEATH BENEFIT GUARANTEE / THREE-YEAR NO LAPSE GUARANTEE PREMIUM FOR THIS POLICY WOULD BE $3,533.96. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN. 32 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors of Equitable Variable Life Insurance Company and Policyowners of Separate Account FP of Equitable Variable Life Insurance Company 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 Money Market Division, Intermediate Government Securities Division, Quality Bond Division, High Yield Division, Growth and Income Division, Equity Index Division, Common Stock Division, Global Division, International Division, Aggressive Stock Division, Conservative Investors Division, Balanced Division and Growth Investors Division, separate investment divisions of Equitable Variable Life Insurance Company ("Equitable Variable Life") Separate Account FP at December 31, 1995 and the results of each of their operations and changes in each of their net assets for each of the periods indicated, in conformity with generally accepted accounting principles. These financial statements are the responsibility of Equitable Variable Life's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of shares in The Hudson River Trust at December 31, 1995 with the transfer agent, provide a reasonable basis for the opinion expressed above. PRICE WATERHOUSE LLP New York, NY February 7, 1996 FSA-1 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 1995
INTERMEDIATE MONEY GOVERNMENT QUALITY HIGH GROWTH & EQUITY MARKET SECURITIES BOND YIELD INCOME INDEX DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION ------------ ----------- ------------ ----------- ----------- ----------- ASSETS Investments in shares of The Hudson River Trust -- at market value (Notes 2 and 7) Cost: $207,548,119..... $207,638,095 37,536,467..... $37,681,989 141,011,715..... $138,906,039 68,700,148..... $72,524,129 17,021,456..... $19,144,802 59,443,291..... $71,895,056 Receivable for sales of shares of The Hudson River Trust........... -- -- -- -- -- -- Receivable for policy- related transactions.. 1,030,719 472,227 195,736 671,870 272,371 214,843 ------------ ----------- ------------ ----------- ----------- ----------- Total Assets............ 208,668,814 38,154,216 139,101,775 73,195,999 19,417,173 72,109,899 ------------ ----------- ------------ ----------- ----------- ----------- LIABILITIES Payable for purchases of shares of The Hudson River Trust................. 1,021,043 488,551 195,429 740,734 272,227 214,856 Payable for policy- related transactions.. -- -- -- -- -- -- Amount retained by Equitable Variable Life in Separate Account FP (Note 4)........... 514,240 516,621 618,900 524,303 526,633 271,428 ------------ ----------- ------------ ----------- ---------- ----------- Total Liabilities....... 1,535,283 1,005,172 814,329 1,265,037 798,860 486,284 ------------ ----------- ------------ ----------- ---------- ----------- NET ASSETS ATTRIBUTABLE TO POLICYOWNERS......... $207,133,531 $37,149,044 $138,287,446 $71,930,962 $18,618,313 $71,623,615 ============ =========== ============ =========== =========== ===========
See Notes to Financial Statements.
COMMON AGGRESSIVE STOCK GLOBAL INTERNATIONAL STOCK DIVISION DIVISION DIVISION DIVISION -------------- ------------ ----------- ------------ ASSETS Investments in shares of The Hudson River Trust -- at market value (Notes 2 and 7) Cost: 966,230,780...... $1,148,055,059 297,303,481...... $333,829,077 11,991,226...... $12,659,132 475,758,260...... $556,029,378 Receivable for sales of shares of The Hudson River Trust........... -- -- -- -- Receivable for policy- related transactions.. 233,000 421,042 137,166 800,569 -------------- ------------ ----------- ------------ Total Assets............ 1,148,288,059 334,250,119 12,796,298 556,829,947 -------------- ------------ ----------- ------------ LIABILITIES Payable for purchases of shares of The Hudson River Trust................. 679,729 246,368 143,511 1,121,615 Payable for policy- related transactions.. -- -- -- -- Amount retained by Equitable Variable Life in Separate Account FP (Note 4)........... 1,023,056 506,731 220,849 520,201 -------------- ------------ ----------- ------------ Total Liabilities....... 1,702,785 753,099 364,360 1,641,816 -------------- ------------ ----------- ------------ NET ASSETS ATTRIBUTABLE TO POLICYOWNERS....... $1,146,585,274 $333,497,020 $12,431,938 $555,188,131 ============== ============ =========== ============
See Notes to Financial Statements. ASSET ALLOCATION SERIES -------------------------------------------- CONSERVATIVE GROWTH INVESTORS BALANCED INVESTORS DIVISION DIVISION DIVISION ------------ ------------ ------------ ASSETS Investments in shares of The Hudson River Trust -- at market value (Notes 2 and 7) Cost: 162,300,470...... $172,662,590 356,282,500...... $399,379,687 474,917,898...... $556,703,771 Receivable for sales of shares of The Hudson River Trust........... 76,736 -- -- Receivable for policy- related transactions.. -- -- 191,779 ------------ ------------ ------------ Total Assets............ 172,739,326 399,379,687 556,895,550 ------------ ------------ ------------ LIABILITIES Payable for purchases of shares of The Hudson River Trust................. -- 179,701 414,996 Payable for policy- related transactions.. 81,465 47,918 -- Amount retained by Equitable Variable Life in Separate Account FP (Note 4)........... 570,762 586,859 602,888 ------------ ------------ ------------ Total Liabilities....... 652,227 814,478 1,017,884 ------------ ------------ ------------ NET ASSETS ATTRIBUTABLE TO POLICYOWNERS....... $172,087,099 $398,565,209 $555,877,666 ============ ============ ============ See Notes to Financial Statements. FSA-2 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP STATEMENTS OF OPERATIONS
INTERMEDIATE GOVERNMENT MONEY MARKET DIVISION SECURITIES DIVISION ------------------------------------ -------------------------------------- YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, ------------------------------------ -------------------------------------- 1995 1994 1993 1995 1994 1993 ---------- ---------- ---------- ---------- ------------ ---------- INCOME AND EXPENSES: Income (Note 2): Dividends from The Hudson River Trust......... $9,225,401 $5,368,883 $4,163,389 $2,010,283 $ 5,671,984 $14,930,827 Expenses (Note 3): Mortality and expense risk charges............ 954,556 826,379 834,113 197,721 527,675 1,470,325 ---------- ---------- ---------- ---------- ----------- ----------- NET INVESTMENT INCOME............................. 8,270,845 4,542,504 3,329,276 1,812,562 5,144,309 13,460,502 ---------- ---------- ---------- ---------- ----------- ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 2): Realized gain (loss) on investments........... (432,347) 95,530 (339,754) (810,768) (10,163,976) 3,999,846 Realized gain distribution from The Hudson River Trust...................... -- -- -- -- -- 11,449,074 ---------- ---------- ---------- ---------- ----------- ----------- NET REALIZED GAIN (LOSS).......................... (432,347) 95,530 (339,754) (810,768) (10,163,976) 15,448,920 Unrealized appreciation/depreciation on investments: Beginning of period........................... 32,760 (14,267) (224,885) (2,736,863) (1,617,237) 1,966,231 End of period................................. 89,976 32,760 (14,267) 145,522 (2,736,863) (1,617,237) ---------- ---------- ---------- ---------- ----------- ----------- Change in unrealized appreciation/depreciation during the period............................. 57,216 47,027 210,618 2,882,385 (1,119,626) (3,583,468) ---------- ---------- ---------- ---------- ----------- ----------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS.................................. (375,131) 142,557 (129,136) 2,071,617 (11,283,602) 11,865,452 ---------- ---------- ---------- ---------- ----------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS................................. $7,895,714 $4,685,061 $3,200,140 $3,884,179 $(6,139,293) $25,325,954 ========== ========== ========== ========== =========== ===========
QUALITY BOND DIVISION ------------------------------------------- OCTOBER 1* TO YEAR ENDED DECEMBER 31, DECEMBER 31, --------------------------- ------------ 1995 1994 1993 ----------- ------------ ------------ INCOME AND EXPENSES: Income (Note 2): Dividends from The Hudson River Trust......... $ 7,958,285 $ 8,123,722 $ 1,221,840 Expenses (Note 3): Mortality and expense risk charges............ 767,627 689,178 163,308 ----------- ------------ ------------ NET INVESTMENT INCOME............................. 7,190,658 7,434,544 1,058,532 ----------- ------------ ------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 2): Realized gain (loss) on investments........... (632,666) (410,697) (106) Realized gain distribution from The Hudson River Trust...................... -- -- 130,973 ----------- ------------ ------------ NET REALIZED GAIN (LOSS).......................... (632,666) (410,697) 130,867 Unrealized appreciation/depreciation on investments: Beginning of period........................... (15,521,200) (1,886,621) -- End of period................................. (2,105,676) (15,521,200) (1,886,621) ----------- ------------ ----------- Change in unrealized appreciation/depreciation during the period............................. 13,415,524 (13,634,579) (1,886,621) ----------- ------------ ----------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS.................................. 12,782,858 (14,045,276) (1,755,754) ----------- ------------ ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS................................. $19,973,516 $ (6,610,732) $ (697,222) =========== ============ =========== See Notes to Financial Statements. * Commencement of Operations
FSA-3 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP STATEMENTS OF OPERATIONS (CONTINUED)
HIGH YIELD DIVISION ---------------------------------------- YEAR ENDED DECEMBER 31, ---------------------------------------- 1995 1994 1993 ----------- ----------- ---------- INCOME AND EXPENSES: Income (Note 2): Dividends from The Hudson River Trust................. $ 6,518,568 $ 4,578,946 $4,488,259 Expenses (Note 3): Mortality and expense risk charges.................... 371,369 305,522 285,992 ----------- ----------- ---------- NET INVESTMENT INCOME..................................... 6,147,199 4,273,424 4,202,267 ----------- ----------- ---------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 2): Realized gain (loss) on investments................... (179,454) (328,199) 107,852 Realized gain distribution from The Hudson River Trust.............................. -- -- 1,030,687 ----------- ----------- ---------- NET REALIZED GAIN (LOSS).................................. (179,454) (328,199) 1,138,539 Unrealized appreciation/depreciation on investments: Beginning of period................................... (873,103) 4,734,999 763,746 End of period......................................... 3,823,981 (873,103) 4,734,999 ----------- ----------- ---------- Change in unrealized appreciation/depreciation during the period..................................... 4,697,084 (5,608,102) 3,971,253 ----------- ----------- ---------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS.... 4,517,630 (5,936,301) 5,109,792 ----------- ----------- ---------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS......................................... $10,664,829 $(1,662,877) $9,312,059 =========== =========== ==========
See Notes to Financial Statements.
GROWTH & INCOME DIVISION EQUITY INDEX DIVISION --------------------------------------- -------------------------- OCTOBER 1* APRIL 1* TO YEAR ENDED TO YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, ------------------------ ------------- ----------- ------------- 1995 1994 1993 1995 1994 ---------- --------- ------------- ----------- ------------- INCOME AND EXPENSES: Income (Note 2): Dividends from The Hudson River Trust................. $ 380,677 $ 108,492 $ 3,394 $ 964,775 $ 596,180 Expenses (Note 3): Mortality and expense risk charges.................... 69,716 19,204 1,833 289,199 152,789 ---------- --------- ------- ----------- --------- NET INVESTMENT INCOME..................................... 310,961 89,288 1,561 675,576 443,391 ---------- --------- ------- ----------- --------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 2): Realized gain (loss) on investments................... 2,791 (11,709) (134) 3,060 (6,949) Realized gain distribution from The Hudson River Trust.............................. -- -- -- 536,890 134,154 ---------- --------- ------- ----------- --------- NET REALIZED GAIN (LOSS).................................. 2,791 (11,709) (134) 539,950 127,205 Unrealized appreciation/depreciation on investments: Beginning of period................................... (141,585) (904) -- (399,286) -- End of period......................................... 2,123,346 (141,585) (904) 12,451,765 (399,286) ---------- --------- ------- ----------- --------- Change in unrealized appreciation/depreciation during the period..................................... 2,264,931 (140,681) (904) 12,851,051 (399,286) ---------- --------- ------- ----------- --------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS.... 2,267,722 (152,390) (1,038) 13,391,001 (272,081) ---------- --------- ------- ----------- --------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS......................................... $2,578,683 $ (63,102) $ 523 $14,066,577 $ 171,310 ========== ========= ======= =========== ========= See Notes to Financial Statements. * Commencement of Operations
FSA-4 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP STATEMENTS OF OPERATIONS (CONTINUED)
COMMON STOCK DIVISION GLOBAL STOCK DIVISION -------------------------------------------- ----------------------------------------- YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, -------------------------------------------- ----------------------------------------- 1995 1994 1993 1995 1994 1993 ------------ ------------ ------------ ----------- ----------- ----------- INCOME AND EXPENSES: Income (Note 2): Dividends from The Hudson River Trust.................... $ 14,259,262 $ 11,755,355 $ 10,311,886 $ 5,152,442 $ 2,768,605 $ 1,060,406 Expenses (Note 3): Mortality and expense risk charges........................ 6,050,368 4,741,008 4,005,102 1,743,898 1,211,620 466,897 ------------ ------------ ------------ ----------- ----------- ----------- NET INVESTMENT INCOME................ 8,208,894 7,014,347 6,306,784 3,408,544 1,556,985 593,509 ------------ ------------ ------------ ----------- ----------- ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 2): Realized gain (loss) on investments.................... 16,793,683 292,144 4,176,629 3,049,444 3,347,704 1,333,766 Realized gain distribution from The Hudson River Trust......... 63,838,178 43,936,280 85,777,775 9,214,950 4,821,242 11,642,904 ------------ ------------ ------------ ----------- ----------- ----------- NET REALIZED GAIN (LOSS)............. 80,631,861 44,228,424 89,954,404 12,264,394 8,168,946 12,976,670 Unrealized appreciation (depreciation) on investments: Beginning of period.............. (2,048,649) 71,350,568 22,647,989 3,130,280 7,062,877 2,783,724 End of period.................... 181,824,279 (2,048,649) 71,350,568 36,525,596 3,130,280 7,062,877 ------------ ------------ ------------ ----------- ----------- ----------- Change in unrealized appreciation/ depreciation during the period... 183,872,928 (73,399,217) 48,702,579 33,395,316 (3,932,597) 4,279,153 ------------ ------------ ------------ ----------- ----------- ----------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS.............. 264,504,789 (29,170,793) 138,656,983 45,659,710 4,236,349 17,255,823 ------------ ------------ ------------ ----------- ----------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS.......... $272,713,683 $(22,156,446) $144,963,767 $49,068,254 $ 5,793,334 $17,849,332 ============ ============ ============ =========== =========== ===========
See Notes to Financial Statements.
INTERNATIONAL DIVISION AGGRESSIVE STOCK DIVISION -------------- -------------------------------------------- APRIL 3* TO DECEMBER 31, YEAR ENDED DECEMBER 31, -------------- -------------------------------------------- 1995 1995 1994 1993 ---------- ------------ ------------ ------------ INCOME AND EXPENSES: Income (Note 2): Dividends from The Hudson River Trust.................... $195,500 $ 1,268,689 $ 400,102 $ 766,228 Expenses (Note 3): Mortality and expense risk charges........................ 36,471 2,702,978 1,944,639 1,757,109 -------- ------------ ------------ ------------ NET INVESTMENT INCOME................ 159,029 (1,434,289) (1,544,537) (990,881) -------- ------------ ------------ ------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 2): Realized gain (loss) on investments.................... (790) 11,560,966 (6,075,250) 35,696,507 Realized gain distribution from The Hudson River Trust......... 51,741 61,903,470 -- 25,339,962 -------- ------------ ------------ ------------ NET REALIZED GAIN (LOSS)............. 50,951 73,464,436 (6,075,250) 61,036,469 Unrealized appreciation (depreciation) on investments: Beginning of period.............. -- 30,761,318 35,185,988 53,885,737 End of period.................... 667,906 80,271,118 30,761,318 35,185,988 -------- ------------ ------------ ------------ Change in unrealized appreciation/ depreciation during the period... 667,906 49,509,800 (4,424,670) (18,699,749) -------- ------------ ------------ ------------ NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS.............. 718,857 122,974,236 (10,499,920) 42,336,720 -------- ------------ ------------ ------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS.......... $877,886 $121,539,947 $(12,044,457) $ 41,345,839 ======== ============ ============ ============ See Notes to Financial Statements. *Commencement of Operations
FSA-5 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP STATEMENTS OF OPERATIONS (CONCLUDED)
ASSET ALLOCATION SERIES --------------------------------------------------------------------------------- CONSERVATIVE INVESTORS DIVISION BALANCED DIVISION -------------------------------------- ---------------------------------------- YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, -------------------------------------- ---------------------------------------- 1995 1994 1993 1995 1994 1993 ----------- ----------- ---------- ----------- ------------ ----------- INCOME AND EXPENSES: Income (Note 2): Dividends from The Hudson River Trust....... $ 8,169,109 $ 6,205,574 $4,088,977 $12,276,328 $ 10,557,487 $10,062,862 Expenses (Note 3): Mortality and expense risk charges.......... 921,294 750,164 551,610 2,237,982 2,103,510 2,047,811 ----------- ----------- ---------- ----------- ------------ ----------- NET INVESTMENT INCOME........................... 7,247,815 5,455,410 3,537,367 10,038,346 8,453,977 8,015,051 ----------- ----------- ---------- ----------- ------------ ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 2): Realized gain (loss) on investments......... (378,551) (421,501) 91,739 (2,466,524) 858,164 1,446,919 Realized gain distribution from The Hudson River Trust.................... 1,068,272 -- 4,651,717 10,894,130 -- 20,280,817 ----------- ----------- ---------- ----------- ------------ ----------- NET REALIZED GAIN (LOSS)........................ 689,721 (421,502) 4,743,456 8,427,606 858,164 21,727,736 Unrealized appreciation (depreciation) on investments: Beginning of period......................... (8,767,697) 1,915,037 2,223,612 (2,878,875) 37,960,661 30,072,900 End of period............................... 10,362,120 (8,767,697) 1,915,037 43,097,187 (2,878,875) 37,960,661 ----------- ----------- ---------- ----------- ------------ ----------- Change in unrealized appreciation/depreciation during the period........................... 19,129,817 (10,682,734) (308,575) 45,976,062 (40,839,536) 7,887,761 ----------- ----------- ---------- ----------- ------------ ----------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS................................ 19,819,538 (11,104,236) 4,434,881 54,403,668 (39,981,372) 29,615,497 ----------- ----------- ---------- ----------- ------------ ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS............................... $27,067,353 $(5,648,826) $7,972,248 $64,442,014 $(31,527,395) $37,630,548 =========== =========== ========== =========== ============ ===========
See Notes to Financial Statements.
ASSET ALLOCATION SERIES ------------------------------------------- GROWTH INVESTORS DIVISION ------------------------------------------- YEAR ENDED DECEMBER 31, ------------------------------------------- 1995 1994 1993 ------------ ------------ ----------- INCOME AND EXPENSES: Income (Note 2): Dividends from The Hudson River Trust......... $ 15,855,901 $ 10,663,204 $ 5,922,228 Expenses (Note 3): Mortality and expense risk charges............ 2,796,354 1,995,747 1,274,117 ------------ ------------ ----------- NET INVESTMENT INCOME............................. 13,059,547 8,667,457 4,648,111 ------------ ------------ ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 2): Realized gain (loss) on investments........... 1,752,185 241,591 52,392 Realized gain distribution from The Hudson River Trust...................... 7,421,853 -- 14,624,517 ------------ ------------ ----------- NET REALIZED GAIN (LOSS).......................... 9,174,038 241,591 14,676,909 Unrealized appreciation (depreciation) on investments: Beginning of period........................... (770,693) 20,567,604 12,746,740 End of period................................. 81,785,873 (770,693) 20,567,604 ------------ ------------ ----------- Change in unrealized appreciation/depreciation during the period............................. 82,556,566 (21,338,297) 7,820,864 ------------ ------------ ----------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS.................................. 91,730,604 (21,096,706) 22,497,773 ------------ ------------ ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS................................. $104,790,151 $(12,429,249) $27,145,884 ============ ============ ===========
See Notes to Financial Statements. FSA-6 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP STATEMENTS OF CHANGES IN NET ASSETS
INTERMEDIATE GOVERNMENT MONEY MARKET DIVISION SECURITIES DIVISION ------------------------------------------ ------------------------------------------- YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, ------------------------------------------ ------------------------------------------- 1995 1994 1993 1995 1994 1993 ------------ ------------ ------------ ----------- ------------- ------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income............. $ 8,270,845 $ 4,542,504 $ 3,329,276 $ 1,812,562 $ 5,144,309 $ 13,460,502 Net realized gain (loss).......... (432,347) 95,530 (339,754) (810,768) (10,163,976) 15,448,920 Change in unrealized appreciation/ depreciation on investments..... 57,216 47,027 210,618 2,882,385 (1,119,626) (3,583,468) ------------ ------------ ------------ ----------- ------------- ------------- Net increase (decrease) from operations................. 7,895,714 4,685,061 3,200,140 3,884,179 (6,139,293) 25,325,954 ------------ ------------ ------------ ----------- ------------- ------------- FROM POLICY-RELATED TRANSACTIONS: Net premiums (Note 3)............. 96,773,056 82,536,703 64,845,505 11,016,347 18,915,140 26,598,113 Benefits and other policy-related transactions (Note 3)........... (39,770,849) (32,432,771) (31,747,197) (6,286,070) (5,813,181) (7,539,335) Net transfers among divisions..... 4,776,165 (25,466,044) (50,510,704) 953,149 (125,116,319) (180,916,946) ------------ ------------ ------------ ----------- ------------- ------------- Net increase (decrease) from policy-related transactions..... 61,778,372 24,637,888 (17,412,396) 5,683,426 (112,014,360) (161,858,168) ------------ ------------ ------------ ----------- ------------- ------------- NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE VARIABLE IN SEPARATE ACCOUNT FP (Note 4)...... (36,640) (24,067) 92,890 (72,636) 15,335 (69,330) ------------ ------------ ------------ ----------- ------------- ------------- INCREASE (DECREASE) IN NET ASSETS... 69,637,446 29,298,882 (14,119,366) 9,494,969 (118,138,318) (136,601,544) NET ASSETS, BEGINNING OF PERIOD..... 137,496,085 108,197,203 122,316,569 27,654,075 145,792,393 282,393,937 ------------ ------------ ------------ ----------- ------------- ------------- NET ASSETS, END OF PERIOD........... $207,133,531 $137,496,085 $108,197,203 $37,149,044 $ 27,654,075 $ 145,792,393 ============ ============ ============ =========== ============= =============
See Notes to Financial Statements.
QUALITY BOND DIVISION ------------------------------------------- OCTOBER 1* TO YEAR ENDED DECEMBER 31, DECEMBER 31, ---------------------------- ----------- 1995 1994 1993 ------------ ------------ ----------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income............. $ 7,190,658 $ 7,434,544 $ 1,058,532 Net realized gain (loss).......... (632,666) (410,697) 130,867 Change in unrealized appreciation/ depreciation on investments..... 13,415,524 (13,634,579) (1,886,621) ------------ ------------ ----------- Net increase (decrease) from operations................. 19,973,516 (6,610,732) (697,222) ------------ ------------ ----------- FROM POLICY-RELATED TRANSACTIONS: Net premiums (Note 3)............. 2,516,135 850,240 181,283 Benefits and other policy-related transactions (Note 3)........... (3,189,044) (2,891,278) (441,626) Net transfers among divisions..... 2,462,969 25,765,197 100,786,909 ------------ ------------ ----------- Net increase (decrease) from policy-related transactions..... 1,790,060 23,724,159 100,526,566 ------------ ------------ ----------- NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE VARIABLE IN SEPARATE ACCOUNT FP (Note 4)...... (712,602) 255,654 38,047 ------------ ------------ ----------- INCREASE (DECREASE) IN NET ASSETS... 21,050,974 17,369,081 99,867,391 NET ASSETS, BEGINNING OF PERIOD..... 117,236,472 99,867,391 -- ------------ ------------ ----------- NET ASSETS, END OF PERIOD........... $138,287,446 $117,236,472 $99,867,391 ============ ============ =========== See Notes to Financial Statements. *Commencement of Operations
FSA-7 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
HIGH YIELD DIVISION ------------------------------------------ YEAR ENDED DECEMBER 31, ------------------------------------------ 1995 1994 1993 ----------- ------------ ----------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income................................... $ 6,147,199 $ 4,273,424 $ 4,202,267 Net realized gain (loss)................................ (179,454) (328,199) 1,138,539 Change in unrealized appreciation/ depreciation on investments........................... 4,697,084 (5,608,102) 3,971,253 ----------- ------------ ----------- Net increase (decrease) from operations................. 10,664,829 (1,662,877) 9,312,059 ----------- ------------ ----------- FROM POLICY-RELATED TRANSACTIONS: Net premiums (Note 3)................................... 15,333,474 14,287,345 10,787,763 Benefits and other policy-related transactions (Note 3)................................. (8,211,013) (7,162,537) (5,179,424) Net transfers among divisions........................... 4,789,450 (11,048,174) 1,006,671 ----------- ------------ ----------- Net increase (decrease) from policy-related transactions.......................................... 11,911,911 (3,923,366) 6,615,010 ----------- ------------ ----------- NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE VARIABLE IN SEPARATE ACCOUNT FP (Note 4)................ (100,679) 16,028 (31,889) ----------- ------------ ----------- INCREASE (DECREASE) IN NET ASSETS......................... 22,476,061 (5,570,215) 15,895,180 NET ASSETS, BEGINNING OF PERIOD........................... 49,454,901 55,025,116 39,129,936 ----------- ------------ ----------- NET ASSETS, END OF PERIOD................................. $71,930,962 $ 49,454,901 $55,025,116 =========== ============ ===========
See Notes to Financial Statements.
GROWTH & INCOME DIVISION EQUITY INDEX DIVISION ------------------------------------- -------------------------- OCTOBER 1* APRIL 1* TO YEAR ENDED TO YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, ------------------------- ----------- ----------- ----------- 1995 1994 1993 1995 1994 ----------- ---------- ----------- ----------- ----------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income................................... $ 310,961 $ 89,288 $ 1,561 $ 675,576 $ 443,391 Net realized gain (loss)................................ 2,791 (11,709) (134) 539,950 127,205 Change in unrealized appreciation/ depreciation on investments........................... 2,264,931 (140,681) (904) 12,851,051 (399,286) ----------- ---------- -------- ----------- ----------- Net increase (decrease) from operations................. 2,578,683 (63,102) 523 14,066,577 171,310 ----------- ---------- -------- ----------- ----------- FROM POLICY-RELATED TRANSACTIONS: Net premiums (Note 3)................................... 6,464,035 2,953,965 182,381 10,308,871 690,540 Benefits and other policy-related transactions (Note 3)................................. (1,385,132) (481,430) (6,581) (2,111,532) (472,818) Net transfers among divisions........................... 5,274,221 3,033,230 279,153 18,305,589 30,736,505 ----------- ---------- -------- ----------- ----------- Net increase (decrease) from policy-related transactions.......................................... 10,353,124 5,505,765 454,953 26,502,928 30,954,227 ----------- ---------- -------- ----------- ----------- NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE VARIABLE IN SEPARATE ACCOUNT FP (Note 4)................ (221,877) 6,113 4,131 (71,293) (134) ----------- ---------- -------- ----------- ----------- INCREASE (DECREASE) IN NET ASSETS......................... 12,709,930 5,448,776 459,607 40,498,212 31,125,403 NET ASSETS, BEGINNING OF PERIOD........................... 5,908,383 459,607 -- 31,125,403 -- ----------- ---------- -------- ----------- ----------- NET ASSETS, END OF PERIOD................................. $18,618,313 $5,908,383 $459,607 $71,623,615 $31,125,403 =========== ========== ======== =========== =========== See Notes to Financial Statements. *Commencement of Operations
FSA-8 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
COMMON STOCK DIVISION GLOBAL STOCK DIVISION -------------------------------------------- ------------------------------------------ YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, -------------------------------------------- ------------------------------------------ 1995 1994 1993 1995 1994 1993 -------------- ------------- ----------- ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income..... $ 8,208,894 $ 7,014,347 $ 6,306,784 $ 3,408,544 $ 1,556,985 $ 593,509 Net realized gain (loss).. 80,631,861 44,228,424 89,954,404 12,264,394 8,168,946 12,976,670 Change in unrealized appreciation/ depreciation on investments............. 183,872,928 (73,399,217) 48,702,579 33,395,316 (3,932,597) 4,279,153 -------------- ------------ ------------ ------------ ------------ ------------ Net increase (decrease) from operations......... 272,713,683 (22,156,446) 144,963,767 49,068,254 5,793,334 17,849,332 -------------- ------------ ------------ ------------ ------------ ------------ FROM POLICY-RELATED TRANSACTIONS: Net premiums (Note 3)..... 216,068,996 171,525,812 124,210,476 92,666,618 77,766,997 25,508,452 Benefits and other policy-related transactions (Note 3)... (118,456,643) (93,481,219) (77,837,895) (37,507,499) (23,371,745) (8,931,159) Net transfers among divisions............... (34,354,864) 19,730,410 (9,498,455) (12,472,104) 47,610,957 59,544,080 -------------- ------------ ------------ ------------ ------------ ------------ Net increase (decrease) from policy-related transactions............ 63,257,489 97,775,003 36,874,126 42,687,015 102,006,209 76,121,373 -------------- ------------ ------------ ------------ ------------ ------------ NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE VARIABLE IN SEPARATE ACCOUNT FP (Note 4).................. (392,099) 44,948 (124,376) (96,720) (17,737) 4,085 -------------- ------------ ------------ ------------ ------------ ------------ INCREASE IN NET ASSETS...... 335,579,073 75,663,505 181,713,517 91,658,549 107,781,806 93,974,790 NET ASSETS, BEGINNING OF PERIOD.................... 811,006,201 735,342,696 553,629,179 241,838,471 134,056,665 40,081,875 -------------- ------------ ------------ ------------ ------------ ------------ NET ASSETS, END OF PERIOD.................... $1,146,585,274 $811,006,201 $735,342,696 $333,497,020 $241,838,471 $134,056,665 ============== ============ ============ ============ ============ ============
See Notes to Financial Statements.
INTERNATIONAL DIVISION AGGRESSIVE STOCK DIVISION ----------- ------------------------------------------ APRIL 3* TO DECEMBER 31, YEAR ENDED DECEMBER 31, ----------- ------------------------------------------ 1995 1995 1994 1993 ----------- ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income..... $ 159,029 $ (1,434,289) $ (1,544,537) $ (990,881) Net realized gain (loss).. 50,951 73,464,436 (6,075,250) 61,036,469 Change in unrealized appreciation/ depreciation on investments............. 667,906 49,509,800 (4,424,670) (18,699,749) ----------- ------------ ------------ ------------ Net increase (decrease) from operations......... 877,886 121,539,947 (12,044,457) 41,345,839 ----------- ------------ ------------ ------------ FROM POLICY-RELATED TRANSACTIONS: Net premiums (Note 3)..... 2,028,670 121,962,483 101,932,221 77,930,596 Benefits and other policy-related transactions (Note 3)... (339,723) (63,165,185) (48,604,650) (39,462,340) Net transfers among divisions............... 9,885,952 19,367,834 4,346,636 (73,890,214) ----------- ------------ ------------ ------------ Net increase (decrease) from policy-related transactions............ 11,574,899 78,165,132 57,674,207 (35,421,958) ----------- ------------ ------------ ------------ NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE VARIABLE IN SEPARATE ACCOUNT FP (Note 4).................. (20,847) (188,813) 35,791 (2,220) ----------- ------------ ------------ ------------ INCREASE IN NET ASSETS...... 12,431,938 199,516,266 45,665,541 5,921,661 NET ASSETS, BEGINNING OF PERIOD.................... 0 355,671,865 310,006,324 304,084,663 ----------- ------------ ------------ ------------ NET ASSETS, END OF PERIOD.................... $12,431,938 $555,188,131 $355,671,865 $310,006,324 =========== ============ ============ ============ See Notes to Financial Statements. *Commencement of Operations
FSA-9 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP STATEMENTS OF CHANGES IN NET ASSETS (CONCLUDED)
ASSET ALLOCATION SERIES ----------------------------------------------------------------------------------------- CONSERVATIVE INVESTORS DIVISION BALANCED DIVISION ------------------------------------------- ------------------------------------------ YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, ------------------------------------------- ------------------------------------------ 1995 1994 1993 1995 1994 1993 ------------- ------------ ------------ ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income.............. $ 7,247,815 $ 5,455,410 $ 3,537,367 $ 10,038,346 $ 8,453,977 $ 8,015,051 Net realized gain (loss)........... 689,721 (421,502) 4,743,456 8,427,606 858,164 21,727,736 Change in unrealized appreciation/ depreciation on investments...... 19,129,817 (10,682,734) (308,575) 45,976,062 (40,839,536) 7,887,761 ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) from operations.................. 27,067,353 (5,648,826) 7,972,248 64,442,014 (31,527,395) 37,630,548 ------------ ------------ ------------ ------------ ------------ ------------ FROM POLICY-RELATED TRANSACTIONS: Net premiums (Note 3).............. 41,419,959 48,492,315 43,782,002 63,451,955 70,116,900 67,351,402 Benefits and other policy-related transactions (Note 3)............ (22,866,003) (21,612,430) (17,644,077) (48,742,571) (45,655,363) (44,497,967) Net transfers among divisions...... (3,379,296) (2,076,793) 6,165,330 (18,908,540) (19,954,097) (6,834,099) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) from policy-related transactions...... 15,174,660 24,803,092 32,303,255 (4,199,156) 4,507,440 16,019,336 ------------ ------------ ------------ ------------ ------------ ------------ NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE VARIABLE IN SEPARATE ACCOUNT FP (Note 4).... (95,412) 22,600 18,535 (93,214) 47,322 256,506 ------------ ------------ ------------ ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS.... 42,146,601 19,176,866 40,294,038 60,149,644 (26,972,633) 53,906,390 NET ASSETS, BEGINNING OF PERIOD...... 129,940,498 110,763,632 70,469,594 338,415,565 365,388,198 311,481,808 ------------ ------------ ------------ ------------ ------------ ------------ NET ASSETS, END OF PERIOD............ $172,087,099 $129,940,498 $110,763,632 $398,565,209 $338,415,565 $365,388,198 ============ ============ ============ ============ ============ ============
See Notes to Financial Statements.
ASSET ALLOCATION SERIES -------------------------------------------- GROWTH INVESTORS DIVISION -------------------------------------------- YEAR ENDED DECEMBER 31, -------------------------------------------- 1995 1994 1993 ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income.............. $ 13,059,547 $ 8,667,457 $ 4,648,111 Net realized gain (loss)........... 9,174,038 241,591 14,676,909 Change in unrealized appreciation/ depreciation on investments...... 82,556,566 (21,338,297) 7,820,864 ------------ ------------ ------------ Net increase (decrease) from operations.................. 104,790,151 (12,429,249) 27,145,884 ------------ ------------ ------------ FROM POLICY-RELATED TRANSACTIONS: Net premiums (Note 3).............. 155,616,059 139,140,391 105,136,825 Benefits and other policy-related transactions (Note 3)............ (68,357,709) (54,863,821) (36,431,873) Net transfers among divisions...... (3,269,896) 20,294,785 30,908,183 ------------ ------------ ------------ Net increase (decrease) from policy-related transactions...... 83,988,454 104,571,355 99,613,135 ------------ ------------ ------------ NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE VARIABLE IN SEPARATE ACCOUNT FP (Note 4).... (120,493) 15,372 (27,455) ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS.... 188,658,112 92,157,478 126,731,564 NET ASSETS, BEGINNING OF PERIOD...... 367,219,554 275,062,076 148,330,512 ------------ ------------ ------------ NET ASSETS, END OF PERIOD............ $555,877,666 $367,219,554 $275,062,076 ============ ============ ============
See Notes to Financial Statements. FSA-10 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995 1. General Equitable Variable Life Insurance Company (Equitable Variable Life), a wholly-owned subsidiary of The Equitable Life Assurance Society of the United States (Equitable Life), established Separate Account FP (the Account) as a unit investment trust registered with the Securities and Exchange Commission under the Investment Company Act of 1940. The Account consists of thirteen investment divisions: the Money Market Division, the Intermediate Government Securities Division, the High Yield Division, the Balanced Division, the Common Stock Division, the Global Division, the Aggressive Stock Division, the Conservative Investors Division, the Growth Investors Division, the Growth & Income Division, the Quality Bond Division, the Equity Index Division and the International Division. The assets in each Division are invested in shares of a designated portfolio (Portfolio) of a mutual fund, The Hudson River Trust (the Trust). Each Portfolio has separate investment objectives. The Account supports the operations of Incentive Life,(TM) flexible premium variable life insurance policies, Incentive Life 2000,(TM) flexible premium variable life insurance policies, Champion 2000,(TM) modified premium variable whole life insurance policies, Survivorship 2000,(TM) flexible premium joint survivorship variable life insurance policies, Incentive Life Plus,(TM) flexible premium variable life insurance policies and SP-Flex,(TM) variable life insurance policies with additional premium option, collectively, the Policies, and the Incentive Life 2000, Champion 2000 and Survivorship 2000 policies are referred to as the Series 2000 Policies. Incentive Life policies offered with the prospectus dated September 15, 1995, are referred to as Incentive Life Plus Second Series. Incentive Life Plus policies issued with a prior prospectus are referred to as Incentive Life Plus Original Series. All Policies are issued by Equitable Variable. The assets of the Account are the property of Equitable Variable. However, the portion of the Account's assets attributable to the Policies will not be chargeable with liabilities arising out of any other business Equitable Variable may conduct. Policyowners may allocate amounts in their individual accounts to the Divisions of the Account and/or (except for SP-Flex policies) to the guaranteed interest division of Equitable Variable Life's General Account. Net transfers to the guaranteed interest division of the General Account and other Separate Accounts of $6,569,372, $35,120,632 and $125,668,098 for the years ended 1995, 1994 and 1993, respectively, are included in Net Transfers Among Divisions. The net assets of any Division of the Account may not be less than the aggregate of the policyowners' accounts allocated to that Division. Additional assets are set aside in Equitable Variable Life's General Account to provide for (1) the unearned portion of the monthly charges for mortality costs, and (2) other policy benefits, as required under the state insurance law. 2. Significant Accounting Policies The accompanying financial statements are prepared in conformity with generally accepted accounting principles (GAAP). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Investments are made in shares of the Trust and are valued at the net asset values per share of the respective Portfolios. The net asset value is determined by the Trust using the market or fair value of the underlying assets of the Portfolio. Investment transactions are recorded on the trade date. Realized gains and losses include gains and losses on redemptions of the Trust's shares (determined on the identified cost basis) and Trust distributions representing the net realized gains on Trust investment transactions. The operations of the Account are included in the consolidated Federal income tax return of Equitable Life. Under the provisions of the Policies, Equitable Variable Life has the right to charge the Account for Federal income tax attributable to the Account. No charge is currently being made against the Account for such tax since, under current tax law, Equitable Variable Life pays no tax on investment income and capital gains reflected in variable life insurance policy reserves. However, Equitable Variable Life retains the right to charge for any Federal income tax incurred which is attributable to the Account if the law is changed. Charges for state and local taxes, if any, attributable to the Account also may be made. Dividends are recorded as income at the end of each quarter on the ex-dividend date. Capital gains are distributed by the Trust at the end of each year. 3. Asset Charges Under the Policies, Equitable Variable Life assumes mortality and expense risks and, to cover these risks, deducts charges from the assets of the Account currently at annual rates of 0.60% of the net assets attributable to Incentive Life, Incentive Life 2000, Incentive Life Plus Second Series and Champion 2000 policyowners, 0.90% of net assets attributable to Survivorship 2000 policyowners, and 0.85% for SP-Flex policyowners. Incentive Life Plus Original Series deducts this charge from the Policy Account. Under SP-Flex, Equitable Variable Life also deducts charges from the assets of the Account for mortality and administrative costs of 0.60% and 0.35%, respectively, of net assets attributable to SP-Flex policies. FSA-11 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 1995 Under Incentive Life, Incentive Life Plus and the Series 2000 Policies, mortality and administrative costs are charged in a different manner than SP-Flex policies (see Notes 4 and 5). Before amounts are allocated to the Account for Incentive Life, Incentive Life Plus and the Series 2000 Policies, Equitable Variable Life deducts a charge for taxes and either an initial policy fee (Incentive Life) or a premium sales charge (Incentive Life Plus and Series 2000 Policies) from premiums. Under SP-Flex, the entire initial premium is allocated to the Account. Before any additional premiums under SP-Flex are allocated to the Account, an administrative charge is deducted. The amounts attributable to Incentive Life, Incentive Life Plus and the Series 2000 policyowners' accounts are charged monthly by Equitable Variable Life for mortality and administrative costs. These charges are withdrawn from the Account along with amounts for additional benefits. Under the Policies, amounts for certain policy-related transactions (such as policy loans and surrenders) are transferred out of the Separate Account. 4. Amounts Retained by Equitable Variable Life in Separate Account FP The amount retained by Equitable Variable Life in the Account arises principally from (1) contributions from Equitable Variable Life, and (2) that portion, determined ratably, of the Account's investment results applicable to those assets in the Account in excess of the net assets for the Policies. Amounts retained by Equitable Variable Life are not subject to charges for mortality and expense risks or mortality and administrative costs. Amounts retained by Equitable Variable Life in the Account may be transferred at any time by Equitable Variable Life to its General Account. The following table shows the surplus contributions (withdrawals) by Equitable Variable Life by investment division:
INVESTMENT DIVISION 1995 1994 1993 ------------------- ----------- ----------- ---------- Common Stock $ (630,000) -- -- Money Market (250,000) -- $1,145,000 Balanced -- -- -- Aggressive Stock (350,000) -- -- High Yield (100,000) -- 330,000 Global (130,000) -- (6,895,000) Conservative Investors -- -- 575,000 Growth Investors -- -- 130,000 Short-Term World Income -- $(5,165,329) -- Intermediate Government Securities (165,000) -- -- Growth & Income (685,000) -- 1,000,000 Quality Bond (4,800,000) -- 5,000,000 Equity Index -- 200,000 -- International 200,000 -- -- ----------- ----------- ---------- $(6,910,000) $(4,965,329) $1,285,000 =========== =========== ==========
5. Distribution and Servicing Agreements Equitable Variable Life has entered into a Distribution and Servicing Agreement with Equitable Life and Equico Securities Inc. (Equico), whereby registered representatives of Equico, authorized as variable life insurance agents under applicable state insurance laws, sell the Policies. The registered representatives are compensated on a commission basis by Equitable Life. Equitable Variable Life also has entered into an agreement with Equitable Life under which Equitable Life performs the administrative services related to the Policies, including underwriting and issuance, billings and collections, and policyowner services. There is no charge to the Account related to this agreement. 6. Share Substitution On February 22, 1994, Equitable Variable Life, the Account and the Trust substituted shares of the Trust's Intermediate Government Securities Portfolio for shares of the Trust's Short-Term World Income Portfolio. The amount transferred to Intermediate Government Securities Portfolio was $2,192,109. The statements of operations and statements of changes in net assets for the Intermediate Government Securities Portfolio is combined with the Short-Term World Income Portfolio for periods prior to the merger on February 22, 1994. The Short-Term World Income Division is not available for future investment. FSA-12 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 1995 7. Investment Returns The Separate Account rates of return attributable to Incentive Life, Incentive Life 2000, Incentive Life Plus Second Series and Champion 2000 policyowners are different than those attributable to Survivorship 2000, Incentive Life Plus Original Series and to SP-Flex policyowners because asset charges are deducted at different rates under each policy (see Note 3). The tables on this page and the following pages show the gross and net investment returns with respect to the Divisions for the periods shown. The net return for each Division is based upon net assets for a policy whose policy commences with the beginning date of such period and is not based on the average net assets in the Division during such period. Gross return is equal to the total return earned by the underlying Trust investment. RATES OF RETURN: INCENTIVE LIFE, - -------------- INCENTIVE LIFE 2000, - -------------------- INCENTIVE LIFE PLUS SECOND SERIES - --------------------------------- AND CHAMPION 2000* - -----------------
JANUARY 26(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, ---------------------------------------------------------------------------------------------------- MONEY MARKET DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 - --------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return.............. 5.74 % 4.02 % 3.00 % 3.56 % 6.18 % 8.24 % 9.18 % 7.32 % 6.63 % 6.05 % Net return................ 5.11 % 3.39 % 2.35 % 2.94 % 5.55 % 7.59 % 8.53 % 6.68 % 5.99 % 5.47 %
APRIL 1(A) TO INTERMEDIATE YEAR ENDED DECEMBER 31, DECEMBER 31, GOVERNMENT ----------------------------------------------- SECURITIES DIVISION 1995 1994 1993 1992 1991 - ------------------- ---- ---- ---- ---- ---- Gross return.............. 13.33 % (4.37)% 10.58 % 5.60 % 12.26 % Net return................ 12.65 % (4.95)% 9.88 % 4.96 % 11.60 % YEAR ENDED OCTOBER 1(A) DECEMBER 31, DECEMBER 31, ---------------------------------- QUALITY BOND DIVISION 1995 1994 1993 - --------------------- ---- ---- ---- Gross return.............. 17.02 % (5.10)% (0.51)% Net return................ 16.32 % (5.67)% (0.66)%
JANUARY 26(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, ---------------------------------------------------------------------------------------------------- HIGH YIELD DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 - ------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return.............. 19.92 % (2.79)% 23.15 % 12.31 % 24.46 % (1.12)% 5.13 % 9.73 % 4.68 % -- Net return................ 19.20 % (3.37)% 22.41 % 11.64 % 23.72 % (1.71)% 4.50 % 9.08 % 4.05 % --
YEAR ENDED OCTOBER 1(A) TO DECEMBER 31, DECEMBER 31, ---------------------------------- GROWTH & INCOME DIVISION 1995 1994 1993 - ------------------------- ---- ---- ---- Gross return.............. 24.07 % (0.58)% (0.25)% Net return................ 23.33 % (1.17)% (0.41)% YEAR ENDED MARCH 31(A) TO DECEMBER 31, DECEMBER 31, ----------------------------------- EQUITY INDEX DIVISION 1995 1994 - --------------------- ---- ---- Gross return.............. 36.48 % 1.08 % Net return................ 35.66 % 0.58 % - ------------------------------- * Sales of Incentive Life 2000 and Champion 2000 commenced on March 2, 1992. Sales of Incentive Life Plus Second Series commenced on September 15, 1995. (a) Date as of which net premiums under the policies were first allocated to the Division. The gross return and the net return for the periods indicated are not annual rates of return. FSA-13 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 1995
JANUARY 26(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, ---------------------------------------------------------------------------------------------------- COMMON STOCK DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 - --------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return.............. 32.45 % (2.14)% 24.84 % 3.22 % 37.88 % (8.12)% 25.59 % 22.43 % 7.49 % 15.65 % Net return................ 31.66 % (2.73)% 24.08 % 2.60 % 37.06 % (8.67)% 24.84 % 21.70 % 6.84 % 15.01 %
AUGUST 31(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, ------------------------------------------------------------------------------------------- GLOBAL DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 - --------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return.............. 18.81 % 5.23 % 32.09 % (0.50)% 30.55 % (6.07)% 26.93 % 10.88 % (13.27)% Net return................ 18.11 % 4.60 % 31.33 % (1.10)% 29.77 % (6.63)% 26.17 % 10.22 % (13.45)%
APRIL 3(A) TO DECEMBER 31, INTERNATIONAL DIVISION 1995 - ---------------------- ---------- Gross return.............. 11.29 % Net return................ 10.79 %
JANUARY 26(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, ---------------------------------------------------------------------------------------------------- AGGRESSIVE STOCK DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 - -------------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return.............. 31.63 % (3.81)% 16.77 % (3.16)% 86.86 % 8.17 % 43.50 % 1.17 % 7.31 % 35.88 % Net return................ 30.85 % (4.39)% 16.05 % (3.74)% 85.75 % 7.51 % 42.64 % 0.53 % 6.66 % 35.13 %
JANUARY 26(A) TO ASSET ALLOCATION SERIES YEAR ENDED DECEMBER 31, DECEMBER 31, ------------------------------------------------------------------------------------------------------ BALANCED DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 - ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return.............. 19.75 % (8.02)% 12.28 % (2.84)% 41.26 % 0.24 % 25.83 % 13.27 % (0.85)% 29.07 % Net return................ 19.03 % (8.57)% 11.64 % (3.42)% 40.42 % (0.36)% 25.08 % 12.59 % (1.45)% 28.34 %
OCTOBER 2(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, CONSERVATIVE -------------------------------------------------------------------------------- INVESTORS DIVISION 1995 1994 1993 1992 1991 1990 1989 - ------------------ ---- ---- ---- ---- ---- ---- ---- Gross return.............. 20.40 % (4.10)% 10.76 % 5.72 % 19.87 % 6.37 % 3.09 % Net return................ 19.68 % (4.67)% 10.15 % 5.09 % 19.16 % 5.73 % 2.94 %
GROWTH INVESTORS DIVISION 1995 1994 1993 1992 1991 1990 1989 - ------------------------- ---- ---- ---- ---- ---- ---- ---- Gross return.............. 26.37 % (3.15)% 15.26 % 4.90 % 48.89 % 10.66 % 3.98 % Net return................ 25.62 % (3.73)% 14.58 % 4.27 % 48.01 % 10.00 % 3.82 % - ---------------------------- * Sales of Incentive Life 2000 and Champion 2000 commenced on March 2, 1992. (a) Date as of which net premiums under the policies were first allocated to the Division. The gross return and the net return for the periods indicated are not annual rates of return.
RATES OF RETURN: SURVIVORSHIP 2000 - ----------------- AUGUST 17(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, --------------------------------------------------- MONEY MARKET DIVISION 1995 1994 1993 1992 - --------------------- ---- ---- ---- ---- Gross return.............. 5.74 % 4.02 % 3.00 % 1.11 % Net return................ 4.80 % 3.08 % 2.04 % 0.77 % INTERMEDIATE GOVERNMENT SECURITIES DIVISION 1995 1994 1993 1992 - ------------------- ---- ---- ---- ---- Gross return.............. 13.33 % (4.37)% 10.58 % 0.90 % Net return................ 12.31 % (5.23)% 9.55 % 0.56 % - ---------- (a) Date as of which net premiums under the policies were first allocated to the Division. The gross return and the net return for the periods indicated are not annual rates of return. FSA-14 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 1995 OCTOBER 1(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, ------------------------------------------------ QUALITY BOND DIVISION 1995 1994 1993 - --------------------- ---- ---- ---- Gross return.............. 17.02 % (5.10)% (0.51)% Net return................ 15.97 % (5.95)% (0.73)% AUGUST 17(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, --------------------------------------------------- HIGH YIELD DIVISION 1995 1994 1993 1992 - ------------------- ---- ---- ---- ---- Gross return.............. 19.92 % (2.79)% 23.15 % 1.84 % Net return................ 18.84 % (3.66)% 22.04 % 1.50 % OCTOBER 1(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, -------------------------------------------------- GROWTH & INCOME DIVISION 1995 1994 1993 - ------------------------ ---- ---- ---- Gross return.............. 24.07 % (0.58)% (0.25)% Net return................ 22.96 % (1.47)% (0.48)% YEAR ENDED MARCH 1(A) TO DECEMBER 31, DECEMBER 31, ------------------------------ EQUITY INDEX DIVISION 1995 1994 - --------------------- ---- ---- Gross return.............. 36.48 % 1.08 % Net return................ 35.26 % 0.33 % AUGUST 17(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, --------------------------------------------------- COMMON STOCK DIVISION 1995 1994 1993 1992 - --------------------- ---- ---- ---- ---- Gross return.............. 32.45 % (2.14)% 24.84 % 5.28 % Net return................ 31.26 % (3.02)% 23.70 % 4.93 % GLOBAL DIVISION - --------------- Gross return.............. 18.81 % 5.23 % 32.09 % 4.87 % Net return................ 17.75 % 4.29 % 30.93 % 4.52 % APRIL 3(A) TO DECEMBER 31, ---------------- INTERNATIONAL DIVISION 1995 - ---------------------- ---- Gross return.............. 11.29 % Net return................ 10.55 % AUGUST 17(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, --------------------------------------------------- AGGRESSIVE STOCK DIVISION 1995 1994 1993 1992 - ------------------------- ---- ---- ---- ---- Gross return.............. 31.63 % (3.81)% 16.77 % 11.49 % Net return................ 30.46 % (4.68)% 15.70 % 11.11 % ASSET ALLOCATION SERIES AUGUST 17(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, CONSERVATIVE INVESTORS -------------------------------------------------- DIVISION 1995 1994 1993 1992 - -------- ---- ---- ---- ---- Gross return.............. 20.40 % (4.10)% 10.76 % 1.38 % Net return................ 19.32 % (4.96)% 9.81 % 1.04 % BALANCED DIVISION 1995 1994 1993 1992 - ----------------- ---- ---- ---- ---- Gross return.............. 19.75 % (8.02)% 12.28 % 5.37 % Net return................ 18.68 % (8.84)% 11.30 % 5.02 % GROWTH INVESTORS DIVISION 1995 1994 1993 1992 - ------------------------- ---- ---- ---- ---- Gross return.............. 26.37 % (3.15)% 15.26 % 6.89 % Net return................ 25.24 % (4.02)% 14.24 % 6.53 % - ---------- (a) Date as of which net premiums under the policies were first allocated to the Division. The gross return and the net return for the periods indicated are not annual rates of return. FSA-15 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31,1995 RATES OF RETURN: INCENTIVE LIFE PLUS ORIGINAL SERIES(B)* - --------------------------------------- YEAR ENDED DECEMBER 31, ------------------------- 1995 ---- Money Market Division........ 5.69% Intermediate Government Securities Division.......... 13.31% Quality Bond Division........ 17.13% High Yield Division.......... 19.95% Growth & Income Division..... 24.38% Equity Index Division........ 36.53% Common Stock Division........ 33.07% Global Division.............. 19.38% APRIL 30 TO DECEMBER 31, ------------------------ 1995 ---- International Division....... 11.29% YEAR ENDED DECEMBER 31, ------------------------ 1995 ---- Aggressive Stock Division.... 33.00% ASSET ALLOCATION SERIES YEAR ENDED DECEMBER 31, ------------------------ 1995 ---- Conservative Investors Division... 20.59% Balanced Division................ 20.32% Growth Investors Division......... 26.92% - -------------------- *Sales of Incentive Life Plus Original Series commenced on January 6, 1995. (b) There are no Separate Account asset charges for this policy and therefore the gross and net rates of return are the same. The rate of return for the period indicated is not an annual rate of return. FSA-16 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31,1995 RATES OF RETURN: SP-FLEX - -------
AUGUST 31(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, ------------------------------------------------------------------------------------------- MONEY MARKET DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 - --------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return.............. 5.74 % 4.02 % 3.00 % 3.56 % 6.17 % 8.24 % 9.18 % 7.32 % 2.15 % Net return................ 3.86 % 2.17 % 1.13 % 1.71 % 4.29 % 6.30 % 7.24 % 5.41 % 1.62 %
APRIL 1(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, INTERMEDIATE GOVERNMENT -------------------------------------------------- SECURITIES DIVISION 1995 1994 1993 1992 1991 - ------------------- ---- ---- ---- ---- ---- Gross return.............. 13.33 % (4.37) % 10.58 % 5.60 % 12.10 % Net return................ 11.31 % (6.08) % 8.57 % 3.71 % 10.59 % YEAR ENDED SEPTEMBER 1(A) TO DECEMBER 31, DECEMBER 31, ------------------------------- QUALITY BOND DIVISION 1995 1994 - --------------------- ---- ---- Gross return.............. 17.02 % (2.20)% Net return................ 14.94 % (2.35)%
AUGUST 31(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, ------------------------------------------------------------------------------------------- HIGH YIELD DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 - ------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return.............. 19.92 % (2.79)% 23.15 % 12.31 % 24.46 % (1.12)% 5.13 % 9.73 % 1.95 % Net return................ 17.79 % (4.52)% 20.96 % 10.30 % 22.25 % (2.89)% 3.26 % 7.78 % 1.39 %
YEAR ENDED SEPTEMBER 1(A) TO DECEMBER 31, DECEMBER 31, --------------------------------- GROWTH & INCOME DIVISION 1995 1994 - ------------------------ ---- ---- Gross return.............. 24.07 % (3.40)% Net return................ 21.87 % (3.55)% EQUITY INDEX DIVISION 1995 1994 - --------------------- ---- ---- Gross return.............. 36.48 % (2.54)% Net return................ 34.06 % (2.69)%
AUGUST 31(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, -------------------------------------------------------------------------------------------- COMMON STOCK DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 - --------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return.............. 32.45 % 2.14 % 24.84 % 3.23 % 37.87 % (8.12)% 25.59 % 22.43 % (22.57)% Net return................ 30.10 % (3.88)% 22.60 % 1.38 % 35.43 % (9.76)% 23.36 % 20.26 % (23.00)% GLOBAL DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 - --------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return.............. 18.81 % 5.23 % 32.09 % (0.50)% 30.55 % (6.07)% 26.93 % 10.88 % (11.40)% Net return................ 16.70 % 3.36 % 29.77 % (2.28)% 28.23 % (7.75)% 24.67 % 8.90 % (11.86)%
APRIL 3(A) TO DECEMBER 31, ------------- INTERNATIONAL DIVISION 1995 - ---------------------- ---- Gross return.............. 11.29 % Net return................ 9.82 %
AUGUST 31(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, -------------------------------------------------------------------------------------------- AGGRESSIVE STOCK DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 - ------------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return.............. 31.63 % 3.81 % 16.77 % (3.16)% 86.86 % 8.17 % 43.50 % 1.17 % (24.28)% Net return................ 29.30 % (5.53)% 14.67 % (4.89)% 83.54 % 6.23 % 40.95 % (0.66)% (24.68)% - ------------------------------ (a) Date as of which net premiums under the policies were first allocated to the Division. The gross return and the net return for the periods indicated are not annual rates of return.
FSA-17 EQUITABLE VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT FP NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 1995 ASSET ALLOCATION SERIES YEAR ENDED SEPTEMBER 1(A) TO DECEMBER 31, DECEMBER 31, CONSERVATIVE INVESTORS --------------------------------------- DIVISION 1995 1994 - -------- ---- ---- Gross return.......... 20.40 % (1.83)% Net return............ 18.26 % (1.98)%
AUGUST 31(A) TO YEAR ENDED DECEMBER 31, DECEMBER 31, ------------------------------------------------------------------------------------------------- BALANCED DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 - ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross return.......... 19.75 % (8.02)% 12.28 % (2.83)% 41.27 % 0.24 % 25.83 % 13.27 % (20.26)% Net return............ 17.62 % (9.66)% 10.31 % (4.57)% 38.75 % (1.56)% 23.59 % 11.25 % (20.71)%
YEAR ENDED SEPTEMBER 1(A) TO DECEMBER 31, DECEMBER 31, GROWTH INVESTORS ------------------------------------ DIVISION 1995 1994 - -------- ---- ---- Gross return........... 26.37 % (3.16)% Net return............. 24.12 % (3.31)% - ------------------------- (a) Date as of which net premiums under the policies were first allocated to the Division. The gross return and the net return for the periods indicated are not annual rates of return. FSA-18 EQUITABLE VARIABLE LIFE INSURANCE COMPANY CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1995 AND 1994
1995 1994 ----------------- ---------------- ASSETS (IN MILLIONS) Investments: Fixed maturities: Available for sale, at estimated fair value........................................ $ 4,366.3 $ 2,138.8 Held to maturity, at amortized cost................................................ -- 2,008.5 Policy loans......................................................................... 1,300.1 1,185.2 Mortgage loans on real estate........................................................ 771.5 888.5 Equity real estate................................................................... 525.4 641.0 Other equity investments............................................................. 200.5 239.1 Other invested assets................................................................ 120.9 107.8 ----------------- ---------------- Total investments.................................................................. 7,284.7 7,208.9 Cash and cash equivalents............................................................... 277.6 182.3 Deferred policy acquisition costs....................................................... 2,037.8 2,077.1 Other assets............................................................................ 250.6 240.7 Separate Accounts assets................................................................ 4,611.6 3,345.3 ----------------- ---------------- TOTAL ASSETS............................................................................ $ 14,462.3 $ 13,054.3 ================= ================ LIABILITIES Policyholders' account balances......................................................... $ 7,045.9 $ 7,340.0 Future policy benefits and other policyholders' liabilities............................. 570.8 509.4 Other liabilities....................................................................... 521.4 441.1 Separate Accounts liabilities........................................................... 4,586.5 3,314.9 ----------------- ---------------- Total liabilities.................................................................. 12,724.6 11,605.4 ----------------- ---------------- Commitments and contingencies (Notes 7, 9, 10 and 11) SHAREHOLDER'S EQUITY Common stock, par value $1 per share; 5.0 million shares authorized, 1.5 million shares issued and outstanding............. 1.5 1.5 Capital in excess of par value.......................................................... 1,480.7 1,355.7 Retained earnings....................................................................... 221.6 165.5 Net unrealized investment gains (losses)................................................ 44.6 (72.6) Minimum pension liability............................................................... (10.7) (1.2) ----------------- ---------------- Total shareholder's equity......................................................... 1,737.7 1,448.9 ----------------- ---------------- TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY.............................................. $ 14,462.3 $ 13,054.3 ================= ================ See Notes to Consolidated Financial Statements.
F-1 EQUITABLE VARIABLE LIFE INSURANCE COMPANY CONSOLIDATED STATEMENTS OF EARNINGS YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1995 1994 1993 ----------------- ---------------- ----------------- (IN MILLIONS) REVENUES Universal life and investment-type product policy fee income...... $ 584.5 $ 552.6 $ 485.2 Premiums.......................................................... 33.7 40.1 46.9 Net investment income............................................. 529.1 526.8 557.6 Investment (losses) gains, net.................................... (.5) (4.6) 1.5 Other income...................................................... 2.1 2.9 3.0 ----------------- ---------------- ----------------- Total revenues.................................................. 1,148.9 1,117.8 1,094.2 ----------------- ---------------- ----------------- BENEFITS AND OTHER DEDUCTIONS Interest credited to policyholders' account balances.............. 376.1 389.3 439.2 Policyholders' benefits........................................... 267.5 242.3 251.0 Other operating costs and expenses................................ 419.5 413.8 356.7 ----------------- ---------------- ----------------- Total benefits and other deductions............................. 1,063.1 1,045.4 1,046.9 ----------------- ---------------- ----------------- Earnings before Federal income taxes and cumulative effect of accounting change....................................... 85.8 72.4 47.3 Federal income tax expense........................................... 29.7 25.0 20.5 ----------------- ---------------- ----------------- Earnings before cumulative effect of accounting change............... 56.1 47.4 26.8 Cumulative effect of accounting change, net of Federal income taxes. -- (11.4) -- ----------------- ---------------- ----------------- Net Earnings......................................................... $ 56.1 $ 36.0 $ 26.8 ================= ================ ================= See Notes to Consolidated Financial Statements.
F-2 EQUITABLE VARIABLE LIFE INSURANCE COMPANY CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1995 1994 1993 ----------------- ---------------- ----------------- (IN MILLIONS) COMMON STOCK AT PAR VALUE, beginning and end of year................. $ 1.5 $ 1.5 $ 1.5 ----------------- ---------------- ----------------- CAPITAL IN EXCESS OF PAR VALUE, beginning of year.................... 1,355.7 1,305.7 1,055.7 Additional capital in excess of par value............................ 125.0 50.0 250.0 ----------------- ---------------- ----------------- Capital in excess of par value, end of year.......................... 1,480.7 1,355.7 1,305.7 ----------------- ---------------- ----------------- RETAINED EARNINGS, beginning of year................................. 165.5 129.5 102.7 Net earnings......................................................... 56.1 36.0 26.8 ----------------- ---------------- ----------------- Retained earnings, end of year....................................... 221.6 165.5 129.5 ----------------- ---------------- ----------------- NET UNREALIZED INVESTMENT (LOSSES) GAINS, beginning of year.......... (72.6) 22.3 11.1 Change in unrealized investment gains (losses)....................... 117.2 (94.9) 11.2 ----------------- ---------------- ----------------- Net unrealized investment gains (losses), end of year................ 44.6 (72.6) 22.3 ----------------- ---------------- ----------------- MINIMUM PENSION LIABILITY, beginning of year......................... (1.2) (6.3) -- Change in minimum pension liability.................................. (9.5) 5.1 (6.3) ----------------- ---------------- ----------------- Minimum pension liability, end of year............................... (10.7) (1.2) (6.3) ----------------- ---------------- ----------------- TOTAL SHAREHOLDER'S EQUITY, END OF YEAR.............................. $ 1,737.7 $ 1,448.9 $ 1,452.7 ================= ================ ================= See Notes to Consolidated Financial Statements.
F-3 EQUITABLE VARIABLE LIFE INSURANCE COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1995 1994 1993 ----------------- ---------------- ----------------- (IN MILLIONS) NET EARNINGS......................................................... $ 56.1 $ 36.0 $ 26.8 ADJUSTMENTS TO RECONCILE NET EARNINGS TO NET CASH (USED) PROVIDED BY OPERATING ACTIVITIES: Interest credited to policyholders' account balances.............. 376.1 389.3 439.2 General Account policy charges.................................... (618.7) (572.8) (496.7) Investment losses (gains), net.................................... .5 4.6 (1.5) Other, net........................................................ 63.8 (17.2) 117.2 ----------------- ---------------- ----------------- Net cash (used) provided by operating activities..................... (122.2) (160.1) 85.0 ----------------- ---------------- ----------------- CASH FLOWS FROM INVESTING ACTIVITIES: Maturities and repayments......................................... 640.7 511.8 1,165.8 Sales............................................................. 2,667.0 2,119.0 2,844.2 Return of capital from joint ventures and limited partnerships.... 23.9 14.2 56.3 Purchases......................................................... (3,065.9) (2,251.7) (4,414.0) Other, net........................................................ (114.8) (102.2) (98.8) ----------------- ---------------- ----------------- Net cash provided (used) by investing activities..................... 150.9 291.1 (446.5) ----------------- ---------------- ----------------- CASH FLOWS FROM FINANCING ACTIVITIES: Policyholders' account balances: Deposits........................................................ 581.1 602.8 612.9 Withdrawals..................................................... (636.6) (697.7) (506.2) Capital contribution from Equitable Life.......................... 125.0 50.0 250.0 Other, net........................................................ (2.9) (1.8) 2.0 ----------------- ---------------- ----------------- Net cash provided (used) by financing activities..................... 66.6 (46.7) 358.7 ----------------- ---------------- ----------------- Change in cash and cash equivalents.................................. 95.3 84.3 (2.8) Cash and cash equivalents, beginning of year......................... 182.3 98.0 100.8 ----------------- ---------------- ----------------- Cash and Cash Equivalents, End of Year............................... $ 277.6 $ 182.3 $ 98.0 ================= ================ ================= Supplemental cash flow information Interest Paid..................................................... $ -- $ 5.7 $ 2.1 ================= ================ ================= Income Taxes Refunded............................................. $ -- $ 8.4 $ .3 ================= ================ ================= See Notes to Consolidated Financial Statements.
F-4 EQUITABLE VARIABLE LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION Equitable Variable Life Insurance Company ("Equitable Variable Life") was incorporated on September 11, 1972 as a wholly owned subsidiary of The Equitable Life Assurance Society of the United States ("Equitable Life"). Equitable Variable Life's operations consist principally of the sale of interest-sensitive life insurance and annuity products. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation and Principles of Consolidation The accompanying consolidated financial statements are prepared in conformity with generally accepted accounting principles ("GAAP"). The accompanying consolidated financial statements include the accounts of Equitable Variable Life and its subsidiaries, (collectively "EVLICO"). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. All significant intercompany transactions and balances have been eliminated in consolidation. Certain reclassifications have been made in the amounts presented for prior periods to conform these periods with the 1995 presentation. Accounting Changes In the first quarter of 1995, EVLICO adopted Statement of Financial Accounting Standards ("SFAS") No. 114, "Accounting by Creditors for Impairment of a Loan." This statement applies to all loans, including loans restructured in a troubled debt restructuring involving a modification of terms. This statement addresses the accounting for impairment of a loan by specifying how allowances for credit losses should be determined. Impaired loans within the scope of this statement are measured based on the present value of expected future cash flows discounted at the loan's effective interest rate, at the loan's observable market price or the fair value of the collateral if the loan is collateral dependent. EVLICO provides for impairment of loans through an allowance for possible losses. The adoption of this statement did not have a material effect on the level of these allowances or on EVLICO's consolidated statements of earnings and shareholder's equity. In the fourth quarter of 1994 (effective as of January 1, 1994), EVLICO adopted SFAS No. 112, "Employers' Accounting for Postemployment Benefits," which required employers to recognize the obligation to provide postemployment benefits. Implementation of this statement resulted in a charge for the cumulative effect of accounting change of $11.4 million, net of a Federal income tax benefit of $6.2 million. At December 31, 1993, EVLICO adopted SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities," which expanded the use of fair value accounting for those securities that a company does not have positive intent and ability to hold to maturity. Implementation of this statement increased consolidated shareholder's equity by $7.2 million, net of deferred policy acquisition costs and deferred Federal income tax. Beginning coincident with issuance of SFAS No. 115 implementation guidance in November 1995, the Financial Accounting Standards Board ("FASB") permitted companies a one-time opportunity, through December 31, 1995, to reassess the appropriateness of the classification of all securities held at that time. On December 1, 1995, EVLICO transferred $1,806.7 million of securities classified as held to maturity to the available for sale portfolio. As a result, consolidated shareholder's equity increased by $17.9 million, net of deferred policy acquisition costs and deferred Federal income tax. New Accounting Pronouncements In March 1995, the FASB issued SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," which requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of such assets may not be recoverable. EVLICO will implement this statement as of January 1, 1996. EVLICO currently provides allowances for possible losses for assets under the scope of this statement. Management has not yet determined the impact of this statement on these assets. Valuation of Investments Fixed maturities which have been identified as available for sale are reported at estimated fair value. At December 31, 1994, fixed maturities which EVLICO had both the ability and the intent to hold to maturity, were stated principally at amortized cost. The amortized cost of fixed maturities is adjusted for impairments in value deemed to be other than temporary. F-5 Mortgage loans on real estate are stated at unpaid principal balances, net of unamortized discounts and valuation allowances. Effective with the adoption of SFAS No. 114 on January 1, 1995, the valuation allowances are based on the present value of expected future cash flows discounted at the loan's original effective interest rate or the collateral value if the loan is collateral dependent. However, if foreclosure is or becomes probable, the measurement method used is collateral value. Prior to the adoption of SFAS No. 114, the valuation allowances were based on losses expected by management to be realized on transfers of mortgage loans to real estate (upon foreclosure or in-substance foreclosure), on the disposition or settlement of mortgage loans and on mortgage loans management believed may not be collectible in full. In establishing valuation allowances, management previously considered, among other things, the estimated fair value of the underlying collateral. Real estate, including real estate acquired in satisfaction of debt, is stated at depreciated cost less valuation allowances. At the date of foreclosure (including in-substance foreclosure), real estate acquired in satisfaction of debt is valued at estimated fair value. Valuation allowances on real estate held for the production of income are computed using the forecasted cash flows of the respective properties discounted at a rate equal to EVLICO's cost of funds; valuation allowances on real estate available for sale are computed using the lower of current estimated fair value, net of disposition costs, or depreciated cost. Policy loans are stated at unpaid principal balances. Partnerships and joint venture interests in which EVLICO does not have control and a majority economic interest are reported on the equity basis of accounting and are included with either equity real estate or other equity investments, as appropriate. Common stocks are carried at estimated fair value and are included in other equity investments. Short-term investments are stated at amortized cost which approximates fair value and are included with other invested assets. Cash and cash equivalents includes cash on hand, amounts due from banks and highly liquid debt instruments purchased with an original maturity of three months or less. All securities are recorded in the consolidated financial statements on a trade date basis. Investment Results and Unrealized Investment Gains (Losses) Realized investment gains and losses are determined by specific identification and are presented as a component of revenue. Valuation allowances are netted against the asset categories to which they apply and changes in the valuation allowances are included in investment gains or losses. Unrealized investment gains and losses on fixed maturities available for sale and equity securities held by EVLICO are accounted for as a separate component of shareholder's equity, net of related deferred Federal income taxes and deferred policy acquisition costs related to universal life and investment-type products. 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 expenses include benefit claims incurred in the period in excess of related policyholders' account balances. Premiums from 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. 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. Deferred policy acquisition costs are 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, deferred policy acquisition costs are amortized over the expected average life of the contracts (periods ranging from 15 to 35 years and 5 to 17 years, respectively) as a constant percentage of estimated gross profits arising principally from investment results, mortality and expense margins and surrender charges based on historical and anticipated future experience, updated at the end of each accounting period. The effect on the amortization of deferred policy acquisition costs of revisions to estimated gross profits is reflected in earnings in the period such estimated gross profits are revised. The effect on the deferred policy acquisition cost asset that would result from realization of unrealized gains (losses) is recognized with an offset to unrealized gains (losses) in consolidated shareholder's equity as of the balance sheet date. Amortization charged to income amounted to $199.0 million, $200.2 million and $135.5 million for the years ended December 31, 1995, 1994 and 1993, respectively. F-6 Policyholders' Account Balances and Future Policy Benefits EVLICO's insurance contracts primarily are universal life and investment-type contracts. Policyholders' account balances are equal to the policy account values. The policy account values represent an accumulation of gross premium payments plus credited interest less expense and mortality charges and withdrawals. The future policy benefit liabilities for the remainder of EVLICO's insurance contracts, consisting primarily of supplementary contracts with life contingencies and various policy riders, are computed by various valuation methods based on assumed interest rates and mortality and morbidity assumptions reflecting EVLICO's experience and industry standards. Federal Income Taxes EVLICO is included in a consolidated Federal income tax return with Equitable Life and its other eligible subsidiaries. In accordance with an agreement between EVLICO and Equitable Life, the amount of current income taxes as determined on a separate return basis will be paid to, or received from, Equitable Life. Benefits for losses, which are paid to EVLICO to the extent they are utilized by Equitable Life, may not have been received in the absence of such agreement. 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 the 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 EVLICO. Separate Accounts assets are subject to General Account claims only to the extent the value of such assets exceeds the Separate Accounts liabilities. Assets and liabilities of the Separate Accounts, representing net deposits and accumulated net investment earnings less fees, held primarily for the benefit of contractholders are shown as separate captions in the consolidated balance sheets. Assets held in the Separate Accounts are carried at quoted market values or, where quoted values are not available, at estimated fair values as determined by management. The investment results of Separate Accounts are reflected directly in Separate Accounts liabilities. For the years ended December 31, 1995, 1994 and 1993, investment results of Separate Accounts were $342.2 million, $135.9 million and $344.1 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 of the Separate Accounts are included in revenues. F-7 3. INVESTMENTS The following tables provide additional information relating to fixed maturities and equity securities:
GROSS GROSS AMORTIZED UNREALIZED UNREALIZED ESTIMATED COST GAINS LOSSES FAIR VALUE ---------------- ----------------- ----------------- --------------- (IN MILLIONS) December 31, 1995 ----------------- Fixed Maturities: Available for Sale: Corporate................................. $ 3,053.5 $ 101.0 $ 22.0 $ 3,132.5 Mortgage-backed........................... 573.9 7.7 .4 581.2 U.S. Treasury securities and U.S. government and agency securities.................. 569.2 9.2 2.6 575.8 States and political subdivisions......... 4.3 .1 -- 4.4 Foreign governments....................... 16.2 .8 -- 17.0 Redeemable preferred stock................ 56.8 3.7 5.1 55.4 ---------------- ----------------- ----------------- --------------- Total Available for Sale.................... $ 4,273.9 $ 122.5 $ 30.1 $ 4,366.3 ================ ================= ================= =============== Equity Securities: Common stock................................ $ 36.2 $ 10.3 $ 4.7 $ 41.8 ================ ================= ================= =============== December 31, 1994 ----------------- Fixed Maturities: Available for Sale: Corporate................................. $ 1,622.3 $ 5.1 $ 112.6 $ 1,514.8 Mortgage-backed........................... 221.9 .5 16.4 206.0 U.S. Treasury securities and U.S. government and agency securities.................. 365.4 1.4 20.7 346.1 States and political subdivisions......... 4.8 -- .6 4.2 Foreign governments....................... 14.8 .2 -- 15.0 Redeemable preferred stock................ 58.0 .1 5.4 52.7 ---------------- ----------------- ----------------- --------------- Total Available for Sale.................... $ 2,287.2 $ 7.3 $ 155.7 $ 2,138.8 ================ ================= ================= =============== Held to Maturity: Corporate................................. $ 1,812.4 $ 11.9 $ 93.1 $ 1,731.2 U.S. Treasury securities and U.S. government and agency securities.................. 180.4 -- 21.7 158.7 States and political subdivisions......... 14.4 -- .9 13.5 Foreign governments....................... 1.3 .1 -- 1.4 ---------------- ----------------- ----------------- --------------- Total Held to Maturity...................... $ 2,008.5 $ 12.0 $ 115.7 $ 1,904.8 ================ ================= ================= =============== Equity Securities: Common stock................................ $ 42.0 $ 10.1 $ 9.4 $ 42.7 ================ ================= ================= ===============
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, EVLICO has determined an estimated fair value using a discounted cash flow approach, including provisions for credit risk, generally based upon the assumption that such securities will be held to maturity. Estimated fair value for equity securities, substantially all of which do not have a readily ascertainable market value, has been determined by EVLICO. 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, 1995 and 1994, respectively, securities without a readily ascertainable market value having an amortized cost of $1,233.7 million and $1,571.5 million, respectively, had estimated fair values of $1,291.1 million and $1,512.2 million, respectively. F-8 The contractual maturity of bonds at December 31, 1995 are shown below:
AVAILABLE FOR SALE ------------------------------------ AMORTIZED ESTIMATED COST FAIR VALUE ----------------- ---------------- (IN MILLIONS) Due in one year or less............................................................. $ 133.3 $ 133.4 Due in years two through five....................................................... 1,416.4 1,444.9 Due in years six through ten........................................................ 1,361.5 1,391.8 Due after ten years................................................................. 732.0 759.6 Mortgage-backed securities.......................................................... 573.9 581.2 ----------------- ---------------- Total............................................................................... $ 4,217.1 $ 4,310.9 ================= ================
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. Investment valuation allowances and changes thereto are shown below:
YEARS ENDED DECEMBER 31, -------------------------------------------------------- 1995 1994 1993 ----------------- ----------------- ----------------- (IN MILLIONS) Balances, beginning of year.................................... $ 68.5 $ 87.3 $ 147.2 Additions charged to income.................................... 31.0 12.7 44.4 Deductions for writedowns and asset dispositions............... (33.8) (31.5) (104.3) ----------------- ----------------- ----------------- Balances, End of Year.......................................... $ 65.7 $ 68.5 $ 87.3 ================= ================= ================= Balances, end of year comprise: Mortgage loans on real estate............................... $ 15.9 $ 24.0 $ 46.7 Equity real estate.......................................... 49.8 44.5 40.6 ----------------- ----------------- ----------------- Total.......................................................... $ 65.7 $ 68.5 $ 87.3 ================= ================= =================
Deductions for writedowns and asset dispositions for 1993 include a $20.2 million writedown of fixed maturity investments at December 31, 1993 as a result of adopting a new accounting statement for the valuation of these investments that requires specific writedowns instead of valuation allowances. At December 31, 1995, the carrying values of investments held for the production of income which were non-income producing for the twelve months preceding the consolidated balance sheet date were $21.5 million of fixed maturities and $29.1 million of mortgage loans on real estate. EVLICO'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. EVLICO seeks to minimize the higher than normal credit risks associated with such securities by monitoring the total investments in any single issuer or total investment in a particular industry group. Certain of these corporate high yield securities are classified as other than investment grade by the various rating agencies, i.e., a rating below Baa or an NAIC (National Association of Insurance Commissioners) designation of 3 (medium grade), 4 or 5 (below investment grade) or 6 (in or near default). At December 31, 1995, approximately 11.0% of the $4,217.2 million aggregate amortized cost of bonds held by EVLICO were considered to be other than investment grade. In addition to its holding of corporate high yield securities, EVLICO is an equity investor in limited partnership interests which primarily invest in securities considered to be other than investment grade. EVLICO has restructured or modified the terms of certain fixed maturity investments. The fixed maturity portfolio, based on amortized cost, includes $13.7 million and $13.3 million at December 31, 1995 and 1994, respectively, of such restructured securities. The December 31, 1994 amount includes fixed maturities which are in default as to principal and/or interest payments, are to be restructured pursuant to commenced negotiations or where the borrowers went into bankruptcy subsequent to acquisition (collectively, "problem fixed maturities") of $5.6 million. Gross interest income that would have been recorded in accordance with the original terms of restructured fixed maturities amounted to $1.4 million, $1.1 million and $2.2 million in 1995, 1994 and 1993, respectively. Gross interest income on these fixed maturities included in net investment income aggregated $1.4 million, $1.0 million and $1.5 million in 1995, 1994 and 1993, respectively. F-9 At December 31, 1995 and 1994, 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 $36.0 million (4.6% of total mortgage loans on real estate) and $35.2 million (3.9% 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 $173.5 million and $130.8 million at December 31, 1995 and 1994, 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 $16.1 million, $12.3 million and $13.9 million in 1995, 1994 and 1993, respectively. Gross interest income on these loans included in net investment income aggregated $14.0 million, $11.4 million and $11.5 million in 1995, 1994 and 1993, respectively. Impaired mortgage loans (as defined under SFAS No. 114) along with the related provision for losses were as follows: DECEMBER 31, 1995 ------------------ (IN MILLIONS) Impaired mortgage loans with provision for losses.... $ 99.0 Impaired mortgage loans with no provision for losses. 24.5 ------------------ Recorded investment in impaired mortgage loans....... 123.5 Provision for losses................................. 14.5 ------------------ Net Impaired Mortgage Loans.......................... $ 109.0 ================== Impaired mortgage loans with no provision for losses are loans where the fair value of the collateral or the net present value of 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 the year ended December 31, 1995, EVLICO's average recorded investment in impaired mortgage loans was $99.2 million. Interest income recognized on these impaired mortgage loans totaled $8.2 million for the year ended December 31, 1995, including $2.2 million recognized on a cash basis. EVLICO's investment in equity real estate is through direct ownership and through investments in real estate joint ventures. At December 31, 1995 and 1994, the carrying value of equity real estate available for sale amounted to $55.6 million and $138.4 million, respectively. For the years ended December 31, 1995, 1994 and 1993, respectively, real estate of $12.2 million, $59.0 million and $92.1 million was acquired in satisfaction of debt. At December 31, 1995 and 1994, EVLICO owned $196.6 million and $230.5 million, respectively, of real estate acquired in satisfaction of debt. Depreciation on real estate is computed using the straight-line method over the estimated useful lives of the properties, which generally range from 40 to 50 years. Accumulated depreciation on real estate was $51.0 million and $51.1 million at December 31, 1995 and 1994, respectively. Depreciation expense on real estate totaled $12.8 million, $12.7 million and $11.6 million for the years ended December 31, 1995, 1994 and 1993, respectively. F-10 4. JOINT VENTURES AND PARTNERSHIPS Summarized combined financial information of real estate joint ventures (10 and 12 individual ventures as of December 31, 1995 and 1994, respectively) and of other limited partnership interests accounted for under the equity method, in which EVLICO has an investment of $10.0 million or greater and an equity interest of 10% or greater is as follows:
DECEMBER 31, ------------------------------------------ 1995 1994 ------------------- ------------------ (IN MILLIONS) FINANCIAL POSITION Investments in real estate, at depreciated cost............................... $ 966.3 $ 1,047.0 Investments in securities, generally at estimated fair value.................. 648.5 3,061.2 Cash and cash equivalents..................................................... 99.2 46.4 Other assets.................................................................. 90.8 261.9 ------------------- ------------------ Total assets.................................................................. 1,804.8 4,416.5 ------------------- ------------------ Borrowed funds -- third party.................................................. 74.4 1,233.6 Other liabilities............................................................. 132.4 611.0 ------------------- ------------------ Total liabilities............................................................. 206.8 1,844.6 ------------------- ------------------ Partners' Capital............................................................. $ 1,598.0 $ 2,571.9 =================== ================== Equity in partners' capital included above.................................... $ 243.8 $ 327.3 Equity in limited partnership interests not included above.................... 82.3 50.4 (Deficit) excess of equity in partners' capital over investment cost and equity earnings........................................ (.4) 3.7 ------------------- ------------------ Carrying Value................................................................ $ 325.7 $ 381.4 =================== ==================
YEARS ENDED DECEMBER 31, -------------------------------------------------------- 1995 1994 1993 ----------------- ---------------- ----------------- (IN MILLIONS) STATEMENTS OF EARNINGS Revenues of real estate joint ventures............................ $ 152.3 $ 180.1 $ 136.6 Revenues of other limited partnership interests................... 86.9 102.5 318.9 Interest expense -- third party.................................... (23.1) (88.1) (79.7) Interest expense -- The Equitable.................................. (5.6) -- -- Other expenses.................................................... (131.8) (172.4) (132.7) ----------------- ---------------- ----------------- Net Earnings...................................................... $ 78.7 $ 22.1 $ 243.1 ================= ================ ================= Equity in net earnings included above............................. $ 14.4 $ 11.7 $ 34.0 Equity in net earnings of limited partnership interests not included above................................... 12.9 6.3 12.0 Reduction of earnings in joint ventures over equity ownership percentage and amortization of differences in bases........................... -- (1.1) (.1) ----------------- ----------------- ----------------- Total Equity in Net Earnings...................................... $ 27.3 $ 16.9 $ 45.9 ================= ================ =================
F-11 5. NET INVESTMENT INCOME AND INVESTMENT (LOSSES) GAINS The sources of net investment income are summarized as follows:
YEARS ENDED DECEMBER 31, -------------------------------------------------------- 1995 1994 1993 ----------------- ---------------- ----------------- (IN MILLIONS) Fixed maturities................................................. $ 319.5 $ 331.4 $ 319.9 Mortgage loans on real estate.................................... 70.3 86.7 105.7 Equity real estate............................................... 66.2 67.0 69.8 Policy loans..................................................... 86.8 79.5 76.1 Other equity investments......................................... 22.4 13.4 38.5 Other investment income.......................................... 30.5 24.5 17.0 ----------------- ---------------- ----------------- Gross investment income.......................................... 595.7 602.5 627.0 Investment expenses.............................................. 66.6 75.7 69.4 ----------------- ---------------- ----------------- Net Investment Income............................................ $ 529.1 $ 526.8 $ 557.6 ================= ================ =================
Investment (losses) gains, net, including changes in valuation allowances, are summarized as follows:
YEARS ENDED DECEMBER 31, -------------------------------------------------------- 1995 1994 1993 ----------------- ---------------- ----------------- (IN MILLIONS) Fixed maturities................................................. $ 23.7 $ (6.8) $ 45.1 Mortgage loans on real estate.................................... (7.0) (13.3) (32.0) Equity real estate............................................... (18.9) (5.3) (13.4) Other equity investments......................................... 1.7 20.8 1.8 ----------------- ---------------- ----------------- Investment (Losses) Gains, Net................................... $ (.5) $ (4.6) $ 1.5 ================= ================ =================
Writedowns of fixed maturities amounted to $11.1 million, $8.2 million and $1.4 million for the years ended December 31, 1995, 1994 and 1993, respectively. For the years ended December 31, 1995 and 1994, respectively, proceeds received on sales of fixed maturities classified as available for sale amounted to $2,551.6 million and $2,065.1 million. Gross gains of $49.6 million and $22.1 million and gross losses of $18.7 million and $24.4 million, respectively, were realized on these sales. The change in unrealized investment gains (losses) related to fixed maturities classified as available for sale for the years ended December 31, 1995 and 1994, amounted to $240.8 million and $(215.2) million, respectively. Gross gains of $66.2 million and gross losses of $66.5 million were realized on sales of investments in fixed maturities held for investment and available for sale for the year ended December 31, 1993. F-12 Net unrealized investment gains (losses), included in the consolidated balance sheets as a component of equity, and the changes for the corresponding years are summarized as follows:
YEARS ENDED DECEMBER 31, -------------------------------------------------------- 1995 1994 1993 ----------------- ---------------- ----------------- (IN MILLIONS) Balance, beginning of year....................................... $ (72.6) $ 22.3 $ 11.1 Changes in unrealized investment gains (losses).................. 244.7 (241.8) 3.4 Effect of adopting SFAS No. 115.................................. -- -- 72.2 Changes in unrealized investment (gains) losses attributable to: Deferred policy acquisition costs............................. (64.4) 95.8 (58.2) Deferred Federal income taxes................................. (63.1) 51.1 (6.2) ----------------- ---------------- ----------------- Balance, End of Year............................................. $ 44.6 $ (72.6) $ 22.3 ================= ================ ================= Balance, end of year comprises: Unrealized investment gains (losses) on: Fixed maturities............................................ $ 92.4 $ (148.4) $ 66.8 Other equity investments.................................... 5.6 .7 25.6 Other....................................................... (2.7) (1.7) -- ----------------- ---------------- ----------------- Total......................................................... 95.3 (149.4) 92.4 Amounts of unrealized investment (gains) losses attributable to: Deferred policy acquisition costs........................... (26.8) 37.6 (58.2) Deferred Federal income taxes............................... (23.9) 39.2 (11.9) ----------------- ---------------- ----------------- Total............................................................ $ 44.6 $ (72.6) $ 22.3 ================= ================ =================
6. FEDERAL INCOME TAXES A summary of the Federal income tax expense in the consolidated statements of earnings is shown below:
YEARS ENDED DECEMBER 31, -------------------------------------------------------- 1995 1994 1993 ----------------- ---------------- ----------------- (IN MILLIONS) Federal income tax expense (benefit): Current....................................................... $ -- $ (1.4) $ (3.4) Deferred...................................................... 29.7 26.4 23.9 ----------------- ---------------- ----------------- Total............................................................ $ 29.7 $ 25.0 $ 20.5 ================= ================ =================
The Federal income taxes attributable to consolidated operations are different from the amounts determined by multiplying the earnings before Federal income taxes and cumulative effect of accounting change by the expected Federal income tax rate of 35%. The sources of the difference and the tax effects of each are as follows:
YEARS ENDED DECEMBER 31, -------------------------------------------------------- 1995 1994 1993 ----------------- ---------------- ----------------- (IN MILLIONS) Expected Federal income tax expense.............................. $ 30.0 $ 25.3 $ 16.6 Tax rate adjustment.............................................. -- -- 4.0 Other............................................................ (.3) (.3) (.1) ----------------- ---------------- ----------------- Federal Income Tax Expense....................................... $ 29.7 $ 25.0 $ 20.5 ================= ================ =================
F-13 The components of the net deferred Federal income tax account are as follows:
DECEMBER 31, 1995 DECEMBER 31, 1994 --------------------------------- --------------------------------- ASSETS LIABILITIES ASSETS LIABILITIES --------------- --------------- --------------- --------------- (IN MILLIONS) Deferred policy acquisition costs, reserves and reinsurance....................................... $ -- $ 253.8 $ -- $ 250.6 Investments.......................................... -- 20.5 38.4 -- Compensation and related benefits.................... 44.3 -- 52.2 -- Other................................................ 7.9 -- 25.6 -- --------------- --------------- --------------- --------------- Total................................................ $ 52.2 $ 274.3 $ 116.2 $ 250.6 =============== =============== =============== ===============
The deferred Federal income tax expense (benefit) 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:
YEARS ENDED DECEMBER 31, -------------------------------------------------------- 1995 1994 1993 ----------------- ---------------- ----------------- (IN MILLIONS) Deferred policy acquisition costs, reserves and reinsurance................................................... $ 3.2 $ (11.4) $ (6.8) Investments...................................................... (4.2) 26.1 11.4 Compensation and related benefits................................ 13.0 (2.8) 1.9 Other............................................................ 17.7 14.5 17.4 ----------------- ---------------- ----------------- Deferred Federal Income Tax Expense.............................. $ 29.7 $ 26.4 $ 23.9 ================= ================ =================
At December 31, 1995, EVLICO had net operating loss carryforwards of approximately $10.2 million. These loss carryforwards are available to offset future tax payments to Equitable Life under the tax sharing agreement. 7. REINSURANCE AGREEMENTS EVLICO cedes reinsurance to other insurance companies. EVLICO evaluates the financial condition of its reinsurers to minimize its exposure to significant losses from reinsurer insolvencies. The effect of reinsurance is summarized as follows:
DECEMBER 31, ------------------------------------ 1995 1994 ----------------- ---------------- (IN MILLIONS) Direct premiums..................................................................... $ 34.1 $ 40.2 Reinsurance ceded................................................................... (.4) (.1) ----------------- ---------------- Premiums............................................................................ $ 33.7 $ 40.1 ================= ================ Universal Life and Investment-type Product Policy Fee Income Ceded.................. $ 31.0 $ 24.9 ================= ================ Policyholders' Benefits Ceded....................................................... $ 18.7 $ 8.3 ================= ================
EVLICO reinsures mortality risks in excess of $5.0 million on any single life. EVLICO also reinsures the entire risk on certain substandard underwriting risks as well as in certain other cases. F-14 8. RELATED PARTY TRANSACTIONS Under a cost sharing agreement, EVLICO reimburses Equitable Life for its use of Equitable Life's personnel, property and facilities in carrying out certain of its operations. Reimbursement for intercompany services is based on the allocated cost of the services provided. The incurred balances of these intercompany transactions, which are included in other operating costs and expenses are as follows:
YEARS ENDED DECEMBER 31, -------------------------------------------------------- 1995 1994 1993 ----------------- ---------------- ----------------- (IN MILLIONS) Personnel and facilities......................................... $ 249.8 $ 257.9 $ 252.7 Agent commissions and fees....................................... 127.4 122.6 103.0
These cost allocations include various employee related obligations for pensions and postretirement benefits. At December 31, 1995 and 1994, EVLICO recorded as a reduction of shareholder's equity its allocated portion of an additional minimum pension liability of $10.7 million and $1.2 million, net of Federal income taxes, respectively, representing the excess of the accumulated benefit obligation over the fair value of plan assets and accrued pension liability. During 1995, 1994 and 1993, Equitable Life restructured certain operations in connection with cost reduction programs. EVLICO recorded provisions of $6.7 million, $6.9 million and $17.3 million in 1995, 1994 and 1993, respectively, relating primarily to allocated lease obligations (net of sub-lease rentals) and severance liabilities. EVLICO incurred investment advisory and asset management fee expenses of $17.6 million, $19.2 million and $16.0 million during 1995, 1994 and 1993, respectively. EVLICO and Equitable Life have an agreement whereby certain Equitable Life policyholders may purchase EVLICO's policies without presenting evidence of insurability. Under the agreement, Equitable Life pays EVLICO a conversion charge for the extra mortality risk associated with issuing these policies. EVLICO received payments of $2.9 million, $3.0 million and $3.1 million in 1995, 1994 and 1993, respectively, which were reported as other income. On August 31, 1993, EVLICO sold $250.0 million of primarily privately placed below investment grade fixed maturities to EQ Asset Trust 1993 (the "Trust"). EVLICO realized a $1.1 million gain, net of related deferred policy acquisition costs and deferred Federal income taxes. In conjunction with this transaction, EVLICO received $75.4 million of Class B notes issued by the Trust. These notes have interest rates ranging from 6.85% to 9.45%. The Class B notes are classified as other invested assets on the consolidated balance sheets. Net amounts payable to Equitable Life were $190.2 million and $226.7 million at December 31, 1995 and 1994, respectively. 9. DERIVATIVES AND FAIR VALUE OF FINANCIAL INSTRUMENTS Derivatives EVLICO primarily uses derivatives for asset/liability risk management and for hedging individual securities. Derivatives mainly are utilized to reduce EVLICO'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, 1995 was $444.8 million. The average unexpired terms at December 31, 1995 is 3.0 years. At December 31, 1995, the cost of terminating outstanding matched swaps in a loss position was $10.1 million and the unrealized gain on outstanding matched swaps in a gain position was $3.4 million. EVLICO has no intention of terminating these contracts prior to maturity. Fair Value of Financial Instruments EVLICO defines fair value as the quoted market prices for those instruments that are actively traded in financial markets. In cases where quoted market prices are not available, fair values are estimated using present value or other valuation techniques. The fair value estimates are made at a specific point in time, based on available market information and judgments about the financial instrument, including estimates of timing, amount of expected future cash flows and the credit standing of counterparties. Such estimates do not reflect any premium or discount that could result from offering for sale at one time EVLICO'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 EVLICO was not material at December 31, 1995 and 1994. F-15 Fair value for mortgage loans on real estate are estimated by discounting future contractual cash flows using interest rates at which loans with similar characteristics and credit quality would be made. Fair values for foreclosed mortgage loans and problem mortgage loans are limited to the estimated fair value of the underlying collateral if lower. The estimated fair values for single premium deferred annuities ("SPDA") are estimated using projected cash flows discounted at current offering rates. The estimated fair values for supplementary contracts not involving life contingencies ("SCNILC") and annuities certain are derived using discounted cash flows based upon the estimated current offering rate. The following table discloses carrying value and estimated fair value for financial instruments not otherwise disclosed in Note 3:
DECEMBER 31, ------------------------------------------------------------------- 1995 1994 -------------------------------- -------------------------------- CARRYING ESTIMATED CARRYING ESTIMATED VALUE FAIR VALUE VALUE FAIR VALUE --------------- --------------- --------------- --------------- (IN MILLIONS) Consolidated Financial Instruments: Mortgage loans on real estate....................... $ 771.5 $ 809.4 $ 888.5 $ 865.3 Other joint ventures................................ 158.7 158.7 196.4 196.4 Policy loans........................................ 1,300.1 1,374.0 1,185.2 1,138.7 Policyholders' account balances: SPDA............................................. 1,265.8 1,272.0 1,744.3 1,732.7 Annuities certain and SCNILC..................... 188.0 188.1 159.0 151.3
10. COMMITMENTS AND CONTINGENT LIABILITIES EVLICO 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, EVLICO has purchased single premium annuities from Equitable Life and directed Equitable Life to make payments directly to the beneficiaries. A contingent liability exists with respect to these agreements should Equitable Life be unable to meet its obligations. Management believes the need to satisfy such obligations is remote. 11. LITIGATION A number of lawsuits have been filed against life and health insurers in the jurisdictions in which EVLICO does business involving insurers' sales practices, alleged agent misconduct, failure to properly supervise agents, and other matters. Some of the lawsuits have resulted in the award of substantial judgments against other insurers, including material amounts of punitive amounts, or in substantial settlements. In some states juries have substantial discretion in awarding punitive damages. EVLICO, like other life and health insurers, from time to time is involved in such litigation as well as other legal actions and proceedings in connection with its businesses. Some of these litigations 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 EVLICO's financial position or results of operations. 12. STATUTORY FINANCIAL INFORMATION EVLICO is restricted as to the amounts it may pay as dividends to Equitable Life. Under the New York Insurance Law, the New York 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 the years ended December 31, 1995, 1994 and 1993, statutory (loss) earnings totaled $(102.5) million, $27.3 million and $(88.4) million, respectively. No amounts are expected to be available for dividends from EVLICO to Equitable Life in 1996. At December 31, 1995, EVLICO, in accordance with various government and state regulations, had $4.2 million of securities deposited with such government or state agencies. Accounting practices used to prepare statutory financial statements for regulatory filings of stock life insurance companies differ in certain instances from GAAP. The following reconciles EVLICO's net change in statutory surplus and capital stock and statutory surplus and capital stock determined in accordance with accounting practices prescribed by the New York Insurance Department with net earnings and equity on a GAAP basis. F-16
YEARS ENDED DECEMBER 31, -------------------------------------------------------- 1995 1994 1993 ----------------- ---------------- ----------------- (IN MILLIONS) Net change in statutory surplus and capital stock................ $ (56.6) $ 64.8 $ 184.4 Change in asset valuation reserves............................... 57.8 18.5 26.0 ----------------- ---------------- ----------------- Net change in statutory surplus, capital stock and asset valuation reserves.................................. 1.2 83.3 210.4 Adjustments: Future policy benefits and policyholders' account balances.... (12.9) (13.5) (22.5) Initial fee liability......................................... (34.2) (20.3) (11.6) Deferred policy acquisition costs............................. 25.1 34.7 62.2 Deferred Federal income taxes................................. (29.7) (20.2) (23.9) Valuation of investments...................................... 38.3 19.9 25.9 Limited risk reinsurance...................................... 146.9 .1 (5.4) Contribution from Equitable Life.............................. (125.0) (50.0) (250.0) Other, net.................................................... 46.4 2.0 41.7 ----------------- ---------------- ----------------- Net Earnings..................................................... $ 56.1 $ 36.0 $ 26.8 ================= ================ =================
DECEMBER 31, -------------------------------------------------------- 1995 1994 1993 ----------------- ---------------- ----------------- (IN MILLIONS) Statutory surplus and capital stock.............................. $ 720.9 $ 777.6 $ 712.7 Asset valuation reserves......................................... 146.1 88.3 69.8 ----------------- ---------------- ----------------- Statutory surplus, capital stock and asset valuation reserves.... 867.0 865.9 782.5 Adjustments: Future policy benefits and policyholders' account balances.... (367.4) (354.5) (341.1) Initial fee liability......................................... (234.7) (200.5) (180.3) Deferred policy acquisition costs............................. 2,037.8 2,077.1 1,946.7 Deferred Federal income taxes................................. (222.1) (134.4) (159.5) Valuation of investments...................................... 68.4 (219.2) 4.4 Limited risk reinsurance...................................... (231.7) (378.6) (378.7) Postretirement and other pension liabilities.................. (111.6) (105.8) (122.7) Other, net.................................................... (68.0) (101.1) (98.6) ----------------- ---------------- ----------------- Shareholder's Equity............................................. $ 1,737.7 $ 1,448.9 $ 1,452.7 ================= ================ =================
F-17 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders of Equitable Variable Life Insurance Company In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of earnings, of shareholder's equity and of cash flows present fairly, in all material respects, the financial position of Equitable Variable Life Insurance Company and its subsidiaries ("EVLICO") at December 31, 1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. These financial statements are the responsibility of EVLICO'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, EVLICO changed its methods of accounting for loan impairments in 1995, for postemployment benefits in 1994 and for investment securities in 1993. PRICE WATERHOUSE LLP New York, New York February 7, 1996 F-18 APPENDIX A COMMUNICATING PERFORMANCE DATA In reports or other communications to policyowners or in advertising material, we may describe general economic and market conditions affecting the Separate Account and the Trust and may compare the performance or ranking of the Separate Account Funds and Trust portfolios with (1) that of other insurance company separate accounts or mutual funds included in the rankings prepared by Lipper Analytical Services, Inc., Morningstar, Inc. or similar investment services that monitor the performance of insurance company separate accounts or mutual funds, (2) other appropriate indices of investment securities and averages for peer universes of funds, or (3) data developed by us derived from such indices or averages. Advertisements or other communications furnished to present or prospective policyowners may also include evaluations of a Separate Account Fund or Trust portfolio by financial publications that are nationally recognized such as Barron's, Morningstar's Variable Annuities / Life, Business Week, Forbes, Fortune, Institutional Investor, Money, Kiplinger's Personal Finance, Financial Planning, Investment Adviser, Investment Management Weekly, Money Management Letter, Investment Dealers Digest, National Underwriter, Pension & Investments, USA Today, Investor's Daily, The New York Times, The Wall Street Journal, the Los Angeles Times and the Chicago Tribune. Performance data for peer universes of funds with similar investment objectives are compiled by Lipper Analytical Services, Inc. (Lipper) in its Lipper Variable Insurance Products Performance Analysis Service (Lipper Survey) and Morningstar, Inc. in the Morningstar Variable Annuity / Life Report (Morningstar Report). The Lipper Survey records performance data as reported to it by over 800 funds underlying variable annuity and life insurance products. The Lipper Survey divides these actively managed funds into 25 categories by portfolio objectives. The Lipper Survey contains two different universes, which differ in terms of the types of fees reflected in performance data. The "Separate Account" universe reports performance data net of investment management fees, direct operating expenses and asset-based charges applicable under variable insurance and annuity contracts. The "Mutual Fund" universe reports performance net only of investment management fees and direct operating expenses, and therefore reflects asset-based charges that relate only to the underlying mutual fund. The Morningstar Report consists of over 700 variable life and annuity funds, all of which report their data net of investment management fees, direct operating expenses and separate account level charges. LONG-TERM MARKET TRENDS As a tool for understanding how different investment strategies may affect long-term results, it may be useful to consider the historical returns on different types of assets. The following chart presents historical return trends for various types of securities. The information presented, while not directly related to the performance of the Funds of the Separate Account or the Trust portfolios, may help to provide a perspective on the potential returns of different asset classes over different periods of time. By combining this information with your knowledge of your own financial needs, you may be able to better determine how you wish to allocate your Incentive Life Plus premiums. Historically, the investment performance of common stocks over the long term has generally been superior to that of long or short-term debt securities, although common stocks have been subject to more dramatic changes in value over short periods of time. The Common Stock Fund of the Separate Account may, therefore, be a desirable selection for policyowners who are willing to accept such risks. Policyowners who have a need to limit short-term risk, may find it preferable to allocate a smaller percentage of their net premiums to those funds that invest primarily in common stock. Any investment in securities, whether equity or debt, involves varying degrees of potential risk, in addition to offering varying degrees of potential reward. The chart on page A-2 illustrates the average annual compound rates of return over selected time periods between December 31, 1925 and December 31, 1995 for common stocks, long-term government bonds, long-term corporate bonds, intermediate-term government bonds and Treasury Bills. The Consumer Price Index is shown as a measure of inflation for comparison purposes. The average annual returns assume the reinvestment of dividends, capital gains and interest. The information presented is an historical record of unmanaged groups of securities and is neither an estimate nor a guarantee of future results. In addition, investment management fees and expenses and charges associated with a variable life insurance policy, are not reflected. The rates of return illustrated do not represent returns of the Separate Account or the Trust and do not constitute a representation that the performance of the Separate Account funds or the Trust portfolios will correspond to rates of return such as those illustrated in the chart. For a comparative illustration of performance results of The Hudson River Trust, see page A-1 of the Trust's prospectus. A-1 AVERAGE ANNUAL RATES OF RETURN
FOR THE FOLLOWING LONG-TERM LONG-TERM INTERMEDIATE U.S. CONSUMER PERIODS ENDING COMMON GOVERNMENT CORPORATE TERM GOV'T TREASURY PRICE 12/31/95: STOCKS BONDS BONDS BONDS BILLS INDEX - -------- ------ ----- ----- ----- ----- ----- 1 year.................. 37.43 31.67 26.39 16.80 5.60 2.74 3 years................. 15.26 12.82 10.47 7.22 4.13 2.72 5 years................. 16.57 13.10 12.07 8.81 4.29 2.83 10 years................. 14.84 11.92 11.25 9.08 5.55 3.48 20 years................. 14.59 10.45 10.54 9.69 7.28 5.23 30 years................. 10.68 7.92 8.17 8.36 6.72 5.39 40 years................. 10.78 6.38 6.75 7.02 5.73 4.46 50 years................. 11.94 5.35 5.75 5.87 4.80 4.36 60 years................. 11.34 5.20 5.46 5.34 4.01 4.10 Since 1926............... 10.54 5.17 5.69 5.25 3.72 3.12 Inflation Adjusted Since 1926............... 7.20 1.99 2.49 2.07 0.58 0.00 - ---------------------------- *Source: Ibbotson, Roger G. and Rex A. Sinquefield, STOCKS, BONDS, BILLS, AND INFLATION (SBBI), 1982, updated in STOCKS, BONDS, BILLS, AND INFLATION 1996 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 1969-1995, represented by the Salomon Brothers Long-Term, High-Grade Corporate Bond Index; for the period 1946-1968, the Salomon Brothers' Index was backdated using Salomon Brothers' monthly yield data and a methodology similar to that used by Salomon for 1969-1995; for the period 1926-1945, the Standard and Poor's monthly High-Grade Corporate Composite yield data were used, assuming a 4 percent coupon and a twenty year maturity. Intermediate-term Government Bonds -- Measured by a one-bond portfolio constructed each year containing a bond with approximately a five year maturity. U.S. Treasury Bills -- Measured by rolling over each month a one-bill portfolio containing, at the beginning of each month, the bill having the shortest maturity not less than one month. Inflation -- Measured by the Consumer Price Index for all Urban Consumers (CPI-U), not seasonally adjusted.
A-2 VM522 (5/96) Cat. #126946 Part II REPRESENTATION REGARDING REASONABLENESS OF AGGREGATE POLICY FEES AND CHARGES Equitable represents that the fees and charges deducted under the Policies described in this Registration Statement, in the aggregate, are reasonable in relation to the services rendered, the expenses to be incurred, and the risks assumed by Equitable under the Policies. Equitable bases its representation on its assessment of all of the facts and circumstances, including such relevant factors as: the nature and extent of such services, expenses and risks, the need for Equitable to earn a profit, the degree to which the Policies include innovative features, and regulatory standards for the grant of exemptive relief under the Investment Company Act of 1940 used prior to October 1996, including the range of industry practice. UNDERTAKING TO FILE REPORTS Subject to the terms and conditions of Section 15(d) of the Securities Exchange Act of 1934, the undersigned registrant hereby undertakes to file with the Securities and Exchange Commission such supplementary and periodic information, documents, and reports as may be prescribed by any rule or regulation of the Commission heretofore or hereafter duly adopted pursuant to authority conferred in that section. UNDERTAKING PURSUANT TO RULE 484(b)(1) UNDER THE SECURITIES ACT OF 1933 Equitable's By-Laws provide, in Article VII, as follows: 7.1 Indemnification of Directors, Officers, Employees and Incorporators. To the extent permitted by the law of the State of New York and subject to all applicable requirements thereof: (a) 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, his testator or intestate, is or was a director, officer, employee or incorporator of the Company shall be indemnified by the Company. (b) 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, his 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 (c) the related expenses of any such person in any of said categories may be advanced by the Company. Insofar as indemnification for liability arising under the Securities Act of 1933 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. II-1 Part II CONTENTS OF REGISTRATION STATEMENT This Registration Statement comprises the following papers and documents: The facing sheet. Reconciliation and Tie. The Supplement dated January 1, 1997 (for Accounting Benefit Rider) consisting of 1 page. The Supplement dated January 1, 1997 (for Corporate Incentive Life) consisting of 1 page. The Supplement dated January 1, 1997 (updating supplement for inforce business) consisting of 94 pages. The Prospectus dated January 1, 1997 consisting of 127 pages. The Supplement of Equitable Variable dated May 1, 1996 (updating supplement for inforce business) consisting of 50 pages. The Prospectus of Equitable Variable dated May 1, 1996 consisting of 72 pages. Representation regarding reasonableness of aggregate policy fees and charges. Undertaking to file reports. Undertaking pursuant to Rule 484(b)(1) under the Securities Act of 1933. The signatures. Written Consents of the following persons: Mary P. Breen, Vice President and Associate General Counsel of Equitable (See exhibit 2(a)) Barbara Fraser, F.S.A., M.A.A.A., Vice President of Equitable (See exhibit 2(b)) Independent Public Accountants (See exhibit 6) The following exhibits: Exhibits required by Article IX, paragraph A of Form N-8B-2: 1-A(1)(a) Certified resolutions re authority to market variable life insurance and establish separate accounts. 1-A(2) Inapplicable. 1-A(3)(a) See Exhibit 1-A(8). 1-A(3)(b) Broker-Dealer and General Agent Sales Agreement 1-A(3)(c) See Exhibit 1-A(8)(i). 1-A(4) Inapplicable. + 1-A(5)(a)(i) Flexible Premium Variable Life Insurance Policy. (94-300) (Incentive Life Plus) (Equitable Variable). + 1-A(5)(a)(ii) Flexible Premium Variable Life Insurance Policy (94-300) (Incentive Life Plus) (Equitable). + 1-A(5)(a)(iii) Flexible Premium Variable Life Insurance Policy (95-300) (Corporate Incentive Life) (Equitable Variable). + 1-A(5)(a)(iv) Flexible Premium Variable Life Insurance Policy (95-300) (Corporate Incentive Life) (Equitable). 1-A(5)(a)(v) Flexible Premium Variable Life Insurance Policy (85-300) (Equitable Variable) 1-A(5)(b) Name Change Endorsement (S.97-1). + 1-A(5)(c) Option to Purchase Additional Insurance Rider (R94-204) (Equitable Variable). + 1-A(5)(d) Option to Purchase Additional Insurance Rider (R94-204) (Equitable). + 1-A(5)(e) Substitution of Insured Rider (R94-212) (Equitable Variable). + 1-A(5)(f) Substitution of Insured Rider (R94-212) (Equitable). + 1-A(5)(g) Renewable Term Insurance Rider on the Insured (R94-215) (Equitable Variable). + 1-A(5)(h) Renewable Term Insurance Rider on the Insured (R94-215) (Equitable). + 1-A(5)(i) Disability Rider - Waiver of Monthly Deductions (R94-216) (Equitable Variable). + 1-A(5)(j) Disability Rider - Waiver of Monthly Deductions (R94-216) (Equitable). + 1-A(5)(k) Disability Rider - Waiver of Premiums (R94-216A) (Equitable Variable). + 1-A(5)(l) Disability Rider - Waiver of Premiums (R94-216A) (Equitable). - ----------------------- +State variations not included II-2 + 1-A(5)(m) Yearly Renewable Term Insurance Rider on the Insured (R94-220) (Equitable Variable). + 1-A(5)(n) Yearly Renewable Term Insurance Rider on the Insured (R94-220) (Equitable). 1-A(5)(o) Accelerated Death Benefit Rider (R94-102) (Equitable Variable). 1-A(5)(p) Accelerated Death Benefit Rider (R94-102) (Equitable). 1-A(5)(q) Designated Insured Option Rider (R91-107) (Equitable Variable). 1-A(5)(r) Designated Insured Option Rider (R91-107) (Equitable). 1-A(5)(s) Accounting Benefit Rider (S.94-118) (Equitable Variable). 1-A(5)(t) Accounting Benefit Rider (S.94-118) (Equitable). 1-A(5)(u) Limitation on Amount of Insurance Rider (R85-406) (Equitable Variable). + 1-A(5)(v) Exchange Privilege Rider (R85-405) (for use with Policy 85-300). (Equitable Variable) + 1-A(5)(w) Disability Rider - Waiver of Monthly Deductions (R85-408)(for use with Policy 85-300) (Equitable Variable). 1-A(5)(x) Pro Rata Surrender Charge Endorsement (S.87-289) (for use with Policy 85-300) (Equitable Variable). 1-A(5)(y) Asset Allocation Endorsement (S.89-301) (for use with Policy 85-300) (Equitable Variable). 1-A(5)(z) Investment Options Rider and Guaranteed Interest Division Transfer Rider (R.89-303)(for use with Policy No. 85-300). (Equitable Variable). 1-A(6)(a) Declaration and Charter of Equitable, as amended. 1-A(6)(b) By-Laws of Equitable, as amended. 1-A(7) Inapplicable. - ----------------------- +State variations not included II-3 1-A(8) Distribution and Servicing Agreement among EQ Financial Consultants, Inc. (formerly known as Equico Securities, Inc.), Equitable and Equitable Variable dated as of May 1, 1994. 1-A(8)(i) Schedule of Commissions. 1-A(9)(a) Agreement and Plan of Merger of Equitable Variable with and into Equitable dated September 19, 1996. 1-A(10)(a) Application EV4-200Y (Equitable Variable). 1-A(10)(b) Application EV4-200Y (Equitable). Other Exhibits: 2(a) Opinion and Consent of Mary P. Breen, Vice President and Associate General Counsel of Equitable. 2(b)(i) Opinion and Consent of Barbara Fraser, F.S.A., M.A.A.A., Vice President of Equitable. 2(b)(ii) Consent of Barbara Fraser, F.S.A., M.A.A.A., Vice President of Equitable, relating to Exhibit 2(b)(i). 2(b)(iii) Opinion and Consent of Barbara Fraser, F.S.A., M.A.A.A., Vice President of Equitable. 3 Inapplicable. 4 Inapplicable. 5 Financial Data Schedule (See Exhibit 27 below). 6 Consent of Independent Public Accountant. 7(a) Powers-of-Attorney. II-4 8 Description of Equitable's Issuance, Transfer and Redemption Procedures for Flexible Premium Policies pursuant to Rule 6e-3(T)(b)(12)(iii) under the Investment Company Act of 1940. 27 Financial Data Schedules -- Separate Account FP. II-5 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, and its seal to be hereunto affixed and attested, all in the City and State of New York on the 9th day of December, 1996. SEPARATE ACCOUNT FP OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES By: THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES, DEPOSITOR By: /s/ Samuel B. Shlesinger ------------------------ (Samuel B. Shlesinger) Senior Vice President Attest: /s/ Linda Galasso ----------------- (Linda Galasso) Assistant Secretary December 9, 1996 II-6 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City and State of New York on the 9th day of December, 1996. THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES By: /s/ Samuel B. Shlesinger ------------------------ (Samuel B. Shlesinger) Senior Vice President Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the date indicated: PRINCIPAL EXECUTIVE OFFICERS: * Joseph J. Melone Chairman of the Board * James M. Benson President and Chief Executive Officer * William T. McCaffrey Senior Executive Vice President and Chief Operating Officer * Jerry M. de St. Paer Executive Vice President PRINCIPAL FINANCIAL OFFICER: * Stanley B. Tulin. Senior Executive Vice President and Chief Financial Officer PRINCIPAL ACCOUNTING OFFICER: /s/ Alvin H. Fenichel - --------------------- Alvin H. Fenichel Senior Vice President and Controller December 9, 1996 *DIRECTORS: Claude Bebear Jean-Rene Foutou Winthrop Knowlton James M. Benson Norman C. Francis Arthur L. Liman Christopher J. Brocksom Donald J. Greene George T. Lowy Francoise Colloc'h John T. Hartley William T. McCaffrey Henri de Castries John H.F. Haskell, Jr. Joseph J. Melone Joseph L. Dionne W. Edwin Jarmain Didier Pineau-Valencienne William T. Esrey G.Donald Johnson, Jr. George J. Sella, Jr. Dave H. Williams *By: /s/ Samuel B. Shlesinger ------------------------ (Samuel B. Shlesinger) Attorney-in-Fact December 9, 1996 II-7 EXHIBIT INDEX -------------
EXHIBIT NO. TAG VALUE - ----------- --------- 1-A(1)(a) Certified resolutions re authority to market variable life EX-99.1A1a. RESOLU insurance and establish separate accounts. 1-A(3)(b) Broker-Dealer and General Agent Sales Agreement EX-99.1A3b BROKR AGR 1-A(5)(a)(i) Flexible Premium Variable Life Insurance Policy. (94-300) (Incentive Life Plus) (Equitable Variable). EX-99.1A5ai POLICY 1-A(5)(a)(ii) Flexible Premium Variable Life Insurance Policy (94-300) (Incentive Life Plus) (Equitable). EX-99.1A5aii POLICY 1-A(5)(a)(iii) Flexible Premium Variable Life Insurance Policy (95-300) (Corporate Incentive Life) (Equitable Variable). EX-99.1A5aiii POLICY 1-A(5)(a)(iv) Flexible Premium Variable Life Insurance Policy (95-300) (Corporate Incentive Life) (Equitable). EX-99.1A5aiv POLICY 1-A(5)(a)(v) Flexible Premium Variable Life Insurance Policy (85-300) (Equitable Variable) EX-99.1A5av POLICY 1-A(5)(b) Name Change Endorsement (S.97-1). EX-99.1A5b ENDORS 1-A(5)(c) Option to Purchase Additional Insurance Rider (R94-204) (Equitable Variable). EX-99.1A5c RIDER 1-A(5)(d) Option to Purchase Additional Insurance Rider (R94-204) (Equitable). EX-99.1A5d RIDER 1-A(5)(e) Substitution of Insured Rider (R94-212) (Equitable Variable). EX-99.1A5e RIDER 1-A(5)(f) Substitution of Insured Rider (R94-212) (Equitable). EX-99.1A5f RIDER 1-A(5)(g) Renewable Term Insurance Rider on the Insured (R94-215) (Equitable Variable). EX-99.1A5g RIDER 1-A(5)(h) Renewable Term Insurance Rider on the Insured (R94-215) (Equitable). EX-99.1A5h RIDER 1-A(5)(i) Disability Rider - Waiver of Monthly Deductions (R94-216) (Equitable Variable). EX-99.1A5i RIDER 1-A(5)(j) Disability Rider - Waiver of Monthly Deductions (R94-216) (Equitable). EX-99.1A5j RIDER 1-A(5)(k) Disability Rider - Waiver of Premiums (R94-216A) (Equitable Variable). EX-99.1A5k RIDER 1-A(5)(l) Disability Rider - Waiver of Premiums (R94-216A) (Equitable). EX-99.1A5l RIDER 1-A(5)(m) Yearly Renewable Term Insurance Rider on the Insured (R94-220) (Equitable Variable). EX-99.1A5m RIDER 1-A(5)(n) Yearly Renewable Term Insurance Rider on the Insured (R94-220) (Equitable). EX-99.1A5n RIDER 1-A(5)(o) Accelerated Death Benefit Rider (R94-102) (Equitable Variable). EX-99.1A5o RIDER 1-A(5)(p) Accelerated Death Benefit Rider (R94-102) (Equitable). EX-99.1A5p RIDER 1-A(5)(q) Designated Insured Option Rider (R91-107) (Equitable Variable). EX-99.1A5q RIDER 1-A(5)(r) Designated Insured Option Rider (R91-107) (Equitable). EX-99.1A5r RIDER 1-A(5)(s) Accounting Benefit Rider (S.94-118) (Equitable Variable). EX-99.1A5s ENDORS 1-A(5)(t) Accounting Benefit Rider (S.94-118) (Equitable). EX-99.1A5t ENDORS 1-A(5)(u) Limitation on Amount of Insurance Rider (R85-406) (Equitable Variable). EX-99.1A5u RIDER 1-A(5)(v) Exchange Privilege Rider (R85-405) (for use with Policy 85-300). (Equitable Variable) EX-99.1A5v RIDER 1-A(5)(w) Disability Rider - Waiver of Monthly Deductions (R85-408) (for use with Policy 85-300) (Equitable Variable). EX-99.1A5w RIDER 1-A(5)(x) Pro Rata Surrender Charge Endorsement (S.87-289) (for use with Policy 85-300) (Equitable Variable). EX-99.1A5x ENDORS 1-A(5)(y) Asset Allocation Endorsement (S.89-301) (for use with Policy 85-300) (Equitable Variable). EX-99.1A5y ENDORS 1-A(5)(z) Invest Options Rider and Guaranteed Interest Division Transfer Rider (R.89-303)(for use with Policy No. 85-300). (Equitable Variable). EX-99.1A5z RIDER 1-A(6)(a) Declaration and Charter of Equitable, as amended. EX-99.1A6a CHARTER 1-A(6)(b) By-Laws of Equitable, as amended. EX-99.1A6b BYLAWS 1-A(8) Distribution and Servicing Agreement among EQ Financial Consultants, Inc. (formerly known as Equico Securities, Inc.), Equitable and Equitable Variable dated as of May 1, 1994. EX-99.1A8 DIST AGR 1-A(8)(i) Schedule of Commissions. EX-99.1A8i SCHED COM 1-A(9)(a) Agreement and Plan of Merger of Equitable Variable with and into Equitable dated September 19, 1996. EX-99.1A9a MERG AGR 1-A(10)(a) Application EV4-200Y (EQUITABLE VARIABLE). EX-99.1A10a APPLIC 1-A(10)(b) Application EV4-200Y (Equitable). EX-99.1A10b APPLIC 2(a) Opinion and Consent of Mary P. Breen, Vice President and Associate General Counsel of Equitable. EX-99.2a Leg Opin 2(b)(i) Opinion and Consent of Barbara Fraser, F.S.A., M.A.A.A., Vice President of Equitable. EX-99.2bi Act Opin 2(b)(ii) Consent of Barbara Fraser, F.S.A., M.A.A.A., Vice President of Equitable, relating to Exhibit 2(b)(i). EX-99.2bii Act Opin 2(b)(iii) Opinion and Consent of Barbara Fraser, F.S.A., M.A.A.A., Vice President of Equitable. EX-99.2biii Act Opin 6 Consent of Independent Public Accountant. EX-99.6 CONSENT 7(a) Powers-of-Attorney. EX-99.7a. POW ATTY 8 Description of Equitable's Issuance, Transfer and Redemption Procedures for Flexible Premium Policies pursuant to Rule 6e-3(T)(b)(12)(iii) under the Investment Company Act of 1940. EX-99.8 DESC PROC 27 Financial Data Schedule. EX-27
II-8 EX-99.1A1ARESOLU 2 RESOLUTION DATED 9-21-95 ELAS THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES ASSISTANT SECRETARY'S CERTIFICATE As an Assistant Secretary of The Equitable Life Assurance Society of the United States (the "Corporation"), a corporation organized and existing under the laws of the State of New York, I, Janet E. Hannon, hereby certify that attached hereto marked Exhibit A is a true, correct, and complete copy of Resolution B28-95, duly adopted by the Board of Directors of the Corporation at a meeting held on September 21, 1995, at which a quorum was present and acting throughout; and that said resolution has not been amended, annulled, rescinded, or revoked, and is now in full force and effect. IN WITNESS WHEREOF, I have hereunto affixed my signature and the seal of the Corporation this 30th day of May, 1996. SEAL /s/ Janet E. Hannon ------------------- Assistant Secretary 7275N/21 EXHIBIT A AUTHORITY TO MARKET VARIABLE LIFE INSURANCE AND ESTABLISH SEPARATE ACCOUNTS ------------------------------- B28-95 WHEREAS, by memorandum to Executive Vice President and Chief Administrative Officer William T. McCaffrey, dated September 6, 1995 (the "Memorandum"), Senior Vice President Samuel B. Shlesinger referred to a proposal currently under consideration by management to merge Equitable Variable Life Insurance Company into Equitable Life (the "Proposed Merger"); WHEREAS, if the Proposed Merger were to occur, the Company would require all necessary licenses and other approvals to carry on the business of EVLICO, some of which must be applied for in advance upon authority granted by this Board to engage in a variable life insurance business; and WHEREAS, the Memorandum requests that this Board authorize, contingent upon the effectiveness of the Proposed Merger, the conduct by the Company of a variable life insurance business and other actions to facilitate the operation of such business; NOW, THEREFORE, BE IT RESOLVED, That authorization is given to continue studying the feasibility of merging EVLICO into the Company; FURTHER RESOLVED, That, contingent upon the effectiveness of the Proposed Merger, the Company shall commence a variable life insurance business in order to perform its obligations under the EVLICO variable life insurance policies issued prior to the Proposed Merger and to offer and sell variable life insurance policies thereafter; FURTHER RESOLVED, That the Company hereby establishes Separate Accounts I, FP, PVT and P-1 (the "Separate Accounts") to become operational upon the effectiveness of the Merger; FURTHER RESOLVED, That the Separate Accounts shall fund variable life insurance policies currently funded in corresponding separate accounts of EVLICO and policies to be issued by Equitable Life after the Merger. FURTHER RESOLVED, That the Chief Investment Officer of the Company, with power to sub-delegate, is authorized in his discretion as he may deem appropriate from time to time and in accordance with applicable laws and regulations (a) to divide the Separate Accounts into one or more divisions or subdivisions, (b) to modify or eliminate any such division or subdivision, (c) to change the designation of the Separate Accounts to another designation (d) to designate additional divisions or subdivisions thereof and (e) to authorize and establish any and all additional separate accounts as may be deemed by such officer to by necessary or desirable for the Company's variable life insurance business and having investment policies substantially similar to any current or future separate account of the Company which has been or may be specifically approved by this Board; FURTHER RESOLVED, That the officers of the Company be, and each of them hereby is, authorized to invest cash in the Separate Accounts or in any division thereof as may be deemed necessary or appropriate to facilitate the commencement of the Separate Account's operations or to meet any minimum capital requirements under the Investment Company Act of 1940 (the "1949 Act") and to transfer cash or securities from time to time between the Company's general account and any Separate Account as deemed necessary or appropriate as long as such transfers are not prohibited by law and are consistent with the terms of the variable life insurance policies issued by the Company providing for allocations to such Separate Accounts; FURTHER RESOLVED, That authority is hereby delegated to the Chief Executive Officer, the President and the Chief Investment Officer, with power to sub-delegate, to adopt Rules and Regulations for Certain Operations of the Separate Accounts, providing for, among other things, criteria by which the Company shall institute procedures to provide for a pass-through of voting rights to the owners of variable life insurance policies issued by the Company providing for allocation to any Separate Account with respect to the shares of any investment companies which are held in such Separate Account; FURTHER RESOLVED, That the initial fundamental investment policy of each Separate Account shall be the investment policy of the corresponding separate account of EVLICO at the effective date of the Proposed Merger, provided, however, that such investment policy may be changed from time to time in accordance with applicable law by the Chief Investment Officer of the Company or such other officer as he may designate; FURTHER RESOLVED, That the Company may register under the Securities Act of 1933 (the "1933 Act") variable life insurance policies, or units of interest thereunder, under which amounts will be allocated by the Company to the Separate Accounts to support reserves for such policies and, in connection therewith, the officers of the Company be, and each of them hereby is, authorized, with the assistance of accountants, legal counsel and other consultants, to prepare, execute and file with the Securities and Exchange Commission, in the name and on behalf of the Company, registration statements under the 1933 Act, including prospectuses, supplements, exhibits and other documents relating thereto, and amendments to the foregoing, in such form as the officer executing the same may deem necessary or appropriate; FURTHER RESOLVED, That the officers of the Company are authorized, with the assistance of accountants, legal counsel and other consultants, to take all actions necessary to register the Separate Accounts under the 1940 Act and to take such related actions as they deem necessary and appropriate to carry out the foregoing; FURTHER RESOLVED, That the officers of the Company be, and each of them hereby is, authorized to prepare, execute, and file with the Securities and Exchange Commission such no-action requests and applications for such exemptions from or orders under the federal or state securities laws as they may from time to time deem necessary or desirable; FURTHER RESOLVED, That the President of the Company is hereby appointed as agent for service under any registration statement under the 1933 Act or the 1940 Act relating to the Separate Accounts, such person to by duly authorized to receive communications and notices from the Securities and Exchange Commission with respect to such registration statement and to exercise powers given to such agent by the 1933 Act and 1940 Act and the rules and regulations thereunder, and any other applicable law; FURTHER RESOLVED, That the officers of the Company be, and each of them hereby is, authorized to effect, in the name and on behalf of the Company, all such registrations, filing and qualifications under applicable securities laws and regulations and under insurance securities laws and insurance laws and regulations of such states and other jurisdictions as they may deem necessary or appropriate, with respect to the Company, and with respect to any variable life insurance policies under which amounts will be allocated by the Company to the Separate Accounts to support reserves for such policies; such authorization to include registration, filing and qualification of the Company and of said policies, as well as registration, filing and qualification of officers, employees and agents of the Company as brokers, dealers, agents, salesmen, or otherwise; and such authorization shall also include, in connection therewith, authority to prepare, execute, acknowledge and file all such applications, applications for exemptions, certificates, affidavits, covenants, consents to service of process and other instruments and to take all such action as the officer executing the same or taking such action may deem necessary or desirable; B28-95 (continued) FURTHER RESOLVED, That the standards of suitability and code of conduct relating to the doing by the Company of a variable life insurance business, in the forms annexed to the Memorandum, are hereby approved; and FURTHER RESOLVED, That the officers of the Company are, and each of them hereby is, authorized and instructed to take all such acts and prepare and deliver all such documents in the name and on behalf of the Company, including all documents required by state licensing authorities to conduct a variable life insurance business, as may be necessary or desirable to effectuate the purposes of the foregoing resolutions. EX-99.1A3BBROKRAGR 3 BROKER - DEALER AGREEMENT BROKER-DEALER AND GENERAL AGENT SALES AGREEMENT AGREEMENT, by and among EQ Financial Consultants, Inc. ("Distributor"), __________________________ ("Broker-Dealer") and ___________________________ ("General Agent"). W I T N E S S E T H : WHEREAS, the Distributor and the Broker-Dealer are both broker-dealers registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended ("1934 Act"), and members of the National Association of Securities Dealers, Inc.; WHEREAS, the General Agent, which is an Affiliate of, or the same person as, the Broker-Dealer, or whose employees are also employees of the Broker-Dealer, is an insurance agency duly licensed to sell variable life insurance and variable annuities in any state or other jurisdiction in which the General Agent intends to perform hereunder; WHEREAS, The Equitable Life Assurance Society of the United States ("Equitable") has appointed the Distributor as principal underwriter or distributor of the Variable Accounts and the MVA Interests and as distributor of the Contracts and has authorized the Distributor to recommend persons for appointment as agents of Equitable to solicit applications for the sale of the Contracts; WHEREAS, it is intended that the General Agent shall be authorized to offer and sell the Contracts to the general public subject to the terms and conditions set forth more fully herein; WHEREAS, Equitable has authorized the Distributor to enter into separate written agreements with broker-dealers registered under the 1934 Act which agree to participate in the distribution of the Contracts, and the parties hereto desire that the Broker-Dealer be authorized to solicit applications for the sale of the Contracts; WHEREAS, Contracts may be issued by an insurance company which is an Affiliate of Equitable and the Distributor may be authorized to promote the offer and sale of such Contracts in the same manner that Equitable has authorized the Distributor to act, as described above. NOW, THEREFORE, in consideration of the premises and of the mutual covenants and promises herein contained, the parties hereto agree as follows: ARTICLE I DEFINITIONS ss.1.1 Defined Terms. In addition to any terms defined elsewhere in this Agreement, the terms defined in this Section 1.1, whenever used in this Agreement (including in the Schedules and Exhibits), shall have the respective meanings indicated. a. Affiliated Person or Affiliate -- With respect to a person, any other person controlling, controlled by, or under common control with, such person. b. Agent -- An individual associated with the General Agent and registered with the NASD as a representative of the Broker-Dealer who is appointed by an Equitable Life Company as an insurance agent for the purpose of soliciting applications for the Contracts. c. Broker-of-Record -- The party designated in the Equitable Life Companies records as the person, with respect to a Contract, who is entitled to receive compensation payable with respect to such Contract and who is authorized to contact directly the owner of such Contract. In the case of compensation payable with respect to a Premium, the Broker-of-Record shall be the party designated as such in the records of an Equitable Life Company, at the time such Premium is accepted by such Equitable Life Company. In the case of any payment of compensation payable with respect to Contract value or client services, the Broker-of-Record shall be the party designated as such in the records of an Equitable Life Company, in accordance with the rules and procedures of the Equitable Life Companies at the time any such payment is payable. In the case of compensation payable on annuitization of a Contract, the Broker-of-Record shall be the party designated as such in the records of an Equitable Life Company on the annuity commencement date specified in such Contract. d. Contract Prospectus -- The prospectus for the interests under the Contracts included within a Contract Registration Statement and including any Contract prospectus or supplement separately filed under the 1933 Act. The Contract Prospectus also shall include the statement of additional information which is part of the Contract Registration Statement, unless the context otherwise requires. e. Contract Registration Statements -- The most recent effective registration statements, or most recent effective post-effective amendments thereto, relating to interests under the Contracts and in the Variable Accounts, as required by the 1933 Act and the 1940 Act, including financial statements therein and all exhibits thereto. f. Contracts -- All classes of life insurance policies and annuity contracts, including certificates, issued by Equitable or by an Affiliate of Equitable distributed by the Distributor, except those which are identified in Schedule I. Schedule I may be modified from time to time, as provided in Section 2.6. g. Equitable Life Companies or, individually, an Equitable Life Company -- Equitable and any Affiliate of Equitable which is an insurance company. h. MVA Interests -- The market value adjustment interests, if any, under the Contracts. i. NASD -- National Association of Securities Dealers, Inc. j. 1940 Act -- Investment Company Act of 1940, as amended. k. 1934 Act -- Securities Exchange Act of 1934, as amended. l. 1933 Act -- Securities Act of 1933, as amended. m. Premium -- Any premium, contribution or other consideration relating to the Contracts. n. SEC or Commission -- Securities and Exchange Commission. -2- o. Trust -- The Hudson River Trust and any other entity available for investment through the Variable Accounts under the Contracts. p. Trust Prospectus -- The prospectus for the Trust included within the Trust Registration Statement and including any Trust prospectus or supplement separately filed under the 1933 Act. The Trust Prospectus also shall include the statement of additional information which is part of the Trust Registration Statement, unless the context otherwise requires. q. Trust Registration Statement -- The most recent effective registration statement or most recent effective post-effective amendment thereto relating to the Trust as required by the 1933 Act and the 1940 Act, including financial statements therein and all exhibits thereto. r. Variable Accounts -- Segregated asset accounts, each of which has been established by an Equitable Life Company pursuant to state law as a funding vehicle for the Contracts. The Variable Accounts are divided into divisions that invest in shares of the Trust. ss.1.2 Cross-References. All references in this Agreement to a Section, Article, Schedule or Exhibit are to a section, article, schedule or exhibit of this Agreement, unless otherwise indicated. ARTICLE II AUTHORIZATION OF BROKER-DEALER AND GENERAL AGENT ss.2.1 Authority to Distribute Contracts. Pursuant to the authority granted to it by Equitable, the Distributor hereby authorizes the Broker-Dealer, under the securities laws, and General Agent, under the insurance laws, each in a non-exclusive capacity, to distribute the Contracts. The Broker-Dealer and the General Agent accept such authorization and agree to use their best efforts to find purchasers for the Contracts in each case acceptable to the Equitable Life Company issuing such Contracts. The Broker-Dealer and the General Agent understand that the public offering of and solicitation for interests under the Contracts are not permitted to commence, or to continue, unless the Contract Registration Statements have become effective and, with respect to each state or other jurisdiction in which Contract applications are to be solicited, the Contracts are qualified for sale under all applicable securities and insurance laws. The Broker-Dealer and the General Agent agree that the solicitation of applications for the sale of the Contracts will commence as soon as practicable after the Contract Registration Statements have become effective. ss.2.2 Notification by Distributor. The Distributor shall notify the Broker-Dealer and the General Agent: a. If there are no effective Contract Registration Statements, when the Contract Registration Statements have become effective; b. Of all states and other jurisdictions in which the Contracts are qualified for sale and of the states and other jurisdictions in which the Contracts may not be lawfully sold; c. Of any request by the SEC for any amendments or supplements to a Contract Registration Statement or of any request for additional information that must be provided by the Broker-Dealer or the General Agent or any Affiliate of the Broker-Dealer or the General Agent; d. Of the issuance by the SEC of any stop order with respect to a Contract Registration Statement or the initiation of any proceedings for that purpose or for any other purpose relating to the registration and/or offering of the Contracts; -3- e. If any event occurs as a result of which the Contract Prospectus(es) or any sales literature for the Contracts would include any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein not misleading. The Distributor will provide the Broker-Dealer and the General Agent with notification of these matters immediately by telephone, with notification in writing promptly thereafter. ss.2.3 Authority to Recommend Agent Appointments. The General Agent is vested under this Agreement with power and authority to select and recommend individuals who are associated with the General Agent and are registered representatives of the Broker-Dealer for appointment as agents of Equitable, and only individuals so recommended by the General Agent to the Distributor shall be eligible to become Agents, provided that the number of Agents with appointments in effect under this Agreement shall not at any time exceed five. Equitable reserves the right in its sole discretion to refuse to appoint any proposed agent or, once appointed, to terminate the same at any time with or without cause. ss.2.4 Limitations on Authority. Neither the Broker-Dealer nor the General Agent shall possess or exercise any authority on behalf of the Distributor or the Equitable Life Companies other than that expressly conferred on the Broker-Dealer or the General Agent by this Agreement. In particular, and without limiting the foregoing, neither the Broker-Dealer nor the General Agent shall have any authority, nor shall either grant such authority to any Agent, on behalf of the Distributor (i) to make, alter or discharge any Contract or other contract entered into pursuant to a Contract; (ii) to waive any Contract provision; (iii) to extend the time for payment of any Premiums; or (iv) to receive any monies or Premiums from applicants for or purchasers of the Contracts (except for the sole purpose of forwarding monies or Premiums to an Equitable Life Company). ss.2.5 Suitability. The Distributor wishes to ensure that the Contracts solicited by Broker-Dealer will be issued to persons for whom the Contracts will be suitable. Broker-Dealer shall take reasonable steps to ensure that Agents shall not make recommendations to an applicant to purchase any Contract in the absence of reasonable grounds to believe that the purchase of such Contract is suitable for such applicant. While not limited to the following, a determination of suitability shall be based on information furnished to an Agent after reasonable inquiry concerning the applicant's insurance and investment objectives, financial situation and needs. ss.2.6 Insurer's Right to Reject Applications. The Broker-Dealer and the General Agent acknowledge that each Equitable Life Company has the right in its sole discretion to reject any applications or Premiums received by it and to return or refund to an applicant such applicant's Premium. In the event that an Equitable Life Company rejects an application solicited by an Agent, such Equitable Life Company will return any Premium paid by the applicant to such applicant, or to the soliciting Agent for prompt forwarding to such applicant. In the event that a purchaser exercises his or her free look right under a Contract, any amount to be refunded as provided in such Contract will be so refunded to the purchaser by or on behalf of the Equitable Life Company that issued such Contract, or to the soliciting Agent for prompt forwarding to such purchaser. ss.2.7 Contracts Included and Contracts Excluded Under Agreement. This Agreement applies to all classes of annuity contracts or life insurance contracts issued by an Equitable Life Company and distributed by the Distributor ("Contracts"). Schedule I to this Agreement describes the life insurance and annuity contracts which are excluded as Contracts under this Agreement. Schedule I may be amended by the Distributor in its sole discretion from time to time to add or to delete classes of annuity contracts or life insurance contracts. The provisions of this Agreement shall apply with equal force to all Contracts from time to time covered by it unless the context otherwise requires. -4- ss.2.8 Independent Contractor Status. The Distributor acknowledges that the Broker-Dealer and the General Agent are each independent contractors. Accordingly, while the Broker-Dealer and the General Agent agree to use their best efforts to solicit applications for the Contracts, the Broker-Dealer and the General Agent are not obliged or expected to give full time and energies to the performance of their obligations hereunder or to sell or solicit a specified number of Contracts, nor are the Broker-Dealer and the General Agent obliged or expected to represent the Distributor or any Equitable Life Company exclusively. Nothing herein contained shall constitute the Broker-Dealer, the General Agent, or any agents or representatives of the Broker-Dealer or the General Agent as employees of an Equitable Life Company or the Distributor. ARTICLE III LICENSING AND REGISTRATION OF BROKER-DEALER, GENERAL AGENT AND AGENTS ss.3.1 Broker-Dealer Qualifications. The Broker-Dealer represents that it is a broker-dealer registered with the SEC under the 1934 Act, and is a member of the NASD. The Broker-Dealer must, at all times when performing its functions and fulfilling its obligations under this Agreement, be duly registered as a broker-dealer under the 1934 Act and in each state or other jurisdiction in which Broker-Dealer intends to perform its functions and fulfill its obligations hereunder and in which such registration is required, and be a member in good standing of the NASD. ss.3.2 General Agent Qualifications. The General Agent represents that it is a licensed life insurance agent where required to solicit applications. The General Agent must, at all times when performing its functions and fulfilling its obligations under this Agreement, be duly licensed to sell the Contracts in each state or other jurisdiction in which the General Agent intends to perform its functions and fulfill its obligations hereunder. ss.3.3 Qualifications of Broker-Dealer Representatives. The Broker-Dealer represents and warrants that it shall take all necessary action to ensure that no individual shall offer or sell the Contracts on behalf of Broker-Dealer in any state or other jurisdiction in which the Contracts may lawfully be sold unless such individual is an associated person of Broker-Dealer (as that term is defined in Section 3(a)(18) of the 1934 Act), is neither subject to a statutory disqualification (as that term is defined in the 1934 Act) nor prohibited from engaging in the business of insurance (under the Violent Crime Control and Law Enforcement Act of 1994), and is duly registered with the NASD and any applicable state securities regulatory authority as a registered person of Broker-Dealer qualified to distribute the Contracts in such state or other jurisdiction. ss.3.4 Qualifications of General Agent's Agents and Appointment of Agents. The General Agent represents and warrants that it shall take all necessary action to ensure that no individual shall offer or sell the Contracts on behalf of the General Agent in any state or other jurisdiction unless such individual is duly appointed as an agent of the General Agent, duly licensed and appointed as an agent of the appropriate Equitable Life Company and appropriately licensed, registered or otherwise qualified to offer and sell the Contracts to be offered and sold by such individual under the insurance laws of such state or jurisdiction. The General Agent understands that certain states may require that a special variable contracts examination be passed by agent before he or she can solicit applications for the Contracts. Nothing in this Agreement is to be construed as requiring an Equitable Life Company to obtain a license or issue a consent or appointment to enable any particular agent to sell Contracts. All matters concerning the licensing of any individuals recommended for appointment by the General Agent under any applicable state insurance law shall be a matter directly between the General Agent and such individual. The General Agent shall furnish the Equitable Life Companies with proof of proper licensing of such individual or other proof, reasonably acceptable to the Equitable Life Companies, of satisfaction by such individual of licensing requirements prior to the appointment of any such individual as an agent of any Equitable Life Company. In conjunction with the submission of appointment papers for all such -5- individuals as insurance agents of an Equitable Life Company, the General Agent shall fulfill all requirements set forth in the General Letter of Recommendation, which is Exhibit A, and shall be deemed to represent that each individual is competent and qualified to act as an agent for the Equitable Life Companies and to hold himself or herself out in good faith to the general public. ARTICLE IV BROKER-DEALER AND GENERAL AGENT COMPLIANCE ss.4.1 Supervisory Responsibilities of General Agent. The General Agent shall train, supervise and be solely responsible for the conduct of the Agents in their solicitation activities in connection with the Contracts, and shall supervise Agents' strict compliance with applicable rules and regulations of any governmental or other insurance authorities that have jurisdiction over insurance contract activities, as well as the rules and procedures of the Equitable Life Companies pertaining to the solicitation, sale and submission of applications for the Contracts and the provision of services relating to the Contracts. The General Agent shall be solely responsible for background investigations of the proposed agents to determine their qualifications, good character and moral fitness to sell the Contracts. ss.4.2 Supervisory Responsibilities of Broker-Dealer. The Broker-Dealer shall be responsible for securities training, supervision and control of the Agents in connection with their solicitation activities and any incidental services with respect to the Contracts and shall supervise Agents' strict compliance with applicable federal and state securities laws and NASD requirements in connection with such solicitation activities and with the rules and procedures of the Equitable Life Companies. ss.4.3 Compliance With Applicable Laws. The Broker-Dealer and the General Agent hereby represent and warrant that they are in compliance with all applicable federal and state securities laws and regulations and all applicable insurance laws and regulations, including, without limitation, state insurance laws and regulations imposing insurance licensing requirements. The Broker-Dealer and the General Agent each agree to carry out their respective sales and administrative activities and obligations under this Agreement in continued compliance with federal and state laws and regulations, including those governing securities and insurance-related activities or transactions, as applicable. The Broker-Dealer and the General Agent shall notify the Distributor and the Equitable Life Companies immediately in writing if Broker-Dealer and/or the General Agent fail to comply with any of the laws and regulations applicable to either of them. ss.4.4 Restrictions on Sales Activity. The Broker-Dealer and the General Agent and Agents shall not offer or attempt to offer the Contracts, nor solicit applications for the Contracts, nor deliver Contracts, in any state or other jurisdiction in which the Contracts may not lawfully be sold or offered for sale. For purposes of determining where the Contracts may be offered and applications solicited, the Broker-Dealer and the General Agent may rely on written notification, as revised from time to time, received from the Distributor. ss.4.5 Premiums and Other Payments. All Premiums and loan repayments shall be sent promptly (and in any event not later than two business days after receipt) to the appropriate Equitable Life Company at the address indicated in the rules and procedures of the Equitable Life Companies, or at such other address as the Equitable Life Companies or the Distributor may subsequently specify in writing. Each initial Premium shall be accompanied by a properly completed application for a Contract, unless such Premium is submitted in accordance with the procedures set forth in Exhibit B, which have been accepted and agreed to by the Broker-Dealer and the General Agent, as provided in Exhibit B. Checks in payment of Premiums or outstanding loans shall be drawn to the order of the appropriate Equitable Life Company. -6- ss.4.6 Misdirected Payments. In the event that Premiums or loan repayments are sent to the General Agent or Broker-Dealer, rather than to the appropriate Equitable Life Company, the General Agent and Broker-Dealer shall promptly (and in any event, within two business days) remit such Premiums to the appropriate Equitable Life Company at the address indicated in the rules and procedures of the Equitable Life Companies. The General Agent and Broker-Dealer acknowledge that if any Premium or other payment is held at any time by either of them, such Premium or other payment shall be held on behalf of the client, and the General Agent or Broker-Dealer shall segregate such Premium or other payment from their own funds and promptly (and in any event, within two business days) remit such Premium or other payment to the Equitable Life Company issuing the Contract pursuant to which such amounts have been paid. ss.4.7 Delivery of Contracts. Upon issuance of a Contract by an Equitable Life Company and delivery of such Contract to the Agent who solicited its purchase, the soliciting Agent shall promptly deliver such Contract to its purchaser. For purposes of this provision, "promptly" shall be deemed to mean not later than five calendar days. Consistent with its administrative procedures, each Equitable Life Company will assume that a Contract issued by it will be delivered by the soliciting Agent to the purchaser of such Contract within five calendar days. As a result, if a purchaser exercises the free look rights under a Contract, the Broker-Dealer and the General Agent shall indemnify the Equitable Life Company issuing a Contract for any loss incurred by such Equitable Life Company that results from the soliciting Agent's failure to deliver such Contract to its purchaser within the contemplated five-calendar-day period. ss.4.8 Restrictions on Communications. Neither the Broker-Dealer nor the General Agent, nor any of their directors, partners, officers, employees, registered persons, associated persons, agents or affiliated persons, in connection with the offer or sale of the Contracts, shall give any information or make any representations or statements, written or oral, concerning the Contracts, the Variable Accounts or the Trust other than information or representations contained in the Contract and Trust Prospectuses, statements of additional information and Registration Statements, or in reports or proxy statements therefor, or in promotional, sales or advertising material or other information supplied and approved in writing by the Distributor. ss.4.9 Directions Given on Behalf of Contract Owners. The Broker-Dealer and the General Agent shall be solely responsible for the accuracy and propriety of any instruction given or action taken by an Agent on behalf of an owner or prospective owner of a Contract, including any instruction or action pursuant to Exhibit B. Neither the Distributor nor the Equitable Life Companies shall have any responsibility or liability for any action taken or omitted by it or by them in good faith in reliance on or by acceptance of such an instruction or action. ss.4.10 Restrictions on Sales Material and Name Usage. The Broker-Dealer and the General Agent shall neither use nor authorize the use of any promotional, sales or advertising material relating to the Contracts, the Equitable Life Companies, the Variable Accounts, the MVA Interests or the Trust without the prior written approval of the Distributor. Furthermore, the Broker-Dealer and the General Agent shall neither use nor authorize the use of the name of Equitable or of an Affiliate of Equitable, or any other name, trademark, service mark, symbol or trade style that is now or may hereafter be owned by Equitable or by an Affiliate of Equitable, except in the manner and to the extent that such use may be specifically authorized in writing by Equitable or the Distributor. ss.4.11 Market Timing and Other Prohibitions. The Broker-Dealer and the General Agent understand and acknowledge that the Distributor, in its sole discretion and at any time during the term of this Agreement, may restrict or prohibit the solicitation, offer or sale of Contracts and Premiums thereunder in connection with any so-called "market timing" or "asset allocation" program, plan, arrangement or service. Should the Distributor determine in its sole discretion that the Broker-Dealer or -7- the General Agent is soliciting, offering or selling, or has solicited, offered or sold, Contracts or Premiums subject to any so-called "market timing" or "asset allocation" program, plan, arrangement or service which is not permitted under this Agreement (an "unapproved program"), the Distributor may take such action which is necessary, in its sole discretion, to halt such solicitations, offers or sales. Furthermore, in addition to any indemnification provided in Article XI and any other liability that the Broker-Dealer and the General Agent might have, the Distributor may hold the Broker-Dealer and the General Agent liable for any damages or losses, actual or consequential, sustained by the Distributor or any of its Affiliates, or the Trust or any Equitable Life Company, as a result of any unapproved program which causes such losses or damages following solicitation, offer or sale of a Contract or Premium subject to any unapproved program or similar service made available by or through the Broker-Dealer or the General Agent. Notwithstanding any prohibitions which may be imposed pursuant to this Section 4.11, the Broker-Dealer and its registered representatives who are Agents may provide incidental services in the form of guidance to applicants and owners of Contracts regarding the allocation of Premiums and Contract value, provided that such services are (i) solely incidental to the Broker-Dealer's activities in connection with the sales of the Contracts, (ii) subject to the supervision and control of the Broker-Dealer, and (iii) furnished in accordance with rules and procedures prescribed by the Equitable Life Companies. ss.4.12 Tax Reporting Responsibility. The Broker-Dealer and the General Agent shall be solely responsible under applicable tax laws for the reporting of compensation paid to Agents and for any withholding of taxes from compensation paid to Agents, including, without limitation, FICA, FUTA, and federal, state and local income taxes. ss.4.13 Maintenance of Books and Records. The General Agent represents that it maintains and shall maintain such books and records concerning the activities of the Agents as may be required by the appropriate insurance regulatory agencies that have jurisdiction and that may be reasonably required by the Distributor to reflect adequately the Contracts processed through the General Agent. The General Agent shall make such books and records available to the Distributor and/or an Equitable Life Company at any reasonable time upon written request by the Distributor. The Broker-Dealer represents that it maintains and shall maintain appropriate books and records concerning the activities of the Agents as are required by the SEC, the NASD and other agencies having jurisdiction and that may be reasonably required by the Distributor to reflect adequately the Contracts processed through the General Agent. Broker-Dealer shall make such books and records available to the Distributor and/or an Equitable Life Company at any reasonable time upon written request by the Distributor or an Equitable Life Company. ss.4.14 Bonding of Agents and Others. The Broker-Dealer represents that all directors, officers, employees, and registered representatives of the Broker-Dealer who are appointed pursuant to this Agreement as Agents for state insurance law purposes or who have access to funds of the Equitable Life Companies, including but not limited to funds submitted with applications for the Contracts or funds being returned to purchasers of Contracts, are and shall be covered by a blanket fidelity bond, including coverage for larceny and embezzlement, issued by a reputable bonding company. This bond shall be maintained by the Broker-Dealer at the Broker-Dealer's expense. Such bond shall be, at least, of the form, type and amount required under the NASD Rules of Fair Practice. The Distributor may require evidence, satisfactory to it, that such coverage is in force, and the Broker-Dealer shall give prompt written notice to the Distributor of any cancellation or change of coverage. The Broker-Dealer assigns any proceeds received from the fidelity bonding company to the Equitable Life Companies to the extent of each Equitable Life Company's loss due to activities covered by the bond. If there is any deficiency amount, as a result of a deductible provision or otherwise, the Broker-Dealer shall promptly pay the affected Equitable Life Company such amount on demand, and the Broker-Dealer hereby indemnifies and holds harmless such Equitable Life Company from any such deficiency and from the costs of collection thereof (including reasonable attorneys' fees). -8- ss.4.15 Reports to Insurers. The Broker-Dealer and the General Agent shall promptly furnish to each Equitable Life Company or its authorized agent any reports and information that such Equitable Life Company may reasonably request for the purpose of meeting such Equitable Life Company's reporting and recordkeeping requirements under the insurance laws of any state, under any applicable federal or state securities laws, rules or regulations, or the rules of the NASD. ARTICLE V STANDARD OF CONDUCT FOR AGENTS ss.5.1 Basic Rules of Conduct. The Broker-Dealer and the General Agent shall ensure that each Agent shall comply with a standard of conduct including, but not limited to, the following: a. An Agent shall be duly qualified, licensed and registered to solicit and participate in the sale of Contracts as provided in Article III. b. An Agent shall not solicit applications for the Contracts without delivering the appropriate Contract Prospectus(es) the Trust Prospectus and, where required by state insurance law (as set forth in a notice to be supplied by the Equitable Life Companies), the then currently effective statement of additional information for the Contracts, and any other information whose delivery is specifically required. In soliciting applications for the Contracts, an Agent shall only make statements, oral or written, which are in accordance with the Contract Prospectus, the Trust Prospectus and written sales literature regarding the Contracts authorized by the Distributor. An Agent shall utilize only those applications for the Contracts provided to the General Agent by the Distributor. c. An Agent shall recommend the purchase of a Contract to an applicant only if he or she has reasonable grounds to believe that such purchase is suitable for the applicant in accordance with, among other things, applicable regulations of any state regulatory authority, the SEC and the NASD. While not limited to the following, a determination of suitability shall be based on information supplied to an Agent after a reasonable inquiry concerning the applicant's insurance and investment objectives and financial situation and needs. d. An Agent shall require that any payment of an initial Premium, whether in the form of a check or otherwise, shall be drawn in U.S. dollars on a bank located in the United States and made payable to the appropriate Equitable Life Company and, if in the form of a check, signed by the applicant for the Contract. An Agent shall not accept third-party checks or cash for Premiums. e. All checks and applications for the Contracts received by an Agent shall be forwarded promptly, and in any event not later than two business days after receipt, to the processing office designated by the Equitable Life Companies. f. Every Contract received by an Agent shall be delivered promptly, and in any event not later than five calendar days after receipt, to its purchaser. g. Any checks representing a return or refund of Premium which are received by an Agent for delivery to an applicant or purchaser shall be delivered promptly to the designated recipient. h. An Agent shall have no authority to endorse checks to an Equitable Life Company. i. An Agent shall have no authority to alter, modify, waive or change any of the terms, rates, charges or conditions of the Contracts. -9- j. An Agent shall make no representations concerning the continuation of non-guaranteed terms or provisions of the Contracts. k. An Agent shall have no authority to advertise for, on behalf of, or with respect to an Equitable Life Company, the Distributor, the Variable Accounts, the MVA Interests, the Contracts or the Trust without prior written approval and authorization from the Distributor. l. An Agent shall have no authority to solicit applications for Contracts or Premiums thereunder which will be subject to or in connection with any so-called "market timing" or "asset allocation" program, plan, arrangement or service which is an unapproved program. m. An Agent shall not furnish any transfer or other instructions by telephone to an Equitable Life Company on behalf of an owner of a Contract without having first obtained from such owner a written authorization in a form acceptable to the Equitable Life Companies. n. An Agent shall not encourage a prospective purchaser to surrender or exchange an insurance policy or contract issued by an Equitable Life Company in order to purchase a Contract or, conversely, to surrender or exchange a Contract in order to purchase another insurance policy or contract issued by an Equitable Life Company, except to the extent such surrenders or exchanges have been authorized by the Distributor. In the event that an insurance policy or contract issued by an Equitable Life Company is surrendered or exchanged in order to purchase a Contract, no compensation shall be paid under this Agreement. o. An Agent shall act in accordance with the rules and procedures of the Equitable Life Companies, including their policy statements on ethical conduct, in connection with any solicitation activities relating to the Contracts. ARTICLE VI RESPONSIBILITIES OF DISTRIBUTOR FOR MARKETING MATERIALS AND REPORTS ss.6.1 Prospectuses and Applications Provided by Distributor. During the term of this Agreement, the Distributor upon request will make available to the Broker-Dealer and the General Agent, for a reasonable charge, copies of the Contract Prospectus(es), Trust Prospectus and applications for the Contracts. Upon receipt from the Distributor of updated copies of the Contract Prospectus(es), Trust Prospectus and applications for the Contracts, the Broker-Dealer and the General Agent will promptly discard or destroy all copies of such documents previously provided to them, except such copies as are needed for purposes of maintaining proper records. Upon termination of this Agreement, the Broker-Dealer and the General Agent will promptly return, to the Distributor, all Contract and Trust Prospectuses, Contract applications, and other materials and supplies furnished by the Distributor to the Broker-Dealer or the General Agent or to the Agents. ss.6.2 Sales Material Provided by Distributor. During the term of this Agreement, the Distributor will be responsible for providing and approving all promotional, sales and advertising material to be used by the Broker-Dealer and the General Agent. The Distributor will file such materials or will cause such materials to be filed with the SEC and the NASD, and with any state securities regulatory authorities, as required. ss.6.3 Information Provided by Distributor. The Distributor will compile periodic marketing reports summarizing sales results to the extent reasonably requested by the Broker-Dealer or the General Agent. -10- ARTICLE VII COMMISSIONS, FEES AND EXPENSES ss.7.1 Compensation Schedule. During the term of this Agreement, the Distributor shall pay to the General Agent (or to the Broker-Dealer, at the request of the General Agent) as compensation for Contracts for which it is the Broker-of-Record, the amounts set forth in Schedule II, as such Schedule II may be amended or modified at any time, in any manner and without prior notice by the Distributor, and subject to the other provisions of this Agreement. Any amendment to Schedule II will be applicable to any Contract for which an application or initial Premium is received by an Equitable Life Company on or after the effective date of such amendment, in accordance with procedures established by the Distributor. Compensation with respect to any Contract shall be paid to the General Agent only for so long as the General Agent is the Broker-of-Record for such Contract. ss.7.2 Limitations on Compensation. No compensation shall be payable, and any compensation already paid shall be returned to the Distributor (or to Equitable, at the direction of the Distributor) on request, under each of the following conditions: a. if an Equitable Life Company, in its sole discretion, determines not to issue the Contract applied for; b. if an Equitable Life Company refunds the Premium paid by an applicant, upon the exercise of applicant's right of withdrawal; c. if an Equitable Life Company refunds the Premium paid by an applicant, as a result of a complaint by the applicant, recognizing that the Equitable Life Companies have sole discretion to refund Premiums; or d. if the Distributor determines that any person signing an application or any person or entity receiving compensation for soliciting purchases of Contracts is not duly licensed to sell life insurance (and to sell variable contracts if required by the state in question). No compensation or reimbursement of any kind other than that described in this Agreement is payable to the General Agent or the Broker-Dealer. In addition, the Broker-Dealer and the General Agent recognize that, unless the provisions of Exhibit B apply to the receipt of an initial Premium, all compensation payable to the General Agent hereunder will be disbursed by or on behalf of the Distributor after each Premium is received and accepted by the appropriate Equitable Life Company. ss.7.3 Expenses Paid by Broker-Dealer and General Agent. Neither the Broker-Dealer nor the General Agent shall, directly or indirectly, expend or contract for the expenditure of any funds of the Distributor or any Equitable Life Company. The Broker-Dealer and the General Agent shall each pay all expenses incurred by each of them in the performance of this Agreement, unless otherwise specifically provided for in this Agreement or unless the Distributor shall have agreed in advance in writing to share the cost of certain expenses. Initial state appointment fees for agents of an Equitable Life Company who are associated with the General Agent will be paid by such Equitable Life Company unless otherwise paid by the General Agent or Broker-Dealer. Renewal state appointment fees for any Agent shall be paid by such Equitable Life Company if, in the sole discretion of such Equitable Life Company, its minimum production and activity requirements for the payment of renewal appointment fees have been met by such Agent. Each Equitable Life Company shall establish reasonable minimum production and activity requirements for the payment of renewal state appointment fees, which may be changed by such Equitable Life Company in its sole discretion at any time without notice. Except as otherwise provided herein, the Broker-Dealer will be obligated to pay all state appointment fees, including, but not limited -11- to, renewal appointment fees not paid for by an Equitable Life Company, transfer fees and termination fees, and any other fees required to be paid to obtain state insurance licenses for Agents. ss.7.4 Offsets of Compensation Under Other Agreements. With respect to commissions, compensation or any other amounts owed by the Distributor or any Affiliate of the Distributor to the Broker-Dealer or the General Agent under any other agreement, the Distributor shall have a right to set off against such amounts any monies payable by the General Agent under this Agreement, including Schedule II, to the Distributor, to the extent permitted by applicable law. This right on the part of the Distributor shall not prevent both of them or either of them from pursuing any other means or remedies available to them to recover such monies payable by the General Agent. ss.7.5 No Rights of Agents to Compensation Paid by Distributor. Agents shall have no interest in this Agreement or right to any commissions to be paid by the Distributor to the General Agent. The General Agent shall be solely responsible for the payment of any commission or consideration of any kind to Agents. The General Agent shall have no interest in any compensation paid by an Equitable Life Company to the Distributor, now or hereafter, in connection with the sale of any Contracts under this Agreement. ARTICLE VIII TERM AND EXCLUSIVITY OF AGREEMENT ss.8.1 Limited Classes of Contracts. This Agreement relates solely to the Contracts identified in Schedule I. ss.8.2 Term. This Agreement shall remain in effect for a period of one year from the Effective Date, and, unless terminated earlier pursuant to Sections 8.3 or 8.4, shall automatically continue in effect for one-year periods thereafter; provided, however, that it shall automatically terminate upon termination of any distribution agreement between the Distributor and an Equitable Life Company relating to the Contracts. ss.8.3 Early Termination by Notice. This Agreement may be terminated by any party hereto by giving notice to the other parties at least sixty (60) days prior to an anniversary of the Effective Date. ss.8.4 Termination for Cause. If Broker-Dealer or the General Agent shall default in their respective obligations under this Agreement, or breach any of their respective representations or warranties made in this Agreement, the Distributor may, at its option, cancel and terminate this Agreement without notice. ss.8.5 Surviving Provisions. Upon termination of this Agreement, all authorizations, rights, and obligations hereunder shall cease except: a. the obligation to settle accounts hereunder, including the payment of compensation with respect to Contracts in effect at the time of termination or issued pursuant to applications received by an Equitable Life Company prior to termination or Premiums received under such Contracts subsequent to termination of this Agreement; b. the provisions with respect to indemnification set forth in Article XI; c. the provisions of Section 4.13 that require the General Agent and the Broker-Dealer to maintain certain books and records; d. the confidentiality provisions contained in Section 10.3; and -12- e. the provisions of subparagraph l. of Section 5.1 with respect to the surrender or exchange of a Contract. ARTICLE IX COMPLAINTS AND INVESTIGATIONS ss.9.1 Cooperation in Investigations and Proceedings. The Distributor, the Broker-Dealer and the General Agent shall each cooperate fully in any insurance regulatory investigation, proceeding or inquiry or in any judicial proceeding arising in connection with the Contracts marketed under this Agreement. In addition, the Distributor, the Broker-Dealer and the General Agent shall cooperate fully in any securities regulatory investigation, proceeding or inquiry or in any judicial proceeding with respect to the Distributor, the Broker-Dealer, their Affiliates or their agents, to the extent that such investigation or proceeding is in connection with the Contracts marketed under this Agreement. Copies of documents received by any party to this Agreement in connection with any judicial proceeding shall be furnished promptly to all of the other parties. ss.9.2 Notification and Related Requirements. Without limiting the provisions of Section 9.1: a. The Broker-Dealer and the General Agent will be notified promptly of any customer complaint or notice of any regulatory investigation, proceeding or inquiry or any judicial proceeding received by the Distributor or an Equitable Life Company with respect to the Broker-Dealer, General Agent or any Agent. b. The Broker-Dealer and the General Agent will promptly notify the Distributor and the appropriate Equitable Life Company of any customer complaint or notice of any regulatory investigation, proceeding or inquiry or any judicial proceeding received by the Broker-Dealer, the General Agent or their Affiliates with respect to themselves, their Affiliates or any Agent in connection with any Contract marketed under this Agreement or any activity relating to any such Contract and, upon request by the Distributor, will promptly provide copies of all relevant materials to the Distributor. c. In the case of a customer complaint, the Distributor, the Broker-Dealer and the General Agent will cooperate in investigating such complaint, and any response by the Broker-Dealer or the General Agent to such complaint will be sent to the Distributor for written approval not less than five business days prior to its being sent to the customer or regulatory authority, except that if a more prompt response is required, the proposed response shall be communicated by telephone or facsimile. The Distributor shall have final authority to determine the content of each such response. ARTICLE X ASSIGNMENT, AMENDMENT, CONFIDENTIALITY ss.10.1 Non-Assignable Except to Certain Affiliates. This Agreement shall be non-assignable by the parties hereto, except that a party may assign its rights and obligations to any subsidiary of, or any company under common control with, such party, provided that: a. the assignee is duly licensed to perform all functions required of that party under this Agreement; b. the assignee undertakes to perform such party's functions hereunder; and c. in the event that the Broker-Dealer or the General Agent determines to assign its rights and obligations under this Agreement: -13- i. such proposed assignment is approved in advance by the Distributor; and ii. the Broker-Dealer or the General Agent or assignee pays any state insurance agent appointment fees and any other charges or fees, including taxes, that become due and payable as a result of the assignment. ss.10.2 Prior Agreements and Amendments. This Agreement constitutes the entire agreement between the parties hereto and supersedes all prior agreements, either oral or written, between the parties relating to the Contracts and, except for any amendment of Schedule I, pursuant to the terms of Section 2.6, or Schedule II, pursuant to the terms of Section 7.1, may not be modified in any way unless by written agreement. ss.10.3 Confidentiality. Each party to this Agreement shall maintain the confidentiality of any client list or any other proprietary information that it may acquire in the performance of this Agreement and shall not use such information for any purpose unrelated to the administration of the Contracts without the prior written consent of the other parties. ARTICLE XI INDEMNIFICATION ss.11.1 Indemnification of Distributor. The Broker-Dealer and the General Agent, jointly and severally, shall indemnify and hold harmless each Equitable Life Company, the Distributor and each person who controls or is associated with an Equitable Life Company or the Distributor within the meaning of such terms under the federal securities laws, and any officer, director, employee or agent of the foregoing, against any and all losses, claims, damages or liabilities, joint or several (including any investigative, legal and other expenses reasonably incurred in connection with, and any amounts paid in settlement of, any action, suit or proceeding or any claim asserted), insofar as such losses, claims, damages or liabilities arise out of or are based upon: a. violation(s) by the Broker-Dealer, the General Agent or an Agent of federal or state securities laws or regulations, insurance laws or regulations, or any rule or requirement of the NASD; b. any unauthorized use of sales or advertising material, any oral or written misrepresentations, or any unlawful sales practices concerning the Contracts, the Equitable Life Companies, the Variable Accounts, the MVA Interests or the Trust, by the Broker-Dealer, the General Agent or an Agent; c. claims by the Agents or other agents or representatives of the General Agent or the Broker-Dealer for commissions or other compensation or remuneration of any type; d. any action or inaction by any clearing broker or broker furnishing similar services through which the Broker-Dealer or the General Agent processes any transaction pursuant to this Agreement; e. any failure on the part of the Broker-Dealer, the General Agent or an Agent to submit Premiums or applications for Contracts or accurate and proper instructions of a Contract owner or prospective owner to the Equitable Life Companies, or to submit the correct amount of a Premium, on a timely basis and in accordance with Sections 4.5 and 4.6 and the rules and procedures of the Equitable Life Companies. -14- f. any failure on the part of the Broker-Dealer, the General Agent, or an Agent to deliver Contracts to purchasers thereof on a timely basis in accordance with Section 4.7 and in accordance with the rules and procedures of the Equitable Life Companies; or g. any other breach by the Broker-Dealer or the General Agent of any provision of this Agreement, including, without limitation, Section 5.1. This indemnification will be in addition to any liability which the Broker-Dealer and the General Agent may otherwise have. ss.11.2 Indemnification of Broker-Dealer and General Agent. The Distributor shall indemnify and hold harmless the Broker-Dealer and the General Agent and each person who controls or is associated with the Broker-Dealer or the General Agent within the meaning of such terms under the federal securities laws, and any officer, director, employee or agent of the foregoing, against any and all losses, claims, damages or liabilities, joint or several (including any investigative, legal and other expenses reasonably incurred in connection with, and any amounts paid in settlement of, any action, suit or proceeding or any claim asserted), to which they or any of them may become subject under any statute or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities arise out of or are based upon negligent, improper, fraudulent or unauthorized acts or omissions. ss.11.3 Notification and Procedures. After receipt by a party entitled to indemnification ("Indemnified Party") under this Article XI of notice of the commencement of any action or threat of such action, if a claim in respect thereof is to be made against any person obligated to provide indemnification under this Article XI ("Indemnifying Party"), such Indemnified Party will notify the Indemnifying Party in writing of the commencement thereof as soon as practicable thereafter, provided that the omission so to notify the Indemnifying Party will not relieve it from any liability under this Article XI, except to the extent that the omission results in a failure of actual notice to the Indemnifying Party and such Indemnifying Party is damaged solely as a result of the failure to give such notice. The Indemnifying Party, upon the request of the Indemnified Party, shall retain counsel reasonably satisfactory to the Indemnified Party to represent the Indemnified Party and any others the Indemnifying Party may designate in such proceeding and shall pay the fees and disbursements of such counsel related to such proceeding. In any such proceeding, any Indemnified Party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party, unless (i) the Indemnifying Party and the Indemnified Party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the Indemnifying Party and the Indemnified Party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. The Indemnifying Party shall not be liable for any settlement of any proceeding effected without its written consent, but if such proceeding is settled with such consent or if final judgment is entered in such proceeding for the plaintiff, the Indemnifying Party shall indemnify the Indemnified Party from and against any loss or liability by reason of such settlement or judgment. -15- ARTICLE XII MISCELLANEOUS ss.12.1 Headings. The headings in this Agreement are included for convenience of reference only and in no way define or delineate any of the provisions hereof or otherwise affect their construction or effect. ss.12.2 Counterparts. This Agreement may be executed in two or more counterparts, each of which taken together shall constitute one and the same instrument. ss.12.3 Severability. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby. ss.12.4 Notices. All notices under this Agreement shall be given in writing and addressed as follows: if to the Distributor, to: EQ Financial Consultants, Inc. 1755 Broadway New York, New York 10019 Attention: President if to the Broker-Dealer or the General Agent, to: __________________________________ __________________________________ __________________________________ Attention: _______________________ or to such other address as such party may hereafter specify in writing. Each such notice shall be either hand delivered or transmitted by certified United States mail, return receipt requested, and shall be effective upon delivery. ss.12.5 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, excluding its conflict of laws provisions. This Agreement shall also be subject to the rules of the NASD, including its By-Laws; and all disputes arising hereunder shall be submitted to arbitration under the Code of Arbitration Procedure of the NASD. ss.12.6 Scope of Sales Material References. For purposes of this Agreement, all references to sales, promotional, marketing or advertising material shall include, without limitation, advertisements (such as material published, or designed for use in, a newspaper, magazine or other periodical, radio, television, telephone or tape recording, videotape display, signs or billboards, motion pictures or other public media), sales literature (i.e., any written communication distributed or made generally available to customers or the public, including brochures, circulars, research reports, market letters, form letters, seminar texts, reprints or excerpts of any other advertisement, sales literature or published article), and educational or training materials or other communications distributed or made generally available to some or all Agents or employees of the Broker-Dealer or the General Agent. -16- ss.12.7 Noninterference with Employees, Agents, and Clients. a. During the term of this Agreement, neither the Broker-Dealer nor the General Agent shall hire or solicit, as an employee, agent, consultant, registered representative or other sales representative, or in any other capacity, any individual who has been, at any time within six months prior to such hiring or solicitation, an employee, agent or registered representative of the Distributor or any affiliate of the Distributor. Violation of this provision shall constitute a material breach of this Agreement. b. During the term of this Agreement, the Broker-Dealer and the General Agent agree not to solicit knowingly any person who is a client of a member of the career agency force of Equitable (an "Equitable agent"). If, while servicing a client, the Broker-Dealer or General Agent ascertains that the person is also a client of an active Equitable agent, the Broker-Dealer or General Agent will refer the client to the Equitable agent and, if possible, notify the Equitable agent of the person's interest. The Broker-Dealer and the General Agent agree that no commission will be payable under this Agreement in connection with any sale of a Contract which involves a violation of the foregoing rules regarding clients of Equitable agents. In the event that an Agent and an Equitable agent each claim the same person as a client, the client's desires will be taken into consideration in determining the application of this Section 12.7(b). ss.12.8 No Waiver of Rights. The rights, remedies and obligations contained in this Agreement are cumulative and are in addition to any and all rights, remedies and obligations, at law or in equity, which the parties hereto are entitled to under state and federal laws. Failure of any party to insist upon strict compliance with any of the conditions of this Agreement shall not be construed as a waiver of any of the conditions, but the same shall remain in full force and effect. No waiver of any of the provisions of this Agreement shall be deemed, or shall constitute, a waiver of any other provisions, whether or not similar, nor shall any waiver constitute a continuing waiver. ss.12.9 Scope of Agreement. All Schedules and Exhibits to this Agreement are part of the Agreement. ARTICLE XIII SALES BY OR THROUGH BANKS ss.13.1 Applicability of Article; Supplement Definitions. This Article XIII applies only if the Broker-Dealer or the General Agent distributes Contracts in one or more of the following circumstances (collectively referred to as "Bank-Related Sales"): (i) on the premises of a bank, trust company, savings bank, savings and loan association, or other institution (a) the deposits of which are insured by the Federal Deposit Insurance Corporation ("FDIC") or (b) which is chartered, organized, regulated or supervised under the authority of any federal or state bank or similar financial institution regulatory agency or authority (collectively, "Banks"); (ii) by means of personal, telephone, mail or other oral or written contacts originating from the premises of a Bank; or (iii) to persons which are referred to the Broker-Dealer or General Agent by a Bank. For purposes of this Article XIII, the term "Bank Regulatory Requirements" shall include (i) the Interagency Statement on Retail Sales of Non-deposit Products (February 15, 1994), published by the U.S. Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the FDIC and the U.S. Office of Thrift Supervision, as supplemented or amended from time to time, and (ii) any federal or state laws, regulations, orders, directives, circulars, agreements in writing, memoranda, commitments in writing or other legal or supervisory requirements which may be administered, adopted, promulgated, enforced or applied with respect to any Bank-Related Sales under this Agreement (regardless of whether any such requirement is of general or specific applicability) by any federal or state bank or financial institution regulatory agency or authority. -17- ss.13.2 Written Agreement for Bank-Related Sales. The authorization to distribute Contracts which is conferred on the Broker-Dealer and the General Agent under Article II shall not include Bank-Related Sales unless such activities are conducted under the terms of a written agreement with each and any Bank where such Bank-Related Sales will take place which complies in all respects with applicable Bank Regulatory Requirements. The Broker-Dealer or General Agent shall, upon request of the Distributor, provide the Distributor with a copy of each such written agreement. The Broker-Dealer and the General Agent shall have exclusive responsibility for ensuring strict compliance with the terms and conditions of any such written agreement. ss.13.3 Compliance with Bank Regulatory Requirements. The Broker-Dealer and the General Agent each represent and warrant, on behalf of itself and the Agents, that it is in compliance with all Bank Regulatory Requirements applicable to third parties engaged in Bank-Related Sales. The Broker-Dealer and the General Agent shall have exclusive responsibility for ensuring strict compliance with all Bank Regulatory Requirements with respect to any Bank-Related Sales under this Agreement. The Broker-Dealer and the General Agent each undertake to keep the Distributor promptly informed of any amendments, supplements or changes to applicable Bank Regulatory Requirements which may affect this Agreement. ss.13.4 Production by Distributor of Certain Books and Records. The Distributor agrees to provide to the Broker-Dealer or the General Agent, upon request, any books and records relating to Contracts distributed through Bank-Related Sales for purposes of making such records available for inspection by any federal or state bank or financial institution regulatory agency with jurisdiction over such Bank-Related Sales, or over a Bank through which such sales are conducted. The Distributor's agreement under this Section 13.4 shall not constitute or represent in any respect an admission or acknowledgment by Distributor that such federal or state bank or financial institution regulatory authority has any jurisdiction over Distributor or the activities of the Distributor, and the Distributor expressly disclaims any such jurisdiction. ss.13.5 Prospectuses and Applications Provided by Distributor; Sales Materials. During the term of this Agreement, the Distributor will provide the Broker-Dealer and the General Agent, without charge, with as many copies of the Contract Prospectus(es), Trust Prospectus and applications for the Contracts, containing those disclosures specifically required by any applicable Bank Regulatory Requirements with respect to products not insured by the FDIC and similar matters, as the Broker-Dealer or the General Agent reasonably may request. The Broker-Dealer and the General Agent shall have exclusive responsibility for ensuring the use and delivery of such materials, and any sales materials described in Article VI, in compliance with applicable Bank Regulatory Requirements. The terms of Article VI otherwise shall govern the furnishing, use and return of such documents and materials. ss.13.6 Supplemental Indemnification of Distributor. In addition to the indemnifications provided to the Distributor under Section 11.1, the Broker-Dealer and the General Agent, jointly and severally, shall indemnify each person entitled to indemnification under Section 11.1 for any losses, claims, damages or liabilities (as described in Section 11.1) arising out of or based on violations or failures to comply with any Bank Regulatory Requirements. The provisions of Article VI otherwise shall govern the terms and procedures with respect to any indemnifications provided under this Section 13.6. ss.13.7 Construction With Other Provisions. The provisions of this Article XIII are in addition to the other terms and conditions of this Agreement. In the event of any inconsistency between the provisions of this Article XIII and any other term or condition of this Agreement, the requirements of this Article XIII and not such other term or condition, shall govern. -18- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective duly authorized officers. ___________________________________ [Broker-Dealer] By: _______________________________ Title: ___________________________________ [General Agent] By: _______________________________ Title: Agreed to and accepted as of the _______ day of _________________, 199_____ in New York, New York EQ FINANCIAL CONSULTANTS, INC. By: __________________________________ Title: _________________________________ L5S_1.DOC/27424 MTX_1.DOC/29589 OPU_1.DOC/32034 10/95 octsa.doc -19- EXHIBIT A GENERAL LETTER OF RECOMMENDATION The General Agent hereby certifies to the Equitable Life Companies that all the following requirements have been fulfilled in conjunction with the submission of appointment papers for all applicants as agents of an Equitable Life Company submitted by the General Agent, as listed on Schedule A. The General Agent will, upon request, forward proof of compliance with same to the Equitable Life Companies in a timely manner. 1. We have made a thorough and diligent inquiry and investigation relative to each applicant's identity, residence and business reputation and declare that each applicant is personally known to us, has been examined by us, is known to be of good moral character, has a good business reputation, is reliable, is financially responsible and is worthy of a license. Each individual is trustworthy, competent and qualified to act as an agent for the Equitable Life Companies and to hold himself or herself out in good faith to the general public. We vouch for each applicant. 2. We have on file a Form U-4 which was completed by each applicant. We have fulfilled all the necessary investigative requirements for the registration of each applicant as a registered representative through our NASD member firm, and each applicant is presently registered as an NASD registered representative. The above information in our files indicates no fact or condition which would disqualify the applicant from receiving a license, and all the findings of all investigative information is favorable. 3. We certify that all educational requirements have been met for the specific state in which each applicant is requesting a license and that all such persons have fulfilled the appropriate examination, education and training requirements. 4. If the applicant is required to submit his or her picture, signature or securities registration in the state in which he or she is applying for a license, we certify that those items forwarded to the Equitable Life Companies are those of the applicant and the securities registration is a true copy of the original. 5. We hereby warrant that the applicant is not applying for a license with an Equitable Life Company in order to place insurance chiefly or solely on his or her life or property or on the lives, property or liability of relatives or associates. 6. We certify that each applicant will receive close and adequate supervision, and that we will make inspection when needed of any or all risks written by these applicants, to the end that the insurance interest of the public will be properly protected. -i- 7. We will not permit any applicant to transact insurance as an agent until duly licensed therefor. No applicants have been given a contract or furnished supplies, nor have any applicants been permitted to write or solicit business or to act as an agent in any capacity, and they will not be so permitted until the certificate of authority or license applied for is received. This certification is given and agreed to as of the day and year first above written. ___________________________________ [Broker-Dealer] By: _______________________________ ___________________________________ [General Agent] By: _______________________________ -ii- SCHEDULE A APPLICANTS FOR APPOINTMENT AS AGENTS 1)_________________________________ 2)_________________________________ 3)_________________________________ 4)_________________________________ 5)_________________________________ ___________________________________ [Broker-Dealer] By: _______________________________ ___________________________________ [General Agent] By: _______________________________ -i- EXHIBIT B SPECIAL PROCEDURES FOR INITIAL PREMIUM TRANSMITTAL As indicated in Section 4.5, an initial Premium which is not accompanied by a properly completed application for a Contract may be accepted by an Equitable Life Company if the Broker-Dealer and the General Agent have accepted, agreed to and complied with the procedures set forth in this Exhibit B. Wire Transmittal and Submission of Application 1. The Broker-Dealer will cause the initial Premium to be paid to the appropriate Equitable Life Company by wire transfer. 2. The wire transfer will be accompanied by a simultaneous telephone facsimile transmission of application information in a form prescribed by the Equitable Life Companies. 3. Any cost associated with the correction of an error made in the investment of an initial Premium shall be borne by the Broker-Dealer, unless such error results directly from any improper action of an Equitable Life Company. 4. If no properly completed application for a Contract is received by an Equitable Life Company within the period of time specified by it, and the initial Premium is therefore returned to the proposed owner of the Contract, the General Agent shall promptly repay to the Distributor, upon request from the Distributor, any and all compensation received by the General Agent, based on the Premium paid into the Contract, and shall pay any loss incurred as a result of the Premium being returned, unless such loss results directly from any improper action of an Equitable Life Company. The procedures set forth in this Exhibit B, as further described in the Contract Prospectus and as modified from time to time by the Equitable Life Companies, are hereby accepted and agreed to as of the day and year first above written. ___________________________________ [Broker-Dealer] By: _______________________________ ___________________________________ [General Agent] By: _______________________________ -i- SCHEDULE I EXCLUDED CONTRACTS Contracts made available through the Income Management Group of Equitable, including the following, are not covered by this Agreement: NQ Accumulator Rollover IRA Assured Growth Plan NQ Assured Payment Plan (Certain Period and Life Annuity) NQ Assured Payment Plan (Certain Period Only) -i- EX-99.1A5AIPOLICY 4 POLICY NO. 94-300 (EVLICO) (IL PLUS) [EQUITABLE VARIABLE LIFE INSURANCE COMPANY LOGO] VARIABLE LIFE INSURANCE POLICY INSURED PERSON MERV S. BUCKS 1 POLICY OWNER MERV S. BUCKS 1 FACE AMOUNT OF INSURANCE $50,000 DEATH BENEFIT OPTION A (SEE PAGE 6) POLICY NUMBER 60 231 045 - -------------------------------------------------------------------------------- WE AGREE to pay the Insurance Benefit of this policy and to provide its other benefits and rights in accordance with its provisions. FLEXIBLE PREMIUM VARIABLE LIFE POLICY This is a flexible premium variable life insurance policy. You can, within limits: o increase or decrease the Face Amount of Insurance; o make premium payments at any time and in any amount; o change the death benefit option; o change the allocation of net premiums and deductions among your investment options; and o transfer amounts among your investment options. THE DEATH BENEFIT IS GUARANTEED TO THE INSURED'S ATTAINED AGE 100 IF THE DEATH BENEFIT IS ALWAYS OPTION A OR TO THE LATER OF ATTAINED AGE 80 OR 15 YEARS FROM ISSUE IF THE DEATH BENEFIT IS EVER AN OPTION B, SUBJECT TO PREMIUMS HAVING BEEN PAID IN ACCORDANCE WITH THE DEATH BENEFIT GUARANTEE PROVISION DESCRIBED IN THE POLICY. All of these rights and benefits are subject to the terms and conditions of this policy. All requests for policy changes are subject to our approval and may require evidence of insurability. We will put your net premiums into your Policy Account. You may then allocate them to one or more investment divisions of our Separate Account(s) (SA) and to our Guaranteed Interest Division (GID). THE PORTION OF YOUR POLICY ACCOUNT THAT IS IN AN INVESTMENT DIVISION OF OUR SA WILL VARY UP OR DOWN DEPENDING ON THE UNIT VALUE OF SUCH INVESTMENT DIVISION, WHICH IN TURN DEPENDS ON THE INVESTMENT PERFORMANCE OF THE SECURITIES HELD BY THAT SA DIVISION. THERE ARE NO MINIMUM GUARANTEES AS TO SUCH PORTION OF YOUR POLICY ACCOUNT. The portion of your Policy Account that is in our GID will accumulate, after deductions, at rates of interest we determine. Such rates will not be less than 4% a year. THE AMOUNT AND DURATION OF THE DEATH BENEFIT MAY BE VARIABLE OR FIXED AS DESCRIBED IN THIS POLICY. This is a non-participating policy. RIGHT TO EXAMINE POLICY. You may examine this policy and if for any reason you are not satisfied with it, you may cancel it by returning this policy with a written request for cancellation to our Administrative Office by the 10th day after you receive it. If you do this, we will refund the premiums that were paid on this policy. /s/ Molly K. Heines /s/ Joseph J. Melone Molly K. Heines, Joseph J. Melone, Vice President & Secretary Chairman & Chief Executive Officer No. 94-300 CONTENTS - -------- Policy Information 3 Table of Maximum Monthly Charges for Benefits 4 Those Who Benefit from this Policy 5 The Insurance Benefit We Pay 5 Changing the Face Amount of Insur- ance or the Death Benefit Option 7 The Premiums You Pay 7 Your Policy Account and How it Works 9 Your Investment Options 10 The Value of Your Policy Account 11 The Cash Surrender Value of this Policy 12 How a Loan Can Be Made 13 Our Separate Account(s) (SA) 14 Our Annual Report to You 15 How Benefits are Paid 15 Other Important Information 16 IN THIS POLICY: - -------------- "We," "our," and "us" mean Equitable Variable Life Insurance Company. "You" and "your" mean the owner of this policy at the time an owner's right is exercised. Unless otherwise stated, all references to interest in this policy are effective annual rates of interest. Attained age means age on the birthday nearest to the beginning of the current policy year. ADMINISTRATIVE OFFICE - --------------------- The address of our Administrative Office is shown on Page 3. You should send premiums and correspondence to that address unless instructed otherwise. Copies of the application for this policy and any additional benefit riders are attached to the policy. INTRODUCTION The premiums you pay, after deductions are made in accordance with the Table of Expense Charges in the Policy Information section, are put into your Policy Account. Amounts in your Policy Account are allocated at your direction to one or more investment divisions of our SA and to our GID. The investment divisions of our SA invest in securities and other investments whose value is subject to market fluctuations and investment risk. There is no guarantee of principal or investment experience. Our GID earns interest at rates we declare in advance of each policy year. The rates are guaranteed for each policy year. The principal, after deductions, is also guaranteed. If death benefit Option A is in effect, the death benefit is the Face Amount of Insurance, and the amount of the death benefit is fixed except when it is a percentage of your Policy Account. If death benefit Option B is in effect, the death benefit is the Face Amount of Insurance plus the amount in your Policy Account. The amount of the death benefit is variable. Under either option, the death benefit will never be less than a percentage of your Policy Account as stated on Page 6. The death benefit is guaranteed to the Insured's attained age 100 if the Death Benefit is always Option A or to the later of attained age 80 or 15 years from issue if the Death Benefit is ever an Option B, subject to premiums having been paid in accordance with the Death Benefit Guarantee provision described in the policy. We make monthly deductions from your Policy Account to cover the cost of the benefits provided by this policy and the cost of any benefits provided by riders to this policy. If you give up this policy for its Net Cash Surrender Value, reduce the Face Amount of Insurance, or if this policy ends without value at the end of the grace period, we may deduct a surrender charge from your Policy Account. This is only a summary of what this policy provides. You should read all of it carefully. Its terms govern your rights and our obligations. No. 94-300 Page 2 POLICY INFORMATION INSURED PERSON MERV S. BUCKS 1 POLICY OWNER MERV S. BUCKS 1 FACE AMOUNT OF INSURANCE $50,000 DEATH BENEFIT OPTION A (SEE PAGE 6) POLICY NUMBER 60 231 045 SEPARATE ACCOUNT FP BENEFICIARY AS DESIGNATED IN APPLICATION REGISTER DATE FEB 2, 1996 ISSUE AGE 35 DATE OF ISSUE FEB 5, 1996 SEX MALE INSURED PERSON'S STATE OF RESIDENCE SPECIMEN PREFERRED NON-TOBACCO USER AN INITIAL PREMIUM PAYMENT OF $134.21 IS DUE ON OR BEFORE DELIVERY OF THE POLICY. THE PLANNED PERIODIC PREMIUM OF $25,000.00 IS PAYABLE QUARTERLY. PREMIUM PAYMENTS ARE FOR THE INSURANCE BENEFIT AND ANY ADDITIONAL BENEFIT RIDERS LISTED BELOW. SEE PAGE 3 -- CONTINUED FOR TABLE OF SPECIFIED PREMIUMS. THE PLANNED PERIODIC PREMIUMS SHOWN ABOVE MAY NOT BE SUFFICIENT TO CONTINUE THE POLICY AND LIFE INSURANCE COVERAGE IN FORCE TO THE FINAL POLICY DATE, WHICH IS THE POLICY ANNIVERSARY NEAREST THE INSURED PERSON'S 100TH BIRTHDAY. THE PERIOD FOR WHICH THE POLICY AND COVERAGE WILL CONTINUE IN FORCE WILL DEPEND ON: (1) THE AMOUNT, TIMING AND FREQUENCY OF PREMIUM PAYMENTS; (2) CHANGES IN THE FACE AMOUNT OF INSURANCE AND THE DEATH BENEFIT OPTIONS; (3) CHANGES IN THE INTEREST RATES CREDITED TO OUR GID AND IN THE INVESTMENT PERFORMANCE OF THE INVESTMENT DIVISIONS OF OUR SA; (4) CHANGES IN THE MONTHLY COST OF INSURANCE DEDUCTIONS FROM THE POLICY ACCOUNT FOR THIS POLICY AND ANY BENEFITS PROVIDED BY RIDERS TO THIS POLICY; AND (5) LOAN AND PARTIAL NET CASH SURRENDER VALUE WITHDRAWAL ACTIVITY. 94-300-3 PAGE 3 (CONTINUED ON NEXT PAGE) POLICY INFORMATION CONTINUED -- POLICY NUMBER 60 231 045 ------ TABLE OF SPECIFIED PREMIUMS ------ BENEFITS MONTHLY PREMIUM PREMIUM PERIOD - -------- --------------- -------------- BASIC LIFE INSURANCE $44.86 65 YEARS 94-300-3 PAGE 3 -- CONTINUED POLICY INFORMATION CONTINUED -- POLICY NUMBER 60 231 045 ------ TABLE OF AUTOMATIC EXPENSE CHARGES ------ DEDUCTIONS FROM PREMIUM PAYMENTS: CHARGE FOR APPLICABLE TAXES (OTHER THAN TAXES DISCUSSED ON PAGE 12): 2.500% OF EACH PREMIUM PAYMENT. THIS AMOUNT IS SUBTRACTED FROM EACH PREMIUM PAYMENT. WE RESERVE THE RIGHT TO CHANGE THIS PERCENTAGE TO CONFORM TO CHANGES IN THE LAW OR IF THE INSURED PERSON CHANGES RESIDENCE. PREMIUM CHARGE: 6.00% OF EACH PREMIUM PAYMENT. WE RESERVE THE RIGHT TO CHANGE THIS CHARGE BUT IT WILL NEVER BE MORE THAN 6%. DEDUCTIONS FROM YOUR POLICY ACCOUNT: INITIAL ADMINISTRATIVE CHARGE: $30.00 IS DEDUCTED AT THE BEGINNING OF EACH POLICY MONTH DURING THE FIRST TWO POLICY YEARS. SUBSEQUENT YEARS ADMINISTRATIVE CHARGE: $8.00 IS DEDUCTED AT THE BEGINNING OF EACH POLICY MONTH DURING EACH POLICY YEAR AFTER THE SECOND POLICY YEAR. WE RESERVE THE RIGHT TO CHANGE THIS CHARGE BUT IT WILL NEVER BE MORE THAN $10.00 A MONTH. CHANGES WILL BE AS DESCRIBED IN "CHANGES IN POLICY COST FACTORS" ON PAGE 16. 94-300-3-R PAGE 3 -- CONTINUED POLICY INFORMATION CONTINUED -- POLICY NUMBER 60 231 045 ------TABLE OF MAXIMUM SURRENDER CHARGES ------ FOR THE INITIAL FACE AMOUNT BEGINNING OF BEGINNING OF POLICY POLICY YEAR CHARGE YEAR CHARGE ---- ------ ---- ------ 1 $450.30 9 $300.30 2 450.30 10 296.13 3 450.30 11 246.08 4 447.80 12 196.03 5 417.80 13 145.98 6 387.80 14 95.93 7 357.80 15 45.88 8 327.80 16 AND LATER 0.00 A SURRENDER CHARGE WILL BE SUBTRACTED FROM YOUR POLICY ACCOUNT IF THIS POLICY IS GIVEN UP FOR ITS NET CASH SURRENDER VALUE OR IF THIS POLICY TERMINATES WITHIN THE FIRST FIFTEEN POLICY YEARS. THE MAXIMUM CHARGE IN THE FIRST POLICY MONTH OF EACH POLICY YEAR IS SHOWN IN THE TABLE ABOVE (SUBJECT TO ANY APPLICABLE LIMITATIONS IMPOSED BY THE INVESTMENT COMPANY ACT OF 1940). AFTER THE THIRD POLICY YEAR, THE MAXIMUM CHARGE IN ANY OTHER POLICY MONTH WILL BE BASED ON THE NUMBER OF POLICY MONTHS SINCE THE BEGINNING OF THE POLICY YEAR. THIS TABLE ASSUMES NO FACE AMOUNT INCREASES. SEE PAGE 12 FOR A DESCRIPTION OF CHANGES TO MAXIMUM SURRENDER CHARGES FOR FACE AMOUNT INCREASES. IF THE FACE AMOUNT OF INSURANCE IS REDUCED WITHIN THE FIRST FIFTEEN POLICY YEARS, A PRO RATA SHARE OF THE APPLICABLE SURRENDER CHARGE AT THAT TIME MAY BE DEDUCTED FROM YOUR POLICY ACCOUNT. SEE PAGE 12 FOR A DESCRIPTION OF THE PRO RATA SURRENDER CHARGE. *****ADMINISTRATIVE OFFICE: EQUITABLE VARIABLE LIFE INSURANCE COMPANY***** NEW YORK SERVICE CENTER 1755 BROADWAY, 2ND FLOOR NEW YORK, NY 10020 94-300-3 PAGE 3 -- CONTINUED POLICY INFORMATION CONTINUED -- POLICY NUMBER 60 231 045 ------ TABLE OF MAXIMUM MONTHLY CHARGES FOR BENEFITS ------ MONTHLY DEDUCTION BENEFITS FROM POLICY ACCOUNT PERIOD -------- ------------------- ------ BASIC COST OF INSURANCE MAXIMUM MONTHLY COST OF INSURANCE RATE (SEE PAGE 4 -- CONTINUED) TIMES THOUSANDS OF NET AMOUNT AT RISK (SEE PAGE 9) 65 YEARS DEATH BENEFIT GUARANTEE $0.50 65 YEARS 94-300-4 PAGE 4 (CONTINUED ON NEXT PAGE) POLICY INFORMATION CONTINUED -- POLICY NUMBER 60 231 045 ------ TABLE OF GUARANTEED MAXIMUM MONTHLY COST OF INSURANCE RATES ------ PER $1,000 OF NET AMOUNT AT RISK (SEE PAGE 9) FOR BASIC LIFE INSURANCE INSURED INSURED PERSON'S PERSON'S ATTAINED MONTHLY ATTAINED MONTHLY AGE RATE AGE RATE --- ---- --- ---- 35 $0.14083 70 $2.93250 36 0.14750 71 3.30167 37 0.15667 72 3.61750 38 0.16667 73 4.04167 39 1.17833 74 4.52000 40 0.19083 75 5.03667 41 0.20583 76 5.59000 42 0.22083 77 6.17500 43 0.23833 78 6.78667 44 0.25583 79 7.44000 45 0.27667 80 8.16167 46 0.29917 81 8.97250 47 0.32333 82 9.89750 48 0.34917 83 10.95167 49 0.37833 84 12.11833 50 0.41000 85 13.37417 51 0.44667 86 14.69833 52 0.48917 87 16.08083 53 0.53667 88 17.49667 54 0.59250 89 18.96583 55 0.65333 90 20.51167 56 0.72167 91 22.16500 57 0.79417 92 23.98667 58 0.87250 93 26.06583 59 0.96083 94 28.78417 60 1.05917 95 32.81750 61 1.16833 96 39.64250 62 1.29417 97 53.06583 63 1.43667 98 83.33250 64 1.59833 99 83.33250 65 1.77750 66 1.97083 67 2.18083 68 2.40583 69 2.65333 94-300-4 PAGE 4 -- CONTINUED - -------------------------------------------------------------------------------- THOSE WHO BENEFIT FROM THIS POLICY OWNER. The owner of this policy is the insured person unless otherwise stated in the application, or later changed. As the owner, you are entitled to exercise all the rights of this policy while the insured person is living. To exercise a right, you do not need the consent of anyone who has only a conditional or future ownership interest in this policy. BENEFICIARY. The beneficiary is as stated in the application, unless later changed. The beneficiary is entitled to the Insurance Benefit of this policy. One or more beneficiaries for the Insurance Benefit can be named in the application. If more than one beneficiary is named, they can be classed as primary or contingent. If two or more persons are named in a class, their shares in the benefit can be stated. The stated shares in the Insurance Benefit will be paid to any primary beneficiaries who survive the insured person. If no primary beneficiaries survive, payment will be made to any surviving contingent beneficiaries. Beneficiaries who survive in the same class will share the Insurance Benefit equally, unless you have made another arrangement with us. If there is no designated beneficiary living at the death of the insured person, we will pay the Insurance Benefit to the insured person's surviving children in equal shares. If none survive, we will pay the insured person's estate. CHANGING THE OWNER OR BENEFICIARY. While the insured person is living, you may change the owner or beneficiary by written notice in a form satisfactory to us. You can get such a form from our agent or by writing to us at our Administrative Office. The change will take effect on the date you sign the notice. But, it will not apply to any payment we make or other action we take before we receive the notice. If you change the beneficiary, any previous arrangement you made as to a payment option for benefits is cancelled. You may choose a payment option for the new beneficiary in accordance with "How Benefits Are Paid" on Page 15. ASSIGNMENT. You may assign this policy, if we agree. In any event, we will not be bound by an assignment unless we have received it in writing at our Administrative Office. Your rights and those of any other person referred to in this policy will be subject to the assignment. We assume no responsibility for the validity of an assignment. An absolute assignment will be considered as a change of ownership to the assignee. - -------------------------------------------------------------------------------- THE INSURANCE BENEFIT WE PAY We will pay the Insurance Benefit of this policy to the beneficiary when we receive at our Administrative Office (1) proof satisfactory to us that the insured person died before the Final Policy Date; and (2) all other requirements we deem necessary before such payment may be made. The Insurance Benefit includes the following amounts, which we will determine as of the date of the insured person's death: o the death benefit described on Page 6; o PLUS any other benefits then due from riders to this policy; o MINUS any policy loan, lien and accrued interest; o MINUS any overdue deductions from your Policy Account if the insured person dies during a grace period. We will add interest to the resulting amount in accordance with applicable law. We will compute the interest at a rate we determine, but not less than the greater of (a) the rate we are paying on the date of payment under the Deposit Option on Page 15, or (b) the rate required by any applicable law. Payment of the Insurance Benefit may also be affected by other provisions of this policy. See Pages 16 and 17, where we specify our right to contest the policy, the suicide exclusion, and what happens if age or sex has been misstated. Special exclusions or limitations (if any) are listed in the Policy Information section. 94-300-5 Page 5 DEATH BENEFIT. The death benefit at any time will be determined under either Option A or Option B below, whichever you have chosen and is in effect at such time. Under Option A, the death benefit is the greater of (a) the Face Amount of Insurance; or (b) a percentage (see Table below) of the amount in your Policy Account. Under this option, the amount of the death benefit is fixed, except when it is determined by such percentage. Under Option B, the death benefit is the greater of (a) the Face Amount of Insurance plus the amount in your Policy Account; or (b) a percentage (see Table below) of the amount in your Policy Account. Under this option the amount of the death benefit is variable. The percentages referred to above are the percentages from the following table for the insured person's age (nearest birthday) at the beginning of the policy year of determination. TABLE OF PERCENTAGES For ages not shown, the percentages shall decrease by a ratable portion for each full year INSURED INSURED PERSON'S AGE PERCENTAGE PERSON'S AGE PERCENTAGE - ------------ ---------- ------------ ---------- 40 and under 250% 65 120% 45 215 70 115 50 185 75 thru 95 105 55 150 100 100 60 130 Section 7702 of the Internal Revenue Code of 1986, as amended (i.e., the "Code"), gives a definition of life insurance which limits the amounts that may be paid into a life insurance policy relative to the benefits it provides. Even if this policy states otherwise, at no time will the "future benefits" under this policy be less than an amount such that the "premiums paid" do not exceed the Code's "guideline premium limitations". We may adjust the amount of premium paid to meet these limitations. Also, at no time will the "death benefit" under the policy be less than the "applicable percentage" of the "cash surrender value" of the policy. The above terms are as defined in the Code. In addition, we may take certain actions, described here and elsewhere in the policy, to meet the definitions and limitations in the Code, based on our interpretation of the Code. Please see "Policy Changes -- Applicable Tax Law" for more information. DEATH BENEFIT GUARANTEE. Subject to the conditions set forth below, the death benefit of this policy is guaranteed if the sum of premium payments accumulated at 4%, less any partial withdrawals accumulated at 4%, is at least equal to the sum of the Specified Premiums (shown on Page 3 -- Continued) accumulated at 4%, and any outstanding loan and accrued loan interest does not exceed the cash surrender value. Certain policy changes after issue will change the Specified Premiums accordingly. The death benefit is guaranteed to Insured's attained age 100 if the Death Benefit is always Option A, or the later of the Insured's attained age 80 or 15 years from issue if the Death Benefit is ever Option B. MATURITY BENEFIT. If the Insured person is living on the Final Policy Date defined in the Policy Information section, we will pay you the amount in your Policy Account on that date minus any policy loan, liens and accrued interest. This policy will then end. 94-300-5 Page 6 - -------------------------------------------------------------------------------- CHANGING THE FACE AMOUNT OF INSURANCE OR THE DEATH BENEFIT OPTION You may change the death benefit option or the Face Amount of Insurance by written request to us at our Administrative Office, subject to our approval and the following: 1. At any time after the first policy year while this policy is in force, you may ask us to increase the Face Amount of Insurance if you provide evidence satisfactory to us of the insurability of the insured person. If you request an increase and the rating class of the insured person on the date of the increase is higher, a separate policy will be issued for the amount of the increase. Any increase you ask for must be at least $10,000. There is a charge for such increase of $1.50 for each $1,000 of insurance, but not more than $240.00 per increase. We will deduct the charge from your Policy Account as of the date the increase takes effect. Such deduction will be made in accordance with the "Allocations" provision on Page 10. If you increase the face amount, an additional fifteen year surrender charge may apply to that increase if any or all of that increase is surrendered before the end of the fifteenth year from the effective date of increase. 2. At any time after the second policy year while this policy is in force, you may ask us to reduce the Face Amount of Insurance but not to less than the minimum amount for which we would then issue this policy under our rules. Any such reduction in the Face Amount of Insurance may not be less than $10,000. If you do this before the end of the fifteenth policy year or before the end of the fifteenth year following an increase in the face amount, we may deduct from your Policy Account a pro rata share of the applicable surrender charge (see Page 12). Reductions will first be applied against the most recent increase in the Face Amount of Insurance. They will then be applied to prior increases in the Face Amount of Insurance in the reverse order in which such increases took place, and then to the original Face Amount of Insurance. 3. At any time while this policy is in force, you can change your death benefit option. If you ask us to change from Option A to Option B, we will decrease the Face Amount of Insurance by the amount in your Policy Account on the date the change takes effect. However, we reserve the right to decline to make such change if it would reduce the Face Amount of Insurance below the minimum amount for which we would then issue this policy under our rules. We also reserve the right to request evidence of insurability for a change to Option B. If you ask us to change from Option B to Option A, we will increase the Face Amount of Insurance by the amount in your Policy Account on the date the change takes effect. Such decreases and increases in the Face Amount of Insurance are made so that the death benefit remains the same on the date the change takes effect. 4. The change will take effect at the beginning of the policy month that coincides with or next follows the date we approve your request. 5. We reserve the right to decline to make any change that we determine would cause this policy to fail to qualify as life insurance under applicable tax law as interpreted by us (see Page 16). 6. You may ask for a change by completing an application for change, which you can get from our agent or by writing to us at our Administrative Office. A copy of your application for change will be attached to the new Policy Information section that we will issue when the change is made. The new section and the application for change will become a part of this policy. We may require you to return this policy to our Administrative Office to make a policy change. - -------------------------------------------------------------------------------- THE PREMIUMS YOU PAY The initial premium payment shown in the Policy Information section is due on or before delivery of this policy. No insurance will take effect before the initial premium payment is paid. Other premiums may be paid at any time while this policy is in force and before the Final Policy Date at our Administrative Office. We will send premium notices to you for the planned periodic premium shown in the Policy Information section. You may skip planned periodic premium payments. However, this may adversely affect the duration of the death benefit and your policy's values. We will assume that any payment you make to us is a premium payment, unless you tell us in writing that it is a loan repayment. 94-300-7 Page 7 LIMITS. Each premium payment after the initial one must be at least $100. We may increase this minimum limit 90 days after we send you written notice of such increase. We reserve the right to limit the amount of any premium payments you may make which are in excess of the Specified Premiums shown on Page 3 -- Continued. We also reserve the right not to accept premium payments or to return excess amounts (in a policy year) that we determine would cause this policy to fail to qualify as life insurance under applicable tax law as interpreted by us (see Page 16). GRACE PERIOD. At the beginning of each policy month, the Net Cash Surrender Value will be compared to the total monthly deductions described on Page 9. If the Net Cash Surrender Value is sufficient to cover the total monthly deductions, the policy is not in default. If the Net Cash Surrender Value at the beginning of any policy month is less than such deductions for that month we will perform the following calculations to determine whether the policy is in default: 1. Determine the Specified Premium fund. The Specified Premium fund for any policy month is the accumulation of all the specified premiums shown on Page 3 -- Continued up to that month at 4% interest. 2. Determine the actual premium fund. The actual premium fund for any policy month is the accumulation of all the premiums received at 4% interest minus all withdrawals accumulated at 4% interest. 3. If the result in Step 2 is greater than or equal to the result in Step 1, and any loan and accrued loan interest does not exceed the Cash Surrender Value, the policy is not in default. The death benefit guarantee will be in effect and monthly deductions in excess of the Policy Account will be waived. 4. If the result of Step 2 is less than the result in Step 1, or if the result of Step 2 is greater than or equal to the result in Step 1 and any loan and accrued loan interest exceeds the Cash Surrender Value, the policy is in default as of the first day of this policy month. This is the date of default. If the policy has ever been under Death Benefit Option B and a death benefit guarantee does not apply (see Death Benefit Guarantee provision) the calculations in Steps 1.-4. above will not be performed. In that case, if the Net Cash Surrender Value at the beginning of any policy month is less than the monthly deductions for that month, the policy is in default as of the first day of such policy month. If the policy is in default, we will send you and any assignee on our records at last known addresses written notice stating that a grace period of 61 days has begun as of the date of default. The notice will also state the amount of payment that is due. The payment required will not be more than an amount sufficient to increase the Net Cash Surrender Value to cover all monthly deductions for 3 months calculated assuming no interest or investment performance were credited to or charged against the Policy Account and no policy changes were made. If we do not receive such amount at our Administrative Office before the end of the grace period, we will then (1) withdraw and retain the entire amount in your Policy Account; and (2) send a written notice to you and any assignee on our records at last known addresses stating that this policy has ended without value. If we receive the requested amount before the end of the grace period, but the Net Cash Surrender Value is still insufficient to cover total monthly deductions, we will send a written notice that a new 61-day grace period has begun and request an additional payment. If the insured person dies during a grace period, we will pay the Insurance Benefit as described on Page 5. 94-300-7 Page 8 RESTORING YOUR POLICY BENEFITS. If this policy has ended without value, you may restore policy benefits while the insured person is alive if you: 1. Ask for restoration of policy benefits within 6 months from the end of the grace period; and 2. Provide evidence of insurability satisfactory to us; and 3. Make a required payment. The required payment will not be more than an amount sufficient to cover (i) the monthly administrative charges from the date of default to the effective date of restoration; (ii) total monthly deductions for 3 months, calculated from the effective date of restoration; (iii) any excess of the applicable surrender charge on the date of restoration over the surrender charge that was deducted on the date of default; and (iv) the charge for applicable taxes, the premium charge, and any increase in surrender charges associated with this payment. We will determine the amount of this required payment as if no interest or investment performance were credited to or charged against your Policy Account. From the required payment we will deduct the charge for applicable taxes and the premium charge. The policy account on the date of restoration will be equal to the balance of the required payment plus a surrender charge credit. The surrender charge credit will be the surrender charge that was deducted on the date of default, but not greater than the applicable surrender charge as of the effective date of restoration. The effective date of the restoration of policy benefits will be the beginning of the policy month which coincides with or next follows the date we approve your request. We will start to make monthly charges again as of the effective date of restoration. The monthly administrative charges from the date of default to the effective date of restoration will be deducted from the Policy Account as of the effective date of restoration. - -------------------------------------------------------------------------------- YOUR POLICY ACCOUNT AND HOW IT WORKS PREMIUM PAYMENTS. When we receive your premium payments, we subtract the expense charges shown in the table in the Policy Information section and any overdue monthly deductions. We put the balance (the net premium) into your Policy Account as of the date we receive the premium payment at our Administrative Office, and before any deductions from your Policy Account due on that date are made. However, we will put the initial net premium payment into your Policy Account as of the Register Date if it is later than the date of receipt. No premiums will be applied to your Policy Account until the full initial premium payment, as shown on your application, is received at our Administrative Office. MONTHLY DEDUCTIONS. At the beginning of each policy month we make a deduction from your Policy Account to cover monthly administrative charges and to provide insurance coverage. Such deduction for any policy month is the sum of the following amounts determined as of the beginning of that month: o the monthly administrative charges; o the monthly cost of insurance for the insured person; o the monthly cost of any benefits provided by riders to this policy; and o the monthly cost for the Death Benefit Guarantee. The monthly cost of insurance is the sum of a) our current monthly cost of insurance rate times the net amount at risk at the beginning of the policy month divided by $1,000; plus b) any extra charge per $1,000 of Face Amount of Insurance shown in the Policy Information section times the Face Amount of Insurance at the beginning of the policy month divided by $1,000. The net amount at risk at any time is the death benefit minus the amount in your Policy Account at that time. We will determine cost of insurance rates from time to time. Any change in the cost of insurance rates we use will be as described in "Changes in Policy Cost Factors" on Page 16. They will never be more than those shown in the Table of Guaranteed Maximum Cost of Insurance Rates on Page 4 -- Continued. 94-300-9-R Page 9 OTHER DEDUCTIONS. We also make the following other deductions from your Policy Account as they occur: o We deduct a withdrawal charge if you make a partial withdrawal of the Net Cash Surrender Value (see Page 13). o We deduct a surrender charge if, before the end of the fifteenth policy year, you give up this policy for its Net Cash Surrender Value, you reduce the Face Amount of Insurance, or if this policy terminates without value at the end of a grace period (see Page 12). A surrender charge may also apply to such transactions for up to fifteen years following a face amount increase. o We deduct a charge if you increase the Face Amount of Insurance (see Page 7). o We deduct a charge for certain transfers (see below). - -------------------------------------------------------------------------------- YOUR INVESTMENT OPTIONS ALLOCATIONS. This policy provides investment options for the amount in your Policy Account. Amounts put into your Policy Account and deductions from it are allocated to the investment divisions of our SA and to the unloaned portion of our GID at your direction. You specified your initial premium allocation and deduction allocation percentages in your application for this policy, a copy of which is attached to this policy. Unless you change them, such percentages shall also apply to subsequent premium and deduction allocations. However, any amounts which are put into your Policy Account prior to the Allocation Date and which are to be allocated to the investment divisions of our SA will initially be allocated to (and monthly deductions taken from) the Money Market Division of our SA. The Allocation Date is the first business day (see Page 12) twenty calendar days after the date of issue of this policy. On the Allocation Date, any such amounts then in the Money Market Division will be allocated in accordance with the directions contained in your policy application. Allocation percentages must be zero or a whole number not greater than 100. The sum of the premium allocation percentages and of the deduction allocation percentages must each equal 100. You may change such allocation percentages by written notice to our Administrative Office. A change will take effect on the date we receive it at our Administrative Office except for changes received on or prior to the Allocation Date which will take effect on the first business day following the Allocation Date. If we cannot make a monthly deduction on the basis of the deduction allocation percentages then in effect, we will make that deduction based on the proportion that your unloaned value in our GID and your values in the investment divisions of our SA bear to the total unloaned value in your Policy Account. TRANSFERS. At your written request to our Administrative Office, we will transfer amounts from your value in any investment division of our SA to one or more other divisions of our SA or to our GID. Any such transfer will take effect on the date we receive your written request at our Administrative Office. However, no transfers will be made prior to the Allocation Date. Once during each policy year you may ask us by written request to our Administrative Office to transfer an amount you specify from your unloaned value in our GID to one or more investment divisions of our SA. However, we will make such a transfer only if (1) we receive your written request at our Administrative Office within 30 days before or after a policy anniversary; and (2) the amount you specify is not more than the greater of 25% of your unloaned value in our GID as of the date the transfer takes effect or $500.00. In no event will we transfer more than your unloaned value in our GID. The transfer will take effect on the date we receive your written request for it at our Administrative Office but not before the policy anniversary. The minimum amount that we will transfer from your value in an investment division of our SA on any date is the lesser of $500.00 or your value in that investment division on that date, except as stated in the next paragraph. The minimum amount that we will transfer from your value in our GID is the lesser of $500.00 or your unloaned value in our GID as of the date the transfer takes effect, except as stated in the next paragraph. We will waive the minimum amount limitations set forth in the immediately preceding paragraph if the total amount being transferred on that date is at least $500.00. 94-300-9-R Page 10 We reserve the right to make a transfer charge up to $25.00 for each transfer of amounts among your investment options. The transfer charge, if any, is deducted from the amounts transferred from the investment divisions of our SA and the GID based on the proportion that the amount transferred from each investment division and the GID bears to the total amount being transferred. A transfer from the Money Market Division on the Allocation Date (if applicable) will not incur a transfer charge. If you ask us to transfer the entire amount of your value in the investment divisions of our SA to our GID, we will not make a charge for that transfer. - -------------------------------------------------------------------------------- THE VALUE OF YOUR POLICY ACCOUNT The amount in your Policy Account at any time is equal to the sum of the amounts you then have in our GID and the investment divisions of our SA under this policy. YOUR VALUE IN OUR GID. The amount you have in our GID at any time is equal to the amounts allocated and transferred to it, plus the interest credited to it, minus amounts deducted, transferred and withdrawn from it. We will credit the amount in our GID with interest rates we determine. We will determine such interest rates annually in advance for unloaned and loaned amounts in our GID. The rates may be different for unloaned and loaned amounts. The interest rates we determine each year will apply to the policy year that follows the date of determination. Any change in the interest rates we determine will be as described in "Changes in Policy Cost Factors" on Page 16. Such interest rates will not be less than 4%. At the end of each policy month we will credit interest on unloaned amounts in our GID as follows: o On amounts that remain in our GID for the entire policy month, from the beginning to the end of the policy month. o On amounts allocated to our GID during a policy month that are net premium payments or loan repayments, from the date we receive them to the end of the policy month. However, we will credit interest on the amount derived from the initial premium payment from the Register Date, if it is later than the date of receipt. o On amounts transferred to our GID during a policy month, from the date of the transfer to the end of the policy month. o On amounts deducted or withdrawn from our GID during a policy month, from the beginning of the policy month to the date of the deduction or withdrawal. We credit interest on the loaned portion of our GID on each policy anniversary and at any time you repay all of a policy loan. The interest rate we credit to the loaned portion of our GID will be at an annual rate up to 2% less than the loan interest rate we charge. However, we reserve the right to credit a lower rate than this if in the future tax laws change such that our taxes on policy loans or policy loan interest is increased. In no event will we credit less than 4% a year. At the time of crediting such interest, we allocate the interest to the investment divisions of our SA and the unloaned portion of our GID in accordance with your premium allocation percentage. YOUR VALUE IN THE INVESTMENT DIVISIONS OF OUR SA. The amount you have in an investment division of our SA under this policy at any time is equal to the number of units this policy then has in that division multiplied by the division's unit value at that time. Amounts allocated, transferred or added to an investment division of our SA are used to purchase units of that division; units are redeemed when amounts are deducted, loaned, transferred or withdrawn. These transactions are called policy transactions. The number of units a policy has in an investment division at any time is equal to the number of units purchased minus the number of units redeemed in that division to that time. The number of units purchased or redeemed in a policy transaction is equal to the dollar amount of the policy transaction divided by the division's unit value on the date of the policy transaction. Policy transactions may be made on any day. The unit value that applies to a transaction made on a business day will be the unit value for that day. The unit value that applies to a transaction made on a non-business day will be the unit value for the next business day. 94-300-11-R Page 11 We determine unit values for the investment divisions of our SA at the end of each business day. Generally, a business day is any day we are open and the New York Stock Exchange is open for trading. A business day immediately preceded by one or more non-business calendar days will include those non-business days as part of that business day. For example, a business day which falls on a Monday will consist of that Monday and the immediately preceding Saturday and Sunday. The unit value of an investment division of our SA on any business day is equal to the unit value for that division on the immediately preceding business day multiplied by the net investment factor for that division on that business day. The net investment factor for an investment division of our SA on any business day is (a) divided by (b), minus (c), where: (a) is the net asset value of the shares in designated investment companies that belong to the investment division at the close of business on such business day before any policy transactions are made on that day, plus the amount of any dividend or capital gain distribution paid by the investment companies on that day; (b) is the value of the assets in that investment division at the close of business on the immediately preceding business day after all policy transactions were made for that day; and (c) is a charge for each calendar day in that business day, as defined above, corresponding to a charge not exceeding .90% yearly for mortality and expense risks, plus any charge for that day for taxes or amounts set aside as a reserve for taxes. The net asset value of an investment company's shares held in each investment division shall be the value reported to us by that investment company. - -------------------------------------------------------------------------------- THE CASH SURRENDER VALUE OF THIS POLICY CASH SURRENDER VALUE. The Cash Surrender Value on any date is equal to the amount in your Policy Account on that date minus any surrender charge. NET CASH SURRENDER VALUE. The Net Cash Surrender Value is equal to the Cash Surrender Value minus any policy loan and accrued loan interest. You may give up this policy for its Net Cash Surrender Value at any time while the insured person is living. You may do this by sending us a written request for it and this policy to our Administrative Office. We will compute the Net Cash Surrender Value as of the date we receive your request for it and this policy at our Administrative Office. All insurance coverage under this policy ends on such date. SURRENDER CHARGES. If you give up this policy for its Net Cash Surrender Value or if it ends without value at the end of a grace period before the end of the fifteenth policy year, we will subtract a surrender charge from your Policy Account. A table of maximum surrender charges for the initial face amount is in the Policy Information section. We will also establish surrender charges for any increase in the Face Amount of Insurance that represents an increase over the previous highest Face Amount. These will apply before the end of the fifteenth year from the effective date of the increase. Changes in Face Amount resulting from a change in death benefit option will not be considered in computing the previous highest Face Amount. If the Face Amount of Insurance is reduced before the end of the fifteenth policy year or within fifteen years following a face amount increase, we may also deduct a proportionate amount of any applicable surrender charge from your Policy Account. Such deduction will be made in accordance with the "Allocations" provision on Page 10. Reductions will first be applied against the most recent increase in the Face Amount of Insurance. They will then be applied to prior increases in the Face Amount of Insurance in the reverse order in which such increases took place, and then to the original Face Amount of Insurance. We have filed a detailed statement of the method of computing surrender charges with the insurance supervisory official of the jurisdiction in which this policy is delivered. 94-300-11-R Page 12 PARTIAL NET CASH SURRENDER VALUE WITHDRAWAL. After the first policy year and while the insured person is living, you may ask for a partial Net Cash Surrender Value withdrawal by written request to our Administrative Office. Your request will be subject to our approval based on our rules in effect when we receive your request, and to the minimum withdrawal amount of $500.00. The amount withdrawn from the Policy Account is equal to the amount requested plus an expense charge equal to the lesser of $25.00 and 2% of the amount withdrawn. We have the right to decline a request for a partial Net Cash Surrender Value withdrawal. A partial withdrawal will result in a reduction in the Cash Surrender Value and in your Policy Account equal to the amount withdrawn plus the expense charge as well as a reduction in your death benefit. If the death benefit is Option A, the withdrawal may also result in a decrease in the face amount. You may tell us how much of each partial withdrawal is to come from your unloaned value in our GID and from your values in each of the investment divisions of our SA. If you do not tell us, we will make the withdrawal on the basis of your monthly deduction allocation percentages then in effect. The expense charge is deducted from your value remaining in each investment division and the GID, from whichever the withdrawal is made, based on the proportion that the amount withdrawn from each investment division and the GID bears to the total amount being withdrawn. If we cannot make the withdrawal or deduct the expense charge as indicated above, we will make the withdrawal and deduction based on the proportion that your unloaned value in our GID and your values in the investment divisions of our SA bear to the total unloaned value in your Policy Account. Such withdrawal and resulting reduction in the death benefit, in the Cash Surrender Value and in your Policy Account will take effect on the date we receive your written request at our Administrative Office. We will send you a new Policy Information section if a withdrawal results in a reduction in the Face Amount of Insurance. It will become a part of this policy. We may require you to return this policy to our Administrative Office to make a change. - -------------------------------------------------------------------------------- HOW A LOAN CAN BE MADE POLICY LOANS. You can take a loan on this policy while it has a loan value. This policy will be the only security for the loan. The initial loan and each additional loan must be for at least $500.00. Any amount on loan is part of your Policy Account (see Page 11). We refer to this as the loaned portion of your Policy Account. LOAN VALUE. The loan value on any date is 90% of the Cash Surrender Value on that date. The amount of the loan may not be more than the loan value. If you request an increase to an existing loan, the additional amount requested will be added to the amount of the existing loan and accrued loan interest. Your request for a policy loan must be in writing to our Administrative Office. You may tell us how much of the requested loan is to be allocated to your unloaned value in our GID and your value in each investment division of our SA. Such values will be determined as of the date we receive your request. If you do not tell us, we will allocate the loan on the basis of your monthly deduction allocation percentages then in effect. If we cannot allocate the loan on the basis of your direction or those percentages, we will allocate it based on the proportion that your unloaned value in our GID and your values in the investment divisions of our SA bear to the total unloaned value in your Policy Account. The loaned portion of your Policy Account will be maintained as a part of our GID. Thus, when a loaned amount is allocated to an investment division of our SA, we will redeem units of that investment division sufficient in value to cover the amount of the loan so allocated and transfer that amount to our GID. LOAN INTEREST. Interest on a loan accrues daily at an adjustable loan interest rate. We will determine the rate at the beginning of each policy year, subject to the following paragraphs. It will apply to any new or outstanding loan under the policy during the policy year next following the date of determination. The maximum loan interest rate for a policy year shall be the greater of: (1) the "Published Monthly Average," as defined below, for the calendar month that ends two months before the date of determination; or (2) 5%. "Published Monthly Average" means the Monthly Average Corporates yield shown in Moody's Corporate Bond Yield Averages published by Moody's Investors Service, Inc., or any successor thereto. If such averages are no longer published, we will use such other averages as may be established by regulation by the insurance supervisory official of the jurisdiction in which this 94-300-13 Page 13 policy is delivered. In no event will the loan interest rate for a policy year be greater than the maximum rate permitted by applicable law. We reserve the right to establish a rate lower than the maximum. No change in the rate shall be less than 1/2 of 1% a year. We may increase the rate whenever the maximum rate as determined by clause (1) of the preceding paragraph exceeds the rate being charged by 1/2 of 1% or more. We will reduce the rate to or below the maximum rate as determined by clause (1) of the preceding paragraph if such maximum is lower than the rate being charged by 1/2 of 1% or more. We will notify you of the initial loan interest rate when you make a loan. We will also give you advance written notice of any increase in the interest rate of any outstanding loan. Loan interest is due on each policy anniversary. If the interest is not paid when due, it will be added to your outstanding loan and allocated on the basis of the deduction allocation percentages then in effect. If we cannot make the allocation on the basis of these percentages, we will make it based on the proportion that your unloaned value in our GID and your values in the investment divisions of our SA bear to the total unloaned value in your Policy Account. The unpaid interest will then be treated as part of the loaned amount and will bear interest at the loan rate. When unpaid loan interest is allocated to an investment division of our SA, we will redeem units of that investment division sufficient in value to cover the amount of the interest so allocated and transfer that amount to our GID. LOAN REPAYMENT. You may repay all or part of a policy loan at any time while the insured person is alive and this policy is in force. Repayments will first be allocated to our GID until you have repaid any loaned amounts that were allocated to our GID. You may tell us how to allocate payments above that amount among our GID and the investment divisions of our SA. If you do not tell us, we will make the allocation on the basis of the premium allocation percentages then in effect. Failure to repay a policy loan or to pay loan interest will not terminate this policy unless at the beginning of a policy month the Net Cash Surrender Value is less than the total monthly deduction then due. In that case, the Grace Period provision will apply (see Page 8). A policy loan will have a permanent effect on your benefits under this policy even if it is repaid. - -------------------------------------------------------------------------------- OUR SEPARATE ACCOUNT(S) (SA) We established and we maintain our SA under the laws of New York State. Realized and unrealized gains and losses from the assets of our SA are credited or charged against it without regard to our other income, gains, or losses. Assets are put in our SA to support this policy and other variable life insurance policies. Assets may be put in our SA for other purposes, but not to support contracts or policies other than variable contracts. The assets of our SA are our property. The portion of its assets equal to the reserves and other policy liabilities with respect to our SA will not be chargeable with liabilities arising out of any other business we conduct. We may transfer assets of an investment division in excess of the reserves and other liabilities with respect to that division to another investment division or to our General Account. INVESTMENT DIVISIONS. Our SA consists of investment divisions. Each division may invest its assets in a separate class of shares of a designated investment company or companies or make direct investments in securities. The investment divisions of our SA that you chose for your initial allocations are shown on the application for this policy, a copy of which is attached to this policy. We may from time to time make other investment divisions available to you or we may create a new SA. We will provide you with written notice of all material details including investment objectives and all charges. We have the right to change or add designated investment companies. We have the right to add or remove investment divisions. We have the right to withdraw assets of a class of policies to which this policy belongs from an investment division and put them in another investment division. We also have the right to combine any two or more investment divisions. The term investment division in this policy shall then refer to any other investment division in which the assets of a class of policies to which this policy belongs were placed. 94-300-13 Page 14 We have the right to: 1. register or deregister any SA available under this policy under the Investment Company Act of 1940; 2. run any SA available under this policy under the direction of a committee, and discharge such committee at any time; 3. restrict or eliminate any voting rights of policy owners, or other persons who have voting rights as to any SA available under this policy; and 4. operate any SA available under this policy or one or more of its investment divisions by making direct investments or in any other form. If we do so, we may invest the assets of such SA or one or more of the investment divisions in any legal investments. We will rely upon our own or outside counsel for advice in this regard. Also, unless otherwise required by law or regulation, an investment adviser or any investment policy may not be changed without our consent. If required by law or regulation, the investment policy of an investment division of any SA available under this policy will not be changed by us unless approved by the Superintendent of Insurance of New York State or deemed approved in accordance with such law or regulation. If so required, the process for getting such approval is on file with the insurance supervisory official of the jurisdiction in which this policy is delivered. If any of these changes result in a material change in the underlying investments of an investment division of our SA, we will notify you of such change, as required by law. If you have value in that investment division, if you wish, we will transfer it at your written direction from that division (without charge) to another division of our SA or to our GID, and you may then change your premium and deduction allocation percentages. - -------------------------------------------------------------------------------- OUR ANNUAL REPORT TO YOU For each policy year we will send you a report for this policy that shows the current death benefit, the value you have in our GID and the value you have in each investment division of any SA available under this policy, the Cash Surrender Value and any policy loan with the current loan interest rate. It will also show the premiums paid and any other information as may be required by the insurance supervisory official of the jurisdiction in which this policy is delivered. - -------------------------------------------------------------------------------- HOW BENEFITS ARE PAID You can have the Insurance Benefit, your Net Cash Surrender Value withdrawals or your Policy Account payable on the Final Policy Date paid immediately in one sum. Or, you can choose another form of payment for all or part of them. If you do not arrange for a specific choice before the insured person dies, the beneficiary will have this right when the insured person dies. If you do make an arrangement, however, the beneficiary cannot change it after the insured person dies. Payments under the following options will not be affected by the investment experience of any investment division of our SA after proceeds are applied under such options. The options are: 1. DEPOSIT: The sum will be left on deposit for a period mutually agreed upon. We will pay interest at the end of every month, every 3 months, every 6 months or every 12 months, as chosen. 2. INSTALLMENT PAYMENTS: There are two ways that we pay installments: A. FIXED PERIOD: We will pay the sum in equal installments for a specified number of years (not more than 30). The installments will be at least those shown in the Table of Guaranteed Payments on Page 18. B. FIXED AMOUNT: We will pay the sum in installments as mutually agreed upon until the original sum, together with interest on the unpaid balance, is used up. 3. MONTHLY LIFE INCOME: We will pay the sum as a monthly income for life. The amount of the monthly payment will be at least that shown in the Table of Guaranteed Payments on Page 18. You may choose any one of three ways to receive monthly life income. We will guarantee payments for at least 10 years (called "10 Years Certain"); at least 20 years (called "20 Years Certain"); or until the payments we make equal the original sum (called "Refund Certain"). 4. OTHER: We will apply the sum under any other option requested that we make available at the time of payment. 94-300-15 Page 15 The payee may name and change a successor payee for any amount we would otherwise pay to the payee's estate. Any arrangements involving more than one of the options, or a payee who is not a natural person (for example, a corporation) or who is a fiduciary, must have our approval. Also, details of all arrangements will be subject to our rules at the time the arrangement takes effect. These include rules on: the minimum amount we will apply under an option and minimum amounts for installment payments; withdrawal or commutation rights; naming payees and successor payees; and proving age and survival. Payment choices (or any later changes) will be made and will take effect in the same way as a change of beneficiary. Amounts applied under these options will not be subject to the claims of creditors or to legal process, to the extent permitted by law. - -------------------------------------------------------------------------------- OTHER IMPORTANT INFORMATION YOUR CONTRACT WITH US. This policy is issued in consideration of payment of the initial premium payment shown in the Policy Information section. This policy, and the attached copy of the initial application and all subsequent applications to change this policy, and all additional Policy Information sections added to this policy, make up the entire contract. The rights conferred by this policy are in addition to those provided by applicable Federal and State laws and regulations. Only our Chairman of the Board, our President or one of our Vice Presidents can modify this contract or waive any of our rights or requirements under it. The person making these changes must put them in writing and sign them. POLICY CHANGES -- APPLICABLE TAX LAW. For you and the beneficiary to receive the tax treatment accorded to life insurance under Federal law, this policy must qualify initially and continue to qualify as life insurance under the Code or successor law. Therefore, to assure this qualification for you we have reserved earlier in this policy the right to decline to accept premium payments, to decline to change death benefit options, to decline to change the Face Amount of Insurance, or to decline to make partial withdrawals that would cause this policy to fail to qualify as life insurance under applicable tax law as interpreted by us. Further, we reserve the right to make changes in this policy or its riders (for example, in the percentages on Page 6) or to require additional premium payments or to make distributions from this policy or to change the Face Amount of Insurance to the extent we deem it necessary to continue to qualify this policy as life insurance. Any such changes will apply uniformly to all policies that are affected. You will be given advance written notice of such changes. CHANGES IN POLICY COST FACTORS. Changes in policy cost factors (interest rates we credit, cost of insurance deductions, expense charges and mortality and expense risk charges) will be by class and based upon changes in future expectations for such elements as: investment earnings, mortality, persistency, expenses and taxes. Any change in policy cost factors will be determined in accordance with procedures and standards on file, if required, with the insurance supervisory official of the jurisdiction in which this policy is delivered. WHEN THE POLICY IS INCONTESTABLE. We have the right to contest the validity of this policy based on material misstatements made in the initial application for this policy. We also have the right to contest the validity of any policy change or restoration based on material misstatements made in any application for that change. However, we will not contest the validity of this policy after it has been in effect during the lifetime of the insured person for two years from the date of issue shown in the Policy Information section. We will not contest any policy change that requires evidence of insurability, or any restoration of this policy, after the change or restoration has been in effect for two years during the insured person's lifetime. No statement shall be used to contest a claim unless contained in an application. All statements made in an application are representations and not warranties. See any additional benefit riders for modifications of this provision that apply to them. WHAT IF AGE OR SEX HAS BEEN MISSTATED? If the insured person's age or sex has been misstated on any application, the death benefit and any benefits provided by riders to this policy shall be those which would be purchased by the most recent deduction for the cost of insurance, and the cost of any benefits provided by riders, at the correct age and sex. 94-300-15 Page 16 HOW THE SUICIDE EXCLUSION AFFECTS BENEFITS. If the insured person commits suicide (while sane or insane) within two years after the Date of Issue shown in the Policy Information section, our liability will be limited to the payment of a single sum. This sum will be equal to the premiums paid, minus any loan and accrued loan interest and minus any partial withdrawal of the Net Cash Surrender Value. If the insured person commits suicide (while sane or insane) within two years after the effective date of a change that you asked for that increases the death benefit, then our liability as to the increase in amount will be limited to the payment of a single sum equal to the monthly cost of insurance deductions made for such increase plus the expense charge deducted for the increase (see Page 7). HOW WE MEASURE POLICY PERIODS AND ANNIVERSARIES. We measure policy years, policy months, and policy anniversaries from the Register Date shown in the Policy Information section. Each policy month begins on the same day in each calendar month as the day of the month in the Register Date. HOW, WHEN AND WHAT WE MAY DEFER. We may not be able to obtain the value of the assets of the investment divisions of our SA if: (1) the New York Stock Exchange is closed; or (2) the Securities and Exchange Commission requires trading to be restricted or declares an emergency. During such times, as to amounts allocated to the investment divisions of our SA, we may defer: 1. Determination and payment of Net Cash Surrender Value withdrawals; 2. Determination and payment of any death benefit in excess of the Face Amount of Insurance; 3. Payment of loans; 4. Determination of the unit values of the investment divisions of our SA; and 5. Any requested transfer or the transfer on the Allocation Date. As to amounts allocated to our GID, we may defer payment of any Net Cash Surrender Value withdrawal or loan amount for up to six months after we receive a request for it. We will allow interest, at a rate of at least 3% a year, on any Net Cash Surrender Value payment derived from our GID that we defer for 30 days or more. THE BASIS WE USE FOR COMPUTATION. We provide Cash Surrender Values that are at least equal to those required by law. If required to do so, we have filed with the insurance supervisory official of the jurisdiction in which this policy is delivered a detailed statement of our method of computing such values. We compute reserves under this policy by the Commissioners Reserve Valuation Method. We base minimum cash surrender values and reserves on the Commissioners 1980 Standard Ordinary Male and Female Mortality Tables at attained ages 0-19 or the Commissioners 1980 Standard Ordinary, Smoker and Non-Smoker, Mortality Tables at attained ages 20 and over. We also use these tables as the basis for determining maximum insurance costs, taking account of sex, attained age, class of risk and Tobacco User status of the insured person. We use an effective annual interest rate of 4%. POLICY ILLUSTRATIONS. Upon request we will give you an illustration of the future benefits under this policy based upon both guaranteed and current cost factor assumptions. However, if you ask us to do this more than once in any policy year, we reserve the right to charge you a fee for this service. POLICY CHANGES. You may add additional benefit riders or make other changes, subject to our rules at the time of change. 94-300-17 Page 17 TABLE OF GUARANTEED PAYMENTS (MINIMUM AMOUNT FOR EACH $1,000 APPLIED) OPTION 2A FIXED PERIOD INSTALLMENTS ------------------------- Number of Years' Monthly Annual Installments Installment Installment - ------------ ----------- ----------- 1 $84.28 $1000.00 2 42.66 506.17 3 28.79 341.60 4 21.86 259.33 5 17.70 210.00 6 14.93 177.12 7 12.95 153.65 8 11.47 136.07 9 10.32 122.40 10 9.39 111.47 11 8.64 102.54 12 8.02 95.11 13 7.49 88.83 14 7.03 83.45 15 6.64 78.80 16 6.30 74.73 17 6.00 71.15 18 5.73 67.97 19 5.49 65.13 20 5.27 62.58 21 5.08 60.28 22 4.90 58.19 23 4.74 56.29 24 4.60 54.55 25 4.46 52.95 26 4.34 51.48 27 4.22 50.12 28 4.12 48.87 29 4.02 47.70 30 3.93 46.61 If installments are paid every 3 months, they will be 25.23% of the annual installments. If they are paid every 6 months, they will be 50.31% of the annual installments. OPTION 3 MONTHLY LIFE INCOME -------------------
10 Years Certain 20 Years Certain Refund Certain ---------------- ---------------- -------------- AGE Male Female Male Female Male Female --- ---- ------ ---- ------ ---- ------ 50 $3.48 $3.19 $3.42 $3.17 $3.37 $3.14 51 3.54 3.23 3.47 3.21 3.42 3.17 52 3.59 3.28 3.51 3.25 3.46 3.21 53 3.65 3.32 3.56 3.29 3.51 3.25 54 3.70 3.37 3.61 3.33 3.56 3.29 55 3.77 3.42 3.66 3.37 3.61 3.34 56 3.83 3.47 3.72 3.42 3.67 3.38 57 3.90 3.52 3.77 3.47 3.72 3.43 58 3.97 3.58 3.83 3.52 3.78 3.48 59 4.04 3.64 3.88 3.57 3.84 3.53 60 4.12 3.70 3.94 3.62 3.90 3.58 61 4.20 3.76 4.00 3.68 3.97 3.64 62 4.29 3.83 4.06 3.74 4.04 3.69 63 4.38 3.90 4.12 3.79 4.11 3.75 64 4.48 3.98 4.18 3.85 4.19 3.82 65 4.58 4.06 4.25 3.92 4.26 3.88 66 4.68 4.14 4.31 3.98 4.35 3.95 67 4.79 4.23 4.37 4.04 4.43 4.02 68 4.90 4.32 4.43 4.11 4.52 4.10 69 5.02 4.42 4.50 4.18 4.62 4.18 70 5.14 4.52 4.56 4.25 4.71 4.26 71 5.26 4.63 4.62 4.31 4.82 4.35 72 5.39 4.75 4.67 4.38 4.92 4.44 73 5.52 4.87 4.73 4.45 5.03 4.53 74 5.66 4.99 4.78 4.51 5.14 4.63 75 5.80 5.12 4.83 4.58 5.27 4.74 76 5.95 5.26 4.88 4.64 5.39 4.84 77 6.10 5.40 4.93 4.70 5.53 4.96 78 6.25 5.55 4.97 4.75 5.66 5.08 79 6.40 5.70 5.01 4.80 5.80 5.20 80 6.56 5.85 5.04 4.86 5.96 5.33 81 6.72 6.01 5.08 4.90 6.11 5.45 82 6.88 6.18 5.11 4.95 6.27 5.60 83 7.04 6.34 5.13 4.99 6.43 5.73 84 7.20 6.51 5.16 5.03 6.62 5.89 85 & over 7.36 6.67 5.18 5.07 6.81 6.04
Amounts for Monthly Life Income are based on age nearest birthday when income starts. Amounts for ages not shown will be furnished upon request. 85-300-21 Page 18 EQUITABLE VARIABLE LIFE INSURANCE COMPANY A Stock Life Insurance Company Home Office: 787 Seventh Avenue, New York, New York 10019-6018 Flexible Premium Variable Life Insurance Policy. Insurance payable upon death before Final Policy Date. Policy Account less outstanding loans, liens and accrued interest payable on Final Policy Date. Adjustable Death Benefit. Premiums may be paid while insured person is living and before the Final Policy Date. Premiums must be sufficient to keep the policy in force. Values provided by this policy are based on declared interest rates, and on the investment experience of the investment divisions of a separate account which in turn depends on the investment performance of the securities held by such investment division. They are not guaranteed as to dollar amount. Investment options are described on Page 10. This is a non-participating policy. No. 94-300 EX-99.1A5AIIPOLICY 5 POLICY NO. 94-300RV (ELAS) (IL PLUS) [EQUITABLE LIFE ASSURANCE SOCIETY LOGO] THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES VARIABLE LIFE INSURANCE POLICY INSURED PERSON MERV S. BUCKS 1 POLICY OWNER MERV S. BUCKS 1 FACE AMOUNT OF INSURANCE $50,000 DEATH BENEFIT OPTION A (SEE PAGE 6) POLICY NUMBER 60 231 045 - -------------------------------------------------------------------------------- WE AGREE to pay the Insurance Benefit of this policy and to provide its other benefits and rights in accordance with its provisions. FLEXIBLE PREMIUM VARIABLE LIFE POLICY This is a flexible premium variable life insurance policy. You can, within limits: o increase or decrease the Face Amount of Insurance; o make premium payments at any time and in any amount; o change the death benefit option; o change the allocation of net premiums and deductions among your investment options; and o transfer amounts among your investment options. THE DEATH BENEFIT OF THIS POLICY IS GUARANTEED FOR THE PERIOD OF TIME SHOWN ON PAGE 3, SUBJECT TO PREMIUMS HAVING BEEN PAID IN ACCORDANCE WITH THE DEATH BENEFIT GUARANTEE PROVISION. All of these rights and benefits are subject to the terms and conditions of this policy. All requests for policy changes are subject to our approval and may require evidence of insurability. We will put your net premiums into your Policy Account. You may then allocate them to one or more investment divisions of our Separate Account(s) (SA) and to our Guaranteed Interest Division (GID). THE PORTION OF YOUR POLICY ACCOUNT THAT IS IN AN INVESTMENT DIVISION OF OUR SA WILL VARY UP OR DOWN DEPENDING ON THE UNIT VALUE OF SUCH INVESTMENT DIVISION, WHICH IN TURN DEPENDS ON THE INVESTMENT PERFORMANCE OF THE SECURITIES HELD BY THAT SA DIVISION. THERE ARE NO MINIMUM GUARANTEES AS TO SUCH PORTION OF YOUR POLICY ACCOUNT. The portion of your Policy Account that is in our GID will accumulate, after deductions, at rates of interest we determine. Such rates will not be less than 4% a year. THE AMOUNT AND DURATION OF THE DEATH BENEFIT MAY BE VARIABLE OR FIXED AS DESCRIBED IN THIS POLICY. This is a non-participating policy. RIGHT TO EXAMINE POLICY. You may examine this policy and if for any reason you are not satisfied with it, you may cancel it by returning this policy with a written request for cancellation to our Administrative Office by the 10th day after you receive it. If you do this, we will refund the premiums that were paid on this policy. /s/ Pauline Sherman /s/ James M. Benson Pauline Sherman, James M. Benson Vice President & Secretary President & Chief Executive Officer No. 94-300-RV CONTENTS - -------- Policy Information 3 Table of Maximum Monthly Charges for Benefits 4 Those Who Benefit from this Policy 5 The Insurance Benefit We Pay 5 Changing the Face Amount of Insur- ance or the Death Benefit Option 7 The Premiums You Pay 7 Your Policy Account and How it Works 9 Your Investment Options 10 The Value of Your Policy Account 11 The Cash Surrender Value of this Policy 12 How a Loan Can Be Made 13 Our Separate Account(s) (SA) 14 Our Annual Report to You 15 How Benefits are Paid 15 Other Important Information 16 IN THIS POLICY: - -------------- "We," "our," and "us" mean The Equitable Life Assurance Society of the United States. "You" and "your" mean the owner of this policy at the time an owner's right is exercised. Unless otherwise stated, all references to interest in this policy are effective annual rates of interest. Attained age means age on the birthday nearest to the beginning of the current policy year. ADMINISTRATIVE OFFICE - --------------------- The address of our Administrative Office is shown on Page 3. You should send premiums and correspondence to that address unless instructed otherwise. Copies of the application for this policy and any additional benefit riders are attached to the policy. INTRODUCTION The premiums you pay, after deductions are made in accordance with the Table of Expense Charges in the Policy Information section, are put into your Policy Account. Amounts in your Policy Account are allocated at your direction to one or more investment divisions of our SA and to our GID. The investment divisions of our SA invest in securities and other investments whose value is subject to market fluctuations and investment risk. There is no guarantee of principal or investment experience. Our GID earns interest at rates we declare in advance of each policy year. The rates are guaranteed for each policy year. The principal, after deductions, is also guaranteed. If death benefit Option A is in effect, the death benefit is the Face Amount of Insurance, and the amount of the death benefit is fixed except when it is a percentage of your Policy Account. If death benefit Option B is in effect, the death benefit is the Face Amount of Insurance plus the amount in your Policy Account. The amount of the death benefit is variable. Under either option, the death benefit will never be less than a percentage of your Policy Account as stated on Page 6. The death benefit of this policy is guaranteed for the period of time shown on Page 3, subject to premiums having been paid in accordance with the Death Benefit Guarantee provision. We make monthly deductions from your Policy Account to cover the cost of the benefits provided by this policy and the cost of any benefits provided by riders to this policy. If you give up this policy for its Net Cash Surrender Value, reduce the Face Amount of Insurance, or if this policy ends without value at the end of the grace period, we may deduct a surrender charge from your Policy Account. This is only a summary of what this policy provides. You should read all of it carefully. Its terms govern your rights and our obligations. No. 94-300-RV Page 2 POLICY INFORMATION INSURED PERSON MERV S. BUCKS 1 POLICY OWNER MERV S. BUCKS 1 FACE AMOUNT OF INSURANCE $50,000 DEATH BENEFIT OPTION A (SEE PAGE 6) POLICY NUMBER 60 231 045 SEPARATE ACCOUNT FP BENEFICIARY AS DESIGNATED IN APPLICATION REGISTER DATE FEB 2, 1996 ISSUE AGE 35 DATE OF ISSUE FEB 5, 1996 SEX MALE INSURED PERSON'S STATE OF RESIDENCE SPECIMEN PREFERRED NON-TOBACCO USER AN INITIAL PREMIUM PAYMENT OF $134.21 IS DUE ON OR BEFORE DELIVERY OF THE POLICY. THE PLANNED PERIODIC PREMIUM OF $25,000.00 IS PAYABLE QUARTERLY. DEATH BENEFIT GUARANTEE PERIOD -- TO INSURED'S ATTAINED AGE 55 -- SEE DEATH BENEFIT GUARANTEE PROVISION PREMIUM PAYMENTS ARE FOR THE INSURANCE BENEFIT AND ANY ADDITIONAL BENEFIT RIDERS LISTED BELOW. SEE PAGE 3 -- CONTINUED FOR TABLE OF SPECIFIED PREMIUMS. THE PLANNED PERIODIC PREMIUMS SHOWN ABOVE MAY NOT BE SUFFICIENT TO CONTINUE THE POLICY AND LIFE INSURANCE COVERAGE IN FORCE TO THE FINAL POLICY DATE, WHICH IS THE POLICY ANNIVERSARY NEAREST THE INSURED PERSON'S 100TH BIRTHDAY. THE PERIOD FOR WHICH THE POLICY AND COVERAGE WILL CONTINUE IN FORCE WILL DEPEND ON: (1) THE AMOUNT, TIMING AND FREQUENCY OF PREMIUM PAYMENTS; (2) CHANGES IN THE FACE AMOUNT OF INSURANCE AND THE DEATH BENEFIT OPTIONS; (3) CHANGES IN THE INTEREST RATES CREDITED TO OUR GID AND IN THE INVESTMENT PERFORMANCE OF THE INVESTMENT DIVISIONS OF OUR SA; (4) CHANGES IN THE MONTHLY COST OF INSURANCE DEDUCTIONS FROM THE POLICY ACCOUNT FOR THIS POLICY AND ANY BENEFITS PROVIDED BY RIDERS TO THIS POLICY; AND (5) LOAN AND PARTIAL NET CASH SURRENDER VALUE WITHDRAWAL ACTIVITY. 94-300-3-RV PAGE 3 (CONTINUED ON NEXT PAGE) POLICY INFORMATION CONTINUED -- POLICY NUMBER 60 231 045 ------ TABLE OF SPECIFIED PREMIUMS ------ BENEFITS MONTHLY PREMIUM PREMIUM PERIOD - -------- --------------- -------------- BASIC LIFE INSURANCE $44.86 65 YEARS 94-300-3 PAGE 3 -- CONTINUED POLICY INFORMATION CONTINUED -- POLICY NUMBER 60 231 045 ------ TABLE OF AUTOMATIC EXPENSE CHARGES ------ DEDUCTIONS FROM PREMIUM PAYMENTS: CHARGE FOR APPLICABLE TAXES (OTHER THAN TAXES DISCUSSED ON PAGE 12): 2.500% OF EACH PREMIUM PAYMENT. THIS AMOUNT IS SUBTRACTED FROM EACH PREMIUM PAYMENT. WE RESERVE THE RIGHT TO CHANGE THIS PERCENTAGE TO CONFORM TO CHANGES IN THE LAW OR IF THE INSURED PERSON CHANGES RESIDENCE. PREMIUM CHARGE: 6.00% OF EACH PREMIUM PAYMENT. WE RESERVE THE RIGHT TO CHANGE THIS CHARGE BUT IT WILL NEVER BE MORE THAN 6%. DEDUCTIONS FROM YOUR POLICY ACCOUNT: INITIAL ADMINISTRATIVE CHARGE: $30.00 IS DEDUCTED AT THE BEGINNING OF EACH POLICY MONTH DURING THE FIRST TWO POLICY YEARS. SUBSEQUENT YEARS ADMINISTRATIVE CHARGE: $8.00 IS DEDUCTED AT THE BEGINNING OF EACH POLICY MONTH DURING EACH POLICY YEAR AFTER THE SECOND POLICY YEAR. WE RESERVE THE RIGHT TO CHANGE THIS CHARGE BUT IT WILL NEVER BE MORE THAN $10.00 A MONTH. CHANGES WILL BE AS DESCRIBED IN "CHANGES IN POLICY COST FACTORS" ON PAGE 16. 94-300-3-R PAGE 3 -- CONTINUED POLICY INFORMATION CONTINUED -- POLICY NUMBER 60 231 045 ------TABLE OF MAXIMUM SURRENDER CHARGES ------ FOR THE INITIAL FACE AMOUNT BEGINNING OF BEGINNING OF POLICY POLICY YEAR CHARGE YEAR CHARGE ---- ------ ---- ------ 1 $450.30 9 $300.30 2 450.30 10 296.13 3 450.30 11 246.08 4 447.80 12 196.03 5 417.80 13 145.98 6 387.80 14 95.93 7 357.80 15 45.88 8 327.80 16 AND LATER 0.00 A SURRENDER CHARGE WILL BE SUBTRACTED FROM YOUR POLICY ACCOUNT IF THIS POLICY IS GIVEN UP FOR ITS NET CASH SURRENDER VALUE OR IF THIS POLICY TERMINATES WITHIN THE FIRST FIFTEEN POLICY YEARS. THE MAXIMUM CHARGE IN THE FIRST POLICY MONTH OF EACH POLICY YEAR IS SHOWN IN THE TABLE ABOVE (SUBJECT TO ANY APPLICABLE LIMITATIONS IMPOSED BY THE INVESTMENT COMPANY ACT OF 1940). AFTER THE THIRD POLICY YEAR, THE MAXIMUM CHARGE IN ANY OTHER POLICY MONTH WILL BE BASED ON THE NUMBER OF POLICY MONTHS SINCE THE BEGINNING OF THE POLICY YEAR. THIS TABLE ASSUMES NO FACE AMOUNT INCREASES. SEE PAGE 12 FOR A DESCRIPTION OF CHANGES TO MAXIMUM SURRENDER CHARGES FOR FACE AMOUNT INCREASES. IF THE FACE AMOUNT OF INSURANCE IS REDUCED WITHIN THE FIRST FIFTEEN POLICY YEARS, A PRO RATA SHARE OF THE APPLICABLE SURRENDER CHARGE AT THAT TIME MAY BE DEDUCTED FROM YOUR POLICY ACCOUNT. SEE PAGE 12 FOR A DESCRIPTION OF THE PRO RATA SURRENDER CHARGE. *****ADMINISTRATIVE OFFICE: THE EQUITABLE LIFE ASSURANCE SOCIETY***** NEW YORK SERVICE CENTER 1755 BROADWAY, 2ND FLOOR NEW YORK, NY 10020 94-300-3 PAGE 3 -- CONTINUED POLICY INFORMATION CONTINUED -- POLICY NUMBER 60 231 045 ------ TABLE OF MAXIMUM MONTHLY CHARGES FOR BENEFITS ------ MONTHLY DEDUCTION BENEFITS FROM POLICY ACCOUNT PERIOD -------- ------------------- ------ BASIC COST OF INSURANCE MAXIMUM MONTHLY COST OF INSURANCE RATE (SEE PAGE 4 -- CONTINUED) TIMES THOUSANDS OF NET AMOUNT AT RISK (SEE PAGE 9) 65 YEARS DEATH BENEFIT GUARANTEE $0.50 65 YEARS 94-300-4 PAGE 4 (CONTINUED ON NEXT PAGE) POLICY INFORMATION CONTINUED -- POLICY NUMBER 60 231 045 ------ TABLE OF GUARANTEED MAXIMUM MONTHLY COST OF INSURANCE RATES ------ PER $1,000 OF NET AMOUNT AT RISK (SEE PAGE 9) FOR BASIC LIFE INSURANCE INSURED INSURED PERSON'S PERSON'S ATTAINED MONTHLY ATTAINED MONTHLY AGE RATE AGE RATE --- ---- --- ---- 35 $0.14083 70 $ 2.93250 36 0.14750 71 3.30167 37 0.15667 72 3.61750 38 0.16667 73 4.04167 39 0.17833 74 4.52000 40 0.19083 75 5.03667 41 0.20583 76 5.59000 42 0.22083 77 6.17500 43 0.23833 78 6.78667 44 0.25583 79 7.44000 45 0.27667 80 8.16167 46 0.29917 81 8.97250 47 0.32333 82 9.89750 48 0.34917 83 10.95167 49 0.37833 84 12.11833 50 0.41000 85 13.37417 51 0.44667 86 14.69833 52 0.48917 87 16.08083 53 0.53667 88 17.49667 54 0.59250 89 18.96583 55 0.65333 90 20.51167 56 0.72167 91 22.16500 57 0.79417 92 23.98667 58 0.87250 93 26.06583 59 0.96083 94 28.78417 60 1.05917 95 32.81750 61 1.16833 96 39.64250 62 1.29417 97 53.06583 63 1.43667 98 83.33250 64 1.59833 99 83.33250 65 1.77750 66 1.97083 67 2.18083 68 2.40583 69 2.65333 94-300-4 PAGE 4 -- CONTINUED - -------------------------------------------------------------------------------- THOSE WHO BENEFIT FROM THIS POLICY OWNER. The owner of this policy is the insured person unless otherwise stated in the application, or later changed. As the owner, you are entitled to exercise all the rights of this policy while the insured person is living. To exercise a right, you do not need the consent of anyone who has only a conditional or future ownership interest in this policy. BENEFICIARY. The beneficiary is as stated in the application, unless later changed. The beneficiary is entitled to the Insurance Benefit of this policy. One or more beneficiaries for the Insurance Benefit can be named in the application. If more than one beneficiary is named, they can be classed as primary or contingent. If two or more persons are named in a class, their shares in the benefit can be stated. The stated shares in the Insurance Benefit will be paid to any primary beneficiaries who survive the insured person. If no primary beneficiaries survive, payment will be made to any surviving contingent beneficiaries. Beneficiaries who survive in the same class will share the Insurance Benefit equally, unless you have made another arrangement with us. If there is no designated beneficiary living at the death of the insured person, we will pay the Insurance Benefit to the insured person's surviving children in equal shares. If none survive, we will pay the insured person's estate. CHANGING THE OWNER OR BENEFICIARY. While the insured person is living, you may change the owner or beneficiary by written notice in a form satisfactory to us. You can get such a form from our agent or by writing to us at our Administrative Office. The change will take effect on the date you sign the notice. But, it will not apply to any payment we make or other action we take before we receive the notice. If you change the beneficiary, any previous arrangement you made as to a payment option for benefits is cancelled. You may choose a payment option for the new beneficiary in accordance with "How Benefits Are Paid" on Page 15. ASSIGNMENT. You may assign this policy, if we agree. In any event, we will not be bound by an assignment unless we have received it in writing at our Administrative Office. Your rights and those of any other person referred to in this policy will be subject to the assignment. We assume no responsibility for the validity of an assignment. An absolute assignment will be considered as a change of ownership to the assignee. - -------------------------------------------------------------------------------- THE INSURANCE BENEFIT WE PAY We will pay the Insurance Benefit of this policy to the beneficiary when we receive at our Administrative Office (1) proof satisfactory to us that the insured person died before the Final Policy Date; and (2) all other requirements we deem necessary before such payment may be made. The Insurance Benefit includes the following amounts, which we will determine as of the date of the insured person's death: o the death benefit described on Page 6; o PLUS any other benefits then due from riders to this policy; o MINUS any policy loan, lien and accrued interest; o MINUS any overdue deductions from your Policy Account if the insured person dies during a grace period. We will add interest to the resulting amount in accordance with applicable law. We will compute the interest at a rate we determine, but not less than the greater of (a) the rate we are paying on the date of payment under the Deposit Option on Page 15, or (b) the rate required by any applicable law. Payment of the Insurance Benefit may also be affected by other provisions of this policy. See Pages 16 and 17, where we specify our right to contest the policy, the suicide exclusion, and what happens if age or sex has been misstated. Special exclusions or limitations (if any) are listed in the Policy Information section. 94-300-5-RV Page 5 DEATH BENEFIT. The death benefit at any time will be determined under either Option A or Option B below, whichever you have chosen and is in effect at such time. Under Option A, the death benefit is the greater of (a) the Face Amount of Insurance; or (b) a percentage (see Table below) of the amount in your Policy Account. Under this option, the amount of the death benefit is fixed, except when it is determined by such percentage. Under Option B, the death benefit is the greater of (a) the Face Amount of Insurance plus the amount in your Policy Account; or (b) a percentage (see Table below) of the amount in your Policy Account. Under this option the amount of the death benefit is variable. The percentages referred to above are the percentages from the following table for the insured person's age (nearest birthday) at the beginning of the policy year of determination. TABLE OF PERCENTAGES For ages not shown, the percentages shall decrease by a ratable portion for each full year INSURED INSURED PERSON'S AGE PERCENTAGE PERSON'S AGE PERCENTAGE - ------------ ---------- ------------ ---------- 40 and under 250% 65 120% 45 215 70 115 50 185 75 thru 95 105 55 150 100 100 60 130 Section 7702 of the Internal Revenue Code of 1986, as amended (i.e., the "Code"), gives a definition of life insurance which limits the amounts that may be paid into a life insurance policy relative to the benefits it provides. Even if this policy states otherwise, at no time will the "future benefits" under this policy be less than an amount such that the "premiums paid" do not exceed the Code's "guideline premium limitations". We may adjust the amount of premium paid to meet these limitations. Also, at no time will the "death benefit" under the policy be less than the "applicable percentage" of the "cash surrender value" of the policy. The above terms are as defined in the Code. In addition, we may take certain actions, described here and elsewhere in the policy, to meet the definitions and limitations in the Code, based on our interpretation of the Code. Please see "Policy Changes -- Applicable Tax Law" for more information. DEATH BENEFIT GUARANTEE. Subject to the conditions set forth below, the death benefit of this policy is guaranteed if during the death benefit guarantee period the sum of premium payments accumulated at 4%, less any partial withdrawals accumulated at 4%, is at least equal to the sum of the Specified Premiums (shown on Page 3 -- Continued) accumulated at 4%, and any outstanding loan and accrued loan interest does not exceed the cash surrender value. Certain policy changes after issue will change the Specified Premiums accordingly. The death benefit of this policy is guaranteed for the period of time shown on Page 3. The death benefit guarantee terminates after that time, although Specified Premiums may be shown for periods beyond the time of the guarantee. MATURITY BENEFIT. If the Insured person is living on the Final Policy Date defined in the Policy Information section, we will pay you the amount in your Policy Account on that date minus any policy loan, liens and accrued interest. This policy will then end. 94-300-5-RV Page 6 - -------------------------------------------------------------------------------- CHANGING THE FACE AMOUNT OF INSURANCE OR THE DEATH BENEFIT OPTION You may change the death benefit option or the Face Amount of Insurance by written request to us at our Administrative Office, subject to our approval and the following: 1. At any time after the first policy year while this policy is in force, you may ask us to increase the Face Amount of Insurance if you provide evidence satisfactory to us of the insurability of the insured person. If you request an increase and the rating class of the insured person on the date of the increase is higher, a separate policy will be issued for the amount of the increase. Any increase you ask for must be at least $10,000. There is a charge for such increase of $1.50 for each $1,000 of insurance, but not more than $240.00 per increase. We will deduct the charge from your Policy Account as of the date the increase takes effect. Such deduction will be made in accordance with the "Allocations" provision on Page 10. If you increase the face amount, an additional fifteen year surrender charge may apply to that increase if any or all of that increase is surrendered before the end of the fifteenth year from the effective date of increase. 2. At any time after the second policy year while this policy is in force, you may ask us to reduce the Face Amount of Insurance but not to less than the minimum amount for which we would then issue this policy under our rules. Any such reduction in the Face Amount of Insurance may not be less than $10,000. If you do this before the end of the fifteenth policy year or before the end of the fifteenth year following an increase in the face amount, we may deduct from your Policy Account a pro rata share of the applicable surrender charge (see Page 12). Reductions will first be applied against the most recent increase in the Face Amount of Insurance. They will then be applied to prior increases in the Face Amount of Insurance in the reverse order in which such increases took place, and then to the original Face Amount of Insurance. 3. At any time while this policy is in force, you can change your death benefit option. If you ask us to change from Option A to Option B, we will decrease the Face Amount of Insurance by the amount in your Policy Account on the date the change takes effect. However, we reserve the right to decline to make such change if it would reduce the Face Amount of Insurance below the minimum amount for which we would then issue this policy under our rules. We also reserve the right to request evidence of insurability for a change to Option B. If you ask us to change from Option B to Option A, we will increase the Face Amount of Insurance by the amount in your Policy Account on the date the change takes effect. Such decreases and increases in the Face Amount of Insurance are made so that the death benefit remains the same on the date the change takes effect. 4. The change will take effect at the beginning of the policy month that coincides with or next follows the date we approve your request. 5. We reserve the right to decline to make any change that we determine would cause this policy to fail to qualify as life insurance under applicable tax law as interpreted by us (see Page 16). 6. You may ask for a change by completing an application for change, which you can get from our agent or by writing to us at our Administrative Office. A copy of your application for change will be attached to the new Policy Information section that we will issue when the change is made. The new section and the application for change will become a part of this policy. We may require you to return this policy to our Administrative Office to make a policy change. - -------------------------------------------------------------------------------- THE PREMIUMS YOU PAY The initial premium payment shown in the Policy Information section is due on or before delivery of this policy. No insurance will take effect before the initial premium payment is paid. Other premiums may be paid at any time while this policy is in force and before the Final Policy Date at our Administrative Office. We will send premium notices to you for the planned periodic premium shown in the Policy Information section. You may skip planned periodic premium payments. However, this may adversely affect the duration of the death benefit and your policy's values. We will assume that any payment you make to us is a premium payment, unless you tell us in writing that it is a loan repayment. 94-300-7-RV Page 7 LIMITS. Each premium payment after the initial one must be at least $100. We may increase this minimum limit 90 days after we send you written notice of such increase. We reserve the right to limit the amount of any premium payments you may make which are in excess of the Specified Premiums shown on Page 3 -- Continued. We also reserve the right not to accept premium payments or to return excess amounts (in a policy year) that we determine would cause this policy to fail to qualify as life insurance under applicable tax law as interpreted by us (see Page 16). GRACE PERIOD. At the beginning of each policy month, the Net Cash Surrender Value will be compared to the total monthly deductions described on Page 9. If the Net Cash Surrender Value is sufficient to cover the total monthly deductions, the policy is not in default. If the Net Cash Surrender Value at the beginning of any policy month during the death benefit guarantee period is less than such deductions for that month we will perform the following calculations to determine whether the policy is in default: 1. Determine the Specified Premium fund. The Specified Premium fund for any policy month is the accumulation of all the specified premiums shown on Page 3 -- Continued up to that month at 4% interest. 2. Determine the actual premium fund. The actual premium fund for any policy month is the accumulation of all the premiums received at 4% interest minus all withdrawals accumulated at 4% interest. 3. If the result in Step 2 is greater than or equal to the result in Step 1, and any loan and accrued loan interest does not exceed the Cash Surrender Value, the policy is not in default. The death benefit guarantee will be in effect and monthly deductions in excess of the Policy Account will be waived. 4. If the result of Step 2 is less than the result in Step 1, or if the result of Step 2 is greater than or equal to the result in Step 1 and any loan and accrued loan interest exceeds the Cash Surrender Value, the policy is in default as of the first day of this policy month. This is the date of default. If the death benefit guarantee period has terminated (see Death Benefit Guarantee provision), the calculations in Steps 1.- 4. above will not be performed. In that case, if the Net Cash Surrender Value at the beginning of any policy month is less than the monthly deductions for that month, the policy is in default as of the first day of such policy month. If the policy is in default, we will send you and any assignee on our records at last known addresses written notice stating that a grace period of 61 days has begun as of the date of default. The notice will also state the amount of payment that is due. The payment required will not be more than an amount sufficient to increase the Net Cash Surrender Value to cover all monthly deductions for 3 months calculated assuming no interest or investment performance were credited to or charged against the Policy Account and no policy changes were made. If we do not receive such amount at our Administrative Office before the end of the grace period, we will then (1) withdraw and retain the entire amount in your Policy Account; and (2) send a written notice to you and any assignee on our records at last known addresses stating that this policy has ended without value. If we receive the requested amount before the end of the grace period, but the Net Cash Surrender Value is still insufficient to cover total monthly deductions, we will send a written notice that a new 61-day grace period has begun and request an additional payment. If the insured person dies during a grace period, we will pay the Insurance Benefit as described on Page 5. 94-300-7-RV Page 8 RESTORING YOUR POLICY BENEFITS. If this policy has ended without value, you may restore policy benefits while the insured person is alive if you: 1. Ask for restoration of policy benefits within 6 months from the end of the grace period; and 2. Provide evidence of insurability satisfactory to us; and 3. Make a required payment. The required payment will not be more than an amount sufficient to cover (i) the monthly administrative charges from the date of default to the effective date of restoration; (ii) total monthly deductions for 3 months, calculated from the effective date of restoration; (iii) any excess of the applicable surrender charge on the date of restoration over the surrender charge that was deducted on the date of default; and (iv) the charge for applicable taxes, the premium charge, and any increase in surrender charges associated with this payment. We will determine the amount of this required payment as if no interest or investment performance were credited to or charged against your Policy Account. From the required payment we will deduct the charge for applicable taxes and the premium charge. The policy account on the date of restoration will be equal to the balance of the required payment plus a surrender charge credit. The surrender charge credit will be the surrender charge that was deducted on the date of default, but not greater than the applicable surrender charge as of the effective date of restoration. The effective date of the restoration of policy benefits will be the beginning of the policy month which coincides with or next follows the date we approve your request. We will start to make monthly charges again as of the effective date of restoration. The monthly administrative charges from the date of default to the effective date of restoration will be deducted from the Policy Account as of the effective date of restoration. - -------------------------------------------------------------------------------- YOUR POLICY ACCOUNT AND HOW IT WORKS PREMIUM PAYMENTS. When we receive your premium payments, we subtract the expense charges shown in the table in the Policy Information section and any overdue monthly deductions. We put the balance (the net premium) into your Policy Account as of the date we receive the premium payment at our Administrative Office, and before any deductions from your Policy Account due on that date are made. However, we will put the initial net premium payment into your Policy Account as of the Register Date if it is later than the date of receipt. No premiums will be applied to your Policy Account until the full initial premium payment, as shown on your application, is received at our Administrative Office. MONTHLY DEDUCTIONS. At the beginning of each policy month we make a deduction from your Policy Account to cover monthly administrative charges and to provide insurance coverage. Such deduction for any policy month is the sum of the following amounts determined as of the beginning of that month: o the monthly administrative charges; o the monthly cost of insurance for the insured person; o the monthly cost of any benefits provided by riders to this policy; and o the monthly cost for the Death Benefit Guarantee. The monthly cost of insurance is the sum of a) our current monthly cost of insurance rate times the net amount at risk at the beginning of the policy month divided by $1,000; plus b) any extra charge per $1,000 of Face Amount of Insurance shown in the Policy Information section times the Face Amount of Insurance at the beginning of the policy month divided by $1,000. The net amount at risk at any time is the death benefit minus the amount in your Policy Account at that time. We will determine cost of insurance rates from time to time. Any change in the cost of insurance rates we use will be as described in "Changes in Policy Cost Factors" on Page 16. They will never be more than those shown in the Table of Guaranteed Maximum Cost of Insurance Rates on Page 4 -- Continued. 94-300-9-R Page 9 OTHER DEDUCTIONS. We also make the following other deductions from your Policy Account as they occur: o We deduct a withdrawal charge if you make a partial withdrawal of the Net Cash Surrender Value (see Page 13). o We deduct a surrender charge if, before the end of the fifteenth policy year, you give up this policy for its Net Cash Surrender Value, you reduce the Face Amount of Insurance, or if this policy terminates without value at the end of a grace period (see Page 12). A surrender charge may also apply to such transactions for up to fifteen years following a face amount increase. o We deduct a charge if you increase the Face Amount of Insurance (see Page 7). o We deduct a charge for certain transfers (see below). - -------------------------------------------------------------------------------- YOUR INVESTMENT OPTIONS ALLOCATIONS. This policy provides investment options for the amount in your Policy Account. Amounts put into your Policy Account and deductions from it are allocated to the investment divisions of our SA and to the unloaned portion of our GID at your direction. You specified your initial premium allocation and deduction allocation percentages in your application for this policy, a copy of which is attached to this policy. Unless you change them, such percentages shall also apply to subsequent premium and deduction allocations. However, any amounts which are put into your Policy Account prior to the Allocation Date and which are to be allocated to the investment divisions of our SA will initially be allocated to (and monthly deductions taken from) the Money Market Division of our SA. The Allocation Date is the first business day (see Page 12) twenty calendar days after the date of issue of this policy. On the Allocation Date, any such amounts then in the Money Market Division will be allocated in accordance with the directions contained in your policy application. Allocation percentages must be zero or a whole number not greater than 100. The sum of the premium allocation percentages and of the deduction allocation percentages must each equal 100. You may change such allocation percentages by written notice to our Administrative Office. A change will take effect on the date we receive it at our Administrative Office except for changes received on or prior to the Allocation Date which will take effect on the first business day following the Allocation Date. If we cannot make a monthly deduction on the basis of the deduction allocation percentages then in effect, we will make that deduction based on the proportion that your unloaned value in our GID and your values in the investment divisions of our SA bear to the total unloaned value in your Policy Account. TRANSFERS. At your written request to our Administrative Office, we will transfer amounts from your value in any investment division of our SA to one or more other divisions of our SA or to our GID. Any such transfer will take effect on the date we receive your written request at our Administrative Office. However, no transfers will be made prior to the Allocation Date. Once during each policy year you may ask us by written request to our Administrative Office to transfer an amount you specify from your unloaned value in our GID to one or more investment divisions of our SA. However, we will make such a transfer only if (1) we receive your written request at our Administrative Office within 30 days before or after a policy anniversary; and (2) the amount you specify is not more than the greater of 25% of your unloaned value in our GID as of the date the transfer takes effect or $500.00. In no event will we transfer more than your unloaned value in our GID. The transfer will take effect on the date we receive your written request for it at our Administrative Office but not before the policy anniversary. The minimum amount that we will transfer from your value in an investment division of our SA on any date is the lesser of $500.00 or your value in that investment division on that date, except as stated in the next paragraph. The minimum amount that we will transfer from your value in our GID is the lesser of $500.00 or your unloaned value in our GID as of the date the transfer takes effect, except as stated in the next paragraph. We will waive the minimum amount limitations set forth in the immediately preceding paragraph if the total amount being transferred on that date is at least $500.00. 94-300-9-R Page 10 We reserve the right to make a transfer charge up to $25.00 for each transfer of amounts among your investment options. The transfer charge, if any, is deducted from the amounts transferred from the investment divisions of our SA and the GID based on the proportion that the amount transferred from each investment division and the GID bears to the total amount being transferred. A transfer from the Money Market Division on the Allocation Date (if applicable) will not incur a transfer charge. If you ask us to transfer the entire amount of your value in the investment divisions of our SA to our GID, we will not make a charge for that transfer. - -------------------------------------------------------------------------------- THE VALUE OF YOUR POLICY ACCOUNT The amount in your Policy Account at any time is equal to the sum of the amounts you then have in our GID and the investment divisions of our SA under this policy. YOUR VALUE IN OUR GID. The amount you have in our GID at any time is equal to the amounts allocated and transferred to it, plus the interest credited to it, minus amounts deducted, transferred and withdrawn from it. We will credit the amount in our GID with interest rates we determine. We will determine such interest rates annually in advance for unloaned and loaned amounts in our GID. The rates may be different for unloaned and loaned amounts. The interest rates we determine each year will apply to the policy year that follows the date of determination. Any change in the interest rates we determine will be as described in "Changes in Policy Cost Factors" on Page 16. Such interest rates will not be less than 4%. At the end of each policy month we will credit interest on unloaned amounts in our GID as follows: o On amounts that remain in our GID for the entire policy month, from the beginning to the end of the policy month. o On amounts allocated to our GID during a policy month that are net premium payments or loan repayments, from the date we receive them to the end of the policy month. However, we will credit interest on the amount derived from the initial premium payment from the Register Date, if it is later than the date of receipt. o On amounts transferred to our GID during a policy month, from the date of the transfer to the end of the policy month. o On amounts deducted or withdrawn from our GID during a policy month, from the beginning of the policy month to the date of the deduction or withdrawal. We credit interest on the loaned portion of our GID on each policy anniversary and at any time you repay all of a policy loan. The interest rate we credit to the loaned portion of our GID will be at an annual rate up to 2% less than the loan interest rate we charge. However, we reserve the right to credit a lower rate than this if in the future tax laws change such that our taxes on policy loans or policy loan interest is increased. In no event will we credit less than 4% a year. At the time of crediting such interest, we allocate the interest to the investment divisions of our SA and the unloaned portion of our GID in accordance with your premium allocation percentage. YOUR VALUE IN THE INVESTMENT DIVISIONS OF OUR SA. The amount you have in an investment division of our SA under this policy at any time is equal to the number of units this policy then has in that division multiplied by the division's unit value at that time. Amounts allocated, transferred or added to an investment division of our SA are used to purchase units of that division; units are redeemed when amounts are deducted, loaned, transferred or withdrawn. These transactions are called policy transactions. The number of units a policy has in an investment division at any time is equal to the number of units purchased minus the number of units redeemed in that division to that time. The number of units purchased or redeemed in a policy transaction is equal to the dollar amount of the policy transaction divided by the division's unit value on the date of the policy transaction. Policy transactions may be made on any day. The unit value that applies to a transaction made on a business day will be the unit value for that day. The unit value that applies to a transaction made on a non-business day will be the unit value for the next business day. 94-300-11-R Page 11 We determine unit values for the investment divisions of our SA at the end of each business day. Generally, a business day is any day we are open and the New York Stock Exchange is open for trading. A business day immediately preceded by one or more non-business calendar days will include those non-business days as part of that business day. For example, a business day which falls on a Monday will consist of that Monday and the immediately preceding Saturday and Sunday. The unit value of an investment division of our SA on any business day is equal to the unit value for that division on the immediately preceding business day multiplied by the net investment factor for that division on that business day. The net investment factor for an investment division of our SA on any business day is (a) divided by (b), minus (c), where: (a) is the net asset value of the shares in designated investment companies that belong to the investment division at the close of business on such business day before any policy transactions are made on that day, plus the amount of any dividend or capital gain distribution paid by the investment companies on that day; (b) is the value of the assets in that investment division at the close of business on the immediately preceding business day after all policy transactions were made for that day; and (c) is a charge for each calendar day in that business day, as defined above, corresponding to a charge not exceeding .90% yearly for mortality and expense risks, plus any charge for that day for taxes or amounts set aside as a reserve for taxes. The net asset value of an investment company's shares held in each investment division shall be the value reported to us by that investment company. - -------------------------------------------------------------------------------- THE CASH SURRENDER VALUE OF THIS POLICY CASH SURRENDER VALUE. The Cash Surrender Value on any date is equal to the amount in your Policy Account on that date minus any surrender charge. NET CASH SURRENDER VALUE. The Net Cash Surrender Value is equal to the Cash Surrender Value minus any policy loan and accrued loan interest. You may give up this policy for its Net Cash Surrender Value at any time while the insured person is living. You may do this by sending us a written request for it and this policy to our Administrative Office. We will compute the Net Cash Surrender Value as of the date we receive your request for it and this policy at our Administrative Office. All insurance coverage under this policy ends on such date. SURRENDER CHARGES. If you give up this policy for its Net Cash Surrender Value or if it ends without value at the end of a grace period before the end of the fifteenth policy year, we will subtract a surrender charge from your Policy Account. A table of maximum surrender charges for the initial face amount is in the Policy Information section. We will also establish surrender charges for any increase in the Face Amount of Insurance that represents an increase over the previous highest Face Amount. These will apply before the end of the fifteenth year from the effective date of the increase. Changes in Face Amount resulting from a change in death benefit option will not be considered in computing the previous highest Face Amount. If the Face Amount of Insurance is reduced before the end of the fifteenth policy year or within fifteen years following a face amount increase, we may also deduct a proportionate amount of any applicable surrender charge from your Policy Account. Such deduction will be made in accordance with the "Allocations" provision on Page 10. Reductions will first be applied against the most recent increase in the Face Amount of Insurance. They will then be applied to prior increases in the Face Amount of Insurance in the reverse order in which such increases took place, and then to the original Face Amount of Insurance. We have filed a detailed statement of the method of computing surrender charges with the insurance supervisory official of the jurisdiction in which this policy is delivered. 94-300-11-R Page 12 PARTIAL NET CASH SURRENDER VALUE WITHDRAWAL. After the first policy year and while the insured person is living, you may ask for a partial Net Cash Surrender Value withdrawal by written request to our Administrative Office. Your request will be subject to our approval based on our rules in effect when we receive your request, and to the minimum withdrawal amount of $500.00. The amount withdrawn from the Policy Account is equal to the amount requested plus an expense charge equal to the lesser of $25.00 and 2% of the amount withdrawn. We have the right to decline a request for a partial Net Cash Surrender Value withdrawal. A partial withdrawal will result in a reduction in the Cash Surrender Value and in your Policy Account equal to the amount withdrawn plus the expense charge as well as a reduction in your death benefit. If the death benefit is Option A, the withdrawal may also result in a decrease in the face amount. You may tell us how much of each partial withdrawal is to come from your unloaned value in our GID and from your values in each of the investment divisions of our SA. If you do not tell us, we will make the withdrawal on the basis of your monthly deduction allocation percentages then in effect. The expense charge is deducted from your value remaining in each investment division and the GID, from whichever the withdrawal is made, based on the proportion that the amount withdrawn from each investment division and the GID bears to the total amount being withdrawn. If we cannot make the withdrawal or deduct the expense charge as indicated above, we will make the withdrawal and deduction based on the proportion that your unloaned value in our GID and your values in the investment divisions of our SA bear to the total unloaned value in your Policy Account. Such withdrawal and resulting reduction in the death benefit, in the Cash Surrender Value and in your Policy Account will take effect on the date we receive your written request at our Administrative Office. We will send you a new Policy Information section if a withdrawal results in a reduction in the Face Amount of Insurance. It will become a part of this policy. We may require you to return this policy to our Administrative Office to make a change. - -------------------------------------------------------------------------------- HOW A LOAN CAN BE MADE POLICY LOANS. You can take a loan on this policy while it has a loan value. This policy will be the only security for the loan. The initial loan and each additional loan must be for at least $500.00. Any amount on loan is part of your Policy Account (see Page 11). We refer to this as the loaned portion of your Policy Account. LOAN VALUE. The loan value on any date is 90% of the Cash Surrender Value on that date. The amount of the loan may not be more than the loan value. If you request an increase to an existing loan, the additional amount requested will be added to the amount of the existing loan and accrued loan interest. Your request for a policy loan must be in writing to our Administrative Office. You may tell us how much of the requested loan is to be allocated to your unloaned value in our GID and your value in each investment division of our SA. Such values will be determined as of the date we receive your request. If you do not tell us, we will allocate the loan on the basis of your monthly deduction allocation percentages then in effect. If we cannot allocate the loan on the basis of your direction or those percentages, we will allocate it based on the proportion that your unloaned value in our GID and your values in the investment divisions of our SA bear to the total unloaned value in your Policy Account. The loaned portion of your Policy Account will be maintained as a part of our GID. Thus, when a loaned amount is allocated to an investment division of our SA, we will redeem units of that investment division sufficient in value to cover the amount of the loan so allocated and transfer that amount to our GID. LOAN INTEREST. Interest on a loan accrues daily at an adjustable loan interest rate. We will determine the rate at the beginning of each policy year, subject to the following paragraphs. It will apply to any new or outstanding loan under the policy during the policy year next following the date of determination. The maximum loan interest rate for a policy year shall be the greater of: (1) the "Published Monthly Average," as defined below, for the calendar month that ends two months before the date of determination; or (2) 5%. "Published Monthly Average" means the Monthly Average Corporates yield shown in Moody's Corporate Bond Yield Averages published by Moody's Investors Service, Inc., or any successor thereto. If such averages are no longer published, we will use such other averages as may be established by regulation by the insurance supervisory official of the jurisdiction in which this 94-300-13 Page 13 policy is delivered. In no event will the loan interest rate for a policy year be greater than the maximum rate permitted by applicable law. We reserve the right to establish a rate lower than the maximum. No change in the rate shall be less than 1/2 of 1% a year. We may increase the rate whenever the maximum rate as determined by clause (1) of the preceding paragraph exceeds the rate being charged by 1/2 of 1% or more. We will reduce the rate to or below the maximum rate as determined by clause (1) of the preceding paragraph if such maximum is lower than the rate being charged by 1/2 of 1% or more. We will notify you of the initial loan interest rate when you make a loan. We will also give you advance written notice of any increase in the interest rate of any outstanding loan. Loan interest is due on each policy anniversary. If the interest is not paid when due, it will be added to your outstanding loan and allocated on the basis of the deduction allocation percentages then in effect. If we cannot make the allocation on the basis of these percentages, we will make it based on the proportion that your unloaned value in our GID and your values in the investment divisions of our SA bear to the total unloaned value in your Policy Account. The unpaid interest will then be treated as part of the loaned amount and will bear interest at the loan rate. When unpaid loan interest is allocated to an investment division of our SA, we will redeem units of that investment division sufficient in value to cover the amount of the interest so allocated and transfer that amount to our GID. LOAN REPAYMENT. You may repay all or part of a policy loan at any time while the insured person is alive and this policy is in force. Repayments will first be allocated to our GID until you have repaid any loaned amounts that were allocated to our GID. You may tell us how to allocate payments above that amount among our GID and the investment divisions of our SA. If you do not tell us, we will make the allocation on the basis of the premium allocation percentages then in effect. Failure to repay a policy loan or to pay loan interest will not terminate this policy unless at the beginning of a policy month the Net Cash Surrender Value is less than the total monthly deduction then due. In that case, the Grace Period provision will apply (see Page 8). A policy loan will have a permanent effect on your benefits under this policy even if it is repaid. - -------------------------------------------------------------------------------- OUR SEPARATE ACCOUNT(S) (SA) We established and we maintain our SA under the laws of New York State. Realized and unrealized gains and losses from the assets of our SA are credited or charged against it without regard to our other income, gains, or losses. Assets are put in our SA to support this policy and other variable life insurance policies. Assets may be put in our SA for other purposes, but not to support contracts or policies other than variable contracts. The assets of our SA are our property. The portion of its assets equal to the reserves and other policy liabilities with respect to our SA will not be chargeable with liabilities arising out of any other business we conduct. We may transfer assets of an investment division in excess of the reserves and other liabilities with respect to that division to another investment division or to our General Account. INVESTMENT DIVISIONS. Our SA consists of investment divisions. Each division may invest its assets in a separate class of shares of a designated investment company or companies or make direct investments in securities. The investment divisions of our SA that you chose for your initial allocations are shown on the application for this policy, a copy of which is attached to this policy. We may from time to time make other investment divisions available to you or we may create a new SA. We will provide you with written notice of all material details including investment objectives and all charges. We have the right to change or add designated investment companies. We have the right to add or remove investment divisions. We have the right to withdraw assets of a class of policies to which this policy belongs from an investment division and put them in another investment division. We also have the right to combine any two or more investment divisions. The term investment division in this policy shall then refer to any other investment division in which the assets of a class of policies to which this policy belongs were placed. 94-300-13 Page 14 We have the right to: 1. register or deregister any SA available under this policy under the Investment Company Act of 1940; 2. run any SA available under this policy under the direction of a committee, and discharge such committee at any time; 3. restrict or eliminate any voting rights of policy owners, or other persons who have voting rights as to any SA available under this policy; and 4. operate any SA available under this policy or one or more of its investment divisions by making direct investments or in any other form. If we do so, we may invest the assets of such SA or one or more of the investment divisions in any legal investments. We will rely upon our own or outside counsel for advice in this regard. Also, unless otherwise required by law or regulation, an investment adviser or any investment policy may not be changed without our consent. If required by law or regulation, the investment policy of an investment division of any SA available under this policy will not be changed by us unless approved by the Superintendent of Insurance of New York State or deemed approved in accordance with such law or regulation. If so required, the process for getting such approval is on file with the insurance supervisory official of the jurisdiction in which this policy is delivered. If any of these changes result in a material change in the underlying investments of an investment division of our SA, we will notify you of such change, as required by law. If you have value in that investment division, if you wish, we will transfer it at your written direction from that division (without charge) to another division of our SA or to our GID, and you may then change your premium and deduction allocation percentages. - -------------------------------------------------------------------------------- OUR ANNUAL REPORT TO YOU For each policy year we will send you a report for this policy that shows the current death benefit, the value you have in our GID and the value you have in each investment division of any SA available under this policy, the Cash Surrender Value and any policy loan with the current loan interest rate. It will also show the premiums paid and any other information as may be required by the insurance supervisory official of the jurisdiction in which this policy is delivered. - -------------------------------------------------------------------------------- HOW BENEFITS ARE PAID You can have the Insurance Benefit, your Net Cash Surrender Value withdrawals or your Policy Account payable on the Final Policy Date paid immediately in one sum. Or, you can choose another form of payment for all or part of them. If you do not arrange for a specific choice before the insured person dies, the beneficiary will have this right when the insured person dies. If you do make an arrangement, however, the beneficiary cannot change it after the insured person dies. Payments under the following options will not be affected by the investment experience of any investment division of our SA after proceeds are applied under such options. The options are: 1. DEPOSIT: The sum will be left on deposit for a period mutually agreed upon. We will pay interest at the end of every month, every 3 months, every 6 months or every 12 months, as chosen. 2. INSTALLMENT PAYMENTS: There are two ways that we pay installments: A. FIXED PERIOD: We will pay the sum in equal installments for a specified number of years (not more than 30). The installments will be at least those shown in the Table of Guaranteed Payments on Page 18. B. FIXED AMOUNT: We will pay the sum in installments as mutually agreed upon until the original sum, together with interest on the unpaid balance, is used up. 3. MONTHLY LIFE INCOME: We will pay the sum as a monthly income for life. The amount of the monthly payment will be at least that shown in the Table of Guaranteed Payments on Page 18. You may choose any one of three ways to receive monthly life income. We will guarantee payments for at least 10 years (called "10 Years Certain"); at least 20 years (called "20 Years Certain"); or until the payments we make equal the original sum (called "Refund Certain"). 4. OTHER: We will apply the sum under any other option requested that we make available at the time of payment. 94-300-15 Page 15 The payee may name and change a successor payee for any amount we would otherwise pay to the payee's estate. Any arrangements involving more than one of the options, or a payee who is not a natural person (for example, a corporation) or who is a fiduciary, must have our approval. Also, details of all arrangements will be subject to our rules at the time the arrangement takes effect. These include rules on: the minimum amount we will apply under an option and minimum amounts for installment payments; withdrawal or commutation rights; naming payees and successor payees; and proving age and survival. Payment choices (or any later changes) will be made and will take effect in the same way as a change of beneficiary. Amounts applied under these options will not be subject to the claims of creditors or to legal process, to the extent permitted by law. - -------------------------------------------------------------------------------- OTHER IMPORTANT INFORMATION YOUR CONTRACT WITH US. This policy is issued in consideration of payment of the initial premium payment shown in the Policy Information section. This policy, and the attached copy of the initial application and all subsequent applications to change this policy, and all additional Policy Information sections added to this policy, make up the entire contract. The rights conferred by this policy are in addition to those provided by applicable Federal and State laws and regulations. Only our Chairman of the Board, our President or one of our Vice Presidents can modify this contract or waive any of our rights or requirements under it. The person making these changes must put them in writing and sign them. POLICY CHANGES -- APPLICABLE TAX LAW. For you and the beneficiary to receive the tax treatment accorded to life insurance under Federal law, this policy must qualify initially and continue to qualify as life insurance under the Code or successor law. Therefore, to assure this qualification for you we have reserved earlier in this policy the right to decline to accept premium payments, to decline to change death benefit options, to decline to change the Face Amount of Insurance, or to decline to make partial withdrawals that would cause this policy to fail to qualify as life insurance under applicable tax law as interpreted by us. Further, we reserve the right to make changes in this policy or its riders (for example, in the percentages on Page 6) or to require additional premium payments or to make distributions from this policy or to change the Face Amount of Insurance to the extent we deem it necessary to continue to qualify this policy as life insurance. Any such changes will apply uniformly to all policies that are affected. You will be given advance written notice of such changes. CHANGES IN POLICY COST FACTORS. Changes in policy cost factors (interest rates we credit, cost of insurance deductions, expense charges and mortality and expense risk charges) will be by class and based upon changes in future expectations for such elements as: investment earnings, mortality, persistency, expenses and taxes. Any change in policy cost factors will be determined in accordance with procedures and standards on file, if required, with the insurance supervisory official of the jurisdiction in which this policy is delivered. WHEN THE POLICY IS INCONTESTABLE. We have the right to contest the validity of this policy based on material misstatements made in the initial application for this policy. We also have the right to contest the validity of any policy change or restoration based on material misstatements made in any application for that change. However, we will not contest the validity of this policy after it has been in effect during the lifetime of the insured person for two years from the date of issue shown in the Policy Information section. We will not contest any policy change that requires evidence of insurability, or any restoration of this policy, after the change or restoration has been in effect for two years during the insured person's lifetime. No statement shall be used to contest a claim unless contained in an application. All statements made in an application are representations and not warranties. See any additional benefit riders for modifications of this provision that apply to them. WHAT IF AGE OR SEX HAS BEEN MISSTATED? If the insured person's age or sex has been misstated on any application, the death benefit and any benefits provided by riders to this policy shall be those which would be purchased by the most recent deduction for the cost of insurance, and the cost of any benefits provided by riders, at the correct age and sex. 94-300-15 Page 16 HOW THE SUICIDE EXCLUSION AFFECTS BENEFITS. If the insured person commits suicide (while sane or insane) within two years after the Date of Issue shown in the Policy Information section, our liability will be limited to the payment of a single sum. This sum will be equal to the premiums paid, minus any loan and accrued loan interest and minus any partial withdrawal of the Net Cash Surrender Value. If the insured person commits suicide (while sane or insane) within two years after the effective date of a change that you asked for that increases the death benefit, then our liability as to the increase in amount will be limited to the payment of a single sum equal to the monthly cost of insurance deductions made for such increase plus the expense charge deducted for the increase (see Page 7). HOW WE MEASURE POLICY PERIODS AND ANNIVERSARIES. We measure policy years, policy months, and policy anniversaries from the Register Date shown in the Policy Information section. Each policy month begins on the same day in each calendar month as the day of the month in the Register Date. HOW, WHEN AND WHAT WE MAY DEFER. We may not be able to obtain the value of the assets of the investment divisions of our SA if: (1) the New York Stock Exchange is closed; or (2) the Securities and Exchange Commission requires trading to be restricted or declares an emergency. During such times, as to amounts allocated to the investment divisions of our SA, we may defer: 1. Determination and payment of Net Cash Surrender Value withdrawals; 2. Determination and payment of any death benefit in excess of the Face Amount of Insurance; 3. Payment of loans; 4. Determination of the unit values of the investment divisions of our SA; and 5. Any requested transfer or the transfer on the Allocation Date. As to amounts allocated to our GID, we may defer payment of any Net Cash Surrender Value withdrawal or loan amount for up to six months after we receive a request for it. We will allow interest, at a rate of at least 3% a year, on any Net Cash Surrender Value payment derived from our GID that we defer for 30 days or more. THE BASIS WE USE FOR COMPUTATION. We provide Cash Surrender Values that are at least equal to those required by law. If required to do so, we have filed with the insurance supervisory official of the jurisdiction in which this policy is delivered a detailed statement of our method of computing such values. We compute reserves under this policy by the Commissioners Reserve Valuation Method. We base minimum cash surrender values and reserves on the Commissioners 1980 Standard Ordinary Male and Female Mortality Tables at attained ages 0-19 or the Commissioners 1980 Standard Ordinary, Smoker and Non-Smoker, Mortality Tables at attained ages 20 and over. We also use these tables as the basis for determining maximum insurance costs, taking account of sex, attained age, class of risk and Tobacco User status of the insured person. We use an effective annual interest rate of 4%. POLICY ILLUSTRATIONS. Upon request we will give you an illustration of the future benefits under this policy based upon both guaranteed and current cost factor assumptions. However, if you ask us to do this more than once in any policy year, we reserve the right to charge you a fee for this service. POLICY CHANGES. You may add additional benefit riders or make other changes, subject to our rules at the time of change. 94-300-17 Page 17 TABLE OF GUARANTEED PAYMENTS (MINIMUM AMOUNT FOR EACH $1,000 APPLIED) OPTION 2A FIXED PERIOD INSTALLMENTS ------------------------- Number of Years' Monthly Annual Installments Installment Installment - ------------ ----------- ----------- 1 $84.28 $1000.00 2 42.66 506.17 3 28.79 341.60 4 21.86 259.33 5 17.70 210.00 6 14.93 177.12 7 12.95 153.65 8 11.47 136.07 9 10.32 122.40 10 9.39 111.47 11 8.64 102.54 12 8.02 95.11 13 7.49 88.83 14 7.03 83.45 15 6.64 78.80 16 6.30 74.73 17 6.00 71.15 18 5.73 67.97 19 5.49 65.13 20 5.27 62.58 21 5.08 60.28 22 4.90 58.19 23 4.74 56.29 24 4.60 54.55 25 4.46 52.95 26 4.34 51.48 27 4.22 50.12 28 4.12 48.87 29 4.02 47.70 30 3.93 46.61 If installments are paid every 3 months, they will be 25.23% of the annual installments. If they are paid every 6 months, they will be 50.31% of the annual installments. OPTION 3 MONTHLY LIFE INCOME -------------------
10 Years Certain 20 Years Certain Refund Certain ---------------- ---------------- -------------- AGE Male Female Male Female Male Female --- ---- ------ ---- ------ ---- ------ 50 $3.48 $3.19 $3.42 $3.17 $3.37 $3.14 51 3.54 3.23 3.47 3.21 3.42 3.17 52 3.59 3.28 3.51 3.25 3.46 3.21 53 3.65 3.32 3.56 3.29 3.51 3.25 54 3.70 3.37 3.61 3.33 3.56 3.29 55 3.77 3.42 3.66 3.37 3.61 3.34 56 3.83 3.47 3.72 3.42 3.67 3.38 57 3.90 3.52 3.77 3.47 3.72 3.43 58 3.97 3.58 3.83 3.52 3.78 3.48 59 4.04 3.64 3.88 3.57 3.84 3.53 60 4.12 3.70 3.94 3.62 3.90 3.58 61 4.20 3.76 4.00 3.68 3.97 3.64 62 4.29 3.83 4.06 3.74 4.04 3.69 63 4.38 3.90 4.12 3.79 4.11 3.75 64 4.48 3.98 4.18 3.85 4.19 3.82 65 4.58 4.06 4.25 3.92 4.26 3.88 66 4.68 4.14 4.31 3.98 4.35 3.95 67 4.79 4.23 4.37 4.04 4.43 4.02 68 4.90 4.32 4.43 4.11 4.52 4.10 69 5.02 4.42 4.50 4.18 4.62 4.18 70 5.14 4.52 4.56 4.25 4.71 4.26 71 5.26 4.63 4.62 4.31 4.82 4.35 72 5.39 4.75 4.67 4.38 4.92 4.44 73 5.52 4.87 4.73 4.45 5.03 4.53 74 5.66 4.99 4.78 4.51 5.14 4.63 75 5.80 5.12 4.83 4.58 5.27 4.74 76 5.95 5.26 4.88 4.64 5.39 4.84 77 6.10 5.40 4.93 4.70 5.53 4.96 78 6.25 5.55 4.97 4.75 5.66 5.08 79 6.40 5.70 5.01 4.80 5.80 5.20 80 6.56 5.85 5.04 4.86 5.96 5.33 81 6.72 6.01 5.08 4.90 6.11 5.45 82 6.88 6.18 5.11 4.95 6.27 5.60 83 7.04 6.34 5.13 4.99 6.43 5.73 84 7.20 6.51 5.16 5.03 6.62 5.89 85 & over 7.36 6.67 5.18 5.07 6.81 6.04
Amounts for Monthly Life Income are based on age nearest birthday when income starts. Amounts for ages not shown will be furnished on request. 94-300-17 Page 18 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES A Stock Life Insurance Company Home Office: 787 Seventh Avenue, New York, New York 10019-6018 Flexible Premium Variable Life Insurance Policy. Insurance payable upon death before Final Policy Date. Policy Account less outstanding loans, liens and accrued interest payable on Final Policy Date. Adjustable Death Benefit. Premiums may be paid while insured person is living and before the Final Policy Date. Premiums must be sufficient to keep the policy in force. Values provided by this policy are based on declared interest rates, and on the investment experience of the investment divisions of a separate account which in turn depends on the investment performance of the securities held by such investment division. They are not guaranteed as to dollar amount. Investment options are described on Page 10. This is a non-participating policy. No. 94-300-RV EX-99.1A5AIIIPOLICY 6 POLICY NO. 95-300 (EVLICO) (IL PLUS) [EVLICO LOGO] EQUITABLE VARIABLE LIFE INSURANCE COMPANY VARIABLE LIFE INSURANCE POLICY INSURED PERSON FRAN S CAN 1 POLICY OWNER FRAN S CAN 1 FACE AMOUNT OF INSURANCE $100,000 DEATH BENEFIT OPTION A (SEE PAGE 6) POLICY NUMBER 60 231 043 - -------------------------------------------------------------------------------- WE AGREE to pay the Insurance Benefit of this policy and to provide its other benefits and rights in accordance with its provisions. FLEXIBLE PREMIUM VARIABLE LIFE POLICY This is a flexible premium variable life insurance policy. You can, within limits: o make premium payments at any time and in any amount; o change the death benefit option; o change the allocation of net premiums and deductions among your investment options; and o transfer amounts among your investment options. THE DEATH BENEFIT IS GUARANTEED TO THE INSURED'S ATTAINED AGE 100 IF THE DEATH BENEFIT IS ALWAYS OPTION A OR TO THE LATER OF ATTAINED AGE 80 OR 15 YEARS FROM ISSUE IF THE DEATH BENEFIT IS EVER AN OPTION B, SUBJECT TO PREMIUMS HAVING BEEN PAID IN ACCORDANCE WITH THE DEATH BENEFIT GUARANTEE PROVISION DESCRIBED IN THE POLICY. All of these rights and benefits are subject to the terms and conditions of this policy. All requests for policy changes are subject to our approval and may require evidence of insurability. We will put your net premiums into your Policy Account. You may then allocate them to one or more investment divisions of our Separate Account(s) (SA) and to our Guaranteed Interest Division (GID). THE PORTION OF YOUR POLICY ACCOUNT THAT IS IN AN INVESTMENT DIVISION OF OUR SA WILL VARY UP OR DOWN DEPENDING ON THE UNIT VALUE OF SUCH INVESTMENT DIVISION, WHICH IN TURN DEPENDS ON THE INVESTMENT PERFORMANCE OF THE SECURITIES HELD BY THAT SA DIVISION. THERE ARE NO MINIMUM GUARANTEES AS TO SUCH PORTION OF YOUR POLICY ACCOUNT. The portion of your Policy Account that is in our GID will accumulate, after deductions, at rates of interest we determine. Such rates will not be less than 4% a year. THE AMOUNT AND DURATION OF THE DEATH BENEFIT MAY BE VARIABLE OR FIXED AS DESCRIBED IN THIS POLICY. This is a non-participating policy. RIGHT TO EXAMINE POLICY. You may examine this policy and if for any reason you are not satisfied with it, you may cancel it by returning this policy with a written request for cancellation to our Administrative Office by the 10th day after you receive it. If you do this, we will refund the premiums that were paid on this policy. /s/ Pauline Sherman /s/ James M. Benson Pauline Sherman, James M. Benson, Vice President & Secretary President & Chief Executive Officer No. 95-300 CONTENTS - -------- Policy Information 3 Table of Maximum Monthly Charges for Benefits 4 Those Who Benefit from this Policy 5 The Insurance Benefit We Pay 5 Changing the Face Amount of Insur- ance or the Death Benefit Option 7 The Premiums You Pay 7 Your Policy Account and How it Works 9 Your Investment Options 10 The Value of Your Policy Account 11 The Cash Surrender Value of this Policy 12 How a Loan Can Be Made 13 Our Separate Account(s) (SA) 14 Our Annual Report to You 15 How Benefits are Paid 15 Other Important Information 16 IN THIS POLICY: - -------------- "We," "our," and "us" mean Equitable Variable Life Insurance Company. "You" and "your" mean the owner of this policy at the time an owner's right is exercised. Unless otherwise stated, all references to interest in this policy are effective annual rates of interest. Attained age means age on the birthday nearest to the beginning of the current policy year. ADMINISTRATIVE OFFICE - --------------------- The address of our Administrative Office is shown on Page 3. You should send premiums and correspondence to that address unless instructed otherwise. Copies of the application for this policy and any additional benefit riders are attached to the policy. INTRODUCTION The premiums you pay, after deductions are made in accordance with the Table of Expense Charges in the Policy Information section, are put into your Policy Account. Amounts in your Policy Account are allocated at your direction to one or more investment divisions of our SA and to our GID. The investment divisions of our SA invest in securities and other investments whose value is subject to market fluctuations and investment risk. There is no guarantee of principal or investment experience. Our GID earns interest at rates we declare in advance of each policy year. The rates are guaranteed for each policy year. The principal, after deductions, is also guaranteed. If death benefit Option A is in effect, the death benefit is the Face Amount of Insurance, and the amount of the death benefit is fixed except when it is a percentage of your Policy Account. If death benefit Option B is in effect, the death benefit is the Face Amount of Insurance plus the amount in your Policy Account. The amount of the death benefit is variable. Under either option, the death benefit will never be less than a percentage of your Policy Account as stated on Page 6. The death benefit is guaranteed to the Insured's attained age 100 if the Death Benefit is always Option A or to the later of attained age 80 or 15 years from issue if the Death Benefit is ever an Option B, subject to premiums having been paid in accordance with the Death Benefit Guarantee provision described in the policy. We make monthly deductions from your Policy Account to cover the cost of the benefits provided by this policy and the cost of any benefits provided by riders to this policy. If you give up this policy for its Net Cash Surrender Value, reduce the Face Amount of Insurance, or if this policy ends without value at the end of the grace period, we may deduct a surrender charge from your Policy Account. This is only a summary of what this policy provides. You should read all of it carefully. Its terms govern your rights and our obligations. No. 95-300 Page 2 POLICY INFORMATION INSURED PERSON FRAN S CAN 1 POLICY OWNER FRAN S CAN 1 FACE AMOUNT OF INSURANCE $100,000 DEATH BENEFIT OPTION A (SEE PAGE 6) POLICY NUMBER 60 231 043 SEPARATE ACCOUNT FP BENEFICIARY AS DESIGNATED IN APPLICATION REGISTER DATE FEB 2, 1996 ISSUE AGE 35 DATE OF ISSUE FEB 5, 1996 SEX MALE INSURED PERSON'S STATE OF RESIDENCE SPECIMEN PREFERRED NON-TOBACCO USER AN INITIAL PREMIUM PAYMENT OF $1,643.34 IS DUE ON OR BEFORE DELIVERY OF THE POLICY. THE PLANNED PERIODIC PREMIUM OF $675.00 IS PAYABLE QUARTERLY. PREMIUM PAYMENTS ARE FOR THE INSURANCE BENEFIT AND ANY ADDITIONAL BENEFIT RIDERS LISTED BELOW. SEE PAGE 3 -- CONTINUED FOR TABLE OF SPECIFIED PREMIUMS THE PLANNED PERIODIC PREMIUMS SHOWN ABOVE MAY NOT BE SUFFICIENT TO CONTINUE THE POLICY AND LIFE INSURANCE COVERAGE IN FORCE TO THE FINAL POLICY DATE, WHICH IS THE POLICY ANNIVERSARY NEAREST THE INSURED PERSON'S 100TH BIRTHDAY. THE PERIOD FOR WHICH THE POLICY AND COVERAGE WILL CONTINUE IN FORCE WILL DEPEND ON: (1) THE AMOUNT, TIMING AND FREQUENCY OF PREMIUM PAYMENTS; (2) CHANGES IN THE FACE AMOUNT OF INSURANCE AND THE DEATH BENEFIT OPTIONS; (3) CHANGES IN THE INTEREST RATES CREDITED TO OUR GID AND IN THE INVESTMENT PERFORMANCE OF THE INVESTMENT DIVISIONS OF OUR SA; (4) CHANGES IN THE MONTHLY COST OF INSURANCE DEDUCTIONS FROM THE POLICY ACCOUNT FOR THIS POLICY AND ANY BENEFITS PROVIDED BY RIDERS TO THIS POLICY; AND (5) LOAN AND PARTIAL NET CASH SURRENDER VALUE WITHDRAWAL ACTIVITY. 95-300-3 PAGE 3 (CONTINUED ON NEXT PAGE) POLICY INFORMATION CONTINUED -- POLICY NUMBER 60 231 043 ------ TABLE OF SPECIFIED PREMIUMS ------ BENEFITS MONTHLY PREMIUM PREMIUM PERIOD - -------- --------------- -------------- BASIC LIFE INSURANCE $81.07 65 YEARS 95-300-3 PAGE 3 -- CONTINUED POLICY INFORMATION CONTINUED -- POLICY NUMBER 60 231 043 ------ TABLE OF AUTOMATIC EXPENSE CHARGES ------ DEDUCTION FROM PREMIUM PAYMENTS: CHARGE FOR APPLICABLE TAXES (OTHER THAN TAXES DISCUSSED ON PAGE 12): 2.500% OF EACH PREMIUM PAYMENT. THIS AMOUNT IS SUBTRACTED FROM EACH PREMIUM PAYMENT. WE RESERVE THE RIGHT TO CHANGE THIS PERCENTAGE TO CONFORM TO CHANGES IN THE LAW OR IF THE INSURED PERSON CHANGES RESIDENCE. DEDUCTIONS FROM YOUR POLICY ACCOUNT: SALES CHARGE: A MAXIMUM CHARGE OF $4.78 IS DEDUCTED AT THE BEGINNING OF EACH POLICY MONTH DURING THE FIRST TEN POLICY YEARS (SUBJECT TO ANY APPLICABLE LIMITATIONS IMPOSED BY THE INVESTMENT COMPANY ACT OF 1940). FOR MORTALITY AND EXPENSE RISK: .00050 OF THE UNLOANED POLICY ACCOUNT VALUE IS DEDUCTED AT THE BEGINNING OF EACH POLICY MONTH. WE RESERVE THE RIGHT TO CHANGE THIS RATE, BUT IT WILL NEVER BE MORE THAN .00075. INITIAL ADMINISTRATIVE CHARGE: $55.00 IS DEDUCTED AT THE BEGINNING OF EACH POLICY MONTH DURING THE FIRST POLICY YEAR. SUBSEQUENT YEARS ADMINISTRATIVE CHARGE: $6.00 IS DEDUCTED AT THE BEGINNING OF EACH POLICY MONTH DURING EACH POLICY YEAR AFTER THE FIRST POLICY YEAR. WE RESERVE THE RIGHT TO CHANGE THIS CHARGE BUT IT WILL NEVER BE MORE THAN $10.00 A MONTH. CHANGES WILL BE AS DESCRIBED IN "CHANGES IN POLICY COST FACTORS" ON PAGE 16. 95-300-3 PAGE 3 -- CONTINUED POLICY INFORMATION CONTINUED -- POLICY NUMBER 60 231 043 ------ TABLE OF MAXIMUM SURRENDER CHARGES ------ FOR THE INITIAL FACE AMOUNT BEGINNING OF BEGINNING OF POLICY POLICY YEAR CHARGE YEAR CHARGE ---- ------ ---- ------ 1 $ 0.00 9 $481.80 2 96.36 10 475.11 3 192.72 11 394.81 4 289.08 12 314.51 5 385.44 13 234.21 6 481.80 14 153.91 7 481.80 15 73.61 8 481.80 16 AND LATER 0.00 A SURRENDER CHARGE WILL BE SUBTRACTED FROM YOUR POLICY ACCOUNT IF THIS POLICY IS GIVEN UP FOR ITS NET CASH SURRENDER VALUE OR IF THIS POLICY TERMINATES WITHIN THE FIRST FIFTEEN POLICY YEARS. THE MAXIMUM CHARGE IN THE FIRST POLICY MONTH OF EACH POLICY YEAR IS SHOWN IN THE TABLE ABOVE (SUBJECT TO ANY APPLICABLE LIMITATIONS IMPOSED BY THE INVESTMENT COMPANY ACT OF 1940). AFTER THE NINTH POLICY YEAR, THE MAXIMUM CHARGE IN ANY OTHER POLICY MONTH WILL BE BASED ON THE NUMBER OF POLICY MONTHS SINCE THE BEGINNING OF THE POLICY YEAR. IF THE FACE AMOUNT OF INSURANCE IS REDUCED WITHIN THE FIRST FIFTEEN POLICY YEARS, A PRO RATA SHARE OF THE APPLICABLE SURRENDER CHARGE AT THAT TIME MAY BE DEDUCTED FROM YOUR POLICY ACCOUNT. SEE PAGE 12 FOR A DESCRIPTION OF THE PRO RATA SURRENDER CHARGE. *****ADMINISTRATIVE OFFICE: EQUITABLE VARIABLE LIFE INSURANCE COMPANY***** NEW YORK SERVICE CENTER 1755 BROADWAY, 2ND FLOOR NEW YORK, NY 10020 95-300-3 PAGE 3 -- CONTINUED POLICY INFORMATION CONTINUED -- POLICY NUMBER 60 231 043 ------ TABLE OF MAXIMUM MONTHLY CHARGES FOR BENEFITS ------ MONTHLY DEDUCTION BENEFITS FROM POLICY ACCOUNT PERIOD BASIC COST OF INSURANCE MAXIMUM MONTHLY COST OF INSURANCE RATE (SEE PAGE 4 -- CONTINUED) TIMES THOUSANDS OF NET AMOUNT AT RISK (SEE PAGE 9) 65 YEARS DEATH BENEFIT GUARANTEE $1.00 65 YEARS 95-300-4 PAGE 4 (CONTINUED ON NEXT PAGE) POLICY INFORMATION CONTINUED -- POLICY NUMBER 60 231 043 ------ TABLE OF GUARANTEED MAXIMUM MONTHLY COST OF INSURANCE RATES ------ PER $1,000 OF NET AMOUNT AT RISK (SEE PAGE 9) FOR BASIC LIFE INSURANCE INSURED INSURED PERSON'S PERSON'S ATTAINED MONTHLY ATTAINED MONTHLY AGE RATE AGE RATE - -------- ------- -------- ------- 35 $0.14083 70 $ 2.93250 36 0.14750 71 3.30167 37 0.15667 72 3.61750 38 0.16667 73 4.04167 39 0.17833 74 4.52000 40 0.19083 75 5.03667 41 0.20583 76 5.59000 42 0.22083 77 6.17500 43 0.23833 78 6.78667 44 0.25583 79 7.44000 45 0.27667 80 8.16167 46 0.29917 81 8.97250 47 0.32333 82 9.89750 48 0.34917 83 10.95167 49 0.37833 84 12.11833 50 0.41000 85 13.37417 51 0.44667 86 14.69833 52 0.48917 87 16.08083 53 0.53667 88 17.49667 54 0.59250 89 18.96583 55 0.65333 90 20.51167 56 0.72167 91 22.16500 57 0.79417 92 23.98667 58 0.87250 93 26.06583 59 0.96083 94 28.78417 60 1.05917 95 32.81750 61 1.16833 96 39.64250 62 1.29417 97 53.06583 63 1.43667 98 83.33250 64 1.59833 99 83.33250 65 1.77750 66 1.97083 67 2.18083 68 2.40583 69 2.65333 95-300-4 PAGE 4 -- CONTINUED - -------------------------------------------------------------------------------- THOSE WHO BENEFIT FROM THIS POLICY OWNER. The owner of this policy is the insured person unless otherwise stated in the application, or later changed. As the owner, you are entitled to exercise all the rights of this policy while the insured person is living. To exercise a right, you do not need the consent of anyone who has only a conditional or future ownership interest in this policy. BENEFICIARY. The beneficiary is as stated in the application, unless later changed. The beneficiary is entitled to the Insurance Benefit of this policy. One or more beneficiaries for the Insurance Benefit can be named in the application. If more than one beneficiary is named, they can be classed as primary or contingent. If two or more persons are named in a class, their shares in the benefit can be stated. The stated shares in the Insurance Benefit will be paid to any primary beneficiaries who survive the insured person. If no primary beneficiaries survive, payment will be made to any surviving contingent beneficiaries. Beneficiaries who survive in the same class will share the Insurance Benefit equally, unless you have made another arrangement with us. If there is no designated beneficiary living at the death of the insured person, we will pay the Insurance Benefit to the insured person's surviving children in equal shares. If none survive, we will pay the insured person's estate. CHANGING THE OWNER OR BENEFICIARY. While the insured person is living, you may change the owner or beneficiary by written notice in a form satisfactory to us. You can get such a form from our agent or by writing to us at our Administrative Office. The change will take effect on the date you sign the notice. But, it will not apply to any payment we make or other action we take before we receive the notice. If you change the beneficiary, any previous arrangement you made as to a payment option for benefits is cancelled. You may choose a payment option for the new beneficiary in accordance with "How Benefits Are Paid" on Page 15. ASSIGNMENT. You may assign this policy, if we agree. In any event, we will not be bound by an assignment unless we have received it in writing at our Administrative Office. Your rights and those of any other person referred to in this policy will be subject to the assignment. We assume no responsibility for the validity of an assignment. An absolute assignment will be considered as a change of ownership to the assignee. - -------------------------------------------------------------------------------- THE INSURANCE BENEFIT WE PAY We will pay the Insurance Benefit of this policy to the beneficiary when we receive at our Administrative Office (1) proof satisfactory to us that the insured person died before the Final Policy Date; and (2) all other requirements we deem necessary before such payment may be made. The Insurance Benefit includes the following amounts, which we will determine as of the date of the insured person's death: o the death benefit described on Page 6; o PLUS any other benefits then due from riders to this policy; o MINUS any policy loan, lien and accrued interest; o MINUS any overdue deductions from your Policy Account if the insured person dies during a grace period. We will add interest to the resulting amount in accordance with applicable law. We will compute the interest at a rate we determine, but not less than the greater of (a) the rate we are paying on the date of payment under the Deposit Option on Page 15, or (b) the rate required by any applicable law. Payment of the Insurance Benefit may also be affected by other provisions of this policy. See Pages 16 and 17, where we specify our right to contest the policy, the suicide exclusion, and what happens if age or sex has been misstated. Special exclusions or limitations (if any) are listed in the Policy Information section. 95-300-5 Page 5 DEATH BENEFIT. The death benefit at any time will be determined under either Option A or Option B below, whichever you have chosen and is in effect at such time. Under Option A, the death benefit is the greater of (a) the Face Amount of Insurance; or (b) a percentage (see Table below) of the amount in your Policy Account. Under this option, the amount of the death benefit is fixed, except when it is determined by such percentage. Under Option B, the death benefit is the greater of (a) the Face Amount of Insurance plus the amount in your Policy Account; or (b) a percentage (see Table below) of the amount in your Policy Account. Under this option the amount of the death benefit is variable. The percentages referred to above are the percentages from the following table for the insured person's age (nearest birthday) at the beginning of the policy year of determination. TABLE OF PERCENTAGES For ages not shown, the percentages shall decrease by a ratable portion for each full year INSURED INSURED PERSON'S AGE PERCENTAGE PERSON'S AGE PERCENTAGE - ------------ ---------- ------------ ---------- 40 and under 250% 65 120% 45 215 70 115 50 185 75 thru 95 105 55 150 100 100 60 130 Section 7702 of the Internal Revenue Code of 1986, as amended (i.e., the "Code"), gives a definition of life insurance which limits the amounts that may be paid into a life insurance policy relative to the benefits it provides. Even if this policy states otherwise, at no time will the "future benefits" under this policy be less than an amount such that the "premiums paid" do not exceed the Code's "guideline premium limitations". We may adjust the amount of premium paid to meet these limitations. Also, at no time will the "death benefit" under the policy be less than the "applicable percentage" of the "cash surrender value" of the policy. The above terms are as defined in the Code. In addition, we may take certain actions, described here and elsewhere in the policy, to meet the definitions and limitations in the Code, based on our interpretation of the Code. Please see "Policy Changes -- Applicable Tax Law" for more information. DEATH BENEFIT GUARANTEE. Subject to the conditions set forth below, the death benefit of this policy is guaranteed if the sum of premium payments accumulated at 4%, less any partial withdrawals accumulated at 4%, is at least equal to the sum of the Specified Premiums (shown on Page 3 -- Continued) accumulated at 4%, and any outstanding loan and accrued loan interest does not exceed the cash surrender value. Certain policy changes after issue will change the Specified Premiums accordingly. The death benefit is guaranteed to Insured's attained age 100 if the Death Benefit is always Option A, or the later of the Insured's attained age 80 or 15 years from issue if the Death Benefit is ever Option B. MATURITY BENEFIT. If the Insured person is living on the Final Policy Date defined in the Policy Information section, we will pay you the amount in your Policy Account on that date minus any policy loan, liens and accrued interest. This policy will then end. 95-300-5 Page 6 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CHANGING THE FACE AMOUNT OF INSURANCE OR THE DEATH BENEFIT OPTION You may change the death benefit option or the Face Amount of Insurance by written request to us at our Administrative Office, subject to our approval and the following: 1. At any time after the second policy year while this policy is in force, you may ask us to reduce the Face Amount of Insurance but not to less than the minimum amount for which we would then issue this policy under our rules. Any such reduction in the Face Amount of Insurance may not be less than $10,000. If you do this before the end of the fifteenth policy year, we may deduct from your Policy Account a pro rata share of the applicable surrender charge (see Page 12). 2. At any time while this policy is in force, you can change your death benefit option. If you ask us to change from Option A to Option B, we will decrease the Face Amount of Insurance by the amount in your Policy Account on the date the change takes effect. However, we reserve the right to decline to make such change if it would reduce the Face Amount of Insurance below the minimum amount for which we would then issue this policy under our rules. We also reserve the right to request evidence of insurability for a change to Option B. If you ask us to change from Option B to Option A, we will increase the Face Amount of Insurance by the amount in your Policy Account on the date the change takes effect. Such decreases and increases in the Face Amount of Insurance are made so that the death benefit remains the same on the date the change takes effect. 3. The change will take effect at the beginning of the policy month that coincides with or next follows the date we approve your request. 4. We reserve the right to decline to make any change that we determine would cause this policy to fail to qualify as life insurance under applicable tax law as interpreted by us (see Page 16). 5. You may ask for a change by completing an application for change, which you can get from our agent or by writing to us at our Administrative Office. A copy of your application for change will be attached to the new Policy Information section that we will issue when the change is made. The new section and the application for change will become a part of this policy. We may require you to return this policy to our Administrative Office to make a policy change. - -------------------------------------------------------------------------------- THE PREMIUMS YOU PAY The initial premium payment shown in the Policy Information section is due on or before delivery of this policy. No insurance will take effect before the initial premium payment is paid. Other premiums may be paid at any time while this policy is in force and before the Final Policy Date at our Administrative Office. We will send premium notices to you for the planned periodic premium shown in the Policy Information section. You may skip planned periodic premium payments. However, this may adversely affect the duration of the death benefit and your policy's values. We will assume that any payment you make to us is a premium payment, unless you tell us in writing that it is a loan repayment. 95-300-7 Page 7 LIMITS. Each premium payment after the initial one must be at least $100. We may increase this minimum limit 90 days after we send you written notice of such increase. We reserve the right to limit the amount of any premium payments you may make which are in excess of the Specified Premiums shown on Page 3 -- Continued. We also reserve the right not to accept premium payments or to return excess amounts (in a policy year) that we determine would cause this policy to fail to qualify as life insurance under applicable tax law as interpreted by us (see Page 16). GRACE PERIOD. At the beginning of each policy month, the Net Cash Surrender Value will be compared to the total monthly deductions described on Page 9. If the Net Cash Surrender Value is sufficient to cover the total monthly deductions, the policy is not in default. If the Net Cash Surrender Value at the beginning of any policy month is less than such deductions for that month we will perform the following calculations to determine whether the policy is in default: 1. Determine the Specified Premium fund. The Specified Premium fund for any policy month is the accumulation of all the specified premiums shown on Page 3 -- Continued up to that month at 4% interest. 2. Determine the actual premium fund. The actual premium fund for any policy month is the accumulation of all the premiums received at 4% interest minus all withdrawals accumulated at 4% interest. 3. If the result in Step 2 is greater than or equal to the result in Step 1, and any loan and accrued loan interest does not exceed the Cash Surrender Value, the policy is not in default. The death benefit guarantee will be in effect and monthly deductions in excess of the Policy Account will be waived. 4. If the result of Step 2 is less than the result in Step 1, or if the result of Step 2 is greater than or equal to the result in Step 1 and any loan and accrued loan interest exceeds the Cash Surrender Value, the policy is in default as of the first day of this policy month. This is the date of default. If the policy has ever been under Death Benefit Option B and a death benefit guarantee does not apply (see Death Benefit Guarantee provision) the calculations in Steps 1. - 4. above will not be performed. In that case, if the Net Cash Surrender Value at the beginning of any policy month is less than the monthly deductions for that month, the policy is in default as of the first day of such policy month. If the policy is in default, we will send you and any assignee on our records at last known addresses written notice stating that a grace period of 61 days has begun as of the date of default. The notice will also state the amount of payment that is due. The payment required will not be more than an amount sufficient to increase the Net Cash Surrender Value to cover all monthly deductions for 3 months calculated assuming no interest or investment performance were credited to or charged against the Policy Account and no policy changes were made. If we do not receive such amount at our Administrative Office before the end of the grace period, we will then (1) withdraw and retain the entire amount in your Policy Account; and (2) send a written notice to you and any assignee on our records at last known addresses stating that this policy has ended without value. If we receive the requested amount before the end of the grace period, but the Net Cash Surrender Value is still insufficient to cover total monthly deductions, we will send a written notice that a new 61-day grace period has begun and request an additional payment. If the insured person dies during a grace period, we will pay the Insurance Benefit as described on Page 5. 95-300-7 Page 8 RESTORING YOUR POLICY BENEFITS. If this policy has ended without value, you may restore policy benefits while the insured person is alive if you: 1. Ask for restoration of policy benefits within 6 months from the end of the grace period; and 2. Provide evidence of insurability satisfactory to us; and 3. Make a required payment. The required payment will not be more than an amount sufficient to cover (i) the monthly administrative charges from the date of default to the effective date of restoration; (ii) total monthly deductions for 3 months, calculated from the effective date of restoration; (iii) any excess of the applicable surrender charge during the three months following the date of restoration over the surrender charge that was deducted on the date of default; and (iv) the charge for applicable taxes, and any increase in surrender charges associated with this payment. We will determine the amount of this required payment as if no interest or investment performance were credited to or charged against your Policy Account. From the required payment we will deduct the charge for applicable taxes. The policy account on the date of restoration will be equal to the balance of the required payment plus a surrender charge credit. The surrender charge credit will be the surrender charge that was deducted on the date of default, but not greater than the applicable surrender charge as of the effective date of restoration. The effective date of the restoration of policy benefits will be the beginning of the policy month which coincides with or next follows the date we approve your request. We will start to make monthly charges again as of the effective date of restoration. The monthly administrative charges from the date of default to the effective date of restoration will be deducted from the Policy Account as of the effective date of restoration. - -------------------------------------------------------------------------------- YOUR POLICY ACCOUNT AND HOW IT WORKS PREMIUM PAYMENTS. When we receive your premium payments, we subtract the expense charge shown in the table in the Policy Information section and any overdue monthly deductions. We put the balance (the net premium) into your Policy Account as of the date we receive the premium payment at our Administrative Office, and before any deductions from your Policy Account due on that date are made. However, we will put the initial net premium payment into your Policy Account as of the Register Date if it is later than the date of receipt. No premiums will be applied to your Policy Account until the full initial premium payment, as shown on your application, is received at our Administrative Office. MONTHLY DEDUCTIONS. At the beginning of each policy month we make a deduction from your Policy Account to cover the monthly administrative charges and any monthly sales charge and to provide insurance coverage. Such deduction for any policy month is the sum of the following amounts determined as of the beginning of that month: o the monthly sales charge during the first ten policy years; o the monthly administrative charges; o the monthly cost of insurance for the insured person; o the monthly cost of any benefits provided by riders to this policy; o the monthly charge for mortality and expense risk; and o the monthly cost for the Death Benefit Guarantee. The monthly cost of insurance is the sum of a) our current monthly cost of insurance rate times the net amount at risk at the beginning of the policy month divided by $1,000; plus b) any extra charge per $1,000 of Face Amount of Insurance shown in the Policy Information section times the Face Amount of Insurance at the beginning of the policy month divided by $1,000. The net amount at risk at any time is the death benefit minus the amount in your Policy Account at that time. We will determine cost of insurance rates from time to time. Any change in the cost of insurance rates we use will be as described in "Changes in Policy Cost Factors" on Page 16. They will never be more than those shown in the Table of Guaranteed Maximum Cost of Insurance Rates on Page 4 -- Continued. 95-300-9 Page 9 OTHER DEDUCTIONS. We also make the following other deductions from your Policy Account as they occur: o We deduct a withdrawal charge if you make a partial withdrawal of the Net Cash Surrender Value (see Page 13). o We deduct a surrender charge if, before the end of the fifteenth policy year, you give up this policy for its Net Cash Surrender Value, you reduce the Face Amount of Insurance, or if this policy terminates without value at the end of a grace period (see Page 12). o We deduct a charge for certain transfers (see below). - -------------------------------------------------------------------------------- YOUR INVESTMENT OPTIONS ALLOCATIONS. This policy provides investment options for the amount in your Policy Account. Amounts put into your Policy Account and deductions from it are allocated to the investment divisions of our SA and to the unloaned portion of our GID at your direction. You specified your initial premium allocation and deduction allocation percentages in your application for this policy, a copy of which is attached to this policy. Unless you change them, such percentages shall also apply to subsequent premium and deduction allocations. However, any amounts which are put into your Policy Account prior to the Allocation Date and which are to be allocated to the investment divisions of our SA will initially be allocated to (and monthly deductions taken from) the Money Market Division of our SA. The Allocation Date is the first business day (see Page 12) twenty calendar days after the date of issue of this policy. On the Allocation Date, any such amounts then in the Money Market Division will be allocated in accordance with the directions contained in your policy application. Allocation percentages must be zero or a whole number not greater than 100. The sum of the premium allocation percentages and of the deduction allocation percentages must each equal 100. You may change such allocation percentages by written notice to our Administrative Office. A change will take effect on the date we receive it at our Administrative Office except for changes received on or prior to the Allocation Date which will take effect on the first business day following the Allocation Date. If we cannot make a monthly deduction on the basis of the deduction allocation percentages then in effect, we will make that deduction based on the proportion that your unloaned value in our GID and your values in the investment divisions of our SA bear to the total unloaned value in your Policy Account. TRANSFERS. At your written request to our Administrative Office, we will transfer amounts from your value in any investment division of our SA to one or more other divisions of our SA or to our GID. Any such transfer will take effect on the date we receive your written request at our Administrative Office. However, no transfers will be made prior to the Allocation Date. Once during each policy year you may ask us by written request to our Administrative Office to transfer an amount you specify from your unloaned value in our GID to one or more investment divisions of our SA. However, we will make such a transfer only if (1) we receive your written request at our Administrative Office within 30 days before or after a policy anniversary; and (2) the amount you specify is not more than the greater of 25% of your unloaned value in our GID as of the date the transfer takes effect or $500.00. In no event will we transfer more than your unloaned value in our GID. The transfer will take effect on the date we receive your written request for it at our Administrative Office but not before the policy anniversary. The minimum amount that we will transfer from your value in an investment division of our SA on any date is the lesser of $500.00 or your value in that investment division on that date, except as stated in the next paragraph. The minimum amount that we will transfer from your value in our GID is the lesser of $500.00 or your unloaned value in our GID as of the date the transfer takes effect, except as stated in the next paragraph. We will waive the minimum amount limitations set forth in the immediately preceding paragraph if the total amount being transferred on that date is at least $500.00. 95-300-9 Page 10 We reserve the right to make a transfer charge up to $25.00 for each transfer of amounts among your investment options. The transfer charge, if any, is deducted from the amounts transferred from the investment divisions of our SA and the GID based on the proportion that the amount transferred from each investment division and the GID bears to the total amount being transferred. A transfer from the Money Market Division on the Allocation Date (if applicable) will not incur a transfer charge. If you ask us to transfer the entire amount of your value in the investment divisions of our SA to our GID, we will not make a charge for that transfer. - -------------------------------------------------------------------------------- THE VALUE OF YOUR POLICY ACCOUNT The amount in your Policy Account at any time is equal to the sum of the amounts you then have in our GID and the investment divisions of our SA under this policy. YOUR VALUE IN OUR GID. The amount you have in our GID at any time is equal to the amounts allocated and transferred to it, plus the interest credited to it, minus amounts deducted, transferred and withdrawn from it. We will credit the amount in our GID with interest rates we determine. We will determine such interest rates annually in advance for unloaned and loaned amounts in our GID. The rates may be different for unloaned and loaned amounts. The interest rates we determine each year will apply to the policy year that follows the date of determination. Any change in the interest rates we determine will be as described in "Changes in Policy Cost Factors" on Page 16. Such interest rates will not be less than 4%. At the end of each policy month we will credit interest on unloaned amounts in our GID as follows: o On amounts that remain in our GID for the entire policy month, from the beginning to the end of the policy month. o On amounts allocated to our GID during a policy month that are net premium payments or loan repayments, from the date we receive them to the end of the policy month. However, we will credit interest on the amount derived from the initial premium payment from the Register Date, if it is later than the date of receipt. o On amounts transferred to our GID during a policy month, from the date of the transfer to the end of the policy month. o On amounts deducted or withdrawn from our GID during a policy month, from the beginning of the policy month to the date of the deduction or withdrawal. We credit interest on the loaned portion of our GID on each policy anniversary and at any time you repay all of a policy loan. The interest rate we credit to the loaned portion of our GID will be at an annual rate up to 2% less than the loan interest rate we charge. However, we reserve the right to credit a lower rate than this if in the future tax laws change such that our taxes on policy loans or policy loan interest is increased. In no event will we credit less than 4% a year. At the time of crediting such interest, we allocate the interest to the investment divisions of our SA and the unloaned portion of our GID in accordance with your premium allocation percentage. YOUR VALUE IN THE INVESTMENT DIVISIONS OF OUR SA. The amount you have in an investment division of our SA under this policy at any time is equal to the number of units this policy then has in that division multiplied by the division's unit value at that time. Amounts allocated, transferred or added to an investment division of our SA are used to purchase units of that division; units are redeemed when amounts are deducted, loaned, transferred or withdrawn. These transactions are called policy transactions. The number of units a policy has in an investment division at any time is equal to the number of units purchased minus the number of units redeemed in that division to that time. The number of units purchased or redeemed in a policy transaction is equal to the dollar amount of the policy transaction divided by the division's unit value on the date of the policy transaction. Policy transactions may be made on any day. The unit value that applies to a transaction made on a business day will be the unit value for that day. The unit value that applies to a transaction made on a non-business day will be the unit value for the next business day. 95-300-11 Page 11 We determine unit values for the investment divisions of our SA at the end of each business day. Generally, a business day is any day we are open and the New York Stock Exchange is open for trading. A business day immediately preceded by one or more non-business calendar days will include those non-business days as part of that business day. For example, a business day which falls on a Monday will consist of that Monday and the immediately preceding Saturday and Sunday. The unit value of an investment division of our SA on any business day is equal to the unit value for that division on the immediately preceding business day multiplied by the net investment factor for that division on that business day. The net investment factor for an investment division of our SA on any business day is (a) divided by (b), minus (c), where: (a) is the net asset value of the shares in designated investment companies that belong to the investment division at the close of business on such business day before any policy transactions are made on that day, plus the amount of any dividend or capital gain distribution paid by the investment companies on that day; (b) is the value of the assets in that investment division at the close of business on the immediately preceding business day after all policy transactions were made for that day; and (c) is any charge for that day for taxes or amounts set aside as a reserve for taxes. The net asset value of an investment company's shares held in each investment division shall be the value reported to us by that investment company. - -------------------------------------------------------------------------------- THE CASH SURRENDER VALUE OF THIS POLICY CASH SURRENDER VALUE. The Cash Surrender Value on any date is equal to the amount in your Policy Account on that date minus any surrender charge. NET CASH SURRENDER VALUE. The Net Cash Surrender Value is equal to the Cash Surrender Value minus any policy loan and accrued loan interest. You may give up this policy for its Net Cash Surrender Value at any time while the insured person is living. You may do this by sending us a written request for it and this policy to our Administrative Office. We will compute the Net Cash Surrender Value as of the date we receive your request for it and this policy at our Administrative Office. All insurance coverage under this policy ends on such date. SURRENDER CHARGES. If you give up this policy for its Net Cash Surrender Value or if it ends without value at the end of a grace period before the end of the fifteenth policy year, we will subtract a surrender charge from your Policy Account. A table of maximum surrender charges for the initial face amount is in the Policy Information section. If the Face Amount of Insurance is reduced before the end of the fifteenth policy year, we may also deduct a proportionate amount of any applicable surrender charge from your Policy Account. Such deduction will be made in accordance with the "Allocations" provision on Page 10. We have filed a detailed statement of the method of computing surrender charges with the insurance supervisory official of the jurisdiction in which this policy is delivered. 95-300-11 Page 12 PARTIAL NET CASH SURRENDER VALUE WITHDRAWAL. After the first policy year and while the insured person is living, you may ask for a partial Net Cash Surrender Value withdrawal by written request to our Administrative Office. Your request will be subject to our approval based on our rules in effect when we receive your request, and to the minimum withdrawal amount of $500.00. The amount withdrawn from the Policy Account is equal to the amount requested plus an expense charge equal to the lesser of $25.00 and 2% of the amount withdrawn. We have the right to decline a request for a partial Net Cash Surrender Value withdrawal. A partial withdrawal will result in a reduction in the Cash Surrender Value and in your Policy Account equal to the amount withdrawn plus the expense charge as well as a reduction in your death benefit. If the death benefit is Option A, the withdrawal may also result in a decrease in the face amount. You may tell us how much of each partial withdrawal is to come from your unloaned value in our GID and from your values in each of the investment divisions of our SA. If you do not tell us, we will make the withdrawal on the basis of your monthly deduction allocation percentages then in effect. The expense charge is deducted from your value remaining in each investment division and the GID, from whichever the withdrawal is made, based on the proportion that the amount withdrawn from each investment division and the GID bears to the total amount being withdrawn. If we cannot make the withdrawal or deduct the expense charge as indicated above, we will make the withdrawal and deduction based on the proportion that your unloaned value in our GID and your values in the investment divisions of our SA bear to the total unloaned value in your Policy Account. Such withdrawal and resulting reduction in the death benefit, in the Cash Surrender Value and in your Policy Account will take effect on the date we receive your written request at our Administrative Office. We will send you a new Policy Information section if a withdrawal results in a reduction in the Face Amount of Insurance. It will become a part of this policy. We may require you to return this policy to our Administrative Office to make a change. - -------------------------------------------------------------------------------- HOW A LOAN CAN BE MADE POLICY LOANS. You can take a loan on this policy while it has a loan value. This policy will be the only security for the loan. The initial loan and each additional loan must be for at least $500.00. Any amount on loan is part of your Policy Account (see Page 11). We refer to this as the loaned portion of your Policy Account. LOAN VALUE. The loan value on any date is 90% of the Cash Surrender Value on that date. The amount of the loan may not be more than the loan value. If you request an increase to an existing loan, the additional amount requested will be added to the amount of the existing loan and accrued loan interest. Your request for a policy loan must be in writing to our Administrative Office. You may tell us how much of the requested loan is to be allocated to your unloaned value in our GID and your value in each investment division of our SA. Such values will be determined as of the date we receive your request. If you do not tell us, we will allocate the loan on the basis of your monthly deduction allocation percentages then in effect. If we cannot allocate the loan on the basis of your direction or those percentages, we will allocate it based on the proportion that your unloaned value in our GID and your values in the investment divisions of our SA bear to the total unloaned value in your Policy Account. The loaned portion of your Policy Account will be maintained as a part of our GID. Thus, when a loaned amount is allocated to an investment division of our SA, we will redeem units of that investment division sufficient in value to cover the amount of the loan so allocated and transfer that amount to our GID. LOAN INTEREST. Interest on a loan accrues daily at an adjustable loan interest rate. We will determine the rate at the beginning of each policy year, subject to the following paragraphs. It will apply to any new or outstanding loan under the policy during the policy year next following the date of determination. The maximum loan interest rate for a policy year shall be the greater of: (1) the "Published Monthly Average," as defined below, for the calendar month that ends two months before the date of determination; or (2) 5%. "Published Monthly Average" means the Monthly Average Corporates yield shown in Moody's Corporate Bond Yield Averages published by Moody's Investors Service, Inc., or any successor thereto. If such averages are no longer published, we will use such other averages as may be established by regulation by the insurance supervisory official of the jurisdiction in which this 95-300-13 Page 13 policy is delivered. In no event will the loan interest rate for a policy year be greater than the maximum rate permitted by applicable law. We reserve the right to establish a rate lower than the maximum. No change in the rate shall be less than 1/2 of 1% a year. We may increase the rate whenever the maximum rate as determined by clause (1) of the preceding paragraph exceeds the rate being charged by 1/2 of 1% or more. We will reduce the rate to or below the maximum rate as determined by clause (1) of the preceding paragraph if such maximum is lower than the rate being charged by 1/2 of 1% or more. We will notify you of the initial loan interest rate when you make a loan. We will also give you advance written notice of any increase in the interest rate of any outstanding loan. Loan interest is due on each policy anniversary. If the interest is not paid when due, it will be added to your outstanding loan and allocated on the basis of the deduction allocation percentages then in effect. If we cannot make the allocation on the basis of these percentages, we will make it based on the proportion that your unloaned value in our GID and your values in the investment divisions of our SA bear to the total unloaned value in your Policy Account. The unpaid interest will then be treated as part of the loaned amount and will bear interest at the loan rate. When unpaid loan interest is allocated to an investment division of our SA, we will redeem units of that investment division sufficient in value to cover the amount of the interest so allocated and transfer that amount to our GID. LOAN REPAYMENT. You may repay all or part of a policy loan at any time while the insured person is alive and this policy is in force. Repayments will first be allocated to our GID until you have repaid any loaned amounts that were allocated to our GID. You may tell us how to allocate payments above that amount among our GID and the investment divisions of our SA. If you do not tell us, we will make the allocation on the basis of the premium allocation percentages then in effect. Failure to repay a policy loan or to pay loan interest will not terminate this policy unless at the beginning of a policy month the Net Cash Surrender Value is less than the total monthly deduction then due. In that case, the Grace Period provision will apply (see Page 8). A policy loan will have a permanent effect on your benefits under this policy even if it is repaid. - -------------------------------------------------------------------------------- OUR SEPARATE ACCOUNT(S) (SA) We established and we maintain our SA under the laws of New York State. Realized and unrealized gains and losses from the assets of our SA are credited or charged against it without regard to our other income, gains, or losses. Assets are put in our SA to support this policy and other variable life insurance policies. Assets may be put in our SA for other purposes, but not to support contracts or policies other than variable contracts. The assets of our SA are our property. The portion of its assets equal to the reserves and other policy liabilities with respect to our SA will not be chargeable with liabilities arising out of any other business we conduct. We may transfer assets of an investment division in excess of the reserves and other liabilities with respect to that division to another investment division or to our General Account. INVESTMENT DIVISIONS. Our SA consists of investment divisions. Each division may invest its assets in a separate class of shares of a designated investment company or companies or make direct investments in securities. The investment divisions of our SA that you chose for your initial allocations are shown on the application for this policy, a copy of which is attached to this policy. We may from time to time make other investment divisions available to you or we may create a new SA. We will provide you with written notice of all material details including investment objectives and all charges. We have the right to change or add designated investment companies. We have the right to add or remove investment divisions. We have the right to withdraw assets of a class of policies to which this policy belongs from an investment division and put them in another investment division. We also have the right to combine any two or more investment divisions. The term investment division in this policy shall then refer to any other investment division in which the assets of a class of policies to which this policy belongs were placed. 95-300-13 Page 14 We have the right to: 1. register or deregister any SA available under this policy under the Investment Company Act of 1940; 2. run any SA available under this policy under the direction of a committee, and discharge such committee at any time; 3. restrict or eliminate any voting rights of policy owners, or other persons who have voting rights as to any SA available under this policy; and 4. operate any SA available under this policy or one or more of its investment divisions by making direct investments or in any other form. If we do so, we may invest the assets of such SA or one or more of the investment divisions in any legal investments. We will rely upon our own or outside counsel for advice in this regard. Also, unless otherwise required by law or regulation, an investment adviser or any investment policy may not be changed without our consent. If required by law or regulation, the investment policy of an investment division of any SA available under this policy will not be changed by us unless approved by the Superintendent of Insurance of New York State or deemed approved in accordance with such law or regulation. If so required, the process for getting such approval is on file with the insurance supervisory official of the jurisdiction in which this policy is delivered. If any of these changes result in a material change in the underlying investments of an investment division of our SA, we will notify you of such change, as required by law. If you have value in that investment division, if you wish, we will transfer it at your written direction from that division (without charge) to another division of our SA or to our GID, and you may then change your premium and deduction allocation percentages. - -------------------------------------------------------------------------------- OUR ANNUAL REPORT TO YOU For each policy year we will send you a report for this policy that shows the current death benefit, the value you have in our GID and the value you have in each investment division of any SA available under this policy, the Cash Surrender Value and any policy loan with the current loan interest rate. It will also show the premiums paid and any other information as may be required by the insurance supervisory official of the jurisdiction in which this policy is delivered. - -------------------------------------------------------------------------------- HOW BENEFITS ARE PAID You can have the Insurance Benefit, your Net Cash Surrender Value withdrawals or your Policy Account payable on the Final Policy Date paid immediately in one sum. Or, you can choose another form of payment for all or part of them. If you do not arrange for a specific choice before the insured person dies, the beneficiary will have this right when the insured person dies. If you do make an arrangement, however, the beneficiary cannot change it after the insured person dies. Payments under the following options will not be affected by the investment experience of any investment division of our SA after proceeds are applied under such options. The options are: 1. DEPOSIT: The sum will be left on deposit for a period mutually agreed upon. We will pay interest at the end of every month, every 3 months, every 6 months or every 12 months, as chosen. 2. INSTALLMENT PAYMENTS: There are two ways that we pay installments: A. FIXED PERIOD: We will pay the sum in equal installments for a specified number of years (not more than 30). The installments will be at least those shown in the Table of Guaranteed Payments on Page 18. B. FIXED AMOUNT: We will pay the sum in installments as mutually agreed upon until the original sum, together with interest on the unpaid balance, is used up. 3. MONTHLY LIFE INCOME: We will pay the sum as a monthly income for life. The amount of the monthly payment will be at least that shown in the Table of Guaranteed Payments on Page 18. You may choose any one of three ways to receive monthly life income. We will guarantee payments for at least 10 years (called "10 Years Certain"); at least 20 years (called "20 Years Certain"); or until the payments we make equal the original sum (called "Refund Certain"). 4. OTHER: We will apply the sum under any other option requested that we make available at the time of payment. 95-300-15 Page 15 The payee may name and change a successor payee for any amount we would otherwise pay to the payee's estate. Any arrangements involving more than one of the options, or a payee who is not a natural person (for example, a corporation) or who is a fiduciary, must have our approval. Also, details of all arrangements will be subject to our rules at the time the arrangement takes effect. These include rules on: the minimum amount we will apply under an option and minimum amounts for installment payments; withdrawal or commutation rights; naming payees and successor payees; and proving age and survival. Payment choices (or any later changes) will be made and will take effect in the same way as a change of beneficiary. Amounts applied under these options will not be subject to the claims of creditors or to legal process, to the extent permitted by law. - -------------------------------------------------------------------------------- OTHER IMPORTANT INFORMATION YOUR CONTRACT WITH US. This policy is issued in consideration of payment of the initial premium payment shown in the Policy Information section. This policy, and the attached copy of the initial application and all subsequent applications to change this policy, and all additional Policy Information sections added to this policy, make up the entire contract. The rights conferred by this policy are in addition to those provided by applicable Federal and State laws and regulations. Only our Chairman of the Board, our President or one of our Vice Presidents can modify this contract or waive any of our rights or requirements under it. The person making these changes must put them in writing and sign them. POLICY CHANGES -- APPLICABLE TAX LAW. For you and the beneficiary to receive the tax treatment accorded to life insurance under Federal law, this policy must qualify initially and continue to qualify as life insurance under the Code or successor law. Therefore, to assure this qualification for you we have reserved earlier in this policy the right to decline to accept premium payments, to decline to change death benefit options, to decline to change the Face Amount of Insurance, or to decline to make partial withdrawals that would cause this policy to fail to qualify as life insurance under applicable tax law as interpreted by us. Further, we reserve the right to make changes in this policy or its riders (for example, in the percentages on Page 6) or to require additional premium payments or to make distributions from this policy or to change the Face Amount of Insurance to the extent we deem it necessary to continue to qualify this policy as life insurance. Any such changes will apply uniformly to all policies that are affected. You will be given advance written notice of such changes. CHANGES IN POLICY COST FACTORS. Changes in policy cost factors (interest rates we credit, cost of insurance deductions, expense charges and mortality and expense risk charges) will be by class and based upon changes in future expectations for such elements as: investment earnings, mortality, persistency, expenses and taxes. Any change in policy cost factors will be determined in accordance with procedures and standards on file, if required, with the insurance supervisory official of the jurisdiction in which this policy is delivered. WHEN THE POLICY IS INCONTESTABLE. We have the right to contest the validity of this policy based on material misstatements made in the initial application for this policy. We also have the right to contest the validity of any policy change or restoration based on material misstatements made in any application for that change. However, we will not contest the validity of this policy after it has been in effect during the lifetime of the insured person for two years from the date of issue shown in the Policy Information section. We will not contest any policy change that requires evidence of insurability, or any restoration of this policy, after the change or restoration has been in effect for two years during the insured person's lifetime. No statement shall be used to contest a claim unless contained in an application. All statements made in an application are representations and not warranties. See any additional benefit riders for modifications of this provision that apply to them. WHAT IF AGE OR SEX HAS BEEN MISSTATED? If the insured person's age or sex has been misstated on any application, the death benefit and any benefits provided by riders to this policy shall be those which would be purchased by the most recent deduction for the cost of insurance, and the cost of any benefits provided by riders, at the correct age and sex. 95-300-15 Page 16 HOW THE SUICIDE EXCLUSION AFFECTS BENEFITS. If the insured person commits suicide (while sane or insane) within two years after the Date of Issue shown in the Policy Information section, our liability will be limited to the payment of a single sum. This sum will be equal to the premiums paid, minus any loan and accrued loan interest and minus any partial withdrawal of the Net Cash Surrender Value. If the insured person commits suicide (while sane or insane) within two years after the effective date of a change that you asked for that increases the death benefit, then our liability as to the increase in amount will be limited to the payment of a single sum equal to any monthly cost of insurance deductions made for such increase. HOW WE MEASURE POLICY PERIODS AND ANNIVERSARIES. We measure policy years, policy months, and policy anniversaries from the Register Date shown in the Policy Information section. Each policy month begins on the same day in each calendar month as the day of the month in the Register Date. HOW, WHEN AND WHAT WE MAY DEFER. We may not be able to obtain the value of the assets of the investment divisions of our SA if: (1) the New York Stock Exchange is closed; or (2) the Securities and Exchange Commission requires trading to be restricted or declares an emergency. During such times, as to amounts allocated to the investment divisions of our SA, we may defer: 1. Determination and payment of Net Cash Surrender Value withdrawals; 2. Determination and payment of any death benefit in excess of the Face Amount of Insurance; 3. Payment of loans; 4. Determination of the unit values of the investment divisions of our SA; and 5. Any requested transfer or the transfer on the Allocation Date. As to amounts allocated to our GID, we may defer payment of any Net Cash Surrender Value withdrawal or loan amount for up to six months after we receive a request for it. We will allow interest, at a rate of at least 3% a year, on any Net Cash Surrender Value payment derived from our GID that we defer for 30 days or more. THE BASIS WE USE FOR COMPUTATION. We provide Cash Surrender Values that are at least equal to those required by law. If required to do so, we have filed with the insurance supervisory official of the jurisdiction in which this policy is delivered a detailed statement of our method of computing such values. We compute reserves under this policy by the Commissioners Reserve Valuation Method. We base minimum cash surrender values and reserves on the Commissioners 1980 Standard Ordinary Male and Female Mortality Tables at attained ages 19 or less or the Commissioners 1980 Standard Ordinary, Male and Female, Smoker and Non-Smoker, Mortality Tables at attained ages 20 and over. We also use these tables as the basis for determining maximum insurance costs, taking account of sex, attained age, class of risk and Tobacco User status of the insured person. We use an effective annual interest rate of 4%. POLICY ILLUSTRATIONS. Upon request we will give you an illustration of the future benefits under this policy based upon both guaranteed and current cost factor assumptions. However, if you ask us to do this more than once in any policy year, we reserve the right to charge you a fee for this service. POLICY CHANGES. You may add additional benefit riders or make other changes, subject to our rules at the time of change. 95-300-17 Page 17 TABLE OF GUARANTEED PAYMENTS (MINIMUM AMOUNT FOR EACH $1,000 APPLIED) OPTION 2A FIXED PERIOD INSTALLMENTS ------------------------- Number of Years' Monthly Annual Installments Installment Installment - ------------ ----------- ----------- 1 $84.28 $1000.00 2 42.66 506.17 3 28.79 341.60 4 21.86 259.33 5 17.70 210.00 6 14.93 177.12 7 12.95 153.65 8 11.47 136.07 9 10.32 122.40 10 9.39 111.47 11 8.64 102.54 12 8.02 95.11 13 7.49 88.83 14 7.03 83.45 15 6.64 78.80 16 6.30 74.73 17 6.00 71.15 18 5.73 67.97 19 5.49 65.13 20 5.27 62.58 21 5.08 60.28 22 4.90 58.19 23 4.74 56.29 24 4.60 54.55 25 4.46 52.95 26 4.34 51.48 27 4.22 50.12 28 4.12 48.87 29 4.02 47.70 30 3.93 46.61 If installments are paid every 3 months, they will be 25.23% of the annual installments. If they are paid every 6 months, they will be 50.31% of the annual installments.
OPTION 3 MONTHLY LIFE INCOME ------------------- 10 Years Certain 20 Years Certain Refund Certain ---------------------- ----------------------- ----------------------- AGE Male Female Male Female Male Female --- ---- ------ ---- ------ ---- ------ 50 $3.48 $3.19 $3.42 $3.17 $3.37 $3.14 51 3.54 3.23 3.47 3.21 3.42 3.17 52 3.59 3.28 3.51 3.25 3.46 3.21 53 3.65 3.32 3.56 3.29 3.51 3.25 54 3.70 3.37 3.61 3.33 3.56 3.29 55 3.77 3.42 3.66 3.37 3.61 3.34 56 3.83 3.47 3.72 3.42 3.67 3.38 57 3.90 3.52 3.77 3.47 3.72 3.43 58 3.97 3.58 3.83 3.52 3.78 3.48 59 4.04 3.64 3.88 3.57 3.84 3.53 60 4.12 3.70 3.94 3.62 3.90 3.58 61 4.20 3.76 4.00 3.68 3.97 3.64 62 4.29 3.83 4.06 3.74 4.04 3.69 63 4.38 3.90 4.12 3.79 4.11 3.75 64 4.48 3.98 4.18 3.85 4.19 3.82 65 4.58 4.06 4.25 3.92 4.26 3.88 66 4.68 4.14 4.31 3.98 4.35 3.95 67 4.79 4.23 4.37 4.04 4.43 4.02 68 4.90 4.32 4.43 4.11 4.52 4.10 69 5.02 4.42 4.50 4.18 4.62 4.18 70 5.14 4.52 4.56 4.25 4.71 4.26 71 5.26 4.63 4.62 4.31 4.82 4.35 72 5.39 4.75 4.67 4.38 4.92 4.44 73 5.52 4.87 4.73 4.45 5.03 4.53 74 5.66 4.99 4.78 4.51 5.14 4.63 75 5.80 5.12 4.83 4.58 5.27 4.74 76 5.95 5.26 4.88 4.64 5.39 4.84 77 6.10 5.40 4.93 4.70 5.53 4.96 78 6.25 5.55 4.97 4.75 5.66 5.08 79 6.40 5.70 5.01 4.80 5.80 5.20 80 6.56 5.85 5.04 4.86 5.96 5.33 81 6.72 6.01 5.08 4.90 6.11 5.45 82 6.88 6.18 5.11 4.95 6.27 5.60 83 7.04 6.34 5.13 4.99 6.43 5.73 84 7.20 6.51 5.16 5.03 6.62 5.89 85 & over 7.36 6.67 5.18 5.07 6.81 6.04
Amounts for Monthly Life Income are based on age nearest birthday when income starts. Amounts for ages not shown will be furnished on request. 95-300-17 Page 18 EQUITABLE VARIABLE LIFE INSURANCE COMPANY A Stock Life Insurance Company Home Office: 787 Seventh Avenue, New York, New York 10019-6018 Flexible Premium Variable Life Insurance Policy. Insurance payable upon death before Final Policy Date. Policy Account less outstanding loans, liens and accrued interest payable on Final Policy Date. Adjustable Death Benefit. Premiums may be paid while insured person is living and before the Final Policy Date. Premiums must be sufficient to keep the policy in force. Values provided by this policy are based on declared interest rates, and on the investment experience of the investment divisions of a separate account which in turn depends on the investment performance of the securities held by such investment division. They are not guaranteed as to dollar amount. Investment options are described on Page 10. This is a non-participating policy. No. 95-300 EX-99.1A5AIVPOLICY 7 POLICY NO. 95-300 (ELAS) (IL PLUS) [EQUITABLE LOGO] THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES VARIABLE LIFE INSURANCE POLICY INSURED PERSON FRAN S CAN 1 POLICY OWNER FRAN S CAN 1 FACE AMOUNT OF INSURANCE $100,000 DEATH BENEFIT OPTION A (SEE PAGE 6) POLICY NUMBER 60 231 043 - -------------------------------------------------------------------------------- WE AGREE to pay the Insurance Benefit of this policy and to provide its other benefits and rights in accordance with its provisions. FLEXIBLE PREMIUM VARIABLE LIFE POLICY This is a flexible premium variable life insurance policy. You can, within limits: o make premium payments at any time and in any amount; o change the death benefit option; o change the allocation of net premiums and deductions among your investment options; and o transfer amounts among your investment options. THE DEATH BENEFIT IS GUARANTEED TO THE INSURED'S ATTAINED AGE 100 IF THE DEATH BENEFIT IS ALWAYS OPTION A OR TO THE LATER OF ATTAINED AGE 80 OR 15 YEARS FROM ISSUE IF THE DEATH BENEFIT IS EVER AN OPTION B, SUBJECT TO PREMIUMS HAVING BEEN PAID IN ACCORDANCE WITH THE DEATH BENEFIT GUARANTEE PROVISION DESCRIBED IN THE POLICY. All of these rights and benefits are subject to the terms and conditions of this policy. All requests for policy changes are subject to our approval and may require evidence of insurability. We will put your net premiums into your Policy Account. You may then allocate them to one or more investment divisions of our Separate Account(s) (SA) and to our Guaranteed Interest Division (GID). THE PORTION OF YOUR POLICY ACCOUNT THAT IS IN AN INVESTMENT DIVISION OF OUR SA WILL VARY UP OR DOWN DEPENDING ON THE UNIT VALUE OF SUCH INVESTMENT DIVISION, WHICH IN TURN DEPENDS ON THE INVESTMENT PERFORMANCE OF THE SECURITIES HELD BY THAT SA DIVISION. THERE ARE NO MINIMUM GUARANTEES AS TO SUCH PORTION OF YOUR POLICY ACCOUNT. The portion of your Policy Account that is in our GID will accumulate, after deductions, at rates of interest we determine. Such rates will not be less than 4% a year. THE AMOUNT AND DURATION OF THE DEATH BENEFIT MAY BE VARIABLE OR FIXED AS DESCRIBED IN THIS POLICY. This is a non-participating policy. RIGHT TO EXAMINE POLICY. You may examine this policy and if for any reason you are not satisfied with it, you may cancel it by returning this policy with a written request for cancellation to our Administrative Office by the 10th day after you receive it. If you do this, we will refund the premiums that were paid on this policy. /s/ Pauline Sherman /s/ James M. Benson Pauline Sherman, James M. Benson, Vice President & Secretary President & Chief Executive Officer No. 95-300 CONTENTS - -------- Policy Information 3 Table of Maximum Monthly Charges for Benefits 4 Those Who Benefit from this Policy 5 The Insurance Benefit We Pay 5 Changing the Face Amount of Insur- ance or the Death Benefit Option 7 The Premiums You Pay 7 Your Policy Account and How it Works 9 Your Investment Options 10 The Value of Your Policy Account 11 The Cash Surrender Value of this Policy 12 How a Loan Can Be Made 13 Our Separate Account(s) (SA) 14 Our Annual Report to You 15 How Benefits are Paid 15 Other Important Information 16 IN THIS POLICY: - -------------- "We," "our," and "us" mean The Equitable Life Assurance Society of the United States. "You" and "your" mean the owner of this policy at the time an owner's right is exercised. Unless otherwise stated, all references to interest in this policy are effective annual rates of interest. Attained age means age on the birthday nearest to the beginning of the current policy year. ADMINISTRATIVE OFFICE - --------------------- The address of our Administrative Office is shown on Page 3. You should send premiums and correspondence to that address unless instructed otherwise. Copies of the application for this policy and any additional benefit riders are attached to the policy. INTRODUCTION The premiums you pay, after deductions are made in accordance with the Table of Expense Charges in the Policy Information section, are put into your Policy Account. Amounts in your Policy Account are allocated at your direction to one or more investment divisions of our SA and to our GID. The investment divisions of our SA invest in securities and other investments whose value is subject to market fluctuations and investment risk. There is no guarantee of principal or investment experience. Our GID earns interest at rates we declare in advance of each policy year. The rates are guaranteed for each policy year. The principal, after deductions, is also guaranteed. If death benefit Option A is in effect, the death benefit is the Face Amount of Insurance, and the amount of the death benefit is fixed except when it is a percentage of your Policy Account. If death benefit Option B is in effect, the death benefit is the Face Amount of Insurance plus the amount in your Policy Account. The amount of the death benefit is variable. Under either option, the death benefit will never be less than a percentage of your Policy Account as stated on Page 6. The death benefit is guaranteed to the Insured's attained age 100 if the Death Benefit is always Option A or to the later of attained age 80 or 15 years from issue if the Death Benefit is ever an Option B, subject to premiums having been paid in accordance with the Death Benefit Guarantee provision described in the policy. We make monthly deductions from your Policy Account to cover the cost of the benefits provided by this policy and the cost of any benefits provided by riders to this policy. If you give up this policy for its Net Cash Surrender Value, reduce the Face Amount of Insurance, or if this policy ends without value at the end of the grace period, we may deduct a surrender charge from your Policy Account. This is only a summary of what this policy provides. You should read all of it carefully. Its terms govern your rights and our obligations. No. 95-300 Page 2 POLICY INFORMATION INSURED PERSON FRAN S CAN 1 POLICY OWNER FRAN S CAN 1 FACE AMOUNT OF INSURANCE $100,000 DEATH BENEFIT OPTION A (SEE PAGE 6) POLICY NUMBER 60 231 043 SEPARATE ACCOUNT FP BENEFICIARY AS DESIGNATED IN APPLICATION REGISTER DATE FEB 2, 1996 ISSUE AGE 35 DATE OF ISSUE FEB 5, 1996 SEX MALE INSURED PERSON'S STATE OF RESIDENCE SPECIMEN PREFERRED NON-TOBACCO USER AN INITIAL PREMIUM PAYMENT OF $1,643.34 IS DUE ON OR BEFORE DELIVERY OF THE POLICY. THE PLANNED PERIODIC PREMIUM OF $675.00 IS PAYABLE QUARTERLY. PREMIUM PAYMENTS ARE FOR THE INSURANCE BENEFIT AND ANY ADDITIONAL BENEFIT RIDERS LISTED BELOW. SEE PAGE 3 -- CONTINUED FOR TABLE OF SPECIFIED PREMIUMS. THE PLANNED PERIODIC PREMIUMS SHOWN ABOVE MAY NOT BE SUFFICIENT TO CONTINUE THE POLICY AND LIFE INSURANCE COVERAGE IN FORCE TO THE FINAL POLICY DATE, WHICH IS THE POLICY ANNIVERSARY NEAREST THE INSURED PERSON'S 100TH BIRTHDAY. THE PERIOD FOR WHICH THE POLICY AND COVERAGE WILL CONTINUE IN FORCE WILL DEPEND ON: (1) THE AMOUNT, TIMING AND FREQUENCY OF PREMIUM PAYMENTS; (2) CHANGES IN THE FACE AMOUNT OF INSURANCE AND THE DEATH BENEFIT OPTIONS; (3) CHANGES IN THE INTEREST RATES CREDITED TO OUR GID AND IN THE INVESTMENT PERFORMANCE OF THE INVESTMENT DIVISIONS OF OUR SA; (4) CHANGES IN THE MONTHLY COST OF INSURANCE DEDUCTIONS FROM THE POLICY ACCOUNT FOR THIS POLICY AND ANY BENEFITS PROVIDED BY RIDERS TO THIS POLICY; AND (5) LOAN AND PARTIAL NET CASH SURRENDER VALUE WITHDRAWAL ACTIVITY. 95-300-3 PAGE 3 (CONTINUED ON NEXT PAGE) POLICY INFORMATION CONTINUED -- POLICY NUMBER 60 231 043 ------ TABLE OF SPECIFIED PREMIUMS ------ BENEFITS MONTHLY PREMIUM PREMIUM PERIOD - -------- --------------- -------------- BASIC LIFE INSURANCE $81.07 65 YEARS 95-300-3 PAGE 3 -- CONTINUED POLICY INFORMATION CONTINUED -- POLICY NUMBER 60 231 043 ------ TABLE OF AUTOMATIC EXPENSE CHARGES ------ DEDUCTION FROM PREMIUM PAYMENTS: CHARGE FOR APPLICABLE TAXES (OTHER THAN TAXES DISCUSSED ON PAGE 12): 2.500% OF EACH PREMIUM PAYMENT. THIS AMOUNT IS SUBTRACTED FROM EACH PREMIUM PAYMENT. WE RESERVE THE RIGHT TO CHANGE THIS PERCENTAGE TO CONFORM TO CHANGES IN THE LAW OR IF THE INSURED PERSON CHANGES RESIDENCE. DEDUCTIONS FROM YOUR POLICY ACCOUNT: SALES CHARGE: A MAXIMUM CHARGE OF $4.78 IS DEDUCTED AT THE BEGINNING OF EACH POLICY MONTH DURING THE FIRST TEN POLICY YEARS (SUBJECT TO ANY APPLICABLE LIMITATION IMPOSED BY THE INVESTMENT COMPANY ACT OF 1940). FOR MORTALITY AND EXPENSE RISK: .0050 OF THE UNLOANED POLICY ACCOUNT VALUE IS DEDUCTED AT THE BEGINNING OF EACH POLICY MONTH. WE RESERVE THE RIGHT TO CHANGE THIS RATE, BUT IT WILL NEVER BE MORE THAN .00075. INITIAL ADMINISTRATIVE CHARGE: $55.00 IS DEDUCTED AT THE BEGINNING OF EACH POLICY MONTH DURING THE FIRST POLICY YEAR. SUBSEQUENT YEARS ADMINISTRATIVE CHARGE: $6.00 IS DEDUCTED AT THE BEGINNING OF EACH POLICY MONTH DURING EACH POLICY YEAR AFTER THE FIRST POLICY YEAR. WE RESERVE THE RIGHT TO CHANGE THIS CHARGE BUT IT WILL NEVER BE MORE THAN $10.00 A MONTH. CHANGES WILL BE AS DESCRIBED IN "CHANGES IN POLICY COST FACTORS" ON PAGE 16. 95-300-3 PAGE 3 -- CONTINUED POLICY INFORMATION CONTINUED -- POLICY NUMBER 60 231 043 ------ TABLE OF MAXIMUM SURRENDER CHARGES ------ FOR THE INITIAL FACE AMOUNT BEGINNING OF BEGINNING OF POLICY POLICY YEAR CHARGE YEAR CHARGE ---- ------ ---- ------ 1 $ 0.00 9 $481.80 2 96.36 10 475.11 3 192.72 11 394.81 4 289.08 12 314.51 5 385.44 13 234.21 6 481.80 14 153.91 7 481.80 15 73.61 8 481.80 16 AND LATER 0.00 A SURRENDER CHARGE WILL BE SUBTRACTED FROM YOUR POLICY ACCOUNT IF THIS POLICY IS GIVEN UP FOR ITS NET CASH SURRENDER VALUE OR IF THIS POLICY TERMINATES WITHIN THE FIRST FIFTEEN POLICY YEARS. THE MAXIMUM CHARGE IN THE FIRST POLICY MONTH OF EACH POLICY YEAR IS SHOWN IN THE TABLE ABOVE (SUBJECT TO ANY APPLICABLE LIMITATIONS IMPOSED BY THE INVESTMENT COMPANY ACT OF 1940). AFTER THE NINTH POLICY YEAR, THE MAXIMUM CHARGE IN ANY OTHER POLICY MONTH WILL BE BASED ON THE NUMBER OF POLICY MONTHS SINCE THE BEGINNING OF THE POLICY YEAR. IF THE FACE AMOUNT OF INSURANCE IS REDUCED WITHIN THE FIRST FIFTEEN POLICY YEARS, A PRO RATA SHARE OF THE APPLICABLE SURRENDER CHARGE AT THAT TIME MAY BE DEDUCTED FROM YOUR POLICY ACCOUNT. SEE PAGE 12 FOR A DESCRIPTION OF THE PRO RATA SURRENDER CHARGE. *****ADMINISTRATIVE OFFICE: THE EQUITABLE LIFE ASSURANCE SOCIETY***** NEW YORK SERVICE CENTER 1755 BROADWAY, 2ND FLOOR NEW YORK, NY 10020 95-300-3 PAGE 3 -- CONTINUED POLICY INFORMATION CONTINUED -- POLICY NUMBER 60 231 043 ------ TABLE OF MAXIMUM MONTHLY CHARGES FOR BENEFITS ------ MONTHLY DEDUCTION BENEFITS FROM POLICY ACCOUNT PERIOD -------- ------------------- ------ BASIC COST OF INSURANCE MAXIMUM MONTHLY COST OF INSURANCE RATE (SEE PAGE 4 -- CONTINUED) TIMES THOUSANDS OF NET AMOUNT AT RISK (SEE PAGE 9) 65 YEARS DEATH BENEFIT GUARANTEE $1.00 65 YEARS 95-300-4 PAGE 4 (CONTINUED ON NEXT PAGE) POLICY INFORMATION CONTINUED -- POLICY NUMBER 60 231 043 ------ TABLE OF GUARANTEED MAXIMUM MONTHLY COST OF INSURANCE RATES ------ PER $1,000 OF NET AMOUNT AT RISK (SEE PAGE 9) FOR BASIC LIFE INSURANCE INSURED INSURED PERSON'S PERSON'S ATTAINED MONTHLY ATTAINED MONTHLY AGE RATE AGE RATE --- ---- --- ---- 35 $0.14083 70 $ 2.93250 36 0.14750 71 3.30167 37 0.15667 72 3.61750 38 0.16667 73 4.04167 39 0.17833 74 4.52000 40 0.19083 75 5.03667 41 0.20583 76 5.59000 42 0.22083 77 6.17500 43 0.23833 78 6.78667 44 0.25583 79 7.44000 45 0.27667 80 8.16167 46 0.29917 81 8.97250 47 0.32333 82 9.89750 48 0.34917 83 10.95167 49 0.37833 84 12.11833 50 0.41000 85 13.37417 51 0.44667 86 14.69833 52 0.48917 87 16.08083 53 0.53667 88 17.49667 54 0.59250 89 18.96583 55 0.65333 90 20.51167 56 0.72167 91 22.16500 57 0.79417 92 23.98667 58 0.87250 93 26.06583 59 0.96083 94 28.78417 60 1.05917 95 32.81750 61 1.16833 96 39.64250 62 1.29417 97 53.06583 63 1.43667 98 83.33250 64 1.59833 99 83.33250 65 1.77750 66 1.97083 67 2.18083 68 2.40583 69 2.65333 95-300-4 PAGE 4 -- CONTINUED - -------------------------------------------------------------------------------- THOSE WHO BENEFIT FROM THIS POLICY OWNER. The owner of this policy is the insured person unless otherwise stated in the application, or later changed. As the owner, you are entitled to exercise all the rights of this policy while the insured person is living. To exercise a right, you do not need the consent of anyone who has only a conditional or future ownership interest in this policy. BENEFICIARY. The beneficiary is as stated in the application, unless later changed. The beneficiary is entitled to the Insurance Benefit of this policy. One or more beneficiaries for the Insurance Benefit can be named in the application. If more than one beneficiary is named, they can be classed as primary or contingent. If two or more persons are named in a class, their shares in the benefit can be stated. The stated shares in the Insurance Benefit will be paid to any primary beneficiaries who survive the insured person. If no primary beneficiaries survive, payment will be made to any surviving contingent beneficiaries. Beneficiaries who survive in the same class will share the Insurance Benefit equally, unless you have made another arrangement with us. If there is no designated beneficiary living at the death of the insured person, we will pay the Insurance Benefit to the insured person's surviving children in equal shares. If none survive, we will pay the insured person's estate. CHANGING THE OWNER OR BENEFICIARY. While the insured person is living, you may change the owner or beneficiary by written notice in a form satisfactory to us. You can get such a form from our agent or by writing to us at our Administrative Office. The change will take effect on the date you sign the notice. But, it will not apply to any payment we make or other action we take before we receive the notice. If you change the beneficiary, any previous arrangement you made as to a payment option for benefits is cancelled. You may choose a payment option for the new beneficiary in accordance with "How Benefits Are Paid" on Page 15. ASSIGNMENT. You may assign this policy, if we agree. In any event, we will not be bound by an assignment unless we have received it in writing at our Administrative Office. Your rights and those of any other person referred to in this policy will be subject to the assignment. We assume no responsibility for the validity of an assignment. An absolute assignment will be considered as a change of ownership to the assignee. - -------------------------------------------------------------------------------- THE INSURANCE BENEFIT WE PAY We will pay the Insurance Benefit of this policy to the beneficiary when we receive at our Administrative Office (1) proof satisfactory to us that the insured person died before the Final Policy Date; and (2) all other requirements we deem necessary before such payment may be made. The Insurance Benefit includes the following amounts, which we will determine as of the date of the insured person's death: o the death benefit described on Page 6; o PLUS any other benefits then due from riders to this policy; o MINUS any policy loan, lien and accrued interest; o MINUS any overdue deductions from your Policy Account if the insured person dies during a grace period. We will add interest to the resulting amount in accordance with applicable law. We will compute the interest at a rate we determine, but not less than the greater of (a) the rate we are paying on the date of payment under the Deposit Option on Page 15, or (b) the rate required by any applicable law. Payment of the Insurance Benefit may also be affected by other provisions of this policy. See Pages 16 and 17, where we specify our right to contest the policy, the suicide exclusion, and what happens if age or sex has been misstated. Special exclusions or limitations (if any) are listed in the Policy Information section. 95-300-5 Page 5 DEATH BENEFIT. The death benefit at any time will be determined under either Option A or Option B below, whichever you have chosen and is in effect at such time. Under Option A, the death benefit is the greater of (a) the Face Amount of Insurance; or (b) a percentage (see Table below) of the amount in your Policy Account. Under this option, the amount of the death benefit is fixed, except when it is determined by such percentage. Under Option B, the death benefit is the greater of (a) the Face Amount of Insurance plus the amount in your Policy Account; or (b) a percentage (see Table below) of the amount in your Policy Account. Under this option the amount of the death benefit is variable. The percentages referred to above are the percentages from the following table for the insured person's age (nearest birthday) at the beginning of the policy year of determination. TABLE OF PERCENTAGES For ages not shown, the percentages shall decrease by a ratable portion for each full year INSURED INSURED PERSON'S AGE PERCENTAGE PERSON'S AGE PERCENTAGE - ------------ ---------- ------------ ---------- 40 and under 250% 65 120% 45 215 70 115 50 185 75 thru 95 105 55 150 100 100 60 130 Section 7702 of the Internal Revenue Code of 1986, as amended (i.e., the "Code"), gives a definition of life insurance which limits the amounts that may be paid into a life insurance policy relative to the benefits it provides. Even if this policy states otherwise, at no time will the "future benefits" under this policy be less than an amount such that the "premiums paid" do not exceed the Code's "guideline premium limitations". We may adjust the amount of premium paid to meet these limitations. Also, at no time will the "death benefit" under the policy be less than the "applicable percentage" of the "cash surrender value" of the policy. The above terms are as defined in the Code. In addition, we may take certain actions, described here and elsewhere in the policy, to meet the definitions and limitations in the Code, based on our interpretation of the Code. Please see "Policy Changes -- Applicable Tax Law" for more information. DEATH BENEFIT GUARANTEE. Subject to the conditions set forth below, the death benefit of this policy is guaranteed if the sum of premium payments accumulated at 4%, less any partial withdrawals accumulated at 4%, is at least equal to the sum of the Specified Premiums (shown on Page 3 -- Continued) accumulated at 4%, and any outstanding loan and accrued loan interest does not exceed the cash surrender value. Certain policy changes after issue will change the Specified Premiums accordingly. The death benefit is guaranteed to Insured's attained age 100 if the Death Benefit is always Option A, or the later of the Insured's attained age 80 or 15 years from issue if the Death Benefit is ever Option B. MATURITY BENEFIT. If the Insured person is living on the Final Policy Date defined in the Policy Information section, we will pay you the amount in your Policy Account on that date minus any policy loan, liens and accrued interest. This policy will then end. 95-300-5 Page 6 - -------------------------------------------------------------------------------- CHANGING THE FACE AMOUNT OF INSURANCE OR THE DEATH BENEFIT OPTION You may change the death benefit option or the Face Amount of Insurance by written request to us at our Administrative Office, subject to our approval and the following: 1. At any time after the second policy year while this policy is in force, you may ask us to reduce the Face Amount of Insurance but not to less than the minimum amount for which we would then issue this policy under our rules. Any such reduction in the Face Amount of Insurance may not be less than $10,000. If you do this before the end of the fifteenth policy year, we may deduct from your Policy Account a pro rata share of the applicable surrender charge (see Page 12). 2. At any time while this policy is in force, you can change your death benefit option. If you ask us to change from Option A to Option B, we will decrease the Face Amount of Insurance by the amount in your Policy Account on the date the change takes effect. However, we reserve the right to decline to make such change if it would reduce the Face Amount of Insurance below the minimum amount for which we would then issue this policy under our rules. We also reserve the right to request evidence of insurability for a change to Option B. If you ask us to change from Option B to Option A, we will increase the Face Amount of Insurance by the amount in your Policy Account on the date the change takes effect. Such decreases and increases in the Face Amount of Insurance are made so that the death benefit remains the same on the date the change takes effect. 3. The change will take effect at the beginning of the policy month that coincides with or next follows the date we approve your request. 4. We reserve the right to decline to make any change that we determine would cause this policy to fail to qualify as life insurance under applicable tax law as interpreted by us (see Page 16). 5. You may ask for a change by completing an application for change, which you can get from our agent or by writing to us at our Administrative Office. A copy of your application for change will be attached to the new Policy Information section that we will issue when the change is made. The new section and the application for change will become a part of this policy. We may require you to return this policy to our Administrative Office to make a policy change. - -------------------------------------------------------------------------------- THE PREMIUMS YOU PAY The initial premium payment shown in the Policy Information section is due on or before delivery of this policy. No insurance will take effect before the initial premium payment is paid. Other premiums may be paid at any time while this policy is in force and before the Final Policy Date at our Administrative Office. We will send premium notices to you for the planned periodic premium shown in the Policy Information section. You may skip planned periodic premium payments. However, this may adversely affect the duration of the death benefit and your policy's values. We will assume that any payment you make to us is a premium payment, unless you tell us in writing that it is a loan repayment. 95-300-7 Page 7 LIMITS. Each premium payment after the initial one must be at least $100. We may increase this minimum limit 90 days after we send you written notice of such increase. We reserve the right to limit the amount of any premium payments you may make which are in excess of the Specified Premiums shown on Page 3 -- Continued. We also reserve the right not to accept premium payments or to return excess amounts (in a policy year) that we determine would cause this policy to fail to qualify as life insurance under applicable tax law as interpreted by us (see Page 16). GRACE PERIOD. At the beginning of each policy month, the Net Cash Surrender Value will be compared to the total monthly deductions described on Page 9. If the Net Cash Surrender Value is sufficient to cover the total monthly deductions, the policy is not in default. If the Net Cash Surrender Value at the beginning of any policy month is less than such deductions for that month we will perform the following calculations to determine whether the policy is in default: 1. Determine the Specified Premium fund. The Specified Premium fund for any policy month is the accumulation of all the specified premiums shown on Page 3 -- Continued up to that month at 4% interest. 2. Determine the actual premium fund. The actual premium fund for any policy month is the accumulation of all the premiums received at 4% interest minus all withdrawals accumulated at 4% interest. 3. If the result in Step 2 is greater than or equal to the result in Step 1, and any loan and accrued loan interest does not exceed the Cash Surrender Value, the policy is not in default. The death benefit guarantee will be in effect and monthly deductions in excess of the Policy Account will be waived. 4. If the result of Step 2 is less than the result in Step 1, or if the result of Step 2 is greater than or equal to the result in Step 1 and any loan and accrued loan interest exceeds the Cash Surrender Value, the policy is in default as of the first day of this policy month. This is the date of default. If the policy has ever been under Death Benefit Option B and a death benefit guarantee does not apply (see Death Benefit Guarantee provision) the calculations in Steps 1. - 4. above will not be performed. In that case, if the Net Cash Surrender Value at the beginning of any policy month is less than the monthly deductions for that month, the policy is in default as of the first day of such policy month. If the policy is in default, we will send you and any assignee on our records at last known addresses written notice stating that a grace period of 61 days has begun as of the date of default. The notice will also state the amount of payment that is due. The payment required will not be more than an amount sufficient to increase the Net Cash Surrender Value to cover all monthly deductions for 3 months calculated assuming no interest or investment performance were credited to or charged against the Policy Account and no policy changes were made. If we do not receive such amount at our Administrative Office before the end of the grace period, we will then (1) withdraw and retain the entire amount in your Policy Account; and (2) send a written notice to you and any assignee on our records at last known addresses stating that this policy has ended without value. If we receive the requested amount before the end of the grace period, but the Net Cash Surrender Value is still insufficient to cover total monthly deductions, we will send a written notice that a new 61-day grace period has begun and request an additional payment. If the insured person dies during a grace period, we will pay the Insurance Benefit as described on Page 5. 95-300-7 Page 8 RESTORING YOUR POLICY BENEFITS. If this policy has ended without value, you may restore policy benefits while the insured person is alive if you: 1. Ask for restoration of policy benefits within 6 months from the end of the grace period; and 2. Provide evidence of insurability satisfactory to us; and 3. Make a required payment. The required payment will not be more than an amount sufficient to cover (i) the monthly administrative charges from the date of default to the effective date of restoration; (ii) total monthly deductions for 3 months, calculated from the effective date of restoration; (iii) any excess of the applicable surrender charge during the three months following the date of restoration over the surrender charge that was deducted on the date of default; and (iv) the charge for applicable taxes, and any increase in surrender charges associated with this payment. We will determine the amount of this required payment as if no interest or investment performance were credited to or charged against your Policy Account. From the required payment we will deduct the charge for applicable taxes. The policy account on the date of restoration will be equal to the balance of the required payment plus a surrender charge credit. The surrender charge credit will be the surrender charge that was deducted on the date of default, but not greater than the applicable surrender charge as of the effective date of restoration. The effective date of the restoration of policy benefits will be the beginning of the policy month which coincides with or next follows the date we approve your request. We will start to make monthly charges again as of the effective date of restoration. The monthly administrative charges from the date of default to the effective date of restoration will be deducted from the Policy Account as of the effective date of restoration. - -------------------------------------------------------------------------------- YOUR POLICY ACCOUNT AND HOW IT WORKS PREMIUM PAYMENTS. When we receive your premium payments, we subtract the expense charge shown in the table in the Policy Information section and any overdue monthly deductions. We put the balance (the net premium) into your Policy Account as of the date we receive the premium payment at our Administrative Office, and before any deductions from your Policy Account due on that date are made. However, we will put the initial net premium payment into your Policy Account as of the Register Date if it is later than the date of receipt. No premiums will be applied to your Policy Account until the full initial premium payment, as shown on your application, is received at our Administrative Office. MONTHLY DEDUCTIONS. At the beginning of each policy month we make a deduction from your Policy Account to cover the monthly administrative charges and any monthly sales charge and to provide insurance coverage. Such deduction for any policy month is the sum of the following amounts determined as of the beginning of that month: o the monthly sales charge during the first ten policy years; o the monthly administrative charges; o the monthly cost of insurance for the insured person; o the monthly cost of any benefits provided by riders to this policy; o the monthly charge for mortality and expense risk; and o the monthly cost for the Death Benefit Guarantee. The monthly cost of insurance is the sum of a) our current monthly cost of insurance rate times the net amount at risk at the beginning of the policy month divided by $1,000; plus b) any extra charge per $1,000 of Face Amount of Insurance shown in the Policy Information section times the Face Amount of Insurance at the beginning of the policy month divided by $1,000. The net amount at risk at any time is the death benefit minus the amount in your Policy Account at that time. We will determine cost of insurance rates from time to time. Any change in the cost of insurance rates we use will be as described in "Changes in Policy Cost Factors" on Page 16. They will never be more than those shown in the Table of Guaranteed Maximum Cost of Insurance Rates on Page 4 -- Continued. 95-300-9 Page 9 OTHER DEDUCTIONS. We also make the following other deductions from your Policy Account as they occur: o We deduct a withdrawal charge if you make a partial withdrawal of the Net Cash Surrender Value (see Page 13). o We deduct a surrender charge if, before the end of the fifteenth policy year, you give up this policy for its Net Cash Surrender Value, you reduce the Face Amount of Insurance, or if this policy terminates without value at the end of a grace period (see Page 12). o We deduct a charge for certain transfers (see below). - -------------------------------------------------------------------------------- YOUR INVESTMENT OPTIONS ALLOCATIONS. This policy provides investment options for the amount in your Policy Account. Amounts put into your Policy Account and deductions from it are allocated to the investment divisions of our SA and to the unloaned portion of our GID at your direction. You specified your initial premium allocation and deduction allocation percentages in your application for this policy, a copy of which is attached to this policy. Unless you change them, such percentages shall also apply to subsequent premium and deduction allocations. However, any amounts which are put into your Policy Account prior to the Allocation Date and which are to be allocated to the investment divisions of our SA will initially be allocated to (and monthly deductions taken from) the Money Market Division of our SA. The Allocation Date is the first business day (see Page 12) twenty calendar days after the date of issue of this policy. On the Allocation Date, any such amounts then in the Money Market Division will be allocated in accordance with the directions contained in your policy application. Allocation percentages must be zero or a whole number not greater than 100. The sum of the premium allocation percentages and of the deduction allocation percentages must each equal 100. You may change such allocation percentages by written notice to our Administrative Office. A change will take effect on the date we receive it at our Administrative Office except for changes received on or prior to the Allocation Date which will take effect on the first business day following the Allocation Date. If we cannot make a monthly deduction on the basis of the deduction allocation percentages then in effect, we will make that deduction based on the proportion that your unloaned value in our GID and your values in the investment divisions of our SA bear to the total unloaned value in your Policy Account. TRANSFERS. At your written request to our Administrative Office, we will transfer amounts from your value in any investment division of our SA to one or more other divisions of our SA or to our GID. Any such transfer will take effect on the date we receive your written request at our Administrative Office. However, no transfers will be made prior to the Allocation Date. Once during each policy year you may ask us by written request to our Administrative Office to transfer an amount you specify from your unloaned value in our GID to one or more investment divisions of our SA. However, we will make such a transfer only if (1) we receive your written request at our Administrative Office within 30 days before or after a policy anniversary; and (2) the amount you specify is not more than the greater of 25% of your unloaned value in our GID as of the date the transfer takes effect or $500.00. In no event will we transfer more than your unloaned value in our GID. The transfer will take effect on the date we receive your written request for it at our Administrative Office but not before the policy anniversary. The minimum amount that we will transfer from your value in an investment division of our SA on any date is the lesser of $500.00 or your value in that investment division on that date, except as stated in the next paragraph. The minimum amount that we will transfer from your value in our GID is the lesser of $500.00 or your unloaned value in our GID as of the date the transfer takes effect, except as stated in the next paragraph. We will waive the minimum amount limitations set forth in the immediately preceding paragraph if the total amount being transferred on that date is at least $500.00. 95-300-9 Page 10 We reserve the right to make a transfer charge up to $25.00 for each transfer of amounts among your investment options. The transfer charge, if any, is deducted from the amounts transferred from the investment divisions of our SA and the GID based on the proportion that the amount transferred from each investment division and the GID bears to the total amount being transferred. A transfer from the Money Market Division on the Allocation Date (if applicable) will not incur a transfer charge. If you ask us to transfer the entire amount of your value in the investment divisions of our SA to our GID, we will not make a charge for that transfer. - -------------------------------------------------------------------------------- THE VALUE OF YOUR POLICY ACCOUNT The amount in your Policy Account at any time is equal to the sum of the amounts you then have in our GID and the investment divisions of our SA under this policy. YOUR VALUE IN OUR GID. The amount you have in our GID at any time is equal to the amounts allocated and transferred to it, plus the interest credited to it, minus amounts deducted, transferred and withdrawn from it. We will credit the amount in our GID with interest rates we determine. We will determine such interest rates annually in advance for unloaned and loaned amounts in our GID. The rates may be different for unloaned and loaned amounts. The interest rates we determine each year will apply to the policy year that follows the date of determination. Any change in the interest rates we determine will be as described in "Changes in Policy Cost Factors" on Page 16. Such interest rates will not be less than 4%. At the end of each policy month we will credit interest on unloaned amounts in our GID as follows: o On amounts that remain in our GID for the entire policy month, from the beginning to the end of the policy month. o On amounts allocated to our GID during a policy month that are net premium payments or loan repayments, from the date we receive them to the end of the policy month. However, we will credit interest on the amount derived from the initial premium payment from the Register Date, if it is later than the date of receipt. o On amounts transferred to our GID during a policy month, from the date of the transfer to the end of the policy month. o On amounts deducted or withdrawn from our GID during a policy month, from the beginning of the policy month to the date of the deduction or withdrawal. We credit interest on the loaned portion of our GID on each policy anniversary and at any time you repay all of a policy loan. The interest rate we credit to the loaned portion of our GID will be at an annual rate up to 2% less than the loan interest rate we charge. However, we reserve the right to credit a lower rate than this if in the future tax laws change such that our taxes on policy loans or policy loan interest is increased. In no event will we credit less than 4% a year. At the time of crediting such interest, we allocate the interest to the investment divisions of our SA and the unloaned portion of our GID in accordance with your premium allocation percentage. YOUR VALUE IN THE INVESTMENT DIVISIONS OF OUR SA. The amount you have in an investment division of our SA under this policy at any time is equal to the number of units this policy then has in that division multiplied by the division's unit value at that time. Amounts allocated, transferred or added to an investment division of our SA are used to purchase units of that division; units are redeemed when amounts are deducted, loaned, transferred or withdrawn. These transactions are called policy transactions. The number of units a policy has in an investment division at any time is equal to the number of units purchased minus the number of units redeemed in that division to that time. The number of units purchased or redeemed in a policy transaction is equal to the dollar amount of the policy transaction divided by the division's unit value on the date of the policy transaction. Policy transactions may be made on any day. The unit value that applies to a transaction made on a business day will be the unit value for that day. The unit value that applies to a transaction made on a non-business day will be the unit value for the next business day. 95-300-11 Page 11 We determine unit values for the investment divisions of our SA at the end of each business day. Generally, a business day is any day we are open and the New York Stock Exchange is open for trading. A business day immediately preceded by one or more non-business calendar days will include those non-business days as part of that business day. For example, a business day which falls on a Monday will consist of that Monday and the immediately preceding Saturday and Sunday. The unit value of an investment division of our SA on any business day is equal to the unit value for that division on the immediately preceding business day multiplied by the net investment factor for that division on that business day. The net investment factor for an investment division of our SA on any business day is (a) divided by (b), minus (c), where: (a) is the net asset value of the shares in designated investment companies that belong to the investment division at the close of business on such business day before any policy transactions are made on that day, plus the amount of any dividend or capital gain distribution paid by the investment companies on that day; (b) is the value of the assets in that investment division at the close of business on the immediately preceding business day after all policy transactions were made for that day; and (c) is any charge for that day for taxes or amounts set aside as a reserve for taxes. The net asset value of an investment company's shares held in each investment division shall be the value reported to us by that investment company. - -------------------------------------------------------------------------------- THE CASH SURRENDER VALUE OF THIS POLICY CASH SURRENDER VALUE. The Cash Surrender Value on any date is equal to the amount in your Policy Account on that date minus any surrender charge. NET CASH SURRENDER VALUE. The Net Cash Surrender Value is equal to the Cash Surrender Value minus any policy loan and accrued loan interest. You may give up this policy for its Net Cash Surrender Value at any time while the insured person is living. You may do this by sending us a written request for it and this policy to our Administrative Office. We will compute the Net Cash Surrender Value as of the date we receive your request for it and this policy at our Administrative Office. All insurance coverage under this policy ends on such date. SURRENDER CHARGES. If you give up this policy for its Net Cash Surrender Value or if it ends without value at the end of a grace period before the end of the fifteenth policy year, we will subtract a surrender charge from your Policy Account. A table of maximum surrender charges for the initial face amount is in the Policy Information section. If the Face Amount of Insurance is reduced before the end of the fifteenth policy year, we may also deduct a proportionate amount of any applicable surrender charge from your Policy Account. Such deduction will be made in accordance with the "Allocations" provision on Page 10. We have filed a detailed statement of the method of computing surrender charges with the insurance supervisory official of the jurisdiction in which this policy is delivered. 95-300-11 Page 12 PARTIAL NET CASH SURRENDER VALUE WITHDRAWAL. After the first policy year and while the insured person is living, you may ask for a partial Net Cash Surrender Value withdrawal by written request to our Administrative Office. Your request will be subject to our approval based on our rules in effect when we receive your request, and to the minimum withdrawal amount of $500.00. The amount withdrawn from the Policy Account is equal to the amount requested plus an expense charge equal to the lesser of $25.00 and 2% of the amount withdrawn. We have the right to decline a request for a partial Net Cash Surrender Value withdrawal. A partial withdrawal will result in a reduction in the Cash Surrender Value and in your Policy Account equal to the amount withdrawn plus the expense charge as well as a reduction in your death benefit. If the death benefit is Option A, the withdrawal may also result in a decrease in the face amount. You may tell us how much of each partial withdrawal is to come from your unloaned value in our GID and from your values in each of the investment divisions of our SA. If you do not tell us, we will make the withdrawal on the basis of your monthly deduction allocation percentages then in effect. The expense charge is deducted from your value remaining in each investment division and the GID, from whichever the withdrawal is made, based on the proportion that the amount withdrawn from each investment division and the GID bears to the total amount being withdrawn. If we cannot make the withdrawal or deduct the expense charge as indicated above, we will make the withdrawal and deduction based on the proportion that your unloaned value in our GID and your values in the investment divisions of our SA bear to the total unloaned value in your Policy Account. Such withdrawal and resulting reduction in the death benefit, in the Cash Surrender Value and in your Policy Account will take effect on the date we receive your written request at our Administrative Office. We will send you a new Policy Information section if a withdrawal results in a reduction in the Face Amount of Insurance. It will become a part of this policy. We may require you to return this policy to our Administrative Office to make a change. - -------------------------------------------------------------------------------- HOW A LOAN CAN BE MADE POLICY LOANS. You can take a loan on this policy while it has a loan value. This policy will be the only security for the loan. The initial loan and each additional loan must be for at least $500.00. Any amount on loan is part of your Policy Account (see Page 11). We refer to this as the loaned portion of your Policy Account. LOAN VALUE. The loan value on any date is 90% of the Cash Surrender Value on that date. The amount of the loan may not be more than the loan value. If you request an increase to an existing loan, the additional amount requested will be added to the amount of the existing loan and accrued loan interest. Your request for a policy loan must be in writing to our Administrative Office. You may tell us how much of the requested loan is to be allocated to your unloaned value in our GID and your value in each investment division of our SA. Such values will be determined as of the date we receive your request. If you do not tell us, we will allocate the loan on the basis of your monthly deduction allocation percentages then in effect. If we cannot allocate the loan on the basis of your direction or those percentages, we will allocate it based on the proportion that your unloaned value in our GID and your values in the investment divisions of our SA bear to the total unloaned value in your Policy Account. The loaned portion of your Policy Account will be maintained as a part of our GID. Thus, when a loaned amount is allocated to an investment division of our SA, we will redeem units of that investment division sufficient in value to cover the amount of the loan so allocated and transfer that amount to our GID. LOAN INTEREST. Interest on a loan accrues daily at an adjustable loan interest rate. We will determine the rate at the beginning of each policy year, subject to the following paragraphs. It will apply to any new or outstanding loan under the policy during the policy year next following the date of determination. The maximum loan interest rate for a policy year shall be the greater of: (1) the "Published Monthly Average," as defined below, for the calendar month that ends two months before the date of determination; or (2) 5%. "Published Monthly Average" means the Monthly Average Corporates yield shown in Moody's Corporate Bond Yield Averages published by Moody's Investors Service, Inc., or any successor thereto. If such averages are no longer published, we will use such other averages as may be established by regulation by the insurance supervisory official of the jurisdiction in which this 95-300-13 Page 13 policy is delivered. In no event will the loan interest rate for a policy year be greater than the maximum rate permitted by applicable law. We reserve the right to establish a rate lower than the maximum. No change in the rate shall be less than 1/2 of 1% a year. We may increase the rate whenever the maximum rate as determined by clause (1) of the preceding paragraph exceeds the rate being charged by 1/2 of 1% or more. We will reduce the rate to or below the maximum rate as determined by clause (1) of the preceding paragraph if such maximum is lower than the rate being charged by 1/2 of 1% or more. We will notify you of the initial loan interest rate when you make a loan. We will also give you advance written notice of any increase in the interest rate of any outstanding loan. Loan interest is due on each policy anniversary. If the interest is not paid when due, it will be added to your outstanding loan and allocated on the basis of the deduction allocation percentages then in effect. If we cannot make the allocation on the basis of these percentages, we will make it based on the proportion that your unloaned value in our GID and your values in the investment divisions of our SA bear to the total unloaned value in your Policy Account. The unpaid interest will then be treated as part of the loaned amount and will bear interest at the loan rate. When unpaid loan interest is allocated to an investment division of our SA, we will redeem units of that investment division sufficient in value to cover the amount of the interest so allocated and transfer that amount to our GID. LOAN REPAYMENT. You may repay all or part of a policy loan at any time while the insured person is alive and this policy is in force. Repayments will first be allocated to our GID until you have repaid any loaned amounts that were allocated to our GID. You may tell us how to allocate payments above that amount among our GID and the investment divisions of our SA. If you do not tell us, we will make the allocation on the basis of the premium allocation percentages then in effect. Failure to repay a policy loan or to pay loan interest will not terminate this policy unless at the beginning of a policy month the Net Cash Surrender Value is less than the total monthly deduction then due. In that case, the Grace Period provision will apply (see Page 8). A policy loan will have a permanent effect on your benefits under this policy even if it is repaid. - -------------------------------------------------------------------------------- OUR SEPARATE ACCOUNT(S) (SA) We established and we maintain our SA under the laws of New York State. Realized and unrealized gains and losses from the assets of our SA are credited or charged against it without regard to our other income, gains, or losses. Assets are put in our SA to support this policy and other variable life insurance policies. Assets may be put in our SA for other purposes, but not to support contracts or policies other than variable contracts. The assets of our SA are our property. The portion of its assets equal to the reserves and other policy liabilities with respect to our SA will not be chargeable with liabilities arising out of any other business we conduct. We may transfer assets of an investment division in excess of the reserves and other liabilities with respect to that division to another investment division or to our General Account. INVESTMENT DIVISIONS. Our SA consists of investment divisions. Each division may invest its assets in a separate class of shares of a designated investment company or companies or make direct investments in securities. The investment divisions of our SA that you chose for your initial allocations are shown on the application for this policy, a copy of which is attached to this policy. We may from time to time make other investment divisions available to you or we may create a new SA. We will provide you with written notice of all material details including investment objectives and all charges. We have the right to change or add designated investment companies. We have the right to add or remove investment divisions. We have the right to withdraw assets of a class of policies to which this policy belongs from an investment division and put them in another investment division. We also have the right to combine any two or more investment divisions. The term investment division in this policy shall then refer to any other investment division in which the assets of a class of policies to which this policy belongs were placed. 95-300-13 Page 14 We have the right to: 1. register or deregister any SA available under this policy under the Investment Company Act of 1940; 2. run any SA available under this policy under the direction of a committee, and discharge such committee at any time; 3. restrict or eliminate any voting rights of policy owners, or other persons who have voting rights as to any SA available under this policy; and 4. operate any SA available under this policy or one or more of its investment divisions by making direct investments or in any other form. If we do so, we may invest the assets of such SA or one or more of the investment divisions in any legal investments. We will rely upon our own or outside counsel for advice in this regard. Also, unless otherwise required by law or regulation, an investment adviser or any investment policy may not be changed without our consent. If required by law or regulation, the investment policy of an investment division of any SA available under this policy will not be changed by us unless approved by the Superintendent of Insurance of New York State or deemed approved in accordance with such law or regulation. If so required, the process for getting such approval is on file with the insurance supervisory official of the jurisdiction in which this policy is delivered. If any of these changes result in a material change in the underlying investments of an investment division of our SA, we will notify you of such change, as required by law. If you have value in that investment division, if you wish, we will transfer it at your written direction from that division (without charge) to another division of our SA or to our GID, and you may then change your premium and deduction allocation percentages. - -------------------------------------------------------------------------------- OUR ANNUAL REPORT TO YOU For each policy year we will send you a report for this policy that shows the current death benefit, the value you have in our GID and the value you have in each investment division of any SA available under this policy, the Cash Surrender Value and any policy loan with the current loan interest rate. It will also show the premiums paid and any other information as may be required by the insurance supervisory official of the jurisdiction in which this policy is delivered. - -------------------------------------------------------------------------------- HOW BENEFITS ARE PAID You can have the Insurance Benefit, your Net Cash Surrender Value withdrawals or your Policy Account payable on the Final Policy Date paid immediately in one sum. Or, you can choose another form of payment for all or part of them. If you do not arrange for a specific choice before the insured person dies, the beneficiary will have this right when the insured person dies. If you do make an arrangement, however, the beneficiary cannot change it after the insured person dies. Payments under the following options will not be affected by the investment experience of any investment division of our SA after proceeds are applied under such options. The options are: 1. DEPOSIT: The sum will be left on deposit for a period mutually agreed upon. We will pay interest at the end of every month, every 3 months, every 6 months or every 12 months, as chosen. 2. INSTALLMENT PAYMENTS: There are two ways that we pay installments: A. FIXED PERIOD: We will pay the sum in equal installments for a specified number of years (not more than 30). The installments will be at least those shown in the Table of Guaranteed Payments on Page 18. B. FIXED AMOUNT: We will pay the sum in installments as mutually agreed upon until the original sum, together with interest on the unpaid balance, is used up. 3. MONTHLY LIFE INCOME: We will pay the sum as a monthly income for life. The amount of the monthly payment will be at least that shown in the Table of Guaranteed Payments on Page 18. You may choose any one of three ways to receive monthly life income. We will guarantee payments for at least 10 years (called "10 Years Certain"); at least 20 years (called "20 Years Certain"); or until the payments we make equal the original sum (called "Refund Certain"). 4. OTHER: We will apply the sum under any other option requested that we make available at the time of payment. 95-300-15 Page 15 The payee may name and change a successor payee for any amount we would otherwise pay to the payee's estate. Any arrangements involving more than one of the options, or a payee who is not a natural person (for example, a corporation) or who is a fiduciary, must have our approval. Also, details of all arrangements will be subject to our rules at the time the arrangement takes effect. These include rules on: the minimum amount we will apply under an option and minimum amounts for installment payments; withdrawal or commutation rights; naming payees and successor payees; and proving age and survival. Payment choices (or any later changes) will be made and will take effect in the same way as a change of beneficiary. Amounts applied under these options will not be subject to the claims of creditors or to legal process, to the extent permitted by law. - -------------------------------------------------------------------------------- OTHER IMPORTANT INFORMATION YOUR CONTRACT WITH US. This policy is issued in consideration of payment of the initial premium payment shown in the Policy Information section. This policy, and the attached copy of the initial application and all subsequent applications to change this policy, and all additional Policy Information sections added to this policy, make up the entire contract. The rights conferred by this policy are in addition to those provided by applicable Federal and State laws and regulations. Only our Chairman of the Board, our President or one of our Vice Presidents can modify this contract or waive any of our rights or requirements under it. The person making these changes must put them in writing and sign them. POLICY CHANGES -- APPLICABLE TAX LAW. For you and the beneficiary to receive the tax treatment accorded to life insurance under Federal law, this policy must qualify initially and continue to qualify as life insurance under the Code or successor law. Therefore, to assure this qualification for you we have reserved earlier in this policy the right to decline to accept premium payments, to decline to change death benefit options, to decline to change the Face Amount of Insurance, or to decline to make partial withdrawals that would cause this policy to fail to qualify as life insurance under applicable tax law as interpreted by us. Further, we reserve the right to make changes in this policy or its riders (for example, in the percentages on Page 6) or to require additional premium payments or to make distributions from this policy or to change the Face Amount of Insurance to the extent we deem it necessary to continue to qualify this policy as life insurance. Any such changes will apply uniformly to all policies that are affected. You will be given advance written notice of such changes. CHANGES IN POLICY COST FACTORS. Changes in policy cost factors (interest rates we credit, cost of insurance deductions, expense charges and mortality and expense risk charges) will be by class and based upon changes in future expectations for such elements as: investment earnings, mortality, persistency, expenses and taxes. Any change in policy cost factors will be determined in accordance with procedures and standards on file, if required, with the insurance supervisory official of the jurisdiction in which this policy is delivered. WHEN THE POLICY IS INCONTESTABLE. We have the right to contest the validity of this policy based on material misstatements made in the initial application for this policy. We also have the right to contest the validity of any policy change or restoration based on material misstatements made in any application for that change. However, we will not contest the validity of this policy after it has been in effect during the lifetime of the insured person for two years from the date of issue shown in the Policy Information section. We will not contest any policy change that requires evidence of insurability, or any restoration of this policy, after the change or restoration has been in effect for two years during the insured person's lifetime. No statement shall be used to contest a claim unless contained in an application. All statements made in an application are representations and not warranties. See any additional benefit riders for modifications of this provision that apply to them. WHAT IF AGE OR SEX HAS BEEN MISSTATED? If the insured person's age or sex has been misstated on any application, the death benefit and any benefits provided by riders to this policy shall be those which would be purchased by the most recent deduction for the cost of insurance, and the cost of any benefits provided by riders, at the correct age and sex. 95-300-15 Page 16 HOW THE SUICIDE EXCLUSION AFFECTS BENEFITS. If the insured person commits suicide (while sane or insane) within two years after the Date of Issue shown in the Policy Information section, our liability will be limited to the payment of a single sum. This sum will be equal to the premiums paid, minus any loan and accrued loan interest and minus any partial withdrawal of the Net Cash Surrender Value. If the insured person commits suicide (while sane or insane) within two years after the effective date of a change that you asked for that increases the death benefit, then our liability as to the increase in amount will be limited to the payment of a single sum equal to any monthly cost of insurance deductions made for such increase. HOW WE MEASURE POLICY PERIODS AND ANNIVERSARIES. We measure policy years, policy months, and policy anniversaries from the Register Date shown in the Policy Information section. Each policy month begins on the same day in each calendar month as the day of the month in the Register Date. HOW, WHEN AND WHAT WE MAY DEFER. We may not be able to obtain the value of the assets of the investment divisions of our SA if: (1) the New York Stock Exchange is closed; or (2) the Securities and Exchange Commission requires trading to be restricted or declares an emergency. During such times, as to amounts allocated to the investment divisions of our SA, we may defer: 1. Determination and payment of Net Cash Surrender Value withdrawals; 2. Determination and payment of any death benefit in excess of the Face Amount of Insurance; 3. Payment of loans; 4. Determination of the unit values of the investment divisions of our SA; and 5. Any requested transfer or the transfer on the Allocation Date. As to amounts allocated to our GID, we may defer payment of any Net Cash Surrender Value withdrawal or loan amount for up to six months after we receive a request for it. We will allow interest, at a rate of at least 3% a year, on any Net Cash Surrender Value payment derived from our GID that we defer for 30 days or more. THE BASIS WE USE FOR COMPUTATION. We provide Cash Surrender Values that are at least equal to those required by law. If required to do so, we have filed with the insurance supervisory official of the jurisdiction in which this policy is delivered a detailed statement of our method of computing such values. We compute reserves under this policy by the Commissioners Reserve Valuation Method. We base minimum cash surrender values and reserves on the Commissioners 1980 Standard Ordinary Male and Female Mortality Tables at attained ages 19 or less or the Commissioners 1980 Standard Ordinary, Male and Female, Smoker and Non-Smoker, Mortality Tables at attained ages 20 and over. We also use these tables as the basis for determining maximum insurance costs, taking account of sex, attained age, class of risk and Tobacco User status of the insured person. We use an effective annual interest rate of 4%. POLICY ILLUSTRATIONS. Upon request we will give you an illustration of the future benefits under this policy based upon both guaranteed and current cost factor assumptions. However, if you ask us to do this more than once in any policy year, we reserve the right to charge you a fee for this service. POLICY CHANGES. You may add additional benefit riders or make other changes, subject to our rules at the time of change. 95-300-17 Page 17 TABLE OF GUARANTEED PAYMENTS (MINIMUM AMOUNT FOR EACH $1,000 APPLIED) OPTION 2A FIXED PERIOD INSTALLMENTS ------------------------- Number of Years' Monthly Annual Installments Installment Installment - ------------ ----------- ----------- 1 $84.28 $1000.00 2 42.66 506.17 3 28.79 341.60 4 21.86 259.33 5 17.70 210.00 6 14.93 177.12 7 12.95 153.65 8 11.47 136.07 9 10.32 122.40 10 9.39 111.47 11 8.64 102.54 12 8.02 95.11 13 7.49 88.83 14 7.03 83.45 15 6.64 78.80 16 6.30 74.73 17 6.00 71.15 18 5.73 67.97 19 5.49 65.13 20 5.27 62.58 21 5.08 60.28 22 4.90 58.19 23 4.74 56.29 24 4.60 54.55 25 4.46 52.95 26 4.34 51.48 27 4.22 50.12 28 4.12 48.87 29 4.02 47.70 30 3.93 46.61 If installments are paid every 3 months, they will be 25.23% of the annual installments. If they are paid every 6 months, they will be 50.31% of the annual installments. OPTION 3 MONTHLY LIFE INCOME -------------------
10 Years Certain 20 Years Certain Refund Certain ---------------- ---------------- -------------- AGE Male Female Male Female Male Female --- ---- ------ ---- ------ ---- ------ 50 $3.48 $3.19 $3.42 $3.17 $3.37 $3.14 51 3.54 3.23 3.47 3.21 3.42 3.17 52 3.59 3.28 3.51 3.25 3.46 3.21 53 3.65 3.32 3.56 3.29 3.51 3.25 54 3.70 3.37 3.61 3.33 3.56 3.29 55 3.77 3.42 3.66 3.37 3.61 3.34 56 3.83 3.47 3.72 3.42 3.67 3.38 57 3.90 3.52 3.77 3.47 3.72 3.43 58 3.97 3.58 3.83 3.52 3.78 3.48 59 4.04 3.64 3.88 3.57 3.84 3.53 60 4.12 3.70 3.94 3.62 3.90 3.58 61 4.20 3.76 4.00 3.68 3.97 3.64 62 4.29 3.83 4.06 3.74 4.04 3.69 63 4.38 3.90 4.12 3.79 4.11 3.75 64 4.48 3.98 4.18 3.85 4.19 3.82 65 4.58 4.06 4.25 3.92 4.26 3.88 66 4.68 4.14 4.31 3.98 4.35 3.95 67 4.79 4.23 4.37 4.04 4.43 4.02 68 4.90 4.32 4.43 4.11 4.52 4.10 69 5.02 4.42 4.50 4.18 4.62 4.18 70 5.14 4.52 4.56 4.25 4.71 4.26 71 5.26 4.63 4.62 4.31 4.82 4.35 72 5.39 4.75 4.67 4.38 4.92 4.44 73 5.52 4.87 4.73 4.45 5.03 4.53 74 5.66 4.99 4.78 4.51 5.14 4.63 75 5.80 5.12 4.83 4.58 5.27 4.74 76 5.95 5.26 4.88 4.64 5.39 4.84 77 6.10 5.40 4.93 4.70 5.53 4.96 78 6.25 5.55 4.97 4.75 5.66 5.08 79 6.40 5.70 5.01 4.80 5.80 5.20 80 6.56 5.85 5.04 4.86 5.96 5.33 81 6.72 6.01 5.08 4.90 6.11 5.45 82 6.88 6.18 5.11 4.95 6.27 5.60 83 7.04 6.34 5.13 4.99 6.43 5.73 84 7.20 6.51 5.16 5.03 6.62 5.89 85 & over 7.36 6.67 5.18 5.07 6.81 6.04
Amounts for Monthly Life Income are based on age nearest birthday when income starts. Amounts for ages not shown will be furnished upon request. 95-300-17 Page 18 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES A Stock Life Insurance Company Home Office: 787 Seventh Avenue, New York, New York 10019-6018 Flexible Premium Variable Life Insurance Policy. Insurance payable upon death before Final Policy Date. Policy Account less outstanding loans, liens and accrued interest payable on Final Policy Date. Adjustable Death Benefit. Premiums may be paid while insured person is living and before the Final Policy Date. Premiums must be sufficient to keep the policy in force. Values provided by this policy are based on declared interest rates, and on the investment experience of the investment divisions of a separate account which in turn depends on the investment performance of the securities held by such investment division. They are not guaranteed as to dollar amount. Investment options are described on Page 10. This is a non-participating policy. No. 95-300 EX-99.1A5AVPOLICY 8 EVLICO POLICY NO. 85-300 [EQUITABLE VARIABLE LIFE INSURANCE COMPANY LOGO] VARIABLE LIFE INSURANCE POLICY INSURED PERSON THOMAS DARSEY POLICY OWNER THOMAS DARSEY FACE AMOUNT OF INSURANCE $50,000 DEATH BENEFIT OPTION A (SEE PAGE 6) POLICY NUMBER 37 200 109 ________________________________________________________________________________ WE AGREE to pay the insurance benefits and to provide the other rights and benefits of this policy in accordance with its provisions. FLEXIBLE PREMIUM VARIABLE LIFE PLAN This is a flexible premium variable life insurance policy. You can: o increase or decrease the face amount of insurance; o make premium payments at any time and, within limits, in any amount; o change the death benefit option; o change the allocation of net premiums and deductions among your investment options; and o transfer amounts, within limits, among your investment options. All of these rights and benefits are subject to the terms and conditions of this policy. All requests for policy changes are subject to our approval and may require evidence of insurability. We will put your net premiums in your Policy Account. You may then allocate them to one or more investment divisions of our Separate Account (SA) and to our Guaranteed Interest Division (GID). THE PORTION OF YOUR POLICY ACCOUNT THAT IS IN AN INVESTMENT DIVISION OF OUR SA WILL VARY UP OR DOWN DEPENDING ON THE UNIT VALUE OF SUCH INVESTMENT DIVISION, WHICH IN TURN DEPENDS ON THE INVESTMENT PERFORMANCE OF THE CORRESPONDING PORTFOLIO OF A DESIGNATED INVESTMENT COMPANY. THERE ARE NO MINIMUM GUARANTEES AS TO SUCH PORTION OF YOUR POLICY ACCOUNT. The portion of your Policy Account that is in our GID will accumulate, after deductions, at rates of interest we determine. Such rates will not be less than 4-1/2% a year. THE AMOUNT OF THE DEATH BENEFIT, OR THE DURATION OF INSURANCE COVERAGE, OR BOTH, MAY BE VARIABLE OR FIXED AS DESCRIBED ON PAGES 6 AND 8. This is a non-participating policy. RIGHT TO EXAMINE POLICY. You may examine this policy and if for any reason you are not satisfied with it, you may cancel it by returning the policy with a written request for cancellation to our Administrative Office by the later of: (a) the 10th day after you receive it; or (b) the 45th day after Part 1 of the application was signed. If you do this, we will refund an amount equal to (A) the premium payments made under this policy; plus (B) any interest added to our GID under this policy; and (C) an amount that reflects the net investment experience (plus or minus) of the investment divisions of the Separate Account under this policy to the date the returned policy is received at our Administrative Office. /s/ Pauline Sherman /s/ James M. Benson Pauline Sherman, James M. Benson, President & Chief Vice President & Secretary Executive Officer No. 85-300 CONTENTS - -------- Policy Information 3 Table of Guaranteed Maximum Insurance Cost Rates 4 Who Benefits from this Policy? 5 The Insurance Benefits We Pay 5 Changing the Face Amount of Insur- ance or the Death Benefit Option 7 The Premiums You Pay 8 Your Policy Account and How it Works 9 Your Investment Options 10 The Value of Your Policy Account 11 The Cash Surrender Value of this Policy 13 How a Loan Can be Made 15 Our Separate Account (SA) 16 Our Annual Report to You 17 How Benefits are Paid 18 Other Important Information 19 IN THIS POLICY: - -------------- "We", "our" and "us" mean Equitable Variable Life Insurance Company. "You" and "Your" mean the owner of the policy at the time an owner's right is exercised. References to amounts and values include all adjustments provided by this policy. ADMINISTRATIVE OFFICE - --------------------- The address of our Administrative Office is shown on Page 3. You should send premium payments and requests to that address unless instructed otherwise. A copy of the application for this policy and any additional benefit riders are at the back of the policy. INTRODUCTION The premiums you pay, after deductions for applicable taxes, and after deduction of an initial administrative charge from your initial premium payment, are put in your Policy Account. Amounts in your Policy Account are allocated at your direction to one or more investment divisions of our SA and to our GID. The investment divisions of our SA are invested in securities and other investments whose value is subject to market fluctuations and investment risk. There is no guarantee of principal or investment experience. Our GID earns interest at rates we declare in advance of each policy year. The rates are guaranteed for each policy year. The principal, after deductions, is also guaranteed. The duration of life insurance coverage depends upon the amount in your Policy Account. If death benefit Option A is in effect, the death benefit is the Face Amount of Insurance, and the amount of the death benefit is fixed except when it is a percentage of your Policy Account. If death benefit Option B is in effect, the death benefit is the Face Amount of Insurance plus the amount in your Policy Account. The amount of the death benefit is variable. Under either option the death benefit will never be less than a percentage of the Policy Account as stated on Page 6. We make monthly deductions from your Policy Account to cover the cost of the benefits provided by this policy and the cost of any benefits provided by riders to this policy. If you give up this policy for its Net Cash Surrender Value or reduce the Face Amount of Insurance during the first ten policy years, we may deduct a surrender charge from the Policy Account. This is only a summary of what the policy provides. You should read all of the policy carefully. Its terms govern your rights and our obligations. 85-300 Page 2 POLICY INFORMATION INSURED PERSON THOMAS DARSEY POLICY OWNER THOMAS DARSEY FACE AMOUNT OF INSURANCE $50,000 DEATH BENEFIT OPTION A (SEE PAGE 6) POLICY NUMBER 37 200 109 BENEFICIARY AS DESIGNATED IN APPLICATION REGISTER DATE FEB 1, 1996 ISSUE AGE 35 DATE OF ISSUE FEB 5, 1996 PARTIAL NET CASH NON-SMOKER SURRENDER VALUE WITHDRAWAL MINIMUM WITHDRAWAL IS $500 POLICY LOAN MINIMUM LOAN IS $500 TRANSFER MINIMUM TRANSFER AMOUNT IS $500 STATE OF RESIDENCE AN INITIAL PREMIUM PAYMENT OF $1,220.00 IS DUE ON OR BEFORE DELIVERY OF THE POLICY. THE PLANNED PERIODIC PREMIUM OF $305.00 IS PAYABLE QUARTERLY. PREMIUM PAYMENTS ARE FOR THE INSURANCE BENEFITS AND ANY ADDITIONAL BENEFIT RIDERS LISTED BELOW. FINAL POLICY DATE: THIS POLICY PROVIDES LIFE INSURANCE COVERAGE ON THE INSURED PERSON UNTIL THE FINAL POLICY DATE, WHICH IS THE POLICY ANNIVERSARY NEAREST THE INSURED PERSON'S 95TH BIRTHDAY, PROVIDED THE POLICY ACCOUNT IS SUFFICIENT TO COVER THE DEDUCTIONS FOR THE COST TO THAT DATE OF THE BENEFITS OF THIS POLICY AND OF ANY RIDERS TO THIS POLICY. YOU MAY HAVE TO PAY MORE THAN THE PREMIUMS SHOWN ABOVE TO KEEP THIS POLICY AND COVERAGE IN FORCE TO THAT DATE, AND TO KEEP ANY ADDITIONAL BENEFIT RIDERS IN FORCE. 85-300-3 PAGE 3 (CONTINUED ON NEXT PAGE) POLICY INFORMATION CONTINUED -- POLICY NUMBER 37 200 109 ------ TABLE OF EXPENSE CHARGES ------ CHARGE FOR APPLICABLE TAXES (OTHER THAN TAXES DISCUSSED ON PAGE 13): 2.500% OF EACH PREMIUM PAYMENT. THIS AMOUNT IS SUBTRACTED FROM EACH PREMIUM PAYMENT. WE RESERVE THE RIGHT TO CHANGE THIS PERCENTAGE TO CONFORM TO CHANGES IN THE LAW OR IF THE INSURED PERSON CHANGES RESIDENCE. INITIAL ADMINISTRATIVE CHARGE: $250.00 DEDUCTED FROM THE INITIAL PREMIUM PAYMENT. MONTHLY ADMINISTRATIVE CHARGE: $6.00 DEDUCTED MONTHLY FROM THE POLICY ACCOUNT. WE RESERVE THE RIGHT TO CHANGE THIS CHARGE BUT IT WILL NEVER BE MORE THAN $8.00 A MONTH. CHANGES WILL BE AS DESCRIBED IN "CHANGES IN POLICY COST FACTORS" ON PAGE 19. FOR PARTIAL WITHDRAWAL OF NET CASH SURRENDER VALUE: $25.00, OR 2% OF THE AMOUNT WITHDRAWN IF LESS, DEDUCTED FROM THE POLICY ACCOUNT WHENEVER THERE IS A PARTIAL NET CASH SURRENDER VALUE WITHDRAWAL. FOR AN INCREASE YOU ASK FOR IN THE FACE AMOUNT OF INSURANCE: $1.50 FOR EACH $1,000 OF INCREASE (BUT NOT MORE THAN $250.00) IS DEDUCTED FROM THE POLICY ACCOUNT. FOR TRANSFERS: AFTER THE FIRST FOUR TRANSFERS OF AMOUNTS IN A POLICY YEAR AMONG YOUR INVESTMENT OPTIONS, WE MAY CHARGE UP TO $25.00 FOR EACH ADDITIONAL TRANSFER IN THAT POLICY YEAR. 85-300-3 PAGE 3 -- CONTINUED (CONTINUED ON NEXT PAGE) POLICY INFORMATION CONTINUED -- POLICY NUMBER 37 200 109 ------ TABLE OF SURRENDER CHARGES ------ POLICY POLICY YEAR CHARGE YEAR CHARGE ---- ------ ---- ------ 1 $180 6 $180 2 180 7 144 3 180 8 108 4 180 9 72 5 180 10 36 A SURRENDER CHARGE WILL BE SUBTRACTED FROM YOUR POLICY ACCOUNT IF THIS POLICY IS GIVEN UP FOR ITS NET CASH SURRENDER VALUE IN THE FIRST TEN POLICY YEARS. THE SURRENDER CHARGE AT ANY TIME IN A POLICY YEAR IS EQUAL TO THE LESSER OF (1) THE CHARGE SHOWN IN THE TABLE ABOVE FOR THAT YEAR; OR (2) AN AMOUNT EQUAL TO (A) MINUS (B), WHERE (A) IS 30% OF THE FIRST $360 IN PREMIUM PAYMENTS RECEIVED DURING THE FIRST POLICY YEAR, PLUS 9% OF ALL OTHER PREMIUM PAYMENTS RECEIVED TO SUCH TIME; AND (B) IS THE AMOUNT OF ANY PRO RATA SURRENDER CHARGE PREVIOUSLY MADE UNDER THIS POLICY. IF THE FACE AMOUNT OF INSURANCE IS REDUCED AT ANY TIME IN THE FIRST TEN POLICY YEARS, A PRO RATA SHARE OF THE APPLICABLE SURRENDER CHARGE AT THAT TIME MAY BE DEDUCTED FROM YOUR POLICY ACCOUNT. SEE PAGE 13 FOR A DESCRIPTION OF THE PRO RATA SURRENDER CHARGE. THERE ARE NO SURRENDER CHARGES AFTER THE TENTH POLICY YEAR. *****ADMINISTRATIVE OFFICE: EQUITABLE VARIABLE LIFE INSURANCE COMPANY***** NEW YORK SERVICE CENTER 1755 BROADWAY, 2ND FLOOR NEW YORK, NY 10020 85-300-3 PAGE 3 -- CONTINUED POLICY INFORMATION CONTINUED -- POLICY NUMBER 37 200 109 ------ TABLE OF GUARANTEED MAXIMUM INSURANCE COST RATES ------ GUARANTEED MAXIMUM MONTHLY RATES PER $1,000 OF NET AMOUNT AT RISK (SEE PAGE 9) INSURED INSURED PERSON'S PERSON'S ATTAINED MONTHLY ATTAINED MONTHLY AGE RATE AGE RATE --- ---- --- ---- 35 $0.11000 70 $3.35333 36 0.18667 71 3.68167 37 0.20000 72 4.06000 38 0.21500 73 4.49583 39 0.23250 74 4.98333 40 0.25167 75 5.51333 41 0.27417 76 6.07667 42 0.29750 77 6.66583 43 0.32333 78 7.27583 44 0.35000 79 7.92417 45 0.38000 80 8.63500 46 0.41083 81 9.43083 47 0.44417 82 10.33917 48 0.48000 83 11.37333 49 0.51917 84 12.51417 50 0.56083 85 13.73750 51 0.61000 86 15.02167 52 0.66583 87 16.35667 53 0.72833 88 17.73833 54 0.80000 89 19.17167 55 0.87667 90 20.67750 56 0.96000 91 22.28750 57 1.04667 92 24.06333 58 1.14000 93 26.12000 59 1.23917 94 28.81333 60 1.35000 61 1.47333 62 1.61333 63 1.77250 64 1.94917 65 2.14333 66 2.35083 67 2.57250 68 2.80917 69 3.06500 85-300-4 PAGE 4 WHO BENEFITS FROM THIS POLICY? OWNER. The owner of this policy is the insured person unless stated otherwise in the application, or later changed. If the insured person is living on the Final Policy Date defined in the Policy Information section, we will pay you the amount in the Policy Account on that date minus any outstanding loan and loan interest. This policy will then end. As the owner, you are entitled to exercise all the rights of this policy while the insured person is living. To exercise a right, you do not need the consent of anyone who has only a conditional or future ownership interest in this policy. BENEFICIARY. The beneficiary is as stated in the application, unless later changed. The beneficiary is entitled to the insurance benefits of this policy. If two or more persons are named, those who survive the insured person will share the insurance benefits equally, unless you have made another arrangement with us. If there is no designated beneficiary living at the death of the insured person, we will pay the benefits to the surviving children of the insured person in equal shares. If none survive, we will pay the insured person's estate. CHANGING THE OWNER OR BENEFICIARY. While the insured person is living, you may change the owner or beneficiary by written notice in a form satisfactory to us. (You can get such a form from our agent or by writing to us.) The change will take effect on the date you sign the notice. But, it will not apply to any payment we make or other action we take before we receive the notice. If you change the beneficiary, any previous arrangement you made as to a payment option for benefits is cancelled. You may choose a payment option for the new beneficiary in accordance with "How Benefits Are Paid" on Page 17. ASSIGNMENT. You may assign this policy, but we will not be bound by an assignment unless we have received it in writing. Your rights and those of any other person referred to in this policy will be subject to the assignment. We assume no responsibility for the validity of an assignment. An absolute assignment will be considered as a change of ownership to the assignee. - -------------------------------------------------------------------------------- THE INSURANCE BENEFITS WE PAY We will pay the insurance benefits of this policy to the beneficiary when we receive at our Administrative Office (1) proof that the insured person died before the Final Policy Date; and (2) all other requirements deemed necessary before such payment may be made. These insurance benefits include the following amounts, which we will determine as of the date of the insured person's death: o the death benefit described on Page 6; o PLUS any other benefits then due from riders to this policy; o MINUS any loan (and loan interest) on the policy; o MINUS any overdue deductions if the insured person dies during the grace period. 85-300-5 Page 5 THE INSURANCE BENEFITS WE PAY (continued) We will add interest to the resulting amount for the period from the date of death to the date of payment. We will compute the interest at a rate we determine, but not less than the greater of (a) the rate we are paying on the date of payment under the Deposit Option on Page 18, or (b) the rate required by any applicable law. Payment of these benefits may also be affected by other provisions of this Policy. See Pages 19 and 20, where we specify our right to contest the policy, the suicide exclusion, and what happens if age or sex has been misstated. Special exclusions or limitations (if any) are listed in the Policy Information section. DEATH BENEFIT. The death benefit will be determined at any time under either Option A or Option B below, whichever you have chosen and is in effect at such time. Under Option A, the death benefit is the greater of the Face Amount of Insurance, or a percentage (see below) of the amount in your Policy Account. Under this option, the amount of the death benefit is fixed, except when it is determined by such a percentage. Under Option B, the death benefit is the greater of the Face Amount of Insurance plus the amount in your Policy Account, or a percentage (see below) of the amount in your Policy Account. Under this option the amount of the death benefit is variable. Under either option, the duration of insurance coverage depends upon the amount in your Policy Account. The percentage referred to above is the applicable percentage from the following table for the insured person's age (nearest birthday) at the beginning of the policy year of determination. TABLE OF APPLICABLE PERCENTAGES FOR AGES NOT SHOWN, THE APPLICABLE PERCENTAGES SHALL DECREASE BY A RATABLE PORTION FOR EACH FULL YEAR INSURED INSURED PERSON'S AGE PERCENTAGE PERSON'S AGE PERCENTAGE - ------------ ---------- ------------ ---------- 40 and under 250% 65 120% 45 215 70 115 50 185 75 thru 90 105 55 150 95 100 60 130 85-300-5 Page 6 CHANGING THE FACE AMOUNT OF INSURANCE OR THE DEATH BENEFIT OPTION. During the first policy year the death benefit option and the Face Amount of Insurance will be as you chose on the application for this policy, and which are shown in the Policy Information section. At any time after the first policy year while this policy is in force, you may change the death benefit option or the Face Amount of Insurance by written request to us at our Administrative Office, subject to our approval and the following: 1. You may ask us to increase the Face Amount of Insurance if you provide evidence satisfactory to us of the insurability of the insured person. Any increase you ask for must be at least $10,000. There is a charge for such increase that is shown in the Policy Information section. We will deduct the charge from your Policy Account as of the date the increase takes effect. Such deduction will be made in accordance with the "Allocations" provision on Page 10. 2. You may ask us to reduce the Face Amount of Insurance but not to less than the minimum amount for which we would then issue this policy under our rules. If you do this in the first ten policy years, we may deduct from your Policy Account a pro rata share of the applicable surrender charge (see Page 13). 3. You can change your death benefit option. If you ask us to change from Option A to Option B, we will decrease the Face Amount of Insurance by the amount in your Policy Account on the date of change. However, we reserve the right to decline to make such change if it would reduce the Face Amount of Insurance below the minimum amount for which we would then issue this policy under our rules. If you ask us to change from Option B to Option A, we will increase the Face Amount of Insurance by the amount in your Policy Account on the date of change. Such decreases and increases in the Face Amount of Insurance are made so that the death benefit remains the same on the date of change. We do not require evidence of insurability, nor do we deduct surrender charges or the charge for increases in the Face Amount of Insurance, for such changes. 4. Any change will take effect at the beginning of the policy month that coincides with or next follows the date we approve the request. 5. We reserve the right to decline to make any change that we determine would cause this policy to fail to qualify as life insurance under applicable tax law as interpreted by us (see Page 19). 6. You may ask for a change by completing an application for change, which you can get from our agent or by writing to us. A copy of your application for change will be attached to the new Policy Information section that we will issue when the change is made. The new section and the application for change will become a part of this policy. We may require you to return the policy to our Administrative Office to make a policy change. 85-300-7 Page 7 THE PREMIUMS YOU PAY The initial premium payment shown in the Policy Information section is due on or before delivery of the policy. No insurance will take effect before the initial premium payment is paid. Other premiums may be paid at any time at our Administrative Office while the policy is in force and before the Final Policy Date. They may be in any amount subject to the limits described below. We will send premium reminder notices to you for the planned periodic premium shown in the Policy Information section unless you ask us not to in the application for this policy or later by written notice to our Administrative Office. You may skip planned premium payments or change their frequency and amount. LIMITS. Each premium payment after the initial one must be at least $100. We may increase this minimum limit 90 days after we send you written notice of such increase. We reserve the right not to accept premium payments (in a policy year) that we determine would cause this policy to fail to qualify as life insurance under applicable tax law as interpreted by us (see Page 19). GRACE PERIOD. The duration of insurance coverage depends upon the Net Cash Surrender Value being sufficient to cover the monthly deductions described on Page 9. If the Net Cash Surrender Value at the beginning of any policy month is less than such deductions for that month, we will send a written notice to you and any assignee on our records at last known addresses stating that a grace period of 61 days has begun, starting with the beginning of that policy month. The notice will also state the amount of the premium payment sufficient to cover 3 monthly deductions. If we do not receive such amount at our Administrative Office before the end of the grace period, we will then (1) withdraw the amount in your Policy Account, including any applicable surrender charge; and (2) send a written notice to you and any assignee on our records at last known addresses stating that this policy has ended without value. If the insured person dies during the grace period, we will pay the insurance benefits as described on Page 5. REINSTATEMENT. If this policy has ended without value, you may reinstate it while the insured person is alive if you: 1. Ask for reinstatement within 3 years after the end of the grace period; and 2. Provide evidence of insurability satisfactory to us; and 3. Make a premium payment of an amount sufficient to keep the policy in force for at least 3 months after the date of reinstatement. The effective date of the reinstated policy will be the beginning of the policy month which coincides with or next follows the date we approve your reinstatement application. 85-300-7 Page 8 YOUR POLICY ACCOUNT AND HOW IT WORKS PREMIUM PAYMENTS. When we receive your premium payments, we subtract the expense charges shown in the table in the Policy Information section. We put the balance (the net premium) in your Policy Account as of the date we receive the premium payment at our Administrative Office, and before any deductions from your Policy Account due on that date are made. However, we will put the net initial premium payment in your Policy Account as of the Register Date if later than the date of receipt. MONTHLY DEDUCTIONS. At the beginning of each policy month we make a deduction from your Policy Account to cover monthly administrative charges and to provide insurance coverage, subject to the Grace Period provision on Page 8. Such deduction for any policy month is the sum of the following amounts determined as of the beginning of that month: o The monthly administrative charges shown in the Table of Expense Charges in the Policy Information section. o The monthly cost of any benefits provided by riders to this policy, as determined in accordance with such riders. o The monthly cost of insurance for the insured person that we determine. The monthly cost of insurance is our current monthly "cost of insurance rate" times the "net amount at risk" (current death benefit minus the amount in your Policy Account) at the beginning of the policy month; plus any extra charge shown in the Policy Information section times the Face Amount of Insurance at the beginning of the policy month. For this purpose the amount in your Policy Account is determined before the monthly cost of insurance deduction but after all other deductions due on that date have been made. The cost of insurance rate is based on the sex, attained age, and rating class of the insured person. ("Attained age" means age on the birthday nearest to the beginning of the then current policy year.) We will determine cost of insurance rates from time to time. Any change in the cost of insurance rates we use will be as described in "Changes in Policy Cost Factors" on Page 19. They will never be more than those shown in the Table of Guaranteed Maximum Insurance Cost Rates on Page 4 plus any extra charge stated in the Policy Information section. OTHER DEDUCTIONS. We also make the following other deductions from your Policy Account as they occur: o We deduct a charge if you make a partial withdrawal of the Net Cash Surrender Value (see Page 14). o We deduct a surrender charge if, during the first ten policy years, you give up the policy for its Net Cash Surrender Value 85-300-9 Page 9 YOUR POLICY ACCOUNT AND HOW IT WORKS (continued) or you reduce the Face Amount of Insurance or this policy ends without value at the end of a grace period (see Page 13). o We deduct a charge if you increase the Face Amount of Insurance (see Page 7). o We deduct a charge for certain transfers (see below). - -------------------------------------------------------------------------------- YOUR INVESTMENT OPTIONS ALLOCATIONS. This policy provides investment options for the amount in your Policy Account. Amounts put into your Policy Account and deductions from it are allocated to the investment divisions of our SA and to the unloaned portion of our GID at your direction. You specified your initial premium allocation and deduction allocation percentages in your application for this policy, a copy of which is at the back of this policy. Unless you change them, such percentages shall also apply to subsequent premium and deduction allocations. Allocation percentages must be zero or a whole number not greater than 100. The sum of the premium allocation percentages and of the deduction allocation percentages must each equal 100. You may change such allocation percentages by written notice to our Administrative Office. A change will take effect on the date we receive it at our Administrative Office. If we cannot make a monthly deduction on the basis of the deduction allocation percentages then in effect, we will make that deduction based on the proportion that your unloaned value in our GID and your values in the investment divisions of our SA bear to the total unloaned value in your Policy Account. TRANSFERS. At your request we will transfer amounts from your value in any investment division of our SA to one or more other divisions of our SA or to our GID. The minimum amount that we will transfer from your value in an investment division of our SA on any date is the lesser of the amount shown on Page 3 or your value in that investment division on that date. You may ask us to transfer on any policy anniversary an amount from your unloaned value in our GID to one or more investment divisions of our SA. However, we will make such a transfer only if (1) we receive your request for it at least 30 days before that policy anniversary; and (2) the amount you request is not more than the greater of 25% of your unloaned value in our GID on that anniversary or the minimum amount shown on Page 3. In no event will we transfer more than such unloaned value. The minimum amount that we will transfer from your value in our GID on any policy anniversary is the lesser of the amount shown on Page 3 or your unloaned value in our GID on that date. 85-300-9 Page 10 However, notwithstanding anything to the contrary in the preceding paragraphs we will make a transfer on any date on which a transfer is permitted if the total amount being transferred on that date is at least the amount shown on Page 3. Four transfers may be made in a policy year without charge. We may make an expense charge for additional transfers in a policy year (see Page 3). You may tell us how much of each expense charge is to come from your unloaned value in our GID and from your values in each of the investment divisions of our SA. If you do not tell us, we will make the expense charge on the basis of your monthly deduction allocation percentages then in effect. If we cannot make the expense charge on the basis of your direction or those percentages, we will make it based on the proportion that your unloaned value in our GID and your values in the investment divisions of our SA bear to the total unloaned value in your Policy Account. You must make all such requests in writing to our Administrative Office. A transfer will take effect on the date we receive it at our Administrative Office, except that a transfer you request from our GID will be made as of the policy anniversary following the date we receive your request. - -------------------------------------------------------------------------------- THE VALUE OF YOUR POLICY ACCOUNT The amount in your Policy Account at any time is equal to the sum of the amounts you then have in our GID and the investment divisions of our SA under this policy. YOUR VALUE IN OUR GUARANTEED INTEREST DIVISION (GID). The amount you have in our GID at any time is equal to the amounts allocated and transferred to it under this policy, plus the interest credited to it, minus amounts deducted, transferred and withdrawn from it under this policy. We will credit the amount in our GID with interest at effective annual rates we determine. We will determine such interest rates annually in advance for unloaned and loaned amounts in our GID. The rates may be different for unloaned and loaned amounts. The interest rates we determine each year will apply to the policy year that follows the date of determination. Any change in the interest rates we determine will be as described in "Changes in Policy Cost Factors" on Page 19. Such effective annual interest rates will not be less than 4-1/2%. At the end of each policy month we will credit interest on amounts in our GID as follows: o On amounts that remain in our GID for the entire policy month, from the beginning to the end of the month. o On amounts allocated to our GID during a policy month that are net premium payments or loan repayments, from the date we receive them to the end of the policy month. However, we will credit interest on the amount derived from the initial premium payment from the Register Date, if later than the date of receipt. 85-300-11 Page 11 THE VALUE OF YOUR POLICY ACCOUNT (continued) o On amounts transferred to our GID during a policy month, from the date of the transfer to the end of the policy month. o On amounts deducted or withdrawn from our GID during a policy month, from the beginning of the policy month to the date of the deduction or withdrawal. Interest credited to the loaned portion of our GID will be allocated at the end of each policy month to the unloaned portion of our GID. YOUR VALUE IN THE INVESTMENT DIVISIONS OF OUR SEPARATE ACCOUNT (SA). The amount you have in an investment division of our SA under this policy at any time is equal to the number of units this policy then has in that division multiplied by the division's unit value at that time. Amounts allocated, transferred or added to an investment division of our SA are used to purchase units of that division; units are redeemed when amounts are deducted, transferred or withdrawn. These transactions are called "policy transactions." The number of units a policy has in an investment division at any time is equal to the number of units purchased minus the number of units redeemed in that division up to that time. The number of units purchased or redeemed in a policy transaction is equal to the dollar amount of the policy transaction divided by the division's unit value on the date of the policy transaction. Policy transactions may be made on any day but the unit value that applies will be the unit value for the next business day. For example, if a monthly deduction from an investment division falls due on a Saturday, it will be made as of that day but at the unit value for the next business day, which usually would be the next Monday. Unit values for the investment divisions will be determined at the close of trading on each "business day", i.e., each day in which the degree of trading of the investment company's portfolio in which the division is invested might materially affect the net return of the portfolio. Normally, this would be each day that the New York Stock Exchange is open. The unit value of an investment division of our SA on any business day is equal to the unit value for that division on the immediately preceding business day multiplied by the net investment factor for that division on that business day. The net investment factor for an investment division of our SA on any business day is (a) divided by (b), minus (c), where: (a) is the net asset value of the shares in designated investment companies that belong to the investment division at the close of business on such business day before any policy transactions are made on that day, plus the per share amount of any dividend or capital gain distribution paid by the investment companies on that day; (b) is the value of the assets in that investment division at the close of business on the immediately preceding business day after all policy transactions were made for that day; and 85-300-11 Page 12 (c) is a charge not exceeding .00001649 for each day in that "business day", as defined above, corresponding to a charge not exceeding .60% per year for mortality and expense risks, plus any charge for that day for taxes or amounts set aside as a reserve for taxes. The net asset value of an investment company's shares held in each investment division shall be the value reported to us by that investment company. - -------------------------------------------------------------------------------- THE CASH SURRENDER VALUE OF THIS POLICY CASH SURRENDER VALUE. The Cash Surrender Value on any date is equal to the amount in the Policy Account on that date minus any applicable surrender charge. NET CASH SURRENDER VALUE. The Net Cash Surrender Value is equal to the Cash Surrender Value minus any loan and loan interest. You may give up this policy for its Net Cash Surrender Value at any time while the insured person is living. You may do this by sending a written request for it and this policy to our Administrative Office. We will compute the Net Cash Surrender Value as of the date we receive your request for it and this policy at our Administrative Office. All insurance coverage under this policy ends on such date. SURRENDER CHARGES. If you give up this policy for its Net Cash Surrender Value or if it ends without value at the end of a grace period in the first ten policy years, we will subtract a surrender charge from the Policy Account. A description of surrender charges is in the Policy Information section. If the Face Amount of Insurance is reduced during any of the first ten policy years because you ask us to reduce it, we may also deduct from the Policy Account a pro rata surrender charge. Such deduction will be made in accordance with the "Allocations" provision on Page 10. The amount of the pro rata surrender charge will be determined by the following formula: A/B x C where A -- Represents the decrease in the Face Amount of Insurance to which a surrender charge will be applied. The amount of the decrease is the difference between the Face Amount of Insurance immediately before the reduction and the new Face Amount of Insurance. However, this amount will be reduced by (1) the sum of all requested and approved prior increases in the Face Amount of Insurance; less (2) the sum of all requested and approved prior reductions in the Face Amount of Insurance (as described in sections 1 and 2 of "Changing the Face Amount of Insurance or the Death Benefit Option" on Page 7) minus the portion of such prior reductions on which a pro rata surrender charge was previously made. 85-300-13 Page 13 THE CASH SURRENDER VALUE OF THIS POLICY (continued) where B -- Is the initial Face Amount of Insurance. where C -- Is the applicable surrender charge immediately before the reduction. If a pro rata surrender charge is made, the surrender charges shown in the Table on Page 3 are reduced proportionately, and we will send you a new table which reflects such changes. PARTIAL NET CASH SURRENDER VALUE WITHDRAWAL. After the first policy year you may ask for a partial Net Cash Surrender Value withdrawal, subject to our approval and to the minimum withdrawal amount shown in the Policy Information section. A partial withdrawal will result in a reduction in the Death Benefit, the Cash Surrender Value and in your Policy Account equal to the amount requested plus the expense charge shown in the Table of Expense Charges in the Policy Information section. Your request for a partial Net Cash Surrender Value withdrawal must be in writing to our Administrative Office. You may tell us how much of each partial withdrawal and expense charge is to come from your unloaned value in our GID and from your values in each of the investment divisions of our SA. If you do not tell us, we will make the withdrawal on the basis of your monthly deduction allocation percentages then in effect. If we cannot make the withdrawal on the basis of your direction or those percentages, we will make it based on the proportion that your unloaned value in our GID and your values in the investment divisions of our SA bear to the total unloaned value in your Policy Account. Such withdrawal and resulting reduction in the Death Benefit, Cash Surrender Value and in your Policy Account will take effect on the date we receive it at our Administrative Office. We will send you a new Policy Information section that reflects the changes. It will become a part of this policy. We may require you to return the policy to our Administrative Office to make a change. We reserve the right to decline a request for a partial Net Cash Surrender Value withdrawal if: (a) the Death Benefit would be reduced below the minimum amount for which we would then issue this policy under our rules; or (b) we determine that the withdrawal would cause this policy to fail to qualify as life insurance under applicable tax law as interpreted by us (see Page 19). 85-300-13 Page 14 HOW A LOAN CAN BE MADE POLICY LOANS. You can get a loan on this policy while it has a loan value. This policy will be the only security for the loan. The initial loan and each additional loan must be for at least the minimum loan amount shown in the Policy Information section. Any amount on loan is part of your Policy Account (see Page 11). The loan value on any date is the Cash Surrender Value on that date. The amount of the loan may not be more than the loan value. Any existing loan and loan interest will be subtracted from a new loan. Your request for a policy loan must be in writing to our Administrative Office. You may tell us how much of the loan is to be allocated to your unloaned value in our GID and your value in each investment division of our SA. Such values will be determined as of the date we receive your request. If you do not tell us, we will allocate the loan on the basis of your monthly deduction allocation percentages then in effect. If we cannot allocate the loan on the basis of your direction or those percentages, we will allocate it based on the proportion that your unloaned value in our GID and your values in the investment divisions of our SA bear to the total unloaned value in your Policy Account. The loaned portion of your Policy Account will be maintained as a part of our GID. Thus, when a loaned amount is allocated to an investment division of our SA, we will redeem units of that investment division sufficient in value to cover the amount of the loan so allocated and transfer that amount to our GID. LOAN INTEREST. Interest on a loan accrues daily at an adjustable loan interest rate. We will determine the rate at the beginning of each policy year, subject to the following paragraphs. It will apply to any new or outstanding loan under the policy during the policy year next following the date of determination. The maximum loan interest rate for a policy year shall be the greater of: (1) the "Published Monthly Average," as defined below, for the calendar month that ends two months before the date of determination; or (2) 5-1/2%. "Published Monthly Average" means the Monthly Average Corporates yield shown in Moody's Corporate Bond Yield Averages published by Moody's Investors Service, Inc., or any successor thereto. If such averages are no longer published, we will use such other averages as may be established by regulation by the insurance supervisory official of the jurisdiction in which the policy is delivered. In no event will the loan interest rate for a policy year be greater than the maximum rate permitted by applicable law. We reserve the right to establish a rate lower than the maximum. No change in the rate shall be less than 1/2 of 1% a year. We may increase the rate whenever the maximum rate as determined by clause (1) of the preceding paragraph increases by 1/2 of 1% or more. We will reduce the rate to or below the maximum rate as determined by clause (1) of the preceding paragraph if such maximum is lower than the rate being charged by 1/2 of 1% or more. 85-300-15 Page 15 HOW A LOAN CAN BE MADE (continued) We will notify you of the initial loan interest rate when you make a loan. We will also give you advance written notice of any increase in the interest rate of any outstanding loan. Loan interest is due on each policy anniversary. If the interest is not paid when due, it will be added to your outstanding loan and allocated on the basis of the deduction allocation percentages then in effect. If we cannot make the allocation on the basis of these percentages, we will make it based on the proportion that your unloaned value in our GID and your values in the investment divisions of our SA bear to the total unloaned value in your Policy Account. The unpaid interest will then be treated as part of the loaned amount and will bear interest at the loan rate. LOAN REPAYMENT. You may repay all or part of a policy loan at any time while the insured person is alive and this policy is in force. We will assume that any payment you make to us while you have a loan is a loan repayment, unless you tell us in writing that it is a premium payment. Repayments will first be allocated to our GID until you have repaid any loaned amounts that were allocated to our GID. You may tell us how to allocate repayments above that amount among our GID and the investment divisions of our SA. If you do not tell us, we will make the allocation on the basis of the premium allocation percentages then in effect. Failure to repay a policy loan or to pay loan interest will not terminate this policy unless the Net Cash Surrender Value is less than the monthly deduction due on a monthly policy anniversary. In that case, the Grace Period provision will apply (see Page 8). A policy loan will have a permanent effect on your benefits under this policy even if it is repaid. - -------------------------------------------------------------------------------- OUR SEPARATE ACCOUNT (SA) The Separate Account is our Separate Account FP (SA). We established and we maintain it under the laws of New York State. Realized and unrealized gains and losses from the assets of our SA are credited or charged against it without regard to our other income, gains, or losses. Assets are put in our SA to support this policy and other variable life insurance policies. Assets may be put in our SA for other purposes, but not to support contracts or policies other than variable contracts. The assets of our SA are our property. The portion of its assets equal to the reserves and other policy liabilities with respect to our SA will not be chargeable with liabilities arising out of any other business we conduct. We may transfer assets of an investment division in excess of the reserves and other liabilities with respect to that division to another investment division or to our General Account. INVESTMENT DIVISIONS. Our SA consists of "investment divisions." Each division may invest its assets in a separate class of shares of a designated investment company or companies. The investment divisions of our SA that you chose for your initial allocations are shown on the application for this policy, a copy of which is at the 85-300-15 Page 16 back of this policy. We may from time to time make other investment divisions available to you. We will provide you with written notice of all material details including investment objectives and all charges. We have the right to change or add designated investment companies. We have the right to add or remove investment divisions. We have the right to withdraw assets of a class of policies to which this policy belongs from an investment division and put them in another investment division. We also have the right to combine any two or more investment divisions. The term "investment division" in this policy shall then refer to any other investment division in which the assets of a class of policies to which this policy belongs were placed. We have the right to: 1. register or deregister the Separate Account under the Investment Company Act of 1940; 2. run the Separate Account under the direction of a committee, and discharge such committee at any time; 3. restrict or eliminate any voting rights of policy owners, or other persons who have voting rights as to the Separate Account; and 4. operate the Separate Account or one or more of the investment divisions by making direct investments or in any other form. If we do so, we may invest the assets of the Separate Account or one or more of the investment divisions in any legal investments. We will rely upon our own or outside counsel for advice in this regard. Also, unless otherwise required by law or regulation, an investment adviser or any investment policy may not be changed without our consent. If any of these changes result in a material change in the underlying investments of an investment division of our SA, we will notify you of such change. If you have value in that investment division, if you wish we will transfer it at your written direction from that division (without charge) to another division of our SA or to the unloaned portion of our GID, and you may then change your premium and deduction allocation percentages. - -------------------------------------------------------------------------------- OUR ANNUAL REPORT TO YOU For each policy year we will send you a report for this policy that shows the current Death Benefit, the value you have in our GID, the number of units, the unit value and the total value you have in each investment division of our SA, the Cash Surrender Value and any outstanding policy loan with the current loan interest rate. It will also show the premiums paid and policy transactions for the year. For the investment divisions of our SA it will show the dollar amount of each transaction, the number of units involved in the transaction and the unit value on the date of the transaction. The report will also show such other information as may be required by the insurance supervisory official of the jurisdiction in which this policy is delivered. 85-300-17 Page 17 HOW BENEFITS ARE PAID You can have insurance benefits, Net Cash Surrender Value withdrawals, and the Policy Account payable on the Final Policy Date paid immediately in one sum. Or, you can choose another form of payment for all or part of them. If you do not arrange for a specific choice before the insured person dies, the beneficiary will have this right when the insured person dies. If you do make an arrangement, however, the beneficiary cannot change it after the insured person dies. Payments under the following options will not be affected by the investment experience of any investment division of our SA after proceeds are applied under such options. The options are: 1. DEPOSIT: The sum will be left on deposit for a period mutually agreed upon. We will pay interest at the end of every month, every 3 months, every 6 months or every 12 months, as chosen. 2. INSTALLMENT PAYMENTS: There are two ways that we pay installments: FIXED PERIOD: We will pay the sum in equal installments for a specified number of years (not more than 30). The installments will be at least those shown in the Table of Guaranteed Payments on Page 22. FIXED AMOUNT: We will pay the sum in installments as mutually agreed upon until the original sum, together with interest on the unpaid balance, is used up. 3. MONTHLY LIFE INCOME: We will pay the sum as a monthly income for life. The amount of the monthly payment will be at least that shown in the Table of Guaranteed Payments on Page 22. You may choose any one of three ways to receive monthly life income. We will guarantee payments for at least 10 years (called "10 Years Certain"); at least 20 years (called "20 Years Certain"); or until the payments we make equal the original sum (called "Refund Certain"). 4. OTHER: We will apply the sum under any other option requested that we make available at the time of the insured person's death or Net Cash Surrender Value withdrawal, or on the Final Policy Date, whichever applies. We guarantee interest under the Deposit Option at the rate of 3% a year and under either Installment Option at 3-1/2% a year. We may raise these guaranteed rates. We may also allow interest under the Deposit Option and under either Installment Option at a rate above the guaranteed rate. The payee may name and change a successor payee for any amount we would otherwise pay to the payee's estate. Any arrangements involving more than one of the options, or a payee who is not a natural person (for example, a corporation) or who is a fiduciary, must have our approval. Also, details of all arrangements will be subject to our rules at the time the arrangement takes effect. These include rules on: the minimum amount we will apply under an option and minimum amounts for installment payments; withdrawal or commutation rights; naming payees and successor payees; and proving age and survival. 85-300-17 Page 18 Payment choices (or any later changes) will be made and will take effect in the same way as a change of beneficiary. Amounts applied under these options will not be subject to the claims of creditors or to legal process, to the extent permitted by law. - -------------------------------------------------------------------------------- OTHER IMPORTANT INFORMATION YOUR CONTRACT WITH US. This policy is issued in consideration of payment of the initial premium payment shown in the Policy Information section. This policy, and the attached copy of the initial application and all subsequent applications to change the policy, and all additional Policy Information sections added to this policy, make up the entire contract. The rights conferred by this policy are in addition to those provided by applicable Federal and State laws and regulations. Only our President or one of our Vice Presidents can modify this contract or waive any of our rights or requirements under it. The person making these changes must put them in writing and sign them. POLICY CHANGES -- APPLICABLE TAX LAW. For you and the beneficiary to receive the tax treatment accorded to life insurance under Federal law, this policy must qualify initially and continue to qualify as life insurance under the Internal Revenue Code or successor law. Therefore, to assure this qualification for you we have reserved earlier in this policy the right to decline to accept premium payments, to decline to change death benefit options, or to decline to make partial withdrawals that would cause the policy to fail to qualify as life insurance under applicable tax law as interpreted by us. Further, we reserve the right to make changes in this policy or its riders (for example in the percentages on Page 6) or to make distributions from the policy to the extent we deem it necessary to continue to qualify this policy as life insurance. Any such changes will apply uniformly to all policies that are affected. You will be given advance written notice of such changes. CHANGES IN POLICY COST FACTORS. Changes in policy cost factors (interest rates we credit, cost of insurance deductions, and expense charges) will be by class and based upon changes in future expectations for such elements as: investment earnings, mortality, persistency, expenses and taxes. Any change in policy cost factors will be determined in accordance with procedures and standards on file, if required, with the insurance supervisory official of the jurisdiction in which this policy is delivered. WHEN THE POLICY IS INCONTESTABLE. We have the right to contest the validity of this policy based on material misstatements made in the initial application for this policy. We also have the right to contest the validity of any policy change based on material misstatements made in any application for that change. However, we will not contest the validity of this policy after it has been in effect during the lifetime of the insured person for two years from the Date of Issue shown in the Policy 85-300-19 Page 19 OTHER IMPORTANT INFORMATION (continued) Information section. We will not contest any policy change that requires evidence of insurability, or any reinstatement of this policy, after the change or reinstatement has been in effect for two years during the insured person's lifetime. No statement shall be used to contest a claim unless contained in an application. All statements made in an application are representations and not warranties. See any additional benefit riders for modifications of this provision that apply to them. WHAT IF AGE OR SEX HAS BEEN MISSTATED? If the insured person's age or sex has been misstated on any application, the death benefit and any benefits provided by riders to this policy shall be those which would be purchased by the most recent deduction for the cost of insurance, and the cost of any benefits provided by riders, at the correct age and sex. HOW THE SUICIDE EXCLUSION AFFECTS BENEFITS. If the insured person commits suicide (while sane or insane) within two years after the Date of Issue shown in the Policy Information section, our liability will be limited to the payment of a single sum. This sum will be equal to the premiums paid, minus any loan and loan interest and minus any partial withdrawal of the net cash surrender value. If the insured person commits suicide (while sane or insane) within two years after the effective date of a change that you asked for that increases the Death Benefit, then our liability as to the increase in amount will be limited to the payment of a single sum equal to the monthly cost of insurance deductions made for such increase. This will include the expense charge deducted for the increase (see Page 7). HOW WE MEASURE POLICY PERIODS AND ANNIVERSARIES. We measure policy years, policy months, and policy anniversaries from the Register Date shown in the Policy Information section. Each policy month begins on the same day in each calendar month as the day of the month in the Register Date. HOW, WHEN AND WHAT WE MAY DEFER. We may not be able to obtain the value of the assets of the investment divisions of our SA if: (1) the New York Stock Exchange is closed; (2) the Securities and Exchange Commission requires trading to be restricted or declares an emergency; or (3) the Securities and Exchange Commission by order permits us to defer payments for the protection of our policy owners. During such times, as to amounts allocated to the investment divisions of our SA, we may defer: 1. Determination and payment of Net Cash Surrender Value withdrawals; 2. Determination and payment of any death benefit in excess of the Face Amount of Insurance; 3. Payment of loans; 4. Determination of the unit values of the investment divisions of our SA; 85-300-19 Page 20 5. Any requested transfer; and 6. Use of insurance benefits under the payment options. As to amounts allocated to our GID, we may defer payment of any Net Cash Surrender Value withdrawal or loan amount for up to six months after we receive a request for it. We will allow interest, at a rate of at least 3% a year, on any Net Cash Surrender Value payment derived from our GID that we defer for 30 days or more. THE BASIS WE USE FOR COMPUTATION. We provide Cash Surrender Values that are at least equal to or more than those required by law. If required to do so, we have filed with the insurance supervisory official of the jurisdiction in which this policy is delivered a detailed statement of our method of computing such values. We compute reserves under this policy by the Commissioners Reserve Valuation Method. We base minimum cash surrender values and reserves on the "Commissioners 1980 Standard Ordinary Male and Female Mortality Tables." We also use these tables as the basis for determining maximum insurance costs, taking account of sex, attained age and rating class of the insured person. We use interest compounded annually at 4-1/2%. POLICY ILLUSTRATIONS. Upon request we will give you an illustration of the future benefits under this policy based upon both guaranteed and current cost factor assumptions. However, if you ask us to do this more than once in any policy year, we reserve the right to charge you a fee for this service. POLICY CHANGES. You may change this policy to another available plan of insurance or add additional benefit riders or make other changes, subject to our rules at the time of change. 85-300-21 Page 21 TABLE OF GUARANTEED PAYMENTS (MINIMUM AMOUNT FOR EACH $1,000 APPLIED) OPTION 2A FIXED PERIOD INSTALLMENTS ------------------------- Number of Years Monthly Annual Installments Installment Installment - ------------ ----------- ----------- 1 $84.70 $1,000.00 2 43.08 508.60 3 29.21 344.86 4 22.28 263.04 5 18.12 213.99 6 15.36 181.32 7 13.38 158.01 8 11.91 140.56 9 10.76 127.00 10 9.84 116.18 11 9.09 107.34 12 8.47 99.98 13 7.94 93.78 14 7.49 88.47 15 7.11 83.89 16 6.77 79.89 17 6.47 76.37 18 6.20 73.25 19 5.97 70.47 20 5.76 67.98 21 5.57 65.74 22 5.40 63.70 23 5.24 61.85 24 5.10 60.17 25 4.97 58.62 26 4.84 57.20 27 4.73 55.90 28 4.63 54.69 29 4.54 53.57 30 4.45 52.53 If installments are paid each 3 months, they will be 25.32% of the annual installments. If they are paid each 6 months, they will be 50.43% of the annual installments. OPTION 3 MONTHLY LIFE INCOME -------------------
10 Years Certain 20 Years Certain Refund Certain ---------------- ---------------- -------------- AGE Male Female Male Female Male Female --- ---- ------ ---- ------ ---- ------ 50 $4.50 $3.96 $4.27 $3.89 $4.28 $3.87 51 4.58 4.02 4.32 3.94 4.35 3.93 52 4.67 4.09 4.38 4.00 4.42 3.99 53 4.75 4.16 4.44 4.06 4.50 4.05 54 4.85 4.24 4.50 4.12 4.58 4.11 55 4.94 4.32 4.56 4.18 4.66 4.18 56 5.04 4.40 4.62 4.24 4.74 4.25 57 5.15 4.49 4.68 4.31 4.83 4.33 58 5.26 4.58 4.74 4.38 4.93 4.41 59 5.37 4.68 4.81 4.45 5.03 4.49 60 5.49 4.78 4.86 4.52 5.13 4.58 61 5.62 4.89 4.92 4.59 5.24 4.67 62 5.75 5.00 4.98 4.66 5.35 4.77 63 5.88 5.12 5.04 4.73 5.48 4.88 64 6.03 5.25 5.09 4.80 5.60 4.99 65 6.17 5.39 5.14 4.88 5.74 5.10 66 6.32 5.53 5.19 4.95 5.88 5.22 67 6.48 5.68 5.24 5.01 6.03 5.35 68 6.64 5.83 5.28 5.08 6.18 5.49 69 6.80 6.00 5.32 5.14 6.35 5.64 70 6.97 6.17 5.35 5.20 6.53 5.79 71 7.15 6.34 5.38 5.26 6.71 5.96 72 7.32 6.53 5.41 5.30 6.91 6.13 73 7.50 6.72 5.43 5.35 7.12 6.32 74 7.67 6.92 5.45 5.38 7.34 6.52 75 7.85 7.12 5.47 5.42 7.58 6.73 76 8.02 7.32 5.48 5.44 7.82 6.96 77 8.19 7.53 5.49 5.46 8.09 7.21 78 8.36 7.75 5.50 5.48 8.38 7.47 79 8.52 7.96 5.50 5.49 8.67 7.75 80 8.67 8.16 5.51 5.50 9.00 8.05 81 8.81 8.36 5.51 5.51 9.34 8.39 82 8.94 8.55 5.51 5.51 9.70 8.73 83 9.06 8.73 5.51 5.51 10.10 9.12 84 9.16 8.90 5.51 5.51 10.52 9.53 85 & over 9.26 9.05 5.51 5.51 10.96 9.97
Amounts for Monthly Life Income are based on age nearest birthday when income starts. Amounts for ages not shown will be furnished upon request. 85-300-21 Page 22 EQUITABLE VARIABLE LIFE INSURANCE COMPANY A Stock Life Insurance Company Home Office: 787 Seventh Avenue, New York, New York 10019 Flexible Premium Variable Life Insurance Plan. Insurance payable upon death before Final Policy Date. Policy Account payable on Final Policy Date. Adjustable Death Benefit. Values provided by this policy are based on declared interest rates, and on the investment experience of the investment divisions of a separate account which in turn depends on the investment performance of the corresponding portfolios of investment companies. They are not guaranteed as to dollar amount. Investment options are described on Page 10. This is a non-participating policy. No. 85-300 EX-99.1A5BENDORS 9 ENDORSEMENT S.97-1 (IL PLUS) NAME CHANGE ENDORSEMENT In this endorsement, "your" means the Owner of the policy at the time an Owner's right is exercised. - -------------------------------------------------------------------------------- EFFECTIVE DATE: JANUARY 1, 1997 This endorsement is made part of your policy as of its Effective Date. It should be attached to and kept with your policy. Effective January 1, 1997, Equitable Variable Life Insurance Company merged into The Equitable Life Assurance Society of the United States. The Equitable Life Assurance Society of the United States is now responsible for all the liabilities and obligations of Equitable Variable Life Insurance Company under this policy. Wherever the name Equitable Variable Life Insurance Company appears in this policy, the name The Equitable Life Assurance Society of the United States is hereby substituted. In all other respects, the terms and provisions of this policy remain unchanged and in full force and effect. THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES /s/ Pauline Sherman /s/ James M. Benson Pauline Sherman, James M. Benson, Vice President & Secretary President & Chief Executive Officer S.97-1 EX-99.1A5CRIDER 10 RIDER R94-204 (EVLICO) (IL PLUS) OPTION TO PURCHASE ADDITIONAL INSURANCE RIDER In this rider, "we", "our" and "us" mean Equitable Variable Life Insurance Company. "You" and "your" mean the owner of the policy at the time an owner's right is exercised. - -------------------------------------------------------------------------------- You may buy new insurance policies on the life of the Insured under Options A, B and C, subject to the terms of this rider. We will not ask for evidence of insurability, except as stated in Option B and except where required for additional benefit riders. The consent of the Insured is required. OPTION AMOUNT. This amount is shown on page 3 of the policy or on the Additional Benefits Rider if this rider is added after issue of the policy. THIS RIDER'S COST. While this rider is in effect, its charge will be a part of the monthly deduction from the Policy Account. The maximum monthly charge for this benefit is shown in the Table of Maximum Monthly Charges For Benefits on Page 4 of the policy. OPTION A -- REGULAR OPTION (AVAILABLE ON OPTION DATES). You may buy a new policy with a face amount up to the Option Amount on each of the Option Dates that applies to the Insured while this rider is in effect. These dates are the policy anniversaries after issue of this rider on which the Insured's age at nearest birthday is 22, 25, 28, 31, 34, 37 and 40. The number of Option Dates available depends on the Insured's age at issue of this rider. You must submit an application for the new policy and pay its first premium on or within 60 days before the Option Date. The new policy will not take effect until the Option Date, which will be its Register Date. OPTION B -- ALTERNATIVE OPTION (AVAILABLE INSTEAD OF NEXT REGULAR OPTION). Within three years before an Option Date specified in Option A and while this rider is in effect, you may buy a new policy on the life of the Insured with a face amount up to the Option Amount. You may do this only if evidence of insurability satisfactory to us is furnished. We will issue the new policy with a current Register Date and at a premium rate based on the same rating class as applies to this rider if the following condition is met. We must be satisfied that the Insured then qualifies for a permanent plan of life insurance policy, with premiums payable for life and at a premium rate not more than 150% of the premium rate then in effect for that policy at the same class of risk as under this rider. You must submit an application for the new policy and pay its first premium while the Insured is living. Any purchase under this option automatically cancels the regular option on the next Option Date. OPTION C -- BIRTH OR ADOPTION OF A CHILD. You may also buy a new policy on the life of the Insured if a live birth of a child of the Insured or a legal adoption of a child by the Insured occurs while this rider is in effect. Its face amount may be up to the Option Amount. In the case of multiple live births, its face amount may be up to the Option Amount times the number of live births. You must submit an application for the new policy and pay its first premium within 90 days after the birth or adoption while this rider is in effect. The new policy will not take effect until its Register Date. This date will be the earlier of: (1) the 90th day after the date of birth or adoption; or (2) the day after this rider terminates. We may require evidence of birth or adoption. TEMPORARY INSURANCE UPON BIRTH OR ADOPTION. We will provide temporary insurance on the life of the Insured starting on the date of the live birth of a child of the Insured or legal adoption of the child by the Insured, if this rider is then in effect. If the Insured dies before the 90th day following such date and while this rider is in effect, we will pay an amount equal to the Option Amount upon receipt of proof of death. In the case of multiple births, we will pay the Option Amount times the number of live births. We will include this amount with the other insurance benefits of this policy. THE NEW POLICY. You may choose that the new policy be on any permanent plan of insurance for which it qualifies under our rules in effect on its Register Date as to plan, amount, age and class of risk. You may not choose a policy of term insurance, a policy which includes term insurance, or one that provides insurance on more than one life. Premiums will be at our rate then in effect for the Insured's attained insurance age and for the same class of risk as under this rider. The new policy may contain an Accidental Death Benefit rider if such a rider is then in effect under this policy. The amount of its benefit may not be more than the face amount of the new policy. The new policy may also contain a Disability Waiver of premium or monthly deductions rider if such a rider is then in effect under this policy. Otherwise, inclusion of an additional benefit rider will require our consent and evidence of insurability satisfactory to us. The new policy may not contain an Option to Purchase Additional Insurance. R94-204 Option to Purchase Additional Insurance Rider (continued on back) TERMINATION. This rider will no longer be in effect: 1. on and after the policy anniversary nearest the Insured's 40th birthday (except as to any Regular Option then available); 2. if the insurance under the policy terminates. You may terminate this rider on any premium due date by asking for this in writing. GENERAL. This rider is a part of the policy. Its benefits are subject to all of the terms of this rider and the policy. The Suicide Exclusion and Incontestability provisions of the policy apply to this rider. However, if this rider is added after the policy is issued, the periods referred to in them are measured for this rider from its Date of Issue as shown on the Additional Benefits Rider. EQUITABLE VARIABLE LIFE INSURANCE COMPANY /s/ Molly K. Heines /s/ Joseph J. Melone Molly K. Heines, Joseph J. Melone, Vice President & Secretary Chairman & Chief Executive Officer R94-204 EX-99.1A5DRIDER 11 RIDER R94-204 (ELAS) (IL PLUS) OPTION TO PURCHASE ADDITIONAL INSURANCE RIDER In this rider, "we", "our" and "us" mean The Equitable Life Assurance Society of the United States. "You" and "your" mean the owner of the policy at the time an owner's right is exercised. - -------------------------------------------------------------------------------- You may buy new insurance policies on the life of the Insured under Options A, B and C, subject to the terms of this rider. We will not ask for evidence of insurability, except as stated in Option B and except where required for additional benefit riders. The consent of the Insured is required. OPTION AMOUNT. This amount is shown on page 3 of the policy or on the Additional Benefits Rider if this rider is added after issue of the policy. THIS RIDER'S COST. While this rider is in effect, its charge will be a part of the monthly deduction from the Policy Account. The maximum monthly charge for this benefit is shown in the Table of Maximum Monthly Charges For Benefits on Page 4 of the policy. OPTION A -- REGULAR OPTION (AVAILABLE ON OPTION DATES). You may buy a new policy with a face amount up to the Option Amount on each of the Option Dates that applies to the Insured while this rider is in effect. These dates are the policy anniversaries after issue of this rider on which the Insured's age at nearest birthday is 22, 25, 28, 31, 34, 37 and 40. The number of Option Dates available depends on the Insured's age at issue of this rider. You must submit an application for the new policy and pay its first premium on or within 60 days before the Option Date. The new policy will not take effect until the Option Date, which will be its Register Date. OPTION B -- ALTERNATIVE OPTION (AVAILABLE INSTEAD OF NEXT REGULAR OPTION). Within three years before an Option Date specified in Option A and while this rider is in effect, you may buy a new policy on the life of the Insured with a face amount up to the Option Amount. You may do this only if evidence of insurability satisfactory to us is furnished. We will issue the new policy with a current Register Date and at a premium rate based on the same rating class as applies to this rider if the following condition is met. We must be satisfied that the Insured then qualifies for a permanent plan of life insurance policy, with premiums payable for life and at a premium rate not more than 150% of the premium rate then in effect for that policy at the same class of risk as under this rider. You must submit an application for the new policy and pay its first premium while the Insured is living. Any purchase under this option automatically cancels the regular option on the next Option Date. OPTION C -- BIRTH OR ADOPTION OF A CHILD. You may also buy a new policy on the life of the Insured if a live birth of a child of the Insured or a legal adoption of a child by the Insured occurs while this rider is in effect. Its face amount may be up to the Option Amount. In the case of multiple live births, its face amount may be up to the Option Amount times the number of live births. You must submit an application for the new policy and pay its first premium within 90 days after the birth or adoption while this rider is in effect. The new policy will not take effect until its Register Date. This date will be the earlier of: (1) the 90th day after the date of birth or adoption; or (2) the day after this rider terminates. We may require evidence of birth or adoption. TEMPORARY INSURANCE UPON BIRTH OR ADOPTION. We will provide temporary insurance on the life of the Insured starting on the date of the live birth of a child of the Insured or legal adoption of the child by the Insured, if this rider is then in effect. If the Insured dies before the 90th day following such date and while this rider is in effect, we will pay an amount equal to the Option Amount upon receipt of proof of death. In the case of multiple births, we will pay the Option Amount times the number of live births. We will include this amount with the other insurance benefits of this policy. THE NEW POLICY. You may choose that the new policy be on any permanent plan of insurance for which it qualifies under our rules in effect on its Register Date as to plan, amount, age and class of risk. You may not choose a policy of term insurance, a policy which includes term insurance, or one that provides insurance on more than one life. Premiums will be at our rate then in effect for the Insured's attained insurance age and for the same class of risk as under this rider. The new policy may contain an Accidental Death Benefit rider if such a rider is then in effect under this policy. The amount of its benefit may not be more than the face amount of the new policy. The new policy may also contain a Disability Waiver of premium or monthly deductions rider if such a rider is then in effect under this policy. Otherwise, inclusion of an additional benefit rider will require our consent and evidence of insurability satisfactory to us. The new policy may not contain an Option to Purchase Additional Insurance. R94-204 Option to Purchase Additional Insurance Rider (continued on back) TERMINATION. This rider will no longer be in effect: 1. on and after the policy anniversary nearest the Insured's 40th birthday (except as to any Regular Option then available); 2. if the insurance under the policy terminates. You may terminate this rider on any premium due date by asking for this in writing. GENERAL. This rider is a part of the policy. Its benefits are subject to all of the terms of this rider and the policy. The Suicide Exclusion and Incontestability provisions of the policy apply to this rider. However, if this rider is added after the policy is issued, the periods referred to in them are measured for this rider from its Date of Issue as shown on the Additional Benefits Rider. THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES /s/ Pauline Sherman /s/ James M. Benson Pauline Sherman, James M. Benson, Vice President & Secretary President & Chief Executive Officer R94-204 EX-99.1A5ERIDER 12 RIDER R94-212 (EVLICO) (IL PLUS) SUBSTITUTION OF INSURED RIDER In this rider, "we", "our" and "us" mean Equitable Variable Life Insurance Company. "You" means the Owner of the policy at the time an Owner's right is exercised. - ------------------------------------------------------------------------------- After the second policy year you may substitute coverage on the life of a new insured person for coverage on the life of the original insured person, subject to conditions we determine. The conditions include but are not limited to the following: 1. We must be satisfied that the new insured person is insurable for the amount of insurance applied for. 2. The new insured person must join in the request for substitution and the owner of the policy must have an insurable interest in the new insured person. If the policy is assigned, the assignee must consent to the substitution of coverage. 3. The substitution may be made as of the beginning of any policy month if the new insured person is not then over age 65. 4. The new insured person's date of birth must not be later than the Register Date of the policy. 5. This policy must be in effect on the date of substitution with all monthly deductions from the Policy Account having been made, and with no such deductions or premiums then being waived nor amounts credited to the Policy Account by a disability rider. 6. Within 31 days before the date of substitution, we must receive: (a) written request for the substitution on our application form; (b) evidence of the new insured person's insurability satisfactory to us; and (c) any extra sum we may require. 7. Insurance on the original insured person will cease when insurance on the new insured person takes effect. 8. Any additional benefit riders in effect under the policy will terminate at the time of substitution of insureds. You may apply for any of them as to the new insured person. The issue of such riders will require our consent and evidence of insurability satisfactory to us. 9. In our determination the substitution must not affect the qualification of this policy as life insurance under the Internal Revenue Code or successor legislation, as interpreted by us. EFFECTS OF SUBSTITUTION. Premiums for the policy will be based on our rules in effect on its Register Date for the insurance age of the new insured person on that date. The Register Date for the policy will not be affected by the substitution of insureds. The face amount of insurance and the death benefit option in the policy will be the same as in effect immediately before the substitution, unless either (i) you ask for a change or (ii) a change is required in order to continue the qualification of the policy as life insurance under the Internal Revenue Code or successor legislation. We reserve the right to charge an administrative fee of $100 for the substitution. This fee will be deducted from the policy account. The substitution of a new insured person for the original insured person shall not preclude additional later substitutions of insureds, in which case reference to the "original insured person" shall include such substituted insureds as the context requires. The time periods in the Incontestability and Suicide Exclusion provisions of this policy will begin on the date of substitution. HOW THIS RIDER RELATES TO THE POLICY. This rider is a part of the policy. Its benefits are subject to all the terms of this rider and the policy. EQUITABLE VARIABLE LIFE INSURANCE COMPANY /s/ Molly K. Heines /s/ Joseph J. Melone Molly K. Heines, Joseph J. Melone, Vice President & Secretary Chairman & Chief Executive Officer R94-212 Substitution of Insured Rider EX-99.1A5FRIDER 13 RIDER R94-212 (ELAS) (IL PLUS) SUBSTITUTION OF INSURED RIDER In this rider, "we", "our" and "us" mean The Equitable Life Assurance Society of the United States. "You" means the Owner of the policy at the time an Owner's right is exercised. - ------------------------------------------------------------------------------- After the second policy year you may substitute coverage on the life of a new insured person for coverage on the life of the original insured person, subject to conditions we determine. These conditions include but are not limited to the following: 1. We must be satisfied that the new insured person is insurable for the amount of insurance applied for. 2. The new insured person must join in the request for substitution and the owner of the policy must have an insurable interest in the new insured person. If the policy is assigned, the assignee must consent to the substitution of coverage. 3. The substitution may be made as of the beginning of any policy month if the new insured person is not then over age 65. 4. The new insured person's date of birth must not be later than the Register Date of the policy. 5. This policy must be in effect on the date of substitution with all monthly deductions from the Policy Account having been made, and with no such deductions or premiums then being waived nor amounts credited to the Policy Account by a disability rider. 6. Within 31 days before the date of substitution, we must receive: (a) written request for the substitution on our application form; (b) evidence of the new insured person's insurability satisfactory to us; and (c) any extra sum we may require. 7. Insurance on the original insured person will cease when insurance on the new insured person takes effect. 8. Any additional benefit riders in effect under the policy will terminate at the time of substitution of insureds. You may apply for any of them as to the new insured person. The issue of such riders will require our consent and evidence of insurability satisfactory to us. 9. In our determination the substitution must not affect the qualification of this policy as life insurance under the Internal Revenue Code or successor legislation, as interpreted by us. EFFECTS OF SUBSTITUTION. Premiums for the policy will be based on our rules in effect on its Register Date for the insurance age of the new insured person on that date. The Register Date for the policy will not be affected by the substitution of insureds. The face amount of insurance and the death benefit option in the policy will be the same as in effect immediately before the substitution, unless either (i) you ask for a change or (ii) a change is required in order to continue the qualification of the policy as life insurance under the Internal Revenue Code or successor legislation. We reserve the right to charge an administrative fee of $100 for the substitution. This fee will be deducted from the policy account. The substitution of a new insured person for the original insured person shall not preclude additional later substitutions of insureds, in which case reference to the "original insured person" shall include such substituted insureds as the context requires. The time periods in the Incontestability and Suicide Exclusion provisions of the policy will begin on the date of substitution. HOW THIS RIDER RELATES TO THE POLICY. This rider is a part of the policy. Its benefits are subject to all the terms of this rider and the policy. THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES /s/ Pauline Sherman /s/ James M. Benson Pauline Sherman, James M. Benson, Vice President & Secretary President & Chief Executive Officer R94-212 Substitution of Insured Rider EX-99.1A5GRIDER 14 RIDER R94-215 (EVLICO) (IL PLUS) RENEWABLE TERM INSURANCE RIDER ON THE INSURED In this rider "we", "our" and "us" mean Equitable Variable Life Insurance Company. "You" means the owner of the policy at the time an owner's right is exercised. - -------------------------------------------------------------------------------- THIS RIDER'S BENEFIT AND ITS COST. We will pay to the Beneficiary the amount of term insurance in effect under this rider at the insured person's death, when we receive proof that the insured person died before this rider's Term Expiry Date. This rider's Term Expiry Date is the Initial Term Expiry Date unless this rider is renewed. If it is renewed, the Term Expiry Date is the tenth policy anniversary after the latest renewal, but not later than the Final Term Expiry Date, which is the policy anniversary nearest the insured person's 65th birthday. The Policy Information section of the policy or the rider that adds this benefit shows the amount of term insurance on the insured person and this rider's Initial Term Expiry Date. While this rider is in effect, its charge will be a part of the monthly deduction from the Policy Account. The maximum monthly charge for this benefit is shown in the Table of Maximum Monthly Charges for Benefits on Page 4 of the policy. HOW YOU MAY EXCHANGE THIS RIDER FOR A NEW POLICY. While this rider is in effect, you may exchange it for (a) a new policy on the life of the insured person or (b) an increase in the face amount of insurance of a permanent life insurance policy on the life of the insured person that was issued by us and provides for face amount increases. You may do this at the beginning of any policy month that is on or before the policy anniversary nearest the insured person's 62nd birthday. We will not ask for evidence of insurability, except as stated below for additional benefit riders. The new policy or the face amount increase will have an insurance amount equal to the amount of term insurance in effect on this rider on the date of exchange. Or, you may choose a lower amount allowed by our rules then in effect. The Register Date of the new policy or the effective date of the face amount increase will be the date of exchange. Rates for the new policy will be based on our rates in effect on that date. They will be for the Insured's then attained insurance age and for the same class of risk as for this rider. You may choose that the new policy be on any permanent plan of insurance for which it qualifies under our rules then in effect as to plan, amount, age and class of risk. You may ask that additional benefit riders be included in the new policy. The issue of any rider will require our consent and evidence of insurability satisfactory to us. The first premium for the new policy must be received by us on or within 31 days before the date of exchange. We will tell you the amount of the first premium for the new policy on request. WHEN THIS RIDER WILL TERMINATE. This rider will not be in effect: 1. On and after its Term Expiry Date, if not renewed; 2. If this rider is exchanged for a new policy or a face amount increase; or 3. If the policy is terminated. You may terminate this rider by asking for this in writing. The effective date of termination will be the beginning of the policy month which coincides with or next follows the date we receive your request. INCONTESTABILITY AND SUICIDE EXCLUSION. The incontestability and Suicide Exclusion provisions of the policy also apply to this rider. However, if this rider is added after the policy is issued, the time periods in those provisions will be measured for this rider from its Date of Issue as shown on the Additional Benefits Rider. HOW THIS RIDER RELATES TO THE POLICY. This rider is a part of the policy. Its benefit is subject to all the terms of this rider and the policy. EQUITABLE VARIABLE LIFE INSURANCE COMPANY /s/ Pauline Sherman /s/ James M. Benson PAULINE SHERMAN, JAMES M. BENSON, Vice President & Secretary President & Chief Executive Officer R94-215 Renewable Term Insurance Rider On the Insured EX-99.1A5HRIDER 15 RIDER R94-215 (ELAS) (IL PLUS) RENEWABLE TERM INSURANCE RIDER ON THE INSURED In this rider "we", "our" and "us" mean The Equitable Life Assurance Society of the United States. "You" means the owner of the policy at the time an owner's right is exercised. - -------------------------------------------------------------------------------- THIS RIDER'S BENEFIT AND ITS COST. We will pay to the Beneficiary the amount of term insurance in effect under this rider at the insured person's death, when we receive proof that the insured person died before this rider's Term Expiry Date. This rider's Term Expiry Date is the Initial Term Expiry Date unless this rider is renewed. If it is renewed, the Term Expiry Date is the tenth policy anniversary after the latest renewal, but not later than the Final Term Expiry Date, which is the policy anniversary nearest the insured person's 65th birthday. The Policy Information section of the policy or the rider that adds this benefit shows the amount of term insurance on the insured person and this rider's Initial Term Expiry Date. While this rider is in effect, its charge will be a part of the monthly deduction from the Policy Account. The maximum monthly charge for this benefit is shown in the Table of Maximum Monthly Charges for Benefits on Page 4 of the policy. HOW YOU MAY EXCHANGE THIS RIDER FOR A NEW POLICY. While this rider is in effect, you may exchange it for (a) a new policy on the life of the insured person or (b) an increase in the face amount of insurance of a permanent life insurance policy on the life of the insured person that was issued by us and provides for face amount increases. You may do this at the beginning of any policy month that is on or before the policy anniversary nearest the insured person's 62nd birthday. We will not ask for evidence of insurability, except as stated below for additional benefit riders. The new policy or the face amount increase will have an insurance amount equal to the amount of term insurance in effect on this rider on the date of exchange. Or, you may choose a lower amount allowed by our rules then in effect. The Register Date of the new policy or the effective date of the face amount increase will be the date of exchange. Rates for the new policy will be based on our rates in effect on that date. They will be for the Insured's then attained insurance age and for the same class of risk as for this rider. You may choose that the new policy be on any permanent plan of insurance for which it qualifies under our rules then in effect as to plan, amount, age and class of risk. You may ask that additional benefit riders be included in the new policy. The issue of any rider will require our consent and evidence of insurability satisfactory to us. The first premium for the new policy must be received by us on or within 31 days before the date of exchange. We will tell you the amount of the first premium for the new policy on request. WHEN THIS RIDER WILL TERMINATE. This rider will not be in effect: 1. On and after its Term Expiry Date, if not renewed; 2. If this rider is exchanged for a new policy or a face amount increase; or 3. If the policy is terminated. You may terminate this rider by asking for this in writing. The effective date of termination will be the beginning of the policy month which coincides with or next follows the date we receive your request. INCONTESTABILITY AND SUICIDE EXCLUSION. The incontestability and Suicide Exclusion provisions of the policy also apply to this rider. However, if this rider is added after the policy is issued, the time periods in those provisions will be measured for this rider from its Date of Issue as shown on the Additional Benefits Rider. HOW THIS RIDER RELATES TO THE POLICY. This rider is a part of the policy. Its benefit is subject to all the terms of this rider and the policy. THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES /s/ Pauline Sherman /s/ James M. Benson PAULINE SHERMAN, JAMES M. BENSON, Vice President & Secretary President & Chief Executive Officer R94-215 Renewable Term Insurance Rider On the Insured EX-99.1A5IRIDER 16 RIDER R94-216 (EVLICO VERSION) (IL PLUS) DISABILITY RIDER -- WAIVER OF MONTHLY DEDUCTIONS In this rider, "we", "our" and "us" mean Equitable Variable Life Insurance Company. "You" and "your" mean the owner of the policy at the time an owner's right is exercised. - -------------------------------------------------------------------------------- THIS RIDER'S BENEFITS AND ITS COST. We will waive the monthly deductions from the Policy Account as described in the policy, when we receive proof that total disability of the insured person has existed continuously for at least six months, as provided in this rider. If total disability begins on or after the insured person's fifth birthday and before the age 60 anniversary, we will waive all such deductions while total disability continues. If total disability begins at or after the age 60 anniversary, we will waive only such deductions due to be made before the age 65 anniversary while total disability continues. In this rider, "age 60 anniversary" and "age 65 anniversary" mean the policy anniversaries nearest the insured person's 60th and 65th birthdays, respectively. While such deductions are being waived: 1. Insurance under the policy and under any additional benefit riders will be provided in accordance with their terms; and 2. You may not increase or decrease the Face Amount of Insurance; and 3. Except for the waiver of monthly deductions, your Policy Account will continue to operate as if monthly deductions were not being waived. Monthly deductions made from your Policy Account during total disability that are later waived will be refunded as credits to your Policy Account as of the dates they were subtracted. Such credits will be allocated to your value in the unloaned portion of our Guaranteed Interest Division and to your values in the investment divisions of our Separate Account on the basis of your monthly deduction allocation percentages in effect on the date the deductions were made. The value of your Policy Account will be determined as if such deductions had never been made. While this rider is in effect, its cost will be a part of the monthly deduction from the Policy Account. The monthly cost is a percentage of the total monthly deduction from the Policy Account, as described in the policy. Such percentage will be determined by us from time to time, based on the insured person's sex, attained age and rating class. It will never be more than the percentage shown in the Table of Guaranteed Maximum Rates For Disability Waiver of Monthly Deductions on Page 4 -- Continued of the policy. Any change in the cost of insurance percentage we use for this benefit will apply to all individuals of the same class as the insured person. WHAT IS TOTAL DISABILITY? Total disability means the insured person's complete inability, because of bodily injury or disease, to perform all of the substantial and material duties of his or her regular occupation. However, after 24 consecutive months of such disability, total disability will mean the insured person's complete inability to engage in any gainful occupation for which he or she is reasonably fitted by education, training, or experience. We will also recognize the complete and irrevocable loss of sight of both eyes, or the use of both hands or both feet, or of one hand and one foot as total disability. We will presume any such loss to be total disability even if the insured person engages in any occupation. WHAT IS NOT COVERED? We will not waive such monthly deductions: 1. For a total disability that begins before the insured person's fifth birthday, or that begins while this rider is not in effect; or 2. If total disability results from: a. Intentionally self-inflicted injury; or b. Service in the armed forces of any country at war, including declared and undeclared war and resistance to armed aggression. YOU MUST GIVE US PROOF OF DISABILITY. Before we waive any monthly deductions, we must be given written notice of claim, and proof that total disability of the insured person has existed continuously for at least six months. This must be done while total disability continues and while the insured person is still living, or as soon as reasonably possible. If notice or proof is not given as soon as reasonably possible, we will not refund as a credit monthly deductions due more than one year prior to the date that proof is given to us. R94-216 Disability Rider Waiver of Monthly Deductions (continued on back) We may require proof at reasonable intervals that total disability continues. After total disability has continued for two years we will not require proof more than once a year. We will not require proof after the age 65 anniversary if monthly deductions have been waived for the five preceding years. We may require examination of the insured person by our medical representatives at our expense as part of any proof of total disability. We will not waive monthly deductions if proof is not furnished as required. WHEN THIS RIDER WILL TERMINATE. This rider will not be in effect: 1. At and after the age 65 anniversary; or 2. If the policy terminates. You may terminate this rider by asking for this in writing. The effective date of termination will be the beginning of the policy month which coincides with or next follows the date we receive your request. A claim based on total disability that begins before termination of this rider will not be affected by the termination. WHEN THIS RIDER IS INCONTESTABLE. This rider will become incontestable only after it has been in effect, during the lifetime of the insured person and without the occurrence of total disability of the insured person, for two years from the later of: (a) the Date of Issue of the Policy; or (b) the date as of which this rider becomes effective if added or restored after issue of the policy. HOW THIS RIDER RELATES TO THE POLICY. This rider is a part of the policy. Its benefits are subject to all the terms of this rider and the policy. EQUITABLE VARIABLE LIFE INSURANCE COMPANY /s/ Molly K. Heines /s/ Joseph J. Melone Molly K. Heines, Joseph J. Melone, Vice President & Secretary Chairman & Chief Executive Officer R94-216 EX-99.1A5JRIDER 17 RIDER R94-216 (IL PLUS) (ELAS) DISABILITY RIDER - In this rider "we", "our" and "us" mean WAIVER OF MONTHLY DEDUCTIONS The Equitable Life Assurance Society of the United States. "You" and "your" mean the owner of the policy at the time an owner's right is exercised. - -------------------------------------------------------------------------------- THIS RIDER'S BENEFITS AND ITS COST. We will waive the monthly deductions from the Policy Account as described in the policy, when we receive proof that total disability of the insured person has existed continously for at least six months, as provided in this rider. If total disability begins on or after the insured person's fifth birthday and before the age 60 anniversary, we will waive all such deductions while total disability continues. If total disability begins at or after the age 60 anniversary, we will waive only such deductions due to be made before the age 65 anniversary while total disability continues. In this rider, "age 60 anniversary" and "age 65 anniversary" mean the policy anniversaries nearest the insured person's 60th and 65th birthdays, respectively. While such deductions are being waived: 1. Insurance under the policy and under any additional benefit riders will be provided in accordance with their terms; and 2. You may not increase or decrease the Face Amount of Insurance; and 3. Except for the waiver of monthly deductions, your Policy Account will continue to operate as if monthly deductions were not being waived. Monthly deductions made from your Policy Account during total disability that are later waived will be refunded as credits to your Policy Account as of the dates they were subtracted. Such credits will be allocated to your value in the unloaned portion of our Guaranteed Interest Division and to your values in the investment divisions of our Separate Account on the basis of your monthly deduction allocation percentages in effect on the date the deductions were made. The value of your Policy Account will be determined as if such deductions had never been made. While this rider is in effect, its cost will be a part of the monthly deduction from the Policy Account. The monthly cost is a percentage of the total monthly deduction from the Policy Account, as described in the policy. Such percentage will be determined by us from time to time, based on the insured person's sex, attained age and rating class. It will never be more than the percentage shown in the Table of Guaranteed Maximum Rates For Disability Waiver of Monthly Deductions on Page 4-Continued of the policy. Any change in the cost of insurance percentage we use for this benefit will apply to all individuals of the same class as the insured person. WHAT IS TOTAL DISABILITY? Total disability means the insured person's complete inability, because of bodily injury or disease, to perform all of the substantial and material duties of his or her regular occupation. However, after 24 consecutive months of such disability, total disability will mean the insured person's complete inability to engage in any gainful occupation for which he or she is reasonably fitted by education, training or experience. We will also recognize the complete and irrecoverable loss of sight of both eyes, or the use of both hands or both feet, or of one hand and one foot as total disability. We will presume any such loss to be total disability even if the insured person engages in any occupation. WHAT IS NOT COVERED? We will not waive such monthly deductions: 1. For a total disability that begins before the insured person's fifth birthday, or that begins while this rider is not in effect; or 2. If total disability results from: a. Intentionally self-inflicted injury; or b. Service in the armed forces of any country at war, including declared and undeclared war and resistance to armed aggression. YOU MUST GIVE US PROOF OF DISABILITY. Before we waive any monthly deductions, we must be given written notice of claim, and proof that total disability of the insured person has existed continuously for at least six months. This must be done while total disability continues and while the insured person is still living, or as soon as reasonably possible. If notice or proof is not given as soon as reasonably possible, we will not refund as a credit monthly deductions due more than one year prior to the date that proof is given to us. R94-216 Disability Rider Waiver of Monthly Deductions (continued on back) We may require proof at reasonable intervals that total disability continues. After total disability has continued for two years we will not require proof more than once a year. We will not require proof after the age 65 anniversary if monthly deductions have been waived for the five preceding years. We may require examination of the insured person by our medical representatives at our expense as part of any proof of total disability. We will not waive monthly deductions if proof is not furnished as required. WHEN THIS RIDER WILL TERMINATE. This rider will not be in effect: 1. At and afer the age 65 anniversary; or 2. If the policy terminates. You may terminate this rider by asking for this in writing. The effective date of termination will be the beginning of the policy month which coincides with or next follows the date we receive your request. A claim based on total disability that begins before termination of this rider will not be affected by the termination. WHEN THIS RIDER IS INCONTESTABLE. This rider will become incontestable only after it has been in effect, during the lifetime of the insured person and without the occurrence of total disability of the insured person, for two years from the later of: (a) the Date of Issue of the Policy; or (b) the date as of which this rider becomes effective if added or restored after issue of the policy. HOW THIS RIDER RELATES TO THE POLICY. This rider is a part of the policy. Its benefits are subject to all the terms of this rider and the policy. THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES /s/ Pauline Sherman /s/ James M. Benson - ------------------- ------------------- Pauline Sherman James M. Benson Vice President & Secretary President & Chief Executive Officer R94-216 EX-99.1A5KRIDER 18 RIDER R94-216A (EVLICO) (IL PLUS) DISABILITY RIDER -- WAIVER OF PREMIUMS In this rider, "we", "our" and "us" mean Equitable Variable Life Insurance Company. "You" and "your" mean the owner of the policy at the time an owner's right is exercised. - -------------------------------------------------------------------------------- THIS RIDER'S BENEFITS AND ITS COST. We will pay the specified premiums for this policy when we receive proof that total disability of the insured person has existed continuously for at least six months, as provided in this rider. However, if the total monthly deductions at the beginning of a policy month is higher than the specified premiums for that month for this policy, we will instead waive such monthly deductions. If total disability begins on or after the insured person's fifth birthday and before the age 60 anniversary, we will pay all such premiums or waive all such deductions, if higher, while total disability continues. If total disability begins at or after the age 60 anniversary, we will pay only such premiums or waive only such deductions due to be made before the age 65 anniversary while total disability continues. In this rider, "age 60 anniversary" and "age 65 anniversary" mean the policy anniversaries nearest the insured person's 60th and 65th birthdays, respectively. While such premiums or deductions, if higher, are being waived: 1. Insurance under the policy and under any additional benefit riders will be provided in accordance with their terms; and 2. You may not increase or decrease the Face Amount of Insurance; and 3. Except for the waiver of monthly deductions, your Policy Account will continue to operate as if monthly deductions were not being waived. We will refund any premiums that are eligible for waiver and were paid by you prior to the time we began to pay specified premiums, but not more than the specified premiums that were due during that time. If the monthly deduction was higher than the specified premium for any month described in the paragraph above, the monthly deduction for that month will instead be credited to your Policy Account as of the date it was subtracted. Such credits will be allocated to your value in the unloaned portion of our Guaranteed Interest Division and to your values in the investment divisions of our Separate Account on the basis of your monthly deduction allocation percentages in effect on the date the deductions were made. The value of your Policy Account will be determined as if such deductions had never been made. While this rider is in effect, its cost will be a part of the monthly deduction from the Policy Account. The Maximum Monthly Charges for this rider are shown on page 4. WHAT IS TOTAL DISABILITY? Total disability means the insured person's complete inability, because of bodily injury or disease, to perform all of the substantial and material duties of his or her regular occupation. However, after 24 consecutive months of such disability, total disability will mean the insured person's complete inability to engage in any gainful occupation for which he or she is reasonably fitted by education, training, or experience. We will also recognize the complete and irrevocable loss of sight of both eyes, or the use of both hands or both feet, or of one hand and one foot as total disability. We will presume any such loss to be total disability even if the insured person engages in any occupation. WHAT IS NOT COVERED? We will not pay premiums or waive such monthly deductions: 1. For a total disability that begins before the insured person's fifth birthday, or that begins while this rider is not in effect; or 2. If total disability results from: a. Intentionally self-inflicted injury; or b. Service in the armed forces of any country at war, including declared and undeclared war and resistance to armed aggression. YOU MUST GIVE US PROOF OF DISABILITY. Before we pay any premiums or waive any monthly deductions, if higher, we must be given written notice of claim, and proof that total disability of the insured person has existed continuously for at least six months. This must be done while total disability continues and while the insured person is still living, or as soon as reasonably possible. If notice or proof is not given as soon as reasonably possible, we will not pay or refund any specified premiums or refund as a credit monthly deductions due more than one year prior to the date that proof is given to us. R94-216A Disability Rider Waiver of Premiums (continued on back) We may require proof at reasonable intervals that total disability continues. After total disability has continued for two years we will not require proof more than once a year. We will not require proof after the age 65 anniversary if we paid premiums or waived monthly deductions, if higher, for the five preceding years. We may require examinations of the insured person by our medical representatives at our expense as part of any proof of total disability. We will not pay premiums or waive monthly deductions if proof is not furnished as required. WHEN THIS RIDER WILL TERMINATE. This rider will not be in effect: a. At and after the age 65 anniversary; or b. If the policy terminates. You may terminate this rider by asking for this in writing. The effective date of termination will be the beginning of the policy month which coincides with or next follows the date we receive your request. A claim based on total disability that begins before termination of this rider will not be affected by the termination. WHEN THIS RIDER IS INCONTESTABLE. This rider will become incontestable only after it has been in effect, during the lifetime of the insured person and without the occurrence of total disability of the insured person, for two years from the later of: (a) the Date of Issue of the Policy; or (b) the date as of which this rider becomes effective if added or restored after issue of the policy. HOW THIS RIDER RELATES TO THE POLICY. This rider is a part of the policy. Its benefits are subject to all the terms of this rider and the policy. EQUITABLE VARIABLE LIFE INSURANCE COMPANY /s/ Molly K. Heines /s/ Joseph J. Melone Molly K. Heines, Joseph J. Melone, Vice President & Secretary Chairman & Chief Executive Officer R94-216A EX-99.1A5LRIDER 19 RIDER R94-216A (IL PLUS) (ELAS) DISABILITY RIDER - In this rider, "we", "our" and "us" mean WAIVER OF PREMIUMS The Equitable Life Assurance Society of the United States. "You" and "your" mean the owner of the policy at the time an owner's right is exercised. - -------------------------------------------------------------------------------- THIS RIDER'S BENEFITS AND ITS COST. We will pay the specified premiums for this policy when we receive proof that total disability of the insured person has existed continuously for at least six months, as provided in this rider. However, if the total monthly deductions at the beginning of a policy month is higher than the specified premiums for that month for this policy, we will instead waive such monthly deductions. If total disability begins on or after the insured person's fifth birthday and before the age 60 anniversary, we will pay all such premiums or waive all such deductions, if higher, while total disability continues. If total disability begins at or after the age 60 anniversary we will pay only such premiums or waive only such deductions due to be made before the age 65 anniversary while total disability continues. In this rider, "age 60 anniversary" and "age 65 anniversary" mean the policy anniversaries nearest the insured person's 60th and 65th birthdays, respectively. While such premiums or deductions, if higher, are being waived: 1. Insurance under the policy and under any additional benefit riders will be provided in accordance with their terms, and 2. You may not increase or decrease the Face Amount of Insurance; and 3. Except for the waiver of monthly deductions, your Policy Account will continue to operate as if monthly deductions were not being waived. We will refund any premiums that are eligible for waiver and were paid by you prior to the time we began to pay specified premiums, but not more than the specified premiums that were due during that time. If the monthly deduction was higher than the specified premium for any month described in the paragraph above, the monthly deduction for that month will instead be credited to your Policy Account as of the date it was subtracted. Such credits will be allocated to your value in the unloaned portion of our Guaranteed Interest Division and to your values in the investment divisions of our Separate Account on the basis of your monthly deduction allocation percentages in effect on the date deductions were made. The value of your Policy Account will be determined as if such deductions had never been made. While this rider is in effect, its cost will be a part of the monthly deduction from the Policy Account. The Maximum Monthly Charges for this rider are shown on Page 4. WHAT IS TOTAL DISABILITY? Total disability means the insured person's complete inability, because of bodily injury or disease, to perform all of the substantial and material duties of his or her regular occupation. However, after 24 consecutive months of such disability, total disability will mean the insured person's complete inability to engage in any gainful occupation for which he or she is reasonably fitted by education, training or experience. We will also recognize the complete and irrecoverable loss of sight of both eyes, or the use of both hands or both feet or of one hand and one foot as total disability. We will presume any such loss to be total disability even if the insured person engages in any occupation. WHAT IS NOT COVERED? We will not pay premiums or waive such monthly deductions: 1. For a total disability that begins before the insured person's fifth birthday, or that begins while this rider is not in effect; or 2. If total disability results from: a. Intentionally self-inflicted injury; or b. Service in the armed forces of any country at war, including declared and undeclared war and resistance to armed aggression. YOU MUST GIVE US PROOF OF DISABILITY. Before we pay any premiums or waive any monthly deductions, if higher, we must be given written notice of claim, and proof that total disability of the insured person has existed continuously for at least six months. This must be done while total disability continues and while the insured person is still living, or as soon as reasonably possible. If notice or proof is not given as soon as reasonably possible, we will not pay or refund any specified premiums or refund as a credit monthly deductions due more than one year prior to the date that proof is given to us. R94-216A Disability Rider Waiver of Premiums (continued on back) We may require proof at reasonable intervals that total disability continues. After total disability has continued for two years we will not require proof more than once a year. We will not require proof after the age 65 anniversary if we paid premiums or waived monthly deductions, if higher, for the five preceding years. We may require examination of the insured person by our medical representatives at our expense as part of any proof of total disability. We will not pay premiums or waive monthly deductions if proof is not furnished as required. WHEN THIS RIDER WILL TERMINATE. This rider will not be in effect: a. At and after the age 65 anniversary; or b. If the policy terminates. You may terminate this rider by asking for this in writing. The effective date of termination will be the beginning of the policy month which coincides with or next follows the date we receive your request. A claim based on total disability that begins before termination of this rider will not be affected by the termination. WHEN THIS RIDER IS INCONTESTABLE. This rider will become incontestable only after it has been in effect, during the lifetime of the insured person and without the occurrence of total disability of the insured person, for two years from the later of: (a) the Date of Issue of the Policy; or (b) the date as of which this rider becomes effective if added or restored after issue of the policy. HOW THIS RIDER RELATES TO THE POLICY. This rider is a part of the policy. Its benefits are subject to all the terms of this rider and the policy. THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES /s/ Pauline Sherman /s/ James M. Benson --------------- --------------- Pauline Sherman James M. Benson Vice President President & Chief & Secretary Executive Officer R94-216A EX-99.1A5MRIDER 20 RIDER R94-220 (EVLICO) (IL PLUS) YEARLY RENEWABLE TERM INSURANCE RIDER ON THE INSURED In this rider, "we", "our" and "us" mean Equitable Variable Life Insurance Company. "You" means the owner of the policy at the time an owner's right is exercised. - -------------------------------------------------------------------------------- THIS RIDER'S BENEFIT. We will pay to the Beneficiary the amount of term insurance in effect under this rider at the insured person's death, when we receive proof that the insured person died before this rider's Term Expiry Date. This rider's Term Expiry Date is the Initial Term Expiry Date unless this rider is renewed. If it is renewed, the Term Expiry Date is the next policy anniversary after the latest renewal, but not later than the Final Term Expiry Date. The Policy Information section of the policy or the rider that adds this benefit shows the amount of term insurance on the insured person and this rider's Initial and Final Term Expiry Date. MONTHLY CHARGES. While this rider is in effect, its charge will be a part of the monthly deduction from the Policy Account. The monthly rate for this benefit for each $1,000 of term insurance in effect under this rider will be determined by us from time to time. The rate is based on the insured person's sex, attained age, tobacco user status and rating class. It will never be more than the rate shown in the Table of Guaranteed Maximum Rates for Yearly Renewable Term Insurance Rider on the Insured on Page 4 -- Continued of the policy. RATE CHANGES. We have the right to change the specified renewal premiums for this rider from time to time, but they will never be more than the guaranteed maximum renewal premiums shown on Page 3 -- Continued of the policy. HOW YOU MAY EXCHANGE THIS RIDER FOR A NEW POLICY. While this rider is in effect, you may exchange it for (a) a new policy on the life of the insured person or (b) an increase in the face amount of insurance of a permanent life insurance policy on the life of the insured person that was issued by us and provides for face amount increases. You may do this at the beginning of any policy month that is on or before the policy anniversary nearest the insured person's 75th birthday. We will not ask for evidence of insurability, except as stated below for additional benefit riders. The new policy or the face amount increase will have an insurance amount equal to the amount of term insurance in effect on this rider on the date of exchange. Or, you may choose a lower amount allowed by our rules then in effect. The Register Date of the new policy or the effective date of the face amount increase will be the date of exchange. Rates for the new policy or the face amount increase will be based on our rates in effect on that date. They will be for the Insured's then attained insurance age and for the same class of risk as for this rider. You may choose that the new policy be on any permanent plan of insurance for which it qualifies under your rules then in effect as to plan, amount, age and class of risk. You may ask that additional benefit riders be included in the new policy. The issue of any rider will require our consent and evidence of insurability satisfactory to us. The first premium for the new policy must be received by us on or within 31 days before the date of exchange. We will tell you the amount of the first premium for the new policy on request. WHEN THIS RIDER WILL TERMINATE. This rider will not be in effect: 1. On and after its Term Expiry Date, if not renewed; 2. If this rider is exchanged for a new policy or a face amount increase; or 3. If the policy terminates. You may terminate this rider by asking for this in writing. The effective date of termination will be the beginning of the policy month which coincides with or next follows the date we receive your request. INCONTESTABILITY AND SUICIDE EXCLUSION. The incontestability and Suicide Exclusion provisions of the policy also apply to this rider. However, if this rider is added after the policy is issued, the time periods in those provisions will be measured for this rider from its Date of Issue as shown on the Additional Benefits Rider. HOW THIS RIDER RELATES TO THE POLICY. This rider is a part of the policy. Its benefit is subject to all the terms of this rider and the policy. EQUITABLE VARIABLE LIFE INSURANCE COMPANY /s/ Molly K. Heines /s/ Joseph J. Melone Molly K. Heines, Joseph J. Melone, Vice President & Secretary Chairman & Chief Executive Officer R94-220 Yearly Renewable Term Insurance Rider (On the Insured) EX-99.1A5NRIDER 21 RIDER R94-220 (IL PLUS) (ELAS) YEARLY RENEWABLE TERM INSURANCE In this rider, "we", "our" and "us" RIDER ON THE INSURED mean The Equitable Life Assurance Society of the United States. "You" means the owner of the policy at the time an owner's right is exercised. - -------------------------------------------------------------------------------- THIS RIDER'S BENEFITS. We will pay to the Beneficiary the amount of term insurance in effect under this rider at the insured person's death, when we receive proof that the insured person died before this rider's Term Expiry Date. This rider's Term Expiry Date is the Initial Term Expiry Date unless this rider is renewed. If it is renewed, the Term Expiry Date is the next policy anniversary after the latest renewal, but not later than the Final Term Expiry Date. The Policy Information section of the policy or the rider that adds this benefit shows the amount of term insurance on the insured person and this rider's Initial and Final Term Expiry Date. MONTHLY CHARGES. While this rider is in effect, its charge will be a part of the monthly deduction from the Policy Account. The monthly rate for this benefit for each $1,000 of term insurance in effect under this rider will be determined by us from time to time. The rate is based on the insured person's sex attained age, tobacco user status and rating class. It will never be more than the rate shown in the Table of Guaranteed Maximum Rates for Yearly Renewable Term Insurance Rider on the Insured on Page 4 -- Continued of the policy. RATE CHANGES. We have the right to change the specified renewal premiums for this rider from time to time, but they will never be more than the guaranteed maximum renewal premiums shown on Page 3 -- Continued of the policy. HOW YOU MAY EXCHANGE THIS RIDER FOR A NEW POLICY. While this rider is in effect, you may exchange it for (a) a new policy on the life of the insured person or (b) an increase in the face amount of insurance of a permanent life insurance policy on the life of the insured person that was issued by us and provides for face amount increases. You may do this at the beginning of any policy month that is on or before the policy anniversary nearest the insured person's 75th birthday. We will not ask for evidence of insurability, except as stated below for additional benefit riders. The new policy or the face amount increase will have an insurance amount equal to the amount of term insurance in effect on this rider on the date of exchange. Or, you may choose a lower amount allowed by our rules then in effect. The Register Date of the new policy or the effective date of the face amount increase will be the date of exchange. Rates for the new policy or the face amount increase will be based on our rates in effect on that date. They will be for the Insured's then attained insurance age and for the same class of risk as for this rider. You may choose that the new policy be on any permanent plan of insurance for which it qualifies under our rules then in effect as to plan, amount, age and class of risk. You may ask that additional benefit riders be included in the new policy. The issue of any rider will require our consent and evidence of insurability satisfactory to us. The first premium for the new policy must be received by us on or within 31 days before the date of exchange. We will tell you the amount of the first premium for the new policy on request. WHEN THIS RIDER WILL TERMINATE. This rider will not be in effect: 1. On and after its Term Expiry Date, if not renewed; 2. If this rider is exchanged for a new policy or a face amount increase; or 3. If the policy terminates. You may terminate this rider by asking for this in writing. The effective date of termination will be the beginning of the policy month which coincides with or next follows the date we receive your request. INCONTESTABILITY AND SUICIDE EXCLUSION. The incontestability and Suicide Exclusion provisions of the policy also apply to this rider. However, if this rider is added after the policy is issued, the time periods in those provisions will be measured for this rider from its Date of Issue as shown on the Additional Benefits Rider. HOW THIS RIDER RELATES TO THE POLICY. This rider is a part of the policy. Its benefit is subject to all the terms of this rider and the policy. THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES /s/ Pauline Sherman /s/ James M. Benson --------------- --------------- Pauline Sherman James M. Benson Vice President President, & Chief Executive & Secretary Officer R94-220 Yearly Renewable Term Insurance Rider (On the Insured) EX-99.1A5ORIDER 22 RIDER R94-102 (EVLICO) (IL PLUS) ACCELERATED DEATH BENEFIT RIDER DISCLOSURE. THE RECEIPT OF THE ACCELERATED DEATH BENEFIT AMOUNT MAY BE TAXABLE. YOU SHOULD SEEK ASSISTANCE FROM YOUR PERSONAL TAX ADVISOR PRIOR TO ELECTING THE BENEFIT. In this rider "we", "our" and "us" mean Equitable Variable Life Insurance Company. "You" means the Owner of the policy at the time an Owner's right is exercised. "This Policy" means the policy to which this rider is attached. POLICY NUMBER: - -------------------------------------------------------------------------------- THIS RIDER'S BENEFIT. We will pay an accelerated death benefit in the amount requested by the Owner, if the Insured is terminally ill, subject to the provisions of this rider. We will pay an accelerated death benefit under this policy only once and in one lump sum. The maximum accelerated death benefit you may receive is the lesser of: 1. 75% of the death benefit payable under this policy, less any policy loan and loan interest, and 2. $500,000. The maximum aggregate amount of Accelerated Death Benefit payments that will be paid under all policies issued by us on the life of the Insured is $500,000. For purposes of this benefit, the death benefit does not include any accidental death benefits, non-convertible term riders or convertible term riders not in their conversion period or any benefits payable because of the death of any person other than the Insured. There is no premium or cost of insurance charge for this rider. We reserve the right to deduct a processing charge of up to $250.00 per policy from the accelerated death benefit payment. We reserve the right to set a minimum of $5,000 on the amount you may receive under this rider. To be eligible for this benefit you must provide satisfactory evidence to us that the Insured's life expectancy is six months or less. This evidence must include, but is not limited to, certification by a physician licensed to practice medicine in the United States or Canada and who is acting within the scope of such license. A physician does not include the Owner, the Insured or a member of either's family. HOW THIS RIDER RELATES TO THE POLICY. This rider is a part of the policy. Its benefits are subject to all the terms of this rider and the policy. This rider has no cash or loan value. This rider is non-participating. INTEREST. Interest will be charged on the amount of the Accelerated Death Benefit and on any unpaid premium we advance after the payment of an Accelerated Death Benefit. The interest rate at the time the Accelerated Death Benefit payment is made will not exceed the greater of the following on such date: 1. the yield on a 90-day treasury bill; or 2. the maximum adjustable policy loan interest rate permitted in the state in which this policy is delivered. EFFECT OF ACCELERATED DEATH BENEFIT PAYMENT ON THE POLICY. The Accelerated Death Benefit payment, plus any accrued interest will be treated as a lien against the policy values. The amount of the lien will be pro-rated against the policy's net cash surrender value, if any, and the net amount at risk. (The net amount at risk is defined as the death benefit of the policy minus the cash surrender value, if any.) For variable life policies, the portion of the cash surrender value that is on lien and is allocated to investment divisions of the Separate Account will be transferred to and maintained as a part of the unloaned Guaranteed Investment Division (GID). You may tell us how much of the accelerated payment is to be transferred from each investment division. Units will be redeemed from each investment division sufficient to cover the amount that is on lien and transferred to the unloaned portion of the GID. If you do not tell us how to allocate the payment, we will allocate it based on our rules then in effect. For variable life policies that do not have a GID, the portion of the cash surrender value that is on lien will be transferred to and maintained in the Money Market Division of our Separate Account. Such transfers will occur as of the date we approve an Accelerated Death Benefit payment. The amount payable at death under the policy will be reduced by the full amount of the lien and any other indebtedness outstanding under the policy. The Owner's access to the policy's cash surrender value will be limited to the excess of the policy's cash surrender value over the amount of the lien secured against the cash surrender value and any other outstanding policy loans and loan interest. R94-102 Accelerated Death Benefit Rider If premiums are required to be paid under the policy, they will continue to be due after the payment of the accelerated payment. If any premium is not paid when due, the amount of the unpaid premium will be added to the lien. If the policy is a flexible premium life policy, and the net cash surrender value is not large enough to cover a monthly deduction, Equitable Variable will advance a premium sufficient enough to keep the policy in force for up to six months following the date we approve an Accelerated Death Benefit payment. This premium advance will be added to the lien. If a Disability Premium Waiver Rider is in effect under the policy, this policy's premiums or monthly deductions will be waived as of the date we approve an Accelerated Death Benefit payment. RIDER LIMITATIONS. Your right to be paid under the Accelerated Death Benefit Rider is subject to the following conditions: 1. The policy must be in force other than as extended term insurance. 2. For term insurance policies, there must be at least one year left before the final term expiry date. 3. For adjustable life policies (Equitable Life Account), if policy is term insurance or paid-up extended term insurance, there must be at least one year left before the final term expiry date. 4. You must make a claim in writing in a form that is satisfactory to us. 5. If the policy is collaterally assigned, except to us as security for a policy loan or an Accelerated Death Benefit lien, we must receive a full release of this assignment for the election of this benefit. 6. An Accelerated Death Benefit payment must be approved in writing by any irrevocable beneficiary. 7. For joint last to die policies, a claim may be made under the rider only after the death of the first of the Insureds to die. 8. You may not be eligible for the Accelerated Death Benefit if we are notified that: a) you are required by law to elect this rider's benefit in order to meet the claims of creditors, whether in bankruptcy or otherwise; or b) you are required by a government agency to elect this rider's benefit in order to apply for, obtain, or keep a government benefit or entitlement. 9. You may request only one Accelerated Death Benefit Amount to be paid per policy. 10. We may require examination of the Insured by our medical representatives at our expense as part of any proof to establish eligibility for benefits under this rider. WHEN THIS RIDER WILL TERMINATE. You may terminate this rider by asking us in writing in a form satisfactory to us and by sending the rider to our Administrative Office. The effective date of the termination will be the beginning of the policy month which coincides with or next follows the date we receive your request. Once this rider has been terminated, another Accelerated Death Benefit Rider cannot be attached to the policy. This rider will terminate when the policy terminates. If at any time the amount of the lien equals the total death benefit the policy will terminate. Termination will occur 31 days after we have mailed notice to the last known address of the Owner, unless the full amount of the lien is repaid within 31 days of the notice. EQUITABLE VARIABLE LIFE INSURANCE COMPANY /s/ Molly K. Heines /s/ Joseph J. Melone Molly K. Heines Joseph J. Melone Vice President & Secretary Chairman & Chief Executive Officer R94-102 Accelerated Death Benefit Rider EX-99.1A5PRIDER 23 RIDER R94-102 (IL PLUS) (ELAS) ACCELERATED DEATH BENEFIT RIDER DISCLOSURE. THE RECEIPT OF THE ACCELERATED In this rider "we", "our" and DEATH BENEFIT AMOUNT MAY BE TAXABLE. YOU "us" mean The Equitable Life SHOULD SEEK ASSISTANCE FROM YOUR PERSONAL Assurance Society of the United TAX ADVISOR PRIOR TO ELECTING THE BENEFIT. States. "You" means the Owner of the policy at the time an Owner's right is exercised. "This Policy" means the policy to which this rider is attached. POLICY NUMER: - -------------------------------------------------------------------------------- THIS RIDER'S BENEFIT. We will pay an accelerated death benefit in the amount requested by the Owner, if the Insured is terminally ill, subject to the provisions of this rider. We will pay an accelerated death benefit under this policy only once and in one lump sum. The maximum accelerated death benefit you may receive is the lesser of: 1. 75% of the death benefit payable under this policy, less any policy loan and loan interest, and 2. $500,000. The maximum aggregate amount of Accelerated Death Benefits payments that will be paid under all policies issued by us on the life of the Insured is $500,000. For purposes of this benefit, the death benefit does not include any accidental death benefits, non-convertible term riders or convertible term riders not in their conversion period or any benefits payable because of the death of any person other than the Insured. There is no premium or cost of insurance charge for this rider. We reserve the right to deduct a processing charge of up to $250.00 per policy from the accelerated death benefit payment. We reserve the right to set a minimum of $5,000 on the amount you may receive under this rider. To be eligible for this benefit you must provide satisfactory evidence to us that the Insured's life expectancy is six months or less. This evidence must include, but is not limited to, certification by a physician licensed to practice medicine in the United States or Canada and who is acting within the scope of such license. A physician does not include the Owner, the Insured or a member of either's family. HOW THIS RIDER RELATES TO THE POLICY. This rider is a part of the policy. Its benefits are subject to all the terms of this rider and the policy. This rider has no cash or loan value. This rider is non-participating. INTEREST. Interest will be charged on the amount of the Accelerated Death Benefit and on any unpaid premium we advance after the payment of an Accelerated Death Benefit. The interest rate at the time the Accelerated Death Benefit payment is made will not exceed the greater of the following on such date: 1. the yield on a 90-day treasury bill; or 2. the maximum adjustable policy loan interest rate permitted in the state in which this policy is delivered. EFFECT OF ACCELERATED DEATH BENEFIT PAYMENT ON THE POLICY. The Accelerated Death Benefit payment, plus any accrued interest will be treated as a lien against the policy values. The amount of the lien will be pro-rated against the policy's net cash surrender value, if any, and the net amount at risk. (The net amount at risk is defined as the death benefit of the policy minus the cash surrender value, if any.) For variable life policies, the portion of the cash surrender value that is on lien and is allocated to investment divisions of the Separate Account will be transferred to and maintained as a part of the unloaned Guaranteed Investment Division (GID). You may tell us how much of the accelerated payment is to be transferred from each investment division. Units will be redeemed from each investment division sufficient to cover the amount that is on lien and transferred to the unloaned portion of the GID. If you do not tell us how to allocate the payment, we will allocate it based on our rules then in effect. For variable life policies that do not have a GID, the portion of the cash surrender value that is on lien will be transferred to and maintained in the Money Market Division of our Separate Account. Such transfers will occur as of the date we approve an Accelerated Death Benefit payment. The amount payable at death under the policy will be reduced by the full amount of the lien and any other indebtedness outstanding under the policy. The Owner's access to the policy's cash surrender value will be limited to the excess of the policy's cash surrender value over the amount of the lien secured against the cash surrender value and any other outstanding policy loans and loan interest. R94-102 Accelerated Death Benefit Rider If premiums are required to be paid under the policy, they will continue to be due after the payment of the accelerated payment. If any premium is not paid when due, the amount of the unpaid premium will be added to the lien. If the policy is a flexible premium life policy, and the net cash surrender value is not large enough to cover a monthly deduction, Equitable Life will advance a premium sufficient enough to keep the policy in force for up to six months following the date we approve an Accelerated Death Benefit payment. This premium advance will be added to the lien. If a Disability Premium Waiver Rider is in effect under the policy, this policy's premiums or monthly deductions will be waived as of the date we approve an Accelerated Death Benefit payment. RIDER LIMITATIONS. Your right to be paid under the Accelerated Death Benefit Rider is subject to the following conditions: 1. The policy must be in force other than as extended term insurance. 2. For term insurance policies, there must be at least one year left before the final term expiry date. 3. For adjustable life policies (Equitable Life Account), if policy is term insurance or paid-up extended term insurance, there must be at least one year left before the final term expiry date. 4. You must make a claim in writing in a form that is satisfactory to us. 5. If the policy is collaterally assigned, except to us as security for a policy loan or an Accelerated Death Benefit lien, we must receive a full release of this assignment for the election of this benefit. 6. An Accelerated Death Benefit payment must be approved in writing by any irrevocable beneficiary. 7. For joint last to die policies, a claim may be made under the rider only after the death of the first of the Insureds to die. 8. You may not be eligible for the Accelerated Death Benefit if we are notified that: a) you are required by law to elect this rider's benefit in order to meet the claims of creditors, whether in bankruptcy or otherwise; or b) you are required by a government agency to elect this rider's benefit in order to apply for, obtain, or keep a government benefit or entitlement. 9. You may request only one Accelerated Death Benefit Amount to be paid per policy. 10. We may require examination of the Insured by our medical representatives at our expense as part of any proof to establish eligibility for benefits under this rider. WHEN THIS RIDER WILL TERMINATE. You may terminate this rider by asking us in writing in a form satisfactory to us and by sending the rider to our Administrative Office. The effective date of the termination will be the beginning of the policy month which coincides with or next follows the date we receive your request. Once this rider has been terminated, another Accelerated Death Benefit Rider cannot be attached to the policy. This rider will terminate when the policy terminates. If at any time the amount of the lien equals the total death benefit the policy will terminate. Termination will occur 31 days after we have mailed notice to the last known address of the Owner, unless the full amount of the lien is repaid within 31 days of the notice. THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES /s/ Pauline Sherman /s/ James M. Benson --------------- --------------- Pauline Sherman James M. Benson Vice President & President & Chief Secretary Executive Officer R94-102 Accelerated Death Benefit Rider EX-99.1A5QRIDER 24 RIDER R91-107 (EVLICO VERSION) DESIGNATED INSURED OPTION RIDER In this rider, "we", "our" and "us" mean Equitable Variable Life Insurance Company. "You" and "your" mean the owner of the policy at the time an owner's right is exercised. - -------------------------------------------------------------------------------- THIS RIDER'S BENEFIT AND ITS COST. If the insured person dies while this rider is in effect, the owner of this policy can purchase a new policy during the Option Period on the Designated Insured's life without evidence of insurability. However, if the new policy is purchased during the contestability period of this rider, then the application for this rider will be made a part of the new policy. (See "Incontestability and Suicide Exclusion Period of New Policy") If the insured person was the owner of this policy, then the beneficiary(ies) for the Insurance Benefit can purchase the new policy. The Designated Insured is the person named in the application for this rider and will be the insured person in any new policy issued under the terms of this rider. You may not change the Designated Insured. The Policy Information section of the policy or the Additional Benefits Rider that adds this benefit shows the name of the Designated Insured and the Option Amount. When this rider is added to a policy which is already inforce, the Additional Benefits Rider also shows the effective date of this rider. While this rider is in effect, its charge will be a part of the monthly deduction from the Policy Account. OPTION PERIOD. The Option Period begins on the date we pay the Insurance Benefit under this policy and ends ninety (90) days after that date. PURCHASE OF NEW POLICY. We will issue a new policy based on the application submitted for it and subject to the following conditions: 1. The completed application and the first full payment for the new policy must be received by us before the end of the Option Period and while the Designated Insured is living. If the Designated Insured dies during the Option Period prior to receipt by us of the application and the first full payment for the new policy, we will pay an amount equal to the Option Amount to the Designated Insured's estate, upon receipt of proof of such death. We will deduct the full initial payment for a new whole life policy for that amount of insurance. However, if the application for the new policy is received prior to the payment of the Option Amount, we will pay the Option Amount less the full initial payment for the new policy to the beneficiary shown on such application. If the Designated Insured dies at the same time as the insured person, it will be deemed that the Designated Insured survived the Insured for purposes of paying the Option Amount under this rider. 2. The Designated Insured and the owner of the new policy must sign the application. The owner of the new policy must have an insurable interest in the life of the Designated Insured at the time the new policy is applied for. 3a. Up to attained insurance age 70 of the Designated Insured, during the option period, this rider may be converted to a level premium whole life or a variable life plan offered by us or by one of our affiliated companies, which qualifies under our rules in effect on its Register Date as to plan, amount, age and class of risk. Premiums will be at rates then in effect for the Designated Insured's attained insurance age and for the same class of risk as under this rider. b. For attained insurance ages 70 to 99 of the Designated Insured, during the option period, this rider may be converted to a level premium whole life plan offered by us or by one of our affiliated companies which qualifies under our rules in effect as to plan, amount, age and class of risk on the date the application for the new policy is signed. Premiums will be at rates then in effect for the Designated Insured's insurance age 70 and for the same class of risk as under this rider. Such new policy will be issued on an original insurance age 70 basis. The initial payment for the new policy will be the sum of: i) 105% of the guaranteed cash value of the new policy for the policy duration corresponding to the attained insurance age of the Designated Insured on the date of purchase, and ii) the premium due on the new policy. R91-107 Designated Insured Option Rider c. You may not choose a policy of term insurance, one that includes term insurance or one that provides insurance on more than one life. 4. The new policy will have a face amount equal to the Option Amount in effect on this rider on the date of the insured person's death. You may choose a lower amount subject to our rules in effect on the date the application for the new policy is signed. We will tell you the amount of the initial payment for the new policy upon request. 5. The issue of any additional benefit riders under the new policy will require our consent and evidence of insurability satisfactory to us. INCONTESTABILITY AND SUICIDE EXCLUSION PERIOD OF NEW POLICY. The two-year time period of the new policy with respect to a contest or a suicide exclusion will start from the later of the Date of Issue of the policy to which this rider is attached or the effective date of this rider. During such period, we have the right to contest the validity of the new policy based on material misstatements made in the application for the new policy or in the application for this rider. If the new policy is issued with a rider or with an additional amount of insurance which requires our consent, the time period for any suicide exclusion or incontestability provision with regard to such additional insurance or rider will start from the Date of Issue of the new policy instead. HOW YOU MAY RESTORE THIS RIDER'S BENEFIT. If you restore the policy's benefits, you may restore them with this rider in accordance with the section of this policy entitled, "Restoration of Policy Benefits". You must also provide evidence satisfactory to us of the Designated Insured's insurability. WHEN THIS RIDER IS INCONTESTABLE. We have the right to contest the validity of this rider based on material misstatements made in the application for it. We will not contest this rider after it has been in effect during the lifetime of the Designated Insured for two years from the later of: (a) the Date of Issue of the policy; or (b) the date as of which this rider becomes effective if added after issue of the policy. WHEN THIS RIDER WILL TERMINATE. This rider will not be in effect: 1. After the end of the grace period; 2. On and after the policy anniversary nearest the Designated Insured's attained age 100. 3. After the date the Designated Insured dies, if the Designated Insured dies prior to the insured person under this policy. We will refund to the owner the monthly deduction for this rider that was deducted from the date of death of the Designated Insured to the date we are notified of such death, provided such notice is received within one year of the Designated Insured's death. Otherwise, the refund will be limited to one year's monthly deductions for this rider; 4. After the date the Option Period ends; or 5. On and after the Final Policy Date or the date this policy terminates or is surrendered. You may terminate this rider by asking for this in writing. The effective date of termination will be the beginning of the policy month which coincides with or next follows the date we receive your request. HOW THIS RIDER RELATES TO THE POLICY. This rider is a part of the policy. Its benefit is subject to all the terms of this rider and the policy. This rider has no cash or loan value. EQUITABLE VARIABLE LIFE INSURANCE COMPANY /s/ Molly K. Heines /s/ Joseph J. Melone Molly K. Heines, Joseph J. Melone, Vice President & Secretary Chairman & Chief Executive Officer R91-107 Designated Insured Option Rider EX-99.1A5RRIDER 25 RIDER R-91-107 (IL PLUS) (ELAS) DESIGNATED In this rider, "we", "our" and "us" mean INSURED The Equitable Life Assurance Society of OPTION the United States. "You" and "your" RIDER mean the owner of the policy at the time an owner's right is exercised. - -------------------------------------------------------------------------------- THIS RIDER'S BENEFIT AND ITS COST. If the insured person dies while this rider is in effect, the owner of this policy can purchase a new policy during the Option Period on the Designated Insured's life without evidence of insurability. However, if the new policy is purchased during the contestability period of this rider, then the application for this rider will be made a part of the new policy. (See "Incontestability and Suicide Exclusion Period of New Policy") If the insured person was the owner of this policy, then the beneficiary(ies) for the Insurance Benefit can purchase the new policy. The Designated Insured is the person named in the application for this rider and will be the insured person in any new policy issued under the terms of this rider. You may not change the Designated Insured. The Policy Information section of the policy or the Additional Benefits Rider that adds this benefit shows the name of the Designated Insured and the Option Amount. When this rider is added to a policy which is already inforce, the Additional Benefits Rider also shows the effective date of this rider. While this rider is in effect, its charge will be a part of the monthly deduction from the Policy Account. OPTION PERIOD. The Option Period begins on the date we pay the Insurance Benefit under this policy and ends ninety (90) days after that date. PURCHASE OF NEW POLICY. We will issue a new policy based on the application submitted for it and subject to the following conditions: 1. The completed application and the first full payment for the new policy must be received by us before the end of the Option Period and while the Designated Insured is living. If the Designated Insured dies during the Option Period prior to receipt by us of the application and the first full payment for the new policy, we will pay an amount equal to the Option Amount to the Designated Insured's estate, upon receipt of proof of such death. We will deduct the full initial payment for a new whole life policy for that amount of insurance. However, if the application for the new policy is received prior to the payment of the Option Amount, we will pay the Option Amount less the full initial payment for the new policy to the beneficiary shown on such application. If the Designated Insured dies at the same time as the insured person, it will be deemed that the Designated Insured survived the Insured for purposes of paying the Option Amount under this rider. 2. The Designated Insured and the owner of the new policy must sign the application. The owner of the new policy must have an insurable interest in the life of the Designated Insured at the time the new policy is applied for. 3a. Up to attained insurance age 70 of the Designated Insured, during the option period, this rider may be converted to a level premium whole life or a variable life plan offered by us or by one of our affiliated companies, which qualifies under our rules in effect on its Register Date as to plan, amount, age and class of risk. Premiums will be at rates then in effect for the Designated Insured's attained insurance age and for the same class of risk as under this rider. b. For attained insurance ages 70 to 99 of the Designated Insured, during the option period, this rider may be converted to a level premium whole life plan offered by us or by one of our affiliated companies which qualifies under our rules in effect as to plan, amount, age and class of risk on the date the application for the new policy is signed. Premiums will be at rates then in effect for the Designated Insured's insurance age 70 and for the same class of risk as under this rider. Such new policy will be issued on an original insurance age 70 basis. The initial payment for the new policy will be the sum of: i) 105% of the guaranteed cash value of the new policy for the policy duration corresponding to the attained insurance age of the Designated Insured on the date of purchase, and ii) the premium due on the new policy. R91-107 Designated Insured Option Rider c. You may not choose a policy of term insurance, one that includes term insurance or one that provides insurance on move than one life. 4. The new policy will have a face amount equal to the Option Amount in effect on this rider on the date of the insured person's death. You may choose a lower amount subject to our rules in effect on the date the application for the new policy is signed. We will tell you the amount of the initial payment for the new policy upon request. 5. The issue of any additional benefit riders under the new policy will require our consent and evidence of insurability satisfactory to us. INCONTESTABILITY AND SUICIDE EXCLUSION PERIOD OF NEW POLICY. The two-year time period of the new policy with respect to a contest or a suicide exclusion will start from the later of the Date of Issue of the policy to which this rider is attached or the effective date of this rider. During such period, we have the right to contest the validity of the new policy based on material misstatements made in the application for the new policy or in the application for this rider. If the new policy is issued with a rider or with an additional amount of insurance which requires our consent, the time period for any suicide exclusion or incontestability provision with regard to such additional insurance or rider will start from the Date of Issue of the new policy instead. HOW YOU MAY RESTORE THIS RIDER'S BENEFIT. If you restore the policy's benefits, you may restore them with this rider in accordance with the section of this policy entitled, "Restoration of Policy Benefits". You must also provide evidence satisfactory to us of the Designated Insured's insurability. WHEN THIS RIDER IS INCONTESTABLE. We have the right to contest the validity of this rider based on material misstatements made in the application for it. We will not contest this rider after it has been in effect during the lifetime of the Designated Insured for two years from the later of: (a) the Date of Issue of the policy; or (b) the date as of which this rider becomes effective if added after issue of the policy. WHEN THIS RIDER WILL TERMINATE. This rider will not be in effect: 1. After the end of the grace period; 2. On and after the policy anniversary nearest the Designated Insured's attained age 100; 3. After the date the Designated Insured dies, if the Designated Insured dies prior to the insured person under this policy. We will refund to the owner the monthly deduction for this rider that was deducted from the date of death of the Designated Insured to the date we are notified of such death, provided such notice is received within one year of the Designated Insured's death. Otherwise, the refund will be limited to one year's monthly deductions for this rider; 4. After the date the Option Period ends; or 5. On and after the Final Policy Date or the date this policy terminates or is surrendered. You may terminate this rider by asking for this in writing. The effective date of termination will be the beginning of the policy month which coincides with or next follows the date we receive your request. HOW THIS RIDER RELATES TO THE POLICY. This rider is a part of the policy. Its benefit is subject to all the terms of this rider and the policy. This rider has no cash or loan value. THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES /s/ Pauline Sherman /s/ James M. Benson - ------------------- ------------------- Pauline Sherman James M. Benson Vice President & Secretary President & Chief Executive Officer R91-107 Designated Insured Option Rider EX-99.1A5SENDORS 26 ENDORSEMENT S.94-118 EVLICO VERSION ACCOUNTING BENEFIT ENDORSEMENT - -------------------------------------------------------------------------------- Enclosed on this policy as of its Date of Issue. The Policy Information Sections (PAGE 3 -- CONTINUED) -- Table of Expense Charges and Table of Maximum Surrender Charges -- are amended as follows: 1. TABLE OF EXPENSE CHARGES The following paragraph is inserted as the last paragraph under "DEDUCTIONS FROM PREMIUM PAYMENTS": SHOULD YOU GIVE UP THIS POLICY FOR ITS NET CASH SURRENDER VALUE, WE WILL REFUND TO YOU A PERCENTAGE OF THE CUMULATIVE DEDUCTIONS FROM PREMIUM PAYMENTS BY APPLYING THE FOLLOWING PERCENTAGES. IF YOU GIVE UP YOUR POLICY IN YEAR 1 - 100%, YEAR 2 - 67%, YEAR 3 - 33%, YEAR 4 AND LATER - 0%. 2. TABLE OF MAXIMUM SURRENDER CHARGES The following paragraph is inserted as the fourth paragraph: SHOULD YOU GIVE UP THIS POLICY FOR ITS NET CASH SURRENDER VALUE, THE APPLICATION SURRENDER CHARGE WILL BE REDUCED BY THE APPLICATION OF THE FOLLOWING PERCENTAGES. IF YOU GIVE UP YOU POLICY IN YEAR 1 - 100%, YEAR 2 - 80%, YEAR 3 - 60%, YEAR 4 - 40%, YEAR 5 - 20%, YEAR 6 AND LATER - 0%. THESE PERCENTAGES DO NOT APPLY TO PRO-RATA SURRENDER CHARGES RESULTING FROM FACE AMOUNT REDUCTIONS. EQUITABLE VARIABLE LIFE INSURANCE COMPANY /s/ Pauline Sherman /s/ James M. Benson - ------------------- ------------------- Pauline Sherman James M. Benson Vice President & Secretary President & Chief Executive Officer S.94-118 EX-99.1A5TENDORS 27 ENDORSEMENT S.94-118 ELAS VERSION ACCOUNTING BENEFIT ENDORSEMENT - -------------------------------------------------------------------------------- Enclosed on this policy as of its Date of Issue. The Policy Information Sections (PAGE 3 -- CONTINUED) -- Table of Expense Charges and Table of Maximum Surrender Charges -- are amended as follows: 1. TABLE OF EXPENSE CHARGES The following paragraph is inserted as the last paragraph under "DEDUCTIONS FROM PREMIUM PAYMENTS": SHOULD YOU GIVE UP THIS POLICY FOR ITS NET CASH SURRENDER VALUE, WE WILL REFUND TO YOU A PERCENTAGE OF THE CUMULATIVE DEDUCTIONS FROM PREMIUM PAYMENTS BY APPLYING THE FOLLOWING PERCENTAGES. IF YOU GIVE UP YOUR POLICY IN YEAR 1 - 100%, YEAR 2 - 67%, YEAR 3 - 33%, YEAR 4 AND LATER - 0%. 2. TABLE OF MAXIMUM SURRENDER CHARGES The following paragraph is inserted as the fourth paragraph: SHOULD YOU GIVE UP THIS POLICY FOR ITS NET CASH SURRENDER VALUE, THE APPLICATION SURRENDER CHARGE WILL BE REDUCED BY THE APPLICATION OF THE FOLLOWING PERCENTAGES. IF YOU GIVE UP YOU POLICY IN YEAR 1 - 100%, YEAR 2 - 80%, YEAR 3 - 60%, YEAR 4 - 40%, YEAR 5 - 20%, YEAR 6 AND LATER - 0%. THESE PERCENTAGES DO NOT APPLY TO PRO-RATA SURRENDER CHARGES RESULTING FROM FACE AMOUNT REDUCTIONS. THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES /s/ Pauline Sherman /s/ James M. Benson - ------------------- ------------------- Pauline Sherman James M. Benson Vice President & Secretary President & Chief Executive Officer S.94-118 EX-99.1A5URIDER 28 RIDER R85-406 (IL PLUS) (EVLICO) LIMITATION ON AMOUNT in this rider, "we", "our" and "us" OF INSURANCE RIDER mean Equitable Variable Life Insurance (This limitation is required Company. "You" and "your" mean the by the laws of New York State) Owner of the policy at the time an Owner's right is exercised. - -------------------------------------------------------------------------------- If the insured person dies before the age of 14 years and 6 months, the benefit paid may be limited. The total amount of life insurance payable on the life of the insured person under this policy and under all other insurance policies in effect on the Date of Issue of this policy, in our company and all other companies shall be subject to the following maximum amount limitation. Insured Person's Maximum Amount Attained Age Limitation - ---------------- -------------- Less than 4 years The greater of: and 6 months a) $5,000; or b) 25% of the total amount of life insurance in effect on the life of the applicant for this policy on its Date of Issue. Between 4 years The greater of: and 6 months and a) $10,000; or 14 years and 6 months b) 50% of the total amount of life insurance in effect on the life of the applicant for this policy on its Date of Issue. "Total amount of life insurance" as used in this rider shall not include: (a) return premium benefits; (b) additional benefits in the event of death by accident; (c) any additional insurance provided by use of dividends; (d) any variable death benefit above the guaranteed minimum death benefit provided under a variable life insurance policy; (e) any additional insurance provided by amounts credited to a policy after its issue; or (f) any insurance provided by a policy in excess of the face amount of insurance in force at the time of demand or death. Any part of this Policy not in excess of the above limits at the date of issue will not become in excess by reason of any later reduction in the amount of insurance on the Applicant's life. If the total amount of life insurance on the life of the insured person is in excess of this maximum, we will terminate the amount of such excess insurance that is in effect under this policy. We will do this when the insured person dies or upon your earlier written request, but only if we are given satisfactory proof that such excess exists at the time of such death or request. We will make an appropriate refund of the Monthly Deductions from the Policy Account if such excess insurance is terminated. We will determine the amount of the refund based on the Monthly Deductions made for the terminated insurance, with appropriate adjustments to recognize interest on such deductions (at 4-1/2% per year compounded annually), any loan on the policy, and any partial withdrawal of the net cash surrender value. We will pay the refund to you if the insured person is living at the time of payment. If the insured person is not then living, we will pay it to the beneficiary. When such refund is paid, all of our obligations for such excess insurance terminate. No such refund will be paid, however, if we have paid an excess amount as part of a death claim without having had proof satisfactory to us that an excess amount of insurance existed. EQUITABLE VARIABLE LIFE INSURANCE COMPANY /s/ Joseph J. Melone -------------------- Joseph J. Melone Chairman & Chief Executive Officer /s/ Molly K. Heines ------------------- Vice President & Secretary R85-406 EX-99.1A5VRIDER 29 RIDER R85-405 (EVLICO) (IL PLUS) EXCHANGE PRIVILEGE RIDER In this rider, "we", "our" and "us" mean Equitable Variable Life Insurance Company. "You" means the Owner of the policy at the time an Owner's right is exercised. - -------------------------------------------------------------------------------- After the first policy year you may exchange this policy for a new policy on the life of a new insured person, subject to conditions we determine. These conditions include but are not limited to the following: 1. We must be satisfied that the new insured person is insurable for the amount of insurance applied for. 2. The new insured person must join in the request for the new policy and the owner of the new policy must have an insurable interest in the new insured person. If this policy is assigned, the assignee must consent to the exchange. 3. The exchange may be made as of the beginning of any policy month if neither the original insured person nor the new insured person is then over age 65. 4. This policy must be in effect on the exchange date with all monthly deductions from the Policy Account having been made, and with no such deductions then being waived nor amounts credited to the Policy Account by a disability rider. 5. Within 31 days before the date of exchange, we must receive (a) written request for the exchange on our application form; and (b) evidence of the new insured person's insurability satisfactory to us. 6. We will carry over to the new policy any loan and loan interest not repaid. 7. Insurance under this policy will cease when insurance under the new policy takes effect. 8. In our determination the new policy must qualify as life insurance under the Internal Revenue Code or successor legislation, as interpreted by us. THE NEW POLICY. Planned periodic premiums for the new policy will be based on our rules in effect on its Register Date for the insurance age of the new insured person on that date. The Register Date of the new policy will be the same as the Register Date of this policy. However, if the new insured person's date of birth is later than the Register Date of this policy, the Register Date of the new policy will be the policy anniversary of this policy next preceding the date of exchange. The face amount of insurance and the death benefit option in the new policy will be the same as in effect in this policy on the date of exchange unless you ask for a change. You may ask that additional benefit riders be included in the new policy. The issue of any rider will require our consent and evidence of insurability satisfactory to us. The time periods in the Incontestability and Suicide Exclusion provisions of the new policy will begin on the Date of Issue of the new policy. EQUITABLE VARIABLE LIFE INSURANCE COMPANY /s/ Molly K. Heines /s/ Joseph J. Melone Molly K. Heines, Joseph J. Melone, Vice President & Secretary Chairman & Chief Executive Officer R85-405 Exchange Privilege EX-99.1A5WRIDER 30 RIDER R85-408 (EVLICO) (IL PLUS) DISABILITY RIDER -- WAIVER OF MONTHLY DEDUCTIONS In this rider, "we", "our" and "us" mean Equitable Variable Life Insurance Company. "You" and "your" mean the owner of the policy at the time an owner's right is exercised. - -------------------------------------------------------------------------------- THIS RIDER'S BENEFITS. We will waive the monthly deductions from the Policy Account as described in the policy when we receive proof that total disability of the insured person has existed continuously for at least six months, as provided in this rider. If total disability begins on or after the insured person's fifth birthday and before the age 60 anniversary, we will waive all such deductions while total disability continues. If total disability begins at or after the age 60 anniversary, we will waive only such deductions due to be made before the age 65 anniversary while total disability continues. In this rider, "age 60 anniversary" and "age 65 anniversary" mean the policy anniversaries nearest the insured person's 60th and 65th birthdays, respectively. While such deductions are being waived: 1. Insurance under the policy and under any additional benefit riders will be provided in accordance with their terms; and 2. You may not increase the Face Amount of Insurance; and 3. If your death benefit option under the policy is Option A when we start to waive deductions, we will then change the death benefit option to Option B. You may not change the death benefit option while deductions are being waived; and 4. Except for the waiver of monthly deductions, your Policy Account will continue to operate as if monthly deductions were not being waived; and 5. You may continue to pay premiums under the policy except as stated below. Expense charges will be deducted from them as described in the policy. We will put the balance in the Policy Account. You may not pay premiums while the death benefit under the policy is a percentage of the amount in the Policy Account, as described on Page 6 of the policy. Monthly deductions made from your Policy Account during total disability that are later waived will be refunded as credits to your Policy Account as of the dates they were subtracted. Such credits will be allocated to your value in the unloaned portion of our Guaranteed Interest Division and to your values in the investment divisions of our Separate Account on the basis of your monthly deduction allocation percentages in effect on the date the deductions were made. The value of your Policy Account will be determined as if such deductions had never been made. WHAT IS TOTAL DISABILITY? Total disability means the insured person's complete inability, because of bodily injury or disease, to perform all of the substantial and material duties of his or her regular occupation. However, after 24 consecutive months of such disability, total disability will mean the insured person's complete inability to engage in any gainful occupation for which he or she is reasonably fitted by education, training, or experience. We will also recognize the complete and irrecoverable loss of sight of both eyes, or the use of both hands or both feet, or of one hand and one foot as total disability. We will presume any such loss to be total disability even if the insured person engages in any occupation. WHAT IS NOT COVERED? We will not waive such monthly deductions: 1. For a total disability that begins before the insured person's fifth birthday, or that begins while this rider is not in effect; or 2. If total disability results from: a. Intentionally self-inflicted injury; or b. Service in the armed forces of any country at war, including declared and undeclared war and resistance to armed aggression. YOU MUST GIVE US PROOF OF DISABILITY. Before we waive any monthly deductions, we must be given written notice of claim, and proof that total disability of the insured person has existed continuously for at least six months. This must be done while total disability continues and while the insured person is still living, or as soon as reasonably possible. We may require proof at reasonable intervals that total disability continues. After total disability has continued for two years we will not require proof more than once a year. We will not require proof after the age 65 anniversary if monthly deductions have been waived for the five preceding years. We may require examination of the insured person by our medical representatives at our expense as part of any proof of total disability. We will not waive monthly deductions if proof is not furnished as required. COST OF RIDER -- While this rider is in effect, its cost will be a part of the monthly deduction from the Policy Account. The monthly cost is a percentage of the total monthly deduction from the Policy Account as described in the policy. R85-408 Disability Rider Waiver of Monthly Deductions (continued on back) Such percentage will be determined by us from time to time, based on the insured person's sex, attained age and rating class. It will never be more than the percentage shown in the Table of Guaranteed Maximum Costs for Disability on Page 4 -- Continued of the policy. Any change in the cost of insurance percentage we use for this benefit will apply to all individuals of the same class as the insured person. While this rider is in effect, the amount in the Policy Account referred to in determining the "net amount at risk" described on Page 9 of the policy is the amount determined before the monthly cost of insurance deduction and the part of the deduction for this benefit that is for the monthly cost of insurance are made, but after all other deductions due on that date have been made. WHEN THIS RIDER WILL TERMINATE. This rider will not be in effect: 1. At and after the age 65 anniversary; or 2. After the end of the grace period, if we have not received an amount sufficient to cover at least three monthly deductions. You may terminate this rider as of the beginning of any policy month by asking for this in advance in writing. A claim based on total disability that begins before termination of this rider will not be affected by the termination. WHEN THIS RIDER IS INCONTESTABLE. This rider will become incontestable only after it has been in effect, during the lifetime of the insured person and without the occurrence of total disability of the insured person, for two years from the later of: (a) the Date of Issue of the Policy; or (b) the date as of which this rider becomes effective if added after issue of the policy. HOW THIS RIDER RELATES TO THE POLICY. This rider is a part of the policy. Its benefits are subject to all the terms of the rider and the policy. EQUITABLE VARIABLE LIFE INSURANCE COMPANY /s/ Molly K. Heines /s/ Joseph J. Melone Molly K. Heines, Joseph J. Melone, Vice President & Secretary Chairman & Chief Executive Officer R85-408 EX-99.1A5XENDORS 31 ENDORSEMENT S.87-289 (EVLICO) (IL PLUS) PRO RATA SURRENDER CHARGE ENDORSEMENT - -------------------------------------------------------------------------------- Endorsed on this policy as of its Date of Issue. 1. This policy is changed in the following way: During the first five policy years a pro rata surrender charge will apply only to that part of a requested reduction in the Face Amount of Insurance that, taken together with all previous requested reductions in the Face Amount of Insurance, exceeds 20% of the initial Face Amount of Insurance. Also, during such years the definition of numerator A on Page 13 of this policy shall read: where A -- Represents the reduction in the Face Amount of Insurance to which a surrender charge will be applied; plus the sum of all requested and approved prior reductions in the Face Amount of Insurance (as described in sections 1 and 2 of "Changing the Face Amount of Insurance or the Death Benefit Option" on Page 7); minus the part of such prior reductions on which a pro rata surrender charge was previously made; minus the sum of all requested and approved prior increases in the Face Amount of Insurance; minus 20% of the initial Face Amount of Insurance. After the fifth policy year there will be no pro rata surrender charges. 2. The table of maximum mortality charges is the "1980 CSO -- A" table. EQUITABLE VARIABLE LIFE INSURANCE COMPANY /s/ Molly K. Heines /s/ Joseph J. Melone Molly K. Heines, Joseph J. Melone, Vice President & Secretary Chairman & Chief Executive Officer S.87-289 EX-99.1A5YENDORS 32 ENDORSEMENT 85-300-3 (EVLICO) (IL PLUS) POLICY INFORMATION CONTINUED -- POLICY NUMBER 37 200 109 ------ ENDORSEMENT ------ 1. THE FOLLOWING SENTENCE IS ADDED IMMEDIATELY PRECEDING THE LAST SENTENCE OF THE FIRST PARAGRAPH OF THE "ALLOCATIONS" SECTION OF THE "YOUR INVESTMENT OPTIONS" PROVISION: HOWEVER, ANY AMOUNTS WHICH ARE PUT INTO YOUR POLICY ACCOUNT PRIOR TO THE ALLOCATION DATE WILL INITIALLY BE ALLOCATED TO (AND MONTHLY DEDUCTIONS TAKEN FROM) THE MONEY MARKET DIVISION OF OUR SEPARATE ACCOUNT. THE ALLOCATION DATE IS THE FIRST BUSINESS DAY (SEE PAGE 12) TWENTY CALENDAR DAYS AFTER THE DATE OF ISSUE OF THIS POLICY. ON THE ALLOCATION DATE, THE AMOUNTS THEN IN YOUR POLICY ACCOUNT WILL BE ALLOCATED IN ACCORDANCE WITH THE DIRECTIONS CONTAINED IN YOUR POLICY APPLICATION. 2. THE FOLLOWING SENTENCE IS ADDED AFTER THE FIRST SENTENCE OF THE PARAGRAPH REGARDING TRANSFER CHARGES IN THE "TRANSFERS" SECTION OF THE "YOUR INVESTMENT OPTIONS" PROVISION: A TRANSFER (IF APPLICABLE) FROM THE MONEY MARKET DIVISION ON THE ALLOCATION DATE IS NOT COUNTED AS ONE OF THE FOUR ALLOWABLE TRANSFERS WITHOUT CHARGE PER POLICY YEAR. 3. THE PHRASE "ANY REQUESTED TRANSFER" IN ITEM 5 OF THE "HOW, WHEN AND WHAT WE MAY DEFER" SECTION OF THE "OTHER IMPORTANT INFORMATION" PROVISION IS DELETED AND THE FOLLOWING IS INSERTED: ANY REQUESTED TRANSFER OR THE TRANSFER ON THE ALLOCATION DATE S.89-301 85-300-3 PAGE 3 -- CONTINUED EX-99.1A5ZRIDER 33 RIDER R89-303 (EVLICO) (IL PLUS) EQUITABLE VARIABLE LIFE INSURANCE COMPANY (EQUITABLE VARIABLE) INVESTMENT OPTIONS RIDER In this rider "us" means Equitable Variable Life Insurance Company. "You" means the Owner of the contract at the time an Owner's right is exercised. - -------------------------------------------------------------------------------- 1. The first three paragraphs of "Transfers" section of "Your Investment Options" provision are changed as follows: Transfers. At your written request to our administrative office we will transfer amounts from your value in any investment division of our SA to one or more other divisions of our SA or to our GID. Any such transfer will take effect on the date we receive your written request for it at our administrative office except as stated in the next paragraph. Once during each policy year you may ask us to transfer an amount you specify from your unloaned value in our GID to one or more investment divisions of our SA. However, we will make such a transfer only if (1) we receive your request at our administrative office; and (2) the amount you specify is not more than the greater of 25% of your unloaned value in our GID as of the date the transfer takes effect or the minimum transfer amount shown on page 3. In no event will we transfer more than such unloaned value. The minimum amount that we will transfer from your value in an investment division of our SA on any date is the lesser of the minimum transfer amount shown on page 3 or your value in that investment division on that date, except as stated in the next paragraph. The minimum amount that we will transfer from your value in our GID is the lesser of the amount shown on page 3 or your unloaned value in our GID on the date of transfer, except as stated in the next paragraph. The transfer will take effect (1) on the policy anniversary if the request is received on or before that policy anniversary or (2) on the date of receipt at our administrative office if the request is received within 30 days after a policy anniversary. We will waive the minimum amount limitations set forth in the immediately preceding paragraph if the total amount being transferred on that date is at least the minimum transfer amount shown on age 3. 2. The last paragraph of the "Transfers" section of "Your Investment Options" provision is deleted. /s/ Joseph J. Melone /s/ Molly K. Heines Joseph J. Melone, Molly K. Heines, Chairman & Chief Executive Officer Vice President & Secretary R89-303 EX-99.1A6ACHARTER 34 RESTATED CHARTER OF ELAS RESTATED CHARTER OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Under Sections 1206 and 7103 of the New York Insurance Law and Section 807 of the New York Business Corporation Law ---------------------------------------- The undersigned, being the President and Secretary, respectively, of The Equitable Life Assurance Society of the United States (the "Corporation"), a New York corporation, hereby certify as follows: 1. The name of the Corporation is The Equitable Life Assurance Society of the United States. 2. The Charter of the Corporation was filed in the office of the Superintendent of Insurance of the State of New York on May 10, 1859. 3. The Charter of the Corporation, as restated and amended prior to the date hereof (the "Charter"), is hereby further amended, as authorized by Sections 1206 and 7103 of the New York Insurance Law and Section 807 of the New York Business Corporation Law, in connection with the Agreement and Plan of Merger (the "Merger Agreement"), dated as of September 19, 1996, by and between the Corporation and Equitable Variable Life Insurance Company ("EVLICO"), to (i) revise the provision of the Charter relating to the definition of "Life Insurance" to be in accordance with Section 1113 (a) (1) of the New York Insurance Law and (ii) delete the third sentence in paragraph (a) of Article VI relating to the Board of Directors of the Corporation. 4. The text of the Charter, as amended by the filing of this Restated Charter, is hereby amended and restated to read in full as follows: RESTATED CHARTER OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES ARTICLE I The name of the corporation shall continue to be The Equitable Life Assurance Society of the United States. ARTICLE II The principal office of the corporation shall be located in the City of New York, County of New York, State of New York. ARTICLE III (a) The business to be transacted by the corporation shall be the kinds of insurance business specified in Paragraphs 1, 2 and 3 of Subsection (a) of Section 1113 of the Insurance Law of the State of New York, as follows: (1) "Life insurance": every insurance upon the lives of human beings, and every insurance appertaining thereto, including the granting of endowment benefits, additional benefits in the event of death by accident, additional benefits to safeguard the contract from lapse, accelerated payments of part or all of the death benefit or a special surrender value upon diagnosis (A) of terminal illness defined as a life expectancy of twelve months or less, or (B) of a medical condition requiring extraordinary medical care or treatment regardless of life expectancy, or provide a special surrender value, upon total and permanent disability of the insured, and optional modes of settlement of proceeds. "Life insurance" also includes additional benefits to safeguard the contract against lapse in the event of unemployment of the insured. Amounts paid the insurer for life insurance and proceeds applied under optional modes of settlement or under dividend options may be allocated by the insurer -2- to one or more separate accounts pursuant to section four thousand two hundred forty of the Insurance Law of the State of New York; (2) "Annuities": all agreements to make periodical payments for a period certain or where the making or continuance of all or some of a series of such payments, or the amount of any such payment, depends upon the continuance of human life, except payments made under the authority of paragraph (1) above. Amounts paid the insurer to provide annuities and proceeds applied under optional modes of settlement or under dividend options may be allocated by the insurer to one or more separate accounts pursuant to section four thousand two hundred forty of the Insurance Law of the State of New York; (3) "Accident and health insurance": (i) insurance against death or personal injury by accident or by any specified kind or kinds of accident and insurance against sickness, ailment or bodily injury, including insurance providing disability benefits pursuant to article nine of the workers' compensation law, except as specified in item (ii) hereof; and (ii) non-cancellable disability insurance, meaning insurance against disability resulting from sickness, ailment or bodily injury (but excluding insurance solely against accidental injury) under any contract which does not give the insurer the option to cancel or otherwise terminate the contract at or after one year from its effective date or renewal date; and any amendments to such paragraphs or provisions in substitution therefor which may be hereafter adopted; such other kind or kinds of business now or hereafter authorized by the laws of the State of New York to stock life insurance companies; and such other kind or kinds of business to the extent necessarily or properly incidental to the kind or kinds of insurance business which the corporation is authorized to do. (b) The corporation shall also have all other rights, powers, and privileges now or hereafter authorized or granted by the Insurance Law of the State of New York or any other law or laws of the State of New York to stock life insurance companies having power to do the kind or kinds of business hereinabove referred to and any and all other rights, powers, and privileges of a corporation now or hereafter granted by the laws of the State of New York and not prohibited to such stock life insurance companies. -3- ARTICLE IV The business of the corporation shall be managed under the direction of the Board of Directors. ARTICLE V (a) The Board of Directors shall consist of not less than 13 (except for vacancies temporarily unfilled) nor more than 36 Directors, as may be determined from time to time by a vote of a majority of the entire Board of Directors. No decrease in the number of Directors shall shorten the term of any incumbent Director. (b) The Board of Directors shall have the power to adopt from time to time such By-Laws, rules and regulations for the governance of the officers, employees and agents and for the management of the business and affairs of the corporation, not inconsistent with this Charter and the laws of the State of New York, as may be expedient, and to amend or repeal such by-laws, rules and regulations, except as provided in the By-Laws. (c) Any or all of the Directors may be removed at any time, either for or without cause, by vote of the shareholders. (d) No Director shall be personally liable to the corporation or any of its shareholders for damages for any breach of duty as a Director; provided, however, that the foregoing provision shall not eliminate or limit (i) the liability of a Director if a judgment or other final adjudication adverse to him or her establishes that his or her acts or omissions were in bad faith or involved intentional misconduct or that he or she personally gained in fact a financial profit or other advantage to which he or she was not legally entitled, or were acts or omissions which (a) he or she knew or reasonably should have known violated the Insurance Law of the State of New York or (b) violated a specific standard of care imposed on Directors directly, and not by reference, by a provision of the Insurance Law of the State of New York (or any regulations promulgated thereunder) or (c) constituted a knowing violation of any other law; or (ii) the liability of a Director for any act or omission prior to September 21, 1989. -4- ARTICLE VI (a) The Directors of the corporation shall be elected at each annual meeting of shareholders of the corporation in the manner prescribed by law. The annual meeting of shareholders shall be held at such place, within or without the State of New York, and at such time as may be fixed by or under the By-Laws. At each annual meeting of shareholders, directors shall be elected to hold office for a term expiring at the next annual meeting of shareholders. (b) Newly created directorships resulting from an increase in the number of Directors and vacancies occurring in the Board of Directors shall be filled by vote of the shareholders. (c) Each Director shall be at least twenty-one years of age, and at all times a majority of the Directors shall be citizens and residents of the United States, and not less than three of the Directors shall be residents of the State of New York. (d) The Board of Directors shall elect such officers as are provided for in the By-Laws at the first meeting of the Board of Directors following each annual meeting of the shareholders. In the event of the failure to elect officers at such meeting, officers may be elected at any regular or special meeting of the Board of Directors. A vacancy in any office may be filled by the Board of Directors at any regular or special meeting. ARTICLE VII The duration of the corporate existence of the corporation shall be perpetual. ARTICLE VIII The amount of the capital of the corporation shall be $2,500,000, and shall consist of 2,000,000 Common Shares, par value $1.25 per share. -5- 5. The Merger Agreement and the foregoing amendments and restatement of the Charter were duly authorized, adopted and approved at a meeting duly called and held on September 19, 1996 by the board of directors of the Corporation, followed by the written consent of the sole shareholder of the Corporation, and the Merger Agreement was duly authorized, adopted and approved by the unanimous written consent dated September 19, 1996 of the board of directors of EVLICO followed by the written consent of the sole shareholder of EVLICO. IN WITNESS WHEREOF, the undersigned have executed this Restated Charter on the 19th day of September, 1996. /s/ James M. Benson -------------------------- James M. Benson President /s/ Pauline Sherman -------------------------- Pauline Sherman Secretary -6- STATE OF NEW YORK ) ) SS.: COUNTY OF NEW YORK ) On this 19th day of September, 1996, before me personally came James M. Benson, to me personally known to me to be one of the persons who executed the foregoing instrument, and he duly acknowledged to me that he executed the same. /s/ Edra F Bloom -------------------------- Notary Public EDRA F. BLOOM Notary Public, State of New York No. 31-4962102 Qualified in New York County Commission Expires February 12th, 1998 STATE OF NEW YORK ) ) SS.: COUNTY OF NEW YORK ) On this 19th day of September, 1996, before me personally came Pauline Sherman, to me personally known to me to be one of the persons who executed the foregoing instrument, and she duly acknowledged to me that she executed the same. /s/ Edra F Bloom -------------------------- Notary Public EDRA F. BLOOM Notary Public, State of New York No. 31-4962102 Qualified in New York County Commission Expires February 12th, 1998 44606-1.DOC -7- EX-99.1A6BBYLAWS 35 EQUITABLE'S BY-LAWS AS AMENDED THRU JULY 22, 1992 BY-LAWS OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES ARTICLE I --------- SHAREHOLDERS ------------ Section 1.1. Annual Meetings. The annual meeting of the shareholders of the Company for the election of Directors and for the transaction of such other business as properly may come before such meeting shall be held at the principal office of the Company on the third Wednesday in the month of May at 3:00 P.M. or at such other hour as may be fixed from time to time by resolution of the Board of Directors and set forth in the notice or waiver of notice of the meeting. [Business Corporation Law Sec. 602 (a), (b)]* Section 1.2. Notice of Meetings; Waiver. The Secretary or any Assistant Secretary shall cause written notice of the place, date and hour of each meeting of the shareholders, and, in the case of a special meeting, the purpose or purposes for which such meeting is called and by or at whose direction such notice is being issued, to be given, personally or by first class mail, not fewer than ten nor more than fifty days before the date of the meeting to each shareholder of record entitled to vote at such meeting. No notice of any meeting of shareholders need be given to any shareholder who submits a signed waiver of notice, in person or by proxy, whether before or after the meeting or who attends the meeting, in person or by proxy, without protesting prior to its conclusion the lack of notice of such meeting. [Business Corporation Law Sec. 605, 606] Section 1.3. Organization; Procedure. At every meeting of shareholders the presiding officer shall be the Chairman of the Board or, in the event of his or her absence or disability, the President or, in his or her absence, any officer of the Company designated by the shareholders. The order of business and all other matters of procedure at every meeting of shareholders may be determined by such presiding officer. The Secretary, or in the event of his or her absence or disability, an Assistant Secretary or, in his or her absence, an appointee of the presiding officer shall act as Secretary of the meeting. - ------------------------------------ * Citations are to the Business Corporation Law and Insurance Law of the State of New York, as in effect on [date of adoption], and are inserted for reference only, and do not constitute a part of the By-Laws. 1 Section 1.4. Action Without a Meeting. Any action required or permitted to be taken by shareholders may be taken without a meeting on written consent signed by the holders of all the outstanding shares entitled to vote on such action. [Business Corporation Law Sec. 615] ARTICLE II BOARD OF DIRECTORS Section 2.1. Regular Meetings. Regular meetings of the Board of Directors shall be held at the principal office of the Company on the third Thursday of each month, except January and August, unless a change in place or date is ordered by the Board of Directors. The first regular meeting of the Board of Directors following the annual meeting of the shareholders of the Company is designated as the Annual Meeting. [Business Corporation Law Sec. 710] Section 2.2. Special Meetings. Special meetings of the Board of Directors may be called at any time by the Chairman of the Board, the President, or two directors. [Business Corporation Law Sec. 710] Section 2.3. Independent Directors; Quorum. Not less than one-third of the Board of Directors shall be persons who are not officers or employees of the Company or of any entity controlling, controlled by, or under common control with the Company and who are not beneficial owners of a controlling interest in the voting stock of the Company or of any such entity. A majority of the entire Board of Directors, including at least one Director who is not an officer or employee of the Company or of any entity controlling, controlled by, or under common control with the Company and who is not a beneficial owner of a controlling interest in the voting stock of the Company or of any such entity, shall constitute a quorum for the transaction of business at any regular or special meeting of the Board of Directors, except as otherwise prescribed by these By-Laws. Except as otherwise prescribed by law, the Charter of the Company, or these By-Laws, the vote of a majority of the Directors present at the time of the vote, if a quorum is present at such time, shall be the act of the Board of Directors. A majority of the Directors present, whether or not a quorum is present, may adjourn any meeting from time to time and from place to place. As used in these By-Laws "entire Board of Directors" means the total number of directors which the Company would have if there were no vacancies. [Business Corporation Law Sec. 707, 708; Insurance Law Sec. 1202] Section 2.4. Notice of Meetings. Notice of a regular meeting of the Board of Directors need not be given. Notice of a change in the time or place of a regular meeting of the Board of Directors shall be given to each Director at least ten days in advance thereof in writing and by telephone or telecopy. Notice of each special meeting of the Board of Directors shall be given to each Director at least two days in advance thereof in 2 writing and by telephone or telecopy, and shall state in general terms the purpose or purposes of the meeting. Any such notice for a regular or special meeting not specifically required by this Section 2.4 to be given by telephone or telecopy shall be deemed given to a director when sent by mail, telegram, cablegram or radiogram addressed to such director at his or her address furnished to the Secretary. Notice of an adjourned regular or special meeting of the Board of Directors shall be given if and as determined by a majority of the directors present at the time of the adjournment, whether or not a quorum is present. [Business Corporation Law Sec. 711] Section 2.5. Newly Created Directorships; Vacancies. Any newly created directorships resulting from an increase in the number of Directors and vacancies occurring in the Board of Directors for any reasons (including vacancies resulting from the removal of a Director without cause) shall be filled by the shareholders of the Company. [Business Corporation Law Sec. 705; Insurance Law Sec. 4211] Section 2.6. Presiding Officer. In the absence or inability to act of the Chairman of the Board at any regular or special meeting of the Board of Directors, any Vice-Chairman of the Board, or the President, as designated by the chief executive officer, shall preside at such meeting. In the absence or inability to act of all of such officers, the Board of Directors shall select from among their number present a presiding officer. Section 2.7. Telephone Participation in Meetings; Action by Consent Without Meeting. Any Director may participate in a meeting of the Board or any committee thereof by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other at the same time, and such participation shall constitute presence in person at such meeting; provided that one meeting of the Board each year shall be held without the use of such conference telephone or similar communication equipment. When time is of the essence, but not in lieu of a regularly scheduled meeting of the Board of Directors, any action required or permitted to be taken by the Board or any committee thereof may be taken without a meeting if all members of the Board or such committee, as the case may be, consent in writing to the adoption of a resolution authorizing the action and such written consents and resolution are filed with the minutes of the Board or such committee, as the case may be. [Business Corporation Law Sec. 708]. ARTICLE III COMMITTEES Section 3.1. Committees. (a) The Board of Directors, by resolution adopted by a majority of the entire Board of Directors, may establish from among its members an Executive Committee of the Board composed of five or more Directors. Not less than one-third of the members of such committee shall be persons who are not officers or employees of the Company or of any entity controlling, controlled by, or under common 3 control with the Company and who are not beneficial owners of a controlling interest in the voting stock of the Company or of any such entity. (b) The Board of Directors, by resolution adopted by a majority of the entire Board of Directors, shall establish from among its members one or more committees with authority to discharge the responsibilities enumerated in this subsection (b). Each such committee shall be composed of five or more Directors and shall be comprised solely of Directors who are not officers or employees of the Company or of any entity controlling, controlled by, or under common control with the Company and who are not beneficial owners of a controlling interest in the voting stock of the Company or of any such entity. Such committee or committees shall have responsibility for: (i) Recommending to the Board of Directors candidates for nomination for election by the shareholders to the Board of Directors; (ii) Evaluating the performance of officers deemed by any such committee to be principal officers of the Company and recommending their selection and compensation; (iii) Recommending the selection of independent certified public accountants; (iv) Reviewing the scope and results of the independent audit and of any internal audit; and (v) Reviewing the Company's financial condition. (c) The Board of Directors, by resolution adopted from time to time by a majority of the entire Board of Directors, may establish from among its members one or more additional committees of the Board, each composed of five or more Directors. Not less than one-third of the members of each such committee shall be persons who are not officers or employees of the Company or of any entity controlling, controlled by, or under common control with the Company and who are not beneficial owners of a controlling interest in the voting stock of the Company or of any such entity. [Business Corporation Law Sec. 712; Insurance Law Sec. 1202] Section 3.2. Authority of Committees. Each committee shall have all the authority of the Board of Directors, to the extent permitted by law and provided in the resolution creating such committee, provided, however, that no committee shall have the authority of the Board of Directors contained in Sections 1.1, 1.3, 2.1, 3.1, 3.2, 3.3, 3.4, 3.5, 3.7, 3.8, 4.1, 4.2, 4.3, 4.4. 4.5, 4.6, 5.1, 5.2, 7.1, 7.3, 7.4, 7.5 or 8.1 or these By-Laws, nor shall any committee have authority to amend or repeal any resolution of the Board of Directors. [Business Corporation Law Sec. 712] 4 Section 3.3. Quorum and Manner of Acting. A majority of the total membership that a committee would have if there were no vacancies (including at least one Director who is not an officer or employee of the Company or of any entity controlling, controlled by, or under common control with the Company and who is not a beneficial owner of a controlling interest in the voting stock of the Company or of any such entity) shall constitute a quorum for the transaction of business. The vote of a majority of the members present at the time of the vote, if a quorum is present at such time, shall be the act of such committee. Except as otherwise prescribed by these By-Laws or by the Board of Directors, each committee may elect a chairman from among its members, fix the times and dates of its meeting, and adopt other rules of procedure. Section 3.4. Removal of Members. Any member (and any alternate member) of a committee may be removed by vote of a majority of the entire Board of Directors. Section 3.5. Vacancies. Any vacancy occurring in any committee for any reason may be filled by vote of a majority of the entire Board of Directors. Section 3.6. Subcommittees. Any committee may appoint one or more subcommittees from its members. Any such subcommittee may be charged with the duty of considering and reporting to the appointing committee on any matter within the responsibility of the committee appointing such subcommittee but cannot act in place of the appointing committee. Section 3.7. Alternate Members of Committees. The Board of Directors may designate, by resolution adopted by a majority of the entire Board of Directors, one or more directors as alternate members of any committee who may replace any absent member or members at a meeting of such committee. [Business Corporation Law Sec. 712] Section 3.8. Attendance of Other Directors. Except as otherwise prescribed by the Board of Directors, members of the Board of Directors may attend any meeting of any committee. ARTICLE IV OFFICERS Section 4.1. Chairman of the Board. The Board of Directors may at a regular or special meeting elect from among their number a Chairman of the Board who shall hold office, at the pleasure of the Board of Directors, until the next Annual Meeting. The Chairman of the Board shall preside at all meetings of the Board of Directors and also shall exercise such powers and perform such duties as may be delegated or assigned to or required of him or her by these By-Laws or by or pursuant to authorization of the Board of Directors. 5 Section 4.2. Vice-Chairman of the Board. The Board of Directors may at a regular or special meeting elect from among their number one or more Vice-Chairmen of the Board who shall hold office, at the pleasure of the Board of Directors, until the next Annual Meeting. The Vice-Chairman of the Board shall exercise such powers and perform such duties as may be delegated or assigned to or required of them by these By-Laws or by or pursuant to authorization of the Board of Directors or by the Chairman of the Board. Section 4.3. President. The Board of Directors shall at a regular or special meeting elect from among their number a President who shall hold office, at the pleasure of the Board of Directors, until the next Annual Meeting and until the election of his or her successor. The President shall exercise such powers and perform such duties as may be delegated or assigned to or required of him or her by these By-Laws or by or pursuant to authorization of the Board of Directors or (if the President is not the chief executive officer) by the chief executive officer. The President and Secretary may not be the same person. Section 4.4. Chief Executive Officer. The Chairman of the Board or the President shall be the chief executive officer of the Company as the Board of Directors from time to time shall determine, and the Board of Directors from time to time may determine who shall act as chief executive officer in the absence or inability to act of the then incumbent. Subject to the control of the Board of Directors, and to the extent not otherwise prescribed by these By-Laws, the chief executive officer shall have plenary power over all departments, officers, employees, and agents of the Company, and shall be responsible for the general management and direction of all the business and affairs of the Company. Section 4.5. Secretary. The Board of Directors shall at a regular or special meeting elect a Secretary who shall hold office, at the pleasure of the Board of Directors, until the next Annual Meeting and until the election of his or her successor. The Secretary shall issue notices of the meeting of the shareholders and the Board of Directors and its committees, shall keep the minutes of the meetings of the shareholders and the Board of Directors and its committees and shall have custody of the Company's corporate seal and records. The Secretary shall exercise such powers and perform such other duties as relate to the office of the Secretary, and also such powers and duties as may be delegated or assigned to or required of him or her by or pursuant to authorization of the Board of Directors or by the Chairman of the Board or (if the Chairman of the Board is not the chief executive officer) the chief executive officer. Section 4.6. Other Offices. The Board of Directors may elect such other officers as may be deemed necessary for the conduct of the business of the Company. Each such 6 officer elected by the Board of Directors shall exercise such powers and perform such duties as may be delegated or assigned to or required of him or her by the Board of Directors of the chief executive officer, and shall hold office until the next Annual Meeting, but at any time may be suspended by the chief executive officer or by the Board of Directors, or removed by the Board of Directors. [Business Corporation Law Sec. 715, 716] ARTICLE V CAPITAL STOCK Section 5.1. Transfers of Stock; Registered Shareholders. (a) Shares of stock of the Company shall be transferable only upon the books of the Company kept for such purpose upon surrender to the Company or its transfer agent or agents of a certificate (unless such shares shall be uncertificated shares) representing shares, duly endorsed or accompanied by appropriate evidence of succession, assignment or authority to transfer. Within a reasonable time after the transfer of uncertificated shares, the Company shall send to the registered owner thereof a written notice containing the information required to be set forth or stated on certificates. (b) Except as otherwise prescribed by law, the Board of Directors may make such rules, regulations and conditions as it may deem expedient concerning the subscription for, issue, transfer and registration of, shares of stock. Except as otherwise prescribed by law, the Company, prior to due presentment for registration of transfer, may treat the registered owner of shares as the person exclusively entitled to vote, to receive notification, and otherwise to exercise all the rights and powers of an owner. [Business Corporation Law Sec.508(d), (f); Insurance Law Sec. 4203] Section 5.2. Transfer Agent and Registrar. The Board of Directors may appoint one or more transfer agents and one or more registrars, and may require all certificates representing shares to bear the signature of any such transfer agents or registrars. The same person may act as transfer agent and registrar for the Company. ARTICLE VI EXECUTION OF INSTRUMENTS Section 6.1. Execution of Instruments. (a) Any one of the following, namely, the Chairman of the Board, any Vice-Chairman of the Board, the President, any Vice-President (including a Deputy or Assistant Vice-President or any other Vice-President designated by a number or a word or words added before or after the title Vice-President to indicate his or her rank or responsibilities), the Secretary, or the Treasurer, or any officer, employee or agent designated by or pursuant to authorization of the Board of Directors or any committee created under these By-Laws, shall have power in the ordinary course of business to enter into contracts or execute instruments on behalf of the 7 Company (other than checks, drafts and other orders drawn on funds of the Company deposited in its name in banks) and to affix the corporate seal. If any such instrument is to be executed on behalf of the Company by more than one person, any two or more of the foregoing or any one or more of the foregoing with an Assistant Secretary or an Assistant Treasurer shall have power to execute such instrument and affix the corporate seal. (b) The signature of any officer may be in facsimile on any such instrument if it shall also bear the actual signature, or personally inscribed initials, of an officer, employee or agent empowered by or pursuant to the first sentence of this Section to execute such instrument, provided that the Board of Directors or a committee thereof may authorize the issuance of insurance contracts and annuity contracts on behalf of the Company bearing the facsimile signature of an officer without the actual signature or personally inscribed initials of any person. (c) All checks, drafts and other orders drawn on funds of the Company deposited in its name in banks shall be signed only pursuant to authorization of and in accordance with rules prescribed from time to time by the Board of Directors or a committee thereof , which rules may permit the use of facsimile signatures. Section 6.2. Facsimile Signatures of Former Officers. If any officer whose facsimile signature has been placed upon any instrument shall have ceased to be such officer before such instrument is issued, it may be issued with the same effect as if he or she had been such officer at the time of its issue. Section 6.3. Meaning of Term "Instruments". As used in this Article VI, the term "instruments" includes, but is not limited to, contracts and agreements, checks, drafts and other orders for the payment of money, transfers of bonds, stocks, notes and other securities, and powers of attorney, deeds, leases, releases of mortgages, satisfactions and all other instruments entitled to be recorded in any jurisdiction. ARTICLE VII GENERAL Section 7.1. Reports of Committees. Reports of any committee charged with responsibility for supervising or making investments shall be submitted at the next meeting of the Board of Directors. Reports of other committees of the Board of Directors shall be submitted at a regular meeting of the Board of Directors as soon as practicable, unless otherwise directed by the Board of Directors. Section 7.2. Financial Statements and Reports, etc. At the meeting of the Board of Directors falling on the third Thursday of February, the Annual Statement and audited financial statements of the Company for the preceding year, together with an opinion with respect to such audited financial statements by such independent certified public accountants as may have been selected by the Board of Directors, shall be submitted. 8 Interim reports on the financial condition of the Company shall be submitted at a regular meeting of the Board of Directors as soon as practicable following the end of each of the first three quarterly financial periods in each year. All such financial statements and interim reports shall be filed with the records of the Board of Directors and a note of such submission shall be spread upon the minutes. Section 7.3. Independent Certified Public Accountants. The books and accounts of the Company shall be audited throughout each year by such independent certified public accountants as shall be selected by the Board of Directors. Section 7.4. Directors' Fees. The Directors shall be paid such fees for their services in any capacity as may have been authorized by the Board of Directors. No Director who is a salaried officer of the Company shall receive any fees for serving as a Director of the Company. [Business Corporation Law Sec. 713(e)] Section 7.5. 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 Sec. 721-726; Insurance Law Sec. 1216] Section 7.6. Waiver of Notice. Notice of any meeting of the Board of Directors or any committee thereof shall not be required to be given to any Director who submits a signed waiver of notice whether before or after the meeting, or who attends the meeting without protesting, prior to or at its commencement, the lack of notice to him. [Business Corporation Law Sec. 711(c)] 9 Section 7.7. Company. The term "Company" in these By-Laws means The Equitable Life Assurance Society of the United States. ARTICLE VIII AMENDMENT OF BY-LAWS Section 8.1. Amendment of By-Laws. Subject to Section 1210 of the Insurance Law of the State of New York, these By-Laws (other than Sections 1.4, 2.2, 2.3, 2.4, 2.5, 3.1, 3.2 and 8.1 (the "Governance By-Laws") and all By-Laws adopted by vote of the shareholders of the Company) may be amended or repealed and new By-Laws, consistent with the Governance By-Laws and with all By-Laws adopted by the shareholders of the Company, may be adopted at a regular or special meeting of the Board of Directors, provided that a notice, given not less than ten days before the meeting in writing and by telephone or telecopy, shall set forth the amendment or repeal or new By-Laws proposed to be acted upon at such meeting. [Business Corporation Law Sec. 601; Insurance Law Sec. 1210] 10 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES BY-LAWS As Amended July 22, 1992 11 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Table of Contents ----------------- ARTICLE I SHAREHOLDERS 1 Section 1.1 Annual Meetings 1 Section 1.2 Notice of Meetings; Waiver 1 Section 1.3 Organization; Procedure 1 Section 1.4 Action Without a Meeting 2 ARTICLE II BOARD OF DIRECTORS 2 Section 2.1 Regular Meetings 2 Section 2.2 Special Meetings 2 Section 2.3 Independent Directors; Quorum 2 Section 2.4 Notice of Meetings 2 Section 2.5 Newly Created Directorships; Vacancies 3 Section 2.6 Presiding Officer 3 Section 2.7 Telephone Participation in Meetings; Action by Consent Without Meeting 3 ARTICLE III COMMITTEES 3 Section 3.1 Committees 3 Section 3.2 Authority of Committees 4 Section 3.3 Quorum and Manner of Acting 5 Section 3.4 Removal of Members 5 Section 3.5 Vacancies 5 Section 3.6 Subcommittees 5 Section 3.7 Alternate Members of Committees 5 Section 3.8 Attendance of Other Directors 5 ARTICLE IV OFFICERS 5 Section 4.1 Chairman of the Board 5 Section 4.2 Vice-Chairman of the Board 6 Section 4.3 President 6 Section 4.4 Chief Executive Officer 6 Section 4.5 Secretary 6 Section 4.6 Other Officers 6 i ARTICLE V CAPITAL STOCK 7 Section 5.1 Transfers of Stock; Registered Shareholders 7 Section 5.2 Transfer Agent and Registrar 7 ARTICLE VI EXECUTION OF INSTRUMENTS 7 Section 6.1 Execution of Instruments 7 Section 6.2 Facsimile Signature of Former Officers 8 Section 6.3 Meaning of Term "Instruments" 8 ARTICLE VII GENERAL 8 Section 7.1 Reports of Committees 8 Section 7.2 Financial Statements and Reports, etc. 8 Section 7.3 Independent Certified Public Accountants 9 Section 7.4 Directors' Fees 9 Section 7.5 Indemnification of Directors, Officers and Employees 9 Section 7.6 Waiver of Notice 9 Section 7.7 Company 10 ARTICLE VIII AMENDMENT OF BY-LAWS 10 Section 8.1 Amendment of By-laws 10 ii EX-99.1A8DISTAGR 36 DISTRIBUTION AND SERVICING AGREEMENT DISTRIBUTION AND SERVICING AGREEMENT This DISTRIBUTION AND SERVICING AGREEMENT, dated as of May 1, 1994, is made by and among Equico Securities, Inc. ("Equico"), The Equitable Life Assurance Society of the United States ("Equitable") and Equitable Variable Life Insurance Company ("Equitable Variable"), as follows: WHEREAS, pursuant to a Distribution Agreement, dated as of May 1, 1994, Equico is the principal underwriter of The Hudson River Trust ("Trust"), a series mutual fund registered under the Investment Company Act of 1940 ("1940 Act") whose shareholders are separate accounts of Equitable and Equitable Variable and of other insurance companies; WHEREAS, both Equitable and Equitable Variable issue variable insurance contracts ("Variable Contracts") whose net premiums or considerations are allocated in whole or in part to the respective separate accounts of Equitable and Equitable Variable for investment in the Trust, for direct investment or for investment in other funding media ("Separate Accounts"); WHEREAS, units of interest in the Separate Accounts are registered under the Securities Act of 1933 ("1933 Act") to the extent such registration is required; WHEREAS, Equitable and Equitable Variable are each broker-dealers registered under the Securities Exchange Act of 1934, as amended ("1934 Act"), and each is a member of the National Association of Securities Dealers, Inc. ("NASD"); -2- WHEREAS, the Variable Contracts (including all Variable Contracts issued by Equitable Variable) are offered and sold by members of Equitable's agency force, or by insurance brokers under contract with Equitable, who are also registered representatives of Equico and of Equitable ("Agents"); WHEREAS, Equitable and Equitable Variable each desire to engage Equico, a wholly-owned subsidiary of Equitable which is a registered broker-dealer under the 1934 Act and a member of the NASD, to assume the responsibilities set forth in this Agreement with respect to the distribution of the Variable Contracts, including in particular the responsibility for compliance with broker-dealer requirements under federal and any applicable state or foreign securities laws and the NASD Rules of Fair Practice ("NASD Rules") with respect to the offering of the Variable Contracts, and Equico desires to assume such responsibilities; WHEREAS, Equico desires to utilize Equitable's services and personnel in carrying out certain of its responsibilities under this Agreement, and Equitable is willing to furnish the same on the terms and conditions hereinafter set forth; NOW, THEREFORE, the parties hereto agree as follows: -3- ARTICLE I Distribution Responsibility for the Variable Contracts Sec. 1.1 Equitable and Equitable Variable authorize Equico to act, and Equico agrees to serve, as broker-dealer in connection with the distribution of their respective Variable Contracts to the extent provided in this Agreement. Equico shall be fully responsible for carrying out all compliance and supervisory obligations in connection with the distribution of the Variable Contracts, as required by the NASD Rules and by federal and any applicable state or foreign securities laws. Equitable shall be fully responsible for compensating the Agents for their sales of Variable Contracts, as provided in Section 1.4. Sec. 1.2 Without limiting the generality of Section 1.1, Equico agrees that it shall be fully responsible for: (A) Requiring that each person who is authorized to offer and sell the Variable Contracts is duly registered as a representative of Equico and is appropriately licensed, registered or otherwise qualified to offer and sell the Variable Contracts under the federal securities laws and any applicable securities laws of each state or other jurisdiction in which the Variable Contracts offered by such person may be lawfully sold; (B) Training, supervising and directing the Agents for purposes of complying on a continuous basis with the NASD Rules and with federal and state securities laws applicable in connection with the offer and sale of the Variable Contracts. In this connection, Equico shall: -4- (i) Establish and implement reasonable written procedures which provide for diligent supervision of sales practices of the Agents; (ii) Require that Agents shall recommend the purchase of Variable Contracts only upon reasonable grounds to believe that the purchase is suitable for each prospective purchaser, and verify their compliance with such requirement; (iii) Provide a sufficient number of registered principals and an adequate compliance staff to carry out the responsibilities set forth herein; and (iv) Impose disciplinary measures on the Agents. (C) Oversight of the securities activities of all persons engaged directly or indirectly in operations of Equico, Equitable and Equitable Variable related to the offer or sale of the Variable Products, each of whom shall be considered a "person associated" with Equico, as defined in Section 3(a)(18) of the 1934 Act. Equico shall have full responsibility for each such person with regard to his or her training, supervision and control, as contemplated by Section 15 of the 1934 Act, and, in that connection, shall have the authority to require that disciplinary action be taken with respect to such persons. Sec. 1.3 Equico represents that it is a broker-dealer duly registered under the 1934 Act and is a member in good standing of the NASD and, to the extent necessary to perform the activities contemplated hereunder, is duly registered, or otherwise qualified, under the securities laws of every state or other jurisdiction in -5- which the Variable Contracts are available for sale, and Equico agrees to maintain such status. Consistent with its designation as distributor of the Variable Contracts, as provided in Section 1.1 of this Agreement, Equico acknowledges that it may be deemed to be an "underwriter" or a "principal underwriter" of the Separate Accounts under the federal securities laws. Sec. 1.4 Equitable shall have exclusive responsibility for the payment of commissions or other fees in accordance with the applicable agreements between each Agent and Equitable relating to the Variable Contracts. All compensation paid by Equitable to the Agents with respect to sales of the Variable Contracts shall be paid by Equitable on its own behalf or on behalf of Equitable Variable (with respect to sales of Variable Contracts issued by Equitable Variable), and shall be reflected on the books and records of Equitable and, to the extent related to Variable Contracts issued by Equitable Variable, on the books and records of Equitable Variable. The responsibility of Equitable shall include the performance of all activities necessary in order that the payment of compensation hereunder complies with all applicable federal securities laws and state securities and insurance laws. Equitable and Equitable Variable retain the ultimate right to determine the rates of commission and other fees to be paid to the Agents in connection with their respective Variable Contracts. Nothing contained in this Agreement shall obligate Equico to pay any commissions or other fees to Agents or to reimburse any Agents for expenses incurred by them, nor shall Equico have any responsibility for the adequacy or accuracy of any amount paid to an Agent in connection with the sale of the Variable Contracts. Equico shall have no right or interest whatsoever in any commissions or other fees payable to Agents by Equitable or by Equitable Variable. -6- Sec. 1.5 Equitable represents that it is a broker-dealer duly registered under the 1934 Act and is a member in good standing of the NASD. If Equitable shall determine, in its sole judgment, that such status is not required for the purpose of properly discharging its responsibility under Section 1.4 of this Agreement, Equitable may terminate its status as a registered broker-dealer without notice to the other parties hereto. Sec. 1.6 Equitable Variable agrees to cooperate fully with Equico and with Equitable in the proper discharge of the responsibilities allocated to them under this Article I. While undertaking to provide such cooperation and to perform various activities on its own behalf hereunder, Equitable Variable assumes no duties or responsibilities under this Agreement in its capacity as a registered broker-dealer and, accordingly, shall be under no obligation to maintain such status. Sec. 1.7 Equico, Equitable and Equitable Variable shall each cause to be maintained and preserved such accounts, books and other documents as are required by the 1934 Act and 1940 Act and any other applicable laws and regulations. In particular, without limiting the foregoing, Equico shall cause all the books and records in connection with the offer and sale of the Variable Contracts to be maintained and preserved in conformity with the requirements of Rules 17a-3 and 17a-4 under the 1934 Act, to the extent that such requirements are applicable to the Variable Contracts. The payment of premiums, purchase payments, commissions and other fees and payments in connection with the Variable Contracts shall be reflected on the books and records of Equitable and of Equitable Variable, as provided in Section 1.4 hereof and as may otherwise be -7- required under applicable NASD regulations and federal and applicable state securities laws requirements. Sec. 1.8 Equico, Equitable and Equitable Variable shall each submit to all regulators and administrative bodies having jurisdiction over the sales of the Variable Contracts, present or future, any information, reports, or other material that any such body by reason of this Agreement may request or require pursuant to applicable laws or regulations. In particular, without limiting the foregoing, Equitable and Equitable Variable agree that any books and records which they maintain pursuant to Section 1.5 of this Agreement which are required to be maintained under Rule 17a-3 or 17a-4 of the 1934 Act shall be subject to inspection by the SEC in accordance with Section 17(a) of the 1934 Act. Sec. 1.9 Equico and Equitable each agree and understand that all documents, reports, records, books, files and other materials required under applicable NASD regulations and federal and state securities laws relative to the sale of Variable Contracts shall be the property of Equico, with the exception of those books and records maintained by Equitable pursuant to Section 1.4 which relate to sales compensation and shall be the joint property of Equitable and Equico. If, however, such documents, reports, records, books, files and other materials which are the property of Equico are required by applicable regulation or law to be maintained also by Equitable or by Equitable Variable, such material shall be the joint property of Equico, Equitable or Equitable Variable. All other documents, reports, records, books, files and other materials maintained relative to this Agreement shall be the property of Equitable or of Equitable Variable, depending upon the identity of the issuer of the Variable Contracts involved. Upon the -8- termination of this Agreement, all such material shall be returned to the applicable party. Sec. 1.10 Equico, Equitable and Equitable Variable from time to time during the term of this Agreement, shall allocate among themselves, subject to a right of further delegation, the administrative responsibility for maintaining and preserving the books, records and accounts kept in connection with the Variable Contracts; provided, however, in the case of books, records and accounts kept pursuant to a requirement of applicable law or regulation, the ultimate responsibility for maintaining and preserving such books, records and accounts shall be that of the party which is required to maintain or preserve such books, records and accounts under the applicable law or regulation, and such books, records and accounts shall be maintained and preserved under the supervision of that party. Equico, Equitable and Equitable Variable shall cause each other to be furnished with such reports as each may reasonably request for the purpose of meeting its respective reporting and recordkeeping requirements under such regulations and laws and under the insurance laws of the State of New York and any other applicable states or jurisdictions. ARTICLE II Procedures for Sale of Variable Contracts Sec. 2.1 Equitable and Equitable Variable each represent and warrant that units of interest of their respective Separate Accounts offered under the Variable Contracts are registered under the 1933 Act to the extent such registration is required, that the Separate Accounts are registered under the 1940 Act unless -9- exempt from such registration, and that the Variable Contracts are qualified to be sold under the insurance laws and any applicable securities laws of all states and other jurisdictions in which the Variable Contracts are authorized for sale. Equitable and Equitable Variable each further represent and warrant that each of them is a life insurance company duly organized under the laws of the State of New York and in good standing and authorized to conduct business under the laws of each state in which the Variable Contracts are offered and sold. Sec. 2.2 Equico will require that the Agents use only the effective prospectuses, statements of additional information ("SAIs") and other authorized materials in soliciting and selling the Variable Contracts. Equico is not authorized to give any information or to make any representations concerning the Variable Contracts other than those contained in the current prospectus or SAI therefor filed with the SEC or in such materials as may be authorized by Equitable or by Equitable Variable. Sec. 2.3 All applications for Variable Contracts shall be made on application forms supplied by Equitable or by Equitable Variable, as appropriate, and all payments collected by Equico shall be remitted by Equico promptly in full, together with such application or enrollment forms and any other required documentation, directly to Equitable or to Equitable Variable, as appropriate, at the address indicated on such application or to such other address as Equitable or Equitable Variable may, from time to time, designate in writing. Equico shall review all such applications for suitability. Checks or money orders in payment on any Variable Contract shall be drawn to the order of "The Equitable Life Assurance Society of the United States" or "Equitable Variable Life Insurance Company", as appropriate. All applications for Variable Contracts shall be subject to -10- acceptance or rejection by Equitable or by Equitable Variable at their respective discretion. Sec. 2.4 All money payable in connection with any of the Variable Contracts, whether as premiums, purchase payments or otherwise, and whether paid by, or on behalf of any applicant or contractowner, is the property of Equitable or of Equitable Variable and shall be transmitted promptly in accordance with the administrative procedures of Equitable and Equitable Variable without any deduction or offset for any reason, including by example but not limitation, any deduction or offset for compensation claimed by Equico or payable to the Agents. No cash payments shall be accepted by Equico in connection with the Variable Contracts. Sec. 2.5 Equitable and Equitable Variable shall be responsible for payment of the costs of printing the prospectuses, SAIs and sales material used in connection with the solicitation of applications for the Variable Contracts and to allocate such costs between themselves. Equitable and Equitable Variable shall provide to Equico copies of such prospectuses, SAIs and sales material in such number as Equico shall reasonably request. Equitable and Equitable Variable shall make available to Equico copies of all financial statements and other documents that Equico shall reasonably request for use in connection with the distribution of the Variable Contracts. Sec. 2.6 Notwithstanding anything in this Agreement to the contrary, Equico may enter into sales agreements with independent broker-dealers for the sale of the Variable Contracts, subject to the prior written approval of Equitable and of Equitable Variable of each such sales agreement and the terms thereof. All such -11- sales agreements entered into by Equico shall provide that each independent broker-dealer will assume full responsibility for continued compliance by itself and its associated persons with the NASD Rules and applicable federal and state securities and insurance laws. All associated persons of such independent broker-dealer soliciting applications for the Variable Contracts shall be duly and appropriately licensed or appointed for the sale of the Variable Contracts under the NASD Rules and federal and state securities and insurance laws in which such person shall offer or sell the Variable Contracts. Sec. 2.7 Equitable shall apply for and maintain the proper insurance licenses for each of the Agents selling the Variable Contracts in all states or jurisdictions in which the Variable Contracts are offered for sale by such Agent. Equitable and Equitable Variable reserve the right to refuse to appoint any proposed agent, or independent broker-dealer, and to terminate an Agent or independent broker-dealer once appointed. Equitable and Equitable Variable shall promptly notify Equico of each such termination. Equitable agrees to be responsible for all licensing or other fees required under pertinent state insurance laws to properly authorize Agents for the sale of the Variable Contracts; however, the foregoing shall not limit Equitable's right to collect such amount from any person or entity other than Equico. Sec. 2.8 The parties hereto recognize that any person selling the Variable Contracts as contemplated by this Agreement shall be acting as an insurance agent of Equitable or of Equitable Variable or as an insurance broker, and that the rights of Equico to supervise such persons shall be limited to the extent specifically described herein or required under applicable federal or state securities laws or NASD regulations. Such persons shall not be considered employees of Equico and -12- shall be considered agents of Equico only as and to the extent required by such laws and regulations. Further, it is intended by the parties hereto that such persons are and shall continue to be considered to have a common law independent contractor relationship with Equitable and Equitable Variable and not to be common law employees of Equitable or of Equitable Variable, unless any contract between Equitable and any person selling the Variable Contracts specifically provides otherwise. Sec. 2.9 Consistent with the responsibility of Equico to discharge all compliance and supervisory obligations relating to the distribution of the Variable Contracts as provided in this Agreement and consistent with the authority given to Equico hereunder, Equitable and Equitable Variable shall retain the ultimate right of control over, and responsibility for, the issuance, servicing and marketing of their respective Variable Contracts. In that connection, Equitable and Equitable Variable shall review and approve all advertising concerning the Variable Contracts issued by each of them; however, Equico shall be responsible for filing such materials, as required, with the NASD and with state securities regulators and for obtaining such approvals as may be necessary. Sec. 2.10 Unless otherwise agreed in writing by Equitable or by Equitable Variable, neither Equico nor any Agent nor any independent broker-dealer shall have an interest in any surrender charges, deductions or other fees payable to Equitable or to Equitable Variable. -13- ARTICLE III Services and Personnel Provided by Equitable Sec. 3.1 Equitable agrees to furnish compliance and related support services, including personnel, to assist Equico in the performance of the services which Equico is required to provide hereunder. In furnishing such services, all personnel of Equitable shall be subject at all times to the supervision and control of Equico. ARTICLE IV Compensation and Expenses Sec. 4.1 Equico shall be compensated, not less frequently than quarterly, by Equitable and by Equitable Variable for its services under this Agreement in an aggregate annual amount which shall be equal to the actual expenses incurred by Equico to provide compliance and related support services, plus a percentage of such expenses which shall approximate the annual rate of profit earned by Equico from its performance of comparable services for unaffiliated clients. Sec. 4.2 Equico shall pay the costs and expenses, direct and indirect, incurred by Equitable in furnishing services and personnel, pursuant to Article III of this Agreement. In determining the basis for the apportionment of expenses, specific identification or estimates based on time, company assets, square footage or any other mutually agreeable method providing for a fair and reasonable allocation of cost may be used, provided such method is in conformity with the requirements of Section 1712 of the New York Insurance Law and New York Insurance -14- Department Regulation No. 33. The charge to Equico for such apportioned expenses shall be at cost as described in this Section 4.2. Sec. 4.3 Within 45 days after the end of each calendar quarter, and more often if desired, Equitable shall submit to Equico a statement of apportioned expenses showing the basis for such apportionment; and settlement shall be made within 15 days thereafter. The statement of apportioned expenses shall set forth in reasonable detail the nature of the expenses being apportioned and other relevant information to support the charge. Sec. 4.4 To enable Equitable to compensate Agents for the sale of Variable Contracts issued by Equitable Variable, Equitable Variable shall furnish Equitable with a schedule of the commissions and other fees payable with respect to each form of Variable Contract issued by it, together with a list of rules and procedures applicable to the payment of such compensation. Equitable Variable agrees to reimburse Equitable for commissions and service fees (not in excess of the amounts specified by Equitable Variable) paid to the Agents for the sale of its Variable Contracts pursuant to Section 1.4 of this Agreement. ARTICLE V Term of Agreement Sec. 5.1 Subject to termination as herein provided, this Agreement shall remain in full force and effect for a two-year period commencing on the date first above written, and this Agreement shall continue in full force and effect from year to year thereafter, until terminated as herein provided. -15- Sec. 5.2 This Agreement may be terminated by any party hereto on not less than 60 days' prior written notice to the other parties or by an agreement in writing signed by all of the parties hereto, except that data processing services may not be terminated on less than 180 days' prior written notice, if requested by Equico in writing promptly following its receipt of written notice of termination of this Agreement. This Agreement shall automatically be terminated in the event of its assignment. Sec. 5.3 Upon termination of this Agreement, all authorizations, rights, and obligations shall cease except the obligations to settle accounts hereunder, including the settlement of monies due in connection with Variable Contracts in effect at the time of termination or issued pursuant to applications received by Equitable or by Equitable Variable prior to termination. ARTICLE VI Miscellaneous Sec. 6.1 Should an irreconcilable difference of opinion arise between or among the parties to this Agreement as to the interpretation of any matter respecting this Agreement, it is hereby mutually agreed that such differences shall be submitted to arbitration as the sole remedy available to the parties. Such arbitration shall be in accordance with the rules of the American Arbitration Association, the arbitrators shall have extensive experience in the insurance industry, and the arbitration shall take place in New York, New York. -16- Sec. 6.2 For purposes of this Agreement, the term "Variable Contracts" shall not include any variable insurance contract issued by Equitable which is not offered and sold by employees or agents of Equitable. Sec. 6.3 This Agreement replaces the Sales Agreement, dated December 23, 1985, as amended, between Equitable Variable and Equitable, which shall terminate on the effective date hereof. Sec. 6.4 If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule, or otherwise, the remainder of this Agreement shall not be affected thereby. Sec. 6.5 This Agreement constitutes the entire agreement between the parties hereto and may not be modified except in a written instrument executed by all parties hereto. Sec. 6.6 This Agreement shall be subject to the provisions of the 1934 Act and, to the extent applicable, the 1940 Act and the rules, regulations and rulings thereunder and of the NASD, from time to time in effect, including such exemptions from the 1940 Act as the SEC may grant, and the terms hereof shall be interpreted and construed in accordance therewith. Sec. 6.7 This Agreement shall be interpreted in accordance with the laws of the State of New York. -17- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed by their respective officials thereunto duly authorized, as of the day and year first above written. THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES By: /s/Joseph J. Melone ------------------- Joseph J. Melone Chairman and Chief Executive Officer EQUITABLE VARIABLE LIFE INSURANCE COMPANY By: /s/Samuel B. Shlesinger ----------------------- Samuel B. Shlesinger Senior Vice President EQUICO SECURITIES, INC. By: /s/Richard V. Silver -------------------- Richard V. Silver President and Chief Operating Officer 5292/430_1.DOC EX-99.1A8ISCHEDCOM 37 SCHEDULE OF COMMISSION (IL PLUS) SCHEDULE OF COMMISSIONS A. Incentive Life Plus(SM) (Policy Form 94-300) ------------------------ Policy Year Up to CP Amounts Over CP ----------- -------- --------------- 1st 50%(2) 3%(2) 2nd through 10th 6%(3) 3%(4) 11th and later 3%(5) 3%(5) Notes ----- (1) CP = Commissionable Premium. The CP is equal to the lesser of the annualized planned periodic premium, the amount the client intends to pay in the first policy year, and the commissionable target premium (CTP). CTP is actuarially determined based on the age, sex, and risk class of the insured person and the face amount of the policy. (2) Production credits are payable on all commissions earned in PYI. (3) The 6% is comprised of 4% renewal commission and 2% Transferable Service Fee (TSF). (4) The 3% is comprised of 1% renewal commission and 2% TSF. (5) The 3% is comprised of 2% TSF and 1% Service Fee Boost (SFB) for those agents who qualify. At issue ages 0 through 19, the first year commission rate is reduced to 40%. The first year commission rate of 50% is also reduced by 1% for each year that the insured's age exceeds 65, i.e., the rate payable at issue age 66 is 49%. B. Corporate Incentive Life (Policy Form 95-300) ------------------------ Policy Year Up to CP(1) Over CP ----------- ----------- ------- 1 50%(2)(3) 3%(3) 2 - 10 6%(4) 3%(5) 11 and later 3%(6) 3%(6) Notes ----- (1) CP = Commissionable Premium. The CP is equal to the lesser of the annualized planned periodic premium, the amount the client intends to pay in the first policy year, and the commissionable target premium (CTP). CTP is actuarially determined based on the age, sex, and risk class of the insured person and the face amount of the policy. (2) A 50% rate is paid up to CP with 20% payable in the first policy year and the remaining deferred. The deferral rates are 4.5% for policy years 2 through 5 and 12% for year 6. The deferral is paid at the beginning of policy years 2-6 as long as the policy is in force. (3) Production credits are payable on all commissions earned in the first policy year. (4) The 6% is comprised of 4% renewal and 2% Transferable Service Fee (TSF). (5) The 3% is comprised of 2% renewal and 1% Transferable Service Fee (TSF). (6) The 3% is comprised of 2% TSF and 1% Service Fee Boost (SFB) for those agents who qualify. The first year commission rate of 50% is reduced by 1% for each year the insured's age exceeds age 65, i.e., the rate payable at age 66 is 49%. LCH_1.DOC/27665 - --------------- EX-99.1A9AMERGAGR 38 MERGER AGREEMENT AGREEMENT AND PLAN OF MERGER OF EQUITABLE VARIABLE LIFE INSURANCE COMPANY WITH AND INTO THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES -------------------------------------- THIS AGREEMENT AND PLAN OF MERGER (this "Agreement and Plan of Merger"), dated as of September 19, 1996, is by and between The Equitable Life Assurance Society of the United States, a New York corporation having its principal place of business at 787 Seventh Avenue, New York, New York 10019 ("Equitable Life"), and Equitable Variable Life Insurance Company, a New York corporation having its principal place of business at 787 Seventh Avenue, New York, New York 10019 ("EVLICO") (the foregoing corporations hereinafter sometimes referred to as the "Constituent Companies"). WHEREAS, Equitable Life and EVLICO are corporations duly organized and validly existing under the laws of the State of New York and duly licensed as stock life insurance companies under the New York Insurance Law (the "Insurance Law"); WHEREAS, EVLICO has authorized capital stock consisting of 5 million shares of Common Stock (the "EVLICO Common Stock"), $1.00 par value, of which at the date hereof 1.5 million shares are issued and outstanding and owned by Equitable Life and are the only shares of stock of EVLICO entitled to vote on this Agreement and Plan of Merger; WHEREAS, Equitable Life has authorized capital stock consisting of 2 million shares of Common Stock (the "Equitable Common Stock"), $1.25 par value, all of which shares on the date hereof are issued and outstanding and owned by The Equitable Companies Incorporated, a Delaware corporation having its principal place of business at 787 Seventh Avenue, New York, New York, 10019. The issued and outstanding shares of Equitable Common Stock are the only shares of stock of Equitable Life entitled to vote on this Agreement and Plan of Merger; and WHEREAS, the Boards of Directors of Equitable Life and EVLICO deem it advisable and in the best interest of the policyholders and contract holders of their respective companies to effect the merger (the "Merger") of EVLICO and Equitable Life with and into Equitable Life as the surviving company, and the Board of Directors and sole stockholder, respectively, of each of Equitable Life and EVLICO have duly approved and adopted this Agreement and Plan of Merger. -2- NOW THEREFORE, in consideration of the premises and the mutual covenants and agreements herein contained, it is hereby agreed by and between the parties hereto that EVLICO shall be merged with and into Equitable Life pursuant to Article 71 of the Insurance Law and in accordance with this Agreement and Plan of Merger. ARTICLE 1 --------- Surviving Company ----------------- Section 1.1 The Surviving Company. The surviving company of the Merger (the "Surviving Company") shall be Equitable Life. Section 1.2 Charter. The proposed Restated Charter of the Surviving Company is annexed hereto as Exhibit A. Section 1.3 By-Laws. The By-Laws of Equitable Life in effect at the Effective Time of the Merger (as hereinafter defined) shall be the By-Laws of the Surviving Company. ARTICLE 2 --------- Terms and Conditions of the Merger and Mode of Carrying the Merger into Effect - ------------------------------------------------------------------------------ Section 2.1 General. Subject to and upon the terms and conditions of this Agreement and Plan of Merger, upon the Effective Time of the Merger, EVLICO shall be merged with and into Equitable Life and Equitable Life shall continue as the Surviving Company as permitted and provided by Section 7102 of the Insurance Law. All of the EVLICO Common Stock issued and outstanding immediately prior to the Effective Time of the Merger shall, at the Effective Time of the Merger, be cancelled. All of the Equitable Common Stock issued and outstanding immediately prior to the Effective Time of the Merger shall remain unchanged. Section 2.2 Consents, Approvals, Etc. to be Obtained by the Parties to the Merger. Equitable Life and EVLICO shall each obtain all necessary consents and approvals of, permits from, and assurances of no objection to the Merger or other rulings from, the appropriate governmental authorities, including the following: (a) approval by the New York Insurance Department to consummate the Merger pursuant to Section 7105 of the Insurance Law; and (b) approval by the New York Insurance Department of one or more plans of operation of Equitable Life separate accounts which will continue the operations of EVLICO separate -3- accounts in operation at the Effective Time of the Merger as separate accounts of Equitable Life. Section 2.3 Effective Time of the Merger. This Agreement and Plan of Merger shall be duly executed and attested and a certified copy thereof, together with certificates of its adoption as provided for in the Insurance Law and certificates as to fees, commissions or other compensations or valuable considerations paid or to be paid in connection with the Merger, shall be submitted for approval to the Superintendent of Insurance of the State of New York (the "Superintendent"). Following the receipt of such approval from the Superintendent and the fulfillment of the conditions set forth herein, a certified copy of this Agreement and Plan of Merger, with evidence of the approval of the Superintendent endorsed thereon, shall be filed in the office of the Clerk of the County of New York, where the principal office of each of Equitable Life and EVLICO is located. Subject to the foregoing, the Merger shall become effective at 12:01 a.m. on January 1, 1997 (the "Effective Time of the Merger"). ARTICLE 3 --------- Other Provisions with Respect to the Merger ------------------------------------------- Section 3.1. Effect of the Merger. At the Effective Time of the Merger, the separate existence of EVLICO shall cease and, in accordance with the provisions of this Agreement and Plan of Merger, EVLICO shall be merged with and into Equitable Life, and Equitable Life shall survive the Merger and shall continue in existence and shall possess all the rights, privileges, immunities, powers and purposes of each of the Constituent Companies. All the rights, franchises and interests in and to every species of property, real, personal, and mixed, including things in action, causes of action and every other asset of the Constituent Companies, shall vest in the Surviving Company without further act or deed, except that if the Surviving Company shall at any time deem it desirable that any further assignment or assurance shall be given to fully accomplish the purposes of the Merger, the directors and officers of EVLICO shall do all things necessary, including the execution of any and all relevant documents, to carry out the intent and purposes of this Agreement and Plan of Merger. No liability or obligation due or to become due, or claim or demand for any cause existing against either Constituent Company, or any policyholder, shareholder, officer, or director thereof, shall be released or impaired by the Merger. No action or proceeding, civil or criminal, then pending by or against either Constituent Company, or any policyholder, shareholder, officer, or director thereof, shall be abated or discontinued by the Merger, but may be enforced, prosecuted, settled or compromised as if the Merger had not occurred, or Equitable Life, as the Surviving Company, may be substituted in place of EVLICO by order of the court in which the action or proceeding may be pending. From and after the Effective Time of the Merger, Equitable Life shall be liable in place of EVLICO for all the liabilities and obligations of EVLICO, including liabilities under policies and contracts issued by EVLICO. -4- Section 3.2. Abandonment of the Merger. If, at any time prior to the Effective Time of the Merger, events or circumstances occur which, in the opinion of a majority of the Board of Directors of either of the Constituent Companies, render it inadvisable to consummate the Merger, this Agreement and Plan of Merger shall not become effective even though previously approved and adopted by the Board of Directors and sole shareholder, respectively, of each of Equitable Life and EVLICO. Section 3.3. Expenses of the Merger. Equitable Life shall pay all the expenses of carrying this Agreement and Plan of Merger into effect and of accomplishing the Merger. Section 3.4. Counterparts. For the convenience of the parties and to facilitate approval of this Agreement and Plan of Merger, any number of counterparts hereof may be executed, and each such executed counterpart shall be deemed to be an original instrument. Section 3.5. Governing Law. This Agreement and Plan of Merger has been executed in and shall be governed by and construed under the laws of the State of New York. IN WITNESS WHEREOF, this Agreement and Plan of Merger has been duly executed and delivered by the duly authorized officers of Equitable Life and EVLICO on the date first above written. THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES [Seal] Attest: /s/ Pauline Sherman /s/ James M. Benson - -------------------------- By:------------------------------------ Secretary President and Chief Executive Officer EQUITABLE VARIABLE LIFE INSURANCE COMPANY [Seal] Attest: /s/ Pauline Sherman /s/ James M. Benson - -------------------------- By:------------------------------------ Secretary President and Chief Executive Officer 28903 Exhibit A RESTATED CHARTER OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES ARTICLE I The name of the corporation shall continue to be The Equitable Life Assurance Society of the United States. ARTICLE II The principal office of the corporation shall be located in the City of New York, County of New York, State of New York. ARTICLE III (a) The business to be transacted by the corporation shall be the kinds of insurance business specified in Paragraphs 1, 2 and 3 of Subsection (a) of Section 1113 of the Insurance Law of the State of New York, as follows: (1) "Life insurance": every insurance upon the lives of human beings, and every insurance appertaining thereto, including the granting of endowment benefits, additional benefits in the event of death by accident, additional benefits to safeguard the contract from lapse, accelerated payments of part or all of the death benefit or a special surrender value upon diagnosis (A) of terminal illness defined as a life expectancy of twelve months or less, or (B) of a medical condition requiring extraordinary medical care or treatment regardless of life expectancy, or provide a special surrender value, upon total and permanent disability of the insured, and optional modes of settlement of proceeds. "Life insurance" also includes additional benefits to safeguard the contract against lapse in the event of unemployment of the insured. Amounts paid the insurer for life insurance and proceeds applied under optional modes of settlement or under dividend options may be allocated by the insurer to one or more separate accounts pursuant to section four thousand two hundred forty of the Insurance Law of the State of New York; (2) "Annuities": all agreements to make periodical payments for a period certain or where the making or continuance of all or some of a series of such payments, or the amount of any such payment, depends upon the continuance of human life, except payments made under the authority of paragraph (1) above. Amounts paid the insurer to provide annuities and proceeds applied under optional modes of settlement or under dividend options may be allocated by the insurer to one or more separate accounts pursuant to section four thousand two hundred forty of the Insurance Law of the State of New York; (3) "Accident and health insurance": (i) insurance against death or personal injury by accident or by any specified kind or kinds of accident and insurance against sickness, ailment or bodily injury, including insurance providing disability benefits pursuant to article nine of the workers' compensation law, except as specified in item (ii) hereof; and (ii) non-cancellable disability insurance, meaning insurance against disability resulting from sickness, ailment or bodily injury (but excluding insurance solely against accidental injury) under any contract which does not give the insurer the option to cancel or otherwise terminate the contract at or after one year from its effective date or renewal date; and any amendments to such paragraphs or provisions in substitution therefor which may be hereafter adopted; such other kind or kinds of business now or hereafter authorized by the laws of the State of New York to stock life insurance companies; and such other kind or kinds of business to the extent necessarily or properly incidental to the kind or kinds of insurance business which the corporation is authorized to do. (b) The corporation shall also have all other rights, powers, and privileges now or hereafter authorized or granted by the Insurance Law of the State of New York or any other law or laws of the State of New York to stock life insurance companies having power to do the kind or kinds of business hereinabove referred to and any and all other rights, powers, and privileges of a corporation now or hereafter granted by the laws of the State of New York and not prohibited to such stock life insurance companies. -2- ARTICLE IV The business of the corporation shall be managed under the direction of the Board of Directors. ARTICLE V (a) The Board of Directors shall consist of not less than 13 (except for vacancies temporarily unfilled) nor more than 36 Directors, as may be determined from time to time by a vote of a majority of the entire Board of Directors. No decrease in the number of Directors shall shorten the term of any incumbent Director. (b) The Board of Directors shall have the power to adopt from time to time such By-Laws, rules and regulations for the governance of the officers, employees and agents and for the management of the business and affairs of the corporation, not inconsistent with this Charter and the laws of the State of New York, as may be expedient, and to amend or repeal such by-laws, rules and regulations, except as provided in the By-Laws. (c) Any or all of the Directors may be removed at any time, either for or without cause, by vote of the shareholders. (d) No Director shall be personally liable to the corporation or any of its shareholders for damages for any breach of duty as a Director; provided, however, that the foregoing provision shall not eliminate or limit (i) the liability of a Director if a judgment or other final adjudication adverse to him or her establishes that his or her acts or omissions were in bad faith or involved intentional misconduct or that he or she personally gained in fact a financial profit or other advantage to which he or she was not legally entitled, or were acts or omissions which (a) he or she knew or reasonably should have known violated the Insurance Law of the State of New York or (b) violated a specific standard of care imposed on Directors directly, and not by reference, by a provision of the Insurance Law of the State of New York (or any regulations promulgated thereunder) or (c) constituted a knowing violation of any other law; or (ii) the liability of a Director for any act or omission prior to September 21, 1989. -3- ARTICLE VI (a) The Directors of the corporation shall be elected at each annual meeting of shareholders of the corporation in the manner prescribed by law. The annual meeting of shareholders shall be held at such place, within or without the State of New York, and at such time as may be fixed by or under the By-Laws. At each annual meeting of shareholders, directors shall be elected to hold office for a term expiring at the next annual meeting of shareholders. (b) Newly created directorships resulting from an increase in the number of Directors and vacancies occurring in the Board of Directors shall be filled by vote of the shareholders. (c) Each Director shall be at least twenty-one years of age, and at all times a majority of the Directors shall be citizens and residents of the United States, and not less than three of the Directors shall be residents of the State of New York. (d) The Board of Directors shall elect such officers as are provided for in the By-Laws at the first meeting of the Board of Directors following each annual meeting of the shareholders. In the event of the failure to elect officers at such meeting, officers may be elected at any regular or special meeting of the Board of Directors. A vacancy in any office may be filled by the Board of Directors at any regular or special meeting. ARTICLE VII The duration of the corporate existence of the corporation shall be perpetual. ARTICLE VIII The amount of the capital of the corporation shall be $2,500,000, and shall consist of 2,000,000 Common Shares, par value $1.25 per share. 44859-1.DOC -4- EX-99.1-A10AAPPLIC 39 APPLICATION EV4-200-Y (EVLICO) PART 1: APPLICATION FOR LIFE INSURANCE TO: EQUITABLE VARIABLE LIFE INSURANCE COMPANY (Equitable Variable) Home Office: 787 Seventh Avenue, New York, NY 10019 - -------------------------------------------------------------------------------- 1. PROPOSED INSURED (Print Name as it is to appear on the policy) Please print in ink. - -------------------------------------------------------------------------------- A. Title: |_| Mr. |_| Mrs. |_| Ms. |_| Miss |_| Other Title|_|_|_|_| B. Name: First: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Middle: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Last: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| C. Date of Birth Mo. |_|_| Day |_|_| Yr. |_|_|_|_| D. Age Nearest Birthday |_|_| E. Sex |_| M |_| F F. Place of Birth: ______________________________________ G. Soc. Sec. No. |_|_|_|_|_|_|_|_|_| H. Previous/Other Name(If Applicable) __________________________________________ I. U.S. Citizen? |_| Yes |_| No If No, Country ______________________________ J. Current Occupation(s): (1) Title: ___________________________________________ (2) Duties: __________________________________________ (3) How Long? ____________ If less than 1 year at current occupation, give previous in Special Instructions. K. Residence/Care of: |C|/|O|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Years There? |_|_| Current No. & Street: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Apt/Suite/Bldg. #: |_|_|_|_|_| City: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| State: |_|_| Zip +4 Code: |_|_|_|_|_|-|_|_|_|_| Previous No. & Street: _____________________________________________________ City: ___________________ State: ______ Zip +4 Code: ____________ (If less than 2 years at current) L. Tel.: (1) Home |_|_|_| |_|_|_| |_|_|_|_| (2) Business |_|_|_| |_|_|_| |_|_|_|_| M. Currently employed? |_| Yes |_| No |_| Retired N. Employer Name: ______________________________________________________________ O. Years Employed: ____________ P. Employer Address: No. & Street: _______________________________________________________________ City: _____________________________ State: ______ Zip +4 Code: ____________ - -------------------------------------------------------------------------------- 2. APPLICANT (If not Proposed Insured) - -------------------------------------------------------------------------------- A. Name: First: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Middle: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Last: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| B. Relationship to Proposed Insured ____________________________________________ C. Date of Birth Mo. |_|_| Day |_|_| Yr. |_|_|_|_| D. Sex |_| M |_| F E. Place of Birth: ____________________ F. Current Occupation(s): (1) Title ____________________________________________ (2) Duties: __________________________________________ If less than 1 year at current occupation, give previous in Special Instructions. G. Address: Same as-- |_| Question 1.k. Residence or |_| Question 1.p. Business Other: Residence: No. & Street: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Apt/Suite/Bldg.: |_|_|_|_|_| City: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| State: |_|_| Zip +4 Code: |_|_|_|_|_|-|_|_|_|_| Business: No. & Street: ______________________________________________________ City: ____________________ State: ______ Zip +4 Code: ____________ - -------------------------------------------------------------------------------- 3. POLICYOWNER - -------------------------------------------------------------------------------- A. THE OWNER IS: (1) |_| Proposed Insured (2) |_| Applicant (3) |_| OTHER: (A) |_| Individual (B) |_| Corporation (C) |_| Partnership (D) |_| Trust Dated Mo. |_|_| Day |_|_| Yr. |_|_|_|_| (E) |_| Qualified Plan (F) Name of Person First |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Middle |_|_|_|_|_|_|_|_|_|_|_|_| Last |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Name of firm or plan |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| (G) If an individual, indicate: |_| Mr. |_| Mrs. |_| Miss |_| Other Title |_|_|_|_| (H) Relationship to Insured __________________ B. Owner's Mailing Address: Same as-- |_| Current Residence (1.k.) or |_| Applicant's Residence (2.g.) Other: Care of: |C|/|O|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| No. & Street: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Apt/Suite/Bldg.: |_|_|_|_|_| City: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| State: |_|_| Zip +4 Code: |_|_|_|_|_|-|_|_|_|_| C. Answer if Policyowner is not Proposed Insured: (1) Soc. Sec. or Tax I.D. Number |_|_|_|_|_|_|_|_|_| (2) DATE OF BIRTH: |_| Same as 2.c. or Mo. |_|_| Day |_|_| Yr. |_|_|_|_| (3) TEL.: |_|_|_| |_|_|_| |_|_|_|_| D. SUCCESSOR OWNER (if desired) Give full name: _____________________________________________________________ and Relationship to Insured: ________________________________________________ If the Owner or Successor Owner is other than the Proposed Insured, and if all persons so designated die before the Proposed Insured, the Owner will be the estate of the last such person to die, except where the Proposed Insured is a child. In cases where the Proposed Insured is a child and the Applicant is to be the Owner or Successor Owner and the Applicant dies before the insured child, the child will be the Owner unless otherwise designated. In such designation, include Owner's full name and relationship to the child, and the Owner's social security or tax number. - -------------------------------------------------------------------------------- 4. BENEFICIARY FOR INSURANCE ON PROPOSED INSURED. Include Full Name and Relationship to Proposed Insured. - -------------------------------------------------------------------------------- A. Primary Beneficiary(ies): (1) Name(s):________________________________ Relationship: __________________ (2) Name(s):________________________________ Relationship: __________________ B. Contingent Beneficiary(ies): (1) Name(s):________________________________ Relationship: __________________ (2) Name(s):________________________________ Relationship: __________________ NOTE: Unless otherwise requested, the contingent beneficiary will be the surviving children of the Insured in equal shares. If none survive, payment will be made to the Insured's estate. The Beneficiary(ies) under any Term Insurance Rider on any Additional Insured or on a Child will be as stated in those riders, unless otherwise designated in Special Instructions. In any such designation, give full name and relationship of beneficiary(ies) to the Insured. EV4-200Y CAT #125751 NO. A217511 1 5. PLAN DESCRIPTION AND PREMIUM PAYMENT METHOD - -------------------------------------------------------------------------------- A. Plan ________________________________________________________________________ B. Initial Face Amount $________________________________________________________ C. If Modified Premium VLI (Complete only if more than Scheduled Premium. If Billed Premium specified is less than Scheduled Premium, we automatically bill the Scheduled Premium.) Billed Premium $_____________________________________________________________ D. If Flexible Premium VLI: (a.) Initial Premium Payment $______________________ (b.) Planned Periodic Payments $_____________________________________________ E. Death Benefit Option: |_| Option A |_| Option B (B-Plus for Flex. Prem.-IL 2000) F. Premium Mode: |_| Annual |_| Semi-Annual |_| Quarterly |_| System-Matic (Complete S-M form) G. |_| Salary Allotment (1) Unit Name _______________ (2) Register Date ___/___/___ (3) Unit/Sub Unit No. |_|_|_|_|_|_|_|_|_| (4) Payroll No. __________________ (5) Allotor's Name ______________________ (6) Allotor's No. ________________ (if other than Proposed Insured) H. |_| Military Allotment: Branch __________________ Register Date: ___________ I. INITIAL ALLOCATIONS TO INVESTMENT OPTIONS*
For Premiums For Deductions (WHOLE PERCENTAGES ONLY) (1) Guaranteed Interest (1)________% (1)________% (2) Money Market (2)________% (2)________% (3) Intermediate Gov't. Securities (3)________% (3)________% (4) Short-Term World Income (4)________% (4)________% (5) High Yield (5)________% (5)________% (6) Balanced (6)________% (6)________% (7) Common Stock (7)________% (7)________% (8) Global (8)________% (8)________% (9) Aggressive Stock (9)________% (9)________% (10) Asset Allocation Series: a. Conservative Investors (10a.)______% (10a.)______% b. Growth Investors (10b.)______% (10b.)______% (11) __________________________________ (11)________% (11)________% (12) __________________________________ (12)________% (12)________% 100% 100% *Except for initial allocations to Guaranteed Interest, your Policy Account will be allocated according to these percentages on the first business day 20 days after the date of issue of your policy. Before that time, all Policy Account allocations (except to Guaranteed Interest) will be to the Money Market Division. Consult prospectus for investment option information.
- -------------------------------------------------------------------------------- 6. OPTIONAL BENEFITS - -------------------------------------------------------------------------------- A. |_| Accidental Death Benefit* (specify amount) $_____________________________ B. |_| Disability Premium Waiver* (Modified Premium VLI only) C. |_| Disability - Waiver Monthly Deductions* (Flex Prem-IL 2000 only) *JUVENILE LIMITATIONS: If applied for, the Accidental Death Benefit is payable only if the Child dies as a result of an accident after the Child's first birthday; the Disability Waiver Benefits are effective only if the Child becomes totally disabled on or after the Child's 5th birthday. D. |_| Designated Insured Option (Flex Prem/IL 2000 only)** E. Other _______________________________________________________________________ SURVIVORSHIP VLI RIDERS F. |_| Option to Split Upon Divorce G. |_| Estate Protector TERM RIDERS H. |_| Renewable Term: (1) On Insured $____________ (2) On Add'l Insured** $____________ (Available on Modified Premium VLI only) I. |_| Children's Term** $____________ Units ____________ **If coverage is elected be sure to complete applicable parts of Question 8, and answer Questions 10 through 16 with respect to the Additional, Designated Insured(s) and/or Children for Term Insurance Rider. - -------------------------------------------------------------------------------- 7. COMPLETE FOR PROPOSED ADDITIONAL OR DESIGNATED INSURED(S), CHILDREN'S TERM RIDER OR JUVENILE INSURANCE Also answer Questions 10 through 16 with respect to Proposed Additional or Designated Insured(s) and/or Children under Children's Term Rider - -------------------------------------------------------------------------------- A. Title: |_| Mr. |_| Mrs. |_|Ms. |_| Miss |_| Other Title |_|_|_|_| B. Proposed Add'l Insured: First: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Middle: |_|_|_|_|_|_|_|_|_|_|_|_|_|_| Last: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Date of Birth Mo. |_|_| Day |_|_| Yr. |_|_|_|_| Age Nearest Birthday |_|_| Sex |_| M |_| F Place of Birth: _______________ Soc. Sec. No. |_|_|_|_|_|_|_|_|_| Previous/Other Name (If Applicable) ____________________________________________ Relationship of Owner to Add'l Insured: ________________________________________ State of Residence: __________ Current Occupation(s): (1) Title: ______________________________________________ (2) Duties: ___________________________________________ (3) How Long? __________ If less than 1 year at current occupation, give previous in Special Instructions. C. Proposed Designated Insured (to add others, submit form 180-333D or successor): First: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Middle: |_|_|_|_|_|_|_|_|_|_|_|_|_| Last: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Date of Birth Mo. |_|_| Day |_|_| Yr. |_|_|_|_| Age Nearest Birthday |_|_| Sex |_| M |_| F Place of Birth: _______________ Soc. Sec. No. |_|_|_|_|_|_|_|_|_| Previous/Other Name (If Applicable) ____________________________________________ Relationship of Owner to Add'l Insured: ________________________________________ State of Residence: __________ Current Occupation(s): (1) Title: ______________________________________________ (2) Duties: ___________________________________________ (3) How Long? __________ If less than 1 year at current occupation, give previous in Special Instructions. D. Children for Term Insurance Rider (Use Special Instructions if more space is needed.)* First: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Middle: |_|_|_|_|_|_|_|_|_|_|_|_|_| Last: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Date of Birth Mo. |_|_| Day |_|_| Yr. Sex |_| M |_| F Relationship to Owner: _________________________________________________________ First: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Middle: |_|_|_|_|_|_|_|_|_|_|_|_|_| Last: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Date of Birth Mo. |_|_| Day |_|_| Yr. Sex |_| M |_| F Relationship to Owner: _________________________________________________________ First: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Middle: |_|_|_|_|_|_|_|_|_|_|_|_|_| Last: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Date of Birth Mo. |_|_| Day |_|_| Yr. Sex |_| M |_| F Relationship to Owner: _________________________________________________________ *NOTE: To be eligible, children (including stepchildren and legally adopted children) must not have reached their 18th birthday. Coverage does not begin until a child is 15 days old. E. For Juvenile Insurance (Ages 0-14): (1) Will there be more life insurance in effect on this Child than on any other child in the family? |_| Yes |_| No If "Yes", explain ___________________________________________________________ (2) Total Life Insurance in effect on Applicant: $ __________________________ - -------------------------------------------------------------------------------- 8. OPAI. COMPLETE IF EXERCISING OPTION TO PURCHASE ADDITIONAL INSURANCE - -------------------------------------------------------------------------------- A. (1) |_| Regular; (2) |_| Birth or Adoption; Child's Name __________________; Date of Birth or Adoption ____/____/____; (3) |_| Alternate B. Existing original policy no. ___________________ C. Option Date ____/____/____ D. Option Amount $_________________________________ E. If applying for Disability Premium Waiver, is Proposed Insured now totally disabled as defined in the Disability Premium Waiver Provision of the original policy indicated above in b.? |_| Yes |_| No This application is made under a provision in the existing policy indicated in 8.b. above, permitting the purchase of additional individual life insurance (the "Option Provision"). If this application is made within the time allowed and in accordance with the other terms in the Option Provision, including timely payment of the full first premium for the additional insurance, then the additional insurance shall take effect upon the terms of the policy the Insurer would issue. Otherwise, the additional insurance shall not take effect. (Answer Questions 10 through 16 only if evidence of insurability is required in connection with an optional benefit or any excess of the insurance amount applied for over the insurance amount permitted by the Option Provision.) EV4-200Y 2 9. SUITABILITY (All VLI Plans) - -------------------------------------------------------------------------------- A. Have you, the Proposed Insured or the Owner, if other than the Proposed Insured, received: (1) a prospectus for the policy(ies) applied for? |_| Yes |_| No Date of prospectus ____/____/____. Date of any supplement(s) ____/____/____; ____/____/____; ____/____/____. (2) a prospectus for the Hudson River Trust? |_| Yes |_| No Date of prospectus ____/____/____. Date of any supplement(s) ____/____/____; ____/____/____; ____/____/____. (3) a prospectus for the designated investment company(ies) ________________? |_| Yes |_| No Date of prospectus ____/____/____. Date of any supplement(s) ____/____/____; ____/____/____; ____/____/____. B. Do you understand that (i) policy values reflect certain deductions and charges and may increase or decrease depending on credited interest for Guaranteed Interest Division and/or the investment experience of Separate Account Divisions and (ii) the cash value may be subject to a surrender charge, if any, upon policy surrender, lapse or face amount reduction? |_| Yes |_| No C. With this in mind, is (are) the policy(ies) in accord with your insurance and long-term investment objectives and anticipated financial needs? |_| Yes |_| No - -------------------------------------------------------------------------------- OTHER INFORMATION For any "Yes" response, provide full details. - -------------------------------------------------------------------------------- HAS ANY PERSON PROPOSED FOR INSURANCE: 10. A. Ever had a driver's license suspended or revoked, or within the last 3 years been convicted of 2 or more moving violations or driving under the influence of alcohol or drugs? |_| Yes |_| No (If "Yes", include dates, types of violation, and reason for suspension or revocation.) B. Any plans to travel or reside outside the United States? |_| Yes |_| No C. Any other life insurance now in effect or application now pending? |_| Yes |_| No (Give companies and amounts and policy numbers if Equitable.) D. Been disabled for 2 or more weeks within the last 2 years? |_| Yes |_| No 11. A. In the last year flown other than as a passenger or plan to do so? |_| Yes |_| No If "Yes", enter total flying time at present _________ hours; last 12 mos. _________ hours; next 12 mos. _________ est. hours. (Complete Aviation Supplement for crop dusting; pilot instruction; or commercial, competitive, helicopter, military, stunt or test flying.) B. Engaged within the last year or any plan to engage in motor racing on land or water, underwater diving, skydiving, ballooning, hang gliding, parachuting or flying ultra-light aircraft? (If "Yes", complete Avocation Supplement.) |_| Yes |_| No C. Ever had an application for life or health insurance that was declined, required an extra premium or other modification? |_| Yes |_| No (If "Yes", state companies and provide full details.) D. Replaced or changed any existing insurance or annuity (or any plan to do so) assuming the insurance applied for will be issued? |_| Yes |_| No (If "Yes", state companies, plans and amounts.) - -------------------------------------------------------------------------------- ANSWER QUESTIONS 12-16 ONLY IF NON-MEDICAL - -------------------------------------------------------------------------------- 12. A. Proposed Insured: Hgt. ____Ft. ____In.; Wgt. ____lbs. B. Additional Insured: Hgt. ____Ft. ____In.; Wgt. ____lbs. C. Designated Insured: Hgt. ____Ft. ____In.; Wgt. ____lbs. HAS ANY PERSON PROPOSED FOR INSURANCE: 13. A. Ever had or been treated for heart trouble, stroke, high blood pressure, chest pain, diabetes, tumor, cancer, respiratory or neurological disorder? |_| Yes |_| No B. In the last 5 years, consulted a physician, or been examined or treated at a hospital or other medical facility? |_| Yes |_| No (Include medical check-ups in the last 2 years. Do not include colds, minor injuries or normal pregnancy.) 14. In the last 12 months: A. Smoked cigarettes? |_| Yes |_| No B. Used any other form of tobacco? |_| Yes |_| No 15. In the last 10 years: A. Used, except as legally prescribed by a physician, tranquilizers; barbiturates or other sedatives; marijuana, cocaine, hallucinogens or other mood-altering drugs; heroin, methadone or other narcotics; amphetamines or other stimulants; or any other illegal or controlled substances? |_| Yes |_| No B. Received counseling or treatment regarding the use of alcohol or drugs including attendance at meetings or membership in any self-help group or program such as Alcoholics Anonymous or Narcotics Anonymous? |_| Yes |_| No 16. In the last 10 years, been: A. Diagnosed by a member of the medical profession as having Acquired Immune Deficiency Syndrome (AIDS) or AIDS-Related Complex (ARC)? |_| Yes |_| No B. Treated by a member of the medical profession for AIDS or ARC? |_| Yes |_| No - -------------------------------------------------------------------------------- 17. DETAILS/SPECIAL INSTRUCTIONS/ADDITIONAL INFORMATION For each "Yes" answer give Question Number, name of person(s) affected, and full details. For 13-16 include conditions, dates, durations, treatment and results, and names and addresses of physicians and medical facilities. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- DETAILS QUES. NO. NAME OF PERSON (Attach additional sheets if more space needed) - -------------------------------------------------------------------------------- ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ - -------------------------------------------------------------------------------- EV4-200Y 3 - -------------------------------------------------------------------------------- 18. COMPLETE IF MONEY IS PAID OR AN APPROVED PAYMENT AUTHORIZATION IS SIGNED BEFORE THE POLICY IS DELIVERED: Have the undersigned read and do they agree to the conditions of Equitable Variable's Temporary Insurance Agreement, including: (i) the requirement that all of the conditions in that Agreement must be met before any temporary insurance takes effect, and (ii) the $500,000 insurance amount limitation? |_| Yes |_| No (If "No," or if any Person Proposed for Insurance has been diagnosed or treated for Acquired Immune Deficiency Syndrome (AIDS) or AIDS-Related Complex (ARC) by a member of the medical profession within the last 10 years or had cancer, a stroke, or a heart attack within the last year, a premium may not be paid nor an approved payment authorization signed before the policy is delivered.) |_| AMOUNT PAID: $_________. (Draw checks to the order of Equitable Variable.) |_| APPROVED PAYMENT AUTHORIZATION SIGNED. 19. SOCIAL SECURITY OR TAX I.D. NUMBER CERTIFICATION. I, the proposed policyowner, by my signature below, certify under penalties of perjury that (i) the number shown in question 3.c.(1) or 1.g. of this form is my correct taxpayer identification number, and (ii) I |_| am |_| am not subject to a backup withholding order issued by the Internal Revenue Service. I understand that failure to furnish the correct information may subject me to Federal backup withholding. - -------------------------------------------------------------------------------- AGREEMENT. Each signer of this application agrees that: (1). The statements and answers in all parts of this application are true and complete to the best of my (our) knowledge and belief. Equitable Variable may rely on them in acting on this application. (2). Equitable Variable's Temporary Insurance Agreement states the conditions that must be met before any insurance takes effect if money is paid or an approved payment authorization is signed, before the policy is delivered. Temporary Insurance is not provided for a policy or benefit applied for under the terms of a guaranteed insurability option or a conversion privilege. (3). Except as stated in the Temporary Insurance Agreement, no insurance shall take effect on this application: (a) until a policy is delivered and the full initial premium for it is paid, or an approved payment authorization is signed, while the person(s) proposed for insurance is (are) living; (b) before any Register Date specified in this application; and (c) unless to the best of my (our) knowledge and belief the statements and answers in all parts of this application continue to be true and complete, without material change, as of the time such premium is paid or an approved payment authorization is signed. (4). No agent or medical examiner has authority to modify this Agreement or the Temporary Insurance Agreement, nor to waive any of Equitable Variable's rights or requirements. Equitable Variable shall not be bound by any information unless it is stated in Application Part 1 or Part 2. (5). POLICY VALUES INCREASE OR DECREASE DEPENDING ON CREDITED INTEREST FOR THE GUARANTEED INTEREST DIVISION AND/OR INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT DIVISIONS AND REFLECT CERTAIN DEDUCTIONS AND CHARGES. THE DEATH BENEFIT MAY BE FIXED OR VARIABLE UNDER SPECIFIED CONDITIONS, AS DESCRIBED IN THE POLICY. - -------------------------------------------------------------------------------- VLI Notice: Available on request are illustrations of benefits, including death benefits, policy values and cash surrender values. - -------------------------------------------------------------------------------- ACKNOWLEDGEMENT AND AUTHORIZATIONS UNDERWRITING PRACTICES. I (We) have received a statement of the underwriting practices of Equitable Variable which describes how and why Equitable Variable obtains information on my insurability, to whom such information may be reported and how I may obtain it. The statement also contains the notice required by the Fair Credit Reporting Act. AUTHORIZATIONS. TO OBTAIN MEDICAL INFORMATION. I (we) authorize any physician, hospital, medical practitioner or other facility, insurance company, and the Medical Information Bureau to release to Equitable Variable and its legal representative any and all information they may have about any diagnosis, treatment and prognosis regarding my physical or mental condition. TO OBTAIN NON-MEDICAL INFORMATION. I (we) authorize any employer, business associate, government unit, financial institution, Consumer Reporting Agency, and the Medical Information Bureau to release to Equitable Variable and its legal representative any information they may have about my occupation, avocations, finances, driving record, character and general reputation. I (we) authorize Equitable Variable to obtain investigative consumer reports, as appropriate. TO USE AND DISCLOSE INFORMATION. I (we) understand that the information that I (we) authorize Equitable Variable to obtain will be used by Equitable Variable to help determine my insurability or my eligibility for benefits under an existing policy. I (we) authorize Equitable Variable to release information about my insurability to its reinsurers, contractors and affiliates, my (our) Equitable Variable Agent, and to the Medical Information Bureau, all as described in the statement of Equitable Variable's underwriting practices or to other persons or businesses performing business or legal services in connection with my application or claim of eligibility for benefits, or as may be otherwise lawfully required, or as I (we) may further authorize. I (we) understand that I (we) have the right to learn the contents of any report of information (generally, through my physician, in the case of medical information). COPY OF AUTHORIZATIONS. I (we) have a right to ask for and receive a true copy of this Acknowledgement and Authorizations signed by me (us). I (we) agree that a reproduced copy will be as valid as the original. DURATION. I (we) agree that these authorizations will be valid for 12 months from the date shown below. - -------------------------------------------------------------------------------- Laws in your state may make it a crime to fill out an insurance or annuity application with information you know is false or to leave out material facts. - -------------------------------------------------------------------------------- Dated at City __________________________________________________________________ State __________________________________________________________________________ on _____________________________________________________________________ 19 ____ X_______________________________________________________________________________ Signature of Proposed Insured or Applicant if Proposed Insured is a Child, Issue Age 0-14. X_______________________________________________________________________________ Signature of Proposed Additional Insured, if any. X_______________________________________________________________________________ Signature of Applicant if not Proposed Insured or Owner. X_______________________________________________________________________________ Signature of Owner if not Proposed Insured or Applicant. (If a corporation, show firm's name and signature of authorized officer.) ________________________________________________________________________________ Signature of Agent (Registered Representative) EV4-200Y 4 EX-99.1A10BAPPLIC 40 APPLICATION EV4-200-Y (ELAS VERSION) PART 1: APPLICATION FOR LIFE INSURANCE TO: THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES (EQUITABLE) Home Office: 787 Seventh Avenue, New York, NY 10019 - -------------------------------------------------------------------------------- 1. PROPOSED INSURED (Print Name as it is to appear on the policy) Please print in ink. - -------------------------------------------------------------------------------- A. Title: |_| Mr. |_| Mrs. |_| Ms. |_| Miss |_| Other Title|_|_|_|_| B. Name: First: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Middle: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Last: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| C. Date of Birth Mo. |_|_| Day |_|_| Yr. |_|_|_|_| D. Age Nearest Birthday |_|_| E. Sex |_| M |_| F F. Place of Birth: ______________________________________ G. Soc. Sec. No. |_|_|_|_|_|_|_|_|_| H. Previous/Other Name(If Applicable) __________________________________________ I. U.S. Citizen? |_| Yes |_| No If No, Country ______________________________ J. Current Occupation(s): (1) Title: ___________________________________________ (2) Duties: __________________________________________ (3) How Long? ____________ If less than 1 year at current occupation, give previous in Special Instructions. K. Residence/Care of: |C|/|O|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Years there? |_|_| Current No. & Street: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Apt/Suite/Bldg. #: |_|_|_|_|_| City / Municipality: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| County / Parish: |_|_|_|_|_|_|_|_|_|_|_|_| State: |_|_| Zip +4 Code: |_|_|_|_|_|-|_|_|_|_| Previous No. & Street: _____________________________________________________ City: ___________________ State: ______ Zip +4 Code: ____________ (If less than 2 years at current) L. Tel.: (1) Home |_|_|_| |_|_|_| |_|_|_|_| (2) Business |_|_|_| |_|_|_| |_|_|_|_| M. Currently employed? |_| Yes |_| No |_| Retired N. Employer Name: ______________________________________________________________ O. Years Employed: ____________ P. Employer Address: No. & Street: _______________________________________________________________ City: _____________________________ State: ______ Zip +4 Code: ____________ - -------------------------------------------------------------------------------- 2. APPLICANT (If not Proposed Insured) - -------------------------------------------------------------------------------- A. Name: First: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Middle: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Last: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| B. Relationship to Proposed Insured ____________________________________________ C. Date of Birth Mo. |_|_| Day |_|_| Yr. |_|_|_|_| D. Sex |_| M |_| F E. Place of Birth: ____________________ F. Current Occupation(s): (1) Title ____________________________________________ (2) Duties: __________________________________________ If less than 1 year at current occupation, give previous in Special Instructions. G. Address: Same as-- |_| Question 1.k.Residence or |_| Question 1.p. Business Other: Residence: No. & Street: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Apt/Suite/Bldg.: |_|_|_|_|_| City: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| State: |_|_| Zip +4 Code: |_|_|_|_|_|-|_|_|_|_| Business: No. & Street: ______________________________________________________ City: ____________________ State: ______ Zip +4 Code: ____________ - -------------------------------------------------------------------------------- 3. POLICYOWNER - -------------------------------------------------------------------------------- A. THE OWNER IS: (1) |_| Proposed Insured (2) |_| Applicant (3) |_| OTHER: (A) |_| Individual (B) |_| Corporation (C) |_| Partnership (D) |_| Trust Dated Mo. |_|_| Day |_|_| Yr. |_|_|_|_| (E) |_| Qualified Plan (F) Name of Person First |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Middle |_|_|_|_|_|_|_|_|_|_|_|_| Last |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Name of firm or plan |_|_|_|_|_|_|_|_|_|_|_|_||_|_|_|_|_|_|_|_|_|_|_|_| (G) If an individual, indicate: |_| Mr. |_| Mrs. |_| Miss |_| Other Title |_|_|_|_| (H) Relationship to Insured __________________ B. Owner's Mailing Address: Same as-- |_| Current Residence (1.k.) or |_| Applicant's Residence (2.g.) Other: Care of: |C|/|O|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| No. & Street: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Apt/Suite/Bldg.: |_|_|_|_|_| City: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| State: |_|_| Zip +4 Code: |_|_|_|_|_|-|_|_|_|_| C. Answer if Policyowner is not Proposed Insured: (1) Soc. Sec. or Tax I.D. Number |_|_|_|_|_|_|_|_|_| (2) DATE OF BIRTH: |_| Same as 2.c. or Mo. |_|_| Day |_|_| Yr. |_|_|_|_| (3) TEL.: |_|_|_| |_|_|_| |_|_|_|_| D. SUCCESSOR OWNER (if desired) Give full name: _____________________________________________________________ and Relationship to Insured: ________________________________________________ If the Owner or Successor Owner is other than the Proposed Insured, and if all persons so designated die before the Proposed Insured, the Owner will be the estate of the last such person to die, except where the Proposed Insured is a child. In cases where the Proposed Insured is a child and the Applicant is to be the Owner or Successor Owner and the Applicant dies before the insured child, the child will be the Owner unless otherwise designated. In such designation, include Owner's full name and relationship to the child, and the Owner's social security or tax number. - -------------------------------------------------------------------------------- 4. BENEFICIARY FOR INSURANCE ON PROPOSED INSURED. Include Full Name and Relationship to Proposed Insured. - -------------------------------------------------------------------------------- A. Primary Beneficiary(ies): (1) Name(s):________________________________ Relationship: __________________ (2) Name(s):________________________________ Relationship: __________________ B. Contingent Beneficiary(ies): (1) Name(s):________________________________ Relationship: __________________ (2) Name(s):________________________________ Relationship: __________________ NOTE: Unless otherwise requested, the contingent beneficiary will be the surviving children of the Insured in equal shares. If none survive, payment will be made to the Insured's estate. The Beneficiary(ies) under any Term Insurance Rider on any Additional Insured or on a Child will be as stated in those riders, unless otherwise designated in Special Instructions. In any such designation, give full name and relationship of beneficiary(ies) to the Insured. EV4-200Y ELAS CAT. #127055 NO. A021888 1 5. PLAN DESCRIPTION AND PREMIUM PAYMENT METHOD - -------------------------------------------------------------------------------- A. Plan ________________________________________________________________________ B. Initial Face Amount $________________________________________________________ C. If Modified Premium VLI (Complete only if more than Scheduled Premium. If Billed Premium specified is less than Scheduled Premium, we automatically bill the Scheduled Premium.) Billed Premium $_____________________________________________________________ D. If Flexible Premium VLI: (a.) Initial Premium Payment $______________________ (b.) Planned Periodic Payments $_____________________________________________ E. Death Benefit Option: |_| Option A |_| Option B (B-Plus for Flex. Prem.-IL 2000) F. Premium Mode: |_| Annual |_| Semi-Annual |_| Quarterly |_| System-Matic (Complete S-M form) G. |_| Salary Allotment (1) Unit Name _______________ (2) Register Date ___/___/___ (3) Unit/Sub Unit No. |_|_|_|_|_|_|_|_|_| (4) Payroll No. __________________ (5) Allotor's Name ______________________ (6) Allotor's No. ________________ (if other than Proposed Insured) H. |_| Military Allotment: Branch __________________ Register Date: ___________ I. INITIAL ALLOCATIONS TO INVESTMENT OPTIONS*
For Premiums For Deductions (WHOLE PERCENTAGES ONLY) (1) Guaranteed Interest (1)________% (1)________% (2) Money Market (2)________% (2)________% (3) Intermediate Gov't. Securities (3)________% (3)________% (4) Short-Term World Income (4)________% (4)________% (5) High Yield (5)________% (5)________% (6) Balanced (6)________% (6)________% (7) Common Stock (7)________% (7)________% (8) Global (8)________% (8)________% (9) Aggressive Stock (9)________% (9)________% (10) Asset Allocation Series: a. Conservative Investors (10a.)______% (10a.)______% b. Growth Investors (10b.)______% (10b.)______% (11) __________________________________ (11)________% (11)________% (12) __________________________________ (12)________% (12)________% 100% 100% *Except for initial allocations to Guaranteed Interest, your Policy Account will be allocated according to these percentages on the first business day 20 days after the date of issue of your policy. Before that time, all Policy Account allocations (except to Guaranteed Interest) will be to the Money Market Division. Consult prospectus for investment option information.
- -------------------------------------------------------------------------------- 6. OPTIONAL BENEFITS - -------------------------------------------------------------------------------- A. |_| Accidental Death Benefit* (specify amount) $_____________________________ B. |_| Disability Premium Waiver* (Modified Premium VLI only) C. |_| Disability - Waiver Monthly Deductions* (Flex Prem-IL 2000 only) *JUVENILE LIMITATIONS: If applied for, the Accidental Death Benefit is payable only if the Child dies as a result of an accident after the Child's first birthday; the Disability Waiver Benefits are effective only if the Child becomes totally disabled on or after the Child's 5th birthday. D. |_| Designated Insured Option (Flex Prem/IL 2000 only)** E. Other _______________________________________________________________________ SURVIVORSHIP VLI RIDERS F. |_| Option to Split Upon Divorce G. |_| Estate Protector TERM RIDERS H. |_| Renewable Term: (1) On Insured $____________ (2) On Add'l Insured** $____________ (Available on Modified Premium VLI only) I. |_| Children's Term** $____________ Units ____________ **If coverage is elected be sure to complete applicable parts of Question 8, and answer Questions 10 through 16 with respect to the Additional, Designated Insured(s) and/or Children for Term Insurance Rider. - -------------------------------------------------------------------------------- 7. COMPLETE FOR PROPOSED ADDITIONAL OR DESIGNATED INSURED(S), CHILDREN'S TERM RIDER OR JUVENILE INSURANCE Also answer Questions 10 through 16 with respect to Proposed Additional or Designated Insured(s) and/or Children under Children's Term Rider - -------------------------------------------------------------------------------- A. Title: |_| Mr. |_| Mrs. |_|Ms. |_| Miss |_| Other Title |_|_|_|_| B. Proposed Add'l Insured: First: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Middle: |_|_|_|_|_|_|_|_|_|_|_|_|_|_| Last: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Date of Birth Mo. |_|_| Day |_|_| Yr. |_|_|_|_| Age Nearest Birthday |_|_| Sex |_| M |_| F Place of Birth: _______________ Soc. Sec. No. |_|_|_|_|_|_|_|_|_| Previous/Other Name (If Applicable) ____________________________________________ Relationship of Owner to Add'l Insured: ________________________________________ State of Residence: __________ Current Occupation(s): (1) Title: ______________________________________________ (2) Duties: ___________________________________________ (3) How Long? __________ If less than 1 year at current occupation, give previous in Special Instructions. C. Proposed Designated Insured (to add others, submit form 180-333D or successor): First: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Middle: |_|_|_|_|_|_|_|_|_|_|_|_|_| Last: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Date of Birth Mo. |_|_| Day |_|_| Yr. |_|_|_|_| Age Nearest Birthday |_|_| Sex |_| M |_| F Place of Birth: _______________ Soc. Sec. No. |_|_|_|_|_|_|_|_|_| Previous/Other Name (If Applicable) ____________________________________________ Relationship of Owner to Designated Insured: ___________________________________ State of Residence: __________ Current Occupation(s): (1) Title: ______________________________________________ (2) Duties: ___________________________________________ (3) How Long? __________ If less than 1 year at current occupation, give previous in Special Instructions. D. Children for Term Insurance Rider (Use Special Instructions if more space is needed.)* First: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Middle: |_|_|_|_|_|_|_|_|_|_|_|_|_| Last: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Date of Birth Mo. |_|_| Day |_|_| Yr. Sex |_| M |_| F Relationship to Owner: _________________________________________________________ First: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Middle: |_|_|_|_|_|_|_|_|_|_|_|_|_| Last: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Date of Birth Mo. |_|_| Day |_|_| Yr. Sex |_| M |_| F Relationship to Owner: _________________________________________________________ First: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Middle: |_|_|_|_|_|_|_|_|_|_|_|_|_| Last: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Date of Birth Mo. |_|_| Day |_|_| Yr. Sex |_| M |_| F Relationship to Owner: _________________________________________________________ *NOTE: To be eligible, children (including stepchildren and legally adopted children) must not have reached their 18th birthday. Coverage does not begin until a child is 15 days old. E. For Juvenile Insurance (Ages 0-14): (1) Will there be more life insurance in effect on this Child than on any other child in the family? |_| Yes |_| No If "Yes", explain ___________________________________________________________ (2) Total Life Insurance in effect on Applicant: $ __________________________ - -------------------------------------------------------------------------------- 8. OPAI. COMPLETE IF EXERCISING OPTION TO PURCHASE ADDITIONAL INSURANCE - -------------------------------------------------------------------------------- A. (1) |_| Regular; (2) |_| Birth or Adoption; Child's Name __________________; Date of Birth or Adoption ____/____/____; (3) |_| Alternate B. Existing original policy no. ___________________ C. Option Date ____/____/____ D. Option Amount $_________________________________ E. If applying for Disability Premium Waiver, is Proposed Insured now totally disabled as defined in the Disability Premium Waiver Provision of the original policy indicated above in b.? |_| Yes |_| No This application is made under a provision in the existing policy indicated in 8.b. above, permitting the purchase of additional individual life insurance (the "Option Provision"). If this application is made within the time allowed and in accordance with the other terms in the Option Provision, including timely payment of the full first premium for the additional insurance, then the additional insurance shall take effect upon the terms of the policy the Insurer would issue. Otherwise, the additional insurance shall not take effect. (Answer Questions 10 through 16 only if evidence of insurability is required in connection with an optional benefit or any excess of the insurance amount applied for over the insurance amount permitted by the Option Provision.) EV4-200Y ELAS 2 9. SUITABILITY (All VLI Plans) - -------------------------------------------------------------------------------- A. Have you, the Proposed Insured or the Owner, if other than the Proposed Insured, received: (1) a prospectus for the policy(ies) applied for? |_| Yes |_| No Date of prospectus ____/____/____. Date of any supplement(s) ____/____/____; ____/____/____; ____/____/____. (2) a prospectus for the Hudson River Trust? |_| Yes |_| No Date of prospectus ____/____/____. Date of any supplement(s) ____/____/____; ____/____/____; ____/____/____. (3) a prospectus for the designated investment company(ies) ________________? |_| Yes |_| No Date of prospectus ____/____/____. Date of any supplement(s) ____/____/____; ____/____/____; ____/____/____. B. Do you understand that (i) policy values reflect certain deductions and charges and may increase or decrease depending on credited interest for Guaranteed Interest Division and/or the investment experience of Separate Account Divisions and (ii) the cash value may be subject to a surrender charge, if any, upon policy surrender, lapse or face amount reduction? |_| Yes |_| No C. With this in mind, is (are) the policy(ies) in accord with your insurance and long-term investment objectives and anticipated financial needs? |_| Yes |_| No - -------------------------------------------------------------------------------- OTHER INFORMATION For any "Yes" response, provide full details. - -------------------------------------------------------------------------------- HAS ANY PERSON PROPOSED FOR INSURANCE: 10. A. Ever had a driver's license suspended or revoked, or within the last 3 years been convicted of 2 or more moving violations or driving under the influence of alcohol or drugs? |_| Yes |_| No (If "Yes", include dates, types of violation, and reason for suspension or revocation.) B. Any plans to travel or reside outside the United States? |_| Yes |_| No C. Any other life insurance now in effect or application now pending? |_| Yes |_| No (Give companies and amounts and policy numbers if Equitable.) D. Been disabled for 2 or more weeks within the last 2 years? |_| Yes |_| No 11. A. In the last year flown other than as a passenger or plan to do so? |_| Yes |_| No If "Yes", enter total flying time at present _________ hours; last 12 mos. _________ hours; next 12 mos. _________ est. hours. (Complete Aviation Supplement for crop dusting; pilot instruction; or commercial, competitive, helicopter, military, stunt or test flying.) B. Engaged within the last year or any plan to engage in motor racing on land or water, underwater diving, skydiving, ballooning, hang gliding, parachuting or flying ultra-light aircraft? (If "Yes", complete Avocation Supplement.) |_| Yes |_| No C. Ever had an application for life or health insurance that was declined, required an extra premium or other modification? |_| Yes |_| No (If "Yes", state companies and provide full details.) D. Replaced or changed any existing insurance or annuity (or any plan to do so) assuming the insurance applied for will be issued? |_| Yes |_| No (If "Yes", state companies, plans and amounts.) - -------------------------------------------------------------------------------- ANSWER QUESTIONS 12-16 ONLY IF NON-MEDICAL - -------------------------------------------------------------------------------- 12. A. Proposed Insured: Hgt. ____Ft. ____In.; Wgt. ____lbs. B. Additional Insured: Hgt. ____Ft. ____In.; Wgt. ____lbs. C. Designated Insured: Hgt. ____Ft. ____In.; Wgt. ____lbs. HAS ANY PERSON PROPOSED FOR INSURANCE: 13. A. Ever had or been treated for heart trouble, stroke, high blood pressure, chest pain, diabetes, tumor, cancer, respiratory or neurological disorder? |_| Yes |_| No B. In the last 5 years, consulted a physician, or been examined or treated at a hospital or other medical facility? |_| Yes |_| No (Include medical check-ups in the last 2 years. Do not include colds, minor injuries or normal pregnancy.) 14. In the last 12 months: A. Smoked cigarettes? |_| Yes |_| No B. Used any other form of tobacco? |_| Yes |_| No 15. In the last 10 years: A. Used, except as legally prescribed by a physician, tranquilizers; barbiturates or other sedatives; marijuana, cocaine, hallucinogens or other mood-altering drugs; heroin, methadone or other narcotics; amphetamines or other stimulants; or any other illegal or controlled substances? |_| Yes |_| No B. Received counseling or treatment regarding the use of alcohol or drugs including attendance at meetings or membership in any self-help group or program such as Alcoholics Anonymous or Narcotics Anonymous? |_| Yes |_| No 16. In the last 10 years, been: A. Diagnosed by a member of the medical profession as having Acquired Immune Deficiency Syndrome (AIDS) or AIDS-Related Complex (ARC)? |_| Yes |_| No B. Treated by a member of the medical profession for AIDS or ARC? |_| Yes |_| No - -------------------------------------------------------------------------------- 17. DETAILS/SPECIAL INSTRUCTIONS/ADDITIONAL INFORMATION For each "Yes" answer give Question Number, name of person(s) affected, and full details. For 13-16 include conditions, dates, durations, treatment and results, and names and addresses of physicians and medical facilities. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- DETAILS QUES. NO. NAME OF PERSON (Attach additional sheets if more space needed) - -------------------------------------------------------------------------------- ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ - -------------------------------------------------------------------------------- EV4-200Y ELAS 3 - -------------------------------------------------------------------------------- 18. COMPLETE IF MONEY IS PAID OR AN APPROVED PAYMENT AUTHORIZATION IS SIGNED BEFORE THE POLICY IS DELIVERED: Have the undersigned read and do they agree to the conditions of Equitable's Temporary Insurance Agreement, including: (i) the requirement that all of the conditions in that Agreement must be met before any temporary insurance takes effect, and (ii) the $500,000 insurance amount limitation? |_| Yes |_| No (If "No," or if any Person Proposed for Insurance has been diagnosed or treated for Acquired Immune Deficiency Syndrome (AIDS) or AIDS-Related Complex (ARC) by a member of the medical profession within the last 10 years or had cancer, a stroke, or a heart attack within the last year, a premium may not be paid nor an approved payment authorization signed before the policy is delivered.) |_| AMOUNT PAID: $_________. (Draw checks to the order of Equitable.) |_| APPROVED PAYMENT AUTHORIZATION SIGNED. 19. SOCIAL SECURITY OR TAX I.D. NUMBER CERTIFICATION. I, the proposed policyowner, by my signature below, certify under penalties of perjury that (i) the number shown in question 3.c.(1) or 1.g. of this form is my correct taxpayer identification number, and (ii) I |_| am |_| am not subject to a backup withholding order issued by the Internal Revenue Service. I understand that failure to furnish the correct information may subject me to Federal backup withholding. - -------------------------------------------------------------------------------- AGREEMENT. Each signer of this application agrees that: (1). The statements and answers in all parts of this application are true and complete to the best of my (our) knowledge and belief. Equitable may rely on them in acting on this application. (2). Equitable's Temporary Insurance Agreement states the conditions that must be met before any insurance takes effect if money is paid or an approved payment authorization is signed, before the policy is delivered. Temporary Insurance is not provided for a policy or benefit applied for under the terms of a guaranteed insurability option or a conversion privilege. (3). Except as stated in the Temporary Insurance Agreement, no insurance shall take effect on this application: (a) until a policy is delivered and the full initial premium for it is paid, or an approved payment authorization is signed, while the person(s) proposed for insurance is (are) living; (b) before any Register Date specified in this application; and (c) unless to the best of my (our) knowledge and belief the statements and answers in all parts of this application continue to be true and complete, without material change, as of the time such premium is paid or an approved payment authorization is signed. (4). No agent or medical examiner has authority to modify this Agreement or the Temporary Insurance Agreement, nor to waive any of Equitable's rights or requirements. Equitable shall not be bound by any information unless it is stated in Application Part 1 or Part 2. (5). POLICY VALUES INCREASE OR DECREASE DEPENDING ON CREDITED INTEREST FOR THE GUARANTEED INTEREST DIVISION AND/OR INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT DIVISIONS AND REFLECT CERTAIN DEDUCTIONS AND CHARGES. THE DEATH BENEFIT MAY BE FIXED OR VARIABLE UNDER SPECIFIED CONDITIONS, AS DESCRIBED IN THE POLICY. - -------------------------------------------------------------------------------- VLI Notice: Available on request are illustrations of benefits, including death benefits, policy values and cash surrender values. - -------------------------------------------------------------------------------- ACKNOWLEDGEMENT AND AUTHORIZATIONS UNDERWRITING PRACTICES. I (we) have received a statement of the underwriting practices of Equitable which describes how and why Equitable obtains information on my insurability, to whom such information may be reported and how I may obtain it. The statement also contains the notice required by the Fair Credit Reporting Act. AUTHORIZATIONS. TO OBTAIN MEDICAL INFORMATION. I (we) authorize any physician, hospital, medical practitioner or other facility, insurance company, and the Medical Information Bureau to release to Equitable and its legal representative any and all information they may have about any diagnosis, treatment and prognosis regarding my physical or mental condition. TO OBTAIN NON-MEDICAL INFORMATION. I (we) authorize any employer, business associate, government unit, financial institution, Consumer Reporting Agency, and the Medical Information Bureau to release to Equitable and its legal representative any information they may have about my occupation, avocations, finances, driving record, character and general reputation. I (we) authorize Equitable to obtain investigative consumer reports, as appropriate. TO USE AND DISCLOSE INFORMATION. I (we) understand that the information that I (we) authorize Equitable to obtain will be used by Equitable to help determine my insurability or my eligibility for benefits under an existing policy. I (we) authorize Equitable to release information about my insurability to its reinsurers, contractors and affiliates, my (our) Equitable Agent, and to the Medical Information Bureau, all as described in the statement of Equitable's underwriting practices or to other persons or businesses performing business or legal services in connection with my application or claim of eligibility for benefits, or as may be otherwise lawfully required, or as I (we) may further authorize. I (we) understand that I (we) have the right to learn the contents of any report of information (generally, through my physician, in the case of medical information). COPY OF AUTHORIZATIONS. I (we) have a right to ask for and receive a true copy of this Acknowledgement and Authorizations signed by me (us). I (we) agree that a reproduced copy will be as valid as the original. DURATION. I (we) agree that these authorizations will be valid for 12 months from the date shown below. - -------------------------------------------------------------------------------- Laws in your state may make it a crime to fill out an insurance or annuity application with information you know is false or to leave out material facts. - -------------------------------------------------------------------------------- Dated at City __________________________________________________________________ State __________________________________________________________________________ on _____________________________________________________________________ 19 ____ X_______________________________________________________________________________ Signature of Proposed Insured or Applicant if Proposed Insured is a Child, Issue Age 0-14. X_______________________________________________________________________________ Signature of Proposed Additional Insured, if any. X_______________________________________________________________________________ Signature of Applicant if not Proposed Insured or Owner. X_______________________________________________________________________________ Signature of Owner if not Proposed Insured or Applicant. (If a corporation, show firm's name and signature of authorized officer.) ________________________________________________________________________________ Signature of Agent (Registered Representative) EV4-200Y ELAS 4 EX-99.2ALEGOPIN 41 LEGAL OPINION & CONSENT (IL PLUS) MARY P. BREEN Vice President and Associate General Counsel (212) 554-3841 Fax: (212) 554-1266 December 9, 1996 The Equitable Life Assurance Society of the United States 1290 Avenue of the Americas New York, NY 10104 Dear Sirs: This opinion is furnished in connection with the filing of a Registration Statement on Form S-6 ("Registration Statement") of Separate Account FP ("Separate Account FP") of The Equitable Life Assurance Society of the United States ("Equitable"). The Registration Statement covers an indefinite number of units of interest in Separate Account FP ("Units") funding Incentive Life Plus (policy form No. 94-300) and Corporate Incentive Life (policy form No. 95-300), individual flexible premium variable life insurance policies ("Policies"). Policies issued prior to January 1, 1997 were issued by Equitable Variable Life Insurance Company, a wholly-owned subsidiary of Equitable, which is expected to be merged with and into Equitable on January 1, 1997. Upon consummation of the merger, Policies issued prior thereto will become obligations of Equitable and Policies issued thereafter will be issued by Equitable. This opinion assumes consummation of the merger and compliance with regulatory requirements relating thereto. Net premiums received under the Policies are allocated by Equitable to Separate Account FP to the extent directed by owners of the Policies. Net premiums under other Equitable variable life insurance policies will also be allocated to Separate Account FP. The Policies are designed to provide life insurance protection and are to be offered in the manner described in the Prospectus and the prospectus supplement included in the Registration Statement. The Policies will be sold only in jurisdictions authorizing such sales. I have examined all such corporate records of Equitable and such other documents and laws as I consider appropriate as a basis for the opinion hereinafter expressed. On the basis of such examination, it is my opinion that: 1. Equitable is a corporation duly organized and validly existing under the laws of the State of New York. 2. Separate Account FP has been duly established by Equitable pursuant to the laws of the State of New York, under which income, gains and losses, whether or not realized, from assets allocated to Separate Account FP, are to be, in accordance with the Policies, credited to or charged against Separate Account FP without regard to other income, gains or losses of Equitable. 3. Assets allocated to Separate Account FP will be owned by Equitable; Equitable will not be a trustee with respect thereto. The Policies provide that the portion of the assets of Separate Account FP equal to the reserves and other Policy liabilities with respect to Separate Account FP will not be chargeable with liabilities arising out of any other business Equitable may conduct. Equitable reserves the right to transfer assets of Separate Account FP in excess of such reserves and other Policy liabilities to the general account of Equitable. 4. Upon consummation of the merger, or upon issuance and sale of Policies thereafter, as described above, the Policies (including any Units duly credited thereunder) will be duly authorized and will constitute validly issued and binding obligations of Equitable in accordance with their terms. I hereby consent to the use of this opinion as an exhibit to the Registration Statement. Very truly yours, /s/ Mary P. Breen ----------------- Mary P. Breen 45206-1 -2- EX-99.2BIACTOPIN 42 OPINION & CONSENT OF BARBARA FRASER April 22, 1996 Equitable Variable Life Insurance Company 787 Seventh Avenue New York, New York 10019 This opinion is furnished in connection with the Registration Statement on Form S-6, File No. 33-83948 ("Registration Statement") of Separate Account FP ("Separate Account FP") of Equitable Variable Life Insurance Company ("Equitable Variable") covering an indefinite number of units of interest in Separate Account FP under Incentive Life Plus (TM) (policy form no. 94-300), flexible premium variable life insurance policies ("Policies"). Net premiums received under the Policies may be allocated to Separate Account FP as described in the Prospectus included in the Registration Statement. I participated in the preparation of the Policies and I am familiar with their provisions. I am also familiar with the description contained in the prospectus. In my opinion: 1. The Illustrations of Policy Account and Cash Surrender Values Based on Historical Investment Results in the Summary to the Prospectus and the Illustrations of Policy Benefits in Part 4 of the Prospectus (the "Illustrations") are consistent with the provisions of the Policies. The assumptions upon which these Illustrations are based, including the current cost of insurance and expense charges, are stated in the Prospectus and are reasonable. The Policies have not been designed so as to make the relationship between premiums and benefits, as shown in the Illustrations, appear disproportionately more favorable to prospective purchasers of Policies for non-tobacco user preferred risk males age 40 than to prospective purchasers of Policies for males at other ages or in other underwriting classes or for females. The particular Illustrations shown were not selected for the purpose of making the relationship appear more favorable. I hereby consent to the use of this opinion as an exhibit to the Registration Statement and to the reference to my name under the heading "Accounting and Actuarial Experts" in the Prospectus. Very truly yours, /s/Barbara Fraser ------------------- Barbara Fraser, F.S.A., M.A.A.A. Vice President The Equitable Life Assurance Society of the United States 15171/BFP-1.doc -2- EX-99.2BIIACTOPIN 43 ACTUARIAL CONSENT TO PRIOR OPINION December 9, 1996 The Equitable Life Assurance Society of the United States 1290 Avenue of the Americas New York, New York 10104 This consent is furnished in connection with the filing of the Registration Statement on Form S-6 ("Registration Statement") of Separate Account FP ("Separate Account FP") of The Equitable Life Assurance Society of the United States ("Equitable") covering an indefinite number of units of interest in Separate Account FP to be issued in connection with Incentive Life Plus (policy form no. 94-300), flexible premium variable life insurance policies ("Policies") which were originally offered and issued by Equitable Variable Life Insurance Company ("Equitable Variable"), most recently pursuant to a prospectus dated May 1, 1996. Equitable Variable is to be merged into Equitable on January 1, 1997 and on such date, Equitable will assume Equitable Variable's obligations under the Policies and will continue to collect premiums thereunder. I hereby consent to the filing of my opinion dated April 22, 1996 (the "Opinion") (originally filed as an exhibit to Post-Effective Amendment No. 4 to Equitable Variable's Registration Statement on Form S-6, File No. 33-83948) as an exhibit to Equitable's Registration Statement and to the reference to my name under the heading "Accounting and Actuarial Experts" in the Prospectus. The references to the "Prospectus" in the Opinion and in this consent are to the prospectus dated May 1, 1996 filed in Equitable's Registration Statement, and the Opinion speaks as of its date. Very truly yours, /s/ Barbara Fraser ------------------------ Barbara Fraser, F.S.A., M.A.A.A. Vice President The Equitable Life Assurance Society of the United States 44941 EX-99.2BIIIACTOPIN 44 ACTUARIAL OPINION & CONSENT December 9, 1996 The Equitable Life Assurance Society of the United States 1290 Avenue of the Americas New York, New York 10104 This opinion is furnished in connection with the Registration Statement on Form S-6 ("Registration Statement") of Separate Account FP ("Separate Account FP") of The Equitable Life Assurance Society of the United States ("Equitable") covering an indefinite number of units of interest in Separate Account FP under Incentive Life Plus (policy form no. 94-300), flexible premium variable life insurance policies ("Policies"). Net premiums received under the Policies may be allocated to Separate Account FP as described in the Prospectus included in the Registration Statement. I participated in the preparation of the Policies and I am familiar with their provisions. I am also familiar with the description contained in the prospectus. In my opinion: 1. The Illustrations of Policy Account and Cash Surrender Values Based on Historical Investment Results in the Summary to the Prospectus and the Illustrations of Policy Benefits in Part 4 of the Prospectus (the "Illustrations") are consistent with the provisions of the Policies. The assumptions upon which these Illustrations are based, including the current cost of insurance and expense charges, are stated in the Prospectus and are reasonable. The Policies have not been designed so as to make the relationship between premiums and benefits, as shown in the Illustrations, appear disproportionately more favorable to prospective purchasers of Policies for non-tobacco user preferred risk males age 40 than to prospective purchasers of Policies for males at other ages or in other underwriting classes or for females. The particular Illustrations shown were not selected for the purpose of making the relationship appear more favorable. I hereby consent to the use of this opinion as an exhibit to the Registration Statement and to the reference to my name under the heading "Accounting and Actuarial Experts" in the Prospectus. Very truly yours, /s/ Barbara Fraser ------------------------ Barbara Fraser, F.S.A., M.A.A.A. Vice President The Equitable Life Assurance Society of the United States 45193 EX-99.6CONSENT 45 ACCOUNTANT'S CONSENT CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the use in the Registration Statement on Form S-6 (the "Registration Statement") of our report dated February 7, 1996, relating to the consolidated financial statements of The Equitable Life Assurance Society of the United States, and our report dated February 7, 1996, except as to Note 8 which is as of September 19, 1996, relating to the financial statements of Equitable Variable Life Insurance Company Separate Account FP and to the incorporation by reference of our reports into each Prospectus and Prospectus Supplement which constitute part of this Registration Statement. We also consent to the references to us under the heading "Accounting and Actuarial Experts" in each Prospectus and to the references to us under the heading "Financial Statements" in each Prospectus Supplement. /s/ Price Waterhouse LLP Price Waterhouse LLP New York, New York December 9, 1996 EX-99.7APOWATTY 46 ELAS POWERS OF ATTORNEY POWER OF ATTORNEY ----------------- KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or director of The Equitable Life Assurance Society of the United States (the "Company"), a New York stock life insurance company, hereby constitutes and appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Maureen K. Wolfson, Pauline Sherman, Donald R. Kaplan, Naomi J. Weinstein, Mildred Oliver and each of them (with full power to each of them to act alone), his or her true and lawful attorney-in-fact and agent, with full power of substitution to each, for him or her and on his or her behalf and in his or her name, place and stead, to execute and file any of the documents referred to below relating to registrations under the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Company Act of 1940 with respect to any insurance or annuity contracts or other agreements providing for allocation of amounts to Separate Accounts of the Company, and related units or interests in Separate Accounts: registration statements on any form or forms under the Securities Act of 1933 and the Investment Company Act of 1940 and annual reports on any form or forms under the Securities Exchange Act of 1934, and any and all amendments and supplements thereto, with all exhibits and all instruments necessary or appropriate in connection therewith, each of said attorneys-in-fact and agents and his, her or their substitutes being empowered to act with or without the others or other, and to have full power and authority to do or cause to be done in the name and on behalf of the undersigned each and every act and thing requisite and necessary or appropriate with respect thereto to be done in and about the premises in order to effectuate the same, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said 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 19th day of September, 1996 /s/ Claude Bebear ----------------- 1 POWER OF ATTORNEY ----------------- KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or director of The Equitable Life Assurance Society of the United States (the "Company"), a New York stock life insurance company, hereby constitutes and appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Maureen K. Wolfson, Pauline Sherman, Donald R. Kaplan, Naomi J. Weinstein, Mildred Oliver and each of them (with full power to each of them to act alone), his or her true and lawful attorney-in-fact and agent, with full power of substitution to each, for him or her and on his or her behalf and in his or her name, place and stead, to execute and file any of the documents referred to below relating to registrations under the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Company Act of 1940 with respect to any insurance or annuity contracts or other agreements providing for allocation of amounts to Separate Accounts of the Company, and related units or interests in Separate Accounts: registration statements on any form or forms under the Securities Act of 1933 and the Investment Company Act of 1940 and annual reports on any form or forms under the Securities Exchange Act of 1934, and any and all amendments and supplements thereto, with all exhibits and all instruments necessary or appropriate in connection therewith, each of said attorneys-in-fact and agents and his, her or their substitutes being empowered to act with or without the others or other, and to have full power and authority to do or cause to be done in the name and on behalf of the undersigned each and every act and thing requisite and necessary or appropriate with respect thereto to be done in and about the premises in order to effectuate the same, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said 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 19th day of September, 1996 /s/ James M. Benson ------------------- 2 POWER OF ATTORNEY ----------------- KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or director of The Equitable Life Assurance Society of the United States (the "Company"), a New York stock life insurance company, hereby constitutes and appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Maureen K. Wolfson, Pauline Sherman, Donald R. Kaplan, Naomi J. Weinstein, Mildred Oliver and each of them (with full power to each of them to act alone), his or her true and lawful attorney-in-fact and agent, with full power of substitution to each, for him or her and on his or her behalf and in his or her name, place and stead, to execute and file any of the documents referred to below relating to registrations under the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Company Act of 1940 with respect to any insurance or annuity contracts or other agreements providing for allocation of amounts to Separate Accounts of the Company, and related units or interests in Separate Accounts: registration statements on any form or forms under the Securities Act of 1933 and the Investment Company Act of 1940 and annual reports on any form or forms under the Securities Exchange Act of 1934, and any and all amendments and supplements thereto, with all exhibits and all instruments necessary or appropriate in connection therewith, each of said attorneys-in-fact and agents and his, her or their substitutes being empowered to act with or without the others or other, and to have full power and authority to do or cause to be done in the name and on behalf of the undersigned each and every act and thing requisite and necessary or appropriate with respect thereto to be done in and about the premises in order to effectuate the same, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said 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 30th day of September, 1996 /s/ Christopher J. Brockson --------------------------- 3 POWER OF ATTORNEY ----------------- KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or director of The Equitable Life Assurance Society of the United States (the "Company"), a New York stock life insurance company, hereby constitutes and appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Maureen K. Wolfson, Pauline Sherman, Donald R. Kaplan, Naomi J. Weinstein, Mildred Oliver and each of them (with full power to each of them to act alone), his or her true and lawful attorney-in-fact and agent, with full power of substitution to each, for him or her and on his or her behalf and in his or her name, place and stead, to execute and file any of the documents referred to below relating to registrations under the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Company Act of 1940 with respect to any insurance or annuity contracts or other agreements providing for allocation of amounts to Separate Accounts of the Company, and related units or interests in Separate Accounts: registration statements on any form or forms under the Securities Act of 1933 and the Investment Company Act of 1940 and annual reports on any form or forms under the Securities Exchange Act of 1934, and any and all amendments and supplements thereto, with all exhibits and all instruments necessary or appropriate in connection therewith, each of said attorneys-in-fact and agents and his, her or their substitutes being empowered to act with or without the others or other, and to have full power and authority to do or cause to be done in the name and on behalf of the undersigned each and every act and thing requisite and necessary or appropriate with respect thereto to be done in and about the premises in order to effectuate the same, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said 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 30th day of September, 1996 /s/ Francoise Colloc'h ---------------------- 4 POWER OF ATTORNEY ----------------- KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or director of The Equitable Life Assurance Society of the United States (the "Company"), a New York stock life insurance company, hereby constitutes and appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Maureen K. Wolfson, Pauline Sherman, Donald R. Kaplan, Naomi J. Weinstein, Mildred Oliver and each of them (with full power to each of them to act alone), his or her true and lawful attorney-in-fact and agent, with full power of substitution to each, for him or her and on his or her behalf and in his or her name, place and stead, to execute and file any of the documents referred to below relating to registrations under the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Company Act of 1940 with respect to any insurance or annuity contracts or other agreements providing for allocation of amounts to Separate Accounts of the Company, and related units or interests in Separate Accounts: registration statements on any form or forms under the Securities Act of 1933 and the Investment Company Act of 1940 and annual reports on any form or forms under the Securities Exchange Act of 1934, and any and all amendments and supplements thereto, with all exhibits and all instruments necessary or appropriate in connection therewith, each of said attorneys-in-fact and agents and his, her or their substitutes being empowered to act with or without the others or other, and to have full power and authority to do or cause to be done in the name and on behalf of the undersigned each and every act and thing requisite and necessary or appropriate with respect thereto to be done in and about the premises in order to effectuate the same, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said 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 20th day of September, 1996 /s/ Henri de Castries --------------------- 5 POWER OF ATTORNEY ----------------- KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or director of The Equitable Life Assurance Society of the United States (the "Company"), a New York stock life insurance company, hereby constitutes and appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Maureen K. Wolfson, Pauline Sherman, Donald R. Kaplan, Naomi J. Weinstein, Mildred Oliver and each of them (with full power to each of them to act alone), his or her true and lawful attorney-in-fact and agent, with full power of substitution to each, for him or her and on his or her behalf and in his or her name, place and stead, to execute and file any of the documents referred to below relating to registrations under the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Company Act of 1940 with respect to any insurance or annuity contracts or other agreements providing for allocation of amounts to Separate Accounts of the Company, and related units or interests in Separate Accounts: registration statements on any form or forms under the Securities Act of 1933 and the Investment Company Act of 1940 and annual reports on any form or forms under the Securities Exchange Act of 1934, and any and all amendments and supplements thereto, with all exhibits and all instruments necessary or appropriate in connection therewith, each of said attorneys-in-fact and agents and his, her or their substitutes being empowered to act with or without the others or other, and to have full power and authority to do or cause to be done in the name and on behalf of the undersigned each and every act and thing requisite and necessary or appropriate with respect thereto to be done in and about the premises in order to effectuate the same, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said 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 19th day of September, 1996 /s/ Joseph L. Dionne -------------------- 6 POWER OF ATTORNEY ----------------- KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or director of The Equitable Life Assurance Society of the United States (the "Company"), a New York stock life insurance company, hereby constitutes and appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Maureen K. Wolfson, Pauline Sherman, Donald R. Kaplan, Naomi J. Weinstein, Mildred Oliver and each of them (with full power to each of them to act alone), his or her true and lawful attorney-in-fact and agent, with full power of substitution to each, for him or her and on his or her behalf and in his or her name, place and stead, to execute and file any of the documents referred to below relating to registrations under the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Company Act of 1940 with respect to any insurance or annuity contracts or other agreements providing for allocation of amounts to Separate Accounts of the Company, and related units or interests in Separate Accounts: registration statements on any form or forms under the Securities Act of 1933 and the Investment Company Act of 1940 and annual reports on any form or forms under the Securities Exchange Act of 1934, and any and all amendments and supplements thereto, with all exhibits and all instruments necessary or appropriate in connection therewith, each of said attorneys-in-fact and agents and his, her or their substitutes being empowered to act with or without the others or other, and to have full power and authority to do or cause to be done in the name and on behalf of the undersigned each and every act and thing requisite and necessary or appropriate with respect thereto to be done in and about the premises in order to effectuate the same, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said 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 19th day of September, 1996 /s/ William T. Esrey -------------------- 7 POWER OF ATTORNEY ----------------- KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or director of The Equitable Life Assurance Society of the United States (the "Company"), a New York stock life insurance company, hereby constitutes and appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Maureen K. Wolfson, Pauline Sherman, Donald R. Kaplan, Naomi J. Weinstein, Mildred Oliver and each of them (with full power to each of them to act alone), his or her true and lawful attorney-in-fact and agent, with full power of substitution to each, for him or her and on his or her behalf and in his or her name, place and stead, to execute and file any of the documents referred to below relating to registrations under the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Company Act of 1940 with respect to any insurance or annuity contracts or other agreements providing for allocation of amounts to Separate Accounts of the Company, and related units or interests in Separate Accounts: registration statements on any form or forms under the Securities Act of 1933 and the Investment Company Act of 1940 and annual reports on any form or forms under the Securities Exchange Act of 1934, and any and all amendments and supplements thereto, with all exhibits and all instruments necessary or appropriate in connection therewith, each of said attorneys-in-fact and agents and his, her or their substitutes being empowered to act with or without the others or other, and to have full power and authority to do or cause to be done in the name and on behalf of the undersigned each and every act and thing requisite and necessary or appropriate with respect thereto to be done in and about the premises in order to effectuate the same, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said 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 19th day of September, 1996 /s/ Jean-Rene Fourou -------------------- 8 POWER OF ATTORNEY ----------------- KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or director of The Equitable Life Assurance Society of the United States (the "Company"), a New York stock life insurance company, hereby constitutes and appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Maureen K. Wolfson, Pauline Sherman, Donald R. Kaplan, Naomi J. Weinstein, Mildred Oliver and each of them (with full power to each of them to act alone), his or her true and lawful attorney-in-fact and agent, with full power of substitution to each, for him or her and on his or her behalf and in his or her name, place and stead, to execute and file any of the documents referred to below relating to registrations under the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Company Act of 1940 with respect to any insurance or annuity contracts or other agreements providing for allocation of amounts to Separate Accounts of the Company, and related units or interests in Separate Accounts: registration statements on any form or forms under the Securities Act of 1933 and the Investment Company Act of 1940 and annual reports on any form or forms under the Securities Exchange Act of 1934, and any and all amendments and supplements thereto, with all exhibits and all instruments necessary or appropriate in connection therewith, each of said attorneys-in-fact and agents and his, her or their substitutes being empowered to act with or without the others or other, and to have full power and authority to do or cause to be done in the name and on behalf of the undersigned each and every act and thing requisite and necessary or appropriate with respect thereto to be done in and about the premises in order to effectuate the same, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said 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 19th day of September, 1996 /s/ Norman C. Francis --------------------- 9 POWER OF ATTORNEY ----------------- KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or director of The Equitable Life Assurance Society of the United States (the "Company"), a New York stock life insurance company, hereby constitutes and appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Maureen K. Wolfson, Pauline Sherman, Donald R. Kaplan, Naomi J. Weinstein, Mildred Oliver and each of them (with full power to each of them to act alone), his or her true and lawful attorney-in-fact and agent, with full power of substitution to each, for him or her and on his or her behalf and in his or her name, place and stead, to execute and file any of the documents referred to below relating to registrations under the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Company Act of 1940 with respect to any insurance or annuity contracts or other agreements providing for allocation of amounts to Separate Accounts of the Company, and related units or interests in Separate Accounts: registration statements on any form or forms under the Securities Act of 1933 and the Investment Company Act of 1940 and annual reports on any form or forms under the Securities Exchange Act of 1934, and any and all amendments and supplements thereto, with all exhibits and all instruments necessary or appropriate in connection therewith, each of said attorneys-in-fact and agents and his, her or their substitutes being empowered to act with or without the others or other, and to have full power and authority to do or cause to be done in the name and on behalf of the undersigned each and every act and thing requisite and necessary or appropriate with respect thereto to be done in and about the premises in order to effectuate the same, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said 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 19th day of September, 1996 /s/ Donald J. Greene -------------------- 10 POWER OF ATTORNEY ----------------- KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or director of The Equitable Life Assurance Society of the United States (the "Company"), a New York stock life insurance company, hereby constitutes and appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Maureen K. Wolfson, Pauline Sherman, Donald R. Kaplan, Naomi J. Weinstein, Mildred Oliver and each of them (with full power to each of them to act alone), his or her true and lawful attorney-in-fact and agent, with full power of substitution to each, for him or her and on his or her behalf and in his or her name, place and stead, to execute and file any of the documents referred to below relating to registrations under the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Company Act of 1940 with respect to any insurance or annuity contracts or other agreements providing for allocation of amounts to Separate Accounts of the Company, and related units or interests in Separate Accounts: registration statements on any form or forms under the Securities Act of 1933 and the Investment Company Act of 1940 and annual reports on any form or forms under the Securities Exchange Act of 1934, and any and all amendments and supplements thereto, with all exhibits and all instruments necessary or appropriate in connection therewith, each of said attorneys-in-fact and agents and his, her or their substitutes being empowered to act with or without the others or other, and to have full power and authority to do or cause to be done in the name and on behalf of the undersigned each and every act and thing requisite and necessary or appropriate with respect thereto to be done in and about the premises in order to effectuate the same, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said 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 18th day of September, 1996 /s/ John T. Hartley ------------------- 11 POWER OF ATTORNEY ----------------- KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or director of The Equitable Life Assurance Society of the United States (the "Company"), a New York stock life insurance company, hereby constitutes and appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Maureen K. Wolfson, Pauline Sherman, Donald R. Kaplan, Naomi J. Weinstein, Mildred Oliver and each of them (with full power to each of them to act alone), his or her true and lawful attorney-in-fact and agent, with full power of substitution to each, for him or her and on his or her behalf and in his or her name, place and stead, to execute and file any of the documents referred to below relating to registrations under the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Company Act of 1940 with respect to any insurance or annuity contracts or other agreements providing for allocation of amounts to Separate Accounts of the Company, and related units or interests in Separate Accounts: registration statements on any form or forms under the Securities Act of 1933 and the Investment Company Act of 1940 and annual reports on any form or forms under the Securities Exchange Act of 1934, and any and all amendments and supplements thereto, with all exhibits and all instruments necessary or appropriate in connection therewith, each of said attorneys-in-fact and agents and his, her or their substitutes being empowered to act with or without the others or other, and to have full power and authority to do or cause to be done in the name and on behalf of the undersigned each and every act and thing requisite and necessary or appropriate with respect thereto to be done in and about the premises in order to effectuate the same, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said 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 13th day of September, 1996 /s/ John H.F. Haskell, Jr. -------------------------- 12 POWER OF ATTORNEY ----------------- KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or director of The Equitable Life Assurance Society of the United States (the "Company"), a New York stock life insurance company, hereby constitutes and appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Maureen K. Wolfson, Pauline Sherman, Donald R. Kaplan, Naomi J. Weinstein, Mildred Oliver and each of them (with full power to each of them to act alone), his or her true and lawful attorney-in-fact and agent, with full power of substitution to each, for him or her and on his or her behalf and in his or her name, place and stead, to execute and file any of the documents referred to below relating to registrations under the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Company Act of 1940 with respect to any insurance or annuity contracts or other agreements providing for allocation of amounts to Separate Accounts of the Company, and related units or interests in Separate Accounts: registration statements on any form or forms under the Securities Act of 1933 and the Investment Company Act of 1940 and annual reports on any form or forms under the Securities Exchange Act of 1934, and any and all amendments and supplements thereto, with all exhibits and all instruments necessary or appropriate in connection therewith, each of said attorneys-in-fact and agents and his, her or their substitutes being empowered to act with or without the others or other, and to have full power and authority to do or cause to be done in the name and on behalf of the undersigned each and every act and thing requisite and necessary or appropriate with respect thereto to be done in and about the premises in order to effectuate the same, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said 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 19th day of September, 1996 /s/ W. Edwin Jarmain -------------------- 13 POWER OF ATTORNEY ----------------- KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or director of The Equitable Life Assurance Society of the United States (the "Company"), a New York stock life insurance company, hereby constitutes and appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Maureen K. Wolfson, Pauline Sherman, Donald R. Kaplan, Naomi J. Weinstein, Mildred Oliver and each of them (with full power to each of them to act alone), his or her true and lawful attorney-in-fact and agent, with full power of substitution to each, for him or her and on his or her behalf and in his or her name, place and stead, to execute and file any of the documents referred to below relating to registrations under the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Company Act of 1940 with respect to any insurance or annuity contracts or other agreements providing for allocation of amounts to Separate Accounts of the Company, and related units or interests in Separate Accounts: registration statements on any form or forms under the Securities Act of 1933 and the Investment Company Act of 1940 and annual reports on any form or forms under the Securities Exchange Act of 1934, and any and all amendments and supplements thereto, with all exhibits and all instruments necessary or appropriate in connection therewith, each of said attorneys-in-fact and agents and his, her or their substitutes being empowered to act with or without the others or other, and to have full power and authority to do or cause to be done in the name and on behalf of the undersigned each and every act and thing requisite and necessary or appropriate with respect thereto to be done in and about the premises in order to effectuate the same, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said 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 19th day of September, 1996 /s/ G. Donald Johnston, Jr. --------------------------- 14 POWER OF ATTORNEY ----------------- KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or director of The Equitable Life Assurance Society of the United States (the "Company"), a New York stock life insurance company, hereby constitutes and appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Maureen K. Wolfson, Pauline Sherman, Donald R. Kaplan, Naomi J. Weinstein, Mildred Oliver and each of them (with full power to each of them to act alone), his or her true and lawful attorney-in-fact and agent, with full power of substitution to each, for him or her and on his or her behalf and in his or her name, place and stead, to execute and file any of the documents referred to below relating to registrations under the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Company Act of 1940 with respect to any insurance or annuity contracts or other agreements providing for allocation of amounts to Separate Accounts of the Company, and related units or interests in Separate Accounts: registration statements on any form or forms under the Securities Act of 1933 and the Investment Company Act of 1940 and annual reports on any form or forms under the Securities Exchange Act of 1934, and any and all amendments and supplements thereto, with all exhibits and all instruments necessary or appropriate in connection therewith, each of said attorneys-in-fact and agents and his, her or their substitutes being empowered to act with or without the others or other, and to have full power and authority to do or cause to be done in the name and on behalf of the undersigned each and every act and thing requisite and necessary or appropriate with respect thereto to be done in and about the premises in order to effectuate the same, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said 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 30th day of September, 1996 /s/ Winthrop Knowlton --------------------- 15 POWER OF ATTORNEY ----------------- KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or director of The Equitable Life Assurance Society of the United States (the "Company"), a New York stock life insurance company, hereby constitutes and appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Maureen K. Wolfson, Pauline Sherman, Donald R. Kaplan, Naomi J. Weinstein, Mildred Oliver and each of them (with full power to each of them to act alone), his or her true and lawful attorney-in-fact and agent, with full power of substitution to each, for him or her and on his or her behalf and in his or her name, place and stead, to execute and file any of the documents referred to below relating to registrations under the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Company Act of 1940 with respect to any insurance or annuity contracts or other agreements providing for allocation of amounts to Separate Accounts of the Company, and related units or interests in Separate Accounts: registration statements on any form or forms under the Securities Act of 1933 and the Investment Company Act of 1940 and annual reports on any form or forms under the Securities Exchange Act of 1934, and any and all amendments and supplements thereto, with all exhibits and all instruments necessary or appropriate in connection therewith, each of said attorneys-in-fact and agents and his, her or their substitutes being empowered to act with or without the others or other, and to have full power and authority to do or cause to be done in the name and on behalf of the undersigned each and every act and thing requisite and necessary or appropriate with respect thereto to be done in and about the premises in order to effectuate the same, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said 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 19th day of September, 1996 /s/ Arthur L. Liman ------------------- 16 POWER OF ATTORNEY ----------------- KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or director of The Equitable Life Assurance Society of the United States (the "Company"), a New York stock life insurance company, hereby constitutes and appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Maureen K. Wolfson, Pauline Sherman, Donald R. Kaplan, Naomi J. Weinstein, Mildred Oliver and each of them (with full power to each of them to act alone), his or her true and lawful attorney-in-fact and agent, with full power of substitution to each, for him or her and on his or her behalf and in his or her name, place and stead, to execute and file any of the documents referred to below relating to registrations under the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Company Act of 1940 with respect to any insurance or annuity contracts or other agreements providing for allocation of amounts to Separate Accounts of the Company, and related units or interests in Separate Accounts: registration statements on any form or forms under the Securities Act of 1933 and the Investment Company Act of 1940 and annual reports on any form or forms under the Securities Exchange Act of 1934, and any and all amendments and supplements thereto, with all exhibits and all instruments necessary or appropriate in connection therewith, each of said attorneys-in-fact and agents and his, her or their substitutes being empowered to act with or without the others or other, and to have full power and authority to do or cause to be done in the name and on behalf of the undersigned each and every act and thing requisite and necessary or appropriate with respect thereto to be done in and about the premises in order to effectuate the same, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said 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 19th day of September, 1996 /s/ George T. Lowy ------------------ 17 POWER OF ATTORNEY ----------------- KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or director of The Equitable Life Assurance Society of the United States (the "Company"), a New York stock life insurance company, hereby constitutes and appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Maureen K. Wolfson, Pauline Sherman, Donald R. Kaplan, Naomi J. Weinstein, Mildred Oliver and each of them (with full power to each of them to act alone), his or her true and lawful attorney-in-fact and agent, with full power of substitution to each, for him or her and on his or her behalf and in his or her name, place and stead, to execute and file any of the documents referred to below relating to registrations under the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Company Act of 1940 with respect to any insurance or annuity contracts or other agreements providing for allocation of amounts to Separate Accounts of the Company, and related units or interests in Separate Accounts: registration statements on any form or forms under the Securities Act of 1933 and the Investment Company Act of 1940 and annual reports on any form or forms under the Securities Exchange Act of 1934, and any and all amendments and supplements thereto, with all exhibits and all instruments necessary or appropriate in connection therewith, each of said attorneys-in-fact and agents and his, her or their substitutes being empowered to act with or without the others or other, and to have full power and authority to do or cause to be done in the name and on behalf of the undersigned each and every act and thing requisite and necessary or appropriate with respect thereto to be done in and about the premises in order to effectuate the same, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said 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 19th day of September, 1996 /s/ William T. McCaffrey ------------------------ 18 POWER OF ATTORNEY ----------------- KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or director of The Equitable Life Assurance Society of the United States (the "Company"), a New York stock life insurance company, hereby constitutes and appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Maureen K. Wolfson, Pauline Sherman, Donald R. Kaplan, Naomi J. Weinstein, Mildred Oliver and each of them (with full power to each of them to act alone), his or her true and lawful attorney-in-fact and agent, with full power of substitution to each, for him or her and on his or her behalf and in his or her name, place and stead, to execute and file any of the documents referred to below relating to registrations under the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Company Act of 1940 with respect to any insurance or annuity contracts or other agreements providing for allocation of amounts to Separate Accounts of the Company, and related units or interests in Separate Accounts: registration statements on any form or forms under the Securities Act of 1933 and the Investment Company Act of 1940 and annual reports on any form or forms under the Securities Exchange Act of 1934, and any and all amendments and supplements thereto, with all exhibits and all instruments necessary or appropriate in connection therewith, each of said attorneys-in-fact and agents and his, her or their substitutes being empowered to act with or without the others or other, and to have full power and authority to do or cause to be done in the name and on behalf of the undersigned each and every act and thing requisite and necessary or appropriate with respect thereto to be done in and about the premises in order to effectuate the same, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said 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 12th day of September, 1996 /s/ Joseph J. Melone -------------------- 19 POWER OF ATTORNEY ----------------- KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or director of The Equitable Life Assurance Society of the United States (the "Company"), a New York stock life insurance company, hereby constitutes and appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Maureen K. Wolfson, Pauline Sherman, Donald R. Kaplan, Naomi J. Weinstein, Mildred Oliver and each of them (with full power to each of them to act alone), his or her true and lawful attorney-in-fact and agent, with full power of substitution to each, for him or her and on his or her behalf and in his or her name, place and stead, to execute and file any of the documents referred to below relating to registrations under the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Company Act of 1940 with respect to any insurance or annuity contracts or other agreements providing for allocation of amounts to Separate Accounts of the Company, and related units or interests in Separate Accounts: registration statements on any form or forms under the Securities Act of 1933 and the Investment Company Act of 1940 and annual reports on any form or forms under the Securities Exchange Act of 1934, and any and all amendments and supplements thereto, with all exhibits and all instruments necessary or appropriate in connection therewith, each of said attorneys-in-fact and agents and his, her or their substitutes being empowered to act with or without the others or other, and to have full power and authority to do or cause to be done in the name and on behalf of the undersigned each and every act and thing requisite and necessary or appropriate with respect thereto to be done in and about the premises in order to effectuate the same, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said 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 19th day of September, 1996 /s/ Didier Pineau-Valencienne ----------------------------- 20 POWER OF ATTORNEY ----------------- KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or director of The Equitable Life Assurance Society of the United States (the "Company"), a New York stock life insurance company, hereby constitutes and appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Maureen K. Wolfson, Pauline Sherman, Donald R. Kaplan, Naomi J. Weinstein, Mildred Oliver and each of them (with full power to each of them to act alone), his or her true and lawful attorney-in-fact and agent, with full power of substitution to each, for him or her and on his or her behalf and in his or her name, place and stead, to execute and file any of the documents referred to below relating to registrations under the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Company Act of 1940 with respect to any insurance or annuity contracts or other agreements providing for allocation of amounts to Separate Accounts of the Company, and related units or interests in Separate Accounts: registration statements on any form or forms under the Securities Act of 1933 and the Investment Company Act of 1940 and annual reports on any form or forms under the Securities Exchange Act of 1934, and any and all amendments and supplements thereto, with all exhibits and all instruments necessary or appropriate in connection therewith, each of said attorneys-in-fact and agents and his, her or their substitutes being empowered to act with or without the others or other, and to have full power and authority to do or cause to be done in the name and on behalf of the undersigned each and every act and thing requisite and necessary or appropriate with respect thereto to be done in and about the premises in order to effectuate the same, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said 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 19th day of September, 1996 /s/ George J. Sella Jr. ----------------------- 21 POWER OF ATTORNEY ----------------- KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or director of The Equitable Life Assurance Society of the United States (the "Company"), a New York stock life insurance company, hereby constitutes and appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Maureen K. Wolfson, Pauline Sherman, Donald R. Kaplan, Naomi J. Weinstein, Mildred Oliver and each of them (with full power to each of them to act alone), his or her true and lawful attorney-in-fact and agent, with full power of substitution to each, for him or her and on his or her behalf and in his or her name, place and stead, to execute and file any of the documents referred to below relating to registrations under the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Company Act of 1940 with respect to any insurance or annuity contracts or other agreements providing for allocation of amounts to Separate Accounts of the Company, and related units or interests in Separate Accounts: registration statements on any form or forms under the Securities Act of 1933 and the Investment Company Act of 1940 and annual reports on any form or forms under the Securities Exchange Act of 1934, and any and all amendments and supplements thereto, with all exhibits and all instruments necessary or appropriate in connection therewith, each of said attorneys-in-fact and agents and his, her or their substitutes being empowered to act with or without the others or other, and to have full power and authority to do or cause to be done in the name and on behalf of the undersigned each and every act and thing requisite and necessary or appropriate with respect thereto to be done in and about the premises in order to effectuate the same, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said 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 19th day of September, 1996 /s/ Dave H. Williams -------------------- 22 POWER OF ATTORNEY ----------------- KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or director of The Equitable Life Assurance Society of the United States (the "Company"), a New York stock life insurance company, hereby constitutes and appoints Gordon G. Dinsmore, Jonathan E. Gaines, Jerome S. Golden, James D. Goodwin, Molly K. Heines, David J. Hughes, Naomi J. Weinstein, Charles Wilder, 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 annuity contracts or other agreements, or interests thereunder, providing for allocation of amounts to Separate Accounts of the Company, and related units or interests in Separate Accounts or providing for market value adjustments: registration statements on any form or forms under the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Company Act of 1940 and 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 or other, and to have full power and authority to do or cause to be done in the name and on behalf of the undersigned each and every act and thing requisite and necessary or appropriate with respect thereto to be done in and about the premises in order to effectuate the same, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said 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 17th day of November, 1994 /s/ J. M. de St. Paer --------------------- 23 POWER OF ATTORNEY ----------------- KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or director of The Equitable Life Assurance Society of the United States (the "Company"), a New York stock life insurance company, hereby constitutes and appoints Gordon G. Dinsmore, Samuel B. Shlesinger, James D. Goodwin, Pauline Sherman, Michael F. McNelis, Naomi J. Weinstein, Mildred Oliver and each of them (with full power to each of them to act alone), his or her true and lawful attorney-in-fact and agent, with full power of substitution to each, for him or her and on his or her behalf and in his or her name, place and stead, to execute and file any of the documents referred to below relating to registrations under the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Company Act of 1940 with respect to any insurance or annuity contracts or other agreements providing for allocation of amounts to Separate Accounts of the Company, and related units or interests in Separate Accounts: registration statements on any form or forms under the Securities Act of 1933 and the Investment Company Act of 1940 and annual reports on any form or forms under the Securities Exchange Act of 1934, and any and all amendments and supplements thereto, with all exhibits and all instruments necessary or appropriate in connection therewith, each of said attorneys-in-fact and agents and his, her or their substitutes being empowered to act with or without the others or other, and to have full power and authority to do or cause to be done in the name and on behalf of the undersigned each and every act and thing requisite and necessary or appropriate with respect thereto to be done in and about the premises in order to effectuate the same, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said 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 21st day of May, 1996 /s/ Stanley B. Tulin -------------------- 24 EX-99.8DESCPROC 47 DESCRIPTION OF PROCEDURES (IL PLUS) Exhibit 8 --------- Incentive Life Plus(SM) ----------------------- Description of Equitable's Issuance, Transfer and Redemption Procedures for Policies Pursuant to Rule 6e-3(T)(b)(12)(iii) under the Investment Company Act of 1940 January 1, 1997 Pursuant to Rule 6e-3(T)(b)(12)(iii) under the Investment Company Act of 1940 ("1940 Act"), this exhibit sets forth the issuance, transfer and redemption procedures to be followed by The Equitable Life Assurance Society of the United States ("Equitable") in connection with the issuance of Incentive Life Plus(SM), a flexible premium variable life insurance policy (the "policies"). Equitable believes its procedures meet the requirements of Rule 6e-3(T)(b)(12)(iii) and states the following: 1. Because of the insurance nature of Equitable's policies and due to the requirements of state insurance laws, the procedures necessarily differ in significant respects from procedures for mutual funds and contractual plans for which the 1940 Act was designed. 2. Many of the procedures used by Equitable have been adopted from its established procedures for its scheduled premium variable life insurance policies, its other flexible premium variable life insurance policies and its fixed benefit life insurance products. 3. In structuring its procedures to comply with Rule 6e-3(T), state insurance laws and its established administrative procedures, Equitable has attempted to comply with the intent of the 1940 Act, to the extent deemed feasible. 4. In general, state insurance laws, like Rule 6e-3(T)(b)(12)(iii), require that Equitable's procedures be reasonable, fair and not discriminatory. 5. Because of the nature of the insurance product, it is often difficult to determine precisely when Equitable's procedures deviate from those required under Sections 22(d), 22(e) or 27(c)(1) of the 1940 Act or Rule 22c-1 thereunder. Accordingly, set out below is a summary of the principal policy provisions and procedures not otherwise described in the prospectus, which may be deemed to constitute, either directly or indirectly, such a deviation. The summary, while comprehensive, does not attempt to describe each and every procedure or variation which might occur and does include certain procedural steps which do not constitute deviations from the above-cited sections or rule. Under the policies, a policyowner allocates net premiums to a Guaranteed Interest Account, which is part of Equitable's General Account, and/or to one or more investment funds of Equitable's Separate Account FP (the "Account"). Except as otherwise noted, the procedures described below apply equally to each of the Account's investment funds and, accordingly, are described in terms of the Account. I. "Public Offering Price": Purchase and Related Transactions -- Section 22(d) and Rule 22c-1 -------------------------------------------- This section outlines those principal policy provisions and administrative procedures which might be deemed to constitute, either directly or indirectly, a "purchase" transaction. Because of the insurance nature of the policies, the procedures involved necessarily differ in certain significant respects from the purchase procedures for mutual funds and contractual plans. The chief differences involve the structure of the cost of insurance charges and the insurance underwriting (i.e., evaluation of risk) process. There are also certain policy provisions -- such as restoration and loan repayment -- which do not result in the issuance of a policy but which require certain payments by the policyowner and involve a transfer of assets supporting the policy reserve into the Account. a. Application and Initial Premium Processing ------------------------------------------ Upon receipt of a completed application and other required documentation from a prospective policyowner, Equitable will follow certain insurance underwriting (i.e., evaluation of risks) procedures designed to determine whether the proposed insured is insurable . This process may involve such verification procedures as medical examinations and may require that further information be provided by the proposed policyowner and/or the proposed insured before such a determination can be made. A policy cannot be issued, i.e., physically issued through Equitable's computer issue system, until this underwriting procedure has been completed. These processing procedures will not dilute any benefit payable to any existing policyowner. Although a policy cannot be issued until after the underwriting process has been completed, the proposed policyowner will receive immediate insurance coverage on the proposed insured person once the proposed policyowner has paid his full initial premium and assuming that the proposed insured person proves to be insurable. Equitable will require that the policy be delivered within a specific delivery period to protect itself against anti-selection by the prospective policyowner resulting from a deterioration of the health of the proposed insured. Generally, the period will not exceed 30 days from the policy's Issue Date. Delivery may be delayed where, for example, the full initial premium has not yet been paid, amendment is needed to the application for the policy or where the agent has been unable to contact the prospective policyowner. Where a policy is not delivered within 30 days, Equitable will consider reissuing the policy with a new Register Date and Issue Date. However, if Equitable does not receive the full initial premium within 60 days of the Issue Date, we will consider the prospective policyowner to have withdrawn the application and we will refund any premium paid. To obtain a policy, it would then be necessary for the prospective policyowner to submit a new completed application and satisfactory evidence of insurability of the proposed insured. 2 b. Insurance Charges and Underwriting Standards -------------------------------------------- Cost of insurance charges payable under the policies will not be the same for all policyowners. The chief reason is that the principle of pooling and distribution of mortality risks is based upon the assumption that each policyowner pays a cost of insurance charge commensurate with the insured's mortality risk which is actuarially determined based upon factors such as age, sex, health and occupation. In the context of life insurance, uniform cost of insurance charges for all insureds would discriminate unfairly in favor of those insureds representing greater mortality risks to the disadvantage of those representing lesser risks. Accordingly, although there will be a uniform "public offering price" for all policyowners because premiums are flexible, there will be a different "price" for each actuarial category of insureds because different cost of insurance rates will apply . The "price" will also vary based on the net amount at risk. The Policies will be offered and sold pursuant to our cost of insurance charge schedule and our underwriting standards and in accordance with state insurance laws. Such laws prohibit unfair discrimination among insureds of the same class, but generally recognize that premiums must be based upon factors such as age, sex, health and occupation. A table showing the maximum cost of insurance charges will be delivered as part of the policy. Any additional charges for persons who do not meet standard underwriting requirements or for additional benefit riders will also be indicated in the policy. By administrative practice, Equitable will reduce the cost of insurance rate classification for an existing policy if new evidence of insurability demonstrates that the insured person qualifies for a lower classification. After the reduced rating is determined, the policyowner will pay a lower current monthly cost of insurance charge each month. A similar reduction will be made for tobacco users who meet our non-tobacco user requirements. c. Repayment of Loan ----------------- When a loan is made, Equitable will transfer from each investment division of the Account to the General Account an amount of Policy Account Value equal to the amount of the loan allocable to that division. Upon repayment of indebtedness, Equitable will reduce its General Account policy loan assets and transfer those assets first to the Guaranteed Interest Division to the extent loans were attributable to that Division and then to the Account's investment funds according to the policyowner's instruction or the premium payment allocation percentages then in effect. d. Face Amount Increases --------------------- Equitable reserves the right to decline a Face Amount increase if the policyowner has become a more expensive risk. Corporate Incentive Life (policy form 95-300) does not permit face amount increases. In either case, the policyowner may apply for a new policy for the amount of the increase. Equitable intends to waive the monthly administrative charge and the charge for transfers on the second policy. The minimum Face Amount for the second policy will be $10,000. 3 II. "Redemption Procedures": Surrender and Related Transactions ---------------------------------- This section will outline those procedures which differ in certain significant respects from redemption procedures for mutual funds and contractual plans. The policies provide for the payment of monies to a policyowner or beneficiary upon presentation of the policy. The amount received by the payee will depend upon the particular benefit for which the policy is presented: surrender for net cash surrender value, payment of a death claim, living benefit payment or maturity benefit. There are also certain policy provisions -- such as partial withdrawals, termination and the loan privilege -- under which the policy will not be presented to Equitable but which will affect the policyowner's benefits and may involve a transfer of the assets supporting the policy reserve out of the Account. Any combined transactions on the same day which counteract each other will be allowed. We will assume the policyowner is aware of the conflicting nature of these transactions and desires their combined result. In addition, if a transaction is requested which we will not allow (for example, a request for a face amount decrease which lowers the face amount below our minimum) we will reject the whole request and not just the portion which fails to comply with our rules. Policyowners will be informed of the rejection and will have an opportunity to give new instructions. Finally, state insurance or other laws may require that certain requirements be met before Equitable is permitted to make payments to the payee. Generally, except for the payment of death benefits, the imposition of insurance and administrative charges and the effects of policy loans, the payee will receive a pro rata or proportionate share of the Account's assets within the meaning of the 1940 Act in any transaction involving "redemption procedures". a. Surrender for Net Cash Surrender Value -------------------------------------- Equitable will make the payment of Net Cash Surrender Value out of its General Account and, at the same time, transfer assets from the Account to the General Account in an amount equal to the policy reserves in the Account. b. Death Claims ------------ Equitable will issue a death benefit payable to the beneficiary within seven days after receipt, at our Administrative Office, of the policy, due proof of death of the insured person, and all other requirements necessary(1) to make payment. Equitable will make payment of the death benefit out of its General Account, and will transfer assets from the Account to the General Account in an amount equal to the policy reserves in that Account. The excess, if any, of the death benefit over the amount transferred will be paid out of the General Account reserve maintained for that purpose. c. Transfer -------- - ---------- (1) State insurance laws impose various requirements, such as receipt of a tax waiver, before payment of the death benefit may be made. In addition, payment of the death benefit is subject to the provisions of the policies regarding suicide and incontestability. 4 The policies allow the policyowner, in lieu of a conversion privilege, to transfer all the amounts in the investment funds of the Account to the Guaranteed Interest Account (which is part of our General Account and pays interest at a declared guaranteed rate) without charge. d. Policy Loan ----------- When a loan is made, Equitable transfers a portion of the assets in the Account (which is a portion of the cash surrender value and which also constitutes a portion of the reserves for the death benefit) equal to the indebtedness to the General Account. e. Living Benefit Payment ---------------------- The Living Benefit option enables eligible policyowners to receive a portion of the death benefit if the insured has a terminal illness. When Equitable receives written notice of a Living Benefit claim it will send the policyowner a "quote letter" detailing the effect of a Living Benefit payment on the remaining policy values as well as an explanation of amounts that are available through policy loan or surrender. The letter will be accompanied by the forms necessary for the policyowner to finalize his or her Living Benefit claim. When those forms are received, Equitable will determine whether the policyowner is eligible to receive the Living Benefit payment (e.g., whether satisfactory evidence has been received that the insured's life expectancy is less than six months). Once this eligibility determination is complete, Equitable will pay the Living Benefit amount within seven days. f. Federal Income Tax ------------------ In certain circumstances, a premium payment or change to a policy may cause a policy to be treated as a "modified endowment." (See Tax Effects in the Prospectus). Due to the potential adverse tax consequences, Equitable has instituted procedures aimed to prevent a policy from becoming a modified endowment without the policyowner's prior knowledge. If Equitable determines that, based on the first premium, the policy will be a modified endowment contract, Equitable will issue the policy based on the first premium remitted, provided that the policyowner signs a form acknowledging that the policy is a modified endowment. Alternatively, the policyowner may reduce the amount of the first premium to a level at which the policy will not be a modified endowment. Equitable will then issue the policy based on the reduced premium. Equitable will not deliver a policy unless one of these options is selected. In the case of a subsequent premium payment, which, if applied, would cause a policy to become a modified endowment, Equitable plans to return the excess premium payment (the amount which would cause the contract to become a modified endowment) to the policyowner within one business day. The excess premium payment will be accompanied by a letter of explanation. The letter will explain to the policyowner that the premium payment he submitted would cause the policy to become a modified endowment under federal income tax law. The letter will instruct the policyowner that he may either return the excess premium payment to Equitable with a signed acknowledgment form (enclosed with the letter) or forego making the payment at this time. The acknowledgment form will describe the federal income tax consequences of owning a modified endowment. There may be cases in which a policy becomes a modified endowment before all procedures aimed at preventing this have been fully implemented. In such cases, Equitable may, 5 but is not obligated under applicable federal income tax law to, refund the excess premium with interest not later than 60 days following the policy year in which it was received. In such case the policy should generally be removed from modified endowment status. If an offer to refund premium is made, the policyowner will be notified and given an opportunity to elect a refund. If a refund is elected, the Policy Account will be adjusted to take into account the amount of the refund. The amount of the refund would include interest earned on the excess premium amount in the Guaranteed Interest Account and net return on the excess premium amount in the divisions of the Separate Account, but not less in total than minimum interest of 4%. An election to take a refund and the related adjustments will be effected upon receipt at our administrative office. 6 15125/BO5-1.doc EX-27 48 FP 09/96 FDS (COMMON STOCK)
6 0000771726 Sep Acct FP EVLICO 02 Common Stock Division 1 U. S. Dollars 9-MOS Dec-31-1996 Jan-01-1996 Sep-30-1996 1 1,194,664,886 1,481,486,712 0 0 0 1,481,486,712 197,381 0 1,478,548 1,675,929 0 0 0 0 0 0 0 0 0 1,479,810,783 9,004,982 0 0 5,915,587 3,089,395 66,524,294 104,997,547 174,611,236 0 3,089,395 171,521,841 158,900,506 0 0 0 333,225,509 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
EX-27 49 FP 09/96 FDS (MONEY MARKET)
6 0000771726 Sep Acct FP EVLICO 03 Money Market Division 1 U. S. Dollars 9-MOS Dec-31-1996 Jan-01-1996 Sep-30-1996 1 165,564,928 165,937,243 0 0 3,827,870 169,765,113 3,912,050 0 574,980 4,487,030 0 0 0 0 0 0 0 0 0 165,278,083 6,300,108 0 0 738,965 5,561,143 (149,139) 282,339 5,694,343 0 5,561,143 133,200 (47,489,051) 0 0 0 (41,855,448) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
EX-27 50 FP 09/96 FDS (AGGR STOCK)
6 0000771726 Sep Acct FP EVLICO 04 Aggressive Stock Division 1 U. S. Dollars 9-MOS Dec-31-1996 Jan-01-1996 Sep-30-1996 1 661,363,283 745,660,006 3,329,166 0 0 748,989,172 0 0 4,365,282 4,365,282 0 0 0 0 0 0 0 0 0 744,623,890 1,105,507 0 0 2,923,580 (1,818,073) 109,284,261 4,025,605 111,491,793 0 (1,818,073) 113,309,866 78,138,849 0 0 0 189,435,759 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
EX-27 51 FP 09/96 FDS (BALANCED)
6 0000771726 Sep Acct FP EVLICO 05 Balanced Division 1 U. S. Dollars 9-MOS Dec-31-1996 Jan-01-1996 Sep-30-1996 1 381,690,336 415,550,419 207,444 0 0 415,757,863 0 0 1,168,813 1,168,813 0 0 0 0 0 0 0 0 0 414,589,050 9,585,426 0 0 1,833,659 7,751,767 25,683,251 (9,237,104) 24,197,914 0 7,751,767 16,446,147 (8,070,458) 0 0 0 16,023,841 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
EX-27 52 FP 09/96 FDS (HIGH YIELD)
6 0000771726 Sep Acct FP EVLICO 06 High Yield Division 1 U. S. Dollars 9-MOS Dec-31-1996 Jan-01-1996 Sep-30-1996 1 87,558,526 95,912,162 0 0 0 95,912,162 43,386 0 691,748 735,134 0 0 0 0 0 0 0 0 0 95,177,028 6,020,378 0 0 365,819 5,654,559 3,600,269 4,529,655 13,784,483 0 5,654,559 8,129,924 9,625,700 0 0 0 23,246,066 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
EX-27 53 FP 09/96 FDS (GLOBAL)
6 0000771726 Sep Acct FP EVLICO 07 Global Division 1 U. S. Dollars 9-MOS Dec-31-1996 Jan-01-1996 Sep-30-1996 1 351,595,598 403,967,887 0 0 368,849 404,336,736 181,369 0 576,659 758,028 0 0 0 0 0 0 0 0 0 403,578,708 4,146,524 0 0 1,674,106 2,472,418 11,768,222 15,846,693 30,087,333 0 2,472,418 27,614,915 40,064,284 0 0 0 70,081,688 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
EX-27 54 FP 09/96 FDS (CONSERV INV)
6 0000771726 Sep Acct FP EVLICO 08 Conservative Investors Division 1 U. S. Dollars 9-MOS Dec-31-1996 Jan-01-1996 Sep-30-1996 1 166,617,325 170,418,342 98,112 0 0 170,516,454 0 0 714,160 714,160 0 0 0 0 0 0 0 0 0 169,802,294 5,867,240 0 0 777,140 5,090,100 2,244,729 (6,561,103) 773,726 0 5,090,100 (4,316,374) (3,044,490) 0 0 0 (2,284,805) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
EX-27 55 FP 09/96 FDS (GROWTH INV)
6 0000771726 Sep Acct FP EVLICO 09 Growth Investors Division 1 U. S. Dollars 9-MOS Dec-31-1996 Jan-01-1996 Sep-30-1996 1 608,848,116 659,684,627 0 0 0 659,684,627 250,106 0 755,932 1,006,038 0 0 0 0 0 0 0 0 0 658,678,589 10,945,015 0 0 2,710,777 8,234,238 63,929,470 (30,949,362) 41,214,346 0 8,234,238 32,980,108 61,661,247 0 0 0 102,800,923 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
EX-27 56 FP 09/96 FDS (INT GOVT SEC)
6 0000771726 Sep Acct FP EVLICO 12 Intermed Gov Securities Div 1 U. S. Dollars 9-MOS Dec-31-1996 Jan-01-1996 Sep-30-1996 1 43,750,516 43,305,378 25,723 0 0 43,331,101 0 0 571,916 571,916 0 0 0 0 0 0 0 0 0 42,759,185 1,696,840 0 0 177,582 1,519,258 (408,620) (590,660) 519,978 0 1,519,258 (999,280) 5,102,189 0 0 0 5,610,141 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
EX-27 57 FP 09/96 FDS (GROWTH & INC)
6 0000771726 Sep Acct FP EVLICO 13 Growth & Income Division 1 U. S. Dollars 9-MOS Dec-31-1996 Jan-01-1996 Sep-30-1996 1 27,455,859 31,071,304 0 0 86,467 31,157,771 93,070 0 579,643 672,713 0 0 0 0 0 0 0 0 0 30,485,058 381,846 0 0 105,544 276,302 563,467 1,492,099 2,331,868 0 276,302 2,055,566 9,587,888 0 0 0 11,866,745 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
EX-27 58 FP 09/96 FDS (QUALITY BOND)
6 0000771726 Sep Acct FP EVLICO 14 Quality Bond Division 1 U. S. Dollars 9-MOS Dec-31-1996 Jan-01-1996 Sep-30-1996 1 154,236,243 147,904,622 95,980 0 0 148,000,602 0 0 788,580 788,580 0 0 0 0 0 0 0 0 0 147,212,022 6,372,295 0 0 639,290 5,733,005 (220,874) (4,225,945) 1,286,186 0 5,733,005 (4,446,819) 7,653,347 0 0 0 8,924,576 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
EX-27 59 FP 09/96 FDS (EQUITY INDEX)
6 0000771726 Sep Acct FP EVLICO 15 Equity Index 1 U. S. Dollars 9-MOS Dec-31-1996 Jan-01-1996 Sep-30-1996 1 97,100,736 119,477,987 0 0 196,738 119,674,725 199,909 0 313,444 513,353 0 0 0 0 0 0 0 0 0 119,161,372 1,390,087 0 0 415,358 974,729 316,883 9,925,486 11,217,098 0 974,729 10,242,369 36,362,676 0 0 0 47,537,757 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
EX-27 60 FP 09/96 FDS (INTERNATIONAL)
6 0000771726 Sep Acct FP EVLICO 16 International Fund Division 1 U. S. Dollars 9-MOS Dec-31-1996 Jan-01-1996 Sep-30-1996 1 33,337,481 35,007,334 0 0 120,728 35,128,062 96,161 0 237,480 333,641 0 0 0 0 0 0 0 0 0 34,794,421 268,735 0 0 107,106 161,629 294,981 1,001,947 1,458,557 0 161,629 1,296,928 20,920,558 0 0 0 22,362,483 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
-----END PRIVACY-ENHANCED MESSAGE-----