-----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, KOIBYMra6ztKuL7aINS+vKFGvMPN8UiCL3HaS4Z/FI1dSiM1YtWksh/R+4t++YUy G+zOBkxL4oGfE4pZExrzqA== 0000950136-96-000220.txt : 19960501 0000950136-96-000220.hdr.sgml : 19960501 ACCESSION NUMBER: 0000950136-96-000220 CONFORMED SUBMISSION TYPE: N-4/A PUBLIC DOCUMENT COUNT: 9 FILED AS OF DATE: 19960430 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES /NY/ CENTRAL INDEX KEY: 0000727920 STANDARD INDUSTRIAL CLASSIFICATION: INSURANCE AGENTS BROKERS & SERVICES [6411] IRS NUMBER: 135570651 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-4/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-01301 FILM NUMBER: 96553648 BUSINESS ADDRESS: STREET 1: 787 SEVENTH AVE CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2125541234 N-4/A 1 POST-EFFECTIVE AMENDMENT April 27, 1996 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 30, 1996 REGISTRATION NO. 333-01301 - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------- FORM N-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Pre-Effective Amendment No. [X] Post-Effective Amendment No. [ ] AND/OR REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ] Amendment No. [ ] THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES (EXACT NAME OF REGISTRANT) ------------------- THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES (NAME OF DEPOSITOR) 787 SEVENTH AVENUE, NEW YORK, NEW YORK 10019 (ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES) DEPOSITOR'S TELEPHONE NUMBER, INCLUDING AREA CODE: (201) 392-5279 ------------------- ANTHONY A. DREYSPOOL VICE PRESIDENT AND SENIOR COUNSEL THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES 787 SEVENTH AVENUE, NEW YORK, NEW YORK 10019 (NAME AND ADDRESS OF AGENT FOR SERVICE) PLEASE SEND COPIES OF ALL COMMUNICATIONS TO: PETER E. PANARITES FREEDMAN, LEVY, KROLL & SIMONDS 1050 CONNECTICUT AVENUE, N.W., WASHINGTON, D.C. 20036 APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: CONTINUOUS IT IS PROPOSED THAT THE FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX) [ ] IMMEDIATELY UPON FILING PURSUANT TO PARAGRAPH (B) OF RULE 485 [X] ON MAY 1, 1996 PURSUANT TO PARAGRAPH (B) OR RULE 485 [ ] 60 DAYS AFTER FILING PURSUANT TO PRARGRAPH (A)(1) OR RULE 485 [ ] ON MAY 1, 1996 PURSUANT TO PARAGRAPH (A)(1) OR RULE 485 [ ] 75 DAYS AFTER FILING PURSUANT TO PARAGRAPH (A)(2) [ ] ON (DATE) PURSUANT TO PARAGRAPH (A)(3) OF RULE 485. IF APPROPRIATE, CHECK THE FOLLOWING BOX: [ ] THIS POST-EFFECTIVE AMENDMENT DESIGNATES A NEW EFFECTIVE DATE FOR PREVIOUSLY FILED POST-EFFECTIVE AMENDMENT. - ------------------------------------------------------------------------------- CROSS REFERENCE SHEET SHOWING LOCATION OF INFORMATION IN PROSPECTUS
FORM N-4 ITEM PROSPECTUS CAPTION - ---------------------------------------------------------- ---------------------------------------------- 1. Cover Page ....................................... Cover Page 2. Definitions ...................................... Not Applicable 3. Synopsis ......................................... Summary of Investment Options; Summary of the Program; Summary of Fund Expenses 4. Condensed Financial Information .................. Condensed Financial Information 5. General Description of Registrant, Depositor, and Portfolio Companies .............................. Investment Options; The Equity Funds; The Real Estate Fund; Equitable Life and The Investment Manager 6. Deductions and Expenses .......................... Deductions and Charges; Charges Based on Amounts Invested in the Program; Plan and Transaction Expenses 7. General Description of Variable Annuity Contracts The Program 8. Annuity Period ................................... The Program--Benefit Payment Options 9. Death Benefit .................................... The Program--Benefits Payable After the Death of a Participant 10. Purchases and Contract Value ..................... The Equity Funds--How We Calculate the Value of Amounts Allocated to the Equity Funds; The Real Estate Fund--How We Calculate the Value of Amounts Allocated to the Real Estate Fund; The Program--When Transactions are Effective--Minimum Investments--Making Contributions to the Program--Benefit Payment Options 11. Redemptions ..................................... The Program--Distributions from the Investment Options--Benefit Payment Options 12. Taxes ............................................ Federal Income Tax Considerations 13. Legal Proceedings ................................ Miscellaneous 14. Table of Contents of the Statment of Additional Information ...................................... Table of Contents of the Statement of Additional Information
CROSS REFERENCE SHEET SHOWING LOCATION OF INFORMATION IN STATEMENT OF ADDITIONAL INFORMATION
FORM N-4 ITEM STATEMENT OF ADDITIONAL INFORMATION CAPTION - -------------------------------------------------- ----------------------------------------------- 15. Cover Page ............................... Cover Page 16. Table of Contents ........................ Table of Contents 17. General Information and History .......... Not Applicable 18. Services ................................. Not Applicable 19. Purchase of Securities Being Offered .... Underwriter 20. Underwriters ............................. Underwriter 21. Calculation of Performance Data .......... Not Applicable 22. Annuity Payments ......................... Provisions of the Master Plan--Contributions to Qualified Plans--Contributions to the ADA Master Plan 23. Financial Statements ..................... Financial Statements
############################################################################# GRAPHIC OMITTED PICKUP: "P1" ============================================================================= IMAGE: "64780TOP2" ============================================================================= ############################################################################# ADA MEMBERS RETIREMENT PROGRAM PROSPECTUS MAY 1, 1996 ############################################################################# GRAPHIC OMITTED PICKUP: "P2" ============================================================================= IMAGE: "64780BOX1" ============================================================================= ############################################################################# AMERICAN DENTAL ASSOCIATION MEMBERS RETIREMENT PROGRAM PROSPECTUS MAY 1, 1996 - ----------------------------------------------------------------------------- The American Dental Association Members Retirement Program offers you ten investment options from which to choose. This prospectus describes the seven Separate Accounts under the group annuity contract issued by THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES. THE PROGRAM The American Dental Association Members Retirement Program offers ADA members and other eligible persons the choice of several plans to accumulate retirement savings for themselves and their employees. THE INVESTMENT OPTIONS The Program allows you to choose from ten Investment Options. The Investment Options are: Seven Separate Accounts or "Funds": o Growth Equity Fund o Aggressive Equity Fund o ADA Foreign Fund o Equity Index Fund o Real Estate Fund o Lifecycle Fund--Conservative o Lifecycle Fund--Moderate Three Guaranteed Options: o 3 year Guaranteed Rate Account o 5 year Guaranteed Rate Account o Money Market Guarantee Account These investment options are summarized on page 2 of this prospectus. The Aggressive Equity Fund, the ADA Foreign Fund, and the Equity Index Fund each invest in shares of a corresponding mutual fund, the MFS Emerging Growth Fund, the Templeton Foreign Fund and the Seven Seas S&P 500 Index Fund respectively. We refer to these as the "underlying mutual funds." The Lifecycle Funds--Conservative and Moderate ("Lifecycle Funds") each invest in units of a corresponding group trust maintained by State Street Bank and Trust Company ("State Street"). We refer to these trusts as the "Lifecycle Fund Group Trusts." The prospectuses for the underlying mutual funds and our separate prospectus for the Equity Index Fund and Lifecycle Funds describe the investment objectives, policies and risks of those Funds and should be read carefully and retained for future reference. Copies of those prospectuses may be obtained by writing or calling as indicated below. THIS PROSPECTUS DESCRIBES, IN DETAIL, ALL INVESTMENT OPTIONS EXCEPT THE EQUITY INDEX FUND AND THE LIFECYCLE FUNDS, WHICH ARE DESCRIBED, IN DETAIL, IN OUR SEPARATE PROSPECTUS FOR THOSE FUNDS. This prospectus provides important information you should be aware of before investing. Additional information is included in the Statement of Additional Information (the "SAI") dated May 1, 1996 which has been filed with the Securities and Exchange Commission. Parts of the SAI have been incorporated by reference into this prospectus. A table of contents for the SAI appears at page 53 of this prospectus. To obtain a copy of the SAI free of charge, complete the SAI request form on page 53 and mail it to us, or call or write: The Equitable Life Assurance Society of the United States PO Box 2486 G.P.O. New York, NY 10116
Calls for current participants: Calls for all others: 1-800-223-5790 1-800-523-1125
KEEP THIS PROSPECTUS FOR FUTURE REFERENCE. - ----------------------------------------------------------------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. TABLE OF CONTENTS
PAGE -------- SUMMARY OF INVESTMENT OPTIONS ..................... 2 SUMMARY OF THE PROGRAM ............................ 3 SUMMARY OF FUND EXPENSES .......................... 4 CONDENSED FINANCIAL INFORMATION ................... 9 INVESTMENT OPTIONS ................................ 12 THE EQUITY FUNDS The Growth Equity Fund ........................... 12 The Aggressive Equity Fund ....................... 13 The ADA Foreign Fund ............................. 14 The Equity Index Fund ............................ 15 Lifecycle Funds--Conservative and Moderate ..... 16 The Lifecycle Fund Group Trusts .................. 16 Lifecycle Fund Group Trust--Conservative ........ 16 Lifecycle Fund Group Trust--Moderate ............. 17 The Underlying Funds ............................. 17 Risks and Investment Techniques-- Equity Funds ..................................... 17 How We Calculate the Value of Amounts Allocated to the Equity Funds ................... 19 THE REAL ESTATE FUND Real Estate Fund Objectives and Investment Policies ........................................ 21 Special Risks Related to The Real Estate Fund .. 23 Conflicts of Interest Related to Prime Property Fund ............................................. 23 How We Calculate The Value of Amounts Allocated to The Real Estate Fund ............... 24 THE GUARANTEED OPTIONS Guaranteed Rate Accounts ......................... 26 Money Market Guarantee Account ................... 27 EQUITABLE LIFE AND THE INVESTMENT MANAGERS Equitable Life ................................... 29 The Separate Accounts ............................ 29 Investment Management of the Equity Funds ...... 30 Investment Management of the Real Estate Fund .. 31 INVESTMENT PERFORMANCE Measuring the Investment Performance of the Funds ............................................ 32 Unmanaged Market Indices ......................... 32 How Performance Data Are Presented ............... 33 Annual Percentage Change in Fund Unit Values .......................................... 33 Average Annual Percentage Change in Fund Unit Values--Years Ending December 31, 1995 ............................................. 34 Cumulative Value Examples ........................ 34 How We Calculate Performance Data ................ 36 THE PROGRAM Employers Who May Participate in the Program ......................................... 37 Choices for the Employer ......................... 37 Summary of the Plans And Trusts .................. 37 Information on Joining the Program ............... 38 Choosing the Right Plan .......................... 38 Getting Started In The Program After Choosing A Plan ................................. 38 Communicating With Us After you Enroll .......... 39 Your Responsibilities As the Employer ............ 39 When Transactions Are Effective .................. 40 Minimum Investments .............................. 40 Making Contributions to the Program .............. 40 Our Account Investment Management (AIM) System . 40 Allocating Contributions Among the Investment Options .............................. 41 Transfers Among the Investment Options .......... 41 Distributions From the Investment Options ....... 41 Special Rules For Distributions and Transfers from the Real Estate Fund ....................... 42 When Distributions Are Available to Participants .................................... 43 Participant Loans ................................ 43 Benefit Payment Options .......................... 44 Spousal Consent Rules ............................ 44 Spousal Consent Requirements ..................... 44 Benefits Payable After the Death of a Participant ..................................... 45 DEDUCTIONS AND CHARGES ............................ 46 CHARGES BASED ON AMOUNTS INVESTED IN THE PROGRAM Program Expense Charge ........................... 46 Administration and Investment Management Fees ............................................ 47 Other Expenses Borne Directly by the Funds ..... 48 PLAN AND TRANSACTION EXPENSES ADA Retirement Plan, Prototype Self-Directed Plan and Individually-Designed Plan Fees ................. 49 Individual Annuity Charges ....................... 49 General Information On Fees And Charges ......... 49 FEDERAL INCOME TAX CONSIDERATIONS Adopting the Program ............................ 50 Income Taxation of Distributions to Qualified Plan Participants ............................. 50 Other Tax Consequences .......................... 51 MISCELLANEOUS ..................................... 51 Table of Contents of Statement of Additional Information ................................... 53
SUMMARY OF INVESTMENT OPTIONS EQUITY FUNDS THE GROWTH EQUITY FUND (Separate Account No. 4 (Pooled)) Seeks to achieve long-term growth of capital by investing primarily in common stocks and other equity-type securities of any capitalization but primarily in securities of large and intermediate-sized companies. THE AGGRESSIVE EQUITY FUND (Separate Account No. 200) Seeks to achieve long-term capital growth by investing in shares of the Massachusetts Financial Services Company ("MFS") Emerging Growth Fund, which in turn invests primarily in companies that MFS believes are early in their life cycle but which have the potential to become major enterprises (emerging growth companies). THE ADA FOREIGN FUND (Separate Account No. 191) Invests in shares of the Templeton Foreign Fund, which in turn seeks long-term capital growth through a flexible policy of investing in common stocks of companies outside the United States. THE EQUITY INDEX FUND (Separate Account No. 195) Invests in shares of the Seven Seas S&P 500 Index Fund, which in turn seeks to achieve a total return which parallels that of the Standard and Poor's 500 Composite Stock Price Index by investing in the stocks in the Index. THE LIFECYCLE FUND--CONSERVATIVE (Separate Account No. 197) Invests in units of the Lifecycle Fund Group Trust--Conservative, maintained by State Street, which in turn invests in units of five underlying collective funds ("the Underlying Funds") maintained by State Street to provide current income and a low to moderate growth of capital. THE LIFECYCLE FUND--MODERATE (Separate Account No. 198) Invests in units of the Lifecycle Fund Group Trust--Moderate, maintained by State Street, which in turn invests in units of five Underlying Funds maintained by State Street to provide growth of capital and a reasonable level of current income. REAL ESTATE FUND THE REAL ESTATE FUND (Separate Account No. 30 (Pooled)) Invests primarily in units of our Prime Property Fund, which in turn seeks to achieve a stable rate of return over an extended period of time by investing primarily in high-grade, income-producing real property. There is no assurance that the Funds will achieve their respective objectives. GUARANTEED OPTIONS GUARANTEED RATE ACCOUNTS Contributions to the Guaranteed Rate Accounts will be invested through group annuity contracts issued by a major insurance company. The Guaranteed Rate Accounts have maturities of approximately three and five years. MONEY MARKET GUARANTEE ACCOUNT The Money Market Guarantee Account is credited with interest which will approximate the average rate of money market funds considered "domestic prime," but not less than a minimum rate which we set annually. We guarantee the contributions and interest credited to this Account. - ----------------------------------------------------------------------------- No person is authorized by The Equitable Life Assurance Society of the United States to give any information or make any representations other than those contained in this prospectus and the SAI, or in other printed or written material issued by Equitable Life. You should not rely on any other information or representation. 2 SUMMARY OF THE PROGRAM THE AMERICAN DENTAL ASSOCIATION MEMBERS RETIREMENT PROGRAM The American Dental Association Members Retirement Program consists of several types of retirement plans and two retirement plan Trusts, the Master Trust and the Pooled Trust. Each of the Trusts invests exclusively in the group annuity contracts described in this prospectus. The purpose of the Program is to provide members of the American Dental Association (the "ADA") and their employees with plans to invest, accumulate, and then distribute funds for retirement. The Program is sponsored by the ADA, and the Trustees under the Master and Pooled Trusts are the members of the Council on Insurance of the ADA (the "Trustees"). The Program had 20,072 participants and $1.0 billion in assets at December 31, 1995. EQUITABLE LIFE The Equitable Life Assurance Society of the United States ("Equitable Life") is a diversified financial services organization serving a variety of insurance, investment management and investment banking customers. We are one of the largest life insurance companies in the United States, and have been in business since 1859. In this prospectus, the terms "we," "our," and "us" means Equitable Life. THE INVESTMENT OPTIONS Ten Investment Options are available under the Program. Seven of the Investment Options are Separate Accounts, or Funds, consisting of six Equity Funds and the Real Estate Fund. The Funds operate like mutual funds in many ways. However, because of exclusionary provisions, the Funds are not subject to regulation under the Investment Company Act of 1940 ("1940 Act"). The three additional Investment Options are guaranteed options. They include two Guaranteed Rate Accounts and the Money Market Guarantee Account. YOUR CHOICE OF RETIREMENT PLANS As an employer, you can use the Program to adopt our profit-sharing (including a 401(k) feature) or defined contribution pension master plan or our self-directed prototype plan. You can also have your own individually-designed plan and use our Pooled Trust as a funding vehicle. See The Program for additional information on your choices. 3 SUMMARY OF FUND EXPENSES TRANSACTION EXPENSES Transaction expenses are charges you pay when you buy or sell units of the Funds.
Sales Load None Deferred Sales Charge None Surrender Fees None Transfer or Exchange Fee None
If you annuitize your account, premium taxes and other fees may apply. ANNUAL FUND OPERATING EXPENSES Operating expenses for the Funds are paid out of each Fund's assets. The Growth Equity and Real Estate Funds each pay a management fee to us that varies based on their respective assets. No management fees are paid to us by the Aggressive Equity Fund, the ADA Foreign Fund, the Equity Index Fund, or the Lifecycle Funds. The Program expense charge is based on all assets under the Program; the Administration Fee is based on Fund assets. Each Fund also incurs other expenses for services such as printing, mailing, legal, and similar items. All of these annual fund operating expenses are reflected in each Fund's unit value. See How We Determine the Unit Value. These tables illustrate the effect of the charges which are generally applicable to the Funds. They do not include other charges which are specific to the various plans such as enrollment fees or record maintenance and report fees. See Deductions and Charges. Premium taxes may also be applicable. The expenses shown are based on average Program assets in each of the Funds during the year ended December 31, 1995, restated to reflect current applicable fees. GROWTH EQUITY AND REAL ESTATE FUNDS
INVESTMENT PROGRAM MANAGEMENT EXPENSE ADMINISTRATION FEE CHARGE FEE OTHER TOTAL -------------- ------------ --------- -------------- ------- ------- Growth Equity 0.19% 0.66% 0.15% 0.07% 1.07% Real Estate 1.10 0.66 0.25 0.07 2.08
AGGRESSIVE EQUITY, ADA FOREIGN AND EQUITY INDEX FUNDS The Aggressive Equity Fund, the ADA Foreign Fund and the Equity Index Fund each invest in shares of an underlying mutual fund. The following table combines the charges and fees which are deducted from each Fund and the underlying mutual fund. No transaction charges are incurred by the Funds when shares of the underlying mutual fund are purchased or redeemed, but annual mutual fund operating expenses are incurred. For a description of charges and expenses incurred by the underlying mutual funds see their prospectuses. 4
INVESTMENT PROGRAM MANAGEMENT EXPENSE ADMINISTRATION OTHER FEE CHARGE FEE EXPENSES 12B-1 FEE TOTAL Aggressive Equity Fund None 0.66% 0.15%(2) 0.20%(7) None 1.01%(2) MFS Emerging Growth Fund(1) 0.75% None None 0.33% 0.25% 1.33% TOTAL 0.75% 0.66% 0.15%(2) 0.53%(7) 0.25% 2.34%(2) - ----------------- ------------ --------- -------------- ---------- ----------- ----------
ADA Foreign Fund None 0.66% 0.15%(4) 0.12%(7) None 0.93%(4) Templeton Foreign Fund(3) 0.63% None None 0.27% 0.25% 1.15% TOTAL 0.63% 0.66% 0.15%(4) 0.39%(7) 0.25% 2.08%(4) - ----------------- ------- ------- ---------- ---------- ------- ----------
Equity Index Fund None 0.66% 0.15% 0.63%(7) None 1.44% Seven Seas S&P 500 Fund(5) 0.00%(6) None None 0.13% 0.06% 0.19%(6) TOTAL 0.00%(6) 0.66% 0.15% 0.76%(7) 0.06% 1.63%(6) - ----------------- ------- ------- ---------- ---------- ------- ----------
(1) Source: The MFS Emerging Growth Fund prospectus dated April 1, 1995. (2) An annual amount of up to 0.25% will be paid to Equitable Life. Equitable Life has waived the 0.15% Administration fee applicable to the Aggressive Equity Fund and will use the payment from MFS Fund Distributors, Inc. to defray administrative expenses associated with the Program's operations and to fund Program enhancements. The agreement and waiver are expected to be in effect for an indefinite period, but these arrangements are subject to termination by either party upon notice. (3) Source: Templeton Foreign Fund prospectus dated January 1, 1996. (4) An amount equal to the 12b-1 fee charged by Templeton will be paid by Templeton to Equitable Life for services performed by Equitable Life for Templeton. Equitable Life has waived the 0.15% Administration Fee applicable to the ADA Foreign Fund and will use the payment from Templeton to defray administrative expenses associated with the Program's operations and to fund Program enhancements. The agreement and waiver are expected to be in effect for an indefinite period, but these arrangements are subject to termination by either party upon notice. (5) Source: Seven Seas Series Prospectus dated December 29, 1995. (6) State Street has voluntarily agreed to waive up to the full amount of its management fee of .10% to the extent that total expenses exceed .15% on an annual basis. This agreement will remain in effect until further notice. (See Note 5.) If the waiver agreement is terminated, the full amount of State Street's management fee may be assessed and the total Fund expenses may increase. (7) Includes expenses incurred in connection with the organization of these Funds. For the Aggressive Equity Fund, organizational expenses were $110,846 and are being charged to the Fund in 1996. Organizational expenses for the ADA Foreign Fund and the Equity Index Fund were initially paid by us and we are being reimbursed from the Fund over a five year period. For the ADA Foreign Fund, the organizational expenses were $46,110 and were fully reimbursed as of April 1, 1996. For the Equity Index Fund, organizational expenses were $33,917 and are being amortized over the period which ends December 31, 1998. 5 - ------------------------------------------------------------------------------- LIFECYCLE FUNDS - ------------------------------------------------------------------------------- No transaction charges are incurred by the Lifecycle Funds when units of a corresponding Lifecycle Fund Group Trust are purchased or redeemed, but annual operating expenses are incurred by each Lifecycle Fund Group Trust. A deduction is made from the assets of each Lifecycle Fund Group Trust to compensate State Street for managing the assets of the Group Trust. State Street does not receive a fee for managing the assets of the Underlying Funds in which a Lifecycle Fund Group Trust invests. State Street may receive fees for managing the assets of other collective investment funds in which the Funds may be invested on a temporary basis, and for managing the mutual funds in which assets of the Underlying Funds may be invested. State Street has agreed to reduce its management fee charged each of the Lifecycle Fund Group Trusts to offset any management fees State Street receives attributable to the Group Trusts' investment in such other collective investment funds and mutual funds. Other expenses are deducted from the assets of each Lifecycle Fund Group Trust and Underlying Fund to pay for costs related to services, such as legal and auditing, provided directly to each Lifecycle Fund Group Trust. State Street also receives an administration fee deducted from the assets of each Lifecycle Fund Group Trust to compensate it for providing various recordkeeping and accounting services to the Group Trust. In addition, other expenses are deducted from the assets of the Underlying Funds for custodial services provided to those Funds. 6 The fees and charges which are deducted from the assets of the Lifecycle Funds, the Lifecycle Fund Group Trusts and the Underlying Funds are illustrated in the table below. This table does not reflect other charges which are specific to the various plans participating in the Program, such as enrollment, record maintenance and reporting fees. See Plan and Transaction Expenses.
INVESTMENT PROGRAM MANAGEMENT EXPENSE ADMINISTRATION OTHER FEE CHARGE FEE EXPENSES TOTAL - -------------------------- ------------ --------- -------------- ------------ ---------- Lifecycle Fund - Conservative None 0.66% 0.15% 0.80%(1) 1.61% Lifecycle Fund Group Trust - Conservative 0.17% None 0.82%(2) 1.14%(1&3) 2.13% Underlying Funds: S&P 500 Flagship Fund None None None -- %(4&6) -- %(5&6) Russell 2000 Fund None None None 0.10%(4) 0.10%(5) Daily EAFE Fund None None None 0.20%(4) 0.20%(5) Daily Government/Corporate Bond Fund None None None 0.01%(4) 0.01%(5) Short Term Investment Fund None None None -- %(4&6) -- %(5&6) - -------------------------- ------------ --------- ------------ ------------ ----------
PROGRAM INVESTMENT EXPENSE MANAGEMENT FEE CHARGE ADMINISTRATION FEE OTHER EXPENSES TOTAL - ------------------------------ -------------- ----------- ------------------ -------------- -------------- Lifecycle Fund - Moderate None 0.66% 0.15% 0.22%(1) 1.03% Lifecycle Fund Group Trust - Moderate 0.17% None 0.17%(2) 0.18%(1&3) 0.52% Underlying Funds: S&P 500 Flagship Fund None None None -- %(4&6) -- %(5&6) Russell 2000 Fund None None None 0.10%(4) 0.10%(5) Daily EAFE Fund None None None 0.20%(4) 0.20%(5) Daily Government/Corporate Bond Fund None None None 0.01%(4) 0.01%(5) Short Term Investment Fund None None None -- %(4&6) -- %(5&6) - ------------------------------ -------------- ----------- ---------------- -------------- --------------
(1) These include a charge at the annual rate of .03% of the value of the respective assets in the Lifecycle Funds--Conservative and Moderate to compensate Equitable Life for additional legal, accounting and other potential expenses resulting from the inclusion of the Lifecycle Fund Group Trusts and Underlying Funds maintained by State Street among the Investment Options described in this prospectus and the SAI. Other expenses also include costs incurred by Equitable Life and State Street in connection with the organization of the Lifecycle Funds. Organizational expenses were initially paid by Equitable Life and State Street and are being reimbursed from the Lifecycle Funds over a five year period. Organizational expenses were $150,087 and will be amortized, pro rata based on the assets of each Fund, over the period ending June 30, 2000. On December 8, 1995, the Program's balance in the Balanced Fund (approximately $70 million) was transferred to the Lifecycle Fund--Moderate. The much larger balance in that Fund results in a much lower ratio of other expenses to total assets compared to the corresponding ratio for the Lifecycle Fund--Conservative. (2) Based on the Lifecycle Fund's Group Trusts--Conservative and Moderate current fixed fee of $11,100 per year, per fund, and average net assets for 1995. (3) Based on the Lifecycle Fund's Group Trusts--Conservative and Moderate average net assets for 1995. (4) Other expenses of the Underlying Funds are based on expenses incurred by each Fund during 1995. (5) The fees, charges and expenses columns of the Lifecycle Funds are not totalled in the tables because the expense percentages reflected for the Underlying Funds may change due to the annual review and revision of the targeted percentage investments by each Group Trust in the Underlying Funds. (6) Less than 0.01%. 7 - ------------------------------------------------------------------------------- EXAMPLES - ------------------------------------------------------------------------------- You would pay the following expenses on a $1,000 investment over the time period indicated for each Fund listed below, assuming a 5% annual rate of return. The Examples include all annual fund operating expenses listed in the tables above plus an estimate of average plan and transaction charges over the time periods indicated for a $1,000 initial investment, assuming the account is not annuitized. The estimate is computed by aggregating all record maintenance and report fees and enrollment fees, divided by the average assets for the same period. See ADA Members Retirement Plan, Prototype Self-Directed Plan and Individually-designed Plan Fees of this prospectus. Although the Program has no minimum contribution, the minimum amount that can be converted to an annuity is $3,500. There are no surrender charges, so the amounts would be the same, whether you withdraw all or a portion of your Account Balance.
1 YEAR 3 YEARS 5 YEARS 10 YEARS - ---------------------- ---------- ---------- ---------- ----------- Growth Equity $11.22 $ 34.97 $ 60.59 $133.76 Aggressive Equity 24.05 74.01 126.52 269.92 Real Estate 21.44 66.14 113.37 243.55 ADA Foreign 21.44 66.14 113.37 243.55 Equity Index (1) 16.90(1) 52.37(1) 90.19(1) 196.11(1) ---------- ----------- Lifecycle--Conservative 38.03 115.36 Lifecycle--Moderate 16.09 49.91 - ---------------------- ---------- ----------
(1) The returns shown reflect the waiver of a .10% investment management fee by State Street. The purpose of these tables and examples is to assist you in understanding the various costs and expenses that will be incurred, either directly or indirectly, when amounts are invested in the Funds. FUTURE EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. IN ADDITION, THE 5% RATE OF RETURN IN THE EXAMPLE IS NOT AN ESTIMATE OR GUARANTEE OF FUTURE PERFORMANCE. 8 CONDENSED FINANCIAL INFORMATION - ----------------------------------------------------------------------------- These selected per unit data and ratios for the years ended December 31, 1995, 1994 and 1993 have been audited by Price Waterhouse LLP, independent accountants, as stated in their reports included in the SAI. For years prior to 1993, such condensed financial information was audited by other independent accountants. The Financial Statements of each of the Funds as well as the Consolidated Financial Statements of Equitable Life are contained in the SAI. The report for the Real Estate Fund (Separate Account No. 30 (Pooled)) includes an explanatory paragraph relating to the appraised valuation of real estate investments. Information is provided for the period that each Fund has been available under the Program, but not longer than 10 years. - ------------------------------------------------------------------------------- GROWTH EQUITY FUND: SEPARATE ACCOUNT NO. 4 (POOLED) - -------------------------------------------------------------------------------
------------------------------ INCOME AND EXPENSES ------------------------------ NET YEAR ENDED EXPENSES INCOME DEC. 31, INCOME (NOTE A) (LOSS) - ------------ --------- -------- -------- 1995 $2.10 (2.28) (.18) -------- ---------- -------- 1994 $2.03 (2.03) .00 -------- ---------- -------- 1993* $1.97 (1.92) .05 -------- ---------- -------- 1992 $1.69 (1.75) (.06) -------- ---------- -------- 1991 $1.50 (1.52) (.02) -------- ---------- -------- 1990 $2.13 (1.16) .97 -------- ---------- -------- 1989 $1.88 (1.09) .79 -------- ---------- -------- 1988 $1.41 (.84) .57 -------- ---------- -------- 1987 $1.35 (.89) .46 -------- ---------- -------- 1986 $1.47 (.74) .73 -------- ---------- --------
(RESTUBBED TABLE CONTINUED FROM ABOVE)
CAPITAL CHANGES OPERATING STATISTICS --------------------------------------------------- --------------------------------------------------------- NET REALIZED AND NUMBER OF UNREALIZED NET NET ASSET NET ASSET RATIO OF UNITS GAINS INCREASE VALUE AT VALUE AT OPERATING RATIO OF NET OUTSTANDING (LOSSES) ON (DECREASE) BEGINNING END OF EXPENSES TO INCOME (LOSS) AT END OF PORTFOLIO YEAR ENDED INVESTMENTS IN UNIT OF PERIOD PERIOD AVERAGE NET TO AVERAGE NET PERIOD (IN TURNOVER DEC. 31, (NOTE B) VALUE (NOTE C) (NOTE F) ASSETS ASSETS 000'S) RATE - ----------- ------------- ---------- ----------- ---------- ------------ -------------- ---------- ------------ 1995 57.14 56.96 183.07 $240.03 1.07% (.08)% 1,456 108% ------------- ---------- ----------- ----------- ------------- -------------- ------------- ----------- 1994 (4.23) (4.23) 187.30 $183.07 1.11% .00% 1,441 91% ------------- ---------- ----------- ----------- ------------- -------------- ------------- ----------- 1993* 29.46 29.51 157.79 $187.30 1.14% .03% 1,431 82% ------------- ---------- ----------- ----------- ------------- -------------- ------------- ----------- 1992 .92 .86 156.93 $157.79 1.17% (.04)% 1,418 68% ------------- ---------- ----------- ----------- ------------- -------------- ------------- ----------- 1991 53.07 53.05 103.88 $156.93 1.16% (.02)% 1,350 66% ------------- ---------- ----------- ----------- ------------- -------------- ------------- ----------- 1990 (14.99) (14.02) 117.90 $103.88 1.10% .92 % 1,295 93% ------------- ---------- ----------- ----------- ------------- -------------- ------------- ----------- 1989 35.17 35.96 81.94 $117.90 1.07% .78 % 1,399 113% ------------- ---------- ----------- ----------- ------------- -------------- ------------- ----------- 1988 10.89 11.46 70.48 $ 81.94 1.09% .75 % 1,587 101% ------------- ---------- ----------- ----------- ------------- -------------- ------------- ----------- 1987 2.92 3.38 67.10 $ 70.48 1.11% .58 % 1,742 121% ------------- ---------- ----------- ----------- ------------- -------------- ------------- ----------- 1986 7.07 7.80 59.30 $ 67.10 1.09% 1.09 % 1,838 102% ------------- ---------- ----------- ----------- ------------- -------------- ------------- -----------
- ------------------------------------------------------------------------------- AGGRESSIVE EQUITY FUND: SEPARATE ACCOUNT NO. 3 (POOLED) (NOTE E) - -------------------------------------------------------------------------------
---------------------------------- INCOME AND EXPENSES ---------------------------------- NET INVESTMENT YEAR ENDED EXPENSES INCOME DEC. 31, INCOME (NOTE A) (LOSS) - ------------ -------- ---------- ------------ Jan. 1- Nov. 30, 1995 $.24 (.43) (.19) -------- ---------- ------------ 1994 $.19 (.43) (.24) -------- ---------- ------------ 1993* $.27 (.42) (.15) -------- ---------- ------------ 1992 $.32 (.40) (.08) -------- ---------- ------------ 1991 $.29 (.33) (.04) -------- ---------- ------------ 1990 $.28 (.21) .07 -------- ---------- ------------ 1989 $.29 (.17) .12 -------- ---------- ------------ 1988 $.17 (.14) .03 -------- ---------- ------------ 1987 $.18 (.17) .01 -------- ---------- ------------ 1986 $.15 (.15) .00 -------- ---------- ------------
(RESTUBBED TABLE CONTINUED FROM ABOVE)
CAPITAL CHANGES OPERATING STATISTICS --------------------------------------------------- --------------------------------------------------------- NET REALIZED AND NUMBER OF UNREALIZED NET NET ASSET NET ASSET RATIO OF RATIO OF NET UNITS GAINS INCREASE VALUE AT VALUE AT OPERATING INVESTMENT OUTSTANDING (LOSSES) ON (DECREASE) BEGINNING END OF EXPENSES TO INCOME (LOSS) AT END OF PORTFOLIO YEAR ENDED INVESTMENTS IN UNIT OF PERIOD PERIOD AVERAGE NET TO AVERAGE NET PERIOD (IN TURNOVER DEC. 31, (NOTE B) VALUE (NOTE C) (NOTE F) ASSETS ASSETS 000'S) RATE - ------------ ------------- ---------- ----------- ----------- ------------- -------------- ------------- ----------- Jan. 1- Nov. 30, 1995 9.28 9.09 33.69 $42.78 1.12% (.49)% 1,718 123% ------------- ---------- ----------- ----------- ------------- -------------- ------------- ----------- 1994 (1.37) (1.61) 35.30 $33.69 1.27% (.72)% 1,590 94% ------------- ---------- ----------- ----------- ------------- -------------- ------------- ----------- 1993* 4.42 4.27 31.03 $35.30 1.31% (.49)% 1,536 83% ------------- ---------- ----------- ----------- ------------- -------------- ------------- ----------- 1992 (1.15) (1.23) 32.26 $31.03 1.33% (.24)% 1,612 71% ------------- ---------- ----------- ----------- ------------- -------------- ------------- ----------- 1991 14.93 14.89 17.37 $32.26 1.28% (.17)% 1,309 63% ------------- ---------- ----------- ----------- ------------- -------------- ------------- ----------- 1990 1.22 1.29 16.08 $17.37 1.26% .46 % 644 48% ------------- ---------- ----------- ----------- ------------- -------------- ------------- ----------- 1989 4.94 5.06 11.02 $16.08 1.22% .86 % 578 92% ------------- ---------- ----------- ----------- ------------- -------------- ------------- ----------- 1988 .10 .13 10.89 $11.02 1.24% .23 % 626 103% ------------- ---------- ----------- ----------- ------------- -------------- ------------- ----------- 1987 (.36) (.35) 11.24 $10.89 1.26% .09 % 536 227% ------------- ---------- ----------- ----------- ------------- -------------- ------------- ----------- 1986 .08 .08 11.16 $11.24 1.23% .05% 398 162% ------------- ---------- ----------- ----------- ------------- -------------- ------------- -----------
9 CONDENSED FINANCIAL INFORMATION (CONT'D) - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- ADA FOREIGN FUND: SEPARATE ACCOUNT NO. 191 - -------------------------------------------------------------------------------
---------------------------------- INCOME AND EXPENSES ---------------------------------- NET YEAR ENDED EXPENSES INVESTMENT DEC. 31, INCOME (NOTE A) INCOME - ------------ -------- ---------- ------------ 1995 $.48 (.12) .36 -------- ---------- ------------ 1994 $.50 (.13) .37 -------- ---------- ------------ 1993 $.27 (.09) .18 -------- ---------- ------------ Mar.2- Dec. 31, 1992 $.39 (.08) .31 -------- ---------- ------------
(RESTUBBED TABLE CONTINUED FROM ABOVE)
CAPITAL CHANGES OPERATING STATISTICS --------------------------------------------------- --------------------------------------------------------- NET REALIZED AND RATIO OF NUMBER OF UNREALIZED NET NET ASSET NET ASSET INVESTMENT RATIO OF NET UNITS GAINS INCREASE VALUE AT VALUE AT OPERATING INVESTMENT OUTSTANDING (LOSSES) ON (DECREASE) BEGINNING END OF EXPENSES TO INCOME TO AT END OF PORTFOLIO YEAR ENDED INVESTMENTS IN UNIT OF PERIOD PERIOD AVERAGE NET AVERAGE NET PERIOD (IN TURNOVER DEC. 31, (NOTE B) VALUE (NOTE C) (NOTE F) ASSETS ASSETS 000'S) RATE - ---------- ------------- ---------- ----------- ----------- ------------- -------------- ------------- ----------- 1995 .94 1.30 13.01 $14.31 .84% 2.65% 4,769 N/A - ---------- ------------- ---------- ----------- ----------- ------------- -------------- ------------- ----------- 1994 (.44) (.07) 13.08 $13.01 0.98% 2.78% 5,537 N/A ------------- ---------- ----------- ----------- ------------- -------------- ------------- ----------- 1993 3.09 3.27 9.81 $13.08 1.04% 2.02% 4,220 N/A ------------- ---------- ----------- ----------- ------------- -------------- ------------- ----------- Mar.2- Dec. 31, 1992 (.50) (.19) 10.00 $ 9.81 1.05% 4.10% 1,692 N/A (Note D) (Note D) ------------- ---------- ----------- ----------- ------------- -------------- ------------- -----------
- ------------ NOTES: * Prior to July 22, 1993, Equitable Capital Management Corporation (Equitable Capital) served as the investment adviser to the Funds. On July 22, 1993, Alliance Capital Management L.P. acquired the business and substantially all of the assets of Equitable Capital and became the investment adviser to the Funds. A. Enrollment, annual administration and actuarial and quarterly record maintenance and report fees are not included above and did not affect any Unit Values. Defined benefit plan annual administration and actuarial and quarterly record maintenance and report fees reduced the number of Fund Units credited to participants; enrollment fees were generally deducted from contributions to the Program. B. See Note 2 to Financial Statements of Separate Account Nos. 3 (Pooled) and 4 (Pooled) and Separate Account Nos. 191 and 200, which may be found in the SAI. C. The Program became available beginning on January 1, 1968. The value for a Growth Equity Fund Unit was established at $10.00 on that date. The values for Aggressive Equity, and ADA Foreign Fund Units were established at $10.00 on May 1, 1985 and $10.00 on March 2, 1992, respectively, the dates on which those Funds were first made available under the Program. D. Annualized basis. E. As of the close of business on November 30, 1995, all amounts held in Separate Account No. 3 (Pooled) for the Aggressive Equity Fund were transferred to Separate Account No. 200 and were invested in Class A shares of the MFS Emerging Growth Fund. F. Income, expenses, gains and losses shown above pertain only to participants' accumulations attributable to the Program. Other plans also participate in the Growth Equity and Aggressive Equity Funds and may have operating results and other supplementary data different from those shown above. FUND UNIT VALUES Unit values for the Aggressive Equity Fund (reflecting only the value of units of Separate Account No. 200), the Equity Index Fund and the Lifecycle Funds are shown below.
LIFECYCLE AGGRESSIVE EQUITY INDEX FUND-- LIFECYCLE UNIT VALUE AS OF: EQUITY FUND FUND CONSERVATIVE FUND-- MODERATE - ----------------- ------------- ------------ --------------- --------------- December 31, 1994 -- $ 9.71 -- -- - ----------------- ------------- ------------ --------------- --------------- December 31, 1995 $42.62 $13.12 $10.59 $11.01 - ----------------- ------------- ------------ --------------- ---------------
10 - ------------------------------------------------------------------------------- REAL ESTATE FUND: Separate Account No. 30 (Pooled) - -------------------------------------------------------------------------------
---------------------------------- INCOME AND EXPENSES ---------------------------------- NET INVESTMENT YEAR ENDED EXPENSES INCOME DEC. 31, INCOME (NOTE A) (LOSS) - ------------ -------- ---------- ------------ 1995 $0.06 (.25) (.19) -------- ---------- ------------ 1994 $0.04 (.24) (.20) -------- ---------- ------------ 1993 $0.01 (.24) (.23) -------- ---------- ------------ 1992 $0.01 (.25) (.24) -------- ---------- ------------ 1991 $0.01 (.26) (.25) -------- ---------- ------------ 1990 $0.02 (.27) (.25) -------- ---------- ------------ 1989 $0.02 (.25) (.23) -------- ---------- ------------ 1988 $0.02 (.24) (.22) -------- ---------- ------------ 1987 $0.04 (.22) (.18) -------- ---------- ------------ Aug. 29- Dec. 31, 1986 $0.01 (0.07) (0.06) -------- ---------- ------------
(RESTUBBED TABLE CONTINUED FROM ABOVE)
CAPITAL CHANGES OPERATING STATISTICS -------------------------------------------------- --------------------------------------------------------- NET REALIZED AND RATIO OF NET NUMBER OF UNREALIZED NET UNIT VALUE RATIO OF INVESTMENT UNITS GAINS INCREASE AT UNIT VALUE OPERATING INCOME OR OUTSTANDING PORTFOLIO (LOSSES) ON (DECREASE) BEGINNING AT END OF EXPENSES TO (LOSS) TO AT END OF TURNOVER YEAR ENDED INVESTMENTS IN UNIT OF PERIOD PERIOD AVERAGE NET AVERAGE NET PERIOD (IN RATE (NOTE DEC. 31, (NOTE B) VALUE (NOTE C) (NOTE F) ASSETS ASSETS 000'S) E) - ------------ ------------- ---------- ----------- ---------- ------------- -------------- ------------- ----------- 1995 (.02) (.21) $10.89 $10.68 2.26% (1.67%) 371 N/A ------------- ---------- ----------- ---------- ------------- -------------- ------------- ----------- 1994 .65 .45 10.44 10.89 2.26% (1.87%) 311 N/A ------------- ---------- ----------- ---------- ------------- -------------- ------------- ----------- 1993 .22 (.01) 10.45 10.44 2.26% (2.20%) 408 N/A ------------- ---------- ----------- ---------- ------------- -------------- ------------- ----------- 1992 (.38) (.62) 11.07 10.45 2.30% (2.25%) 511 N/A ------------- ---------- ----------- ---------- ------------- -------------- ------------- ----------- 1991 (.84) (1.09) 12.16 11.07 2.21% (2.10%) 515 N/A ------------- ---------- ----------- ---------- ------------- -------------- ------------- ----------- 1990 .05 (0.20) 12.36 12.16 2.14% (1.96%) 530 N/A ------------- ---------- ----------- ---------- ------------- -------------- ------------- ----------- 1989 1.08 0.85 11.51 12.36 2.11% (1.93%) 584 N/A ------------- ---------- ----------- ---------- ------------- -------------- ------------- ----------- 1988 .89 0.67 10.84 11.51 2.12% (1.98%) 787 N/A ------------- ---------- ----------- ---------- ------------- -------------- ------------- ----------- 1987 .85 0.67 10.17 10.84 2.13% (1.71%) 732 N/A ------------- ---------- ----------- ---------- ------------- -------------- ------------- ----------- Aug. 29- Dec. 31, 1986 0.23 0.17 10.00 $10.17 2.06% (1.71%) 438 N/A (Note D) (Note D) ------------- ---------- ----------- ---------- ------------- -------------- ------------- -----------
- ------------ NOTES: A. Enrollment and quarterly record maintenance and report fees are not included above and did not affect Real Estate Fund Unit Values. Quarterly record maintenance and report fees reduced the number of Real Estate Fund Units credited to participants; enrollment fees were generally deducted from contributions to the Program. B. The change in the value of Separate Account No. 8 units owned by the Account and any realized gains (losses) from the redemption of such units are included in net realized and unrealized gain on investments--see Note 2 to Financial Statements of Separate Account No. 30 (Pooled), which may be found in the SAI. C. The value for a Real Estate Fund Unit was established at $10.00 on August 29, 1986, the date on which the Fund commenced operations. D. Annualized basis. E. The Real Estate Fund invests solely in units of Equitable's Separate Account Nos. 2A and 8 (Pooled); thus, there is no applicable portfolio turnover rate for the Real Estate Fund. F. The Real Estate Fund Unit Values shown above are based on the year-end values for Separate Account Nos. 2A and 8. However, the Unit Values used under the Program for determining Account Balances, processing transactions and calculating performance (including Account Balances, transactions and performance effected or reported on December 31) are based on the last Real Estate Fund Unit Value determined in each relevant period and, therefore, such Unit Values reflect the values of Separate Account Nos. 2A and 8 as of dates prior to the last day of such periods. Income, expenses, gains and losses shown above pertain only to participants' accumulations attributable to the Program. Other plans also participate in Separate Account No. 30 (Pooled) and may have operating results and other supplementary data different from those shown above. 11 INVESTMENT OPTIONS - ------------------------------------------------------------------------------- Ten INVESTMENT OPTIONS are available under the Program. Seven of the Investment Options are Funds, the Real Estate Fund and six which we call the Equity Funds. The six Equity Funds are: the Growth Equity Fund, the Aggressive Equity Fund, the ADA Foreign Fund, the Equity Index Fund, the Lifecycle Fund--Conservative and the Lifecycle Fund--Moderate. The three additional Investment Options are guaranteed options: three and five year Guaranteed Rate Accounts and the Money Market Guarantee Account. See our separate prospectus for a detailed description of the Equity Index Fund and the Lifecycle Funds. THE EQUITY FUNDS - ------------------------------------------------------------------------------- Each of the Equity Funds has a different investment objective that it seeks to achieve by following specific investment policies. We have the right to change the investment objectives of the Growth Equity Fund, subject to the approval of the New York State Insurance Department, although we do not anticipate making such a change. The investment objectives of the Aggressive Equity, ADA Foreign, Equity Index and the Lifecycle Funds, including the choice of the corresponding underlying funds, can only be changed by the Trustees. THERE IS NO ASSURANCE THAT THE INVESTMENT OBJECTIVES OF ANY OF THE FUNDS WILL BE MET. See Risks and Investment Techniques--Equity Funds. - ------------------------------------------------------------------------------- THE GROWTH EQUITY FUND - ------------------------------------------------------------------------------- OBJECTIVE. The Growth Equity Fund seeks to achieve long-term growth of capital by investing in the securities of carefully selected companies we believe will share in the growth of our nation's economy-- and those of other leading industrialized countries--over a long period. The Growth Equity Fund invests in securities of companies of any capitalization but is generally invested primarily in securities of intermediate to large sized companies. INVESTMENT POLICIES. The Growth Equity Fund invests primarily in common stocks. Smaller amounts may be invested in other equity-type securities, such as convertible preferred stocks or convertible debt instruments. The Growth Equity Fund may use its assets to make non-equity investments. These could include non-participating and non-convertible preferred stocks, bonds and debentures. Some non-equity investments may carry certain equity features such as conversion or exchange rights or warrants for the acquisition of stocks of the same or different issuers or participation based on revenues, sales or profits. If, in light of economic conditions and the general level of stock prices, it appears that the Fund's investment objectives will not be met by buying equities, non-equity investment may be substantial. The Fund may invest up to 10% of its total assets in restricted securities. The Growth Equity Fund may make temporary investments in government obligations, short-term commercial paper and other money market instruments, either directly or through our Separate Account No. 2A. While equity investments will be made primarily in securities of United States companies or foreign companies doing substantial business here, up to 15% of the value of the Fund's assets may be invested in the securities of established foreign companies without substantial business in the United States. See Risks and Investment Techniques--Equity Funds for more information on restricted securities, Separate Account No. 2A, securities of medium and smaller sized companies, foreign securities, investment concentration, money market investments and convertible securities. 12 - ------------------------------------------------------------------------------- THE AGGRESSIVE EQUITY FUND - ------------------------------------------------------------------------------- OBJECTIVE. The Aggressive Equity Fund seeks to achieve long-term growth of capital by investing in a mutual fund designated by the Trustees, the MFS Emerging Growth Fund, which will, in turn, invest primarily in companies, that are early in their life cycle but which have the potential to become major enterprises (emerging growth companies). There is no assurance that this objective will be met. INVESTMENT POLICIES. The Aggressive Equity Fund invests 100 percent of its assets in Class A shares of the MFS Emerging Growth Fund. Prior to December 1, 1995, the Aggressive Equity Fund invested in our Separate Account No. 3 (Pooled). THE MFS EMERGING GROWTH FUND. The MFS Emerging Growth Fund's investment objective is to provide long-term growth of capital. Dividend and interest income from portfolio securities, if any, is incidental to the Fund's investment objective of long-term growth of capital. The Fund's policy is to invest primarily (i.e., at least 80% of its assets under normal circumstances) in common stocks of companies that are early in their life cycle but which MFS believes have the potential to become major enterprises (emerging growth companies). MFS believes that such companies generally would be expected to show earnings growth over time that is well above the growth rate of the overall economy and the rate of inflation, and would have the products, technologies, management, market and other opportunities which are usually necessary to become more widely recognized as growth companies. Emerging growth companies can be of any size, and the Fund may invest in larger or more established companies whose rates of earnings growth are expected to accelerate because of special factors, such as rejuvenated management, new products, changes in consumer demand, or basic changes in the economic environment. The nature of investing in emerging growth companies involves greater risk than is customarily associated with investments in more established companies. Emerging growth companies often have limited product lines, markets or financial resources, and they may be dependent on one-person management. In addition, there may be less research available on many promising small and medium sized emerging growth companies, making it more difficult to find and analyze these companies. The securities of emerging growth companies may have limited marketability and may be subject to more abrupt or erratic market movements than securities of larger, more established growth companies or the market averages in general. Shares of the Fund, therefore, are subject to greater fluctuation in value than shares of a conservative equity fund or of a growth fund which invests entirely in proven growth stocks. For further information about the MFS Emerging Growth Fund, including risk factors, see the MFS Emerging Growth Fund's prospectus and Statement of Additional Information. Participants and employers should carefully read the prospectus of the MFS Emerging Growth Fund before they allocate contributions or transfer amounts to the Aggressive Equity Fund. The MFS Series Trust II ("Trust") was organized as a Massachusetts business trust and is registered under the 1940 Act as an open-end management investment company. As a series mutual fund, the Trust issues shares in different investment portfolios, one of which is the MFS Emerging Growth Fund, a diversified series of the Trust. The investment adviser of the MFS Emerging Growth Fund is MFS. VOTING RIGHTS. The MFS Emerging Growth Fund does not hold annual meetings of shareholders. If a meeting of shareholders is held, they may vote on such matters as election of trustees and any other matters requiring a vote by shareholders under the 1940 Act. Equitable Life will vote the shares of the MFS Emerging Growth Fund allocated to the Aggressive Equity Fund in accordance with instructions received from employers, participants or trustees, as appropriate, in the Aggressive Equity Fund. Each 13 employer, participant or trustee, as appropriate, will be allowed to instruct Equitable Life on how to vote shares of the MFS Emerging Growth Fund in proportion to their interest in the Aggressive Equity Fund as of the record date for the shareholders meeting. Equitable Life will abstain from voting shares as to which no instructions are received. Employers, participants or trustees will receive periodic reports relating to the MFS Emerging Growth Fund and proxy materials together with a voting instruction form, in connection with shareholders meetings. The costs of soliciting voting instructions from participants will be borne by the MFS Emerging Growth Fund. - ------------------------------------------------------------------------------- THE ADA FOREIGN FUND - ------------------------------------------------------------------------------- OBJECTIVE. The ADA Foreign Fund invests 100 percent of its assets in shares of the Templeton Foreign Fund which, in turn, seeks long-term capital growth through a flexible policy of investing primarily in common stocks of companies outside the United States. There is no assurance that this objective will be met. INVESTMENT POLICIES. The ADA Foreign Fund invests 100 percent of its assets in shares of the Templeton Foreign Fund. Prior to May 1, 1996, the ADA Foreign Fund invested approximately 95% of its assets in shares of the Templeton Foreign Fund and the balance in our Separate Account No. 2A. TEMPLETON FOREIGN FUND. The Templeton Foreign Fund seeks long-term capital growth through a flexible policy of investing in stocks and debt obligations of companies and governments outside the United States. Although the Templeton Foreign Fund generally invests in common stock, it may also invest in preferred stock and certain debt securities, rated or unrated, such as convertible bonds and bonds selling at a discount. The Templeton Foreign Fund may for temporary defensive purposes invest without limit in U.S. Government securities, bank time deposits in the currency of any major nation, commercial paper and repurchase agreements with banks or broker-dealers. The Templeton Foreign Fund is a portfolio of Templeton Funds, Inc., a series fund which was incorporated under Maryland law in 1977 and is registered under the 1940 Act as an open-end diversified management investment company. As a series mutual fund, Templeton Funds, Inc. issues shares in two investment portfolios, although the Templeton Foreign Fund is the only Templeton fund available under the ADA program. The Templeton Foreign Fund had total net assets of $7.5 billion as of December 31, 1995. The investment manager of the Templeton Foreign Fund is Templeton Global Advisors Ltd., Nassau, Bahamas, an indirect wholly-owned subsidiary of Franklin Resources, Inc. For additional information about the Templeton Foreign Fund, including risk factors, see the Templeton Foreign Fund's prospectus and Statement of Additional Information. Free copies of those documents may be obtained by calling an Equitable Life Account Executive. Participants and employers should carefully read the prospectus of the Templeton Foreign Fund before they allocate contributions or transfer amounts to the ADA Foreign Fund. VOTING RIGHTS. Templeton Funds, Inc. is not required under state law to hold annual meetings of shareholders and may elect not to do so. If a meeting of shareholders is held, they may vote on such matters as election of directors and any other matters requiring a vote by shareholders under the 1940 Act. Equitable Life will vote the shares of the Templeton Foreign Fund allocated to the ADA Foreign Fund in accordance with instructions received from employers, participants or trustees, as the case may be, in the ADA Foreign Fund. Each participant for whom we maintain records and, in other cases, the employer or trustee, will be allowed to instruct Equitable Life on how to vote shares of the Templeton Foreign Fund in proportion to his or her interest in the ADA Foreign Fund as of the record date for the shareholder meeting. Equitable Life will abstain from voting shares as to which no instructions are 14 received. Participants, employers or trustees, as the case may be, in the ADA Foreign Fund will receive periodic reports relating to the Templeton Foreign Fund and proxy material, together with a voting instruction form, in connection with shareholder meetings. By agreement, the responsibility for soliciting such voting instructions and the costs of solicitation will be borne by Templeton Funds, Inc. - ------------------------------------------------------------------------------- THE EQUITY INDEX FUND - ------------------------------------------------------------------------------- OBJECTIVE. The Equity Index Fund seeks to achieve a total return which parallels that of the Standard & Poor's 500 Composite Stock Price Index (the "S&P 500 Index") by investing in a mutual fund designated by the Trustees, the Seven Seas Series S&P 500 Index Fund (a portfolio of The Seven Seas Series S&P Index Fund -- "The Seven Seas Series Fund"). There is no assurance that this objective will be met. INVESTMENT POLICIES. The Equity Index Fund will invest 100 percent of its assets in shares of the Seven Seas S&P 500 Index Fund. THE SEVEN SEAS S&P 500 FUND. The Seven Seas S&P 500 Index Fund's investment objective is to emulate the total return of the S&P 500 Index. The Seven Seas S&P 500 Index Fund seeks to achieve its objective by investing in all 500 stocks in the S&P 500 Index in proportion to their weighting in the S&P 500 Index. To the extent that all 500 stocks cannot be purchased, the Seven Seas S&P 500 Index Fund will purchase a representative sample of the stocks listed in the S&P 500 Index in proportion to their weightings. The Seven Seas Series Fund was organized as a Massachusetts business trust and is registered under the 1940 Act as an open-end diversified management investment company. As a series mutual fund, The Seven Seas Series Fund issues shares in different investment portfolios, one of which is the Seven Seas S&P 500 Index Fund. The investment adviser of the Seven Seas S&P 500 Index Fund is State Street. "S&P 500" IS A TRADEMARK OF STANDARD & POOR'S CORPORATION THAT HAS BEEN LICENSED FOR USE BY THE SEVEN SEAS SERIES FUND. THE SEVEN SEAS SERIES FUND IS NOT SPONSORED, ENDORSED, SOLD OR PROMOTED BY STANDARD & POOR'S CORPORATION, AND STANDARD & POOR'S CORPORATION MAKES NO REPRESENTATION REGARDING THE ADVISABILITY OF INVESTING IN THE SEVEN SEAS SERIES FUND. The S&P 500 Index is composed of 500 common stocks which are chosen by Standard & Poor's Corporation to best capture the price performance of a large cross-section of the United States publicly traded stock market. The S&P 500 Index is structured to approximate the general distribution of industries in the United States economy. The inclusion of a stock in the S&P 500 Index in no way implies that Standard & Poor's Corporation believes the stock to be an attractive investment, nor is Standard & Poor's a sponsor or in any way affiliated with the Seven Seas S&P 500 Index Fund or the Equity Index Fund. The 500 securities, most of which trade on the New York Stock Exchange, represent approximately 75 percent of the market value of all common stocks. Each stock in the S&P 500 Index is weighted by its market capitalization. That is, each security is weighted by its total market value relative to the total market values of all the securities in the S&P 500 Index. Component stocks included in the S&P 500 Index are chosen with the aim of achieving a distribution at the index level representative of the various components of the United States gross national product and therefore do not represent the 500 largest companies. Aggregate market value and trading activity are also considered in the selection process. A limited percentage of the S&P 500 Index may include Canadian securities. No other foreign securities are eligible for inclusion. For further information about the Seven Seas S&P 500 Index Fund, including risk factors, see The Seven Seas Series Fund's prospectus and the related statement of additional information. Free additional copies 15 of The Seven Seas Series Fund prospectus and copies of the related statement of additional information may be obtained by calling an Equitable Life Account Executive. Participants and Employers should carefully read the prospectus of The Seven Seas Series Fund before they allocate contributions or transfer amounts to the Equity Index Fund. VOTING RIGHTS: The Seven Seas Series Fund does not hold annual meetings of shareholders. If a meeting of shareholders is held, they may vote on such matters as election of trustees and any other matters requiring a vote by shareholders under the 1940 Act. Equitable Life will vote the shares of the Seven Seas S&P 500 Index Fund allocated to the Equity Index Fund in accordance with instructions received from employers, participants or trustees, as appropriate, in the Equity Index Fund. Each employer, participant or trustee, as appropriate, will be allowed to instruct Equitable Life on how to vote shares of the Seven Seas S&P 500 Index Fund in proportion to their interest in the Equity Index Fund as of the record date for the shareholder meeting. Equitable Life will abstain from voting shares for which no instructions are received. Employers, participants or trustees will receive periodic reports about the Seven Seas S&P 500 Index Fund and proxy materials together with a voting instruction form, in connection with shareholder meetings. The costs of soliciting voting instructions from participants will be borne by the Seven Seas Series Fund. - ------------------------------------------------------------------------------- LIFECYCLE FUNDS--CONSERVATIVE AND MODERATE - ------------------------------------------------------------------------------- Each Lifecycle Fund is a separate account of Equitable Life. Contributions may be made to the Lifecycle Fund--Conservative and/or the Lifecycle Fund--Moderate. Each of the Lifecycle Funds invests in a Lifecycle Fund Group Trust. Each such Group Trust has identical investment objectives and policies to the Lifecycle Fund to which it relates. In turn each of the Lifecycle Fund Group Trusts invests in a mix of Underlying Funds. - ------------------------------------------------------------------------------- THE LIFECYCLE FUND GROUP TRUSTS - ------------------------------------------------------------------------------- The Lifecycle Funds Group Trusts are collective investment funds maintained by State Street. Each Lifecycle Fund Group Trust is organized as a common law trust under Massachusetts law, and, because of exclusionary provisions, is not subject to regulation under the 1940 Act. There are two Lifecycle Fund Group Trusts: the Lifecycle Fund Group Trust-Conservative and the Lifecycle Fund Group Trust-Moderate. State Street serves as the trustee and investment manager to each of these Group Trusts. Each of the Lifecycle Fund Group Trusts attempts to achieve its investment objective by investing in a mix of underlying collective investment funds (the Underlying Funds) maintained by State Street and offered exclusively to tax exempt retirement plans. - ------------------------------------------------------------------------------- LIFECYCLE FUND GROUP TRUST--CONSERVATIVE - ------------------------------------------------------------------------------- OBJECTIVE. The Lifecycle Fund Group Trust--Conservative seeks to provide current income and a low to moderate growth of capital. There is no assurance that this objective will be met. INVESTMENT POLICIES. The Lifecycle Group Trust--Conservative seeks to achieve its objective by investing 100% of its assets in units of a mix of Underlying Funds in accordance with certain target percentage weightings. The table below shows the mix of Underlying Funds targeted by the Lifecycle Fund Group Trust--Conservative. 16
S&P 500 Flagship Fund ...................15% Russell 2000 Fund ....................... 5% Daily EAFE Fund ......................... 10% Daily Government/Corporate Bond Fund ... 50% Short Term Investment Fund .............. 20%
The target percentages shown above are reviewed annually by the ADA Trustees and may be revised as recommended, subject to State Street's approval. State Street, as investment manager of the Lifecycle Fund Group Trust--Conservative, from time to time makes adjustments in the mix of Underlying Funds, as needed to maintain, to the extent practicable, the target percentages in each of the Underlying Funds. - ------------------------------------------------------------------------------- LIFECYCLE FUND GROUP TRUST--MODERATE - ------------------------------------------------------------------------------- OBJECTIVE. The Lifecycle Fund Group Trust--Moderate seeks to provide growth of capital and a reasonable level of current income. There is no assurance that this objective will be met. INVESTMENT POLICIES. The Lifecycle Fund Group Trust--Moderate seeks to achieve its investment objective by investing 100% of its assets in units of a mix of Underlying Funds in accordance with certain target percentage weightings. The table below shows the mix of Underlying Funds targeted by the Lifecycle Fund Group Trust--Moderate.
S&P 500 Flagship Fund ...................35% Russell 2000 Fund ....................... 10% Daily EAFE Fund ......................... 15% Daily Government/Corporate Bond Fund ... 30% Short Term Investment Fund .............. 10%
The target percentages shown above are reviewed annually by the ADA Trustees and may be revised as recommended, subject to State Street's approval. State Street, as investment manager of the Lifecycle Fund Group Trust--Moderate, from time to time makes adjustments in the mix of Underlying Funds as needed to maintain, to the extent practicable, the target percentages in each of the Underlying Funds. - ------------------------------------------------------------------------------- THE UNDERLYING FUNDS - ------------------------------------------------------------------------------- Like the Lifecycle Fund Group Trusts, the Underlying Funds are collective investment funds maintained by State Street and offered exclusively to tax exempt retirement plans. Unlike the Lifecycle Fund Group Trusts, however, which are available only under the ADA Program, the Underlying Funds may receive contributions from other tax exempt retirement plans. For a description of the Underlying Funds in which the Lifecycle Fund Group Trusts invest, see our separate prospectus for the Lifecycle Funds -- Conservative and Moderate. - ------------------------------------------------------------------------------- RISKS AND INVESTMENT TECHNIQUES--EQUITY FUNDS - ------------------------------------------------------------------------------- You should be aware that any investment in securities carries with it a risk of loss. The investment objective and policies of the Growth Equity Fund may affect the return of the Fund. Additionally, there are market and financial risks inherent in any securities investment. By market risks, we mean factors which do not necessarily relate to a particular issuer but which affect the way markets, and securities within those markets, perform. We sometimes describe market risk in terms of volatility, that is, the range and frequency of market value changes. Market risks include such things as changes in interest rates, general economic conditions and investor perceptions regarding the value of debt and equity securities. 17 By financial risks we mean factors associated with a particular issuer which may affect the price of its securities, such as its competitive posture, its earnings and its ability to meet its debt obligations. The risk factors and investment techniques associated with the Growth Equity Fund are stated below. See the prospectuses and Statements of Additional Information for the MFS Emerging Growth Fund, Templeton Foreign Fund and the Seven Seas S&P 500 Fund for additional information on the special risks of investment in these funds through the Aggressive Equity Fund, the ADA Foreign Fund and the Equity Index Fund, respectively, and see our separate prospectus for information on the special risks of investing in the Equity Index and Lifecycle Funds. FOREIGN SECURITIES. The Growth Equity Fund may make a limited portion of its investments in the securities of established foreign companies which do not do substantial business in the United States. For many foreign securities, there are dollar-denominated American Depository Receipts (ADRs), which are traded in the United States on exchanges or over-the-counter, and are issued by domestic banks. The Fund may invest in foreign securities directly and through ADRs and may hold some foreign securities outside of the US. ADRs do not lessen the foreign exchange risk inherent in investing in the securities of foreign issuers. However, by investing in ADRs rather than directly in foreign issuers' stock, the Fund will avoid currency risks during the settlement period for either purchases or sales. Foreign investments may involve risks not present in domestic investments, such as changes in the political or economic climate of countries in which companies do business. Foreign securities may be less liquid or subject to greater price volatility than securities of domestic issuers, and foreign accounting, auditing and disclosure standards may differ from domestic standards. There may be less regulation in foreign countries of stock exchanges, brokers, banks, and listed companies than in the United States. The value of foreign investments may rise or fall because of changes in currency exchange rates or exchange controls. RESTRICTED SECURITIES. The Growth Equity Fund may make investments in restricted securities. Restricted securities are generally less liquid than registered securities and market quotations for such securities may not be readily available. The Fund may not be able to sell restricted securities except pursuant to registration under applicable Federal and State securities laws or pursuant to Securities and Exchange Commission rules which limit their sale to certain purchasers and may require that they be held by the Funds for a specified period of time prior to resale. Because of these restrictions, at times the Fund may not be readily able to sell them at fair market value. SECURITIES OF MEDIUM AND SMALLER SIZED COMPANIES. In addition to large sized companies, the Growth Equity Fund may invest in securities of medium and smaller sized companies. For this purpose the term medium and smaller sized companies means companies with $500 million to $1.5 billion in capitalization. Medium and smaller sized companies may be dependent on the performance of only one or two products. Such companies may be vulnerable to competition from larger companies with greater resources and to economic conditions affecting their market sector. Therefore, consistent earnings may not be as likely in small companies as in large companies. Such companies may also be more dependent on access to equity markets to raise capital than larger companies with greater ability to support debt. Small and medium sized companies may be new, without long business or management histories, and perceived by the market as unproven. Their securities may be held primarily by insiders or institutional investors, which may have an impact on marketability. The price of these stocks may rise and fall more frequently and to a greater extent than the overall market. INVESTMENT CONCENTRATION. From time to time, the equity holdings in the Growth Equity Fund may be concentrated in the securities of a relatively small number of issuers. In no event will an investment be made for the Fund in the securities of one issuer if such investment would cause more than 10% of the 18 book value of the Growth Equity Fund to be invested in the securities of that issuer, and no investment will be made for the Fund if such investment would cause more than 40% of the book value of the Fund to be invested in the securities of four or fewer issuers. This strategy of investment concentration may increase an investor's risk of loss in the event of a decline in the value of one of these securities. As of December 31, 1995, 28.5% (of market value) of the Growth Equity Fund was held in the stocks of four issuers. See Separate Account No. 4 (Pooled) Statement of Investments and Net Assets in the SAI. MONEY MARKET INVESTMENTS. The Growth Equity Fund may make temporary investments in government obligations, short-term commercial paper and other money market instruments. They may buy these directly or acquire units in our Separate Account No. 2A. We maintain Separate Account No. 2A to provide a more efficient means for certain of our separate accounts to invest cash positions on a pooled basis at no additional cost. Separate Account No. 2A seeks to obtain a high level of current income, preserve its assets and maintain liquidity. It invests only in short-term securities which mature in 60 days or less from the date of purchase or which are subject to repurchase agreements requiring repurchase in 60 days or less. In repurchase agreements, Separate Account No. 2A buys securities from a seller, usually a bank or brokerage firm, with the understanding that the seller will repurchase the securities at a higher price at a future date. Such transactions afford an opportunity for Separate Account No. 2A to earn a fixed rate of return on available cash at minimal market risk, although the account may be subject to various delays and risks of loss if the seller is unable to meet its obligation to repurchase. Units in Separate Account No. 2A are not registered under the Securities Act of 1933. The kinds of direct investments the Fund makes in money market instruments will be payable only in United States dollars and will consist principally of securities issued or guaranteed by the United States Government or one of its agencies or instrumentalities, negotiable certificates of deposit, bankers' acceptances or bank time deposits, repurchase agreements (covering securities issued or guaranteed by the United States Government or one of its agencies or instrumentalities, certificates of deposit or bankers' acceptances), commercial paper that is rated Prime-1 by Moody's Investors Service ("Moodys") or A-1 or A-1 Plus by Standard & Poor's Corporation ("S&P"), unrated commercial paper, master demand notes or variable amount floating rate notes of any issuer that has an outstanding issue of unsecured debt that is currently rated Aa or better by Moody's or AA or better by S&P, and any debt securities issued or guaranteed by an issuer, which is currently rated Aa or better by Moody's or AA or better by S&P, with less than one year to maturity. Such investments may include Eurodollars, certificates of deposit and commercial paper issued by Schedule B Banks. CONVERTIBLE SECURITIES. The Growth Equity Fund may invest in convertible preferred stocks or convertible debt instruments. Convertible securities contain both debt and equity features. Because of their debt element, they may provide some protection when stock prices decline. Nevertheless, convertible securities may lose significant value in periods of extreme market volatility. - ------------------------------------------------------------------------------- HOW WE CALCULATE THE VALUE OF AMOUNTS ALLOCATED TO THE EQUITY FUNDS - ------------------------------------------------------------------------------- CONTRIBUTIONS AND TRANSFERS: PURCHASE OF FUND UNITS. The portion of each contribution or transfer allocated to an Equity Fund will be used to purchase Units. Your interest in each Fund is represented by the value of the Units credited to your Account for that Fund. The number of Units purchased by a contribution or transfer to a Fund is calculated by dividing the amount allocated by the Unit Value calculated as of the close of business on the day we receive your contribution or transfer instruction. The number of Units credited to your Account will not vary because of any subsequent fluctuation in the Unit Value, but the value of a Unit fluctuates with the investment experience of the Fund. In other words, the Unit Value will reflect the investment income and realized and unrealized capital gains and losses of that Fund as well as the deductions and charges we make to the Fund. 19 HOW WE DETERMINE THE UNIT VALUE. We determine the Unit Value for each Equity Fund at the end of each business day. The Unit Value for each Fund is calculated by first determining a gross unit value, which reflects only investment performance, and then adjusting it for Fund expenses to obtain the Fund Unit Value. We determine the gross unit value by multiplying the gross unit value for the preceding business day by the net investment factor for that subsequent business day (for the Growth Equity Fund we also subtract any audit and custodial fees). We calculate the net investment factor as follows: o First, we take the value of the Fund's assets at the close of business on the preceding business day. o Next, we add the investment income and capital gains, realized and unrealized, that are credited to the assets of the Fund during the business day for which we are calculating the net investment factor. o Then we subtract the capital losses, realized and unrealized, charged to the Fund during that business day. o Finally, we divide this amount by the value of the Fund's assets at the close of the preceding business day. The Fund Unit Value is calculated on every business day by multiplying the Fund Unit Value for the last business day of the previous month by the net change factor for that business day. The net change factor for each business day is equal to (a) minus (b) where: (a) is the gross unit value for that business day divided by the gross unit value for the last business day of the previous month; and (b) is the charge to the Fund for that month for the daily accrual of fees and other expenses times the number of days since the end of the preceding month. For information on how we value the assets of the Equity Funds, see the SAI. The Aggressive Equity Fund's investments in the MFS Emerging Growth Fund, the ADA Foreign Fund's investment in the Templeton Foreign Fund and the Equity Index Fund's investment in the Seven Seas S&P 500 Index Fund will be valued at the underlying mutual fund's net asset value per share. The investments made by each of the Lifecycle Funds in units of the corresponding Lifecycle Fund Group Trust will be valued at the net asset value of the units of such Lifecycle Fund Group Trust. Investments made by each Lifecycle Fund Group Trust in the Underlying Funds will be valued at the Underlying Fund's net asset value per unit. The units of each Underlying Fund are valued daily. For a more detailed description of how the Underlying Funds are valued, see our separate prospectus for the Lifecycle Funds -- Conservative and Moderate. 20 THE REAL ESTATE FUND - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- REAL ESTATE FUND OBJECTIVES AND INVESTMENT POLICIES - ------------------------------------------------------------------------------- OBJECTIVE. The Real Estate Fund, Separate Account No. 30, invests primarily, though not exclusively, in units of our Separate Account No. 8 (the "Prime Property Fund"), which in turn invests primarily in real property. The Prime Property Fund seeks to achieve a stable rate of return over an extended period of time through rental income and appreciation of real property values. In addition, the Real Estate Fund seeks to maintain a level of liquidity consistent with anticipated distributions and transfers. The Real Estate Fund's liquid assets typically range from 0 to 10% of its total assets, although the actual level of liquidity will depend on contributions, distributions and transfers. See Special Risks Related to the Real Estate Fund. THERE IS NO ASSURANCE THAT THE INVESTMENT OBJECTIVES OF THE REAL ESTATE FUND OR OF PRIME PROPERTY FUND WILL BE MET. INVESTMENT POLICIES OF PRIME PROPERTY FUND. Prime Property Fund seeks the acquisition and long-term ownership of high-grade, income-producing real property. Prime Property Fund seeks to invest in properties that are located in strong rental markets and have continuous potential for resale. Properties are located throughout the United States. The distribution of investments by property type and by location of properties is expected to change from time to time. For additional information about the distribution of investments, see Prime Property Fund Investments in the SAI. In selecting a property for Prime Property Fund, we consider its location, potential income stream, cost, potential for increasing rental income and capital appreciation, resale marketability and architectural and other physical attributes. We also evaluate the risks, including environmental risks, involved with the property, as well as the probability and potential impact of changes in the local economy. There are no limits as to how much Prime Property Fund can invest in any one property. Currently, however, we do not intend to invest more than 10% of Prime Property Fund's assets in any one property. Prime Property Fund may invest in construction and mortgage loans receivable and notes receivable. Mortgages may be accepted as partial consideration for properties sold. Prime Property Fund acquires both existing and developmental properties. Prime Property Fund will also enter into forward commitments, under which it agrees to purchase a property upon completion of construction or leasing. Prime Property Fund does not currently expect to invest more than 10% of its assets in developmental properties. Prime Property Fund participates in joint ventures, particularly with regard to large properties. In general, co-venturers will be real estate developers, and joint ventures with them may involve property development projects. We seek to form joint ventures with persons and companies who, because of our experience with them or investigation into their financial condition and business history, we regard as experienced and financially responsible. Prime Property Fund may issue construction and mortgage loans on a fixed or variable rate basis in connection with joint ventures in which it participates. If Prime Property Fund issues fixed rate loans, it may seek to stabilize the market value of such loans by engaging in interest rate hedging transactions, to the extent permitted under applicable regulatory requirements. Prime Property Fund may use mortgage financing to acquire properties, may mortgage properties after acquisition, may acquire properties subject to mortgages and may enter into joint ventures or other arrangements that require mortgage financing. There is no limit on mortgage indebtedness with respect to any one property. Prime Property Fund may also borrow money in order to acquire new properties or improve existing investments. These borrowings may have recourse to wholly-owned properties or may be secured by the general credit of the Fund and thus have recourse to the entire Fund. During the period 21 from 1986 through 1995 Prime Property Fund's total borrowings secured by wholly-owned properties ranged from 6.2% to 17.9% of the total portfolio value. Properties held by joint ventures may also be mortgaged. For more information regarding borrowings secured by wholly-owned properties see Prime Property Fund Investments in the SAI. Prime Property Fund may borrow in order to provide working capital for repairs and improvements and to meet other cash flow requirements. Prime Property Fund does not borrow in order to meet investors' withdrawal requests. Consistent with Prime Property Fund's investment objectives, it may engage in transactions and invest in properties other than or in addition to those described above. Prime Property Fund does not seek a specified holding period for the properties it acquires. Prime Property Fund will buy and sell properties at any time; in general, however, it seeks to hold properties for long-term investment. Most properties are managed by us or our affiliates. At December 31, 1995 independent managing and leasing agents managed properties representing approximately 33.8% of aggregate appraised values. INVESTMENT RISKS RELATED TO PRIME PROPERTY FUND. Prime Property Fund is subject to the risks generally incident to the ownership of real property. These include the uncertainty of cash flow, the need to meet fixed and other obligations, shifts in real estate markets in general and in local markets in particular, adverse changes in economic and social conditions, including demographic trends, changes in operating expenses, including real estate taxes, changes in tax, zoning, building, environmental and other laws, losses due to nonpayment of rent, other uninsured losses and other risks beyond our control. However, we believe that the large number of properties held in Prime Property Fund and their geographic and use diversification provide a measure of protection against these risks. Investments in developmental properties are subject to additional risks, which include cost overruns, construction delays, difficulties in finding suitable tenants and delays in fully renting the property. Joint ventures may be vulnerable to losses as a result of a joint venturer's financial difficulties. In addition, the joint venturer may at times have objectives that are contrary to those of Prime Property Fund. Construction loans may be vulnerable to losses due to a developer's financial difficulties. In general, construction loans will not be personal obligations of the borrower, and Prime Property Fund will look solely to the underlying property in case of default. Other liens such as mechanics' liens may have priority over Prime Property Fund's security interest in the property. INVESTMENT POLICIES RELATED TO LIQUID ASSETS. A portion of the Real Estate Fund assets may be held in liquid assets. The portion of the Fund for which liquidity is the investment objective may be invested in units of our Separate Account No. 2A. See Money Market Investments under Risks and Investment Techniques--Equity Funds. In addition, the Real Estate Fund may invest directly in government obligations, short-term commercial paper and other money market instruments of the types described above. Prime Property Fund may also invest in these short-term securities directly or through investment in units of Separate Account No. 2A. The Real Estate Fund seeks to hold enough liquid assets to provide for expected withdrawals. These holdings could, however, tend to reduce the investment performance of the Fund as compared to that of Prime Property Fund or a fund fully invested in real estate. 22 - ------------------------------------------------------------------------------- SPECIAL RISKS RELATED TO THE REAL ESTATE FUND - ------------------------------------------------------------------------------- LIQUIDITY. There is no assurance that the Real Estate Fund will have sufficient liquidity to make distributions and transfers when requested under the Program or when required by law. From 1991 to June 1994 the Real Estate Fund was using substantially all of its available cash flow and liquid assets to pay participant withdrawal requests, and withdrawals were being delayed in accordance with the procedures described below. As of the date of this prospectus, the Real Estate Fund has sufficient liquidity and is paying participant withdrawals on a current basis. IN LIGHT OF THE RISKS AND POSSIBLE ILLIQUIDITY OF AN INVESTMENT IN THE REAL ESTATE FUND, YOU AS AN INDIVIDUAL PARTICIPANT SHOULD CONSIDER LIMITING THE AMOUNT YOU ALLOCATE TO IT, PARTICULARLY AS YOU NEAR RETIREMENT. In considering this matter, you should take into account the other assets in your investment portfolio, both in your plan and elsewhere, and the distributions you anticipate taking from your plan in the foreseeable future. If the Real Estate Fund does not have enough liquid assets to pay all requested withdrawals, it will withdraw some or all of its interest from Prime Property Fund. We may postpone withdrawals from Prime Property Fund, however, for such time as we reasonably consider necessary to obtain the amount to be withdrawn or to protect the interests of other participants in Prime Property Fund. Withdrawals from Prime Property Fund have been restricted from time to time. See Procedures for Withdrawals, Distributions and Transfers--Special Rules for Distributions and Transfers from the Real Estate Fund in the SAI. INSURANCE RISKS. We believe that our casualty insurance would provide adequate compensation for accidental loss of property value. A possible exception would be loss in California resulting from earthquake; our insurance against such loss is limited to $80 million per occurrence and $80 million aggregate annually for all our California properties, including Prime Property Fund properties. We believe that the amount of earthquake insurance we carry is reasonable in light of the types of coverage available at acceptable prices. Prime Property Fund's properties are also covered under an umbrella liability policy that we believe is adequate for the portfolio in view of the types of coverage currently available at acceptable prices. - ------------------------------------------------------------------------------- CONFLICTS OF INTEREST RELATED TO PRIME PROPERTY FUND - ------------------------------------------------------------------------------- ACQUISITION OF PROPERTIES. Our wholly-owned subsidiary, Equitable Real Estate Investment Management, Inc. (Equitable Real Estate) is responsible for advising us as to all our real property acquisitions, management and sales. See Investment Management of the Real Estate Fund. We and Equitable Real Estate make acquisitions for ourselves and for our clients, including Prime Property Fund. Before acquisition, properties are allocated among Prime Property Fund, our other separate accounts (both pooled and single-client accounts), our general account, Equitable Real Estate's own account, our investment advisory account and Equitable Real Estate's advisory accounts. We seek to allocate properties among the accounts based on the accounts' investment policies, size, liquidity and diversification requirements, current availability of funds, current portfolio holdings and annually established investment goals. Equitable Real Estate's recommendations as to the allocation of properties are reviewed and approved by the Investment Committee of our Board of Directors. With limited exceptions, the Investment Committee has final authority over the acquisition and allocation of investment properties for all of our accounts. Two or more of those accounts may share some of those properties. Prime Property Fund does not now share any properties with any of our other accounts. It may do so in the future, however. Sharing real estate could give rise to situations in which our accounts have conflicting interests. 23 MANAGEMENT OF PROPERTIES. In certain cases, we or our affiliates may manage some of the properties held in Prime Property Fund. Pursuant to an exemption issued by the United States Department of Labor, we are permitted to charge market level fees, including a profit, for on-site management and leasing services we provide to properties in Prime Property Fund. During 1995, Equitable Real Estate received payments of $9.4 million for these types of services. We may have interests in properties held in our general account or in other accounts we manage that may be affected by the acquisition, operations or sale of Prime Property Fund properties. APPRAISAL OF PROPERTIES. The portfolio value for the Real Estate Fund depends heavily on the estimated market values of properties held by Prime Property Fund. Those estimates are based on our periodic reappraisals of the properties. Our fees will tend to increase as those appraised values increase. There is no assurance that any of the properties will ultimately be sold for their appraised values. See How We Calculate the Value of Amounts Allocated to the Real Estate Fund. SALE OF PROPERTIES. We may postpone withdrawals from Prime Property Fund under certain circumstances within our discretion (see Special Risks related to the Real Estate Fund), which may include a reasonable determination not to sell properties. Our fees depend on the aggregate value of net assets held in Prime Property Fund. - ------------------------------------------------------------------------------- HOW WE CALCULATE THE VALUE OF AMOUNTS ALLOCATED TO THE REAL ESTATE FUND - ------------------------------------------------------------------------------- CONTRIBUTIONS AND TRANSFERS: PURCHASE OF REAL ESTATE FUND UNITS. The Real Estate Fund accepts contributions and transfers only one day each month. All amounts transferred from other Investment Options or contributed directly to the Real Estate Fund will first be placed in the Money Market Guarantee Account and designated for investment in the Real Estate Fund. On the next day on which the Real Estate Fund accepts contributions, the amount designated for the Real Estate Fund, plus accrued interest, will be used to purchase Units in the Real Estate Fund. The Real Estate Fund accepts contributions as of the day its Unit Value is determined. If you wish to change your mind about contributing to the Real Estate Fund, you may do so before your contribution is transferred to the Real Estate Fund by sending us written instructions that the money being held in the Money Market Guarantee Account is no longer designated for investment in the Real Estate Fund. You should enclose a transfer form telling us where that money is to be allocated. We must receive your instructions by the close of business on the day the transfer is to occur in order for them to be effective. The transfer date will vary from month to month; therefore, we cannot ensure that your instructions will be effective unless we receive them by the first day of the month. The day on which the Real Estate Fund's Unit Value is determined depends each month on the day on which the value of Prime Property Fund is known. Prime Property Fund is valued only once each month, as of the last business day of the month. However, that value is normally not known until several days later because financial data must be calculated and reported from properties located throughout the country. When this process is completed, Units of the Real Estate Fund are valued. During the period between the end of the month and the day on which the Real Estate Fund Units are valued, which normally ranges from five to ten days, the value of Prime Property Fund real estate assets from the end of the preceding month may change, income will accrue and expenses will be incurred. As a result, the procedure described above will tend to favor Real Estate Fund Units being purchased to the extent that there have been net increases in the value of the underlying net assets between the end of the month and the date of the valuation. It will have the opposite effect to the extent of any decreases in the net assets during this period. LIQUIDATION OF REAL ESTATE FUND UNITS. UNITS IN THE REAL ESTATE FUND MAY BE LIQUIDATED ONLY AFTER THE END OF EACH CALENDAR QUARTER. The liquidation will occur after we know the value of Prime Property Fund 24 for the last day of that quarter and have determined the value of Real Estate Fund Units, which normally occurs five to ten days into the succeeding month. If you are taking a distribution or transfer from the Real Estate Fund, the amount distributed will not reflect any change in the value of Prime Property Fund assets attributable to the period between the last day of the quarter and the day your redemption occurs. To the extent that the value increases during that period, this will tend to disadvantage the person liquidating Units and to favor the holders of the remaining Units. HOW WE DETERMINE THE UNIT VALUE. We determine the Unit Value for the Real Estate Fund once each month, generally as of the close of business on the first business day after the day the unit value for Prime Property Fund is known. We first determine the gross unit value, which is equal to (a) plus (b) plus (c) divided by (d), where (a) is the aggregate value of all units of Prime Property Fund held by the Real Estate Fund determined as of the last business day of the preceding month; (b) is the aggregate value of all units of Separate Account No. 2A and cash or cash equivalents held by the Real Estate Fund, determined as of the close of business on the day the Real Estate Fund Unit Value is known; (c) is the net value of all other assets and liabilities of the Real Estate Fund, determined as of the close of business on the day the Real Estate Fund Unit Value is known; and (d) is the total number of Real Estate Fund Units outstanding. To obtain the Real Estate Fund Unit Value, we then adjust this gross unit value for Fund fees and other expenses at rates equal to 1/12 of the annual rates. See Deductions and Charges. Once we determine the Unit Value, it remains constant until set again the following month. Thus, any transactions that occur between determination dates (such as the withdrawal of fees) are processed using the Unit Value determined earlier that month. 25 THE GUARANTEED OPTIONS - ------------------------------------------------------------------------------- Contributions allocated to the Guaranteed Rate Accounts are invested through and guaranteed by major insurance companies. Contributions allocated to the Money Market Guarantee Account are backed by amounts held in Separate Account No. 43 (described below) and are guaranteed by Equitable Life's general account. The general accounts of Equitable Life and other major insurance companies support each company's respective insurance and annuity guarantees as well as their general obligations. The companies' general accounts, as part of their insurance and annuity operations, are subject to insurance laws and regulations of all jurisdictions in which they are authorized to do business. Because of applicable exemptive and exclusionary provisions, interests in or guaranteed by the general accounts have not been registered under the Securities Act of 1933 (the "1933 Act") nor are the general accounts investment companies under the the 1940 Act. Accordingly, neither the general accounts of Equitable Life or of any other major insurance company nor any interests therein, are subject to regulation under the 1933 Act or the 1940 Act, and we have been advised that the staff of the Securities and Exchange Commission has not made a review of the disclosures which are included in this prospectus for your information and which relate to the general accounts of Equitable Life and other major insurance companies and the Guaranteed Options. 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. - ------------------------------------------------------------------------------- GUARANTEED RATE ACCOUNTS - ------------------------------------------------------------------------------- NEW YORK LIFE GUARANTEES--NEW GUARANTEED RATE ACCOUNTS. For approximately a one-year period beginning August 2, 1995, all monies allocated to the Guaranteed Rate Accounts (GRAs) have been and will be invested through two group annuity contracts issued to the Trustees by New York Life Insurance Company ("New York Life"). These GRAs will remain invested with New York Life through maturity. At the end of the one-year period the Trustees may renew the arrangement with New York Life to provide the Program GRAs or they may arrange for other carriers to provide them. Call your Account Executive at that time for further information. All GRAs opened prior to August 2, 1995 will remain invested through maturity with the carrier that provided that GRA. Withdrawals, transfers, reallocations on maturity and benefit distributions from GRAs provided by other carriers are subject to Equitable Life's receipt of the proceeds of such GRA from such other carriers. All references in this prospectus and in the SAI to "The Guaranteed Rate Accounts" or to a "GRA" or "GRAs" shall be deemed to refer to the GRAs provided by New York Life or any other carrier which previously provided or may in the future provide Program GRAs, as appropriate. New York Life is a New York mutual life insurance company with its Home Office located at 51 Madison Ave, New York, New York 10010. Founded in 1845, New York Life is a Fortune 100 company with assets of approximately $59 billion held in its general account as of December 31, 1995. New York Life and its subsidiaries had assets under management as of December 31, 1995 of approximately $74 billion. THE GUARANTEES. Contributions to the GRAs are credited until maturity with the interest rate in effect on the date of receipt. The rate is expressed as an effective annual rate, reflecting daily compounding and the deduction of applicable asset-based fees. See Deductions and Charges. GRAs with maturities of approximately three and approximately five years are available under the Program. AMOUNTS ALLOCATED TO A GRA MAY GENERALLY NOT BE REMOVED PRIOR TO MATURITY. New guaranteed rates are offered each Wednesday and are available for a seven-day period. Interest accrues from the day after your contribution 26 or transfer is credited through the maturity date of the GRA, which is either approximately three or approximately five years from the end of the seven-day offering period. The amount of your contributions and the interest credited is guaranteed subject, however, to any penalties applicable upon premature withdrawal. See Premature Withdrawals and Transfers from a GRA in the SAI for a description of these penalties and when they apply. You may call us to obtain the current GRA rates. For a discussion of maturing GRAs, see Maturing GRAs in the SAI. PREMATURE WITHDRAWALS AND TRANSFERS. You may transfer amounts from other Investment Options to a GRA at the current guaranteed rate at any time. You may not make transfers from one GRA to another or from a GRA to one of the other Investment Options except at maturity. Likewise, you may not remove amounts from a GRA prior to maturity in order to obtain a plan loan, to make a hardship or in-service withdrawal, to receive benefits from a terminated plan or to transfer amounts to a new plan. Withdrawals from GRAs may be made before maturity if you are disabled, you attain age 70 1/2 , or you die. Certain other withdrawals from a GRA prior to maturity are permitted, but may be subject to a penalty. See Procedures for Withdrawals, Distributions and Transfers--Premature Withdrawals and Transfers from a GRA in the SAI. - ------------------------------------------------------------------------------- MONEY MARKET GUARANTEE ACCOUNT - ------------------------------------------------------------------------------- WE GUARANTEE THE MONEY MARKET GUARANTEE ACCOUNT. We guarantee the amount of your contributions and the interest credited to the Money Market Guarantee Account. We maintain Separate Account No. 43 (described below) in connection with these guarantees. All amounts held in the Money Market Guarantee Account are credited with the same rate of interest. The rate changes monthly and is expressed as an effective annual rate, reflecting daily compounding and the deduction of applicable asset-based fees. The rate will approximate the average over each calendar year of money market funds considered "domestic prime," that is, funds with the highest quality investments offered to investors, plus an amount which approximates the average expenses deducted from such funds, less .15% and the applicable Program Expense Charge. See Deductions and Charges. Call us to obtain the current monthly rate. On January 1 each year we set an annual minimum interest rate for this Account. The minimum guaranteed interest rate for 1996 is 2.5% (before applicable asset-based fees). SEPARATE ACCOUNT NO. 43. We will hold assets in Separate Account No. 43 sufficient to pay all principal and accrued interest under the Money Market Guarantee Account option, less applicable fees, in accordance with provisions of the New York Insurance Law which govern the operation of Separate Account No. 43. These provisions generally require that assets held in Separate Account No. 43 be valued at cost and not at market value. In accordance with the New York Insurance Law, the assets which we are required to hold in Separate Account No. 43 attributable to ADA participants will only be available to Program participants who have allocated amounts to the Money Market Guarantee Account and may not be used to satisfy obligations that may arise out of any other business we conduct. We have the right to remove assets from Separate Account No. 43 that are in excess of those attributable to the combined account values of all ADA participants. Your principal and accrued interest under the Money Market Guarantee Account will not fluctuate with the value of the assets we hold in Separate Account No. 43 and are guaranteed by us and backed by our general account assets. If the assets in Separate Account No. 43 prove insufficient to provide for payment of all principal and accrued interest under the Money Market Guarantee Account, we will transfer additional assets into Separate Account No. 43 to make up for any shortfall. Conversely, we may withdraw from Separate Account No. 43 any excess over the amount needed to provide for payment of all such principal and accrued interest. 27 CONTRIBUTIONS. Contributions may be made at any time and will earn the current rate from the day after the contribution is credited through the end of the month or, if earlier, the day of transfer or withdrawal. Balances in the Account at the end of the month automatically begin receiving interest at the new rate until transferred or withdrawn. We guarantee the amount of your contributions and the interest credited. DISTRIBUTIONS, WITHDRAWALS, AND TRANSFERS. Distributions, withdrawals and transfers may be made at any time permitted under your plan. We do not charge penalties. 28 EQUITABLE LIFE AND THE INVESTMENT MANAGERS =============================================================================== EQUITABLE LIFE - ------------------------------------------------------------------------------- Equitable Life is a diversified financial services organization serving a broad spectrum of insurance, investment management and investment banking customers. We are a New York stock life insurance company and our Home Office is located at 787 Seventh Avenue, New York, New York 10019. Founded in 1859, we are one of the largest life insurance companies in the United States. We are authorized to sell life insurance and annuities in all fifty states, the District of Columbia, Puerto Rico and the Virgin Islands. We maintain local offices throughout the United States. Equitable Life is a wholly-owned subsidiary of The Equitable Companies Incorporated (the "Holding Company"). The largest stockholder of the Holding Company is AXA S.A. 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 Life and the Holding Company, AXA is able to exercise significant influence over the operations and capital structure of the Holding Company and its subsidiaries, including Equitable Life. AXA, a French company, is the holding company for an international group of insurance and related financial service companies. Equitable Life, the Holding Company and their subsidiaries managed assets of approximately $195.3 billion as of December 31, 1995. - ------------------------------------------------------------------------------- THE SEPARATE ACCOUNTS - ------------------------------------------------------------------------------- Each of the seven Funds is a separate account of Equitable Life; we own all the assets of the separate accounts. A separate account is a separate investment account which we use to support our group annuity contracts, and for other purposes permitted by applicable law. We keep the assets of each separate account segregated from our general account and from any other separate accounts we may have. Although the assets of the Funds are our property, our obligation to you under the group annuity contract equals the value of your accumulation in each Fund. Income, gains and losses, whether or not realized, from assets invested in the Funds are credited to or charged against the Fund without regard to our other income, gains or losses. The portion of each Fund's assets we hold on your behalf may not be used to satisfy obligations that may arise out of any other business we conduct. We may, however, transfer amounts owed to us, such as fees and expenses, to our general account at any time. We may make these transfers even if the Fund in question does not have sufficient liquidity to make all withdrawals requested by participants. The separate accounts which we call the Growth Equity, Aggressive Equity, ADA Foreign, Equity Index, Lifecycle--Moderate and Lifecycle--Conservative and Real Estate Funds commenced operations on 1968, 1969, 1992, 1994, 1995, and 1986 respectively. The Aggressive Equity Fund, which was part of Equitable's Separate Account No. 3, was transferred on December 1, 1995 to Separate Account No. 200. The Funds are governed by the laws and regulations of the state of New York, where we are domiciled, and may also be governed by laws of other states in which we do business. The Aggressive Equity, ADA Foreign, Equity Index and Lifecycle Funds are used exclusively for the ADA Members Retirement Program. The Growth Equity and Real Estate Funds are "pooled" funds that are used to fund benefits under the ADA Program and other group annuity contracts, agreements, and tax-deferred retirement programs we administer. Because of exclusionary provisions, the separate accounts are not subject to regulation under the 1940 Act. 29 - ------------------------------------------------------------------------------- INVESTMENT MANAGEMENT OF THE EQUITY FUNDS - ------------------------------------------------------------------------------- We act as investment manager to the Growth Equity Fund. As such, we invest and reinvest its assets in accordance with the investment policies for the Fund. We have no investment management responsibility for the Aggressive Equity, ADA Foreign, Equity Index or Lifecycle Funds. In providing investment management to the Growth Equity Fund, we have complete discretion over Fund assets, within the investment policies of the Fund, and currently use the personnel and facilities of Alliance Capital Management L.P. ("Alliance") for portfolio management, securities selection and transaction services. Alliance is a publicly-traded limited partnership which is indirectly majority-owned by Equitable Life. Equitable Life and Alliance are registered investment advisers under the Investment Advisers Act of 1940. As of December 31, 1995, Alliance had total assets under management of over $146.5 billion. Alliance acts as an investment adviser to various separate accounts and general accounts of Equitable Life and other affiliated insurance companies. Alliance also provides management and consulting services to mutual funds, endowment funds, insurance companies, foreign entities, qualified and non-tax qualified corporate funds, public and private pension and profit-sharing plans, foundations and tax-exempt organizations. Alliance's main office is located at 1345 Avenue of the Americas, New York, New York 10105. The securities held in the Fund must be authorized or approved by the Investment Committee of our Board of Directors. Subject to the Investment Committee's broad supervisory authority, our investment officers and managers have been given discretion as to sales and, within specified limits, purchases of stocks, other equity securities and certain debt securities. When an investment opportunity arises that is consistent with the objectives of more than one account, investment opportunities are allocated among accounts in an impartial manner based on certain factors such as the accounts' investment objectives and their then-current investment and cash positions. For the Aggressive Equity Fund, we act in accordance with the investment policies established by the Trustees. The Aggressive Equity Fund is invested solely in the MFS Emerging Growth Fund, which is managed by Massachusetts Financial Services Company. See The Aggressive Equity Fund. For the Equity Index Fund, we act in accordance with the investment policies established by the Trustees. The Equity Index Fund is invested solely in the Seven Seas Series S&P 500 Index Fund. State Street is the investment advisor of that Fund. See The Equity Index Fund. For the ADA Foreign Fund, we act in accordance with the investment policies established by the Trustees. The ADA Foreign Fund is invested solely in the Templeton Foreign Fund, which is managed by Templeton Global Advisors Ltd. See The ADA Foreign Fund. For the Lifecycle Funds, we act in accordance with the investment policies established by the Trustees. The Lifecycle Funds--Conservative and Moderate are invested solely in units of the Lifecycle Fund Group Trusts--Conservative and Moderate, respectively. State Street is the investment adviser and Trustee of these Group Trusts and the Underlying Funds. See Lifecycle Funds. We, together with the Holding Company, own 80.2% of the outstanding common stock of Donaldson, Lufkin & Jenrette, Inc. (DLJ). A DLJ subsidiary, Donaldson, Lufkin & Jenrette Securities Corporation, is one of the nation's largest investment banking and securities firms. Another DLJ subsidiary, Autranet, Inc., is a securities broker that markets independently originated research to institutions. Through the Pershing Division of Donaldson, Lufkin & Jenrette Securities Corporation, DLJ supplies correspondent services, including order execution, securities clearance and other centralized financial services, to numerous independent regional securities firms and banks. 30 To the extent permitted by law and consistent with the Fund transaction practices discussed in this prospectus, and subject to the consent of Fund contractholders, the Growth Equity Fund may engage in securities and other transactions with the above entities or may invest in shares of the investment companies with which those entities have affiliations. In 1995, there were no such transactions through DLJ subsidiaries. - ------------------------------------------------------------------------------- INVESTMENT MANAGEMENT OF THE REAL ESTATE FUND - ------------------------------------------------------------------------------- We act as investment manager to the Real Estate Fund and to Prime Property Fund. In managing the Real Estate Fund and Prime Property Fund, we use the services of Equitable Real Estate, a wholly-owned subsidiary. Equitable Real Estate originates, analyzes, evaluates and recommends commercial real estate investments for its clients, then manages and services those investments on an ongoing basis. Equitable Real Estate provides property management services in connection with some of the properties held in Prime Property Fund and supervises the performance of other property managers which it retains. Equitable Real Estate coordinates related accounting and bookkeeping functions with us. Equitable Real Estate advises us as to the commercial real estate assets of all our accounts, which at December 31, 1995, represented approximately $25.7 billion in equity real estate and mortgage loan holdings. 31 INVESTMENT PERFORMANCE =============================================================================== MEASURING THE INVESTMENT PERFORMANCE OF THE FUNDS - ------------------------------------------------------------------------------- We recognize that the performance of the Funds that you invest your retirement savings in is important to you. The purpose of this discussion is to give you an overview of how our Funds have performed in the past. OF COURSE, PAST PERFORMANCE CANNOT BE USED TO PREDICT FUTURE PERFORMANCE. Fund performance is most often measured by the change in the value of fund units over time. Unlike typical mutual funds, which usually distribute earnings annually, separate account funds reinvest all earnings. As described previously, the unit value calculations for the funds include all earnings, including dividends and realized and unrealized capital gains. Changes in the unit values can be expressed in terms of the Fund's annual percentage change, its average annual change, or its cumulative change over a period of years. Each of these measurements is valuable on its own. In addition, it is often helpful to compare the Funds' performance with the results of unmanaged market indices. The following tables and graphs provide a historical view of the Funds' investment performance. The information presented includes performance results for each Fund, along with data representing unmanaged market indices. - ------------------------------------------------------------------------------- UNMANAGED MARKET INDICES - ------------------------------------------------------------------------------- Unmanaged market indices, or "benchmarks," while providing a broader perspective on relative performance, are only a tool for comparison. Performance data for the unmanaged market indices do not reflect any deductions for investment advisory, brokerage or other expenses of the type typically associated with an actively managed fund. This effectively overstates the rate of return of the market indices relative to that which would be available to a typical investor, and limits the usefulness of these indices in assessing the performance of the Funds. Since the Funds do not distribute dividends or interest, the market indices have been adjusted to reflect reinvestment of dividends and interest to provide greater comparability. We have presented data for the following unmanaged indices. One or more of these indices may be appropriate comparative measures of performance for the Funds. o CONSUMER PRICE INDEX (URBAN CONSUMERS--NOT SEASONALLY ADJUSTED) ("CPI")--an index of inflation. o STANDARD AND POOR'S 500 INDEX ("S&P 500")--an unmanaged weighted index of the securities of 500 industrial, transportation, utility and financial companies widely regarded by investors as representative of the stock market. This index should not be confused with the performance of our Equity Index Fund nor that of the Seven Seas Series S&P 500 Fund, which seek to emulate the results of the S&P 500 Index. See The Equity Funds--The Equity Index Fund for more information. o RUSSELL 2000 INDEX ("RUSSELL 2000")--an unmanaged broadly diversified index maintained by Frank Russell Company consisting of the approximately 2,000 smallest stocks within the Russell 3000 Index. The Russell 3000 Index consists of the largest 3,000 publicly traded stocks of U.S. domiciled corporations and includes large, medium and small capitalization stocks. As such, the Russell 3000 Index represents approximately 98 percent of the total market capitalization of all U.S. stocks that trade on the New York and American Stock Exchanges and in the NASDAQ over-the-counter market. o MORGAN STANLEY CAPITAL INTERNATIONAL EAFE INDEX ("EAFE")--an unmanaged index of the securities of over 1,000 companies traded on the markets of Europe, Australia, New Zealand and the Far East. 32 - ------------------------------------------------------------------------------- HOW PERFORMANCE DATA ARE PRESENTED - ------------------------------------------------------------------------------- We have shown Fund performance on several different bases: o The annual percentage change in Fund Unit Values, o The average annual percentage change in Fund Unit Values, and o The total value as of December 31, 1995 of a $10,000 investment made on January 1, 1986. THE FUND PERFORMANCE SHOWN MAY NOT REPRESENT YOUR ACTUAL EXPERIENCE AND IT DOES NOT REPRESENT THE EFFECT OF THE RECORD MAINTENANCE AND REPORT OR ENROLLMENT FEES. The annual percentage change in Fund unit values represents the percentage increase or decrease in unit values from the beginning of one year to the end of that year. During any year unit values will, of course, increase or decrease reflecting fluctuations in the securities markets. The average annual rates of return are time-weighted, assume an investment at the beginning of each period, and include the reinvestment of investment income. Historical results are presented for the Funds for the periods during which the funds were available under the Program. Hypothetical results were calculated for prior periods. In the case of the Aggressive Equity Fund, hypothetical performance is shown, because the ADA Program did not begin to invest in the MFS Emerging Growth Fund until December 1, 1995. The table and charts below are based on investment returns earned by the MFS Emerging Growth Fund for other investors. For the Equity Index Fund, no results are presented for periods prior to 1993, as the Seven Seas S&P 500 Index Fund began operations during 1992. Performance data for the Lifecycle Funds are shown for the period when the Funds commenced operations on May 1, 1995 through December 31, 1995. See How We Calculate Performance Data. The foregoing applies with respect to the calculation of performance data given in the "Annual Percentage Change in Unit Values" chart, "Average Annual Percentage Change in Unit Values" chart, and "Cumulative Value Examples" given below. - ------------------------------------------------------------------------------- ANNUAL PERCENTAGE CHANGE IN FUND UNIT VALUES - -------------------------------------------------------------------------------
GROWTH AGGRESSIVE ADA EQUITY EQUITY FOREIGN - ------ -------- ------------ --------- 1995 31.1% 17.8% 10.0% - ------ -------- ------------ --------- 1994 -2.3 4.1 -0.5 - ------ -------- ------------ --------- 1993 18.7 23.5 33.4 - ------ -------- ------------ --------- 1992 0.6 10.9 0.8 - ------ -------- ------------ --------- 1991 51.1 86.8 16.9 - ------ -------- ------------ --------- 1990 -11.9 -3.3 -3.3 - ------ -------- ------------ --------- 1989 43.9 26.1 28.6 - ------ -------- ------------ --------- 1988 16.3 7.2 20.5 - ------ -------- ------------ --------- 1987 5.0 3.8 23.0 - ------ -------- ------------ --------- 1986 13.2 -- 26.9 - ------ -------- ------------ ---------
(RESTUBBED TABLE CONTINUED FROM ABOVE)
LIFECYCLE LIFECYCLE EQUITY FUND-- FUND-- REAL RUSSELL INDEX CONSERVATIVE MODERATE ESTATE CPI S&P 500 2000 EAFE - ------ -------- -------------- -------------- -------- ------ --------- --------- ------- 1995 35.1% 5.9% 10.1% 4.4% 2.9% 37.5% 28.4% 11.2% - ------ -------- -------------- -------------- -------- ------ --------- --------- ------- 1994 0.7 -- -- 3.6 2.7 1.3 -1.8 7.8 - ------ -------- -------------- -------------- -------- ------ --------- --------- ------- 1993 6.4 -- -- -3.2 2.7 10.0 18.9 32.6 - ------ -------- -------------- -------------- -------- ------ --------- --------- ------- 1992 -- -- -- -5.2 2.9 7.6 18.4 -12.2 - ------ -------- -------------- -------------- -------- ------ --------- --------- ------- 1991 -- -- -- -8.7 3.0 30.5 46.1 12.5 - ------ -------- -------------- -------------- -------- ------ --------- --------- ------- 1990 -- -- -- 2.0 6.2 -3.1 -19.5 -23.2 - ------ -------- -------------- -------------- -------- ------ --------- --------- ------- 1989 -- -- -- 8.1 4.6 31.7 16.3 10.8 - ------ -------- -------------- -------------- -------- ------ --------- --------- ------- 1988 -- -- -- 4.9 4.4 16.6 24.9 28.6 - ------ -------- -------------- -------------- -------- ------ --------- --------- ------- 1987 -- -- -- 7.6 4.4 5.3 -8.8 24.9 - ------ -------- -------------- -------------- -------- ------ --------- --------- ------- 1986 -- -- -- 5.1 1.1 18.7 5.7 69.9 - ------ -------- -------------- -------------- -------- ------ --------- --------- -------
PAST PERFORMANCE IS NOT AN INDICATION OF FUTURE PERFORMANCE. NO PROVISIONS HAVE BEEN MADE FOR THE EFFECT OF TAXES ON INCOME AND GAINS OR UPON DISTRIBUTION. 33 - ------------------------------------------------------------------------------- AVERAGE ANNUAL PERCENTAGE CHANGE IN FUND UNIT VALUES-- YEARS ENDING DECEMBER 31, 1995 - -------------------------------------------------------------------------------
GROWTH AGGRESSIVE ADA EQUITY EQUITY FOREIGN - ---------- -------- ------------ --------- 1 Year 31.1% 17.8% 10.0% - ---------- -------- ------------ --------- 2 Years 13.2 10.7 4.6 - ---------- -------- ------------ --------- 3 Years 15.0 14.8 13.4 - ---------- -------- ------------ --------- 5 Years 18.2 25.7 11.4 - ---------- -------- ------------ --------- 10 Years 15.0 -- 14.9 - ---------- -------- ------------ ---------
(RESTUBBED TABLE CONTINUED FROM ABOVE)
LIFECYCLE EQUITY FUND-- LIFECYCLE REAL RUSSELL INDEX CONSERVATIVE FUND-- MODERATE ESTATE CPI S&P 500 2000 EAFE - ---------- -------- --------------- --------------- -------- ------ --------- --------- ------- 1 Year 35.1% 5.9% 10.1% 4.4% 2.9% 37.5% 28.4 11.2% - ---------- -------- --------------- --------------- -------- ------ --------- --------- ------- 2 Years 16.7 -- -- 4.0 2.8 18.1 12.3 9.5 - ---------- -------- --------------- --------------- -------- ------ --------- --------- ------- 3 Years 13.1 -- -- 1.6 2.8 15.3 14.5 16.7 - ---------- -------- --------------- --------------- -------- ------ --------- --------- ------- 5 Years -- -- -- -1.9 2.9 16.6 21.0 9.4 - ---------- -------- --------------- --------------- -------- ------ --------- --------- ------- 10 Years -- -- -- 1.7 3.5 14.9 11.3 13.6 - ---------- -------- --------------- --------------- -------- ------ --------- --------- -------
- ------------------------------------------------------------------------------- CUMULATIVE VALUE EXAMPLES - ------------------------------------------------------------------------------- Although historical percentage change data is valuable in evaluating fund performance, it is often easier to understand the information in more graphic examples. One approach to this is the use of "mountain charts." Mountain charts, such as the ones below, illustrate the growth of a hypothetical investment over time for each of the Funds. Each chart (except the Aggressive Equity and the Equity Index) illustrates the growth through December 31, 1995 of an investment of $10,000 made on December 31, 1985. MOUNTAIN CHARTS ARE NOT SHOWN FOR THE LIFECYCLE FUNDS--CONSERVATIVE AND MODERATE BECAUSE THESE FUNDS HAVE BEEN IN OPERATION FOR LESS THAN ONE YEAR. GROWTH OF $10,000 INITIAL INVESTMENT GROWTH EQUITY FUND ############################################################################# GRAPHIC OMITTED PICKUP: "P1" ============================================================================= IMAGE: "CHA" ============================================================================= ############################################################################# AGGRESSIVE EQUITY FUND ############################################################################# GRAPHIC OMITTED IGT: "CHB" ############################################################################# PAST PERFORMANCE IS NOT AN INDICATION OF FUTURE PERFORMANCE. NO PROVISIONS HAVE BEEN MADE FOR THE EFFECT OF TAXES ON INCOME AND GAINS OR UPON DISTRIBUTION. 34 ADA FOREIGN FUND ############################################################################# GRAPHIC OMITTED IGT: "CHC" ############################################################################# EQUITY INDEX FUND ############################################################################# GRAPHIC OMITTED IGT: "CHD" ############################################################################# REAL ESTATE FUND ############################################################################# GRAPHIC OMITTED IGT: "CHE" ############################################################################# PAST PERFORMANCE IS NOT AN INDICATION OF FUTURE PERFORMANCE. NO PROVISIONS HAVE BEEN MADE FOR THE EFFECT OF TAXES ON INCOME AND GAINS OR UPON DISTRIBUTION. 35 - ------------------------------------------------------------------------------- HOW WE CALCULATE PERFORMANCE DATA - ------------------------------------------------------------------------------- Growth Equity Fund performance reflects actual historical investment experience and the deduction of asset-based charges actually incurred by Separate Account No. 4 (Pooled) under the Program during the periods indicated. The Class A shares of the MFS Emerging Growth Fund in which the Aggressive Equity Fund invests have been offered for sale since 1993, whereas the Class B shares of the MFS Emerging Growth Fund have been offered since 1986. The only difference between the two classes of shares is in their respective fee and expense structures. The Class B shares have generally higher class-related expenses than the Class A shares. The investments of the two classes of shares are identical. The Aggressive Equity Fund performance shown reflects the net performance of the Class A shares since September 13, 1993, when those shares were first offered for sale. From December 29, 1986, when Class B shares were first offered, to September 13, 1993, the performance of those shares is reflected. Because the expenses applicable to the Class B shares are higher than the expenses applicable to the Class A shares, the hypothetical performance shown would have been somewhat higher for periods prior to September 13, 1993 if Class A shares had been available. In order to create the hypothetical performance, we have applied the Program expense charge and other expenses actually incurred by the Aggressive Equity Fund when it participated in Separate Account No. 3 (Pooled) to the historical investment performance of the MFS Emerging Growth Fund Class A and Class B shares described above. The ADA Foreign Fund performance shown reflects the performance of Separate Account No. 191 for the period beginning March 2, 1992. For periods prior to March 2, 1992, hypothetical performance is shown, which reflects 95% performance of the Templeton Foreign Fund and 5% performance of Separate Account No. 2A. For these hypothetical calculations we have applied the Program expense charge during those periods plus .15% in estimated other expenses to the historical investment experience of the Templeton Foreign Fund and Separate Account No. 2A or No. 2. Effective May 1, 1996, the ADA Foreign Fund no longer invests in Separate Account No. 2A or 2. The Equity Index Fund performance shown reflects the performance of Separate Account No. 195 for the period beginning February 1, 1994. For periods prior to February 1, 1994, hypothetical performance is shown, which reflects performance of the Seven Seas S&P 500 Index Fund beginning 1992, the first full year after that Fund began operations. For these hypothetical calculations we have applied the Program expense charge during those periods plus .15% in estimated other expenses to the historical investment experience of the Seven Seas Series S&P 500 Index Fund. The Lifecycle Fund--Conservative and the Lifecycle Fund--Moderate performances shown reflect the performance of these Funds on an annualized basis from May 1, 1995 (the date the Funds commenced operations). The Real Estate Fund performance shown reflects the performance of Separate Account No. 30 (Pooled) for the period beginning August 29, 1986. For periods prior to August 29, 1986, hypothetical performance is shown, which reflects 90% performance of the Prime Property Fund and 10% performance of Separate Account No. 2A. For these hypothetical calculations we have applied an estimate of the expenses which would have been chargeable to the Fund. These charges include an amount equal to the average Program expense charge for each year, plus a 1.10% investment management fee, plus the .25% administration fee applicable to the Fund. Real Estate Fund performance includes both current income and the effect of changes in the appraised value of Prime Property Fund investments. See Summary of Unit Values for the Equity Funds, and Summary of Unit Values for the Real Estate Fund in the SAI for a more detailed description of how the hypothetical Unit Values were calculated. 36 THE PROGRAM - ------------------------------------------------------------------------------- The purpose of this section is to explain the ADA Members Retirement Program in more detail. Although we have described important aspects of the Program, you should understand that the provisions of your plan and the Participation Agreement will define the scope of the Program and its specific terms and conditions. This section is for employers, and for the purposes of this section, "you" and "your" refer to you in that role although you may also be a participant in the plan. EMPLOYERS WHO MAY PARTICIPATE IN THE PROGRAM If you are a sole proprietor, a partner or a shareholder in a professional corporation, your practice, as an employer, can adopt the Program if you or at least one of your fellow partners or shareholders is a member of: o the ADA, o one of its constituent or component societies, or o an ADA-affiliated organization whose participation in the Program has been approved by the Council on Insurance of the ADA. ADA constituent or component societies may also adopt the Program for their own employees within certain limitations imposed by the Internal Revenue Code. CHOICES FOR THE EMPLOYER The ADA Members Retirement Program gives you a variety of approaches to choose from. You can: o Adopt our Master Plan, which gives you options as to types of plans and plan provisions. The Master Plan uses the Program Investment Options as the exclusive investment choices. o Adopt the Self-Directed Prototype plan, which gives additional flexibility to choose investments, or o Maintain your own individually-designed plan, but use the Investment Options as an investment for your plan. SUMMARY OF THE PLANS AND TRUSTS THE MASTER PLAN--Under the Master Plan, you will automatically receive a full range of services from Equitable Life, including your choice of the Investment Options, plan-level and participant-level record- keeping, benefit payments and tax withholding and reporting. o The Master Plan is a defined contribution master plan which can be adopted as a profit sharing plan (including an optional 401(k) feature), a defined contribution pension plan, or both. THE SELF-DIRECTED PROTOTYPE PLAN--is a defined contribution prototype plan which can be used to combine the Program Investment Options with individual investments such as stocks and bonds. Employers must also adopt the Pooled Trust and maintain a minimum of $25,000 in the Trust at all times. We provide recordkeeping services only for plan assets held in the Pooled Trust. THE ADA MEMBERS POOLED TRUST FOR RETIREMENT PLANS--is an investment vehicle to be used by those who have an individually designed qualified retirement plan. The Pooled Trust is for investment only and can be used for both defined benefit and defined contribution plans. We provide participant-level or plan-level recordkeeping services for plan assets held in the Pooled Trust. 37 INFORMATION ON JOINING THE PROGRAM Our Retirement Program Specialists are available to answer your questions about joining the Program. To reach one of our Retirement Program Specialists, call or write to us at:
By Phone 1-800-523-1125, ext. 2608 From Alaska, 0-201-392-5331, collect Specialists are available from 9 a.m. to 5 p.m. Eastern Time, Monday through Friday. By Regular Mail The ADA Members Retirement Program c/o Equitable Life Box 2011 Secaucus, New Jersey 07096 By Registered, Certified or The ADA Members Retirement Program c/o Equitable Life 200 Overnight Mail Plaza Drive, Second Floor Secaucus, New Jersey 07094
CHOOSING THE RIGHT PLAN Choosing the right plan depends on your own unique set of circumstances. Although our Retirement Program Specialists can help explain the Program, you and your tax advisors must decide which plan is best for you. GETTING STARTED IN THE PROGRAM AFTER CHOOSING A PLAN To adopt the Master Plan, you must complete a Participation Agreement. If you have your own plan and wish to use the Pooled Trust as an investment option, the trustee of your plan must complete the appropriate Participation Agreement. Our Retirement Program Specialists can help you complete the Participation Agreement for review by your tax advisor. To adopt our prototype self-directed plan, you must complete the prototype plan adoption agreement and a Participation Agreement for the Pooled Trust. In addition, you must also arrange separately for plan level accounting and brokerage services. We provide recordkeeping services only for plan assets held in the Pooled Trust. You can use any plan recordkeeper of your choice or you can arrange through us to hire Trust Consultants, Inc. at a special rate. You can also arrange through us brokerage services from our affiliate, Pershing Discount Brokerage Services, at special rates or use the services of any other broker. 38 COMMUNICATING WITH US AFTER YOU ENROLL
By Phone To Reach an Account 1-800-223-5790 Executive: (9 am to 5 pm Eastern Time, Monday through Friday) To Reach the Account 1-800-223-5790 (24 Hours) Investment Management ("AIM") System: - ------------------------------- ---------------------------------------------- By Regular Mail (Other than The ADA Members Retirement Program contribution checks) Box 2486 G.P.O. New York, New York 10116 - ------------------------------- ---------------------------------------------- By Registered, Certified or The ADA Members Retirement Program c/o Overnight Mail Equitable Life 200 Plaza Drive, Second Floor Secaucus, New Jersey 07094 ----------------------------- ------------------------------------------ For Contribution Checks Only The Association Members Retirement Program P.O. Box 1599 Newark, New Jersey 07101-9764 ----------------------------- ------------------------------------------
YOUR RESPONSIBILITIES AS THE EMPLOYER Employers adopting the Master Plan are responsible for the plan and its administration. This includes certain responsibilities relating to the administration and continued qualification of your plan. See Your Responsibilities As Employer in the SAI for a list of responsibilities which you will have if you adopt the Master Plan. If you have an individually designed plan, you already have these responsibilities; they are not increased in any way by your adoption of the Pooled Trust for investment purposes only. It is your responsibility to determine that the terms of your plan are consistent with the provisions of the Pooled Trust and our practices described in this prospectus and the SAI. If you utilize our prototype self-directed plan, you will have responsibilities as the plan administrator and will also have to appoint a plan trustee; these responsibilities will be greater than those required by the adoption of the Master Plan. Again it is also your responsibility to determine that the terms of your plan are consistent with the provisions of the Pooled Trust and our practices described in this prospectus and the SAI. You should consult your legal advisor for an understanding of your legal responsibilities under the self-directed plan. We will give you guidance and assistance in the performance of your responsibilities. The ultimate responsibility, however, rests with you. 39 WHEN TRANSACTIONS ARE EFFECTIVE A business day is any day both we and the New York Stock Exchange are open. Contributions, transfers, and allocation changes are effective on the business day they are received. Distribution requests are also effective on the business day they are received unless, as in the Master Plan, there are plan provisions to the contrary. However, we may have to delay the processing of any transaction which is not accompanied by a properly completed form or which is not mailed to the correct address. An Account Executive will generally be available to speak with you each business day from 9 a.m. to 5 p.m. Eastern Time. We may, however, close due to emergency conditions. MINIMUM INVESTMENTS There is no minimum amount which must be invested if you adopt the Master Plan, or if you have your own individually-designed plan and use the Pooled Trust as an investment. If you adopt our self-directed prototype plan, you must keep at least $25,000 in the Pooled Trust at all times. MAKING CONTRIBUTIONS TO THE PROGRAM You should send contribution checks or money orders payable to The ADA Retirement Trust to the address shown under Communicating With Us After You Enroll. All contributions must be accompanied by a properly completed Contribution Remittance form which designates the amount to be allocated to each participant. Contributions are normally credited on the business day that we receive them, provided the remittance form is properly completed. Contributions are only accepted from the employer. Employees may not send contributions directly to the Program. The Real Estate Fund will accept contributions only one day a month. Any amount allocated for investment in the Real Estate Fund will first be placed in the Money Market Guarantee Account. On the next day on which the Real Estate Fund accepts contributions, the amount designated for the Fund, plus any accrued interest, will automatically be transferred to the Real Estate Fund. For more information see The Real Estate Fund. OUR ACCOUNT INVESTMENT MANAGEMENT (AIM) SYSTEM We offer an automated telephone system for participants to transfer between investment options, obtain account information and change the allocation of future contributions and maturing GRAs. To use the AIM System, participants must have a Personal Security Code (PSC) number. If you have a touch-tone telephone you may make transfers on the AIM System. Procedures have been established by Equitable Life for its AIM System that are considered to be reasonable and are 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 Equitable Life does not employ reasonable procedures to confirm that instructions communicated by telephone are genuine, we may be liable for any losses arising out of any action on our part or any failure or omission to act as a result of our own negligence, lack of good faith or willful misconduct. In light of the procedures established, Equitable Life will not be liable for following telephone instructions that we reasonably believe to be genuine. We may discontinue the telephone transfer service at any time without notice. 40 ALLOCATING CONTRIBUTIONS AMONG THE INVESTMENT OPTIONS Under the Master Plan, participants make all investment decisions. Under an individually-designed plan or our self-directed prototype plan, either the participants or the plan trustees make the investment allocation decisions, depending on the terms of the plan. Contributions may be allocated among any number of the Investment Options. Allocation instructions may be changed at any time, and as often as needed, by calling the AIM System. New instructions become effective on the business day we receive them. You may allocate employer contributions in different percentages than employee contributions. IF WE HAVE NOT RECEIVED VALID INSTRUCTIONS, WE WILL ALLOCATE YOUR CONTRIBUTIONS TO THE MONEY MARKET GUARANTEE ACCOUNT. TRANSFERS AMONG THE INVESTMENT OPTIONS Participants in the Master Plan may make transfers on a daily basis without charge. Participants in other plans may make transfers whenever the plan allows them to do so. We do not charge a fee for transfers. (If an individually designed plan does not allow transfers by individual participants, only you as employer or trustee may make a transfer.) Participants may use the AIM System to transfer amounts among the investment options. All transfers are made as of the close of business on the day we receive the authorized instructions, provided we receive the request by 4:00 p.m. Eastern time. Transfer requests received after that time will be processed as of the close of business on the following business day. No transfers from the Guaranteed Rate Accounts to other Investment Options are permitted prior to maturity. Transfers to the Guaranteed Rate Accounts, and to or from the Money Market Guarantee Account and the Growth Equity Fund, are permitted at any time. Transfers from the Aggressive Equity Fund, ADA Foreign Fund, Equity Index Fund and Lifecycle Funds are permitted at any time except if there is any delay in redemptions from the underlying mutual fund or, with respect to the Lifecycle Funds, the Lifecycle Fund Group Trusts in which they invest. See The Equity Funds--The Aggressive Equity Fund, The ADA Foreign Fund, The Equity Index Fund and The Lifecycle Funds. Transfers to and from the Real Estate Fund are subject to special rules, which are described in Special Rules for Distributions and Transfers from the Real Estate Fund below, and in The Real Estate Fund. DISTRIBUTIONS FROM THE INVESTMENT OPTIONS There are two sets of rules that must be kept in mind when considering distributions or withdrawals from the Program. The first are the rules and procedures which apply to the Investment Options, exclusive of the provisions of your plan. These are discussed in this section. The second are the rules specific to your plan; these are discussed under When Distributions are Available to Participants. Amounts in the Equity Funds and the Money Market Guarantee Account are generally available for distribution at any time, subject to the provisions of your plan. However, there may be a delay for withdrawals from the Aggressive Equity Fund, ADA Foreign Fund, Equity Index Fund, and the Lifecycle Funds if there is any delay in the redemptions from the underlying mutual fund or, with respect to the Lifecycle Funds, from the Lifecycle Fund Group Trusts in which they invest. Special rules, which are described below, apply to distributions from the Real Estate Fund. In addition, withdrawals generally may not be taken from the Guaranteed Rate Accounts prior to maturity. See Guaranteed Rate Accounts. Please note that certain plan distributions may be subject to penalty or excise taxes. See The Program and Federal Income Tax Considerations for more details. 41 Payments or withdrawals out of the Funds and application of proceeds to an annuity ordinarily will be made promptly upon request in accordance with Plan provisions. However, we can defer payments, applications and withdrawals from the Funds for any period during which the New York Stock Exchange is closed for trading, sales of securities are restricted or determination of the fair market value of assets of the Funds is not reasonably practicable because of an emergency. See The Real Estate Fund and The Equity Funds. SPECIAL RULES FOR DISTRIBUTIONS AND TRANSFERS FROM THE REAL ESTATE FUND Under the Master Plan, a distribution can be obtained from the Real Estate Fund only after the amount to be withdrawn has been transferred to another Investment Option. A distribution of benefits may be made only after you receive confirmation of the transfer. Participants in an individually-designed plan or the prototype self-directed plan may receive a distribution directly from the Real Estate Fund without first having it transferred to another Investment Option. Distributions of all or a portion of the balance in the Real Estate Fund directly from the Fund are payable only in a single sum payment. See Federal Income Tax Considerations and Procedures for Withdrawals, Distributions and Transfers--Special Rules for Distributions and Transfers From the Real Estate Fund in the SAI. All distributions and transfers from the Real Estate Fund are subject to a minimum wait of one calendar quarter: they are scheduled to be made shortly after the end of the calendar quarter following the quarter in which we receive properly completed forms requesting the distribution or transfer. The amount distributed will be based on the Real Estate Fund's Unit Value as of the close of business on the date the distribution or transfer is made. See The Real Estate Fund for more information on how we value and liquidate Real Estate Fund Units. Withdrawals from the Real Estate Fund must be made in amounts of at least $1,000 or, if less, your balance in the Real Estate Fund. The Real Estate Fund may not have enough liquid assets to pay all withdrawals when requested. If liquid assets are insufficient to pay all requested withdrawals, withdrawal requests are prioritized according to the nature of the distribution. Priority 1 consists of all amounts requested because of death or disability or after age 70 1/2. Priority 2 consists of all other requests. The Real Estate Fund will pay all Priority 1 distributions to the extent cash is available or can be obtained through liquidation of the Real Estate Fund's interest in Prime Property Fund. The Real Estate Fund may also pay some or all of the scheduled Priority 2 distributions and transfers, but only if it can liquidate its interest in Prime Property Fund or if we believe it has enough liquid assets to meet anticipated Priority 1 distributions. In making this determination, we will consider anticipated future contributions as well as the amount of cash required for anticipated Priority 1 distributions, expenses and payment of our fees. The Real Estate Fund will satisfy all scheduled Priority 1 distribution requests before it satisfies any Priority 2 request, even if the Priority 1 requests were received after the Priority 2 requests. See Special Risks Related to the Real Estate Fund in the prospectus and Procedures for Withdrawals, Distributions and Transfers--Special Rules for Distributions and Transfers From the Real Estate Fund in the SAI. IN LIGHT OF THE RISKS AND POSSIBLE ILLIQUIDITY OF AN INVESTMENT IN THE REAL ESTATE FUND, INDIVIDUAL PARTICIPANTS SHOULD CONSIDER LIMITING THE AMOUNT ALLOCATED TO IT, PARTICULARLY AS THEY NEAR RETIREMENT. IF YOUR PLAN IS AN EMPLOYER OR TRUSTEE-DIRECTED PLAN, YOU AS THE EMPLOYER ARE RESPONSIBLE FOR ENSURING THAT THERE IS SUFFICIENT CASH AVAILABLE TO PAY BENEFITS. 42 WHEN DISTRIBUTIONS ARE AVAILABLE TO PARTICIPANTS In addition to the rules and procedures generally applicable to investments in the Investment Options under the Program, there are other important rules regarding the distribution and benefit payment options for each type of plan. Distributions and benefit payment options under a qualified retirement plan are subject to extremely complicated legal requirements. Certain plan distributions may be subject to penalty or excise taxes. A general explanation of the federal income tax treatment of distributions and benefit payment options is provided in Federal Income Tax Considerations in both this prospectus and the SAI. If a participant retires, becomes disabled or terminates employment, the benefit payment options available should be discussed with a qualified financial advisor. Our Account Executives can also be of assistance. In general, under the Master Plan or our self-directed prototype plan, participants are eligible for benefits upon retirement, death or disability, or upon termination of employment with a vested benefit. ("Vested" refers to the nonforfeitable portion of your benefits under the plan.) Participants in an individually designed plan are eligible for retirement benefits depending on the terms of that plan. See Benefit Payment Options and Federal Income Tax Considerations for more details. In most cases, benefits must begin no later than April 1 of the year after the participant reaches age 70 1/2. A participant (other than a more-than-10% owner in an unincorporated practice) may be exempt from this requirement only if a special election was filed with the employer before January 1, 1984. Under the Master Plan, self-employed persons may generally not receive a distribution prior to age 59 1/2, and employees generally may not receive a distribution prior to a separation from service. PARTICIPANT LOANS The Master Plan permits participants to borrow a portion (not to exceed $50,000) of their vested Account Balance (all plans combined), if the employer has elected this feature. If the participant is a sole proprietor, partner who owns more than 10% of the business, or a shareholder-employee of an S Corporation who owns more than 5% of the business (or a family member as defined by the IRS), he or she presently may not borrow from his or her vested Account Balance without first obtaining a prohibited transaction exemption from the Department of Labor. Participants should consult with their attorneys or tax advisors regarding the advisability and procedures for obtaining such an exemption. Loans are also available under our self-directed prototype plan and under an individually designed plan if the terms of the plan allow them. Generally speaking, when a loan is taken, an amount equal to the loan is transferred out of the Investment Options and is set up as a loan account. While the loan is outstanding, the participant must pay interest on the loan. Any principal and interest paid will be added to the participant's loan account balance and will be taxable on distribution. If you fail to repay the loan when due, the amount of the unpaid balance may be taxable and subject to additional penalty taxes. The interest paid on a retirement plan loan may not be deductible. Loans from the plan should be applied for through the employer. Loans are subject to restrictions under federal tax laws and all plans of the employer are aggregated for purposes of these restrictions. Loan kits containing all necessary forms, along with an explanation of how interest rates are set, are available from our Account Executives. PLEASE NOTE THAT PARTICIPANTS MAY NOT TAKE A LOAN FROM THE REAL ESTATE FUND OR FROM THE GUARANTEED RATE ACCOUNTS PRIOR TO MATURITY. If a participant is married, written spousal consent will be required for a loan. 43 BENEFIT PAYMENT OPTIONS We offer a variety of benefit payment options to participants who are eligible to receive benefits from a plan. However, many self-directed and individually-designed plans do not allow all of these options, so you should ask your employer for details on which of these options may be available. Your plan may allow for one or more of the following forms of distribution to be selected: o Qualified Joint and Survivor Annuity o Lump Sum Payment o Installment Payments o Life Annuity o Life Annuity--Period Certain o Joint and Survivor Annuity o Joint and Survivor Annuity--Period Certain o Cash Refund Annuity See Types of Benefits in the SAI for detailed information regarding each of these options, and Procedures for Withdrawals, Distributions and Transfers in the SAI. The annuity options may be either fixed or variable except for the Cash Refund Annuity and the Qualified Joint and Survivor Annuity. Fixed annuities are available from insurance companies selected by the Trustees, which meet criteria established by the Trustees from time to time. Upon request, we will provide fixed annuity rate quotes available from one or more such companies. Participants may instruct us to withdraw all or part of their account balance and forward it to the annuity provider selected. Once we have distributed that amount to the company selected, we will have no further responsibility to the extent of the distribution. We provide the variable annuity options. Payments under variable annuity options reflect investment performance of the Growth Equity Fund. The minimum amount that can be used to purchase any type of annuity is $3,500. In most cases an annuity administrative charge of $350 will be deducted from the amount used to purchase an annuity from Equitable Life. Annuities purchased from other providers may also be subject to fees and charges. SPOUSAL CONSENT RULES If a participant is married and has an Account Balance greater than $3,500, federal law generally requires payment of a Qualified Joint and Survivor Annuity payable to the participant for life and then to the surviving spouse for life, unless the participant and spouse have properly waived that form of payment in advance. If a participant is married, the spouse must consent in writing before any type of withdrawal can be made. SPOUSAL CONSENT REQUIREMENTS Under the Master Plan and the self-directed prototype plan, you may designate a non-spouse beneficiary any time after the earlier of the first day of the plan year in which you attain age 35 or the date on which you separate from service with your employer. If you designate a beneficiary other than your spouse prior to your reaching age 35, your spouse must consent to the designation and, upon your reaching age 35, must again give his or her consent or the designation will lapse. In order for you to make a withdrawal, 44 elect a form of benefit other than a Qualified Joint and Survivor Annuity or designate a non-spouse beneficiary, your spouse must consent to your election in writing within the 90 day period before your annuity starting date. To consent, your spouse must sign on the appropriate line on your election of benefits or beneficiary designation form. Your spouse's signature must be witnessed by a notary public or plan representative. If you change your mind, you may revoke your election and elect a qualified Joint and Survivor Annuity or designate your spouse as beneficiary, simply by filing the appropriate form. Your spouse's consent is not required for this revocation. It is also possible for your spouse to sign a blanket consent form. By signing this form, your spouse consents not just to a specific beneficiary or, with respect to the waiver of the Qualified Joint and Survivor Annuity, the form of distribution, but gives you the right to name any beneficiary, or if applicable, form of distribution you want. Once you file such a form, you may change your election whenever you want, even without spousal consent. No spousal consent to a withdrawal or benefit in a form other than a Qualified Joint and Survivor Annuity is required under certain self-directed prototype profit sharing plans that do not offer life annuity benefits. BENEFITS PAYABLE AFTER THE DEATH OF A PARTICIPANT If a participant dies before the entire benefit has been paid, the remaining benefits will be paid to the beneficiary. The law generally requires the entire benefit to be distributed no more than five years after death. There are two exceptions--(1) if the benefit is payable to the spouse, the spouse may elect to receive benefits over his or her life or a fixed period measured by life expectancy beginning any time up to the date the participant would have attained age 70 1/2 or, if later, one year after the participant's death, and (2) a beneficiary who is not the participant's spouse may elect payments over his or her life or a fixed period measured by life expectancy, provided payments begin within one year of death. If, at death, a participant was already receiving benefits, the beneficiary can continue to receive benefits based on the payment option selected by the participant. To designate a beneficiary or to change an earlier designation, a participant must have the employer send us a beneficiary designation form. The spouse must consent in writing to a designation of any non-spouse beneficiary, as explained in Procedures for Withdrawals, Distributions and Transfers--Spousal Consent Requirements in the SAI. If a participant in the Master Plan dies without designating a beneficiary, the vested benefit will automatically be paid to the spouse or, if the participant is not married, to the first surviving class of his or her (a) children, (b) parents and (c) brothers and sisters. If none of them survive, the participant's vested benefit will be paid to the participant's estate. If a participant in our prototype self-directed plan dies without designating a beneficiary, the vested benefit will automatically be paid to the spouse or, if the participant is not married, to the first surviving class of his or her (a) children, (b) grandchildren, (c) parents, (d) brothers and sisters and (e) nephews and nieces. If none of them survive, the participant's vested benefit will be paid to the participant's estate. Under the Master Plan, on the day we receive proof of death, we automatically transfer the participant's Account Balance in the Equity Funds to the Money Market Guarantee Account unless the beneficiary gives us other written instructions. The balance in the Real Estate Fund will be treated as a Priority 1 distribution and will be scheduled for transfer to the Money Market Guarantee Account following the last day of the next quarter. See Special Risks Related to the Real Estate Fund. 45 DEDUCTIONS AND CHARGES - ------------------------------------------------------------------------------- There are two general types of expenses you may incur under the Program. The first is expenses which are applicable to all amounts invested in the Program. These include the Program expense charge, investment management, administration fees, and certain other expenses borne directly by the Funds. These charges are deducted from the amount invested in the Program regardless of the type of plan you may have. Generally speaking, these charges are reflected as reductions in the Unit Values of the Funds or as reductions from the rates credited to the Guaranteed Options. These charges apply to all amounts invested in the Program, including amounts being distributed under installment payout options. The second type of charge is expenses which vary by the type of plan you have or which are charged for specific transactions. These are typically stated in terms of a defined dollar amount. Unless otherwise noted, fees which are set in fixed dollar amounts are deducted by reducing the number of Units in the appropriate Funds and the number of dollars in the Guaranteed Option. The number of Units to be deducted from the Real Estate Fund is based on the last Unit Value determined prior to the date of deduction. See Condensed Financial Information and How We Calculate the Value of Amounts Allocated to The Real Estate Funds. The amount allocable to the three-year or five-year Guaranteed Rate Account will be taken from your most recent GRA in that Account. No deductions are made from contributions or withdrawals for sales expenses. CHARGES BASED ON AMOUNTS INVESTED IN THE PROGRAM - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- PROGRAM EXPENSE CHARGE - ------------------------------------------------------------------------------- We assess the Program expense charge against the combined value of Program assets in all the Investment Options. The purpose of this charge is to cover the expenses incurred by Equitable Life and the ADA in connection with the Program. The Unit Values of the Funds and the interest rates credited to the Guaranteed Options reflect the deduction of this charge. The amount payable to us and the ADA is calculated as follows:
ANNUAL PROGRAM EXPENSE CHARGE - ------------------------ VALUE OF PROGRAM ASSETS EQUITABLE LIFE ADA* TOTAL - ------------------------ ---------------------------- ------- ------- First $400 million .650% .025% .675% Next $350 million .650 .020 .670 Over $750 million .650 .020 .670
* Currently, this charge has been reduced to 0.01% for all asset value levels, but the charge could in the future be increased to the levels shown in the table. For all Investment Options other than GRAs, the Program expense charge is calculated based on Program assets at the end of the second previous month, and is charged at a monthly rate of 1/12 of the relevant annual charge. For GRAs, the program expense charge is calculated based on Program assets at the end of the second month prior to the day on which the GRA is opened, and is charged at a constant daily rate of 1/365 of the relevant annual charge until maturity. Subsequent changes in the Program Expense Charge will not be reflected in the charge against closed GRAs. In addition to the Program expense charge, an annual investment accounting fee of 0.02% is charged on all amounts of Program assets invested in GRAs issued after February 1992. This fee is reflected in the interest rates credited to the GRAs and is calculated and charged in the same manner as the Program expense charge. 46 Our portion of the Program expense charge is applied toward the cost of maintenance of the Investment Options, promotion of the Program, commissions, administrative costs, such as enrollment and answering participant inquiries, and overhead expenses such as salaries, rent, postage, telephone, travel, legal, actuarial and accounting costs, office equipment and stationery. The ADA's part of this fee covers developmental and administrative expenses incurred in connection with the Program. The Trustees can direct us to raise or lower the ADA's part of this fee to reflect their expenses in connection with the Program. Currently, this fee has been reduced to 0.01% for all asset value levels. During 1995 we received $6,487,705 and the ADA received $104,687 under the Program expense charge then in effect. - ------------------------------------------------------------------------------- ADMINISTRATION AND INVESTMENT MANAGEMENT FEES - ------------------------------------------------------------------------------- The computation of the Unit Values applicable for each Fund also reflects the deduction of charges for administration and investment management. EQUITY FUNDS. We receive fees for investment management services we provide for the Growth Equity Fund. We also receive an administration fee from all the Equity Funds which covers the administrative functions related to the offering of those Funds. We maintain records for all portfolio transactions and cash flow control, calculate Unit Values, monitor compliance with the New York Insurance Law and supervise custody matters for all the Funds. REAL ESTATE FUND. The investment management fee compensates us for managing the Real Estate Fund as well as the underlying Prime Property Fund. The Real Estate Fund is not charged an additional fee for our management of Prime Property Fund. The services we provide with respect to the Real Estate Fund include monitoring the Real Estate Fund's holdings and liquidity. The services we provide with respect to Prime Property Fund include selecting real properties for purchase and sale, selecting managers for those properties and, in some cases, managing the properties ourselves, appraising the properties, accounting for their receipts and disbursements and servicing any loans issued by Prime Property Fund. The administration fee is to reimburse us for the additional expenses involved in administering the Fund. 47 FEES. The investment management and administration fees are also based on the Program assets in the Fund at the end of the second month prior to the day on which the calculation is being made. The fees charged monthly are 1/12 of the following amounts:
TYPE OF FEE VALUE OF PROGRAM INVESTMENT FUND FUND ASSETS MANAGEMENT ADMINISTRATION TOTAL - --------------------------- ----------------- ------------ -------------- -------- FIRST $100 Growth Equity Fund million .29% .15% .44% Over $100 million .20 .15 .35 -------------------------- ----------------- ------------ -------------- -------- Aggressive Equity Fund All amounts -- .15(1) .15(1) ----------------- ------------ -------------- -------- ADA Foreign Fund All amounts -- .15(2) .15(2) ----------------- ------------ -------------- -------- Equity Index Fund All amounts -- .15 .15 ----------------- ------------ -------------- -------- Lifecycle Fund--Conservative All amounts -- .15 .15 ----------------- ------------ -------------- -------- Lifecycle Fund--Moderate All amounts -- .15 .15 ----------------- ------------ -------------- -------- Real Estate Fund First $50 million 1.10 .25 1.35 Next $25 million 1.00 .25 1.25 Over $75 million .95 .25 1.20 -------------------------- ----------------- ------------ -------------- --------
(1) An annual amount of up to 0.25% of the average daily net assets of the ADA Program invested in the MFS Emerging Growth Fund is paid to Equitable Life. Equitable Life has waived the 0.15% Administration fee applicable to the Aggressive Equity Fund and will use the payment from MFS Funds Distributors, Inc. to defray administrative expenses associated with the Program's operations and to fund Program enhancements. The agreement and waiver are expected to be in effect for an indefinite period, but these arrangements are subject to termination by either party upon notice. (2) Equitable Life has waived the administrative fee for the ADA Foreign Fund in view of the payment for services rendered to Templeton it will receive from Templeton in an amount equal to the 12b-1 fees charged by Templeton to the Templeton Foreign Fund. The 12b-1 fee charged by Templeton is at the annual rate not to exceed 0.25% of the Templeton Foreign Fund's assets. Amounts received by us will be used for administrative expenses associated with the Program's operations and to fund Program enhancements. - ------------------------------------------------------------------------------- OTHER EXPENSES BORNE DIRECTLY BY THE FUNDS - ------------------------------------------------------------------------------- Certain costs and expenses are charged directly to the Funds. These may include Securities and Exchange Commission filing fees and certain related expenses including printing of SEC filings, prospectuses and reports, mailing costs, custodians' fees, financial accounting costs, outside auditing and legal expenses, and other costs related to the Program. These are included as "Other Expenses" in the tables of Annual Fund Operating Expenses and Summary of Fund Expenses. The Aggressive Equity, ADA Foreign and Equity Index Funds purchase and sell shares in the MFS Emerging Growth Fund, Templeton Foreign Fund and Seven Seas S&P 500 Index Fund, respectively, at net asset value. The net asset value reflects charges for management, audit, legal, shareholder services, transfer agent and custodian fees. For a description of charges and expenses assessed by the MFS Emerging Growth Fund, Templeton Foreign Fund and the Seven Seas S&P 500 Index Fund, which are indirectly borne by the Funds, please refer to the prospectuses for each of these funds. The Lifecycle Funds--Conservative and Moderate purchase and sell units in the Lifecycle Fund Group Trusts--Conservative and Moderate, respectively, at net asset value. The net asset value reflects charges for management, audit, legal, custodian and other fees. By agreement with the ADA Trustees, Equitable Life imposes a charge at the annual rate of .03% of the value of the respective assets of the Lifecycle Funds--Conservative and Moderate to compensate it for additional legal, accounting and other potential expenses resulting from the inclusion of the Lifecycle Fund Group Trusts and Underlying Funds maintained by State Street among the Investment Options described in this prospectus. For a description 48 of charges and expenses assessed by the Lifecycle Fund Group Trusts, which are indirectly borne by the Lifecycle Funds, please refer to our separate prospectus for those Funds. PLAN AND TRANSACTION EXPENSES =============================================================================== ADA RETIREMENT PLAN, PROTOTYPE SELF-DIRECTED PLAN AND INDIVIDUALLY-DESIGNED PLAN FEES - ------------------------------------------------------------------------------- RECORD MAINTENANCE AND REPORT FEE. At the end of each calendar quarter, we deduct a record maintenance and report fee from each participant's Account Balance. This fee is:
ADA Members Retirement Plan participants ....$3 per quarter Self-Directed Prototype Plan participants ... $3 per quarter Participants in Pooled-Trust Arrangement .... $1 per quarter
ENROLLMENT FEE. The employer must pay us a non-refundable enrollment fee of $25 for each participant enrolling under its plan. If we do not maintain individual participant records under an individually- designed plan, the employer is instead charged $25 for each plan or trust. If these charges are not paid by the employer, the amount may be deducted from subsequent contributions or from participants' Account Balances. PROTOTYPE SELF-DIRECTED PLAN FEES. Employers who participate in our prototype self-directed plan will incur additional fees not payable to us, such as brokerage and administration fees. - ------------------------------------------------------------------------------- INDIVIDUAL ANNUITY CHARGES - ------------------------------------------------------------------------------- ANNUITY ADMINISTRATIVE CHARGE. If a participant elects a variable annuity payment option, a $350 charge will usually be deducted from the amount used to purchase the annuity to reimburse us for administrative expenses associated with processing the application for the annuity and with issuing each month's annuity payment. Annuities purchased from other providers may also be subject to fees and charges. See Distributions From the Investment Options and Benefit Payment Options for details. PREMIUM TAXES. In certain jurisdictions, amounts used to purchase an annuity are subject to charges for premium and other applicable taxes (rates currently range up to 5%). Taxes depend, among other things, on your place of residence, applicable laws and the form or annuity benefit you select. We will deduct such charges we pay based on your place of residence at the time the annuity payments begin. - ------------------------------------------------------------------------------- GENERAL INFORMATION ON FEES AND CHARGES - ------------------------------------------------------------------------------- We may change our investment management fees if we give the Trustees 90 days notice and comply with certain conditions of our group annuity contract with them. The other fees and charges described above may be changed at any time by the mutual consent of Equitable Life and the ADA. During 1995 we received total fees and charges under the Program of $9,232,986. 49 FEDERAL INCOME TAX CONSIDERATIONS - ------------------------------------------------------------------------------- Current federal income tax rules relating to adoption of the Program and generally to distributions to participants under qualified retirement plans are outlined briefly below. These rules relating to contributions are outlined briefly in the SAI under Provisions of the ADA Plans. For purposes of this outline we have assumed that you are not a participant in any other qualified retirement plan. We have not attempted to discuss other current federal income tax rules that govern participation, vesting, funding or prohibited transactions, although some information on these subjects appears here and in the SAI; nor do we discuss the reporting and disclosure or fiduciary requirements of the Employee Retirement Income Security Act. In addition, we do not discuss the effect, if any, of state tax laws that may apply. FOR INFORMATION ON THESE MATTERS, WE SUGGEST THAT YOU CONSULT YOUR TAX ADVISOR. - ------------------------------------------------------------------------------- ADOPTING THE PROGRAM - ------------------------------------------------------------------------------- If you adopt an ADA Plan, you will not need IRS approval unless you adopt certain provisions. We will tell you whether it is desirable for you to submit your plan to the Internal Revenue Service for approval. If you make such a submission, you will have to pay an IRS user's fee. The Internal Revenue Service does not have to approve your adoption of the Pooled Trust. - ------------------------------------------------------------------------------- INCOME TAXATION OF DISTRIBUTIONS TO QUALIFIED PLAN PARTICIPANTS - ------------------------------------------------------------------------------- In this section, the word "you" refers to the plan participant. Amounts distributed to a participant from a qualified plan are generally subject to federal income tax as ordinary income when benefits are distributed to you or your beneficiary. Generally speaking, only your post-tax contributions, if any, are not taxed when distributed. LUMP SUM DISTRIBUTIONS. If your benefits are distributed to you in a lump sum after you have participated in the plan for at least five taxable years, you may be able to use five-year averaging. Under this method, the tax on the lump sum distribution is calculated separately from taxes on any other income you may have during the year. The tax is calculated at ordinary income tax rates in the year of the distribution, but as if it were your only income in each of five years. The tax payable is the sum of the five years' calculations. To qualify for five-year averaging, the distribution must consist of your entire balance in the plan and must be made in one taxable year of the recipient after you have attained age 59 1/2. Five-year averaging is available only for one lump sum distribution. If you were born before 1936, you may elect to have special rules apply to one lump sum distribution. You may elect either ten-year averaging using 1986 rates or five-year averaging using then current rates. In addition, you may elect separately to have the portion of your distribution attributable to pre-1974 contributions taxed at a flat 20% rate. ELIGIBLE ROLLOVER DISTRIBUTIONS. Many types of distributions from qualified plans are "eligible rollover distributions" that can be transferred directly to another qualified plan or individual retirement arrangement ("IRA"), or rolled over to another plan or IRA within 60 days of the receipt of the distribution. If a distribution is an "eligible rollover distribution," 20% mandatory federal income tax withholding will apply unless the distribution is directly transferred to a qualified plan or IRA. See Eligible Rollover Distributions and Federal Income Tax Withholding in the SAI for a more detailed discussion. ANNUITY OR INSTALLMENT PAYMENTS. Each payment you receive is treated as ordinary income except where you have a "cost basis" in the benefit. Your cost basis is equal to the amount of your post-tax employee contributions, plus any employer contributions you were required to include in gross income in prior years. A portion of each annuity or installment payment you receive will be excluded from gross income. If you (and your survivor) continue to receive payments after your cost basis in the contract has been paid out, all amounts will be taxable. 50 IN SERVICE WITHDRAWALS; HARDSHIP WITHDRAWALS. Some plans allow in-service withdrawals of after-tax contributions. The portion of each in-service withdrawal attributable to cost basis is received income tax-free. The portion that is attributable to earnings will be included in your gross income. Amounts contributed before January 1, 1987 to employer plans which on May 5, 1986 permitted such withdrawals, are taxable withdrawals only to the extent that they exceed the amount of your cost basis. Other amounts are treated as partly a return of cost basis with the remaining portion treated as earnings. Amounts included in gross income under this rule may also be subject to the additional 10% penalty tax on premature distributions described below. In addition, 20% mandatory federal income tax withholding may also apply. PREMATURE DISTRIBUTIONS. You may be liable for an additional 10% penalty tax on all taxable amounts distributed before age 59 1/2 unless the distribution falls within a specified exception or is rolled over into an IRA or other qualified plan. The exceptions to the penalty tax include (a) distributions made on account of your death or disability, (b) distributions in the form of a life annuity or installments over your life expectancy (or the joint lives or life expectancies of you and your beneficiary), (c) distributions due to separation from active service after age 55 and (d) distributions used to pay deductible medical expenses. EXCESS DISTRIBUTIONS. You may be liable for a 15% excise tax on all distributions in excess of a threshold amount. All distributions you receive from qualified plans, IRAs and Section 403(b) tax deferred annuities are aggregated for this purpose, even if those plans were maintained by unrelated employers. For installment and annuity payments, the threshold amount is $155,000 in 1996. If you elect special averaging for a lump sum distribution received in 1996, you will owe the excise tax only to the extent your distribution exceeds five times the threshold for excess distributions (i.e., $775,000 in 1996). WITHHOLDING. In almost all cases, 20% mandatory income tax withholding will apply to all "eligible rollover distributions" that are not directly transferred to a qualified plan or IRA. If a distribution is not an eligible rollover distribution, the recipient may elect out of withholding. The rate of withholding depends on the type of distribution. See Eligible Rollover Distributions and Federal Income Tax Withholding in the SAI. Under the ADA Master Retirement Plan, we will withhold the tax and send you the remaining amount. Under an individually designed plan or our prototype self-directed plan that uses the Pooled Trust for investment only, we will pay the full amount of the distribution to the plan's trustee. The trustee is then responsible for withholding federal income tax upon distributions to you or your beneficiary. - ------------------------------------------------------------------------------- OTHER TAX CONSEQUENCES - ------------------------------------------------------------------------------- Federal estate and gift and state and local estate, inheritance, and other tax consequences of participation in the Program depend on the residence and the circumstances of each participant or beneficiary. For complete information on federal, state, local and other tax considerations, you should consult a qualified tax advisor. MISCELLANEOUS - ------------------------------------------------------------------------------- CHANGE OR DISCONTINUANCE OF THE PROGRAM. The group annuity contract has been amended from time to time, and may be amended in the future. No future change can affect annuity benefits in the course of payment. Provided certain conditions are met, we may terminate the offer of any of the Investment Options and offer new ones with different terms. 51 Our contract with the Trustees may be terminated by us or the ADA. If our contract with the Trustees is terminated, we will not accept any further contributions or perform recordkeeping functions after the date of termination. At that time we would make arrangements with the Trustees as to the disposition of assets in the Investment Options we provide, subject to the following restrictions (i) transfers and withdrawals of assets allocated to the Real Estate Fund would continue to be subject to the restrictions described in this prospectus and in the SAI; (ii) assets allocated to the Money Market Guarantee Account would be transferred at the direction of the Trustees in installments over a period of time not to exceed two years; however, during that time participants would be permitted to transfer amounts out of the Money Market Guarantee Account to a funding vehicle provided by another financial institution (other than a money market fund or similar investment); and (iii) amounts allocated to the Guaranteed Rate Accounts will be held until maturity. You may be able to continue to invest amounts in the Investment Options we provide and elect payment of benefits through us if the Trustees make arrangements with us. DISQUALIFICATION OF PLAN. If your plan is found not to qualify under the Internal Revenue Code, we may return the plan's assets to the employer, as the plan administrator or we may prevent plan participants from investing in the separate accounts. REPORTS. We send reports annually to employers showing the aggregate Account Balances of all participants and information necessary to complete annual IRS filings. REGULATION. We are subject to regulation and supervision by the Insurance Department of the State of New York, which periodically examines our affairs. We are also subject to the insurance laws and regulations of all jurisdictions in which we are authorized to do business. This regulation does not, however, involve any supervision of the investment policies of the Funds or of the selection of any investments except to determine compliance with the law of New York. We are required to submit annual statements of our operations, including financial statements, to the insurance departments of the various jurisdictions in which we do business for purposes of determining solvency and compliance with local insurance laws and regulations. LEGAL PROCEEDINGS. We are engaged in litigation of various kinds which in our judgment is not of material importance in relation to our total assets. None of the litigation now in progress is expected to affect any assets of the Funds. ADDITIONAL INFORMATION. A registration statement relating to the offering described in this prospectus has been filed with the Securities and Exchange Commission under the Securities Act of 1933. Certain portions of the Registration Statement have been omitted from this prospectus and the SAI pursuant to the rules and regulations of the Commission. The omitted information may be obtained by requesting a copy of the registration statement from the Commission's principal office in Washington, D.C., and paying the Commission's prescribed fees or by accessing the Securities and Exchange Commission's Electronic Data Gathering, Analysis, and Retrieval (EDGAR) System. EXPERTS. The financial statements as of December 31, 1995 and for each of the two years in the period then ended for Separate Account Nos. 3, 4, 191, 30 and 8 and for the period December 1, 1995 through December 31, 1995 for Separate Account No. 200 included in the SAI and the condensed financial information for Separate Account Nos. 3, 4, 191 and 30 for each of the two years in the period ended December 31, 1995 included in this prospectus and the financial statements as of December 31, 1995 and 1994 and for each of the two years in the period ended December 31, 1995 included in the SAI for Equitable Life have been so included in reliance upon the report of Price Waterhouse LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. ACCEPTANCE. The employer or plan sponsor, as the case may be, is solely responsible for determining whether the Program is a suitable funding vehicle and should, therefore, carefully read the prospectus and other materials before entering into a Participation Agreement. 52 TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
PAGE ---------- The Contracts ................................ SAI-2 Your Responsibilities as Employer ............ SAI-2 Procedures for Withdrawals, Distributions and Transfers ................................... SAI-3 Types of Benefits ............................ SAI-8 Provisions of the Master Plan ................ SAI-10 Prime Property Fund Investments .............. SAI-13 Investment Restrictions Applicable to the Funds ................................... SAI-17 How We Value the Assets of the Funds ........ SAI-18 Summary of Unit Values for the Funds ........ SAI-20 Growth Equity and Aggressive Equity Fund Transactions ................................ SAI-22 Investment Management Fee .................... SAI-23 Underwriter .................................. SAI-24 Our Management ............................... SAI-24 Financial Statements ......................... SAI-26
CLIP AND MAIL TO US TO RECEIVE A STATEMENT OF ADDITIONAL INFORMATION ---------------------------------------------------- To:The Equitable Life Assurance Society of the United States Box 2486 G.P.O. New York, NY 10116 Please send me a copy of the Statement of Additional Information for the American Dental Association Members Retirement Program Prospectus dated May 1, 1996. Name ----------------------------------------------------------------------- Address: ----------------------------------------------------------------------- ----------------------------------------------------------------------- ----------------------------------------------------------------------- ---------------------------------------------------- Copyright 1995 by The Equitable Life Assurance Society of the United States. All rights reserved. 53
INVESTMENT OPTION CHARACTERISTICS AGGRESSIVE EQUITY LIFECYCLE FUND-- GROWTH EQUITY FUND FUND ADA FOREIGN FUND EQUITY INDEX FUND CONSERVATIVE - ------------------ ------------------ ------------------ ----------------- ------------------ ---------------- Designed for Long term growth Long term growth Long term growth Parallel the total Current income (Objective) of capital of capital of capital return of the S&P and low to 500 Index moderate growth of capital - ------------------ ------------------ ------------------ ----------------- ------------------ ---------------- Invests Primarily Common stocks and Invests 100% of Invests 100% of Invests 100% of Invests 100% of In other equity-type its assets in the its assets in the its assets in the its assets in a securities MFS Emerging Templeton Foreign Seven Seas Series mix of generally issued Growth Fund which Fund which S&P 500 Index Fund underlying by large and invests in common invests primarily which invests in collective intermediate-sized stocks of small in common stocks all 500 stocks in investment funds companies and medium-sized of companies the S&P 500 Index maintained by companies that are outside the U.S. in proportion to State Street early in their their weighting in life cycle. the Index - ------------------ ------------------ ------------------ ----------------- ------------------ ---------------- Risk to Principal Average for a Somewhat higher Somewhat higher Somewhat lower Somewhat lower growth fund than a growth fund than a growth than the Growth than the fund Equity Fund Lifecycle Fund--Moderate - ------------------ ------------------ ------------------ ----------------- ------------------ ---------------- Primary Growth Capital Capital Capital Capital Capital Potential Through appreciation and appreciation and appreciation and appreciation and appreciation and reinvested reinvested reinvested reinvested reinvested dividends dividends dividends dividends dividends and interest - ------------------ ------------------ ------------------ ----------------- ------------------ ---------------- Income Guarantee No No No No No - ------------------ ------------------ ------------------ ----------------- ------------------ ---------------- Volatility of Somewhat more Highly volatile Generally depends Generally equal to Generally lower Return volatile than the on stock, country the S&P 500 Index than pure equity S&P 500 and currency funds, but selections, as degree may vary well as market depending on factors market conditions - ------------------ ------------------ ------------------ ----------------- ------------------ ---------------- Transfers to other Permitted daily Permitted daily Permitted daily Permitted daily Permitted daily Options except under extreme circumstances - ------------------ ------------------ ------------------ ----------------- ------------------ ---------------- Withdrawal No No No No No Penalties - ------------------ ------------------ ------------------ ----------------- ------------------ ----------------
(RESTUBBED TABLE CONTINUED FROM ABOVE)
INVESTMENT OPTION CHARACTERISTICS LIFECYCLE FUND-- GUARANTEED RATE MONEY MARKET MODERATE REAL ESTATE FUND ACCOUNTS GUARANTEE ACCOUNT - ------------------ ---------------- ----------------- ------------------- ----------------- Designed for Growth of Stable rate of Principal and Principal and (Objective) capital and return through interest interest reasonable level rental income and guaranteed-- guaranteed--short of current appreciation interest rates term rates income reflect maturities - ------------------ ---------------- ----------------- ------------------- ----------------- Invests Primarily Invests 100% of High-grade, Contributions Contributions In its assets in a income-producing credited with fixed credited with mix of real property rate of interest current underlying until the maturity guaranteed rate collective date of interest investment funds maintained by State Street - ------------------ ---------------- ----------------- ------------------- ----------------- Risk to Principal Somewhat lower Lower than the Carrier providing Equitable Life than a growth Equity Funds GRAs guarantees guarantees fund principal and principal and interest interest; also backed by assets in insulated separate account - ------------------ ---------------- ----------------- ------------------- ----------------- Primary Growth Capital Rental income, Interest income Interest income Potential Through appreciation, capital reinvested appreciation and dividends interest - ------------------ ---------------- ----------------- ------------------- ----------------- Income Guarantee No No Yes--subject to Yes withdrawal penalties - ------------------ ---------------- ----------------- ------------------- ----------------- Volatility of Generally lower Stable and less Carrier providing Equitable Life Return than pure equity volatile than the GRAs guarantees guarantees funds, but Equity Funds interest rate until monthly interest degree may vary the maturity date rate; also backed depending on by assets in market insulated conditions separate account - ------------------ ---------------- ----------------- ------------------- ----------------- Transfers to other Permitted daily Permitted Permitted only at Permitted daily Options quarterly if cash maturity available - ------------------ ---------------- ----------------- ------------------- ----------------- Withdrawal No No Prior to maturity, No Penalties withdrawals may not be permitted or may be subject to a penalty - ------------------ ---------------- ----------------- ------------------- -----------------
The Funds each have different investment objectives and policies that can affect the returns of each Fund and the market and financial risks to which each is subject. While we do not intend to change the investment objectives of the pooled funds, we nevertheless have the right to do so, subject to the approval of the New York State Insurance Department. The Funds involve a greater potential for growth but involve risks that are not present with the Guaranteed Options. There is no assurance that any of the investment objectives of the Funds will be achieved or that the risk to principal or volatility of return will be as indicated. - ----------------------------------------------------------------------------- STATEMENT OF ADDITIONAL INFORMATION - ----------------------------------------------------------------------------- MAY 1, 1996 AMERICAN DENTAL ASSOCIATION MEMBERS RETIREMENT PROGRAM Separate Account Units of interest under a group annuity contract with THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES, 787 Seventh Avenue, New York, New York 10019, which funds the American Dental Association Members Retirement Program. Toll-free telephone number 1-800-223-5790. - ----------------------------------------------------------------------------- This Statement of Additional Information is not a prospectus. It should be read in conjunction with the prospectus dated May 1, 1996 for the American Dental Association Members Retirement Program. THIS SAI RELATES TO ALL INVESTMENT OPTIONS EXCEPT THE EQUITY INDEX FUND AND LIFECYCLE FUNDS, WHICH ARE DISCUSSED IN OUR SEPARATE SAI FOR THOSE FUNDS. A copy of the prospectus to which this Statement of Additional Information relates is available at no charge by writing to Equitable Life at Box 2486 G.P.O., New York, New York 10116 or by calling our toll-free telephone number. The following information is contained primarily in the prospectus: Investment Objectives and Policies Investment Advisory Services Certain of the cross references in this Statement of Additional Information are contained in the prospectus dated May 1, 1996 to which this Statement of Additional Information relates. TABLE OF CONTENTS
PAGE ---------- The Contracts ...................................... SAI-2 Your Responsibilities as Employer .................. SAI-2 Procedures for Withdrawals, Distributions and Transfers ........................................ SAI-3 Pre-Retirement Withdrawals ........................ SAI-3 Benefit Distributions ............................. SAI-4 Spousal Consent Requirements ...................... SAI-4 Eligible Rollover Distributions and Federal Income Tax Withholding ................... SAI-5 Premature Withdrawals and Transfers from a GRA ............................................ SAI-5 Maturing GRAs ..................................... SAI-6 Special Rules for Distributions and Transfers from the Real Estate Fund ........................ SAI-7 Real Estate Fund Withdrawals from Prime Property Fund .............................................. SAI-7 Types of Benefits .................................. SAI-8 Provisions of the Master Plan ...................... SAI-10 Plan Eligibility Requirements ..................... SAI-10 Contributions to Qualified Plans .................. SAI-10 Contributions to the Master Plan .................. SAI-10 Allocation of Contributions ....................... SAI-12 The Master Plan and Section 404(c) of ERISA ..... SAI-12 Vesting ........................................... SAI-12 Prime Property Fund Investments .................... SAI-13 Holdings of Prime Property Fund .................... SAI-15 Investment Restrictions Applicable to the Funds ... SAI-17 The Growth Equity Fund ............................ SAI-17 The Aggressive Equity Fund ........................ SAI-17 The ADA Foreign Fund .............................. SAI-17 The Equity Index Fund ............................. SAI-17 Lifecycle Funds ................................... SAI-18 The Real Estate Fund .............................. SAI-18 How We Value the Assets of the Funds ............... SAI-18 Assets Held in Prime Property Fund ................ SAI-19 Summary of Unit Values for the Funds ............... SAI-20 The Equity Funds ................................ SAI-20 The Real Estate Fund ............................ SAI-21 Prime Property Fund ............................. SAI-22 Growth Equity and Aggressive Equity Fund Transactions .................................... SAI-22 Prime Property Fund Transactions ................... SAI-23 Investment Management Fee .......................... SAI-23 Underwriter ........................................ SAI-24 Our Management ..................................... SAI-24 Financial Statements ............................... SAI-26
[FN] - ------------ Copyright 1996 by The Equitable Life Assurance Society of The United States. All rights reserved. ADDITIONAL INFORMATION ABOUT THE PROGRAM THE CONTRACTS The Program is primarily funded through a group annuity contract issued to the Trustees by The Equitable Life Assurance Society of the United States (Equitable Life). The contract governs the Investment Options that are provided by Equitable Life under the Program. The Trustees have also entered into two group annuity contracts with New York Life Insurance Company (New York Life) which govern Guaranteed Rate Accounts opened during the one year period beginning August 2, 1995. The Trustees hold all contracts for the benefit of employers and participants in the Program. In addition, the Trustees and Equitable Life have entered into an administrative services agreement that governs Equitable Life's duties relating to administrative support, recordkeeping and marketing for the Program. This agreement would under most circumstances terminate at the same time as the group annuity contract. YOUR RESPONSIBILITIES AS EMPLOYER If you adopt the Master Plan, you as the employer and plan administrator will have certain responsibilities, including: o sending us your contributions at the proper time and in the proper format; o maintaining all personnel records necessary for administering your plan; o determining who is eligible to receive benefits; o forwarding to us all the forms your employees are required to submit; o distributing summary plan descriptions and participant annual reports to your employees and former employees; o distributing our prospectuses and confirmation notices to your employees and, in some cases, former employees; o filing an annual information return for your plan with the Internal Revenue Service, if required; o providing us the information with which to run special non-discrimination tests, if you have a 401(k) plan or your plan accepts post-tax employee or employer matching contributions; o determining the amount of all contributions for each participant in the plan; o forwarding salary deferral and post-tax employee contributions to us; and o selecting interest rates and monitoring default procedures if you elect the loan provision in your plan. SAI-2 If you, as an employer, have an individually designed plan, your responsibilities will not be increased in any way by your adoption of the Pooled Trust for investment only. If you adopt our self-directed prototype plan, you will be completely responsible for administering the plan and complying with all of the reporting and disclosure requirements applicable to qualified plans, with the assistance of the recordkeeper of your choice. We will give you guidance and assistance in the performance of your responsibilities. The ultimate responsibility, however, rests with you. If you have questions about any of your obligations, you can contact our Account Executives at 1-800-223-5790 or write to us at Box 2486 G.P.O., New York, New York 10116. PROCEDURES FOR WITHDRAWALS, DISTRIBUTIONS AND TRANSFERS PRE-RETIREMENT WITHDRAWALS. Under the Master Plan, self-employed persons may generally not receive a distribution prior to age 59 1/2, and employees may generally not receive a distribution prior to separation from service. However, if your employer maintains the Master Plan as a profit sharing plan, you may request distribution of benefits after you reach age 59 1/2 even if you are still working. If your employer maintains the Master Plan as a 401(k) plan and you are under age 59 1/2, you may withdraw your own 401(k) contributions only if you can demonstrate financial hardship within the meaning of applicable Income Tax Regulations. Each withdrawal must be at least $1,000 (or, if less, your entire Account Balance or the amount of your hardship withdrawal under a 401(k) plan). If your employer terminates the plan, all amounts (subject to GRA restrictions) may be distributed to participants at that time. You may withdraw all or part of your Account Balance under the Master Plan attributable to post-tax employee contributions at any time, subject to any withdrawal restrictions applicable to the Investment Options, provided that you withdraw at least $300 at a time (or, if less, your Account Balance attributable to post-tax employee contributions). See Federal Income Tax Considerations in the prospectus. All benefit payments (including withdrawals due to plan terminations) will be paid in accordance with the rules described below under Benefit Distributions. All other withdrawals will be effected as of the close of business on the day we receive the properly completed form. If you are married, your spouse must consent in writing before you can make any type of withdrawal. See Spousal Consent Requirements below. Under the self-directed prototype plan you may receive a distribution upon attaining normal retirement age as specified in the plan, or upon separation from service. If your employer maintains the self-directed prototype plan as a profit sharing plan, an earlier distribution of funds that have accumulated after two years is available if you incur a financial hardship, as defined in the plan. In addition, if you are married, your spouse may have to consent in writing before you can make any type of withdrawal, except for the purchase of a Qualified Joint and Survivor Annuity. See Spousal Consent Requirements below. Under an individually designed plan, the availability of pre-retirement withdrawals depends on the terms of the plan. We suggest that you ask your employer what types of withdrawals are available under your plan. PLEASE NOTE THAT GENERALLY YOU MAY NOT MAKE WITHDRAWALS FROM THE GUARANTEED RATE ACCOUNTS PRIOR TO MATURITY EVEN IF THE EMPLOYER PLAN PERMITS WITHDRAWALS PRIOR TO THAT TIME. (SEE PREMATURE WITHDRAWALS AND TRANSFERS FROM A GRA). TRANSFERS FROM THE ADA FOREIGN FUND, THE EQUITY INDEX FUND, THE AGGRESSIVE EQUITY FUND AND THE LIFECYCLE FUNDS--CONSERVATIVE AND MODERATE ARE PERMITTED DAILY EXCEPT UNDER SAI-3 INFREQUENT CIRCUMSTANCES WHEN THEY MAY BE SUBJECT TO A DELAY. SEE BENEFIT DISTRIBUTIONS BELOW. IN ADDITION, THE REAL ESTATE FUND IS SUBJECT TO SPECIAL WITHDRAWAL RULES WHICH ARE DESCRIBED UNDER SPECIAL RULES FOR DISTRIBUTIONS AND TRANSFERS FROM THE REAL ESTATE FUND. BENEFIT DISTRIBUTIONS. In order for you to begin receiving benefits under the Master Plan, your employer must send us your properly completed Election of Benefits form and, if applicable, Beneficiary Designation form. If we receive your properly completed forms on or before the 15th of the month, your benefits will commence as of the close of business on the first business day of the next month; if your forms arrive after the 15th, your benefits will commence as of the close of business on the first business day of the second following month. Under an individually designed plan and our self-directed prototype plan, your employer must send us a request for disbursement form. We will send single sum payments to your plan's trustee as of the close of business on the day we receive a properly completed form. If you wish to receive annuity payments, your plan's trustee may purchase a variable annuity contract from us. Fixed annuities are available from insurance companies selected by the Trustees. See Types of Benefits. Annuity payments will be paid directly to you and will commence as of the close of business on the first business day of the next month if we receive your properly completed forms on or before the 15th of the month. If we receive your properly completed forms after the 15th, annuity payments will commence as of the close of business on the first business day of the second following month. Transfers and withdrawals from the Aggresive Equity Fund, the ADA Foreign Fund and the Equity Index Fund may be deferred if there is any delay in redemption of shares of the respective mutual funds in which the Funds invest. We generally do not expect any delays. Transfers and withdrawals from the Lifecycle Funds--Conservative and Moderate may be deferred if there is any delay in redemption of units of the Lifecycle Fund Group Trusts. We generally do not expect any such delays. Special rules apply to withdrawals from the Real Estate Fund. See Special Rules for Distributions and Transfers from the Real Estate Fund. Please note that we use the value of your vested benefits at the close of business on the day payment is due to determine the amount of benefits you receive. We will not, therefore, begin processing your check until the following business day. You should expect your check to be mailed within five days after processing begins. Annuity checks can take longer. If you buy a fixed annuity, your check will come from the company you selected. If you are withdrawing more than $50,000 and you would like expedited delivery at your expense, you may request it on your election of benefits form. Distributions under a qualified retirement plan such as yours are subject to extremely complicated legal requirements. When you are ready to retire, we suggest that you discuss the available payment options with your employer. Our Account Executives can provide you or your employer with information. SPOUSAL CONSENT REQUIREMENTS. Under the Master Plan and the self-directed prototype plan, you may designate a non-spouse beneficiary any time after the earlier of the first day of the plan year in which you attain age 35 or the date on which you separate from service with your employer. If you designate a beneficiary other than your spouse prior to your reaching age 35, your spouse must consent to the designation and, upon your reaching age 35, must again give his or her consent or the designation will lapse. In order for you to make a withdrawal, elect a form of benefit other than a Qualified Joint and Survivor Annuity or designate a non-spouse beneficiary, your spouse must consent to your election in writing within the 90 day period before your annuity starting date. To consent, your spouse must sign the appropriate line on your election of benefits or beneficiary designation form. Your spouse's signature must be witnessed by a notary public or plan representative. SAI-4 If you change your mind, you may revoke your election and elect a Qualified Joint and Survivor Annuity or designate your spouse as beneficiary, simply by filing the appropriate form. Your spouse's consent is not required for this revocation. It is also possible for your spouse to sign a blanket consent form. By signing this form, your spouse consents not just to a specific beneficiary or form of distribution, but gives you the right to name any beneficiary or form of distribution you want. Once you file such a form, you may change your election whenever you want, even without spousal consent. No spousal consent to a withdrawal or benefit in a form other than a Qualified Joint and Survivor Annuity is required under certain self-directed and individually designed profit sharing plans that do not offer life annuity benefits. ELIGIBLE ROLLOVER DISTRIBUTIONS AND FEDERAL INCOME TAX WITHHOLDING. All "eligible rollover distributions" are subject to mandatory federal income tax withholding of 20% unless the participant elects to have the distribution directly rolled over to a qualified plan or individual retirement arrangement (IRA). An "eligible rollover distribution" is generally any distribution that is not one of a series of substantially equal periodic payments made (not less frequently than annually) (1) for the life (or life expectancy) of the plan participant or the joint lives (or joint life expectancies) of the plan participant and his or her designated beneficiary, or (2) for a specified period of 10 years or more. In addition, the following are not subject to mandatory 20% withholding: o certain corrective distributions under Internal Revenue Code (Code) Section 401(k) plans; o loans that are treated as distributions; and o a distribution to a beneficiary other than to a surviving spouse or a current or former spouse under a qualified domestic relations order. If a distribution is made to a participant's surviving spouse, or to a current or former spouse under a qualified domestic relations order, the distribution may be an eligible rollover distribution, subject to mandatory 20% withholding, unless one of the exceptions described above applies. If a distribution is not an "eligible rollover distribution" income tax will be withheld from all taxable payments unless the recipient elects not to have income tax withheld. PREMATURE WITHDRAWALS AND TRANSFERS FROM A GRA. You may transfer amounts from other Investment Options to a GRA at any time. Transfers may not be made from one GRA to another or from a GRA to one of the other Investment Options until the maturity date of the GRA. Likewise, you may not remove amounts from a GRA prior to maturity in order to obtain a plan loan or make a hardship or in-service withdrawal. If your plan's assets are transferred to another funding vehicle from the Program or if your plan is terminated, we will continue to hold your money in GRAs until maturity. All such GRAs will be held in the Pooled Trust under the investment-only arrangement. See The Program--Summary of the Plans and Trusts in the prospectus. Withdrawals are not permitted prior to maturity unless they are permitted under your plan and are Exempt or Qualified, as explained below. Exempt Withdrawals may be made without penalty at any time. Qualified Withdrawals are subject to a penalty. No Qualified Withdrawals are permitted from a five-year GRA during the first two years after the end of its offering period; this rule does not apply if the amount of the applicable penalty is less than the interest you have accrued. If you have more than one GRA and you are taking a partial withdrawal or installments, amounts held in your most recently purchased three-year or five-year GRA that is available under the withdrawal rules for Exempt and Qualified Withdrawals will first be used to make withdrawal or installment payments. Please note that withdrawals, transfers, reallocations on maturity and benefit distributions from GRAs provided by a carrier other than Equitable Life are subject to Equitable Life's receipt of the proceeds of such GRA from such carrier. SAI-5 Exempt Withdrawal. You may withdraw amounts without penalty from a GRA prior to its maturity if: o you are a dentist age 59 1/2 or older and you elect an installment payout of at least three years or an annuity benefit; o you are not a dentist and you attain age 59 1/2 or terminate employment (including retirement); o you are disabled; o you attain age 70 1/2; or o you die. Qualified Withdrawal. You may withdraw amounts with a penalty from a GRA prior to its maturity if you are a dentist and are taking payment upon retirement after age 59 1/2 under a distribution option of less than three years duration. The interest paid to you upon withdrawal will be reduced by an amount calculated as follows: (i) the amount by which the three-year GRA rate being offered on the date of withdrawal exceeds the GRA rate from which the withdrawal is made, times (ii) the years and/or fraction of a year until maturity, times (iii) the amount withdrawn from the GRA. We will make this calculation based on GRA rates without regard to deductions for the applicable Program expense charge. If the three-year GRA is not being offered at the time of withdrawal, the adjustment will be based on then current rates on U.S. Treasury notes or for a comparable option under the Program. Your original contributions will never be reduced by this adjustment. No adjustment is made if the current three-year GRA rate is equal to or less than the rate for the GRA from which the Qualified Withdrawal is being made. A separate adjustment is calculated for each GRA. If the interest accumulated in one GRA is insufficient to recover the amount calculated under the formula, the excess may be deducted as necessary from interest accumulated in other GRAs of the same duration. EXAMPLE: You contribute $1,000 to a three-year GRA on January 1 with a rate of 4%. Two years later you make a Qualified Withdrawal. Your GRA balance is $1,082. The current GRA rate is 6%; (i) 6%-4%=2%, (ii) 2% X 1 year=2%, (iii) 2% X $1,082=$21.64. The withdrawal proceeds would be $1,082-$21.64=$1,060.36. MATURING GRAS o Your confirmation notice lists the maturity date for each GRA you hold. o You may arrange in advance for the reinvestment of your maturing GRAs by filing a GRA maturity form or by using the Account Investment Management ("AIM") system. (Instructions must be received at least four days before the GRA matures.) o The instructions you give us remain in effect until you change them (again, at least four days before you want the change to go into effect). o You may have different instructions for your GRAs attributable to employer contributions than for your GRAs attributable to employee contributions. o If you have never provided GRA maturity instructions, your maturing GRAs will be allocated to the Money Market Guarantee Account. SAI-6 SPECIAL RULES FOR DISTRIBUTIONS AND TRANSFERS FROM THE REAL ESTATE FUND. PLEASE NOTE THAT AT TIMES OF INSUFFICIENT LIQUIDITY WITHDRAWALS FROM THE REAL ESTATE FUND AND PRIME PROPERTY FUND COULD BE DELAYED IN ACCORDANCE WITH THE PROCEDURES DESCRIBED BELOW. AT THIS TIME THE REAL ESTATE FUND IS FULFILLING WITHDRAWAL REQUESTS ON A CURRENT BASIS. YOU MAY CALL US TO RECEIVE CURRENT INFORMATION REGARDING THE STATUS OF REAL ESTATE FUND WITHDRAWALS. SEE SPECIAL RISKS RELATED TO THE REAL ESTATE FUND IN THE PROSPECTUS FOR MORE INFORMATION. THERE IS A MINIMUM WAIT OF ONE CALENDAR QUARTER FOR WITHDRAWALS FROM THE REAL ESTATE FUND. All distributions and transfers from the Real Estate Fund will be scheduled to be made shortly after the end of the calendar quarter following the quarter in which we receive properly completed forms. (See The Real Estate Fund in the prospectus for more information on how we value and liquidate Real Estate Fund Units.) The amount distributed will be based on the Real Estate Fund's Unit Value on the date distribution is made. Withdrawals from the Real Estate Fund must be made in amounts of at least $1,000 or, if less, your balance in the Real Estate Fund. IN ADDITION TO THE WAIT OF AT LEAST ONE CALENDAR QUARTER WHICH IS REQUIRED BY OUR PROCEDURES, IT IS ALSO POSSIBLE THAT THE REAL ESTATE FUND WILL NOT HAVE ENOUGH CASH TO MAKE ALL WITHDRAWALS AND TRANSFERS WHEN REQUESTED. If at the end of a calendar quarter the Real Estate Fund does not have enough cash to pay all scheduled withdrawals, they will be divided into two priority categories. Priority 1 consists of all amounts requested because of death or disability or after age 70 1/2. Priority 2 consists of all other requests. THE REAL ESTATE FUND WILL SATISFY ALL SCHEDULED PRIORITY 1 DISTRIBUTION REQUESTS BEFORE IT SATISFIES ANY PRIORITY 2 REQUEST, EVEN IF THE PRIORITY 1 REQUESTS WERE RECEIVED AFTER THE PRIORITY 2 REQUESTS. If the Real Estate Fund does not have enough cash to make all Priority 1 distributions, they will be paid in the order the requests were received. After the Real Estate Fund has made all Priority 1 distributions, it will make Priority 2 distributions and transfers. If the Real Estate Fund does not satisfy all scheduled Priority 2 distributions and transfer requests, they will be paid in the order the requests were received. To make Priority 1 distributions, the Real Estate Fund will use substantially all its liquid assets, keeping only a reserve that we believe is adequate for anticipated expenses. If possible, the Real Estate Fund will also liquidate as much of its interest in Prime Property Fund as required. With regard to Priority 2, we will make distributions and transfers to the extent that funds are available from cash flow and from liquidation of Prime Property Fund units. However, we will not make Priority 2 distributions and transfers if the Real Estate Fund cannot liquidate enough of its interest in Prime Property Fund and we believe that it would be desirable to maintain liquidity to meet anticipated Priority 1 distributions. Requests that remain unpaid will be scheduled for the next quarterly distribution date. At that time they will be satisfied to the extent possible, in accordance with their respective priorities and order of receipt. Please note that if you make a Priority 2 request that is not paid when scheduled, Priority 1 distributions requested in later quarters may be paid before your Priority 2 request. REAL ESTATE FUND WITHDRAWALS FROM PRIME PROPERTY FUND. If the Real Estate Fund does not have enough liquid assets to pay all requested withdrawals, it will seek to withdraw some or all of its interest from Prime Property Fund. We may postpone withdrawals from Prime Property Fund, however, for such time as we reasonably consider necessary to obtain the amount to be withdrawn or to protect the interests of other participants in Prime Property Fund. In making this determination, we consider primarily (i) the availability of cash to manage Prime Property Fund's property holdings, to meet emergencies and to meet commitments for property acquisitions and loans, (ii) the time necessary to dispose of properties and (iii) any adverse impact of proposed property sales on other participants in Prime Property Fund. Except as described below, Prime Property Fund has been able to pay withdrawals when requested since its inception in 1973. SAI-7 If withdrawal from Prime Property Fund is restricted, any payment from Prime Property Fund is applied pro rata to the withdrawal requests of all participants in Prime Property Fund that are eligible for payment on the withdrawal date, regardless of when those requests were made. Prime Property Fund withdrawal requests not satisfied by a pro rata distribution are deferred until the next withdrawal date (generally the last business day of the following quarter), at which time the amount available for distribution will again be applied pro rata to all pending requests. For purposes of this policy, the Real Estate Fund is considered a single participant in Prime Property Fund, on par with each other participant in Prime Property Fund. From the first quarter of 1995 through the third quarter of 1995, Prime Property Fund satisfied all participant withdrawal requests. As of the fourth quarter of 1995, the Prime Property Fund was unable to satisfy all participant withdrawal requests. Consequently, withdrawals from Prime Property Fund are being delayed in accordance with the procedures discussed above. However, since June 1994 the Real Estate Fund has had sufficient liquidity; and withdrawals have not been restricted. If the Real Estate Fund experiences periods of insufficient liquidity withdrawals may be delayed in accordance with the procedures described above. See Special Rules for Distributions and Transfers from the Real Estate Fund. There have been other periods when there was insufficent available cash in Prime Property Fund to meet all withdrawal requests and the above withdrawal procedures were put into place for all pending Prime Property Fund withdrawal requests. During these other periods Real Estate Fund withdrawals were not delayed or restricted in any manner because there was sufficient liquidity in the Real Estate Fund. In general, a withdrawal from Prime Property Fund by one or more of its larger investors could significantly reduce its cash position and increase the likelihood that the Real Estate Fund would not have cash sufficient to meet all withdrawal requests. At December 31, 1995 there were 206 participants in Prime Property Fund, none of which held more than 3.6% of Prime Property Fund. TYPES OF BENEFITS Under the Master Plan, and under most self-directed prototype plans, except as provided below, you may select one or more of the following forms of distribution once you are eligible to receive benefits. Please see Benefit Distributions under Procedures for Withdrawals, Distributions and Transfers. Not all of these distribution forms may be available to you, if your employer has adopted an individually designed plan or a self-directed prototype profit sharing plan that does not offer annuity benefits. We suggest you ask your employer what types of benefits are available under your plan. Fixed annuities are available from insurance companies selected by the Trustees, which meet criteria established by the Trustees from time to time. Fixed annuities are currently not available from Equitable Life. The types of fixed annuity benefits described below will be available through one or more of such companies. Upon your request, the companies will provide annuity benefit information. We will have no further responsibility for the amount used to purchase the annuity once it has been sent to the insurance company you select. The cost of a fixed annuity is determined by each insurance company based on its current annuity purchase rates. The amount of your monthly annuity benefit will depend on the type of annuity selected, your age and the age of your beneficiary if you select a joint and survivor annuity. Your Account Executive has more details regarding the insurance companies currently providing annuity benefits under the Program. QUALIFIED JOINT AND SURVIVOR ANNUITY. An annuity providing equal monthly payments for your life and, after your death, for your surviving spouse's life. No payments will be made after you and your spouse die, even if you have received only one payment. THE LAW REQUIRES THAT IF THE VALUE OF YOUR VESTED BENEFITS EXCEEDS $3,500, YOU MUST RECEIVE A QUALIFIED JOINT AND SURVIVOR ANNUITY UNLESS YOUR SPOUSE CONSENTS IN SAI-8 WRITING TO A CONTRARY ELECTION. Please see Spousal Consent Requirements under Procedures for Withdrawals, Distributions and Transfers for an explanation of the procedures for electing not to receive a Qualified Joint and Survivor Annuity. LUMP SUM PAYMENT. A single payment of all or part of your vested benefits. If you take a lump sum payment of only part of your balance, it must be at least $1,000. If you have more than one GRA, amounts held in your most recent GRA will first be used to make payment. IF YOUR VESTED BENEFIT IS $3,500 OR LESS, YOU WILL RECEIVE A LUMP SUM PAYMENT OF THE ENTIRE AMOUNT. PERIODIC INSTALLMENTS. Monthly, quarterly, semi-annual or annual payments over a period of at least three years, where the initial payment on a monthly basis is at least $300. You can choose either a time-certain payout, which provides variable payments over a specified period of time, or a dollar-certain payout, which provides level payments over a variable period of time. During the installment period, your remaining Account Balance will be invested in whatever Options you designate, other than the Real Estate Fund; each payment will be drawn pro rata from all the Options you have selected. If you elect installment payments, you may not leave or place any assets in the Real Estate Fund. If you have more than one GRA, amounts held in your most recently purchased three-year or five-year GRA will first be used to make installment payments. If you die before receiving all the installments, we will make the remaining payments to your beneficiary. LIFE ANNUITY. An annuity providing monthly payments for your life. No payments will be made after your death, even if you have received only one payment. LIFE ANNUITY--PERIOD CERTAIN. An annuity providing monthly payments for your life or, if longer, a specified period of time. If you die before the end of that specified period, payments will continue to your beneficiary until the end of the period. Subject to legal limitations, you may specify a minimum payment period of 5, 10, 15 or 20 years; the longer the specified period, the smaller the monthly payments will be. JOINT AND SURVIVOR ANNUITY. An annuity providing monthly payments for your life and that of your beneficiary. You may specify the percentage of the annuity payment to be made to your beneficiary. Subject to legal limitations, that percentage may be 100%, 75%, 50%, or any other percentage you specify. JOINT AND SURVIVOR ANNUITY--PERIOD CERTAIN. An annuity providing monthly payments for your life and that of your beneficiary or, if longer, a specified period of time. If you and your beneficiary both die before the end of the specified period, payments will continue to your contingent beneficiary until the end of the period. Subject to legal limitations, you may specify a minimum payment period of 5, 10, 15 or 20 years and the percentage of the annuity payment to be made to your beneficiary (as noted above under Joint and Survivor Annuity); the longer the specified period, the smaller the monthly payments will be. CASH REFUND ANNUITY. An annuity providing equal monthly payments for your life with a guarantee that the sum of those payments will be at least equal to the portion of your vested benefits used to purchase the annuity. If upon your death the sum of the monthly payments to you is less than that amount, your beneficiary will receive a lump sum payment of the remaining guaranteed amount. Under a Qualified Joint and Survivor Annuity or a Cash Refund Annuity, the amount of the monthly payments is fixed at retirement and remains level throughout the distribution period. Under the Life Annuity, Life Annuity--Period Certain, Joint and Survivor Annuity and Joint and Survivor Annuity--Period Certain, you may select either fixed or variable payments. All forms of variable annuity benefits under the Program will be provided by us. The payments under variable annuity options reflect the investment performance of the Growth Equity Fund. If you are interested in a variable annuity, when you are ready to select your benefit please ask our Account Executives for our variable annuity prospectus supplement. SAI-9 PROVISIONS OF THE MASTER PLAN PLAN ELIGIBILITY REQUIREMENTS. Under the Master Plan, the employer specifies the eligibility requirements for its plan in the Participation Agreement. The employer may exclude any employee who has not attained a specified age (not to exceed 21) and completed a specified number of years (not to exceed two) in each of which he completed 1,000 hours of service. No more than one year of eligibility service may be required for a 401(k) arrangement. The employer may also exclude salaried dentists (those with no ownership interest in the practice), employees of related employers, leased employees and certain other types of employees at the employer's election, provided such exclusion does not cause the Plan to discriminate in favor of "highly compensated" employees (defined below). The Master Plan provides that a partner or shareholder may, upon commencement of employment or upon first becoming eligible to participate in any qualified plan of the employer, make a one-time irrevocable election not to participate in the plan or to make a reduced contribution. This election applies to all plans of the employer, now and in the future, and should be discussed with your tax advisor. CONTRIBUTIONS TO QUALIFIED PLANS. Current federal income tax rules relating to contributions under qualified retirement plans are outlined briefly below. For purposes of this outline we have assumed that you are not a participant in any other qualified retirement plan. The employer's contributions to the plan are deductible in the year for which they are made. As a general rule, employer contributions must be made for any year by the due date (including extensions) for filing the employer's federal income tax return for that year. However, participants' salary deferrals under a 401(k) plan must be contributed by the employer as soon as practicable after the payroll period for which the deferral is made and regulations have been proposed for shortening the maximum time period for remitting contributions to the plan. If the employer contributes more to the plan than is deductible under the rules described below, the employer may be liable for a 10% penalty tax on that nondeductible amount and may risk disqualifying the plan. CONTRIBUTIONS TO THE MASTER PLAN. The employer makes annual contributions to its plan based on the plan's provisions. An employer that adopts the Master Plan as a profit sharing plan makes contributions in discretionary amounts to be determined annually. The aggregate employer contribution to the plan, including participants' salary deferrals under a 401(k) arrangement, is limited to 15% of all participants' compensation for the plan year. For plan purposes, compensation for self-employed persons does not include deductible plan contributions made on behalf of the self-employed person. A 401(k) arrangement is available as part of the profit sharing plan. Under a 401(k) arrangement, employees are permitted to make contributions to the plan on a pre-tax basis. The maximum amount that may be contributed by highly compensated employees is limited depending upon the amount that is contributed by non-highly compensated employees and the amount the employer designates as a nonforfeitable 401(k) contribution. In 1996, "highly compensated" employee for this purpose is (a) an owner of more than 5% of the practice, or (b) anyone with earnings of more than $100,000 from the practice, or (c) anyone with earnings of more than $66,000 from the practice who is among the highest-paid 20% of employees, or (d) an officer of the practice with earnings of more than $60,000. In any event, the SAI-10 maximum amount each employee may defer is limited to $9,500 for 1996 reduced by that employee's salary reduction contributions to simplified employee pensions (SEPs), employee contributions to tax deferred (Section 403(b)) annuities, and contributions deductible by the employee under a trust described under Section 501(c)(18) of the Code. If the employer adopts the Master Plan as a defined contribution pension plan, its contribution is equal to the percentage of each participant's compensation that is specified in the Participation Agreement. Under either type of plan, compensation in excess of $150,000 must be disregarded in making contributions. Contributions may be integrated with Social Security which means that contributions with respect to each participant's compensation in excess of the integration level may exceed contributions made with respect to compensation below the integration level, within limits imposed by the Code. Your Account Executive can help you determine the legally permissible contribution. Contributions on behalf of non-key employees must be at least 3% of compensation (or, under the profit sharing plan, the percentage contributed on behalf of key employees, if less than 3%). In 1996, "key employee" means (a) an owner of one of the ten largest (but more than 1/2%) interests in the practice with earnings of more than $30,000, or (b) an officer of the practice with earnings of more than $60,000 or (c) an owner of more than 5% of the practice, or (d) an owner of more than 1% of the practice with earnings of more than $150,000. For purposes of (b), no more than 50 employees (or, if less, the greater of three or 10% of the employees) shall be treated as officers. Certain plans may also permit participants to make post-tax contributions. We will maintain a separate account to reflect each participant's post-tax contributions and the earnings (or losses) thereon. Post-tax contributions are now subject to complex rules under which the maximum amount that may be contributed by highly compensated employees is limited, depending on the amount contributed by non-highly compensated employees. BEFORE PERMITTING ANY HIGHLY-COMPENSATED EMPLOYEE TO MAKE POST-TAX CONTRIBUTIONS, THE EMPLOYER SHOULD MAKE SURE THAT ALL NON-DISCRIMINATION TESTS HAVE BEEN PASSED. If an employer employs only "highly compensated" employees (as defined above), post-tax contributions may not be made to the plan. In addition, the employer may make matching contributions to certain plans, i.e., contributions which are based upon the amount of post-tax or pre-tax 401(k) contributions made by plan participants. Special non-discrimination rules apply to matching contributions and may limit the amount of matching contributions that may be made on behalf of highly compensated employees. Contributions on behalf of each participant are limited to the lesser of $30,000 and 25% of his earnings (excluding, in the case of self-employed persons, all deductible plan contributions). The participant's post-tax contributions are taken into account for purposes of applying this limitation. Each participant's Account Balance equals the sum of the amounts accumulated in each Investment Option. We will maintain separate records of each participant's interest in each of the Investment Options attributable to employer contributions, 401(k) non-elective contributions, 401(k) elective contributions, post-tax employee contributions and employer matching contributions. Any amounts rolled over from the plan of a previous employer will also be accounted for separately. Our records will also reflect each participant's percentage of vesting (see below) in his Account Balance attributable to employer contributions and employer matching contributions. The participant will receive an individual confirmation of each transaction (including the deduction of record maintenance and report fees). The participant will also receive an annual statement showing his Account Balance in each Investment Option attributable to each type of contribution. Based on information supplied by you, we will run the required special non-discrimination tests (Actual Deferral Percentage and Actual Contribution Percentage) applicable to 401(k) plans and plans that accept post-tax employee contributions or employer matching contributions. SAI-11 Elective deferrals to a 401(k) plan are subject to applicable FICA (social security) and FUTA (unemployment) taxes. ALLOCATION OF CONTRIBUTIONS. Contributions may be allocated among any number of the Investment Options. Allocation instructions may be changed at any time, and as often as needed, by calling the AIM System. New instructions become effective on the business day we receive them. Employer contributions may be allocated in different percentages than employee contributions. The allocation percentages elected for employer contributions will automatically apply to any 401(k) qualified non-elective contributions, qualified matching contributions and matching contributions. The allocation percentages for employee contributions will automatically apply to any post-tax employee contributions and 401(k) salary deferral contributions. IF WE HAVE NOT RECEIVED VALID INSTRUCTIONS, WE WILL ALLOCATE CONTRIBUTIONS TO THE MONEY MARKET GUARANTEE ACCOUNT. THE MASTER PLAN AND SECTION 404(C) OF ERISA. The Master Plan is a participant directed individual account plan designed to comply with the requirements of Section 404(c) of ERISA. Section 404(c) of ERISA, and the related Department of Labor (DOL) regulation, provide that if a participant or beneficiary exercises control over the assets in his or her plan account, plan fiduciaries will not be liable for any loss that is the direct and necessary result of the participant's or beneficiary's exercise of control. This means that if the employer plan complies with Section 404(c), participants can make and are responsible for the results of their own investment decisions. Section 404(c) plans must, among other things, make a broad range of investment choices available to participants and beneficiaries and must provide them with enough information to make informed investment decisions. The ADA Program provides the broad range of investment choices and information that are needed in order to meet the requirements of Section 404(c). Our suggested summary plan descriptions, annual reports, prospectuses, and confirmation notices provide the required investment information; it is the employer's responsibility, however, to see that this information is distributed in a timely manner to participants and beneficiaries. You should read this information carefully before making your investment decisions. VESTING. Vesting refers to the nonforfeitable portion of a participant's Account Balance attributable to employer contributions under the Master Plan. The participant's Account Balance attributable to 401(k) contributions (including salary deferral, qualified non-elective and qualified matching contributions), post-tax employee contributions and to rollover contributions is nonforfeitable at all times. A participant will become fully vested in all benefits if still employed at death, disability, attainment of normal retirement age or upon termination of the plan. If the participant terminates employment before that time, any benefits that have not yet become vested under the plan's vesting schedule will be forfeitable. The normal retirement age is 65 under the Master Plan. SAI-12 Benefits must vest in accordance with any of the schedules below or one at least as favorable to participants:
SCHEDULE A SCHEDULE B SCHEDULE C YEARS OF VESTED VESTED VESTED SERVICE PERCENTAGE PERCENTAGE PERCENTAGE - ---------- ------------ ------------ ------------ 1 0% 0% 0% 2 100 20 0 3 100 40 100 4 100 60 100 5 100 80 100 6 100 100 100
If the plan requires more than one year of service for participation, it must use Schedule A or one at least as favorable to participants. PRIME PROPERTY FUND INVESTMENTS Since typically 90% to 100% of the Real Estate Fund's assets are invested in Prime Property Fund, we have provided the following information about the investments of Prime Property Fund. Prime Property Fund seeks the acquisition and long-term ownership of high-grade, income-producing real property. Prime Property Fund seeks to invest in properties that are located in strong rental markets and have continuous potential for resale. At December 31, 1995, Prime Property Fund held 171 investments in wholly-owned properties and equities in partnerships with an aggregate appraised value of $3.1 billion. Prime Property Fund seeks to diversify its property portfolio by usage and location. Prime Property Fund's major holdings (in wholly-owned properties and equities in partnerships) as of December 31, 1995 included: o 32 retail properties, primarily super-regional shopping centers, with an aggregate market value of $1,665.3 million. o 43 office properties, with an aggregate market value of $896.3 million. o 84 industrial properties (primarily warehouses) and research and development facilities, with an aggregate market value of $373.9 million. o 5 hotels, with an aggregate market value of $117.4 million. o 7 other properties, which include any other income-producing properties not specifically mentioned above, with an aggregate market value of $34.1 million. In addition to wholly-owned properties and equities in partnerships, Prime Property Fund has eight investments in mortgage loans receivable with an aggregate market value of $311 million, or 9.2% of Prime Property Fund's investments. Mortgages may be accepted as partial consideration for properties sold. SAI-13 BORROWINGS. There is no limit on mortgage indebtedness with respect to any one property. During the period from 1986 through 1995 Prime Property Fund's total borrowings secured by wholly-owned properties ranged from 6.2% to 17.9% of the total portfolio value. Properties held by joint ventures may also be mortgaged. The borrowings on wholly-owned properties held in Prime Property Fund as of December 31, 1995 are summarized below. - ----------------------------------------------------------------------------- Summary of Borrowings on Wholly-Owned Properties*--December 31, 1995
Number of mortgages payable ........... 7 Number of encumbered properties ...... 13 Outstanding borrowings (millions) .... 528.8 Borrowings as a percent of total value 17.9%
*Prime Property Fund also held interests in real estate partnerships having total assets of $1,284 million and total liabilities of $915 million. - ----------------------------------------------------------------------------- SAI-14 HOLDINGS OF PRIME PROPERTY FUND The charts below describe the investments in wholly-owned properties, partnership equities and mortgage and construction loans receivable of Prime Property Fund as of December 31, 1995 and for the other periods indicated.
DISTRIBUTION OF INVESTMENT VALUE BY TYPE AND LOCATION* (BY PERCENTAGE) -- DECEMBER 31, 1995 - -------------------------------------------------------------- SOUTH EAST MID-WEST WEST TOTAL - -------------- ------- ------- ---------- ------- ------- Industrial/R&D 2.9% 2.4% 1.3% 4.4% 11.0% Office 1.2 16.1 1.1 11.7 30.1 Retail 13.4 14.1 21.6 5.3 54.4 Hotel 0.9 1.5 -- 1.1 3.5 Other 0.1 0.9 -- -- 1.0 - -------------- ------- ------- ---------- ------- ------- Total 18.5% 35.0% 24.0% 22.5% 100.0% - -------------- ------- ------- ---------- ------- -------
DISTRIBUTION OF INVESTMENTS BY TYPE AND LOCATION* (BY NUMBER OF INVESTMENTS) -- DECEMBER 31, 1995 - ------------------------------------------------------------ SOUTH EAST MID-WEST WEST TOTAL - -------------- ------- ------ ---------- ------ ------- Industrial/R&D 29 21 13 21 84 Office 3 26 7 11 47 Retail 10 12 10 3 35 Hotel 1 3 -- 1 5 Other 1 6 1 -- 8 - -------------- ------- ------ ---------- ------ ------- Total 44 68 31 36 179 - -------------- ------- ------ ---------- ------ -------
DISTRIBUTION OF INVESTMENT VALUE BY LOCATION* (BY PERCENTAGE) - ------------------------------------------------------ 1995 1994 1993 1992 1991 - ---------- ------ ------- ------- ------- ------- South 18.5 19.7% 20.0% 20.8% 24.9% East 35.0 31.0 30.9 29.9 29.3 Mid-West 24.0 27.3 27.6 26.6 23.8 West 22.5 22.0 21.5 22.7 22.0 - ---------- ------ ------- ------- ------- -------
*Each region comprises the states indicated: South: Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, Oklahoma, Tennessee, Texas East: Connecticut, Delaware, District of Columbia, Kentucky, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, South Carolina, Vermont, Virginia, West Virginia Mid-West: Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, Wisconsin West: Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington, Wyoming SAI-15
DISTRIBUTION OF INVESTMENT VALUE BY PROPERTY TYPE (BY PERCENTAGE) - ----------------------------------------------------------- 1995 1994 1993 1992 1991 - -------------- ------- ------- ------- ------- ------- Industrial/R&D 11.0% 10.6% 10.8% 11.4% 10.9% Office 30.1 24.9 25.2 26.8 33.2 Retail 54.4 60.8 60.0 57.6 51.6 Hotel 3.5 3.2 2.9 3.3 3.8 Other 1.0 0.5 1.1 0.9 0.5 - -------------- ------- ------- ------- ------- -------
DISTRIBUTION OF INVESTMENT VALUE BY TYPE OF OWNERSHIP (BY PERCENTAGE) -- DECEMBER 31, 1995 - ------------------------------------------------------------------------- WHOLLY-OWNED EQUITY IN MORTGAGE LOANS REAL ESTATE* PARTNERSHIPS RECEIVABLE TOTAL - -------------- -------------- -------------- ---------------- ------- Industrial/R&D 10.6% 0.4% -- 11.0% Office 23.2 3.1 3.8% 30.1 Retail 48.3 0.7 5.4 54.4 Hotel 2.3 1.2 -- 3.5 Other 0.1 0.9 -- 1.0 - -------------- -------------- -------------- ---------------- ------- Total 84.5% 6.3% 9.2% 100.0% - -------------- -------------- -------------- ---------------- -------
* Title to wholly-owned properties allocated to Prime Property Fund is generally held in Equitable Life's name.
DISTRIBUTION OF INVESTMENTS BY VALUE RANGE* -- DECEMBER 31, 1995 - ------------------------------------------------------------- INVESTMENT PERCENTAGE OF VALUE PERCENTAGE OF NUMBER OF TOTAL NUMBER (MILLIONS) INVESTMENT VALUE INVESTMENTS OF INVESTMENTS - ------------ ---------------- ------------- -------------- Under $2.5 2.0% 48 26.8% $2.5-$5 3.9 36 20.1 $5-$10 6.9 33 18.4 $10-$20 7.2 17 9.5 $20-$50 27.3 28 15.7 $50-$100 20.7 10 5.6 Over $100 32.0 7 3.9 - ------------ ---------------- ------------- -------------- Total 100.0% 179 100.0% - ------------ ---------------- ------------- --------------
* Includes all investments stated at the Fund's ownership share. SAI-16 INVESTMENT RESTRICTIONS APPLICABLE TO THE FUNDS THE GROWTH EQUITY FUND. The Growth Equity Fund will not: o trade in foreign exchange (except transactions incidental to the settlement of purchases or sales of securities); o make an investment in order to exercise control or management over a company; o underwrite the securities of other companies, including purchasing securities that are restricted under the 1933 Act or rules or regulations thereunder (restricted securities cannot be sold publicly until they are registered under the 1933 Act), except as stated below; o make short sales, except when the Fund has, by reason of ownership of other securities, the right to obtain securities of equivalent kind and amount that will be held so long as they are in a short position; o trade in commodities or commodity contracts; purchase or write puts and calls (options); o purchase real estate or mortgages, except as stated below. The Fund may buy shares of real estate investment trusts listed on stock exchanges or reported on the National Association of Securities Dealers, Inc. automated quotation system ("NASDAQ"); o have more than 5% of its assets invested in the securities of any one registered investment company. A Fund may not own more than 3% of an investment company's outstanding voting securities. Finally, total holdings of investment company securities may not exceed 10% of the value of the Fund's assets; o purchase any security on margin or borrow money except for short-term credits necessary for clearance of securities transactions; o make loans, except loans through the purchase of debt obligations or through entry into repurchase agreements; or o invest more than 10% of its total assets in restricted securities, real estate investments, or portfolio securities not readily marketable. o make an investment in an industry if that investment would make the Fund's holding in that industry exceed 25% of its assets. The United States government, and its agencies and instrumentalities, are not considered members of any industry. THE AGGRESSIVE EQUITY FUND. The Aggressive Equity Fund will operate as discussed in The Equity Funds--The Aggressive Equity Fund in the prospectus, and will be subject to the investment policies and limitations described there. The prospectus for the MFS Emerging Growth Fund describes the investment objective, policies and limitations applicable to the Fund. A free copy of the MFS Emerging Growth Fund prospectus may be obtained by calling an Equitable Life Account Executive. THE ADA FOREIGN FUND. The ADA Foreign Fund will operate as discussed in The Equity Funds--The ADA Foreign Fund in the prospectus, and will be subject to the investment policies and limitations described there. The prospectus for the Templeton Foreign Fund describes the investment objective, policies and limitations applicable to that Fund. A free copy of the Templeton Foreign Fund prospectus may be obtained by calling an Equitable Life Account Executive. THE EQUITY INDEX FUND. The Equity Index Fund will operate as discussed in The Equity Funds--The Equity Index Fund in the prospectus, and will be subject to the investment policies and limitations SAI-17 described there. The prospectus for the Seven Seas Series Fund describes the investment objective, policies and limitations applicable to the Seven Seas S&P 500 Index Fund. A free copy of the Seven Seas Series Fund prospectus may be obtained by calling an Equitable Life Account Executive. LIFECYCLE FUNDS. The Lifecycle Funds will operate as discussed in The Equity Funds--The Lifecycle Funds in the prospectus, and will be subject to the investment policies and limitations described there. Our separate prospectus for the Lifecycle Funds describes the investment objectives, policies and limitations applicable to the Lifecycle Fund Group Trusts. A free copy of that prospectus may be obtained by calling an Equitable Life Account Executive. THE REAL ESTATE FUND. The Real Estate Fund will operate as discussed in The Real Estate Fund in the prospectus, and will be subject to the investment policies and limitations described there. HOW WE VALUE THE ASSETS OF THE FUNDS THE GROWTH EQUITY FUND. The assets of the Growth Equity Fund are valued as follows: o STOCKS listed on national securities exchanges or traded on the NASDAQ national market system are valued at the last sale price. If on a particular day there is no sale, they are valued at the latest available bid price reported on a composite tape. Other unlisted securities reported on the NASDAQ system are valued at inside (highest) quoted bid prices. o FOREIGN SECURITIES not traded directly, or in ADR form, in the United States, are valued at the last sale price in the local currency on an exchange in the country of origin. Foreign currency is converted into dollars at current exchange rates. o UNITED STATES TREASURY SECURITIES and other obligations issued or guaranteed by the United States Government, its agencies or instrumentalities are valued at representative quoted prices. o LONG-TERM PUBLICLY TRADED CORPORATE BONDS (i.e., maturing in more than one year) are valued at prices obtained from a bond pricing service of a major dealer in bonds when such prices are available; however, in circumstances where it is deemed appropriate to do so, an over-the-counter or exchange quotation may be used. o CONVERTIBLE PREFERRED STOCKS listed on national securities exchanges are valued at their last sale price or, if there is no sale, at the latest available bid price. o CONVERTIBLE BONDS and UNLISTED CONVERTIBLE PREFERRED STOCKS are valued at bid prices obtained from one or more major dealers in such securities; where there is a discrepancy between dealers, values may be adjusted based on recent premium spreads to the underlying common stock. o SHORT-TERM DEBT SECURITIES that mature in more than 60 days are valued at representative quoted prices. Short-term debt securities that mature in 60 days or less are valued at amortized cost, which approximates market value. The Growth Equity Fund, as well as the Real Estate Fund, may also acquire short-term debt securities through units in our Separate Account No. 2A. These unit values are calculated in the same way as Fund Units. The assets of Separate Account No. 2A are valued as described above. Our investment officers determine in good faith the fair value of securities and other assets that do not have a readily available market price in accordance with accepted accounting practices and applicable laws and regulations. SAI-18 THE AGGRESSIVE EQUITY FUND. The Fund will invest all of its assets in the MFS Emerging Growth Fund. The asset value of the MFS Emerging Growth Fund is computed on a daily basis by the MFS Emerging Growth Fund. See the prospectus of the MFS Emerging Growth Fund for information on valuation methodology. THE ADA FOREIGN FUND. The Fund will invest all of its assets in shares of the Templeton Foreign Fund. The asset value of the Templeton Foreign Fund is computed on a daily basis by the Templeton Foreign Fund. See the prospectus of the Templeton Foreign Fund for information on valuation methodology. THE EQUITY INDEX FUND. The Fund will invest all of its assets in the Seven Seas S&P 500 Index Fund. The asset value of the Seven Seas S&P 500 Index Fund is computed on a daily basis by the Seven Seas S&P 500 Index Fund. See the prospectus of the Seven Seas Series Fund for information on valuation methodology. THE LIFECYCLE FUNDS. The Lifecycle Funds--Conservative and Moderate will invest all of their assets in the Lifecycle Fund Group Trusts--Conservative and Moderate, respectively. The Group Trusts, in turn, will invest all of their assets in the Underlying Funds. See our separate prospectus for the Lifecycle Funds for information on valuation methodology. ASSETS HELD IN PRIME PROPERTY FUND. Real properties held by Prime Property Fund (Equitable's Separate Account No. 8) are valued by staff appraisers in our field offices or third-party appraisers. Appraised values do not necessarily represent the prices at which the real estate investments would sell since sales prices are determined by negotiation between a willing buyer and seller. Our appraisers value each Prime Property Fund property prior to acquisition and at the end of each calendar quarter thereafter. The initial appraisal is a fully documented appraisal. This appraisal takes into account all relevant information, including the property's physical attributes, location, marketability, zoning, expandability, and adaptability to use. The initial appraisal also involves consideration of values based on the three major methods of estimating property value: o the income method, based on the value of the property's projected income stream; o the cost method, based on the replacement cost of improvements, less depreciation, plus land value; and o the market method, based on the sales prices of similar properties. Subsequent quarterly appraisals include less documentation but take into account all relevant information and consist of a physical inspection, a valuation based on the most relevant of the three above methods, usually the income method, performance record and an assessment of any relevant market changes. Interim monthly valuations also take into account physical or economic changes respecting a property which we believe would have a material effect on its market value. Quarterly appraisals are prepared primarily by staff appraisers. Staff appraisals are submitted to one of three designated third-party appraisal firms which also physically inspect those properties periodically. These appraisal firms provide Equitable Real Estate with a written statement of concurrence annually. Partnership equities are valued at Prime Property Fund's equity in the net assets of the partnerships in accordance with the valuation procedures described above. During the past five years, on average, net proceeds (equal to sales price minus sales expenses) from sales of properties in which Equitable Life retains no equity interest were equal to approximately 95.8% of their most recent quarterly valuation. In some cases, Prime Property Fund has received purchase money mortgages for a portion of the sales price. SAI-19 Mortgage and construction loans receivable are valued by comparing the loan rate of interest to market rates for loans of comparable quality and duration, giving consideration to the value of the underlying security. See Note B2 to the Financial Statements of Separate Account No. 8 (Prime Property Fund) in this SAI for more information about the valuation of investments in Prime Property Fund. SUMMARY OF UNIT VALUES FOR THE FUNDS THE EQUITY FUNDS. Set forth below are Unit Values for the Growth Equity, Aggressive Equity, ADA Foreign and Equity Index Funds, computed to the nearest cent on the last business day of the periods specified. The value of a Growth Equity Fund Unit was established at $10.00 on January 1, 1968, the date the Program first became available. The Aggressive Equity Fund Unit Value under the Program was established at $10.00 on May 1, 1985, the date on which Separate Account No. 3 (Pooled) was first made available under the Program. The Program's interest in Separate Account No. 3 (Pooled) was transferred to Separate Account No. 200 at the close of business on November 30, 1995. The ADA Foreign Fund Unit Value was established at $10.00 on March 2, 1992, the date the ADA Foreign Fund began operations. The Equity Index Fund Unit Value was established at $10.00 on February 1, 1994, the date the Equity Index Fund began operations. The Lifecycle Funds' Unit Values were established at $10.00 on May 1, 1995, the date these Funds began operation. Since the Lifecycle Funds and the Lifecycle Fund Group Trusts have had no prior operations, Unit Values for the Lifecycle Funds prior to May 1, 1995 are not provided. Hypothetical Unit Values for the ADA Foreign Fund for periods prior to March 2, 1992 assume that the Fund's assets are invested 95% in the Templeton Foreign Fund and 5% in Separate Account No. 2A. Hypothetical Unit Values for periods prior to the availability of the Aggressive Equity Fund, ADA Foreign Fund and the Equity Index Fund under the Program were calculated by applying the Program expense charge during those periods plus .15% in estimated other expenses to the historical investment experience of the MFS Emerging Growth Fund for the Aggressive Equity Fund, to the historical investment experience of the Templeton Foreign Fund and Separate Account No. 2A for the ADA Foreign Fund, and to the historical investment experience of the Seven Seas S&P 500 Index Fund (from its first full year of operations) for the Equity Index Fund.
UNIT VALUES OF THE EQUITY FUNDS LIFECYCLE LIFECYCLE LAST BUSINESS GROWTH EQUITY AGGRESSIVE ADA FOREIGN EQUITY INDEX FUND- FUND- DAY OF FUND EQUITY FUND (A) FUND (B) FUND (C) CONSERVATIVE MODERATE - --------------- ------------- --------------- ------------- -------------- -------------- ----------- 1986 $ 67.10 $10.00 $ 4.52 -- -- -- 1987 70.48 10.38 5.56 -- -- -- 1988 81.94 11.13 6.70 -- -- -- 1989 117.90 14.04 8.62 -- -- -- 1990 103.88 13.58 8.33 -- -- -- 1991 156.93 25.37 9.74 -- -- -- 1992 157.79 28.13 9.81 $9.06 -- -- 1993 187.30 34.75 13.08 9.64 -- -- 1994 183.07 36.16 13.01 9.71 -- -- 1995 240.03 42.62 14.31 13.12 $10.59 $11.01 March 1996 254.93 45.49 14.93 13.78 10.56 11.22
- --------------- (a) For periods after December 1, 1995, Unit Values reflect the actual performance of Separate Account No. 200, for periods prior to such date unit values reflect the share values of the MFS Emerging Growth SAI-20 Fund Class A shares since September 13, 1993, when those shares were first offered for sale. From December 31, 1986 to September 13, 1993, the performance of Class B shares is reflected. The hypothetical performance shown would have been somewhat higher for the period if Class A shares had been available. (b) For periods prior to March 2, 1992, Unit Values reflect hypothetical performance. (c) For periods prior to February 1, 1994, Unit Values reflect hypothetical performance. THE REAL ESTATE FUND. The Real Estate Fund Unit Value was established at $10.00 on August 29, 1986, the date the Real Estate Fund began operations. Set forth below are Unit Values for the Real Estate Fund, computed to the nearest cent on the last business day of the periods specified. First, we have assumed that, for periods prior to August 29, 1986, 90% of the Real Estate Fund's assets were invested in Prime Property Fund and that 10% were invested in our Separate Account No. 2A, described in the prospectus. We have also approximated the asset-based fees which would have applied under the Program for the periods shown and applied them to the hypothetical investment experience of the Real Estate Fund. For January 1, 1986 through August 28, 1986, we have assumed those charges were equal to the average Program Expense Charge for that year, plus a 1.10% investment management fee for the Real Estate Fund, plus the .25% administration fee applicable to the Real Estate Fund. See Deductions and Charges in the prospectus for more information about the charges that apply to the Real Estate Fund. UNIT VALUES OF THE REAL ESTATE FUND
LAST BUSINESS DAY OF UNIT VALUE* - --------------- ------------ 1986 $10.07 1987 10.84 1988 11.37 1989 12.29 1990 12.53 1991 11.44 1992 10.85 1993 10.50 1994 10.88 1995 11.36 March 1996 10.79
- --------------- (*) Unit Values are the actual Unit Values last determined before the date shown, which determination normally will have been from five to ten days after the end of the preceding month. Consequently, the Unit Values may differ from the Unit Values presented in Condensed Financial Information in the prospectus. SAI-21 PRIME PROPERTY FUND. Set forth below are the unit values of Prime Property Fund, computed to the nearest cent on the last business day of the periods specified. The value of a Prime Property Fund unit was established at $1,000.00 on August 20, 1973, the date on which it commenced operations. Unit values are shown without deduction for investment management fees. UNIT VALUES OF PRIME PROPERTY FUND
LAST BUSINESS DAY OF UNIT VALUE - --------------- ------------ 1986 $4,431.87 1987 4,848.46 1988 5,260.89 1989 5,765.73 1990 5,786.40 1991 5,367.19 1992 5,177.99 1993 5,287.69 1994 5,643.72 1995 5,622.21
GROWTH EQUITY AND AGGRESSIVE EQUITY FUND TRANSACTIONS The Growth Equity and, prior to December 1, 1995, the Aggressive Equity Funds are charged for securities brokers' commissions, transfer taxes and other fees relating to securities transactions. Transactions in equity securities for a Fund are executed primarily through brokers that receive a commission paid by the Fund. The brokers are selected by Alliance Capital Management L.P. ("Alliance") and Equitable Life. For 1995, 1994 and 1993, the Growth Equity Fund paid $6,044,623, $4,738,796 and $3,407,006, respectively, in brokerage commissions. For January 1 through November 30, 1995, and for 1994 and 1993, the Aggressive Equity Fund paid $1,453,659, $908,990 and $616,015, respectively, in brokerage commissions. Alliance and Equitable Life seek to obtain the best price and execution of all orders placed for the portfolios of the funds, considering all the circumstances. If transactions are executed in the over-the- counter market, they will deal with the principal market makers, unless more favorable prices or better execution is otherwise obtainable. There are occasions on which portfolio transactions for the Funds may be executed as part of concurrent authorizations to purchase or sell the same security for certain other accounts or clients advised by Alliance and Equitable Life. These concurrent authorizations potentially can be either advantageous or disadvantageous to the Funds. When the concurrent authorizations occur, the objective is to allocate the executions among the Funds and the other accounts in a fair manner. We also consider the amount and quality of securities research services provided by a broker. Typical research services include general economic information and analyses and specific information on and analyses of companies, industries and markets. Factors in evaluating research services include the diversity of sources used by the broker and the broker's experience, analytical ability, and professional stature. The receipt of research services from brokers tends to reduce our expenses in managing the Funds. This is taken into account when setting the expense charges. Brokers who provide research services may charge somewhat higher commissions than those who do not. However, we will select only brokers whose commissions we believe are reasonable in all the circumstances. Of the brokerage commissions paid by the Growth Equity Fund during 1995 and Aggressive Equity Fund for January 1 through November 30, 1995, $5,731,568 and $1,407,868, respectively, were paid to brokers providing research services on transactions of $3,120,414,654 and $562,849,447, respectively. SAI-22 We periodically evaluate the services provided by brokers and prepare internal proposals for allocating among those various brokers business for all the accounts we manage or advise. That evaluation involves consideration of the overall capacity of the broker to execute transactions, its financial condition, its past performance and the value of research services provided by the broker in servicing the various accounts advised or managed by us. We have no binding agreements with any firm as to the amount of brokerage business which the firm may expect to receive for research services or otherwise. There may, however, be understandings with certain firms that we will continue to receive services from such firms only if such firms are allocated a certain amount of brokerage business. We may try to allocate such amounts of business to such firms to the extent possible in accordance with the policies described above. Research information obtained by us may be used in servicing all accounts under our management, including our general account. Similarly, not all research provided by a broker or dealer with which the Funds transact business will necessarily be used in connection with those Funds. When making securities transactions for Funds that do not involve paying a brokerage commission (such as the purchase of short-term debt securities), we seek to obtain prompt execution in an effective manner at the best price. Subject to this general objective, we may give orders to dealers or underwriters who provide investment research. None of the Funds will pay a higher price, however, and the fact that we may benefit from such research is not considered in setting the expense charges. In addition to using brokers and dealers to execute portfolio securities transactions for accounts we manage, we may enter into other types of business transactions with brokers or dealers. These other transactions will be unrelated to allocation of the Funds' portfolio transactions. PRIME PROPERTY FUND TRANSACTIONS Prime Property Fund is charged separately for fees paid to independent property managers, outside legal expenses, operating expenses, real estate taxes and insurance premiums. In addition, Prime Property Fund reimburses Equitable Life for certain direct expenses and pays property management and leasing fees associated with Equitable Life's management of some properties held in Prime Property Fund. INVESTMENT MANAGEMENT FEE The table below shows the amount we received under the investment management fee under the Program during each of the last three years. These figures include charges for financial accounting. See Deductions and Charges in the prospectus. We no longer receive management fees for the Aggressive Equity, ADA Foreign and Equity Index Funds.
FUND 1995 1994 1993 - ------------------ ---------- ---------- ---------- Growth Equity ..... $585,663 $632,720 $819,035 Aggressive Equity 193,600 209,181 256,490 ADA Foreign ....... -- 40,815 54,409 Equity Index Fund* -- 788 -- Real Estate ....... 41,887 39,344 54,761
- ------------ * The Equity Index Fund became available on February 1, 1994. SAI-23 UNDERWRITER Equico Securities, Inc. (Equico), a wholly-owned subsidiary of Equitable Life, may be deemed to be the principal underwriter of separate account units under the group annuity contract. On or about May 1, 1996, Equico Securities will change its name to EQ Financial Consultants, Inc. 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. The offering of the units under the contract is continuous. No underwriting commissions have been paid during any of the last three fiscal years with respect to units of interest under the contract. See Deductions and Charges in the prospectus. OUR MANAGEMENT Equitable Life is managed by a Board of Directors which is elected by its shareholders. Its directors and certain of its executive officers and their principal occupations are as follows:
DIRECTORS NAME PRINCIPAL OCCUPATION - ----------------------------- ---------------------------------------------------------------------- Claude Bebear Chairman and Chief Executive Officer, AXA, Chairman, The Equitable Companies Incorporated Christopher Brocksom Chief Executive Officer, AXA Equity & Law Life Assurance Society Francoise Colloc'h Executive Vice President--Culture--Management--Communications, AXA *Henri de Castries Executive Vice President--Finance, AXA, Vice Chairman, The Equitable Companies Incorporated Joseph L. Dionne Chairman and Chief Executive Officer, The McGraw-Hill Companies *William T. Esrey Chairman and Chief Executive Officer, Sprint Corporation Jean-Rene Fourtou Chairman and Chief Executive Officer, Rhone Poulenc, S.A. Norman C. Francis President, Xavier University of Louisiana Donald J. Greene Counselor-at-Law, Partner, Le Boeuf, Lamb, Greene & MacRae Anthony J. Hamilton Chairman and Chief Executive Officer, Fox-Pitt, Kelton Limited. John T. Hartley Director, Retired Chairman and Chief Executive Officer, Harris Corporation *John H. F. Haskell, Jr. Director and Managing Director, Dillon, Read & Co., Inc. *W. Edwin Jarmain President, Jarmain Group Inc. G. Donald Johnston, Jr. Retired Chairman and Chief Executive Officer, JWT Group, Inc. *Winthrop Knowlton Chairman, Knowlton Brothers, Inc. Arthur L. Liman Counselor-at-Law, Partner, Paul, Weiss, Rifkind, Wharton & Garrison George T. Lowy Counselor-at-Law, Partner, Cravath, Swaine & Moore Didier Pineau-Valencienne Chairman and Chief Executive Officer, Schneider, S.A. *George J. Sella, Jr. Retired Chairman and Chief Executive Officer, American Cyanamid Company *Dave H. Williams Chairman and Chief Executive Officer, Alliance Capital Management Corporation, L.P.
- ------------ *Member of Equitable's Investment Committee. SAI-24 Unless otherwise indicated, the following persons have been involved in the management of Equitable Life in various executive positions during the last five years.
OFFICER-DIRECTORS NAME PRINCIPAL OCCUPATION - ------------------------- ----------------------------------------------------------------------------- Joseph J. Melone Director, President and Chief Executive Officer, The Equitable Companies Incorporated; prior thereto, President and Chief Operating Officer; Chairman of the Board, Equitable Life; prior thereto, Chairman and Chief Executive Officer James M. Benson Director, Senior Executive Vice President and Chief Operating Officer, The Equitable Companies Incorporated; prior thereto, Senior Executive Vice President; Director, President and Chief Executive Officer, Equitable Life; prior thereto, President and Chief Operating Officer; prior thereto, President, Management Compensation Group Jerry M. de St. Paer Senior Executive Vice President and Chief Financial Officer; prior thereto, Executive Vice President and Chief Financial Officer Robert E. Garber Executive Vice President and General Counsel William T. McCaffrey Director, Senior Executive Vice President and Chief Operating Officer; prior thereto, Executive Vice President and Chief Administrative Officer Peter D. Noris Executive Vice President and Chief Investment Officer Jose Suquet Executive Vice President and Chief Agency Officer Gordon G. Dinsmore Senior Vice President Alvin H. Fenichel Senior Vice President and Controller J. Thomas Liddle, Jr. Senior Vice President and Chief Valuation Actuary Kevin R. Byrne Vice President and Treasurer Paul J. Flora Vice President and Auditor Pauline Sherman Vice President, Secretary and Associate General Counsel
- ------------ * Member of Equitable Life's Investment Committee. SAI-25 FINANCIAL STATEMENTS The financial statements of Equitable Life included in this Statement of Additional Information should be considered only as bearing upon the ability of Equitable Life to meet its obligations under the group annuity contract. They should not be considered as bearing upon the investment experience of the Funds. The financial statements of Separate Account Nos. 3 (Pooled), 4 (Pooled), 30 (Pooled), 191 and 200 reflect applicable fees, charges and other expenses under the Program as in effect during the periods covered and they also reflect the charges against the accounts made in accordance with the terms of all other contracts participating in the respective separate accounts. The financial statements of Separate Account No. 8 (Prime Property Fund) reflect charges against the account made in accordance with the terms of all other contracts participating in the account; there are no Program fees charged against Separate Account No. 8. SEPARATE ACCOUNT NOS. 3 (POOLED) AND 4 (POOLED):
Reports of Independent Accountants ............................................................... SAI-28 Separate Account No. 3 (Pooled) (The Aggressive Equity Fund): Statement of Assets and Liabilities, December 31, 1995 ........................................... SAI-29 Statements of Operations and Changes in Net Assets for the Years Ended December 31, 1995 and 1994 SAI-30 Portfolio of Investments, December 31, 1995 ...................................................... SAI-31 Separate Account No. 4 (Pooled) (The Growth Equity Fund): Statement of Assets and Liabilities, December 31, 1995 ........................................... SAI-35 Statements of Operations and Changes in Net Assets for the Years Ended December 31, 1995 and 1994 SAI-36 Portfolio of Investments, December 31, 1995 ...................................................... SAI-37 Separate Account Nos. 3 (Pooled) and 4 (Pooled) Notes to Financial Statements .................................................................... SAI-41 SEPARATE ACCOUNT NOS. 191 AND 200: Report of Independent Accountants ................................................................ SAI-44 Separate Account No. 191 (The ADA Foreign Fund): Statement of Assets and Liabilities, December 31, 1995 ........................................... SAI-45 Statements of Operations and Changes in Net Assets for the Years Ended December 31, 1995 and 1994 SAI-46 Separate Account No. 200 (The Aggressive Equity Fund): Statement of Assets and Liabilities, December 31, 1995 ........................................... SAI-47 Statement of Operations and Changes in Net Assets, for the Period December 1, 1995 to December 31, 1995 .............................................................................. SAI-48 Separate Account Nos. 191 and 200 Notes to Financial Statements .................................................................... SAI-49 SEPARATE ACCOUNT NO. 30 (POOLED) (THE REAL ESTATE FUND): Report of Independent Accountants ................................................................ SAI-51 Statements of Assets and Liabilities, December 31, 1995 and 1994 ................................. SAI-52 Statements of Operations and Changes in Net Assets for the Years Ended December 31, 1995 and 1994 SAI-53 Statements of Cash Flows for the Years Ended December 31, 1995 and 1994 .......................... SAI-54 Statement of Investments and Net Assets, December 31, 1995 ....................................... SAI-55 Notes to Financial Statements .................................................................... SAI-56 SEPARATE ACCOUNT NO. 8 (PRIME PROPERTY FUND): Report of Independent Accountants ................................................................ SAI-58 Statement of Independent Appraisers .............................................................. SAI-59 Statements of Assets and Liabilities, December 31, 1995 and 1994 ................................. SAI-60 Statements of Operations and Changes in Net Assets for the Years Ended December 31, 1995 and 1994 SAI-61 Statements of Cash Flows for the Years Ended December 31, 1995 and 1994 .......................... SAI-62 Notes to Financial Statements .................................................................... SAI-63 Schedule X: Supplementary Income Statement Information, December 31, 1995 and 1994 .............. SAI-72 Schedule XII: Mortgage Loans Receivable on Real Estate, December 31, 1995 and 1994 .............. SAI-73 SAI-26 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES: Report of Independent Accountants ................................................................ SAI-75 Consolidated Balance Sheets, December 31, 1995 and 1994 .......................................... SAI-76 Consolidated Statements of Earnings for the Years Ended December 31, 1995, 1994 and 1993 ........ SAI-77 Consolidated Statements of Shareholder's Equity for the Years Ended December 31, 1995, 1994 and 1993 ........................................................................................... SAI-78 Consolidated Statements of Cash Flows for the Years Ended December 31, 1995, 1994 and 1993 ...... SAI-79 Notes to Consolidated Financial Statements ....................................................... SAI-80
SAI-27 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors of The Equitable Life Assurance Society of the United States and the Participants in the American Dental Association Members Retirement Program In our opinion, the accompanying statements of assets and liabilities, including the portfolios of investments, and the related statements of operations and changes in net assets present fairly, in all material respects, the financial position of Separate Account Nos. 3 and 4 of The Equitable Life Assurance Society of the United States ("Equitable Life") at December 31, 1995 and each of their results of operations and changes in net assets for each of the two years in the period then ended, in conformity with generally accepted accounting principles. These financial statements are the responsibility of Equitable Life's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 1995 by correspondence with the custodian and brokers and the application of alternative auditing procedures where confirmations from brokers were not received, provide a reasonable basis for the opinion expressed above. Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The selected per unit information (appearing under "Condensed Financial Information" in the prospectus) is presented for the purpose of satisfying regulatory reporting requirements and is not a required part of the basic financial statements. Such selected per unit information has been subjected to auditing procedures applied during the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. PRICE WATERHOUSE LLP New York, New York February 7, 1996 SAI-28 SEPARATE ACCOUNT NO. 3 (POOLED) (THE AGGRESSIVE EQUITY FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Statement of Assets and Liabilities December 31, 1995 - -----------------------------------------------------------------------------
ASSETS: Investments (Notes 2 and 3): Common stocks--at value (cost: $274,102,539) .................. $336,946,517 Participation in Separate Account No. 2A--at amortized cost, which approximates market value, equivalent to 17,601 units at $241.89 ..................................................... 4,257,425 Cash ............................................................ 891,904 Receivables: Securities sold ............................................... 2,490,920 Dividends ..................................................... 8,919 --------------------------------------------------------------- -------------- Total assets ................................................ 344,595,685 --------------------------------------------------------------- -------------- LIABILITIES: Payables: Securities purchased .......................................... 1,122,353 Due to Equitable Life's General Account ....................... 1,587,720 Investment management fees payable ............................ 3,146 Accrued expenses ................................................ 179,212 --------------------------------------------------------------- -------------- Total liabilities ........................................... 2,892,431 --------------------------------------------------------------- -------------- NET ASSETS ...................................................... $341,703,254 =============================================================== ==============
See Notes to Financial Statements. SAI-29 SEPARATE ACCOUNT NO. 3 (POOLED) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Statements of Operations and Changes in Net Assets - -------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1995 1994 - ------------------------------------------------------------------------------- --------------- --------------- FROM OPERATIONS: INVESTMENT INCOME (NOTE 2): Dividends (net of foreign taxes withheld -- 1995: $21,522 and 1994: $19,204) .. $ 1,552,241 $ 1,382,831 Interest ....................................................................... 729,465 262,574 - ------------------------------------------------------------------------------- --------------- --------------- Total .......................................................................... 2,281,706 1,645,405 EXPENSES -- (NOTE 4) ........................................................... (4,967,053) (4,244,367) - ------------------------------------------------------------------------------- --------------- --------------- NET INVESTMENT LOSS ............................................................ (2,685,347) (2,598,962) - ------------------------------------------------------------------------------- --------------- --------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 2): Realized gain (loss) from security and foreign currency transactions .......... 75,694,748 (7,572,930) - ------------------------------------------------------------------------------- --------------- --------------- Unrealized appreciation (depreciation) of investments: Beginning of year ............................................................. 42,542,366 46,444,593 End of year ................................................................... 62,843,978 42,542,366 - ------------------------------------------------------------------------------- --------------- --------------- Change in unrealized appreciation/depreciation ................................. 20,301,612 (3,902,227) - ------------------------------------------------------------------------------- --------------- --------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS ......................... 95,996,360 (11,475,157) - ------------------------------------------------------------------------------- --------------- --------------- Increase (decrease) in net assets attributable to operations ................... 93,311,013 (14,074,119) - ------------------------------------------------------------------------------- --------------- --------------- FROM CONTRIBUTIONS AND WITHDRAWALS: Contributions .................................................................. 205,540,949 213,517,834 Withdrawals .................................................................... (266,542,005) (179,711,235) - ------------------------------------------------------------------------------- --------------- --------------- Increase (decrease) in net assets attributable to contributions and withdrawals (61,001,056) 33,806,599 - ------------------------------------------------------------------------------- --------------- --------------- INCREASE IN NET ASSETS ......................................................... 32,309,957 19,732,480 NET ASSETS -- BEGINNING OF YEAR ................................................ 309,393,297 289,660,817 - ------------------------------------------------------------------------------- --------------- --------------- NET ASSETS -- END OF YEAR ...................................................... $ 341,703,254 $ 309,393,297 =============================================================================== =============== ===============
See Notes to Financial Statements. SAI-30 SEPARATE ACCOUNT NO. 3 (POOLED) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Portfolio of Investments December 31, 1995
- ------------------------------------------------------------------------------- NUMBER OF VALUE (NOTE SHARES 3) - --------------------------------------------------- ----------- ------------- COMMON STOCKS: BASIC MATERIALS CHEMICALS -- SPECIALTY (1.4%) Cytec Industries, Inc.* ............................ 31,000 $ 1,933,625 UCAR International, Inc.* .......................... 89,800 3,030,750 ------------- 4,964,375 ------------- METALS & MINING (0.8%) Newmont Mining Corp. ............................... 60,000 2,715,000 ------------- TOTAL BASIC MATERIALS (2.2%) ....................... 7,679,375 ------------- BUSINESS SERVICES ENVIRONMENTAL CONTROL (1.8%) USA Waste Services, Inc.* .......................... 320,300 6,045,663 ------------- PRINTING, PUBLISHING & BROADCASTING (2.5%) Infinity Broadcasting Corp. (Class A)* ............. 196,200 7,308,450 Playboy Enterprises, Inc.* ......................... 127,900 1,071,163 ------------- 8,379,613 ------------- PROFESSIONAL SERVICES (0.5%) Loewen Group, Inc. ................................. 71,600 1,812,375 ------------- TRUCKING, SHIPPING (2.2%) TNT Freightways Corp. .............................. 61,300 1,233,662 Xtra Corp. ......................................... 152,300 6,472,750 ------------- 7,706,412 ------------- TOTAL BUSINESS SERVICES (7.0%) ..................... 23,944,063 ------------- CONSUMER CYCLICALS AIRLINES (5.1%) America West Airlines, Inc. (Class B)* ............. 197,400 3,355,800 Delta Air Lines, Inc. .............................. 33,000 2,437,875 Northwest Airlines Corp. (Class A)* ................ 79,900 4,074,900 Southwest Airlines Co. ............................. 108,900 2,531,925 USAir Group, Inc.* ................................. 379,300 5,025,725 ------------- 17,426,225 ------------- APPAREL, TEXTILE (3.8%) Jones Apparel Group, Inc.* ......................... 48,200 1,897,875 Nine West Group, Inc.* ............................. 299,100 11,216,250 ------------- 13,114,125 ------------- FOOD SERVICES, LODGING (3.9%) Extended Stay America, Inc.* ....................... 62,300 1,713,250 HFS, Inc.* ......................................... 83,100 6,793,425 Host Marriott Corp.* ............................... 358,800 4,754,100 ------------- 13,260,775 ------------- HOUSEHOLD FURNITURE, APPLIANCES (1.8%) Industrie Natuzzi (ADR) ............................ 138,600 6,288,975 ------------- SAI-31 SEPARATE ACCOUNT NO. 3 (POOLED) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Portfolio of Investments (Continued) December 31, 1995 - ------------------------------------------------------------------------------- NUMBER OF VALUE (NOTE SHARES 3) - --------------------------------------------------- ----------- ------------- LEISURE-RELATED (4.9%) Ascent Entertainment Group, Inc.* .................. 51,000 $ 803,250 Heritage Media Corp. (Class A)* .................... 88,875 2,277,422 ITT Corp. .......................................... 134,400 7,123,200 Mirage Resorts, Inc.* .............................. 100,900 3,481,050 Sierra On-line, Inc.* .............................. 100,800 2,898,000 ------------- 16,582,922 ------------- PHOTO & OPTICAL (0.2%) Luxottica Group (ADR) .............................. 11,700 684,450 ------------- RETAIL -- GENERAL (10.8%) Bed Bath & Beyond, Inc.* ........................... 171,400 6,652,462 Federated Department Stores, Inc.* ................. 478,300 13,153,250 Office Depot, Inc.* ................................ 362,450 7,158,387 Office Max, Inc.* .................................. 390,400 8,735,200 Staples, Inc.* ..................................... 48,650 1,185,844 ------------- 36,885,143 ------------- TOTAL CONSUMER CYCLICALS (30.5%) ................... 104,242,615 ------------- CONSUMER NONCYCLICALS DRUGS (3.9%) Amgen, Inc.* ....................................... 53,800 3,194,375 Biogen, Inc.* ...................................... 46,000 2,829,000 Centocor, Inc.* .................................... 141,200 4,359,550 Cephalon, Inc.* .................................... 59,550 2,426,662 Pharmacyclics, Inc.* ............................... 27,000 378,000 ------------- 13,187,587 ------------- HOSPITAL SUPPLIES & SERVICES (14.5%) Apria Healthcare Group, Inc.* ...................... 154,960 4,377,620 Boston Scientific Corp.* ........................... 108,900 5,336,100 Healthsouth Corp.* ................................. 457,200 13,315,950 Healthwise of America, Inc.* ....................... 121,445 4,736,355 Manor Care, Inc. ................................... 89,400 3,129,000 Saint Jude Medical, Inc.* .......................... 98,050 4,216,150 Summit Technology, Inc.* ........................... 69,550 2,347,313 Sun Healthcare Group, Inc.* ........................ 316,920 4,278,420 Surgical Care Affiliates, Inc. ..................... 230,100 7,823,400 ------------- 49,560,308 ------------- TOTAL CONSUMER NONCYCLICALS (18.4%) ................ 62,747,895 ------------- CREDIT-SENSITIVE INSURANCE (6.6%) CNA Financial Corp.* ............................... 141,600 16,071,600 ITT Hartford Group, Inc. ........................... 134,400 6,501,600 ------------- 22,573,200 ------------- UTILITY -- TELEPHONE (4.4%) Telephone & Data Systems, Inc. ..................... 382,200 15,096,900 ------------- TOTAL CREDIT-SENSITIVE (11.0%) ..................... 37,670,100 ------------- SAI-32 SEPARATE ACCOUNT NO. 3 (POOLED) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Portfolio of Investments (Continued) December 31, 1995 - ------------------------------------------------------------------------------- NUMBER OF VALUE (NOTE SHARES 3) - --------------------------------------------------- ----------- ------------- ENERGY OIL -- DOMESTIC (1.0%) Diamond Shamrock, Inc. ............................. 54,900 $ 1,420,537 Snyder Oil Corp. ................................... 157,600 1,910,900 ------------- 3,331,437 ------------- OIL -- SUPPLIES & CONSTRUCTION (10.1%) Arethusa (Off-Shore) Ltd. .......................... 96,600 2,704,800 Diamond Offshore Drilling, Inc.* ................... 251,600 8,491,500 Global Marine, Inc.* ............................... 806,500 7,056,875 Noble Drilling Corp.* .............................. 496,900 4,472,100 Reading & Bates Corp.* ............................. 319,000 4,785,000 Rowan Cos., Inc.* .................................. 528,400 5,217,950 Sonat Offshore Drilling, Inc. ...................... 45,500 2,036,125 ------------- 34,764,350 ------------- TOTAL ENERGY (11.1%) ............................... 38,095,787 ------------- TECHNOLOGY ELECTRONICS (3.3%) Applied Materials, Inc.* ........................... 35,400 1,393,875 Bay Networks, Inc.* ................................ 45,604 1,875,465 ITT Industries, Inc. ............................... 134,400 3,225,600 Parametric Technology Corp.* ....................... 72,800 4,841,200 ------------- 11,336,140 ------------- OFFICE EQUIPMENT (0.9%) Dell Computer Corp.* ............................... 40,900 1,416,163 Storage Technology Corp.* .......................... 74,000 1,766,750 ------------- 3,182,913 ------------- OFFICE EQUIPMENT SERVICES (2.7%) Hummingbird Communications Ltd.* ................... 14,100 571,050 Informix Corp.* .................................... 221,500 6,645,000 Sybase, Inc.* ...................................... 57,700 2,077,200 ------------- 9,293,250 ------------- TELECOMMUNICATIONS (10.3%) American Satellite Network -- Rights* .............. 9,550 0 Andrew Corp.* ...................................... 74,000 2,830,500 Ascend Communications, Inc.* ....................... 23,800 1,930,775 Cellular Communications, Inc. (Class A)* .......... 77,654 3,863,286 DSC Communications Corp.* .......................... 66,800 2,463,250 Mannesmann AG (ADR) ................................ 31,200 9,921,600 Millicom International Cellular S.A.* .............. 149,360 4,555,480 Tellabs, Inc.* ..................................... 64,900 2,401,300 U.S. Cellular Corp.* ............................... 133,700 4,512,375 Vanguard Cellular Systems, Inc. (Class A)* ........ 125,850 2,548,463 ------------- 35,027,029 ------------- TOTAL TECHNOLOGY (17.2%) ........................... 58,839,332 ------------- SAI-33 SEPARATE ACCOUNT NO. 3 (POOLED) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Portfolio of Investments (Concluded) December 31, 1995 - ------------------------------------------------------------------------------- NUMBER OF VALUE (NOTE SHARES 3) - --------------------------------------------------- ----------- ------------- DIVERSIFIED (1.2%) MISCELLANEOUS Pittston Services Group ............................ 118,800 $ 3,727,350 ------------- TOTAL COMMON STOCKS (98.6%) (Cost $274,102,539) ............................... 336,946,517 ------------- PARTICIPATION IN SEPARATE ACCOUNT NO. 2A, at amortized cost, which approximates market value, equivalent to 17,601 units at $241.89 each (1.3%) ....................................... 4,257,425 ------------- TOTAL INVESTMENTS (99.9%) (Cost/Amortized Cost $278,359,964) ................ 341,203,942 CASH AND RECEIVABLES LESS LIABILITIES (0.1%) ...... 499,312 ------------- NET ASSETS (100.0%) ................................ $341,703,254 =============
* Non-income producing. See Notes to Financial Statements. SAI-34 SEPARATE ACCOUNT NO. 4 (POOLED) (THE GROWTH EQUITY FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Statement of Assets and Liabilities December 31, 1995 - -----------------------------------------------------------------------------
ASSETS: Investments (Notes 2 and 3): Common stocks--at value (cost: $1,772,607,539) ....................... $2,071,380,232 Long-term debt securities--at value (amortized cost: $43,389,734) .... 35,481,250 Participation in Separate Account No. 2A--at amortized cost, which approximates market value, equivalent to 62,384 units at $241.89 ............................................................ 15,090,212 Cash ................................................................... 3,285,960 Receivables: Securities sold ...................................................... 15,481,889 Dividends ............................................................ 1,693,035 Interest ............................................................. 59,583 ---------------------------------------------------------------------- -------------- Total assets ....................................................... 2,142,472,161 ---------------------------------------------------------------------- -------------- LIABILITIES: Payables: Securities purchased ................................................. 10,088,399 Due to Equitable Life's General Account .............................. 5,686,050 Investment management fees payable ................................... 7,255 Accrued expenses ....................................................... 521,041 Amount retained by Equitable Life in Separate Account No. 4 (Note 1) .. 1,044,875 ---------------------------------------------------------------------- -------------- Total liabilities .................................................. 17,347,620 - ------------------------------------------------------------------------ -------------- Net Assets (Note 1): Net assets attributable to participants' accumulations ................. 2,102,751,745 Reserves and other contract liabilities attributable to annuity benefits ............................................................... 22,372,796 ---------------------------------------------------------------------- -------------- NET ASSETS ............................................................. $2,125,124,541 ====================================================================== ==============
See Notes to Financial Statements. SAI-35 SEPARATE ACCOUNT NO. 4 (POOLED) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Statements of Operations and Changes in Net Assets - -----------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1995 1994 - -------------------------------------------------------------------------- -------------- --------------- FROM OPERATIONS: INVESTMENT INCOME (NOTE 2): Dividends (net of foreign taxes withheld--1995: $239,657 and 1994: $280,079) ................................................................ $ 19,610,344 $ 18,981,135 Interest and amortization of premium ...................................... (852,218) 120,286 - -------------------------------------------------------------------------- -------------- --------------- Total ..................................................................... 18,758,126 19,101,421 EXPENSES -- (NOTE 4) ...................................................... (16,007,109) (14,943,802) - -------------------------------------------------------------------------- -------------- --------------- NET INCOME ................................................................ 2,751,017 4,157,619 - -------------------------------------------------------------------------- -------------- --------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 2): Realized gain from security and foreign currency transactions ............ 260,870,246 121,640,003 - -------------------------------------------------------------------------- -------------- --------------- Unrealized appreciation (depreciation) of investments and foreign currency transactions: ............................................................ Beginning of year ........................................................ 41,831,973 211,185,607 End of year .............................................................. 290,870,386 41,831,973 - -------------------------------------------------------------------------- -------------- --------------- Change in unrealized appreciation/depreciation ............................ 249,038,413 (169,353,634) - -------------------------------------------------------------------------- -------------- --------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS .................... 509,908,659 (47,713,631) - -------------------------------------------------------------------------- -------------- --------------- Increase (decrease) in net assets attributable to operations ............. 512,659,676 (43,556,012) - -------------------------------------------------------------------------- -------------- --------------- FROM CONTRIBUTIONS AND WITHDRAWALS: Contributions ............................................................. 422,289,107 435,940,867 Withdrawals ............................................................... (474,530,080) (528,069,361) - -------------------------------------------------------------------------- -------------- --------------- Decrease in net assets attributable to contributions and withdrawals ..... (52,240,973) (92,128,494) - -------------------------------------------------------------------------- -------------- --------------- Decrease in accumulated amount retained by Equitable Life in Separate Account No. 4 (Note 1) ........................ 113,489 449,257 - -------------------------------------------------------------------------- -------------- --------------- INCREASE (DECREASE) IN NET ASSETS ......................................... 460,532,192 (135,235,249) NET ASSETS -- BEGINNING OF YEAR ........................................... 1,664,592,349 1,799,827,598 - -------------------------------------------------------------------------- -------------- --------------- NET ASSETS -- END OF YEAR ................................................. $2,125,124,541 $1,664,592,349 ========================================================================== ============== ===============
See Notes to Financial Statements. SAI-36 SEPARATE ACCOUNT NO. 4 (POOLED) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Portfolio of Investments December 31, 1995
- --------------------------------------------------------------------------------------- NUMBER OF VALUE (NOTE SHARES 3) - ---------------------------------------------------------- ------------ ------------- COMMON STOCKS: BASIC MATERIALS (0.3%) CHEMICALS--SPECIALTY UCAR International, Inc.* ................................. 175,000 $ 5,906,250 BUSINESS SERVICES ENVIRONMENTAL CONTROL (0.2%) Rollins Environmental Services, Inc.* ..................... 1,054,700 3,032,263 USA Waste Services, Inc.* ................................. 120,000 2,265,000 ------------- 5,297,263 ------------- PRINTING, PUBLISHING & BROADCASTING (1.2%) Australis Media Ltd. ...................................... 4,500,250 3,846,532 Australis Media Ltd. Conv. Note* .............................................. 22,000,000 18,804,225 IVI Publishing, Inc.* ..................................... 121,700 1,597,313 ------------- 24,248,070 ------------- PROFESSIONAL SERVICES (0.1%) Loewen Group, Inc. ........................................ 50,000 1,265,625 ------------- TOTAL BUSINESS SERVICES (1.5%) ............................ 30,810,958 ------------- CAPITAL GOODS (2.3%) AEROSPACE General Motors Corp. (Class H) ............................ 1,000,000 49,125,000 ------------- CONSUMER CYCLICALS AIRLINES (1.9%) America West Airlines, Inc. (Class B)* .................... 750,000 12,750,000 Delta Air Lines, Inc. ..................................... 160,000 11,820,000 USAir Group, Inc.* ........................................ 1,000,000 13,250,000 Worldcorp, Inc.* .......................................... 339,300 3,393,000 ------------- 41,213,000 ------------- APPAREL, TEXTILE (0.5%) Cone Mills Corp.* ......................................... 371,000 4,173,750 Nine West Group, Inc.* .................................... 200,000 7,500,000 ------------- 11,673,750 ------------- FOOD SERVICES, LODGING (0.3%) La Quinta Motor Inns, Inc. ................................ 200,000 5,475,000 ------------- HOUSEHOLD FURNITURE, APPLIANCES (1.0%) Industrie Natuzzi (ADR) ................................... 480,000 21,780,000 ------------- LEISURE-RELATED (2.0%) ITT Corp. ................................................. 800,000 42,400,000 ------------- RETAIL-GENERAL (2.6%) Federated Department Stores, Inc.* ........................ 750,000 20,625,000 Lowes Cos., Inc. .......................................... 450,000 15,075,000 Office Depot, Inc.* ....................................... 300,000 5,925,000 Office Max, Inc.* ......................................... 100,000 2,237,500 Tandy Corp. ............................................... 260,000 10,790,000 ------------- 54,652,500 ------------- TOTAL CONSUMER CYCLICALS (8.3%) ........................... 177,194,250 ------------- SAI-37 SEPARATE ACCOUNT NO. 4 (POOLED) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Portfolio of Investments (Continued) December 31, 1995 - --------------------------------------------------------------------------------------- NUMBER OF VALUE (NOTE SHARES 3) - ---------------------------------------------------------- ------------ ------------- CONSUMER NONCYCLICALS DRUGS (1.0%) Biogen, Inc.* ............................................. 45,000 $ 2,767,500 Centocor, Inc.* ........................................... 325,000 10,034,375 MedImmune, Inc.* .......................................... 145,400 2,908,000 Merck & Co., Inc. ......................................... 70,000 4,602,500 ------------- 20,312,375 ------------- HOSPITAL SUPPLIES & SERVICES (6.3%) Amsco International, Inc.* ................................ 150,000 2,231,250 Columbia/HCA Healthcare Corp. ............................. 800,000 40,600,000 Sun Healthcare Group, Inc.* ............................... 1,191,000 16,078,500 Surgical Care Affiliates, Inc. ............................ 2,188,300 74,402,200 ------------- 133,311,950 ------------- TOBACCO (10.4%) Loews Corp. ............................................... 2,250,000 176,343,750 Philip Morris Cos., Inc. .................................. 500,000 45,250,000 ------------- 221,593,750 ------------- TOTAL CONSUMER NONCYCLICALS (17.7%) ....................... 375,218,075 ------------- CREDIT-SENSITIVE FINANCIAL SERVICES (3.1%) Dean Witter Discover & Co. ................................ 50,000 2,350,000 A.G. Edwards, Inc. ........................................ 220,000 5,252,500 Household International, Inc. ............................. 130,000 7,686,250 Legg Mason, Inc. .......................................... 850,000 23,375,000 Merrill Lynch & Co., Inc. ................................. 550,000 28,050,000 ------------- 66,713,750 ------------- INSURANCE (12.5%) CNA Financial Corp.* ...................................... 1,552,500 176,208,750 ITT Hartford Group, Inc. .................................. 800,000 38,700,000 Life Re Corp. ............................................. 700,000 17,500,000 NAC Re Corp. .............................................. 575,000 20,700,000 Travelers Group, Inc. ..................................... 200,000 12,575,000 ------------- 265,683,750 ------------- REAL ESTATE (0.3%) Walden Residential Properties, Inc. ....................... 308,000 6,429,500 ------------- UTILITY -- TELEPHONE (7.7%) Century Telephone Enterprises, Inc. ....................... 397,800 12,630,150 Telephone & Data Systems, Inc. ............................ 3,825,000 151,087,500 ------------- 163,717,650 ------------- TOTAL CREDIT-SENSITIVE (23.6%) ............................ 502,544,650 ------------- ENERGY COAL & GAS PIPELINES (0.0%) Abraxas Petroleum Corp.* .................................. 100,000 625,000 ------------- OIL -- DOMESTIC (0.7%) Louisiana Land & Exploration Corp. ........................ 200,000 8,575,000 Snyder Oil Corp. .......................................... 500,000 6,062,500 ------------- 14,637,500 ------------- SAI-38 SEPARATE ACCOUNT NO. 4 (POOLED) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Portfolio of Investments (Continued) December 31, 1995 - --------------------------------------------------------------------------------------- NUMBER OF VALUE (NOTE SHARES 3) - ---------------------------------------------------------- ------------ ------------- OIL -- INTERNATIONAL (1.6%) Gulf Canada Resources Ltd. ORD* ........................... 530,000 $ 2,186,250 Imperial Oil Ltd. ......................................... 859,000 31,031,375 ------------- 33,217,625 ------------- OIL -- SUPPLIES & CONSTRUCTION (4.5%) ENSCO International, Inc.* ................................ 500,000 11,500,000 Noble Drilling Corp.* ..................................... 1,000,000 9,000,000 Parker Drilling Co.* ...................................... 6,000,000 36,750,000 Rowan Cos., Inc.* ......................................... 3,300,000 32,587,500 Seagull Energy Corp.* ..................................... 250,000 5,562,500 ------------- 95,400,000 ------------- RAILROADS (0.3%) Union Pacific Corp. ....................................... 100,000 6,600,000 ------------- TOTAL ENERGY (7.1%) ....................................... 150,480,125 ------------- TECHNOLOGY ELECTRONICS (13.5%) American Superconductor Corp.* ............................ 149,000 2,160,500 Bay Networks, Inc.* ....................................... 300,000 12,337,500 Cisco Systems, Inc.* ...................................... 1,315,000 98,131,875 General Instrument Corp.* ................................. 3,260,000 76,202,500 ITT Industries, Inc. ...................................... 800,000 19,200,000 National Semiconductor Corp.* ............................. 2,000,000 44,500,000 Texas Instruments, Inc. ................................... 200,000 10,350,000 3Com Corp.* ............................................... 500,000 23,312,500 ------------- 286,194,875 ------------- OFFICE EQUIPMENT (1.8%) Compaq Computer Corp.* .................................... 500,000 24,000,000 Sun Microsystems, Inc.* ................................... 300,000 13,687,500 ------------- 37,687,500 ------------- OFFICE EQUIPMENT SERVICES (0.2%) Informix Corp.* ........................................... 55,000 1,650,000 Oracle Corp.* ............................................. 80,000 3,390,000 ------------- 5,040,000 ------------- TELECOMMUNICATIONS (21.2%) AirTouch Communications, Inc.* ............................ 40,000 1,130,000 American Satellite Network -- Rights* ..................... 70,000 0 Cellular Communications, Inc. (Class A)* .................. 869,268 43,246,083 Cellular Communications Puerto Rico, Inc.* ................ 322,500 8,949,375 DSC Communications Corp.* ................................. 650,000 23,968,750 Mannesmann AG ............................................. 120,000 38,196,841 Mannesmann AG (ADR) ....................................... 200,000 63,600,000 Millicom International Cellular S.A.* ..................... 1,700,000 51,850,000 Nokia Corp. (ADR) ......................................... 600,000 23,325,000 Rogers Cantel Mobile Communications, Inc. (Class B) (ADR)* 900,000 23,850,000 Scientific Atlanta, Inc. .................................. 2,035,000 30,525,000 Tellabs, Inc.* ............................................ 450,000 16,650,000 U.S. Cellular Corp.* ...................................... 2,650,000 89,437,500 Vanguard Cellular Systems, Inc. (Class A)* ................ 1,800,000 36,450,000 ------------- 451,178,549 ------------- TOTAL TECHNOLOGY (36.7%) .................................. 780,100,924 -------------
SAI-39 SEPARATE ACCOUNT NO. 4 (POOLED) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Portfolio of Investments (Concluded) December 31, 1995
- --------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT VALUE (NOTE 3) - --------------------------------------------------------------------------- ------------ -------------- TOTAL COMMON STOCKS (97.5%) (Cost $1,772,607,539) ..................................................... $2,071,380,232 -------------- LONG-TERM DEBT SECURITIES: BUSINESS SERVICES (0.2%) PROFESSIONAL SERVICES First Financial Management Corp. 5.0% Conv., 1999 .......................................................... $ 2,000,000 3,245,000 -------------- TECHNOLOGY ELECTRONICS (1.4%) General Instrument Corp. 5.0% Conv., 2000 .......................................................... 26,600,000 29,592,500 -------------- TELECOMMUNICATIONS (0.1%) U.S. Cellular Corp. Zero Coupon Conv., 2015 ................................................... 7,500,000 2,643,750 -------------- TOTAL TECHNOLOGY (1.5%) .................................................... 32,236,250 -------------- TOTAL LONG-TERM DEBT SECURITIES (1.7%) (Amortized Cost $43,389,734) .............................................. 35,481,250 -------------- PARTICIPATION IN SEPARATE ACCOUNT NO. 2A, at amortized cost, which approximates market value, equivalent to 62,384 units at $241.89 each (0.7%) .................................................... 15,090,212 -------------- TOTAL INVESTMENTS (99.9%) (Cost /Amortized Cost $1,831,087,485) ..................................... 2,121,951,694 CASH AND RECEIVABLES LESS LIABILITIES (0.1%) ............................... 4,217,722 AMOUNT RETAINED BY EQUITABLE LIFE IN SEPARATE ACCOUNT NO. 4 (0.0%) (NOTE 1). ....................................................................... (1,044,875) -------------- NET ASSETS (100.0%) (NOTE 1) ............................................... $2,125,124,541 ============== Reserves attributable to participants' accumulations ....................... $2,102,751,745 Reserves and other contract liabilities attributable to annuity benefits .. 22,372,796 -------------- NET ASSETS (100.0%) ........................................................ $2,125,124,541 ============== * Non-income producing.
See Notes to Financial Statements. SAI-40 SEPARATE ACCOUNT NOS. 3 (POOLED) AND 4 (POOLED) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Notes to Financial Statements 1. Separate Account Nos. 3 (Pooled) (the Aggressive Equity Fund) and 4 (Pooled) (the Growth Equity Fund) (the Funds) of The Equitable Life Assurance Society of the United States (Equitable Life), a wholly-owned subsidiary of The Equitable Companies Incorporated, were established in conformity with the New York State Insurance Law. Pursuant to such law, to the extent provided in the applicable contracts, the net assets in the Funds are not chargeable with liabilities arising out of any other business of Equitable Life. The excess of assets over reserves and other contract liabilities amounting to $1,044,875 as shown in the Statements of Assets and Liabilities in Separate Account No. 4 may be transferred to Equitable Life's General Account. Interests of retirement and investment plans for Equitable Life employees, managers, and agents in Separate Account Nos. 3 and 4 aggregated $68,328,503 (20.0%) and $246,531,777 (11.6%), respectively, at December 31, 1995 and $48,123,292 (15.6%) and $184,086,304 (11.1%), respectively, at December 31, 1994, of the net assets in these Funds. Equitable Life is the investment manager for the Funds. Alliance Capital Management L.P. (Alliance) serves as the investment adviser to Equitable Life with respect to the management of the Funds. Alliance is a publicly-traded limited partnership which is indirectly majority-owned by Equitable Life. As of the close of business on November 30, 1995, the American Dental Association transferred all amounts held in Separate Account No. 3 (Pooled) to a newly established Separate Account No. 200 which invests in Class A shares of the MFS Emerging Growth Fund. Equitable Life and Alliance seek to obtain the best price and execution of all orders placed for the Funds considering all circumstances. In addition to using brokers and dealers to execute portfolio security transactions for accounts under their management, Equitable Life and Alliance may also enter into other types of business and securities transactions with brokers and dealers, which will be unrelated to allocation of the Funds' portfolio transactions. 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. 2. Security transactions are recorded on the trade date. Amortized cost of debt securities consists of cost adjusted, where applicable, for amortization of premium or accretion of discount. Dividend income is recorded on the ex-dividend date; interest income (including amortization of premium and discount on securities using the effective yield method) is accrued daily. Realized gains and losses on the sale of investments are computed on the basis of the identified cost of the related investments sold. Transactions denominated in foreign currencies are recorded at the rate prevailing at the date of such transactions. Asset and liability accounts that are denominated in a foreign currency are adjusted to reflect the current exchange rate at the end of the period. Transaction gains or losses resulting from changes in the exchange rate during the reporting period or upon settlement of the foreign currency transactions are reflected under "Realized and Unrealized Gain (Loss) on Investments" in the Statements of Operations and Changes in Net Assets. SAI-41 SEPARATE ACCOUNT NOS. 3 (POOLED) AND 4 (POOLED) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Notes to Financial Statements (Continued) Equitable Life's internal short-term investment account, Separate Account No. 2A, was established to provide a more flexible and efficient vehicle to combine and invest temporary cash positions of certain eligible accounts (Participating Funds) under Equitable Life's management. Separate Account No. 2A invests in debt securities maturing in sixty days or less from the date of acquisition. At December 31, 1995, the amortized cost of investments held in Separate Account No. 2A consists of the following: - -----------------------------------------------------------------------------
AMORTIZED COST % - -------------------------------------------------------- -------------- -------- Certificates of Deposit, 5.80% due 01/31/96 ............. $ 20,000,000 6.7% Commercial Paper, 5.53%-5.87% due 1/12/96 through 2/23/96 ................................................ 262,329,329 88.0 Time Deposits, 5.875% due 01/02/96 ...................... 800,000 0.3 Variable Rate LIBOR, 5.968% due 01/08/96 ................ 15,000,000 5.0 - -------------------------------------------------------- -------------- -------- Total Investments ....................................... 298,129,329 100.0 Cash and Receivables Less Liabilities ................... 63,333 0.0 - -------------------------------------------------------- -------------- -------- Net Assets of Separate Account No. 2A ................... $298,192,662 100.0% ======================================================== ============== ======== Units Outstanding ....................................... 1,232,756 Unit Value .............................................. $ 241.89
Participating Funds purchase or redeem units depending on each participating account's excess cash availability or cash needs to meet its liabilities. Separate Account No. 2A is not subject to investment management fees. Separate Account No. 2A is valued daily at amortized cost, which approximates market value. For 1995 and 1994, investment security transactions, excluding short-term debt securities, were as follows: - -----------------------------------------------------------------------------
SEPARATE ACCOUNT NO. 3 SEPARATE ACCOUNT NO. 4 ------------------------------ ------------------------------ COST OF NET PROCEEDS COST OF NET PROCEEDS PURCHASES OF SALES PURCHASES OF SALES - --------------------------------------------- -------------- -------------- -------------- -------------- Stocks and long-term corporate debt securities: 1995 ....................................... $460,486,634 $525,937,180 $2,037,876,834 $2,082,648,235 1994 ....................................... 314,667,935 272,832,266 1,556,068,225 1,644,508,525 U.S. Government obligations: 1995 ....................................... -- -- -- -- 1994 ....................................... -- -- -- --
---------------------------------------------------------------------------- 3. Investment securities are valued as follows: Stocks listed on national securities exchanges and certain over-the-counter issues traded on the National Association of Securities Dealers, Inc. Automated Quotation (NASDAQ) national market system are valued at the last sale price, or, if no sale, at the latest available bid price. Foreign securities not traded directly, or in American Depository Receipt (ADR) form in the United States, are valued at the last sale price in the local currency on an exchange in the country of origin. Foreign currency is converted into its U.S. dollar equivalent at current exchange rates. United States Treasury securities and other obligations issued or guaranteed by the United States Government, its agencies or instrumentalities are valued at representative quoted prices. SAI-42 SEPARATE ACCOUNT NOS. 3 (POOLED) AND 4 (POOLED) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Notes to Financial Statements (Concluded) Long-term publicly traded corporate bonds are valued at prices obtained from a bond pricing service of a major dealer in bonds when such prices are available; however, in circumstances where Equitable Life and Alliance deem it appropriate to do so, an over-the-counter or exchange quotation may be used. Convertible preferred stocks listed on national securities exchanges are valued at their last sale price or, if there is no sale, at the latest available bid price. Convertible bonds and unlisted convertible preferred stocks are valued at bid prices obtained from one or more major dealers in such securities; where there is a discrepancy between dealers, values may be adjusted based on recent premium spreads to the underlying common stock. Other assets that do not have a readily available market price are valued at fair value as determined in good faith by Equitable Life's investment officers. Separate Account No. 2A is valued daily at amortized cost, which approximates market value. Short-term debt securities purchased directly by the Funds which mature in 60 days or less are valued at amortized cost. Short-term debt securities which mature in more than 60 days are valued at representative quoted prices. 4. Charges and fees are deducted in accordance with the terms of the various contracts which participate in the Funds. With respect to the American Dental Association Members Retirement Program, these expenses consist of investment management and accounting fees, program expense charge, direct expenses and record maintenance and report fee. These charges and fees are paid to Equitable Life by the Funds and are recorded as expenses in the accompanying Statements of Operations and Changes in Net Assets. 5. No Federal income tax based on net income or realized and unrealized capital gains was applicable to contracts participating in the Funds for the two years ended December 31, 1995, by reason of applicable provisions of the Internal Revenue Code and no Federal income tax payable by Equitable Life for such years will affect such contracts. Accordingly, no Federal income tax provision is required. SAI-43 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors of The Equitable Life Assurance Society of the United States and the Participants in the American Dental Association Members Retirement Program In our opinion, the accompanying statements of assets and liabilities, including the portfolios of investments, and the related statements of operations and changes in net assets present fairly, in all material respects, the financial position of Separate Account Nos. 191 and 200 of The Equitable Life Assurance Society of the United States ("Equitable Life") at December 31, 1995 and each of their results of operations and changes in net assets for the periods indicated, in conformity with generally accepted accounting principles. These financial statements are the responsibility of Equitable Life's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of shares owned in the underlying mutual funds with the transfer agent at December 31, 1995, provide a reasonable basis for the opinion expressed above. Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The selected per unit information (appearing under "Condensed Financial Information" in the prospectus) is presented for the purpose of satisfying regulatory reporting requirements and is not a required part of the basic financial statements. Such selected per unit information has been subjected to auditing procedures applied during the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. PRICE WATERHOUSE LLP New York, New York February 7, 1996 SAI-44 SEPARATE ACCOUNT NO. 191 (THE ADA FOREIGN FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Statement of Assets and Liabilities December 31, 1995 - -----------------------------------------------------------------------------
ASSETS: Investments in shares of The Templeton Foreign Fund--at value (cost: $66,914,606) (Notes 2 and 5) .................................... $65,524,431 Participation in Separate Account No. 2A--at amortized cost, which approximates market value, equivalent to 11,254 units at $241.89 .............. 2,722,162 - ----------------------------------------------------- ------------- Total assets ..................................... 68,246,593 - ----------------------------------------------------- ------------- LIABILITIES: Due to Equitable Life's General Account ............. 4,087 Accrued expenses .................................... 13,622 - ----------------------------------------------------- ------------- Total liabilities ................................ 17,709 - ----------------------------------------------------- ------------- NET ASSETS .......................................... $68,228,884 ===================================================== =============
See Notes to Financial Statements. SAI-45 SEPARATE ACCOUNT NO. 191 OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Statements of Operations and Changes in Net Assets - -----------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1995 1994 - ------------------------------------------------------------------- -------------- -------------- FROM OPERATIONS: INVESTMENT INCOME (NOTE 2): Dividends from The Templeton Foreign Fund .......................... $ 2,301,415 $ 2,444,487 Interest ........................................................... 174,395 125,681 - ------------------------------------------------------------------- -------------- -------------- Total .............................................................. 2,475,810 2,570,168 EXPENSES--(NOTE 3) ................................................. (598,289) (673,967) - ------------------------------------------------------------------- -------------- -------------- NET INVESTMENT INCOME .............................................. 1,877,521 1,896,201 -------------- -------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 2): Realized gain from share transactions .............................. 2,088,140 3,165,838 Realized gain distribution from The Templeton Foreign Fund ........ 2,017,814 2,513,801 - ------------------------------------------------------------------- -------------- -------------- Net realized gain .................................................. 4,105,954 5,679,639 - ------------------------------------------------------------------- -------------- -------------- Unrealized appreciation (depreciation) of investments: Beginning of period ............................................... (2,127,462) 6,344,998 End of period ..................................................... (1,390,175) (2,127,462) - ------------------------------------------------------------------- -------------- -------------- Change in unrealized appreciation/depreciation ..................... 737,287 (8,472,460) - ------------------------------------------------------------------- -------------- -------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS ............ 4,843,241 (2,792,821) - ------------------------------------------------------------------- -------------- -------------- Increase (decrease) in net assets attributable to operations ...... 6,720,762 (896,620) - ------------------------------------------------------------------- -------------- -------------- FROM CONTRIBUTIONS AND WITHDRAWALS: Contributions ...................................................... 22,185,319 52,322,250 Withdrawals ........................................................ (32,718,398) (34,585,740) - ------------------------------------------------------------------- -------------- -------------- Increase in net assets attributable to contributions and withdrawals ....................................................... 10,533,079 17,736,510 - ------------------------------------------------------------------- -------------- -------------- INCREASE (DECREASE) IN NET ASSETS .................................. (3,812,317) 16,839,890 NET ASSETS--BEGINNING OF YEAR ...................................... 72,041,201 55,201,311 - ------------------------------------------------------------------- -------------- -------------- NET ASSETS--END OF YEAR ............................................ $ 68,228,884 $ 72,041,201 =================================================================== ============== ==============
See Notes to Financial Statements. SAI-46 SEPARATE ACCOUNT NO. 200 (THE AGGRESSIVE EQUITY FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Statement of Assets and Liabilities (Concluded) December 31, 1995 - -----------------------------------------------------------------------------
ASSETS Investments in shares of the MFS Emerging Growth Fund--at value (cost: $76,985,878) (Notes 2 and 5) ................................ $76,787,976 Receivable from Equitable Life's General Account 61,803 - ------------------------------------------------ ------------- Total assets ................................. 76,849,779 LIABILITIES--Accrued expenses ................... 56,341 - ------------------------------------------------ ------------- NET ASSETS ...................................... $76,793,438 ================================================ =============
See Notes to Financial Statements. SAI-47 SEPARATE ACCOUNT NO. 200 OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Statement of Operations and Changes in Net Assets - -----------------------------------------------------------------------------
FOR THE PERIOD DECEMBER 1, 1995* TO DECEMBER 31, 1995 - ------------------------------------------------------------------- ----------------- FROM OPERATIONS: EXPENSES--(NOTE 3) ................................................. $ (56,341) - ------------------------------------------------------------------- ----------------- REALIZED AND UNREALIZED LOSS ON INVESTMENTS (NOTE 2): Realized loss from share transactions .............................. (18,654) Unrealized depreciation of investments ............................. (197,902) - ------------------------------------------------------------------- ----------------- NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS .................... (216,556) - ------------------------------------------------------------------- ----------------- Decrease in net assets attributable to operations .................. (272,897) - ------------------------------------------------------------------- ----------------- FROM CONTRIBUTIONS AND WITHDRAWALS: Contributions ...................................................... 79,148,659 Withdrawals ........................................................ (2,082,324) - ------------------------------------------------------------------- ----------------- Increase in net assets attributable to contributions and withdrawals ....................................................... 77,066,335 - ------------------------------------------------------------------- ----------------- INCREASE IN NET ASSETS ............................................. 76,793,438 NET ASSETS--BEGINNING OF PERIOD .................................... -- - ------------------------------------------------------------------- ----------------- NET ASSETS--END OF PERIOD .......................................... $76,793,438 =================================================================== =================
* Commencement of operations. See Notes to Financial Statements. SAI-48 SEPARATE ACCOUNT NOS. 191 AND 200 OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Notes to Financial Statements 1. Separate Account Nos. 191 (the ADA Foreign Fund) and 200 (the Aggressive Equity Fund) (the Funds) of The Equitable Life Assurance Society of the United States (Equitable Life), a wholly-owned subsidiary of The Equitable Companies Incorporated, were established in conformity with the New York State Insurance Law. Pursuant to such law, to the extent provided in the applicable contracts, the net assets in the Funds are not chargeable with liabilities arising out of any other business of Equitable Life. Separate Account No. 200 was established as of the opening of business on December 1, 1995 and is available only to the American Dental Association Members Retirement Trust and the American Dental Association Members Pooled Trust for Retirement Plans (Trusts) sponsored by the American Dental Association (ADA). Equitable Life is the investment manager for the Funds. 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. Separate Account No. 191 normally invests at least 95% of its assets in shares of the Templeton Foreign Fund, a series of Templeton Funds, Inc., which is registered under the Investment Company Act of 1940 as an open-end management investment company. The investment manager of the Templeton Foreign Fund is Templeton Global Advisors Ltd., an indirect wholly-owned subsidiary of Franklin Resources, Inc. The balance of the ADA Foreign Fund's assets (up to 5%) are invested in units of Equitable's Internal short-term investment account, Separate Account No. 2A. Effective May 1, 1996, Separate Account No. 191 will invest 100 percent of its assets in shares of the Templeton Foreign Fund. The Aggressive Equity Fund invests 100% of its assets in Class A shares of the MFS Emerging Growth Fund, a series of MFS Series Trust II, which was organized as a Massachusetts business trust and is registered under the 1940 Act as an open-end management investment company. The investment adviser of the MFS Emerging Growth Fund is Massachusetts Financial Services. Prior to December 1, 1995, the Aggressive Equity Fund invested in Equitable Life's Separate Account No. 3 (Pooled). 2. Realized gains and losses on investments include gains and losses on redemptions of the underlying fund's shares (determined on the identified cost basis) and capital gain distributions from the underlying funds. Dividends and realized gain distributions from underlying funds are recorded on ex-date. Investments in the Templeton Foreign and MFS Emerging Growth Funds are valued at the underlying mutual fund's net asset value per share. Equitable Life's internal short-term investment account, Separate Account No. 2A, was established to provide a more flexible and efficient vehicle to combine and invest temporary cash positions of certain eligible accounts (Participating Funds) under Equitable Life's management. Separate Account No. 2A invests in debt securities maturing SAI-49 SEPARATE ACCOUNT NOS. 191 AND 200 OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Notes to Financial Statements (Concluded) in sixty days or less from the date of acquisition. At December 31, 1995, the amortized cost of investments held in Separate Account No. 2A consists of the following: - -----------------------------------------------------------------------------
AMORTIZED COST % - -------------------------------------------------------- -------------- -------- Certificates of Deposit, 5.80% due 01/31/96 ............. $ 20,000,000 6.7% Commercial Paper, 5.53%-5.87% due 1/12/96 through 2/23/96 ................................................ 262,329,329 88.0 Time Deposits, 5.875% due 01/02/96 ...................... 800,000 0.3 Variable Rate LIBOR, 5.968% due 01/08/95 ................ 15,000,000 5.0 - -------------------------------------------------------- -------------- -------- Total Investments ....................................... 298,129,329 100.0 Cash and Receivables Less Liabilities ................... 63,333 0.0 - -------------------------------------------------------- -------------- -------- Net Assets of Separate Account No. 2A ................... $298,192,662 100.0% ======================================================== ============== ======== Units Outstanding ....................................... 1,232,756 Unit Value .............................................. $241.89 - -------------------------------------------------------- --------------
Participating Funds purchase or redeem units depending on each participating account's excess cash availability or cash needs to meet its liabilities. Separate Account No. 2A is not subject to investment management fees. Separate Account No. 2A is valued daily at amortized cost, which approximates market value. 3. Charges and fees relating to the Funds are deducted in accordance with the terms of the contracts issued by Equitable Life to the Trusts. With respect to the American Dental Association Members Retirement Program, these expenses consist of program expense charge, direct expenses and record maintenance and report fee. These charges and fees are paid to Equitable Life by the Funds and are recorded as expenses in the accompanying Statements of Operations and Changes in Net Assets. 4. No Federal income tax based on net income or realized and unrealized capital gains was applicable to contracts participating in the Funds, by reason of applicable provisions of the Internal Revenue Code and no Federal income tax payable by Equitable Life will affect such contracts. Accordingly, no Federal income tax provision is required. 5. The Templeton Foreign Fund and MFS Emerging Growth Fund have provided Equitable Life with the following unaudited information as of December 31, 1995. The Templeton Foreign Fund had total assets of $7.5 billion and a net asset value per share of $9.18. Its asset allocation consisted of 71.3% in common and preferred shares and convertible issues, 19.2% in liquid investments and 9.5% in fixed income issues. Its five major industry group concentrations were as follows: Banking (11.2%), Telecommunications (5.9%), Energy Sources (5.7%), Transportation (4.6%) and Metals and Mining (4.5%). Geographically, the five major country concentrations were as follows: Hong Kong (8.2%), Spain (7.0%), France (6.3%), Australia (5.8%) and United Kingdom (5.0). The MFS Emerging Growth Fund had net assets of $3.5 billion and a net asset value per share of $26.71. Its asset allocation consisted of 98.1% in common and preferred shares and convertible issues and 1.9% in liquid investments. Its five major industry group concentrations were as follows: Computer Software (27.0%), Gaming and Lodging (14.1%), Health Maintenance Organization (12.8%), Specialty Stores (8.7%) and Medical Services (7.2%). SAI-50 SEPARATE ACCOUNT NO. 30 (THE REAL ESTATE FUND) (POOLED) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Report of Independent Accountants To The Board of Directors of The Equitable Life Assurance Society of the United States: We have audited the accompanying statements of assets and liabilities of The Real Estate Fund (Separate Account No. 30) of The Equitable Life Assurance Society of the United States (the Account) as of December 31, 1995 and 1994, the statement of investments and net assets as of December 31, 1995, the related statements of operations and changes in net assets and of cash flows for the years then ended. These financial statements are the responsibility of the Account's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements audited by us present fairly, in all material respects, the financial position of the Account at December 31, 1995 and 1994, and the results of its operations and the changes in its net assets and its cash flows for the years then ended in conformity with generally accepted accounting principles. As explained in Note 2, the financial statements at December 31, 1995 include an investment in Prime Property Fund (PPF), valued at $7.3 million (84% of total assets). PPF holds real estate related investments whose values have been estimated by management in accordance with the procedures described in Note B2 of the PPF financial statements. We have tested the procedures used by PPF's management in arriving at its estimate of market value and have tested the underlying documentation. In the circumstances, we believe the procedures are reasonable and the documentation appropriate. Because the real estate related assets underlying PPF's investments are generally held for long-term operation and appreciation, amounts ultimately realized from the sale of real estate related investments may vary from the market values presented. Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The condensed financial information of the Account for the years ended December 31, 1995 and 1994 included in the accompanying Prospectus, is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. PRICE WATERHOUSE LLP Atlanta, Georgia April 8, 1996 SAI-51 SEPARATE ACCOUNT NO. 30 (THE REAL ESTATE FUND) (POOLED) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Statements of Assets and Liabilities - -----------------------------------------------------------------------------
DECEMBER 31, 1995 1994 - ------------------------------------------------------------------------------ ------------ ------------ ASSETS: Investments (Notes 2 and 3): Participation in Prime Property Fund, at value, equivalent to 1,304 units at $5,622.21 for 1995 (cost: $6,427,542) and 1,418 units at $5,643.72 for 1994 (cost: $6,966,153) .......................................................... $7,333,914 $8,002,106 Participation in Separate Account No. 2A, at amortized cost which approximates market value,equivalent to 5,659 units at $241.89 for 1995 and 3,922 units at $227.94 for 1994 ............................................. 1,368,746 893,924 Cash .......................................................................... 167 4,426 - ------------------------------------------------------------------------------ ------------ ------------ Total assets ............................................................... 8,702,827 8,900,456 - ------------------------------------------------------------------------------ ------------ ------------ LIABILITIES: Accrued expenses .............................................................. 19,240 12,712 - ------------------------------------------------------------------------------ ------------ ------------ Total liabilities .......................................................... 19,240 12,712 - ------------------------------------------------------------------------------ ------------ ------------ Net Assets .................................................................... $8,683,587 $8,887,744 ============================================================================== ============ ============
See Notes to Financial Statements. SAI-52 SEPARATE ACCOUNT NO. 30 (POOLED) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Statements of Operations and Changes in Net Assets - -----------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1995 1994 - ----------------------------------------------------------------------------- ------------- ------------- FROM OPERATIONS: INVESTMENT INCOME (NOTE 2): Interest Income .............................................................. $ 52,821 $ 36,884 EXPENSES (NOTE 4) ............................................................ (180,455) (185,127) - ----------------------------------------------------------------------------- ------------- ------------- NET INVESTMENT LOSS .......................................................... (127,634) (148,243) - ----------------------------------------------------------------------------- ------------- ------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 2): Realized gain from redemption of Prime Property Fund units ................... 111,388 342,395 - ----------------------------------------------------------------------------- ------------- ------------- Unrealized appreciation (depreciation) of Prime Property Fund units: January 1 ................................................................... 1,035,953 813,978 December 31 ................................................................. 906,373 1,035,953 - ----------------------------------------------------------------------------- ------------- ------------- Unrealized appreciation (depreciation) ....................................... (129,580) 221,975 - ----------------------------------------------------------------------------- ------------- ------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS ....................... (18,192) 564,370 - ----------------------------------------------------------------------------- ------------- ------------- Increase (decrease) in net assets attributable to operations ................. (145,826) 416,127 - ----------------------------------------------------------------------------- ------------- ------------- FROM ALLOCATIONS AND WITHDRAWALS: Allocations .................................................................. 874,036 914,352 Withdrawals .................................................................. (932,367) (4,331,414) - ----------------------------------------------------------------------------- ------------- ------------- Increase (decrease) in net assets attributable to allocations and withdrawals (58,331) (3,417,062) - ----------------------------------------------------------------------------- ------------- ------------- INCREASE (DECREASE) IN NET ASSETS ............................................ (204,157) (3,000,935) NET ASSETS -- JANUARY 1 ...................................................... 8,887,744 11,888,679 - ----------------------------------------------------------------------------- ------------- ------------- NET ASSETS -- DECEMBER 31 .................................................... $ 8,683,587 $ 8,887,744 ============================================================================= ============= =============
See Notes to Financial Statements. SAI-53 SEPARATE ACCOUNT NO. 30 (POOLED) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Statements of Cash Flows - -----------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1995 1994 - ---------------------------------------------------------- ------------- ------------- OPERATING ACTIVITIES: Net investment loss ....................................... $ (127,634) $ (148,243) - ---------------------------------------------------------- ------------- ------------- Adjustments to reconcile net investment loss to net cash flow used in operating activities: Increase (decrease) in accrued expenses .................. 6,528 (4,855) ------------- ------------- Total adjustments ........................................ 6,528 (4,855) - ---------------------------------------------------------- ------------- ------------- Net cash flow used in operating activities ............... (121,106) (153,098) - ---------------------------------------------------------- ------------- ------------- INVESTING ACTIVITIES: Net proceeds from redemption of Prime Property Fund units 650,000 2,331,728 - ---------------------------------------------------------- ------------- ------------- Net cash flow provided by investing activities .......... 650,000 2,331,728 - ---------------------------------------------------------- ------------- ------------- FINANCING ACTIVITIES: Allocations .............................................. 874,036 914,352 Withdrawals .............................................. (932,367) (4,331,414) - ---------------------------------------------------------- ------------- ------------- Net cash flow used in financing activities ............... (58,331) (3,417,062) - ---------------------------------------------------------- ------------- ------------- NET INCREASE (DECREASE) IN CASH AND SHORT-TERM INVESTMENTS 470,563 (1,238,432) CASH AND SHORT-TERM INVESTMENTS -- JANUARY 1 .............. 898,350 2,136,782 - ---------------------------------------------------------- ------------- ------------- CASH AND SHORT-TERM INVESTMENTS -- DECEMBER 31 ........... $1,368,913 $ 898,350 ========================================================== ============= =============
See Notes to Financial Statements. SAI-54 SEPARATE ACCOUNT NO. 30 (POOLED) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Statement of Investments and Net Assets December 31, 1995 - -----------------------------------------------------------------------------
INVESTMENTS (NOTES 2 AND 3): - ------------------------------------------------------------------------------------------------------- ------------ REAL ESTATE INVESTMENTS: Participation in Prime Property Fund at value, equivalent to 1,304 units at $5,622.21 (cost: $6,427,542) ................................................................................... $7,333,914 SHORT-TERM INVESTMENTS: Participation in Separate Account No. 2A, at amortized cost which approximates market value, equivalent to 5,659 units at $241.89 ................................................................. 1,368,746 - ------------------------------------------------------------------------------------------------------- ------------ Total Investments ...................................................................................... 8,702,660 - ------------------------------------------------------------------------------------------------------- ------------ Cash Less Liabilities .................................................................................. (19,073) - ------------------------------------------------------------------------------------------------------- ------------ NET ASSETS ............................................................................................. $8,683,587 ======================================================================================================= ============
See Notes to Financial Statements. SAI-55 SEPARATE ACCOUNT NO. 30 (POOLED) (THE REAL ESTATE FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Notes to Financial Statements 1. Separate Account No. 30 (the Account) was established as a separate account of The Equitable Life Assurance Society of the United States (Equitable), in conformity with the New York State Insurance Law. Pursuant to such law, the net assets of the Account are not chargeable with liabilities arising out of any other business of Equitable. Equitable is the investment manager for the Account. In managing the Account, Equitable uses the services of its wholly-owned subsidiary, Equitable Real Estate Investment Management, Inc. (Management). 2. The Account participates primarily in Equitable's Prime Property Fund by purchasing or redeeming units on the date Prime Property Fund units are valued. Prime Property Fund invests in real estate as discussed in the accompanying financial statements of Prime Property Fund. The change in value of Prime Property Fund units owned by the Account is recorded as unrealized appreciation (depreciation). Prime Property Fund's unit value changes as a result of both investment income and increases and decreases in investment appreciation. In determining realized gains or losses from the redemption of Prime Property Fund units, the cost of units sold is recorded on a first-in, first-out basis. The Account participates in Equitable's Separate Account No. 2A by purchasing or redeeming units, depending on the Account's excess cash availability or need for cash to meet Account liabilities or withdrawals. The investments of Separate Account No. 2A consist of debt securities which mature or can be liquidated in sixty days or less from the date of acquisition. Short-term debt securities may also be purchased directly by the Account. Interest income is recorded when earned and expenses are recognized when incurred. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilites at the date of the financial statements and the reported amounts of income, expenses, and unrealized gains (losses) during the reporting period. Actual results could differ from those estimates. 3. Investments are valued as follows: The Account's participation in Prime Property Fund is valued as of the last business day of the month based upon the number of units held and the unit value of Prime Property Fund. Investments held by Prime Property Fund are valued as disclosed in Note B2 of the financial statements of Prime Property Fund which are included in this Statement of Additional Information. Separate Account No. 2A is primarily valued at amortized cost which approximates market value. 4. Expense charges are made in accordance with the terms of the contracts participating in the Account. 5. In the Statements of Cash Flows, the Account considers short-term investments to be cash equivalents. 6. No federal income tax based on net investment income or realized and unrealized gains was applicable to contracts participating in the Account by reason of applicable sections of the Internal Revenue Code, and no federal income tax payable by Equitable will affect the contracts. SAI-56 SEPARATE ACCOUNT NO. 30 (POOLED) (THE REAL ESTATE FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Notes to Financial Statements (Concluded) 7. The ability of a client to withdraw funds from the Account is subject to the availability of cash arising from net investment income, allocations and the redemption of units in Prime Property Fund. To the extent that withdrawal requests exceed such available cash, Management has uniform procedures to provide for cash payments. As of December 31, 1995, the Real Estate Fund is fulfilling withdrawal requests on a current basis. 8. These financial statements should be read in conjunction with the financial statements of Prime Property Fund, which are included in this Statement of Additional Information. SAI-57 REPORT OF INDEPENDENT ACCOUNTANTS The Equitable Life Assurance Society of the United States: We have audited the accompanying statements of assets and liabilities of Prime Property Fund of The Equitable Life Assurance Society of the United States (the Account) as of December 31, 1995 and 1994, and the related statements of operations and changes in net assets and of cash flows for the years then ended. These financial statements are the responsibility of the Account's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements audited by us present fairly, in all material respects, the financial position of the Account at December 31, 1995 and 1994, and the results of its operations and the changes in its net assets and its cash flows for the years then ended in conformity with generally accepted accounting principles. As explained in Note B2, the financial statements at December 31, 1995 include real estate related investments, valued at $3.4 billion (95% of total assets), whose values have been estimated by management in accordance with the procedures described in the Note. We have tested the procedures used by the Account's management in arriving at its estimate of market value and have tested the underlying documentation. In the circumstances, we believe the procedures are reasonable and the documentation appropriate. Because the real estate related assets underlying the Account's investments are generally held for long-term operation and appreciation, amounts ultimately realized from the sale of real estate related investments may vary from the market values presented. PRICE WATERHOUSE LLP Atlanta, Georgia February 2,1996 SAI-58 STATEMENT OF INDEPENDENT APPRAISERS Equitable Real Estate staff appraisers and independent fee appraisers make quarterly market value estimates of all properties in Prime Property Fund. During 1995, those appraisals completed by Equitable Real Estate staff were independently reviewed by L. W. Ellwood Company, Arthur Andersen & Co. and Landauer Real Estate Counselors. Each company independently reviewed separate portions of the Equitable valuations so that by year end all properties were analyzed once by non-Equitable appraisers. Based on our review and analysis, we concur with the value estimates on properties prepared by Equitable Real Estate staff as of the calendar quarter during which we conducted our review. Our appraisal review is part of a comprehensive three-year program which analyzes Equitable Real Estate staff appraisals including our thorough market value comparisons and physical inspections of one-third of the properties during the year. At the end of the three-year cycle, we have subjected all properties to on-site review. We have had the full cooperation of Equitable Real Estate with complete and unrestricted access to all underlying documents including leases, operation agreements, budgets, and partnership joint venture agreements. We have, where in our opinion deemed appropriate, independently researched the market for additional data and performed supplemental analysis to complete our review. Our review has been made in conformity with and subject to the Code of Professional Ethics and Standards of Practice of the Appraisal Institute. L.W. Ellwood Company Arthur Andersen & Co. Landauer Real Estate Counselors December 31, 1995 SAI-59 SEPARATE ACCOUNT NO. 8 (PRIME PROPERTY FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Statement of Assets and Liabilities - -----------------------------------------------------------------------------
DECEMBER 31, 1995 1994 - ----------------------------------------------------------- -------------- -------------- ASSETS: Real estate investments at value (Notes B and C): Properties ................................................ $2,872,220,000 $3,015,415,000 Partnership equities and related mortgage loans receivable 321,425,207 212,322,573 Mortgage loans receivable ................................. 204,700,000 172,300,000 - ----------------------------------------------------------- -------------- -------------- Total real estate investments at value ..................... 3,398,345,207 3,400,037,573 - ----------------------------------------------------------- -------------- -------------- Cash and short-term investments (Notes B and C) ........... 78,409,583 65,252,499 Accrued investment income .................................. 78,412,412 74,877,495 Prepaid real estate expenses and taxes ..................... 6,559,659 6,638,877 Other assets ............................................... 12,431,297 15,629,624 - ----------------------------------------------------------- -------------- -------------- Total assets .............................................. 3,574,158,158 3,562,436,068 - ----------------------------------------------------------- -------------- -------------- LIABILITIES: Mortgage loans payable (Note E) ............................ 528,809,699 422,207,905 Accrued real estate expenses and taxes ..................... 55,529,792 53,168,032 Accrued asset management fees and other liabilities (Note I) ......................................................... 21,494,899 19,062,551 Accrued capital expenditures ............................... 20,388,611 12,422,321 - ----------------------------------------------------------- -------------- -------------- Total liabilities ......................................... 626,223,001 506,860,809 - ----------------------------------------------------------- -------------- -------------- NET ASSETS ................................................. $2,947,935,157 $3,055,575,259 =========================================================== ============== ==============
SAI-60 SEPARATE ACCOUNT NO. 8 (PRIME PROPERTY FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Statements of Operations and Changes in Net Assets - -----------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1995 1994 - -------------------------------------------------------------------------- -------------- -------------- FROM INVESTMENT ACTIVITIES: INVESTMENT INCOME (NOTES B, C AND D): Rental income from real estate properties ................................. $ 443,539,829 $ 410,179,367 Income from partnership operations and interest from related mortgage loans receivable ......................................................... 24,671,070 21,690,976 Interest from mortgage loans receivable ................................... 15,941,696 13,534,675 Interest from short-term investments ...................................... 11,147,574 5,419,060 Other ..................................................................... 1,517,993 49,609 - -------------------------------------------------------------------------- -------------- -------------- Total ..................................................................... 496,818,162 450,873,687 - -------------------------------------------------------------------------- -------------- -------------- EXPENSES (NOTES B AND D): Real estate operating expenses ............................................ 139,640,785 132,262,835 Real estate taxes ......................................................... 55,808,774 59,635,936 Asset management fees (Note I) ............................................ 31,427,742 29,785,130 Interest on mortgage loans payable (Note E) ............................... 35,593,854 25,931,441 - -------------------------------------------------------------------------- -------------- -------------- Total ..................................................................... 262,471,155 247,615,342 - -------------------------------------------------------------------------- -------------- -------------- NET INVESTMENT INCOME ..................................................... 234,347,007 203,258,345 - -------------------------------------------------------------------------- -------------- -------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE B): Realized gain (loss) from sale of investments: Net proceeds from sales .................................................. 15,730,241 24,326,114 Cost of investments sold ................................................. (18,860,705) (51,428,164) - -------------------------------------------------------------------------- -------------- -------------- Net Realized Gain (Loss) from Sale of Investments ........................ (3,130,464) (27,102,050) - -------------------------------------------------------------------------- -------------- -------------- Unrealized appreciation (depreciation) on investments: January 1 ................................................................ (370,439,139) (359,530,346) December 31 .............................................................. (644,450,055) (370,439,139) - -------------------------------------------------------------------------- -------------- -------------- Unrealized appreciation (depreciation) on investments .................... (274,010,916) (10,908,793) - -------------------------------------------------------------------------- -------------- -------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS .................... (277,141,380) (38,010,843) - -------------------------------------------------------------------------- -------------- -------------- Increase (decrease) in net assets attributable to investment activities .. (42,794,373) 165,247,502 - -------------------------------------------------------------------------- -------------- -------------- FROM CLIENT TRANSACTIONS: Allocations ............................................................... 281,104,520 185,252,463 Withdrawals (Note G) ...................................................... (345,950,249) (206,898,433) - -------------------------------------------------------------------------- -------------- -------------- Increase (decrease) in net assets attributable to client transactions .... (64,845,729) (21,645,970) - -------------------------------------------------------------------------- -------------- -------------- INCREASE (DECREASE) IN NET ASSETS ......................................... (107,640,102) 143,601,532 NET ASSETS -- JANUARY 1 ................................................... 3,055,575,259 2,911,973,727 - -------------------------------------------------------------------------- -------------- -------------- NET ASSETS -- DECEMBER 31 ................................................. $2,947,935,157 $3,055,575,259 ========================================================================== ============== ============== Unit Value ................................................................ $5,622.21 $5,643.72 Units Outstanding ......................................................... 524,336 541,410 - -------------------------------------------------------------------------- -------------- --------------
SAI-61 SEPARATE ACCOUNT NO. 8 (PRIME PROPERTY FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Statement of Cash Flows - -----------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1995 1994 - ----------------------------------------------------------------------------------- --------------- --------------- OPERATING ACTIVITIES: Net investment income .............................................................. $ 234,347,007 $ 203,258,345 - ----------------------------------------------------------------------------------- --------------- --------------- Adjustments to reconcile net investment income to net cash flow provided by operating activities: Changes in assets -- (increase) decrease: Accrued investment income ........................................................ (2,748,532) (13,730,542) Prepaid real estate expenses and taxes ........................................... 79,218 (869,986) Other assets ..................................................................... 3,250,279 (126,116) Changes in liabilities -- increase (decrease): Accrued real estate expenses and taxes ........................................... 2,361,760 9,911,961 Accrued asset management fees and other liabilities .............................. 2,591,007 1,783,913 - ----------------------------------------------------------------------------------- --------------- --------------- Total adjustments ................................................................. 5,533,732 (3,030,770) - ----------------------------------------------------------------------------------- --------------- --------------- Net Cash Flow Provided by Operating Activities .................................... 239,880,739 200,227,575 - ----------------------------------------------------------------------------------- --------------- --------------- INVESTING ACTIVITIES: Acquisitions of real estate properties ............................................. (69,581,894) (79,391,114) Additions to real estate properties ................................................ (77,829,327) (69,096,671) Proceeds from real estate properties sold .......................................... 15,571,583 17,140,410 Acquisitions of mortgage loans receivable .......................................... (28,250,000) -- Repayments of mortgage loans receivable ............................................ 4,653,293 14,425,000 Proceeds from partnership equities sold and repayments of loans receivable related to partnership equities ........................................................... 8,041,534 2,940,517 Contributions to partnership equities and advances on related loans receivable .... (112,323,092) (2,930,726) Distributions from partnerships less than net cash provided by partnership operating activities .............................................................. (8,709,865) (9,200,042) - ----------------------------------------------------------------------------------- --------------- --------------- Net Cash Flow Used in Investing Activities ........................................ (268,427,768) (126,112,626) - ----------------------------------------------------------------------------------- --------------- --------------- FINANCING ACTIVITIES: Increase in mortgage loans payable ................................................. 110,000,000 -- Principal payments on mortgage loans payable ....................................... (3,398,206) (63,675,602) Allocations ........................................................................ 281,052,568 185,208,817 Withdrawals ........................................................................ (345,950,249) (206,898,433) - ----------------------------------------------------------------------------------- --------------- --------------- Net Cash Flow Provided by (Used in) Financing Activities .......................... 41,704,113 (85,365,218) --------------- --------------- NET INCREASE (DECREASE) IN CASH AND SHORT-TERM INVESTMENTS ......................... 13,157,084 (11,250,269) CASH AND SHORT-TERM INVESTMENTS AT JANUARY 1 ....................................... 65,252,499 76,502,768 - ----------------------------------------------------------------------------------- --------------- --------------- CASH AND SHORT-TERM INVESTMENTS AT DECEMBER 31 ..................................... $ 78,409,583 $ 65,252,499 =================================================================================== =============== ===============
SAI-62 SEPARATE ACCOUNT NO. 8 (PRIME PROPERTY FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Notes to Financial Statements A: GENERAL Prime Property Fund (the Account) was established as a separate account of The Equitable Life Assurance Society of the United States (Equitable) in conformity with the New York State Insurance Law for the purpose of acquiring real estate and real estate related investments. Pursuant to such law, the net assets in the Account are not chargeable with liabilities arising out of any other business of Equitable. Equitable acts as investment manager for the Account. In managing the Account, Equitable uses the services of its wholly-owned subsidiary, Equitable Real Estate Investment Management, Inc. (Management). B: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 1. Investment Transactions Real estate property acquisitions are recorded as of the date of closing. Mortgage and construction loans receivable and capital contributions to partnership equities are recorded as of the date funds are advanced. Purchase money mortgages, acquired as consideration received for real estate sold, are recorded as of the closing date of the sales transaction. Expenditures which extend economic life or represent additional capital investments benefiting future periods (including tenant improvements and leasing commissions) are capitalized. For properties under development or major expansion, carrying costs related to the development or expansion, principally real estate taxes, interest, and utility costs, are capitalized prior to substantial completion of tenant improvements for a maximum period of one year from cessation of major construction activity. Historical cost depreciation is not recognized on real estate properties. Rental income is recognized when due in accordance with the terms of the respective leases rather than being averaged over the lives of the leases. Expenses are recognized when incurred. Income from partnership operations represents the Account's share of partnership income excluding historical cost depreciation. The Account determines realized gain (loss) by comparing net proceeds from the sale of properties to the cost of the properties sold. The unrealized gain (loss) previously recorded for these properties is then eliminated. Mortgage loans payable are stated at the principal amount of obligations outstanding. Benefits or detriments resulting from a differential in current mortgage interest rates and contractual mortgage interest rates are taken into consideration in the appraisal of the related property. Certain real estate and partnership equity properties may have a market value that is lower than the outstanding principal amount of the obligation. If the Account's obligation is limited to the value of the individual property and if Management intends to limit the Account's exposure in the property to its existing investment, then the value of the property is adjusted to equal the outstanding principal amount of the obligation plus incidental liabilities. Upon transfer of properties in satisfaction of debt, the Account reclassifies previously recognized unrealized losses to realized gains and losses. SAI-63 SEPARATE ACCOUNT NO. 8 (PRIME PROPERTY FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Notes to Financial Statements (Continued) The preparation of financial statements in conformity with generally accepted accounting principles requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amount of income, expenses, and unrealized gains (losses) during the reporting period. Actual results could differ from those estimates. 2. Valuation of Investments The values of real estate investments are estimated in accordance with the policies and procedures of the Appraisal Institute. Ultimate realization of the market values is dependent to a great extent on economic and other conditions that are beyond Management's control (such as general economic conditions, conditions affecting tenants and other events occurring in the markets in which individual properties are located). Further, values may or may not represent the prices at which the real estate investments would sell since market prices of real estate investments can only be determined by negotiation between a willing buyer and seller. Market value considers the financial aspects of a property, market transactions and the relative yield for an asset as measured against alternative investments. Although the market values represent subjective estimates, Management believes that these market values are reasonable approximations of market prices. Real Estate Properties and Partnership Equities The values of real estate properties and partnership equities have been prepared giving consideration to Income, Cost, and Market Data Approaches of estimating property value. The Income Approach projects an income stream for a property (typically 10 years) and discounts this income plus a reversion (presumed sale) into a present value. Yield rates and growth assumptions utilized in this approach are derived from market transactions as well as other financial and demographic data. The Cost Approach estimates the replacement cost of the building less depreciation plus the land value. Generally, this approach provides a check on the Income Approach. The Market Data Approach compares recent transactions to the appraised property. Adjustments are made for dissimilarities which typically provide a range of value. Generally, the Income Approach carries the most weight in the value reconciliation. The initial valuation of properties allocated to the Account is based on a fully documented appraisal report. Subsequent values are determined quarterly from certificates of value which include less documentation but nevertheless meet all of the requirements of the Appraisal Institute and are considered appraisals. In these appraisals, a full discounted cash flow analysis, which is the basis of an Income Approach, is the primary focus. Interim monthly valuations are determined giving consideration to material investment transactions. Full appraisal reports on selected properties are prepared as deemed necessary by Management. Appraisals are prepared by Management's valuation staff or third-party appraisers. Staff appraisals are concurred with and reviewed by one of three designated third-party appraisal firms which also physically inspect one-third of the properties every year on a rotating basis. Since appraisals take into consideration the estimated effect of physical depreciation, a more meaningful SAI-64 SEPARATE ACCOUNT NO. 8 (PRIME PROPERTY FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Notes to Financial Statements (Continued) financial statement presentation is achieved by excluding historical cost depreciation from net investment income. This presentation does not affect the net assets or unit value of the Account. Partnership equities are stated at the Account's equity in the value of the net assets of the partnerships. Mortgage Loans Receivable The fair value of mortgage loans receivable held in the Account has been determined by one or more of the following criteria as appropriate: (i) on the basis of estimated market interest rates for loans of comparable quality and maturity, (ii) by recognizing the value of equity participations and options to enter into equity participations contained in certain loan instruments and (iii) giving consideration to the value of the underlying security. Short-Term Investments The short-term investments are primarily valued at amortized cost, which approximates market value. SAI-65 SEPARATE ACCOUNT NO. 8 (PRIME PROPERTY FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Notes to Financial Statements (Continued) C: INVESTMENTS 1. Real Estate Investments The Account's real estate investments are comprised of the following:
DECEMBER 31, 1995 DECEMBER 31, 1994 (MILLIONS) (MILLIONS) - --------------- ---------------------- --------------------- COST VALUE COST VALUE - --------------- ---------- ---------- ---------- --------- Properties: Industrial/R&D $ 380.0 $ 360.9 $ 371.5 $ 348.7 Office ..... 1,279.3 788.7 1,194.7 710.2 Retail ..... 1,731.9 1,642.6 1,693.8 1,880.0 Hotel ...... 103.0 76.1 97.7 72.6 Other ...... 4.1 3.9 4.1 3.9 ------------ ---------- ---------- ---------- --------- Subtotal ... 3,498.3 2,872.2 3,361.8 3,015.4 ------------ ---------- ---------- ---------- --------- Partnership equities and related mortgage loans receivable: Industrial/R&D 18.6 13.0 18.7 13.0 Office ..... 221.3 214.2 130.1 107.9 Retail ..... 56.5 22.7 54.8 41.3 Hotel ...... 50.7 41.3 43.0 36.3 Other ...... 27.0 30.2 13.3 13.8 ------------ ---------- ---------- ---------- --------- Subtotal ... 374.1 321.4 259.9 212.3 ------------ ---------- ---------- ---------- --------- Mortgage loans receivable: Office ..... 17.2 21.0 23.6 27.3 Retail ..... 153.2 183.7 125.2 145.0 Other ...... -- -- -- -- ------------ ---------- ---------- ---------- --------- Subtotal ... 170.4 204.7 148.8 172.3 ------------ ---------- ---------- ---------- --------- Total ...... $4,042.8 $3,398.3 $3,770.5 $3,400.0 ------------ ---------- ---------- ---------- ---------
SAI-66 SEPARATE ACCOUNT NO. 8 (PRIME PROPERTY FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Notes to Financial Statements (Continued) 2. Real Estate Partnership Equities The Account's equity interests in real estate partnerships and their respective financial positions at December 31, 1995 and 1994 (based on market valuations determined for the Account) and results from operations for the years then ended are summarized as follows:
1995 1994 - ---------------------------------------------------------- ------------ ------------ Number of interests ....................................... 18 17 Ownership positions ....................................... 33.3-91.2% 33.3-91.2% Account's equity value (millions) ......................... $197 $150 Notes receivable related to partnership equities (millions) ............................................... $18 $43 Partnership assets (millions) ............................. $1,284 $1,280 Partnership liabilities (millions) ........................ $915 $982 Partnership income before depreciation (millions) ........ $30 $29 ========================================================== ============ ============
3. Mortgage Loans Receivable At December 31, 1995, mortgage loans receivable at a fair value of $311.3 million of which $106.6 million related to partnership equities, $175 million of other mortgage loans receivable and $29.7 million of rated commercial mortgage backed securities, had interest rates ranging from 8.2% to 13.1%. Aggregate annual receipts of mortgage principal due during the five years following December 31, 1995 and thereafter are as follows:
YEAR ENDING DECEMBER 31, (MILLIONS) - ------------------------ ---------- 1996 .................... $ 1 1997 .................... 1 1998 .................... 1 1999 .................... 45 2000 .................... 1 Thereafter .............. 194 - ------------------------ ---------- Total ................... $243 ======================== ==========
4. Short-Term Investments The Account's short-term investments are comprised principally of participation in Equitable's Separate Account No. 2A. The assets of Separate Account No. 2A consist of debt securities maturing in sixty days or less from the date of acquisition. Such debt securities may include bankers acceptances, certificates of deposit, commercial paper, and repurchase agreements. Short-term debt securities may also be purchased directly by the Account. SAI-67 SEPARATE ACCOUNT NO. 8 (PRIME PROPERTY FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Notes to Financial Statements (Continued) D: INVESTMENT RESTRUCTURINGS During 1994, five partnership equities and certain related loans receivable with a market value of $222.1 million were transferred to real estate properties. The Account acquired its partners' interests in four of the partnerships in exchange for loans owed by the partners to the Account. Additionally, the Account acquired its partner's interest in a partnership in which the Account had been recording all of the partnership's operating results. In accordance with the terms of the partnership agreement, no consideration was given to the partner in exchange for its interest. These transactions were recorded at the investments' existing cost and market values and had no effect on the net assets or unit value of the Account. In November 1994, the Account acquired the 50% interest of its partner in a partnership in which the Account previously had held the other 50% interest. Upon acquisition, this investment was transferred to real estate properties. E: MORTGAGE LOANS PAYABLE Mortgage loans payable consist of the following at December 31, 1995:(1)
(MILLIONS) - ------------------------------------------------------------------------------------------- ---------- 6.633% loan of $209.5 million and a LIBOR plus 0.5% loan of $70.5 million collateralized by four real estate properties with a market value of $596.6 million. Includes an interest rate cap agreement which limits the interest rate for the floating rate loan to a maximum of 11.5%. Maturing July 2003. .............................................................. $280.0 LIBOR plus 1.1% loan collateralized by four real estate properties with a market value of $374.7 million. Includes an interest rate cap agreement which limits the interest rate to a maximum of 9.5%. Maturing June 1998. ....................................................... 172.0 LIBOR plus 1.4% loan collateralized by a real estate property with a market value of $64.3 million. Maturing July 1996. ............................................................... 35.0 9.0% loan collateralized by a real estate property with a market value of $34.7 million. Maturing June 2011. ........................................................................ 14.3 9.0% loan collateralized by a real estate property with a market value of $18.5 million. Maturing March 2000. ....................................................................... 13.7 9.375% loan collateralized by a real estate property with a market value of $18.5 million. Maturing December 1999.(2) ................................................................. 10.2 9.375% loan collateralized by a real estate property with a market value of $3.9 million. Maturing February 2000. .................................................................... 3.6 - ------------------------------------------------------------------------------------------- ---------- Total ...................................................................................... $528.8 =========================================================================================== ==========
(1) Market values shown are as of 12/31/95. (2) This represents the Account's 50% interest in a tenancy-in-common property with a total market value of $37 million and total outstanding debt of $20.4 million. SAI-68 SEPARATE ACCOUNT NO. 8 (PRIME PROPERTY FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Notes to Financial Statements (Continued) Aggregate annual payments of principal on mortgage loans are as follows:
YEAR ENDING DECEMBER 31, (MILLIONS) - ------------------------ ---------- 1996 .................... $ 36 1997 .................... 1 1998 .................... 173 1999 .................... 11 2000 .................... 16 2001-2005 ............... 284 Thereafter .............. 8 - ------------------------ ---------- Total ................... $529 ======================== ==========
F: LEASES Minimum future rentals to be received on real estate properties, excluding partnership equities, under noncancelable operating leases in effect as of December 31, 1995 are as follows:
YEAR ENDING DECEMBER 31, (MILLIONS) - ------------------------ ---------- 1996 .................... $ 275.7 1997 .................... 248.1 1998 .................... 218.6 1999 .................... 195.2 2000 .................... 154.0 Thereafter .............. 452.8 - ------------------------ ---------- Total ................... $1,544.4 ======================== ==========
Contingent rentals included in investment income were approximately $8.6 million and $8.3 million in 1995 and 1994, respectively. G: WITHDRAWALS The ability of a client to withdraw funds from the Account is subject to the availability of cash arising from net investment income, contributions, and the sale of investments in the normal course of business. To the extent that withdrawal requests exceed such available cash, Management has uniform procedures to provide for cash payments, which may be deferred for such period as Management considers necessary to protect the interests of other clients in the Account or to obtain the funds to be withdrawn. At December 31, 1995 and 1994, withdrawal requests exceeded available cash. SAI-69 SEPARATE ACCOUNT NO. 8 (PRIME PROPERTY FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Notes to Financial Statements (Continued) H: RELATED PARTY TRANSACTIONS At December 31, 1995 and 1994, interests of retirement plans for employees, managers, and agents of Equitable in the Account aggregated $64.6 million (2.2%) and $65.5 million (2.1%), respectively, of the net assets of the Account. Management has an exemption from the Department of Labor which allows it to charge market rate property management and leasing fees for properties it manages for the Account. All such fees must be approved by an independent fiduciary. During 1995 and 1994, Management earned $9.4 million and $6.1 million, respectively, in property management and leasing fees from the Account, and in addition was reimbursed$16.0 million and $13.6 million, respectively, for payroll expenses for on-site personnel. I: FEES Management charges clients in the Account a monthly asset management fee based on the client's prior month-end net asset value at the annual rates shown below:
AMOUNT OF FUNDS ANNUAL RATE - ------------------------ ------------- First $10 million ....... 1.15% Net $15 million ......... 1.00% Excess over $25 million 0.80% - ------------------------ -------------
Additional fees may also be charged to clients for certain optional services provided by Management. At December 3l, 1995 and 1994, the clients' liability to Management for asset management fees totaled $4.6 million and $4.5 million, respectively. Account investments in Separate Account No. 2A are not subject to an additional asset management fee. SAI-70 SEPARATE ACCOUNT NO. 8 (PRIME PROPERTY FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Notes to Financial Statements (Continued) J: SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION In the Statements of Cash Flows, the Account considers short-term investments to be cash equivalents. Cash payments of interest were $35.8 million and $25.6 million during 1995 and 1994, respectively.Non-cash investing and financing activities are summarized as follows:
19954 1994 (MILLIONS) (MILLIONS) - ---------------------------------------------------------------------- ---------- ---------- Conversion of partnership equities and related loans receivable to real estate properties, at cost ...................................... $327 - ---------------------------------------------------------------------- ---------- ---------- Assumption of mortgage loans payable upon conversion of partnership equities to real estate properties ................................... $ 29 - ---------------------------------------------------------------------- ---------- ---------- Refinancing of mortgage loan payable .................................. $205 $205 - ---------------------------------------------------------------------- ---------- ---------- Conversion of notes receivable related to partnership equity to contribution of partnership equity ................................... $ 16 ====================================================================== ==========
K: FEDERAL INCOME TAX No federal income tax based on net investment income or realized and unrealized gains was applicable to contracts participating in the Account by reason of applicable sections of the Internal Revenue Code, and no federal income tax payable by Equitable will affect the contracts. L: INVESTMENT COMMITMENTS As of December 31, 1995, the Account proposes to invest an additional $126 million in existing real estate investments and $39 million in new properties. SAI-71 SEPARATE ACCOUNT NO. 8 (PRIME PROPERTY FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Supplementary Financial Information SCHEDULE X -- SUPPLEMENTARY INCOME STATEMENT INFORMATION (IN THOUSANDS) - -----------------------------------------------------------------------------
COLUMN B YEAR ENDED DECEMBER COLUMN A 31, ITEM 1995 1994 - --------------------------- --------- --------- 1.Maintenance and repairs . $17,498 $11,465 2.Real estate taxes ........ $55,809 $57,663 - --------------------------- --------- ---------
Maintenance and Repairs is included in Real Estate Operating Expenses. Other captions not included since such costs and expenses are not applicable or did not exceed 1% of total revenues. SAI-72 SEPARATE ACCOUNT NO. 8 (PRIME PROPERTY FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Supplementary Financial Information SCHEDULE XII -- MORTGAGE LOANS RECEIVABLE ON REAL ESTATE AS OF DECEMBER 31, 1995 (IN THOUSANDS) - -----------------------------------------------------------------------------
CARRYING AMOUNT OF CURRENT FINAL MORTGAGE AT EFFECTIVE MATURITY FACE AMOUNT MARKET DESCRIPTION INTEREST RATE DATE PERIODIC PAYMENT TERMS OF MORTGAGE VALUE - --------------------------------- -------------- ----------- -------------------------------------- ----------- ----------- Mortgage Loans Receivable: Participating mortgage secured by 8.2% 07/01/03 Monthly payment of interest plus $125,474 $154,000 a shopping center in New Castle participation in property cash flow. County, DE Loan due at maturity date. Secured by office, hotel, retail, 8.71% 03/31/99 Quarterly interest only. Loan due at 43,505 43,505 garage and marina facility in maturity date. Boston, MA Secured by office building in Prime + 3% 08/31/95 Loan in default. 64,376 38,677 Irvine, CA Secured by office, hotel, retail, 12% 03/31/02 Monthly interest only to the extent of 24,451 24,451 garage and marina facility in available cash flow. Principal and Boston, MA all accrued unpaid interest due at maturity date. Secured by shopping center in 13.12% 10/22/01 Monthly payment of interest and 22,700 24,400 Danbury, CN $50,000 of principal. Remaining principal due at maturity date. Secured by 19 office, industrial 9.5% 05/01/01 Monthly interest only payable at 6%. 22,410 21,000 and retail properties in Principal and all accrued unpaid Rockville, MD interest due at maturity date. Other: $5,000,000-$7,500,000 (two loans) 10.0%-12.36% 1/95-5/07 12,500 5,300 - --------------------------------- -------------- ----------- -------------------------------------- ----------- ----------- Total $315,416 $311,333 ================================= ============== =========== ====================================== =========== ===========
SAI-73 - ----------------------------------------------------------------------------- The following is a reconciliation of the carrying amounts of the above loans at market value for the years ended December 31, 1995 and 1994:
YEAR ENDED DECEMBER 31 1995 1994 - ---------------------------------------------------------------- ---------- ---------- (IN THOUSANDS) Balance -- January 1 ............................................ $191,981 $207,100 Additions during the year: Advances/New Loans .............................................. 104,800 1,320 Deductions during the year: Collection of principal and transfers to real estate properties (8,353) (20,198) Increase/(decrease) in unrealized gain/(loss) during the year .. 22,905 3,759 Increase/(decrease in realized gain/(loss) during the year ..... -- -- - ---------------------------------------------------------------- ---------- ---------- Balance -- December 31 ......................................... $311,333 $191,981 ================================================================ ========== ==========
SAI-74 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 SAI-75 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. SAI-76 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. SAI-77 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. SAI-78 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. SAI-79 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. SAI-80 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. SAI-81 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". SAI-82 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. SAI-83 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. SAI-84 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. SAI-85 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. SAI-86 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 ================= ================= ================ ===============
SAI-87 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. SAI-88 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 ===================
SAI-89 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. SAI-90 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 ================= ================ =================
SAI-91 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. SAI-92 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 ================= ================ =================
SAI-93
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 ================= =================
SAI-94
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. SAI-95 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. SAI-96 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. SAI-97 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 ================= ================ =================
SAI-98 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) ================= ================ =================
SAI-99 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 ================= ================ =================
SAI-100 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. SAI-101 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 SAI-102 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. SAI-103 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. SAI-104 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 SAI-105 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 Funds' 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 SAI-106 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 SAI-107 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. SAI-108 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. SAI-109 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 ================= ================ =================
SAI-110 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 ================= ================ =================
SAI-111
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 SAI-112 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 ================ =================
SAI-113 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. SAI-114 Supplement dated May 1, 1996 to Prospectus dated May 1, 1996 MEMBERS RETIREMENT PROGRAMS funded under contracts with THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES 787 Seventh Avenue, New York, New York 10019 Toll-Free Telephone 800-223-5790 ------------------------------- VARIABLE ANNUITY BENEFITS ------------------------------- This Prospectus Supplement should be read and retained for future reference by Participants in the Members Retirement Programs who are considering variable annuity payment benefits after retirement. This Prospectus Supplement is not authorized for distribution unless accompanied or preceded by the Prospectus dated May 1, 1996 for the appropriate Members Retirement Program. - ------------------------------------------------------------------------------ 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. - ------------------------------------------------------------------------------ RETIREMENT BENEFITS When you become eligible to receive benefits under a Members Retirement Program, you may select one or more of the following forms of distribution, which are available in variable or fixed form. The law requires that if the value of your Account Balance is more than $3,500, you must receive a Qualified Joint and Survivor Annuity unless your Spouse consents to a different election. Life Annuity - an annuity providing monthly payments for your life. No payments will be made after your death, even if you have received only one payment. Life Annuity - Period Certain - an annuity providing monthly payments for your life or, if longer, a specified period of time. If you die before the end of that specified period, payments will continue to your beneficiary until the end of the period. Subject to legal limitations, you may specify a minimum payment period of 5, 10, 15 or 20 years; the longer the specified period, the smaller the monthly payments will be. Joint and Survivor Annuity - Period Certain - an annuity providing monthly payments for your life and that of your beneficiary or, if longer, a specified period of time. If you and your beneficiary both die before the end of the specified period, payments will continue to your contingent beneficiary until the end of the period. Subject to legal limitations, you may specify a minimum payment period of 5, 10, 15 or 20 years; the longer the specified period, the smaller the monthly payments will be. How Annuity Payments are Made When your distribution of benefits under an annuity begins, your Units in the Funds are redeemed. Part or all of the proceeds, plus part or all of your Account Balance in the General Account Options, may be used to purchase an annuity. The minimum amount that can be used to purchase any type of annuity is $3,500. Usually, a $350 charge will be deducted from the amount used to purchase the annuity to reimburse us for administrative expenses associated with processing the application and with issuing each month's annuity payment. Applicable premium taxes will also be deducted. Annuity payments may be fixed or variable. FIXED ANNUITY PAYMENTS. Fixed annuity payments are determined from our annuity rate tables in effect at the time the first annuity payment is made. The minimum amount of the fixed payments is determined from tables in our contract with the Trustees, which show the amount of proceeds necessary to purchase each $1 of monthly annuity payments (after deduction of any applicable taxes and the annuity administrative charge). These tables are -2- designed to determine the amounts required to pay for the annuity selected, taking into account our administrative and investment expenses and mortality and expense risks. The size of your payment will depend upon the form of annuity chosen, your age and the age of your beneficiary if you select a joint and survivor annuity. If our current group annuity rates for payment of proceeds would produce a larger payment, those rates will apply instead of the minimums in the contract tables. If we give any group pension client with a qualified plan a better annuity rate than those currently available for the Program, we will also make those rates available to Program participants. The annuity administrative charge may be greater than $350 in that case. Under our contract with the Trustees, we may change the tables but not more frequently than once every five years. Fixed annuity payments will not fluctuate during the payment period. VARIABLE ANNUITY PAYMENTS. Variable annuity payments are funded through our Separate Account No. 4 (Pooled) (the "Fund"), through the purchase of Annuity Units. The number of Annuity Units purchased is equal to the amount of the first annuity payment divided by the Annuity Unit Value for the due date of the first annuity payment. The amount of the first annuity payment is determined in the same manner for a variable annuity as it is for a fixed annuity. The number of Annuity Units stays the same throughout the payment period for the variable annuity but the Annuity Unit Value changes to reflect the investment income and the realized and unrealized capital gains and losses of the Fund, after adjustment for an assumed base rate of return of 5-3/4%, described below. The amounts of variable annuity payments are determined as follows: Payments normally start as of the first day of the second calendar month following our receipt of the proper forms. The first two monthly payments are the same. Payments after the first two will vary according to the investment performance of the Fund. Each monthly payment will be calculated by multiplying the number of Annuity Units credited to you by the Annuity Unit Value for the first business day of the calendar month before the due date of the payment. The Annuity Unit Value was set at $1.1553 as of July 1, 1969, the first day that Separate Account No. 4 (Pooled) was operational. For any month after that date, it is the Annuity Unit Value for the preceding month multiplied by the change factor for the current month. The change factor gives effect to the assumed annual base rate of return of 5-3/4% and to the actual investment experience of the Fund. -3- Because of the adjustment for the assumed base rate of return, the Annuity Unit Value rises and falls depending on whether the actual rate of investment return is higher or lower than 5-3/4%. Illustration of Changes in Annuity Payments. To show how we determine variable annuity payments from month to month, assume that the amount you applied to purchase an annuity is enough to fund an annuity with a monthly payment of $363 and that the Annuity Unit Value for the due date of the first annuity payment is $1.05. The number of annuity units credited under your certificate would be 345.71 (363 / 1.05 = 345.71). If the third monthly payment is due on March 1, and the Annuity Unit Value for February was $1.10, the annuity payment for March would be the number of units (345.71) times the Annuity Unit Value ($1.10), or $380.28. If the Annuity Unit Value was $1.00 on March 1, the annuity payment for April would be 345.71 times $1.00 or $345.71. Summary of Annuity Unit Values for the Fund This table shows the Annuity Unit Values with an assumed based rate of return of 5-3/4%.
First Business Day of Annuity Unit Value --------------------- ------------------ October 1986 $3.4330 October 1987 $4.3934 October 1988 $3.5444 October 1989 $4.8357 October 1990 $3.8569 October 1991 $5.4677 October 1992 $5.1818 October 1993 $6.3886 October 1994 $6.1563 October 1995 $7.4970
THE FUND The Fund (Separate Account No. 4 (Pooled)) was established pursuant to the Insurance Law of the State of New York in 1969. It is an investment account used to fund benefits under group annuity contracts and other agreements for tax-deferred retirement programs administered by us. -4- For a full description of the Fund, its investment policies, the risks of an investment in the Fund and information relating to the valuation of Fund assets, see the description of the Fund in our May 1, 1996 prospectus and the Statement of Additional Information. INVESTMENT MANAGER The Manager We, Equitable Life, act as Investment Manager to the Fund. As such, we have complete discretion over Fund assets and we invest and reinvest these assets in accordance with the investment policies described in our May 1, 1996 prospectus and Statement of Additional Information. We are a New York stock life insurance company with our Home Office at 787 Seventh Avenue, New York, New York 10019. Founded in 1859, we are one of the largest insurance companies in the United States. Equitable Life, the Holding Co. and their subsidiaries managed assets of approximately $195.3 billion as of December 31, 1995. Investment Management In providing investment management to the Funds, we currently use the personnel and facilities of Alliance Capital Management L.P. ("Alliance"), for portfolio selection and transaction services. For a description of Alliance, see our May 1, 1996 prospectus. Fund Transactions The Fund is charged for securities brokers commissions, transfer taxes and other fees relating to securities transactions. Transactions in equity securities for the Fund are executed primarily through brokers which are selected by Alliance/Equitable Life and receive commissions paid by the Fund. For 1995 and 1994, the Fund paid $6,044,623 and $4,738,796, respectively, in brokerage commissions. For a full description of our policies relating to the selection of brokers, see the description of the Fund in our May 1, 1996 Statement of Additional Information. -5- FINANCIAL STATEMENTS The financial statements of the Fund reflect applicable fees, charges and other expenses under the Members Programs as in effect during the periods covered, as well as the charges against the account made in accordance with the terms of all other contracts participating in the account. Separate Account No. 4 (Pooled): Page Report of Independent Accountants - Price Waterhouse LLP 7 Statement of Assets and Liabilities, December 31, 1995 8 Statement of Operations and Changes in Net Assets for the Years Ended December 31, 1995 and 1994 9 Portfolio of Investments December 31, 1995 10 Notes to Financial Statements 14 -6- REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors of The Equitable Life Assurance Society of the United States and the Participants in the Association Members Retirement Program In our opinion, the accompanying statement of assets and liabilities, including the portfolios of investments, and the related statements of operations and changes in net assets present fairly, in all material respects, the financial position of Separate Account No. 4 of The Equitable Life Assurance Society of the United States ("Equitable Life") at December 31, 1995, and its results of operations and changes in net assets for each of the two years in the period then ended, in conformity with generally accepted accounting principles. These financial statements are the responsibility of Equitable Life's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 1995 by correspondence with the custodian and brokers, the application of alternative auditing procedures where confirmations from brokers were not received, provide a reasonable basis for the opinion expressed above. PRICE WATERHOUSE LLP New York, NY February 7, 1996 -7- SEPARATE ACCOUNT NO. 4 (POOLED) (THE GROWTH EQUITY FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Statement of Assets and Liabilities December 31, 1995 - -----------------------------------------------------------------------------
ASSETS: Investments (Notes 2 and 3): Common stocks--at value (cost: $1,772,607,539) ....................... $2,071,380,232 Long-term debt securities--at value (amortized cost: $43,389,734) .... 35,481,250 Participation in Separate Account No. 2A--at amortized cost, which approximates market value, equivalent to 62,384 units at $241.89 ............................................................ 15,090,212 Cash ................................................................... 3,285,960 Receivables: Securities sold ...................................................... 15,481,889 Dividends ............................................................ 1,693,035 Interest ............................................................. 59,583 ---------------------------------------------------------------------- -------------- Total assets ....................................................... 2,142,472,161 ---------------------------------------------------------------------- -------------- LIABILITIES: Payables: Securities purchased ................................................. 10,088,399 Due to Equitable Life's General Account .............................. 5,686,050 Investment management fees payable ................................... 7,255 Accrued expenses ....................................................... 521,041 Amount retained by Equitable Life in Separate Account No. 4 (Note 1) .. 1,044,875 ---------------------------------------------------------------------- -------------- Total liabilities .................................................. 17,347,620 -------------- Net Assets (Note 1): Net assets attributable to participants' accumulations ................. 2,102,751,745 Reserves and other contract liabilities attributable to annuity benefits ............................................................... 22,372,796 ---------------------------------------------------------------------- -------------- NET ASSETS ............................................................. $2,125,124,541 ====================================================================== ==============
See Notes to Financial Statements. -8- SEPARATE ACCOUNT NO. 4 (POOLED) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Statements of Operations and Changes in Net Assets - -----------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1995 1994 - -------------------------------------------------------------------------- -------------- --------------- FROM OPERATIONS: INVESTMENT INCOME (NOTE 2): Dividends (net of foreign taxes withheld--1995: $239,657 and 1994: $280,079) ................................................................ $ 19,610,344 $ 18,981,135 Interest and amortization of premium ...................................... (852,218) 120,286 - -------------------------------------------------------------------------- -------------- --------------- Total ..................................................................... 18,758,126 19,101,421 EXPENSES -- (NOTE 4) ...................................................... (16,007,109) (14,943,802) - -------------------------------------------------------------------------- -------------- --------------- NET INCOME ................................................................ 2,751,017 4,157,619 - -------------------------------------------------------------------------- -------------- --------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 2): Realized gain from security and foreign currency transactions ............ 260,870,246 121,640,003 - -------------------------------------------------------------------------- -------------- --------------- Unrealized appreciation (depreciation) of investments and foreign currency transactions: ............................................................ Beginning of year ........................................................ 41,831,973 211,185,607 End of year .............................................................. 290,870,386 41,831,973 - -------------------------------------------------------------------------- -------------- --------------- Change in unrealized appreciation/depreciation ............................ 249,038,413 (169,353,634) - -------------------------------------------------------------------------- -------------- --------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS .................... 509,908,659 (47,713,631) - -------------------------------------------------------------------------- -------------- --------------- Increase (decrease) in net assets attributable to operations ............. 512,659,676 (43,556,012) - -------------------------------------------------------------------------- -------------- --------------- FROM CONTRIBUTIONS AND WITHDRAWALS: Contributions ............................................................. 422,289,107 435,940,867 Withdrawals ............................................................... (474,530,080) (528,069,361) - -------------------------------------------------------------------------- -------------- --------------- Decrease in net assets attributable to contributions and withdrawals ..... (52,240,973) (92,128,494) - -------------------------------------------------------------------------- -------------- --------------- Decrease in accumulated amount retained by Equitable Life in Separate Account No. 4 (Note 1) ........................ 113,489 449,257 - -------------------------------------------------------------------------- -------------- --------------- INCREASE (DECREASE) IN NET ASSETS ......................................... 460,532,192 (135,235,249) NET ASSETS -- BEGINNING OF YEAR ........................................... 1,664,592,349 1,799,827,598 - -------------------------------------------------------------------------- -------------- --------------- NET ASSETS -- END OF YEAR ................................................. $2,125,124,541 $1,664,592,349 ========================================================================== ============== ===============
See Notes to Financial Statements. -9- SEPARATE ACCOUNT NO. 4 (POOLED) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Portfolio of Investments December 31, 1995
NUMBER OF VALUE SHARES (NOTE 3) - ---------------------------------------------------------- ------------ ------------- COMMON STOCKS: BASIC MATERIALS (0.3%) CHEMICALS--SPECIALTY UCAR International, Inc.* ................................. 175,000 $ 5,906,250 ------------- BUSINESS SERVICES ENVIRONMENTAL CONTROL (0.2%) Rollins Environmental Services, Inc.* ..................... 1,054,700 3,032,263 USA Waste Services, Inc.* ................................. 120,000 2,265,000 ------------- 5,297,263 ------------- PRINTING, PUBLISHING & BROADCASTING (1.2%) Australis Media Ltd. ...................................... 4,500,250 3,846,532 Australis Media Ltd. Conv. Note* .............................................. 22,000,000 18,804,225 IVI Publishing, Inc.* ..................................... 121,700 1,597,313 ------------- 24,248,070 ------------- PROFESSIONAL SERVICES (0.1%) Loewen Group, Inc. ........................................ 50,000 1,265,625 ------------- TOTAL BUSINESS SERVICES (1.5%) ............................ 30,810,958 ------------- CAPITAL GOODS (2.3%) AEROSPACE General Motors Corp. (Class H) ............................ 1,000,000 49,125,000 ------------- CONSUMER CYCLICALS AIRLINES (1.9%) America West Airlines, Inc. (Class B)* .................... 750,000 12,750,000 Delta Air Lines, Inc. ..................................... 160,000 11,820,000 USAir Group, Inc.* ........................................ 1,000,000 13,250,000 Worldcorp, Inc.* .......................................... 339,300 3,393,000 ------------- 41,213,000 ------------- APPAREL, TEXTILE (0.5%) Cone Mills Corp.* ......................................... 371,000 4,173,750 Nine West Group, Inc.* .................................... 200,000 7,500,000 ------------- 11,673,750 ------------- FOOD SERVICES, LODGING (0.3%) La Quinta Motor Inns, Inc. ................................ 200,000 5,475,000 ------------- HOUSEHOLD FURNITURE, APPLIANCES (1.0%) Industrie Natuzzi (ADR) ................................... 480,000 21,780,000 ------------- LEISURE-RELATED (2.0%) ITT Corp. ................................................. 800,000 42,400,000 ------------- RETAIL-GENERAL (2.6%) Federated Department Stores, Inc.* ........................ 750,000 20,625,000 Lowes Cos., Inc. .......................................... 450,000 15,075,000 Office Depot, Inc.* ....................................... 300,000 5,925,000 Office Max, Inc.* ......................................... 100,000 2,237,500 Tandy Corp. ............................................... 260,000 10,790,000 ------------- 54,652,500 ------------- TOTAL CONSUMER CYCLICALS (8.3%) ........................... 177,194,250 ------------- -10- SEPARATE ACCOUNT NO. 4 (POOLED) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Portfolio of Investments (Continued) December 31, 1995 NUMBER OF VALUE SHARES (NOTE 3) - ---------------------------------------------------------- ------------ ------------- CONSUMER NONCYCLICALS DRUGS (1.0%) Biogen, Inc.* ............................................. 45,000 $ 2,767,500 Centocor, Inc.* ........................................... 325,000 10,034,375 MedImmune, Inc.* .......................................... 145,400 2,908,000 Merck & Co., Inc. ......................................... 70,000 4,602,500 ------------- 20,312,375 ------------- HOSPITAL SUPPLIES & SERVICES (6.3%) Amsco International, Inc.* ................................ 150,000 2,231,250 Columbia/HCA Healthcare Corp. ............................. 800,000 40,600,000 Sun Healthcare Group, Inc.* ............................... 1,191,000 16,078,500 Surgical Care Affiliates, Inc. ............................ 2,188,300 74,402,200 ------------- 133,311,950 ------------- TOBACCO (10.4%) Loews Corp. ............................................... 2,250,000 176,343,750 Philip Morris Cos., Inc. .................................. 500,000 45,250,000 ------------- 221,593,750 ------------- TOTAL CONSUMER NONCYCLICALS (17.7%) ....................... 375,218,075 ------------- CREDIT-SENSITIVE FINANCIAL SERVICES (3.1%) Dean Witter Discover & Co. ................................ 50,000 2,350,000 A.G. Edwards, Inc. ........................................ 220,000 5,252,500 Household International, Inc. ............................. 130,000 7,686,250 Legg Mason, Inc. .......................................... 850,000 23,375,000 Merrill Lynch & Co., Inc. ................................. 550,000 28,050,000 ------------- 66,713,750 ------------- INSURANCE (12.5%) CNA Financial Corp.* ...................................... 1,552,500 176,208,750 ITT Hartford Group, Inc. .................................. 800,000 38,700,000 Life Re Corp. ............................................. 700,000 17,500,000 NAC Re Corp. .............................................. 575,000 20,700,000 Travelers Group, Inc. ..................................... 200,000 12,575,000 ------------- 265,683,750 ------------- REAL ESTATE (0.3%) Walden Residential Properties, Inc. ....................... 308,000 6,429,500 ------------- UTILITY -- TELEPHONE (7.7%) Century Telephone Enterprises, Inc. ....................... 397,800 12,630,150 Telephone & Data Systems, Inc. ............................ 3,825,000 151,087,500 ------------- 163,717,650 ------------- TOTAL CREDIT-SENSITIVE (23.6%) ............................ 502,544,650 ------------- ENERGY COAL & GAS PIPELINES (0.0%) Abraxas Petroleum Corp.* .................................. 100,000 625,000 ------------- OIL -- DOMESTIC (0.7%) Louisiana Land & Exploration Corp. ........................ 200,000 8,575,000 Snyder Oil Corp. .......................................... 500,000 6,062,500 ------------- 14,637,500 ------------- -11- SEPARATE ACCOUNT NO. 4 (POOLED) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Portfolio of Investments (Continued) December 31, 1995 NUMBER OF VALUE SHARES (NOTE 3) - ---------------------------------------------------------- ------------ ------------- OIL -- INTERNATIONAL (1.6%) Gulf Canada Resources Ltd. ORD* ........................... 530,000 $ 2,186,250 Imperial Oil Ltd. ......................................... 859,000 31,031,375 ------------- 33,217,625 ------------- OIL -- SUPPLIES & CONSTRUCTION (4.5%) ENSCO International, Inc.* ................................ 500,000 11,500,000 Noble Drilling Corp.* ..................................... 1,000,000 9,000,000 Parker Drilling Co.* ...................................... 6,000,000 36,750,000 Rowan Cos., Inc.* ......................................... 3,300,000 32,587,500 Seagull Energy Corp.* ..................................... 250,000 5,562,500 ------------- 95,400,000 ------------- RAILROADS (0.3%) Union Pacific Corp. ....................................... 100,000 6,600,000 ------------- TOTAL ENERGY (7.1%) ....................................... 150,480,125 ------------- TECHNOLOGY ELECTRONICS (13.5%) American Superconductor Corp.* ............................ 149,000 2,160,500 Bay Networks, Inc.* ....................................... 300,000 12,337,500 Cisco Systems, Inc.* ...................................... 1,315,000 98,131,875 General Instrument Corp.* ................................. 3,260,000 76,202,500 ITT Industries, Inc. ...................................... 800,000 19,200,000 National Semiconductor Corp.* ............................. 2,000,000 44,500,000 Texas Instruments, Inc. ................................... 200,000 10,350,000 3Com Corp.* ............................................... 500,000 23,312,500 ------------- 286,194,875 ------------- OFFICE EQUIPMENT (1.8%) Compaq Computer Corp.* .................................... 500,000 24,000,000 Sun Microsystems, Inc.* ................................... 300,000 13,687,500 ------------- 37,687,500 ------------- OFFICE EQUIPMENT SERVICES (0.2%) Informix Corp.* ........................................... 55,000 1,650,000 Oracle Corp.* ............................................. 80,000 3,390,000 ------------- 5,040,000 ------------- TELECOMMUNICATIONS (21.2%) AirTouch Communications, Inc.* ............................ 40,000 1,130,000 American Satellite Network -- Rights* ..................... 70,000 0 Cellular Communications, Inc. (Class A)* .................. 869,268 43,246,083 Cellular Communications Puerto Rico, Inc.* ................ 322,500 8,949,375 DSC Communications Corp.* ................................. 650,000 23,968,750 Mannesmann AG ............................................. 120,000 38,196,841 Mannesmann AG (ADR) ....................................... 200,000 63,600,000 Millicom International Cellular S.A.* ..................... 1,700,000 51,850,000 Nokia Corp. (ADR) ......................................... 600,000 23,325,000 Rogers Cantel Mobile Communications, Inc. (Class B) (ADR)* 900,000 23,850,000 Scientific Atlanta, Inc. .................................. 2,035,000 30,525,000 Tellabs, Inc.* ............................................ 450,000 16,650,000 U.S. Cellular Corp.* ...................................... 2,650,000 89,437,500 Vanguard Cellular Systems, Inc. (Class A)* ................ 1,800,000 36,450,000 ------------- 451,178,549 ------------- TOTAL TECHNOLOGY (36.7%) .................................. 780,100,924 -------------
-12- SEPARATE ACCOUNT NO. 4 (POOLED) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Portfolio of Investments (Concluded) December 31, 1995
PRINCIPAL AMOUNT VALUE (NOTE 3) - --------------------------------------------------------------------------- ------------ -------------- TOTAL COMMON STOCKS (97.5%) (Cost $1,772,607,539) ..................................................... $2,071,380,232 -------------- LONG-TERM DEBT SECURITIES: BUSINESS SERVICES (0.2%) PROFESSIONAL SERVICES First Financial Management Corp. 5.0% Conv., 1999 .......................................................... $ 2,000,000 3,245,000 -------------- TECHNOLOGY ELECTRONICS (1.4%) General Instrument Corp. 5.0% Conv., 2000 .......................................................... 26,600,000 29,592,500 -------------- TELECOMMUNICATIONS (0.1%) U.S. Cellular Corp. Zero Coupon Conv., 2015 ................................................... 7,500,000 2,643,750 -------------- TOTAL TECHNOLOGY (1.5%) .................................................... 32,236,250 -------------- TOTAL LONG-TERM DEBT SECURITIES (1.7%) (Amortized Cost $43,389,734) .............................................. 35,481,250 -------------- PARTICIPATION IN SEPARATE ACCOUNT NO. 2A, at amortized cost, which approximates market value, equivalent to 62,384 units at $241.89 each (0.7%) .................................................... 15,090,212 -------------- TOTAL INVESTMENTS (99.9%) (Cost /Amortized Cost $1,831,087,485) ..................................... 2,121,951,694 CASH AND RECEIVABLES LESS LIABILITIES (0.1%) ............................... 4,217,722 AMOUNT RETAINED BY EQUITABLE LIFE IN SEPARATE ACCOUNT NO. 4 (0.0%) (NOTE 1). ....................................................................... (1,044,875) -------------- NET ASSETS (100.0%) (NOTE 1) ............................................... $2,125,124,541 ============== Reserves attributable to participants' accumulations ....................... $2,102,751,745 Reserves and other contract liabilities attributable to annuity benefits .. 22,372,796 -------------- NET ASSETS (100.0%) ........................................................ $2,125,124,541 ============== * Non-income producing.
See Notes to Financial Statements. -13- SEPARATE ACCOUNT NO. 4 (POOLED) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Notes to Financial Statements 1. Separate Account No. 4 (Pooled) (the Growth Equity Fund) (the Fund) of The Equitable Life Assurance Society of the United States (Equitable Life), a wholly-owned subsidiary of The Equitable Companies Incorporated, was established in conformity with the New York State Insurance Law. Pursuant to such law, to the extent provided in the applicable contracts, the net assets in the Fund is not chargeable with liabilities arising out of any other business of Equitable Life. The excess of assets over reserves and other contract liabilities amounting to $1,044,875 as shown in the Statements of Assets and Liabilities in Separate Account No. 4 may be transferred to Equitable Life's General Account. At December 31, 1995 and 1994, interests of retirement and investment plans for Equitable Life employees, managers, and agents in Separate Account No. 4 aggregated $246,531,777 (11.6%) and $184,086,304 (11.1%), respectively, of the net assets in the Fund. Equitable Life is the investment manager for the Fund. Alliance Capital Management L.P. (Alliance) serves as the investment adviser to Equitable Life with respect to the management of the Fund. Alliance is a publicly-traded limited partnership which is indirectly majority-owned by Equitable Life. Equitable Life and Alliance seek to obtain the best price and execution of all orders placed for the Fund considering all circumstances. In addition to using brokers and dealers to execute portfolio security transactions for accounts under their management, Equitable Life and Alliance may also enter into other types of business and securities transactions with brokers and dealers, which will be unrelated to allocation of the Funds' portfolio transactions. 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. 2. Security transactions are recorded on the trade date. Amortized cost of debt securities consists of cost adjusted, where applicable, for amortization of premium or accretion of discount. Dividend income is recorded on the ex-dividend date; interest income (including amortization of premium and discount on securities using the effective yield method) is accrued daily. Realized gains and losses on the sale of investments are computed on the basis of the identified cost of the related investments sold. Transactions denominated in foreign currencies are recorded at the rate prevailing at the date of such transactions. Asset and liability accounts that are denominated in a foreign currency are adjusted to reflect the current exchange rate at the end of the period. Transaction gains or losses resulting from changes in the exchange rate during the reporting period or upon settlement of the foreign currency transactions are reflected under "Realized and Unrealized Gain (Loss) on Investments" in the Statements of Operations and Changes in Net Assets. -14- SEPARATE ACCOUNT NO. 4 (POOLED) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Notes to Financial Statements (Continued) Equitable Life's internal short-term investment account, Separate Account No. 2A, was established to provide a more flexible and efficient vehicle to combine and invest temporary cash positions of certain eligible accounts (Participating Funds) under Equitable Life's management. Separate Account No. 2A invests in debt securities maturing in sixty days or less from the date of acquisition. At December 31, 1995, the amortized cost of investments held in Separate Account No. 2A consists of the following: - -----------------------------------------------------------------------------
AMORTIZED COST % - -------------------------------------------------------- -------------- -------- Certificates of Deposit, 5.80% due 01/31/96 ............. $ 20,000,000 6.7% Commercial Paper, 5.53%-5.87% due 1/12/96 through 2/23/96 ................................................ 262,329,329 88.0 Time Deposits, 5.875% due 01/02/96 ...................... 800,000 0.3 Variable Rate LIBOR, 5.968% due 01/08/96 ................ 15,000,000 5.0 - -------------------------------------------------------- -------------- -------- Total Investments ....................................... 298,129,329 100.0 Cash and Receivables Less Liabilities ................... 63,333 0.0 - -------------------------------------------------------- -------------- -------- Net Assets of Separate Account No. 2A ................... $298,192,662 100.0% ======================================================== ============== ======== Units Outstanding ....................................... 1,232,756 Unit Value .............................................. $ 241.89
Participating Funds purchase or redeem units depending on each participating account's excess cash availability or cash needs to meet its liabilities. Separate Account No. 2A is not subject to investment management fees. Separate Account No. 2A is valued daily at amortized cost, which approximates market value. For 1995 and 1994, investment security transactions, excluding short-term debt securities, were as follows: - -----------------------------------------------------------------------------
SEPARATE ACCOUNT NO. 4 COST OF NET PROCEEDS PURCHASES OF SALES - ----------------------------------------------- -------------- -------------- Stocks and long-term corporate debt securities: 1995 ......................................... $2,037,876,834 $2,082,648,235 1994 ......................................... 1,556,068,225 1,644,508,525 U.S. Government obligations: 1995 ......................................... -- -- 1994 ......................................... -- --
---------------------------------------------------------------------------- 3. Investment securities are valued as follows: Stocks listed on national securities exchanges and certain over-the-counter issues traded on the National Association of Securities Dealers, Inc. Automated Quotation (NASDAQ) national market system are valued at the last sale price, or, if no sale, at the latest available bid price. Foreign securities not traded directly, or in American Depository Receipt (ADR) form in the United States, are valued at the last sale price in the local currency on an exchange in the country of origin. Foreign currency is converted into its U.S. dollar equivalent at current exchange rates. United States Treasury securities and other obligations issued or guaranteed by the United States Government, its agencies or instrumentalities are valued at representative quoted prices. -15- SEPARATE ACCOUNT NO. 4 (POOLED) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Notes to Financial Statements (Concluded) Long-term publicly traded corporate bonds are valued at prices obtained from a bond pricing service of a major dealer in bonds when such prices are available; however, in circumstances where Equitable Life and Alliance deem it appropriate to do so, an over-the-counter or exchange quotation may be used. Convertible preferred stocks listed on national securities exchanges are valued at their last sale price or, if there is no sale, at the latest available bid price. Convertible bonds and unlisted convertible preferred stocks are valued at bid prices obtained from one or more major dealers in such securities; where there is a discrepancy between dealers, values may be adjusted based on recent premium spreads to the underlying common stock. Other assets that do not have a readily available market price are valued at fair value as determined in good faith by Equitable Life's investment officers. Separate Account No. 2A is valued daily at amortized cost, which approximates market value. Short-term debt securities purchased directly by the Fund which mature in 60 days or less are valued at amortized cost. Short-term debt securities which mature in more than 60 days are valued at representative quoted prices. 4. Charges and fees are deducted in accordance with the terms of the various contracts which participate in the Fund. With respect to the Members Retirement Plan and Trust, these expenses consist of investment management and accounting fees, program expense charge, direct expenses and record maintenance and report fee. These charges and fees are paid to Equitable Life by the Fund and are recorded as expenses in the accompanying Statements of Operations and Changes in Net Assets. 5. No Federal income tax based on net income or realized and unrealized capital gains was applicable to contracts participating in the Fund for the two years ended December 31, 1995, by reason of applicable provisions of the Internal Revenue Code and no Federal income tax payable by Equitable Life for such years will affect such contracts. Accordingly, no Federal income tax provision is required. -16- PART C OTHER INFORMATION Item 24. Financial Statements and Exhibits (a) Financial Statements included in Part B. The following are included in the Statement of Additional Information relating to the American Dental Association Program: 1. Separate Account Nos. 3 (Pooled) 4 (Pooled) 191 and 200: -------------------------------------------------------- - Report of Independent Accountants 2. Separate Account No. 3 (Pooled) (The Aggressive Equity Fund): - Statement of Assets and Liabilities, December 31, 1995 - Statements of Operations and Changes in Net Assets for the Years Ended December 31, 1995 and 1994 - Portfolio of Investments, December 31, 1995 3. Separate Account No. 4 (Pooled) (The Growth Equity Fund): - Statement of Assets and Liabilities, December 31, 1995 - Statements of Operations and Changes in Net Assets for the Years Ended December 31, 1995 and 1994 - Portfolio of Investments, December 31, 1995 4. Separate Account No. 191 (The ADA Foreign Fund): - Statement of Assets and Liabilities, December 31, 1995 - Statements of Operations and Changes in Net Assets for the Years Ended December 31, 1995 and 1994 5. Separate Account No. 200 (The Aggressive Equity Fund): - Statement of Assets and Liabilities, December 31, 1995 - Statements of Operations and Changes in Net Assets for the Year Ended December 31, 1995 6. Separate Account Nos. 3 (Pooled), 4 (Pooled), 191 and 200 - Notes to Financial Statements 7. Separate Account No. 30 (Pooled (The Real Estate Fund): - Report of Independent Accountants - Statements of Assets and Liabilities, December 31, 1995 and 1994 - Statements of Operations and Changes in Net Assets for the Years Ended December 31, 1995 and 1994 - Statements of Cash Flows for the Years Ended December 31, 1995 and 1994 - Statement of Investments and Net Assets, December 31, 1995 - Notes to Financial Statements C-1 8. Separate Account No. 8 (Prime Property Fund): - Report of Independent Accountants - Statement of Independent Appraisers - Statements of Assets and Liabilities, December 31, 1995 and 1994 - Statements of Operations and Changes in Net Assets for the Years Ended December 31, 1995 and 1994 - Statements of Cash Flows for the Years Ended December 31, 1995 and 1994 - Notes to Financial Statements - Schedule X: Supplementary Income Statement Information, December 31, 1995 and 1994 - Schedule XII: Mortgage Loans Receivable on Real Estate, December 31, 1995 and 1994 9. The Equitable Life Assurance Society of the United States: - Report of Independent Accountants - Consolidated Balance Sheets, December 31, 1995 and 1994 - Consolidated Statements of Earnings for the Years Ended December 31, 1995, 1994 and 1993 - Consolidated Statements of Cash Flows for the Years Ended December 31, 1995, 1994 and 1993 - Notes to Consolidated Financial Statements (b) The following Exhibits are filed herewith: 1. Action by Peter D. Noris, Executive Vice President and Chief Investment Officer of Equitable, dated September 5, 1995 establishing Separate Account No. 200 and copies of resolutions of the Board of Directors of Equitable referenced in said action, incorporated by reference to Registration Statement No. 33-63113 on Form N-4 of Registrant, filed on September 29, 1995. 2. Not applicable. 3. (a) Service Agreement, effective as of December 1, 1995, between MFS Distributors, Inc. and The Equitable Life Assurance Society of the United States, incorporated by reference to Pre-Effective Amendment No. 1 to Registration Statement No. 33-63113 on Form N-4 of Registrant, filed on November 21, 1995. (i) Buy-Sell Agreement effective May 1, 1996 between The Equitable Life Assurance Society of the United States and Franklin Templeton Distributors, Inc. (b) Form of Letter Agreement between The Equitable Life Assurance Society of the United States and the Trustees of the American Dental Association Members Retirement Trust and the Trustees of the American Dental Association Members Pooled Trust for Retirement, incorporated by reference to Pre-Effective Amendment No. 1 to Registration Statement No. 33-63113 on Form N-4 of Registrant, filed on November 21, 1995. (c) Amended and Restated Buy-Sell Agreement effective April 17, 1995 between The Equitable Life Assurance Society of the United States and Franklin Templeton Distributors, Inc., incorporated by reference to Registration Statement No. 33- 91588 on Form N-3 of Registrant, filed on April 28, 1995. C-2 (d) Investment Management Agreement by and among (i) the Trustees of the American Dental Association Members Retirement Trust and the American Dental Association Members Pooled Trust for Retirement Plans, (ii) the Committee of Separate Account No. 191 of The Equitable Life Assurance Society of the United States, and (iii) The Equitable Life Assurance Society of the United States in its capacity as insurer and owner of the assets of Separate Account No. 191 and as an Investment Manager of Separate Account No. 191 to the extent described therein, incorporated by reference to Registration Statement No. 33- 46995 on Form N-3 of Registrant, filed on April 8, 1992. (e) Amended and Restated Investment Management Agreement dated as of May 1, 1996, by and among (i) the Trustees of the American Dental Association Members Retirement Trust for Retirement Plans, (ii) the Committee of Separate Account No. 191 of The Equitable Life Assurance Society of the United States, and (iii) The Equitable Life Assurance Society of the United States in its capacity as insurer and owner of the assets of Separate Account No. 191. 4. (a) Exhibit 6(a)(2) (Group Annuity Contract AC 2100, as amended and restated effective February 1, 1991 on contract Form No. APC 1,000-91, among the Trustees of the American Dental Association Members Retirement Trust, the American Dental Association Members Pooled Trust for Retirement Plans and The Equitable Life Assurance Society of the United States), incorporated by reference to Post-Effective Amendment No. 1 on Form N-3 to Registration Statement 33-40162, filed December 20, 1991. (b) Rider No. 1 to Group Annuity Contract AC 2100 among the Trustees of the American Dental Association Members Retirement Trust, the American Dental Association Members Pooled Trust for Retirement Plans and The Equitable Life Assurance Society of the United States, incorporated by reference to Registration No. 33-46995 on Form N-3 of Registrant, filed April 8, 1992. (c) Form of Rider No. 2 to Group Annuity Contract AC 2100 among the Trustees of the American Dental Association Members Retirement Trust, the American Dental Association Members Pooled Trust for Retirement Plans and The Equitable Life Assurance Society of the United States, incorporated by reference to Registration No. 33-46995 on Form N-3 of Registrant, filed April 8, 1992. (d) Rider No. 3 to Group Annuity Contract AC 2100 among the Trustees of the American Dental Association Members Retirement Trust, the American Dental Association Members Pooled Trust for Retirement Plans and The Equitable Life Assurance Society of the United States, incorporated by reference to Registration No. 33-75616 on Form N-4 of Registrant, filed April 29, 1994. C-3 (e) Form of Rider No. 4 to Group Annuity Contract AC 2100 among the Trustees of the American Dental Association Members Retirement Trust, the American Dental Association Members Pooled Trust for Retirement Plans and The Equitable Life Assurance Society of the United States, incorporated by reference to Registration No. 33-75616 on Form N-4 of Registrant, filed April 29, 1994. (f) Form of Rider No. 5 to Group Annuity Contract AC 2100 among the Trustees of the American Dental Association Members Retirement Trust, the American Dental Association Members Pooled Trust for Retirement Plans and The Equitable Life Assurance Society of the United States, incorporated by reference to Registration No. 33-75616 on Form N-4 of Registrant, on February 27, 1995. (g) Form of Rider No. 6 to Group Annuity Contract AC 2100 among the Trustees of the American Dental Association Members Retirement Trust, the American Dental Association Members Pooled Trust for Retirement Plans and The Equitable Life Assurance Society of the United States, previously filed with this Registration Statement No. 33-63113 on September 29, 1995. (h) Form of Rider No. 7 to Group Annuity Contract AC 2100 among the Trustees of the American Dental Association Members Retirement Trust, the American Dental Association Members Pooled Trust for Retirement Plans and The Equitable Life Assurance Society of the United States, incorporated by reference to Pre-Effective Amendment No. 1 to Registration Statement No. 33-63113 on Form N-4 of Registrant, filed on November 21, 1995. (i) Form of Rider No. 8 to Group Annuity Contract AC 2100 among the Trustees of the American Dental Association Members Retirement Trust, the American Dental Association Members Pooled Trust for Retirement Plans and The Equitable Life Assurance Society of the United States. 5. (a) Exhibit 7(a) (Form of Participation Agreement for the standardized Profit-Sharing Plan under the ADA Program), incorporated by reference to Post-Effective Amendment No. 1 on Form N-3 to Registration Statement on Form S-1 of Registrant, filed April l6, 1986. (b) Exhibit 7(b) (Form of Participation Agreement for the nonstandardized Profit-Sharing Plan under the ADA Program), incorporated by reference to Post-Effective Amendment No. 1 on Form N-3 to Registration Statement on Form S-1 of Registrant, filed April l6, 1986. (c) Exhibit 7(e) (Copy of Attachment to Profit Sharing Participation Agreement under the American Dental Association Members Retirement Plan), incorporated by reference to Registration No. 33-21417 on Form N-3 of Registrant, filed April 26, 1988. C-4 (d) Exhibit 7(e)(2) (Form of Participant Enrollment Form under the ADA Program), incorporated by reference to Post- Effective Amendment No. 2 on Form N-3 to Registration Statement on Form S-1 of Registrant, filed April 2l, l987. (e) Exhibit 7(v) (Form of Simplified Participation Agreement for the Profit-Sharing Plan under the ADA Program, as filed with the Internal Revenue Service), incorporated by reference to Post-Effective Amendment No. 2 to Registration No. 33-21417 on Form N-3 of Registrant, filed April 26, 1989. (f) Exhibit 7(w) (Form of Non-Standardized Participation Agreement for the Profit-Sharing Plan under the ADA Program, as filed with the Internal Revenue Service), incorporated by reference to Post-Effective Amendment No. 2 to Registration No. 33-21417 on Form N-3 of Registrant, filed April 26, 1989. (g) Exhibit 7(x) (Form of Standardized Participation Agreement for the Profit-Sharing Plan under the ADA Program, as filed with the Internal Revenue Service), incorporated by reference to Post-Effective Amendment No. 2 to Registration No. 33-21417 on Form N-3 of Registrant, filed April 26, 1989. 6. (a) Copy of the Restated Charter of The Equitable Life Assurance Society of the United States, adopted August 6, 1992, incorporated by reference to Post-Effective Amendment No. 2 to Registrant No. 33-46995 on Form N-3 of Registrant, filed March 2, 1993. (b) By-Laws of The Equitable Life Assurance Society of the United States, as amended through July 22, 1992, incorporated by reference to Post-Effective Amendment No. 2 to Registration No. 33-46995 on Form N-3 of Registrant, filed March 2, 1993. (c) Certificate of Amendment of the Restated Charter of The Equitable Life Assurance Society of the United States, adopted November 18, 1993, previously filed with this Registration No. 333-01301 on February 29, 1996. 7. Not applicable 8. (a) Exhibit 11(a)(2) (Form of American Dental Association Members Retirement Plan, as filed with the Internal Revenue Service), incorporated by reference to Post-Effective Amendment No. 2 to Registration No. 33-21417 on Form N-3 of Registrant, filed April 26, 1989. (b) Exhibit 11(g)(2) (Form of American Dental Association Members Retirement Trust, as filed with the Internal Revenue Service), incorporated by reference to Post- C-5 Effective Amendment No. 2 to Registration No. 33-21417 on Form N-3 of Registrant, filed April 26, 1989. (c) Exhibit 11(i) (Form of First Amendment to the American Dental Association Members Retirement Trust), incorporated by reference to Post-Effective Amendment No. 1 to Registration No. 33-40162 on Form N-3 of Registrant, filed December 20, 1991. (d) Exhibit 11(o) (Copy of Administration Services Agreement, dated May 1, 1994, among The Equitable Life Assurance Society of the United States, the Trustees of the American Dental Association Members Retirement Trust, and of the American Dental Association Members Pooled Trust for Retirement Plans and the Council of Insurance of the American Dental Association), incorporated by reference to Registration Statement No. 33-75614 on Form N-3 of Registrant, filed February 23, 1994. (e) Exhibit 11(j) (Copy of American Dental Association Members Pooled Trust for Retirement Plans, dated as of January 1, 1984), incorporated by reference to Post-Effective Amendment No. 1 to Registration No. 33-40162 on Form N-3 of Registrant on Form N-3 of Registrant, filed December 20, 1991. (f) Exhibit 11(k) (Form of First Amendment to the American Dental Association Members Pooled Trust for Retirement Plans, dated as of January 1, 1984), incorporated by reference to Post-Effective Amendment No. 1 to Registration No. 33-40162 on Form N-3 of Registrant, filed December 20, 1991. 9. Opinion and Consent of Anthony A. Dreyspool, Vice President and Senior Counsel of The Equitable Life Assurance Society of the United States, previously filed with this Registration Statement No. 333-01301 on February 29, 1996. 10 (a) Consent of Anthony A. Dreyspool (included within Exhibit 9(a) above), previously filed with this Registration No. 333-01301 on February 29, 1996. (b) Consent of Price Waterhouse LLP. (b) Powers of Attorney, previously filed with this Registration Statement No. 333-01301 on February 29, 1996. 11. Not applicable. 12. Not applicable. 13. Not applicable. 14. Not Applicable. Item 27 - FINANCIAL DATA SCHEDULE C-6 Item 25. Directors and Officers of Equitable Set forth below is information regarding the directors and principal officers of Equitable. Equitable's address is 787 Seventh Avenue, New York, New York 10019. The business address of the persons whose names are preceded by an asterisk is that of Equitable. NAME AND PRINCIPAL POSITIONS AND OFFICES BUSINESS ADDRESS WITH EQUITABLE - ----------------- ---------------------- DIRECTORS Claude Bebear Director AXA S.A. 23, Avenue Matignon 75008 Paris, France Christopher J. Brocksom Director AXA Equity & Law Amersham Road High Wycombe Bucks HP 13 5 AL, England Francoise Colloc'h Director AXA S.A. 23, Avenue Matignon 75008 Paris, France Henri de Castries Director AXA S.A. 23, Avenue Matignon 75008 Paris, France Joseph L. Dionne Director The McGraw-Hill Companies 1221 Avenue of the Americas New York, NY 10020 William T. Esrey Director Sprint Corporation P.O. Box 11315 Kansas City, MO 64112 C-7 NAME AND PRINCIPAL POSITIONS AND OFFICES BUSINESS ADDRESS WITH EQUITABLE Jean-Rene Fourtou Director Rhone-Poulenc S.A. 25 Quai Paul Doumer 92408 Courbevoie Cedex France Norman C. Francis Director Xavier University of Louisiana 7325 Palmetto Street New Orleans, LA 70125 Donald J. Greene Director LeBouef, Lamb, Greene & MacRae 125 West 55th Street New York, NY 10019-4513 Anthony J. Hamilton Director Fox-Pitt, Kelton Limited 35 Wilson Street London EC2M 2SJ England John T. Hartley Director Harris Corporation 1025 NASA Boulevard Melbourne, FL 32919 John H.F. Haskell, Jr. Director Dillon, Read & Co., Inc. 535 Madison Avenue New York, NY 10022 W. Edwin Jarmain Director Jarmain Group Inc. 95 Wellington Street West Suite 805 Toronto, Ontario M5J 2N7, Canada G. Donald Johnston, Jr. Director 184-400 Ocean Road John's Island Vero Beach, FL 32963 Winthrop Knowlton Director Knowlton Brothers, Inc. 530 Fifth Avenue New York, NY 10036 C-8 NAME AND PRINCIPAL POSITIONS AND OFFICES BUSINESS ADDRESS WITH EQUITABLE Arthur L. Liman Director Paul, Weiss, Rifkind, Wharton & Garrison 1285 Avenue of the Americas New York, NY 10019 George T. Lowy Director Cravath, Swaine & Moore 825 Eighth Avenue New York, NY 10019 Didier Pineau-Valencienne Director Schneider S. A. 64-70 Avenue Jean-Baptiste Clement 96646 Boulogne- Billancourt Cedex France George J. Sella, Jr. Director P.O. Box 397 Newton, NJ 07860 Dave H. Williams Director Alliance Capital Management Corporation 1345 Avenue of the Americas New York, NY 10105 OFFICER-DIRECTORS *James M. Benson President, Chief Executive Officer and Director *William T. McCaffrey Senior Executive Vice President, Chief Operating Officer and Director *Joseph J. Melone Chairman of the Board and Director OTHER OFFICERS *Harvey Blitz Senior Vice President and Deputy Chief Financial Officer *Kevin R. Byrne Vice President and Treasurer *Jerry M. de St. Paer Senior Executive Vice President and Chief Financial Officer *Gordon G. Dinsmore Senior Vice President *Alvin H. Fenichel Senior Vice President and Controller C-9 NAME AND PRINCIPAL POSITIONS AND OFFICES BUSINESS ADDRESS WITH EQUITABLE *Paul J. Flora Vice President and Auditor *Robert E. Garber Executive Vice President and General Counsel *J. Thomas Liddle, Jr. Senior Vice President and Chief Valuation Actuary *Michael S. Martin Senior Vice President *Peter D. Noris Executive Vice President and Chief Investment Officer *Anthony C. Pasquale Senior Vice President *Pauline Sherman Vice President, Secretary and Associate General Counsel Richard V. Silver Senior Vice President and Chief 1755 Broadway, 3rd floor Compliance Officer New York, New York 10019 *Jose Suquet Executive Vice President and Chief Agency Officer C-10 Item 26. Persons Controlled by or Under Common Control with the Insurance Company or Registrant Separate Account Nos. 3, 4, 8, 30, 191 and 200 of The Equitable Life Assurance Society of the United States (the "Separate Accounts") are separate accounts of Equitable. Equitable, a New York stock life insurance company, is a wholly owned subsidiary of The Equitable Companies Incorporated (the "Holding Company"), a publicly traded company. The largest stockholder of the Holding Company is AXA S.A. At 12/31/95 AXA S.A. beneficially owned approximately 60.6% of the Holding Company's outstanding common stock plus convertible preferred stock. AXA S.A. is able to exercise significant influence over the operations and capital structure of the Holding Company and its subsidiaries, including Equitable. AXA, a French company, is the holding company for an international group of insurance and related financial services companies. C-11 ORGANIZATION CHART OF EQUITABLE'S AFFILIATES The Equitable Companies Incorporated (1991) (Delaware) Donaldson, Lufkin & Jenrette, Inc. (1993) (Delaware) (44.1%) (See Addendum for subsidiaries) The Equitable Life Assurance Society of the United States (l859) (New York) (a)(b) The Equitable of Colorado, Inc. (l983) (Colorado) Equitable Variable Life Insurance Company (l972) (New York) (a) FHJV Holdings, Inc. (1990) (Delaware) EVLICO, INC. (1995) (Delaware) EVLICO East Ridge, Inc. (1995) (Delaware) GP/EQ Southwest, Inc. (1995) (Texas) (5.86%) Franconom, Inc. (1985) (Pennsylvania) Frontier Trust Company (1987) (North Dakota) Gateway Center Buildings, Garage and Apartment Hotel, Inc. (inactive) (pre-l970) (Pennsylvania) Equitable Deal Flow Fund, L.P. Equitable Managed Assets (Delaware) EREIM LP Associates (99%) EML Associates, L.P. (19.8%) ACMC, Inc. (1991) (Delaware) Alliance Capital Management L.P. (1988) (Delaware) (46.7% limited partnership interests) EVCO, Inc. (1991) (New Jersey) EVSA, Inc. (1992) (Pennsylvania) Prime Property Funding, Inc. (1993) (Delaware) Wil Gro, Inc. (1992) (Pennsylvania) Equitable BJVS, Inc. (1992) (California) - ------------ (a) Registered Broker/Dealer (b) Registered Investment Advisor C-12 The Equitable Companies Incorporated (1991) (Delaware) (cont.) The Equitable Life Assurance Society of the United States (cont.) Equitable Rowes Wharf, Inc. (1995) (Massachusetts) GP/EQ Southwest, Inc. (1995) (Texas) (94.132%) Fox Run, Inc. (1994) (Massachusetts) Equitable Underwriting and Sales Agency (Bahamas) Limited (1993) (Bahamas) CCMI Corporation (1994) (Maryland) FTM Corporation (1994) (Maryland) HVM Corporation (1994) (Maryland) STCS, Inc. (1992) (Delaware) Equitable Holding Corporation (1985) (Delaware) Equico Securities, Inc. (l97l) (Delaware) (a) (b) ELAS Securities Acquisition Corp. (l980) (Delaware) Equitable Realty Assets Corporation (l983) (Delaware) 100 Federal Street Funding Corporation (Massachusetts) 100 Federal Street Realty Corporation (Massachusetts) EquiSource of New York, Inc. (formerly Traditional Equinet Business Corporation of New York) (1986) (New York) (See Addendum for subsidiaries.) Equitable Casualty Insurance Company (l986) (Vermont) EREIM LP Corp. (1986) (Delaware) EREIM LP Associates (1%) EML Associates (.02%) Six-Pac G.P., Inc. (1990) (Georgia) Equitable Distributors,Inc. (1988) (Delaware) (a) Equitable JVS, Inc. (1988) (Delaware) - ------------ (a) Registered Broker/Dealer (b) Registered Investment Advisor C-13 The Equitable Life Assurance Society of the United States (cont.) The Equitable Companies Incorporated (1991) (Delaware) (cont.) quitable Holding Corporation (cont.) Astor/Broadway Acquisition Corp. (1990) (New York) Astor Times Square Corp. (1990) (New York) PC Landmark, Inc. (1990) (Texas) Equitable JVS II, Inc. (1994) (Maryland) EJSVS, Inc. (1995) (New Jersey) Donaldson, Lufkin & Jenrette, Inc. (1985 by EIC; 1993 by EHC) (Delaware) (36.1%) (See Addendum for subsidiaries) JMR Realty Services, Inc. (1994) (Delaware) Equitable Investment Corporation (l97l) (New York) Stelas North Carolina Limited Partnership (50% limited partnership interest) (l984) EQ Services, Inc. (1992) (Delaware) Equitable Agri-Business, Inc. (1984) (Delaware) Alliance Capital Management Corporation (l991) (Delaware) (b) (See Addendum for subsidiaries) Equitable Capital Management Corporation (l985) (Delaware) (b) Alliance Capital Management L.P. (1988) (Delaware) (16.6% limited partnership interests) Equitable JV Holding Corporation (1989) (Delaware) Equitable Real Estate Investment Management, Inc. (l984) (Delaware) (b) Equitable Realty Portfolio Management, Inc. (1984) (Delaware) EQK Partners (100% general partnership interest) Compass Management and Leasing Co. (formerly known as EREIM, Inc.) (l984) (Colorado) Equitable Real Estate Capital Markets, Inc. (1987) (Delaware) (a) - ------------ (a) Registered Broker/Dealer (b) Registered Investment Advisor C-14 The Equitable Companies Incorporated (1991) (Delaware) (cont.) The Equitable Life Assurance Society of the United States (cont.) Equitable Holding Corporation (cont.) Equitable Investment Corporation (cont.) Equitable Real Estate Investment Management, Inc. (cont.) EQ Realty Associates-V, Inc. (1987) (Delaware) EPPNLP Corp. (1987) (Delaware) Equitable Pacific Partners Corp. (1987) (Delaware) Equitable Pacific Partners Limited Partnership EREIM Managers Corp. (1986) (Delaware) ML/EQ Real Estate Portfolio, L.P. EML Associates, L.P. (80%) Compass Retail, Inc. (1990) (Delaware) Compass Management and Leasing, Inc. (1991) (Delaware) Compass Cayman (1996) (Delaware) Column Financial, Inc. (1993) (Delaware) (50%) Buckhead Strategic Corp. (1994) (Delaware) Buckhead Strategic Fund L.P. BH Strategic Co. I, L.P. BH Strategic Co. II, L.P. BH Strategic Co. III, L.P. BH Strategic Co. IV, L.P. CJVS, Inc. (1994) (California)) ERE European Corp. I, L.P. (1994) (Delaware) A/E European Associates I Limited Partnership Community Funding, Inc. (1994) (Delaware) Community Mortgage Fund, L.P. (1994) (Delaware) - ------------ (a) Registered Broker/Dealer (b) Registered Investment Advisor C-15 The Equitable Companies Incorporated (1991) (Delaware) (cont.) The Equitable Life Assurance Society of the United States (cont.) Equitable Holding Corporation (cont.) Buckhead Strategic Corp. II (1995) (Delaware) Buckhead Strategic Fund L.P. II Buckhead Co. III, L.P. HYDOC, L.L.C. - ----------------- (a) Registered Broker/Dealer (b) Registered Investment Advisor C-16 ORGANIZATION CHART OF EQUITABLE'S AFFILIATES ADDENDUM - NON-REAL ESTATE SUBSIDIARY OF EQUITABLE HOLDING CORPORATION HAVING MORE THAN FIVE SUBSIDIARIES EquiSource of New York, Inc.(formerly Traditional Equinet Business Corporation of New York) has the following subsidiaries that are brokerage companies to make available to Equitable Agents within each state traditional (non-equity) products and services not produced by Equitable: EquiSource of Delaware, Inc. (1986) (Delaware) EquiSource of Alabama, Inc. (1986) (Alabama) EquiSource of Arizona, Inc. (1986) (Arizona) EquiSource of Arkansas, Inc. (1987) (Arkansas) EquiSource Insurance Agency of California, Inc. (1987) (California) EquiSource of Colorado, Inc. (1986) (Colorado) EquiSource of Hawaii, Inc. (1987) (Hawaii) EquiSource of Maine, Inc. (1987) (Maine) EquiSource Insurance Agency of Massachusetts, Inc. (1988) (Massachusetts) EquiSource of Montana, Inc. (1986) (Montana) EquiSource of Nevada, Inc. (1986) (Nevada) EquiSource of New Mexico, Inc. (1987) (New Mexico) EquiSource of Pennsylvania, Inc. (1986) (Pennsylvania) EquiSource Insurance Agency of Utah, Inc. (1986) (Utah) EquiSource of Washington, Inc. (1987) (Washington) EquiSource of Wyoming, Inc. (1986) (Wyoming) C-17 ORGANIZATION CHART OF EQUITABLE'S AFFILIATES ADDENDUM - OTHER NON-REAL ESTATE SUBSIDIARIES HAVING MORE THAN FIVE SUBSIDIARIES Donaldson, Lufkin & Jenrette, Inc. has the following subsidiaries, and approximately 60 other subsidiaries, most of which are special purpose subsidiaries (the number fluctuates according to business needs): Donaldson, Lufkin & Jenrette, Inc. (1985) (Delaware) Donaldson, Lufkin & Jenrette Securities Corporation (1985) (Delaware) (a) (b) Wood, Struthers & Winthrop Management Corporation (1985) (Delaware) (b) Autranet, Inc. (1985) (Delaware) (a) DLJ Real Estate, Inc. DLJ Capital Corporation (b) DLJ Mortgage Capital, Inc. (1988) (Delaware) Column Financial, Inc.(1993) (Delaware) (50%) Alliance Capital Management Corporation has the following subsidiaries: Alliance Capital Management Corporation (1991) (Delaware) (b) Alliance Capital Management L.P. (1988) (Delaware) (b) Alliance Capital Management Corporation of Delaware, Inc. (Delaware) Alliance Fund Services, Inc. (Delaware) Alliance Capital Management (Japan), Inc. (formerly Alliance Capital Mgmt. Intl.) Alliance Fund Distributors, Inc. (Delaware) (a) Alliance Oceanic Corp. (Delaware) (formerly Alliance Capital, Ltd.) Alliance Capital Management Australia Pty. Ltd. (Australia) Meiji - Alliance Capital Corp. (Delaware) (50%) Alliance Capital (Luxembourg) S.A. (99.98%) Alliance Southern Europe Corp. (Delaware) (inactive) Alliance Barra Research Institute, Inc. (Delaware) (50%) Alliance Capital Management Canada, Inc. (Canada) (99.99%) Alliance Capital Management Limited (United Kingdom) Pastor Alliance Gestora de Fondas de Pensiones, S.A. (Spain) (50%) Dementional Asset Management, Ltd. (U.K.) Dementional Trust Management, Ltd. (U.K.) Alliance Capital Global Derivatives Corp. (Delaware) Alliance Corporate Finance Group, Inc. (Delaware) - ------------ (a) Registered Broker/Dealer (b) Registered Investment Advisor C-18 AXA GROUP CHART The information listed below is dated as of January 1, 1996; percentages shown represent voting power. The name of the owner is noted when AXA indirectly controls the company. AXA INSURANCE AND REINSURANCE BUSINESS HOLDING
COMPANY COUNTRY VOTING POWER - ---------- ------------- ------------- Axa Assurances Iard France 96.9% Axa Assurances Vie France 100% by Axa and Uni Europe Vie Uni Europe Assurance France 100% by Axa and Axa Assurances Iard Uni Europe Vie France 99.3% by Axa and Axa Assurances Iard Alpha Assurances Vie France 100% Axa Direct France 100% Direct Assurances Iard France 100% by Axa Direct Direct Assurance Vie France 100% by Axa Direct Axa Direkt Versicherung A.G. Germany 100% owned by Axa Direct Axiva France 90.3% Defense Civile France 95% Societe Francaise d'Assistance France 51.2% by Axa Assurances Iard Monvoisin Assurances France 99.92% by different companies and Mutuals Societe Beaujon France 100% Lor Finance France 99.9% Jour Finance France 100% by different companies Compagnie Auxiliaire pour le France 100% by Societe Beaujon Commerce et l'Industrie C.F.G.A. France 99.96% owned by the mutuals and Finaxa Saint Bernard Diffusion France 89.9% Sogarep France 95%, (100% with the mutuals) Argovie France 100% by Axiva and SCA Argos Finargos France 66.4% owned by Axiva Astral France 100% by Uni Europe Assurance Argos France N.S. Finaxa Belgium Belgium 100% C-19 Axa Belgium Belgium 18.5% by Axa(SA) and 72.5% by Finaxa Belgium De Kortrijske Verzekering Belgium 99.8% Juris Belgium 100% Finaxa Luxembourg Luxembourg 100% Axa Assurance IARD Luxembourg Luxembourg 99.4% Axa Assurance Vie Luxembourg Luxembourg 99.4% Axa Aurora Spain 50% Aurora Polar SA de Seguros y Spain 99.8% owned by Axa Aurora Reaseguros Axa Vida SA de Seguros y Spain 99.8% owned by Axa Aurora Reaseguros Axa Gestion de Seguros y Spain 100% owned by Axa Aurora Reaseguros Axa Assicurazioni Italy 100% Eurovita Italy 30% owned by Axa Assicurazioni Axa Equity & Law plc U.K. 99.9% Axa Equity & Law Life U.K. 100% by Axa Equity & Law plc Assurance Society Axa Equity & Law International U.K. 100% owned by Axa Equity & Law plc Axa Equity & Law Netherlands 100% by Axa Equity & Law plc Levensverzekeringen Axa Insurance U.K 100% Axa Global Risks U.K 100% by Axa and Uni Europe Assurance Axa U.K. U.K. 100% Axa Canada Canada 100% Boreal Insurance Canada 100% owned by AXA Canada Axa Assurances Inc Canada 100% owned by Axa Canada Axa Insurance Inc Canada 100% owned by Axa Canada Anglo Canada General Insurance Canada 100% owned by Axa Canada Cy Axa Pacific Insurance Canada 100% by Boreal Insurance Boreal Assurances Agricoles Canada 100% by Boreal Insurance C-20 Sime Axa Berhad Malaysia 30% Axa Sime Investment Holdings Singapore 50% Pte Ltd Axa Sime Assurance Hong Kong 100% owned by Axa Sime Invt. Holdings Pte Ltd Axa Sime Assurance Singapore 100% owned by Axa Sime Invt Holdings Pte Ltd Axa Life Insurance Hong Kong 100% PT Asuransi Axa Indonesia Indonesia 80% Equitable Cies Incorp. U.S.A. 60.6% owned by Axa, 44.4% Financiere 45, 3.8%, Lorfinance 7.6% and Axa Equity & Law Life Association Society 4.8% Equitable Life Assurance of U.S.A. 100% owned by Equitable Cies the USA Inc National Mutual Holdings Ltd Australia 51% The National Mutual Life Australia 100% owned by National Mutual Association of Australasia Ltd Holdings Ltd National Mutual International 74% owned by National Mutual Pty Ltd Holdings Ltd and 26% by The National Mutual Life Association of Australasia National Mutual (Bermuda) Ltd Australia 100% owned by National Mutual International Pty Ltd National Mutual Asia Ltd Bermudas 54% owned by National Mutual (Bermuda) Ltd and 20% by Delta Ltd National Mutual Funds Australia 100% owned by National Mutual Management (Global) Ltd Holdings Ltd National Mutual Funds USA 100% owned by National Mutual Management North America Funds Management (Global) Ltd Holdings Inc Australian Casualty & Life Ltd Australia 100% owned by National Mutual Holdings Ltd National Mutual Health Australia 100% owned by National Mutual Insurance Pty Ltd Holdings Ltd Axa Reassurance France 100% Axa Re Finance France 100% owned by Axa Reassurance Axa Re Vie France 100% owned by Axa Reassurance Axa Cessions France 100% C-21 Abeille Reassurances France 100% owned by Axa Reassurance Axa Re Mexico Mexico 100% owned by Axa Reassurance Axa Re Asia Singapore 100% owned by Axa Reassurance Axa Re U.K. Plc U.K. 100% owned by Axa Re U.K. Holding Axa Re U.K. Holding U.K 100% owned by Axa Reassurance Axa Re U.S.A. U.S.A 100% owned by Axa America Axa America U.S.A. 100% owned by Axa Reassurance International Technology U.S.A. 80% owned by Axa America Underwriters Inc (INTEC) Axa Re Life U.S.A. 100% owned by Axa Re Vie C.G.R.M. Monaco 100% by Axa Reassurance Axa Life Insurance Japan 100% owned by Axa Dongbu Axa Life Insurance Co Korea 50% Ltd Axa Oyak Hayat Sigota Turkey 60% Oyak Hayat Sigorta Turkey 11%
C-22 AXA FINANCIAL BUSINESS
COMPANY COUNTRY VOTING POWER - ---------- ---------- ------------- Compagnie Financiere de Paris France 96.9%, (100% with the (C.F.P.) Mutuals) Axa Banque France 98.7% owned by C.F.P. Financiere 78 France 100% owned by C.F.P. Axa Credit France 65% owned by C.F.P. Axa Gestion Interessement France 100% owned by C.F.P. Compagnie Europeenne de Credit France 100% owned by C.F.P. (C.E.C.) Fidei France 20.7% owned by C.F.P. and 10.8% by Axamur Meeschaert Rousselle France 100% owned by Financiere 78 M R Futures SNC France 59% by Meeschaert Rousselle Opale Derivee Bourse France 89.4% by M.R. Futures and Meeschaert Rousselle Anjou Courtage France 70% owned by Meeschaert Rousselle Axiva Gestion France 100% owned by Axiva Juri Creances France 100% by different companies Societe de Placements France 99.3% with the Mutuals Selectionnes S.P.S. Presence et Initiative France 73% with the Mutuals Vamopar France 100% owned by Societe Beaujon Financiere Mermoz France 100% Axa Asset Management Europe France 100% Axa Asset Management France 100% owned by Axa Asset Partenaires Management Europe Axa Asset Management Conseils France 100% owned by Axa Asset Management Europe Axa Asset Management France 100% owned by Axa Asset Distribution Management Europe Axa Equity & Law Home Loans U.K. 100% owned by Axa Equity & Law Axa Equity & Law Commercial U.K. 100% owned by Axa Equity & Loans Law C-23 Alliance Capital Management U.S.A. 59% held by ELAS Donaldson Lufkin & Jenrette U.S.A. 36.1% owned by ELAS and 44.1% by Equitable Cies Inc Cogefin Luxembourg 100% owned by Axa Belgium Soflinter Beligium 100% owned by Axa Belgium Financiere 45 France 99.6% Mofipar France 99.76% owned by Societe Beaujon ORIA France 100% owned by Axa Millesimes Axa Oeuvres d'Art France 100% by the Mutuals Axa Cantenac Brown France 100% Colisee Acti Finance 1 France 100% owned by Societe Beaujon Colisee Acti Finance 2 France 100% owned by Axa Assurances Iard Mutuelle Participations 2001 France 100% owned by Societe Beaujon Finalor France 100% owned by Societe Beaujon
C-24 AXA REAL ESTATE BUSINESS
COMPANY COUNTRY VOTING POWER - ------- ---------- -------------- C.I.P.M. France 97.6% with the Mutuals Fincosa France 100% owned by C.I.P.M. Prebail France 100% owned by Societe Beaujon and C.F.P. Axamur France 100% by different companies and mutuals Parigest France 100% by the Mutuals, C.I.P.M. and Fincosa Parimmo France 100% by the insurance companies and the mutuals S.G.C.I. France 100% with the Mutuals Transaxim France 99.4% owned by S.G.C.I. Compagnie Parisienne de France 100% owned by S.G.C.I. Participations Monte Scopeto France 100% owned by C.P.P. Matipierre France 100% by different companies Securimmo France 87% by different companies and mutuals Paris Orleans France 99.9% by different companies Colisee Bureaux France 99.4% by different companies Colisee Premiere France 99.9% by different companies Colisee Laffitte France 99.8% by Colisee Bureaux Carnot Laforge France 100% by Colisee Premiere Parc Camoin France 100% by Colisee Premiere Delta Point du Jour France 100% owned by Matipierre Paroi Nord de l'Arche France 100% owned by Matipierre Falival France 100% owned by Axa Reassurance Compagnie du Gaz d'Avignon France 99% owned by Axa Assurances Iard Ahorro Familiar France 40.1% owned by Axa Assurances Iard Fonciere du Val d'Oise France 100% owned by C.P.P. Sodarec France 99.9% owned by C.P.P. Centrexpo France 99.9% owned by C.P.P. COMPANY COUNTRY VOTING POWER Fonciere de la Vile du Bois France 99.6% owned by Centrexpo Colisee Seine France 97.4% by different companies Translot France 99.9% by SGCI C-25 S.N.C. Dumont d'Urville France 100% owned by Colisee Premiere Colisee Participations France 100% by SGCI Colisee Federation France 100% by SGCI Colisee Saint Georges France 100% by SGCI Drouot Industrie France 50% by SGCI Colisee Vauban France 99.7% by Matipierre Fonciere Colisee France 98.9% by Matipierre Axa Pierre S.C.I. France 97.6% owned by different companies and Mutuals Axa Millesimes France 77.8% owned by AXA and the Mutuals Chateau Suduirault France 100% owned by Axa Millesimes Diznoko Hongrie 100% owned by Axa Millesimes Compagnie Fonciere Matignon France 100% by different companies and Mutuals Equitable Real Estate U.S.A. 100% owned by ELAS Investment Quinta do Noval Vinhos S.A. Portugal 99.9% owned by Axa Millesimes
C-26 OTHER AXA BUSINESS
COMPANY COUNTRY VOTING POWER - ---------- ------------ --------------- A.N.F. France 95.4% owned by Finaxa SCOR France 10.1% owned by Axa Reassurance Campagnie du Cambodge France 23% owned by A.N.F. Lucia France 20.6% owned by Axa Assurance Iard and 8.6% by the mutuals Rubis et Cie France 12.7% owned by Uni Europe Assurance Schneider S.A. France 10% Eurofin France 31.6% owned by Compangie Financiere de Paris
c-27 ORGANIZATION CHART OF EQUITABLE'S AFFILIATES NOTES 1. The year of formation or acquisition and state or country of incorporation of each affiliate is shown. 2. The chart omits certain relatively inactive special purpose real estate subsidiaries, partnerships, and joint ventures formed to operate or develop a single real estate property or a group of related properties, and certain inactive name-holding corporations. 3. All ownership interests on the chart are 100% common stock ownership except for (a) as noted for certain partnership interests, (b) ACMC, Inc.'s and Equitable Capital Management Corporation's limited partnership interests in Alliance Capital Management L.P., (c) as noted for certain subsidiaries of Alliance Capital Management Corp. of Delaware, Inc., (d) Treasurer Robert L. Bennett's 20% interest in Compass Management and Leasing Co. (formerly known as EREIM, Inc.), (e) as noted for certain subsidiaries of AXA (f) The Equitable Companies Incorporated's 44.1% interest in DLJ and Equitable Holding Corp.'s 36.1% interest in same; and (g) DLJ Mortgage Capital, Inc.'s and Equitable Real Estate Investment Management, Inc.'s ownership (50% each) in Column Financial, Inc. 4. The operational status of the entities shown as having been formed or authorized but "not yet fully operational" should be checked with the appropriate operating areas, especially for those that are start-up situations. 5. The following entities are not included in this chart because, while they have an affiliation with The Equitable, their relationship is not the ongoing equity-based form of control and ownership that is characteristic of the affiliations on the chart, and, in the case of the first two entities, they are under the direction of at least a majority of "outside" trustees: The Equitable Funds The Hudson River Trust Separate Accounts 6. This chart was last revised on March 25, 1996. c-28 Item 27. Number of Contractowners. As of March 31, 1996 the number of participants in the American Dental Association Members Program offered by the Registrant was 21,348. Item 28. Indemnification (a) Indemnification of Principal Underwriter: to the extent permitted by law of the State of New York and subject to all applicable requirements thereof, Equico Securities, Inc. ("Equico") undertook to indemnify each of its directors and officers who is made or threatened to be made a party to any action or proceeding, whether civil or criminal, by reason of the fact that he or she is or was a director or officer of Equico. (b) Undertaking: 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. Item 29. Principal Underwriters (a) Equico, a wholly-owned subsidiary of Equitable is the principal underwriter for Equitable's Separate Account No. 301 and Separate Account A and for Separate Account I and Separate Account FP of Equitable Variable Life Insurance Company. On or about May 1, 1996, Equico will be changing its name to EQ Financial Consultants, Inc. Equico's principal business address is 1755 Broadway, NY, NY 10019. (b) See Item 25. (c) Not applicable. c-29 Item 30. Location of Accounts and Records The records required to be maintained by Section 31(a) of the Investment Company Act of 1940 and Rules 31a-1 to 31a-3 promulgated thereunder, with respect to the separate accounts named in Item 29(a),are maintained by The Equitable Life Assurance Society of the United States at 135 West 50th Street New York, New York 10020. Item 31. Management Services Not applicable. Item 32. Undertakings The Registrant hereby undertakes: (a) to file a post-effective amendment to this registration statement as frequently as is necessary to ensure that the audited financial statements in the registration statement are never more than 16 months old for so long as payments under the variable annuity contracts may be accepted; (b) to include either (1) as part of any application to purchase a contract offered by the prospectus, a space that an applicant can check to request a Statement of Additional Information, or (2) a postcard or similar written communication affixed to or included in the prospectus that the applicant can remove to send for a Statement of Additional Information; (c) to deliver any Statement of Additional Information and any financial statements required to be made available under this Form promptly upon written or oral request. c-30 I SIGNATURES As required by the Securities Act of 1933, the Registrant certifies that it meets the requirements of Securities Act Rule 485(b) for effectiveness of this amended Registration Statement and has caused this amended Registration Statement to be signed on its behalf, in the City and State of New York, on the 30th day of April, 1996. THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES (Registrant) By: The Equitable Life Assurance Society of the United States By: /s/Naomi J. Weinstein ---------------------- Naomi J. Weinstein Vice President c-31 SIGNATURES As required by the Securities Act of 1933, the Depositor certifies that it meets the requirements of Securities Act Rule 485(b) for effectiveness of this amended Registration Statement and has caused this amended Registration Statement to be signed on its behalf, in the City and State of New York, on the 30th day of April, 1996. THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES (Depositor) By: /s/Naomi J. Weinstein --------------------- Naomi J. Weinstein Vice President As required by the Securities Act of 1933 this amendment to the registration statement has been signed by the following persons in the capacities and on the date indicated: PRINCIPAL EXECUTIVE OFFICERS: Joseph J. Melone Chairman of the Board and Director James M. Benson President, Chief Executive Officer and Director William T. McCaffrey Senior Executive Vice President, Chief Operating Officer and Director PRINCIPAL FINANCIAL OFFICER: Jerry M. de St. Paer Senior Executive Vice President and Chief Financial Officer PRINCIPAL ACCOUNTING OFFICER: /s/ Alvin H. Fenichel - --------------------- Alvin H. Fenichel Senior Vice President and April 30, 1996 Controller DIRECTORS: Claude Bebear Jean-Rene Fourtou Winthrop Knowlton James M. Benson Norman C. Francis Arthur L. Liman Chrisopher Brocksom Donald J. Greene George T. Lowy Francoise Colloc'h Anthony J. Hamilton William T. McCaffrey Henri de Castries John T. Hartley Joseph J. Melone Joseph L. Dionne John H.F. Haskell, Jr. Didier Pineau-Valencienne William T. Esrey W. Edwin Jarmain George J. Sella, Jr. G. Donald Johnston, Jr. Dave H. Williams /s/Naomi J. Weinstein - ---------------------- Naomi J. Weinstein Attorney-in-Fact April 30, 1996 c-32 EXHIBIT INDEX
EXHIBIT NO. PAGE NO. - ---------- --------- 3(a)(i) Buy-Sell Agreement effective May 1, 1996 between The Equitable Life Assurance Society of the United States and Franklin Templeton Distributors, Inc. 3(e) Amended and Restated Investment Management Agreement dated as of May 1, 1996. 4(i) Form of Rider No. 8 to Group Annuity Contract 2100. 10(a) Consent of Price Waterhouse LLP. 27 Financial Data Schedule. - ---------------
c-33 EX-99.3(A)(I) 2 BUY SELL AGREEMENT Buy - Sell Agreement The following amends and restates the Buy-Sell Agreement by and among the Trustees of the American Dental Association Members Retirement Trust and of the American Dental Association Members Pooled Trust for Retirement Plans ("Trustees" and "Trusts"), The Equitable Life Assurance Society of the United States ("Equitable"), Templeton Foreign Fund which is a series fund of Templeton Funds, Inc. (the "Fund") and Templeton Funds Distributor, Inc. (collectively known as the "Parties"), which was effective March 2, 1992. This amended and restated Buy-Sell Agreement (the "Agreement") shall be effective May 1, 1996. The compensation arrangements provided for in Section 20 hereof were effective January 1, 1994. Franklin Templeton Distributors, Inc. ("Distributor"), now acts as distributor for the Fund, and hereby and hereinafter replaces Templeton Funds Distributor, Inc. as a party to the Buy-Sell Agreement. In addition, in the following, representations of the Fund in the Buy-Sell Agreement are replaced with similar representations of Distributor on behalf of the Fund. The Fund and the Trustees are no longer parties to the Buy-Sell Agreement. WHEREAS, the Trustees have requested Equitable to establish a separate investment account ("Equitable Separate Account") available solely to the Trusts, which Equitable Separate Account would invest net contributions from participants in the Trusts solely in the shares of the Templeton Foreign Fund (the "Fund") and short-term investments (either directly or through Equitable Separate Account No. 2A) pursuant to investment objectives and policies provided by the Trustees; WHEREAS, Equitable is willing to establish and maintain the Equitable Separate Account on the terms and conditions set forth below, subject to (a) the approval of its Board of Directors and the New York Insurance Department, (b) agreement with the Trustees on an amendment ("Amendment") to the group annuity contract between the Trustees and Equitable dated March 2, 1992 ("Group Annuity Contract") to add and maintain the Equitable Separate Account as an investment option for Trust participants and (c) approval of the Illinois and New York Insurance Departments of the Amendment; WHEREAS, subject to the foregoing, Equitable has filed an amendment to its registration statement under the Securities Act of 1933 ("'33 Act") which registers units of separate account interests in the Group Annuity Contract ("Registration Statement"), and otherwise maintain the currency of the Registration Statement; WHEREAS, Equitable will make units of interest in the Equitable Separate Account available to the Trusts following the effectiveness of such amendment to the Registration Statement; and WHEREAS, the Distributor is willing to sell shares of the Fund to the Equitable Separate Account under the terms and conditions set forth below; NOW THEREFORE, the Parties hereby agree as follows: 1. Distributor will make shares of the Fund available for purchase and redemption by the Equitable Separate Account as follows: a. Distributor agrees to furnish or cause to be furnished to Equitable in the manner set forth in Appendix C hereto, for the Fund (1) confirmed net asset value information as of the close of trading (currently 4:00 P.M. East Coast time, 1:00 P.M. Pacific Coast time) on the New York Stock Exchange (the "Close of Trading") on each business day that the New York Stock Exchange is open for business (each a "Business Day") or at such other time as the net asset value of the Fund is calculated, as disclosed in the then current prospectus, in a format which includes the Fund's name and the change from the last calculated net asset value, and (2) dividend and capital gains information as it arises. Distributor shall use its best efforts to provide or cause to be provided to Equitable such information by 6:30 p.m. East Coast time, 3:30 p.m. Pacific Coast time. b. Equitable, as agent for the Fund, limited to the duties provided herein, shall: (1) receive from benefit plans investing through the Trusts in the Equitable Separate Account for acceptance as of the Close of Trading on each Business Day (based upon the benefit plans' or Equitable's receipt of instructions from participants of the benefit plans prior to the Close of Trading on such Business Days): (a) orders for the purchase of shares of the Fund, (b) exchange orders, and (c) redemption requests and redemption directions with respect to shares of the Fund held in the Equitable Separate Account for benefit of the benefit plans ("Instructions"); (2) transmit to Distributor, as specified in Appendix A hereto, such net purchase and/or net redemption Instructions no later than 9:30 a.m. East Coast time, 6:30 a.m. Pacific Coast time on the next following Business Day; and (3) upon acceptance of any such Instructions, communicate such acceptance as appropriate within Equitable's system (a "Confirmation"). The Business Day on which such Instructions are received in proper form by Equitable and time stamped by the Close of Trading will be the date as of which Fund shares shall be deemed purchased, exchanged, or redeemed as a result of such Instructions, and at the price of such shares as of the close of trading on that Business Day. Instructions received in Proper Form by Equitable and time stamped after the Close of Trading on any given Business Day shall be treated as if received on the next following Business Day. Equitable warrants that all orders, Instructions and Confirmations received which will be transmitted to Distributor for processing as of a particular Business Day will have been received and time stamped prior to the Close of Trading on that Business Day. Proper Form shall be interpreted to mean when amounts to be invested or redeemed are identified on Equitable's system by participant, benefit plan and Fund. c. Equitable will wire payment, or arrange for payment to be wired by its designated bank, for such purchase orders, in immediately available funds, to a Fund custodial account or accounts designated by Distributor. Such wires must be received no later than the close of the Federal Reserve Bank, which is 6:00 p.m. East Coast time, on the Business Day following the Business Day as of which such purchase orders are made in conformance with Paragraph b. d. Except as noted below, Distributor will wire payment, or arrange for payment to be wired, for redemption orders, in immediately available funds, to an account or accounts designated by Equitable as specified in Appendix B hereto, as soon as possible but in any event no later than the close of the Federal Reserve on the Business Day following the Business Day as of which such redemption orders are made in conformance with Paragraph b. Distributor reserves the right to delay settlement in accordance with standard securities transactions settlement guidelines of the Securities and Exchange Commission as then in effect to achieve the required liquidity, unless Equitable provides 3 Business Days advance notice of such intention to redeem, which advance notice shall not be considered an order to redeem until the effective date for such redemption. e. In addition to the written confirmations containing information and sent in a timely manner as reasonably agreed to by the parties, the Distributor will (i) designate in writing a contact person with adequate back up whom Equitable will be able to contact by telephone during normal business hours to verify on a same day basis receipt by the Distributor of FAX redemption orders by the Equitable Separate Account and (ii) make available an automated telephone confirmation system to permit Equitable to confirm all transactions ("Templeton Star Service") no later than 12:00 noon on the business day following receipt of the transaction order, provided that, in the event that the Templeton Star Service is not operational on business day, the Distributor will designate in writing a contact person with adequate back-up whom Equitable will be able to contact to confirm all transactions within the same time frame. f. All dividends with respect to Fund shares held by the Equitable Separate Account will be automatically invested in additional shares of Fund unless and until contrary written instructions are provided by Equitable. 2. The Distributor agrees to provide to Equitable at the Distributor's or the Fund's expense whatever quantities of Fund prospectuses, prospectus supplements, Statements of Additional Information, annual and semi-annual reports Equitable reasonably determines it requires in connection with meeting its or the Trustees' Fund communication and disclosure statement delivery requirements for Trust participants. The Distributor agrees on behalf of Equitable to submit for reimbursement from the Fund reasonable out-of-pocket postage expenses incurred by Equitable in mailing such materials to Trust participants who beneficially own shares of the Fund. With regard to Fund proxy statements for Fund shareholders, Equitable agrees to furnish Distributor with a list of the names and addresses, in a format reasonably acceptable to the Distributor and Equitable, of all Trust participants investing in the Fund though the Equitable Separate Account, and will update such list as of certain Fund shareholder record dates provided by Distributor for such purposes. Distributor or its agents will use such information to forward Fund proxy statements to such Trust participants, and Distributor or its agents shall solicit the return of such proxies as appropriate. 3. The Distributor agrees to assist Equitable in preparation of any sales literature, articles or advertising for the Equitable Separate Account and Group Annuity Contract describing investment in the Fund. 4. Any sales material, articles, advertising, registration statements, annual and semi-annual reports and/or any other material prepared by Equitable which refer to the Fund, the Distributor or the Fund's adviser will be subject to review and written approval by the Distributor. The Distributor agrees to review all such material promptly. 5. The Distributor will provide training as reasonably necessary for Equitable's marketing and operations staffs at the regular place of business of such staffs concerning the Fund, in connection with Equitable's offering the Equitable Separate Account to Trust participants. 6. The Distributor agrees that during the term of this Agreement it will not impose a sales load or any other charge on purchases or redemptions of shares of the Fund for the Equitable Separate Account. 7. The Distributor will prepare such periodic written reports as requested by the Trustees and will arrange to send a representative of the Fund or the Fund's investment adviser to the meetings of the Trustees, as reasonably requested. 8. Distributor agrees to treat as confidential the information provided by Equitable and the Trustees concerning the American Dental Association Members Retirement Program ("Program"), the Trusts and participants in the Trusts and shall not use the information for any purposes except the purposes specified in this Agreement. 9. The Distributor agrees to indemnify and hold harmless Equitable and any employee or agent thereof, the American Dental Association and its employees and the Trustees for any and all losses, claims, damages and liabilities, including legal costs of defending such claims, to which any of them may become subject under the '33 Act, the Securities Exchange Act of 1934, or other Federal or state statutory law or regulation or at common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based on any (a) failure by Distributor to supply Equitable with copies in a timely manner of any Fund Prospectus, Prospectus supplement, Statement of Additional Information, or report relating to the Fund, or (b) untrue statement of a material fact, or alleged omission to state a material fact required to be stated or necessary to make the statements not misleading (x) in the registration statement for the Fund filed pursuant to the '33 Act, or any Prospectus or Statement of Additional Information included as a part thereof, as from time to time amended and supplemented, or in any Fund report, proxy material, sales material, advertising or any other material prepared by the Fund or the Distributor; and (y) in any description of the Fund, including a description of its adviser and Distributor, included in the Registration Statement, or in any Prospectus or Statement of Additional Information included in such Registration Statement, or in any report, sales literature, article, advertising or other material prepared by Equitable describing the Equitable Separate Account, the Fund, provided such description has been approved or provided by the Distributor or the Fund, as applicable. 10. The Distributor agrees to indemnify and hold harmless Equitable, including any employee or agent thereof, and the American Dental Association and its employees and the Trustees for any liability resulting from the Fund's or the Distributor's misfeasance, bad faith or gross negligence or reckless disregard of their duties. 11. Equitable agrees to hold harmless and indemnify Distributor, the Funds and any other Franklin or Templeton entity, including any employees, officers, directors or trustees, against any claims or actions resulting from any material misstatements or omissions or alleged material misstatements or omissions to state a material fact relating to the Fund or the Distributor in marketing or sales literature created by Equitable, unless such literature has been reviewed and approved by Distributor. Equitable also agrees to indemnify Distributor for out-of-pocket losses it or the Fund may become subject to as a result of their reasonable reliance on (i) redemption orders sent by Equitable by Fax as provided in paragraph 1.b above or (ii) information contained in or omitted from any list supplied by Equitable pursuant to Section 2 above. 12. Nothing in paragraphs 9, 10 and 11 shall be construed to require an indemnitor to indemnify any indemnitee for consequential damages. 13. In the event that the Fund or Distributor report to Equitable a price for shares of the Fund, which price is determined subsequent to 9:00 a.m. on the following business day, to be incorrect, the price correction for the Equitable Separate Account will be handled by the Fund and the Distributor on the same basis as the price correction for any other shareholder of the Fund. However, to the extent Trust participants had received Fund redemption proceeds from the Equitable Separate Account in excess of the amounts which should have been paid as a result of such an incorrect price, the Fund and Distributor will not reduce or seek to reduce the number of Fund shares credited to the Equitable Separate Account as of such overpayment, and the Fund and the Distributor agree not to seek reimbursement from such Trust participants. 14. The Distributor agrees to make shares of the Fund available for purchase by the Equitable Separate Account in accordance with the terms and conditions of this Agreement so long as this Agreement is in effect, Distributor acts as distributor for the Fund, and shares of the Fund are generally available for sale. 15. Nothing in this Agreement shall be construed to create an obligation on the part of the Trustees or Equitable to maintain the Equitable Separate Account as an investment option for participants in the Trusts or to prevent Equitable or the Trustees from terminating the Equitable Separate Account or changing its investment objective or policies so as to no longer permit or require investment in shares of the Fund. 16. It is understood that decisions to allocate Trust assets to the Equitable Separate Account are made solely by participants and accordingly, no representation is, or can be, made by Equitable or the Trustees concerning a minimum investment in the Fund by the Equitable Separate Account. 17. Distributor represents that the Fund is a registered investment company under the Investment Company Act of 1940 ("'40 Act") and that shares of the Fund are registered under the '33 Act. Distributor also represents that the Fund will maintain such registration statements on a current basis so long as it makes its shares available for purchase by the Equitable Separate Account. 18. Equitable represents that the Equitable Separate Account is not required to register under the 40 Act pursuant to Section 3(c) (11) thereof and that Equitable Separate Account units of interests in the Group Annuity Contract will be registered under the '33 Act prior to offering such units to Trust participants and such registration will be maintained on a current basis so long as units of the Equitable Separate Account are offered to Trust participants. 19. Equitable agrees that it will abide by the Rules of Fair Practice of the National Association of Securities Dealers to the extent these Rules are applicable to the marketing and sale of units of interest in the Equitable Separate Account. 20. For services to the Trusts and Trust participants investing in the Fund through the Equitable Separate Account, Distributor shall pay Equitable compensation derived from the amount invested by the Equitable Separate Account in the Fund. Presently, the rate of such compensation is .25% per annum of the average daily net assets attributable to the Equitable Separate Account's investment in the Fund, payable quarterly. Such compensation is derived from compensation payable by the Fund to Distributor from a 12b-1 Plan adopted by the Fund, and is contingent upon Distributor's receipt of related compensation from the Fund. Due to regulatory requirements, Equitable hereby agrees to waive its right to receive such compensation until such time as Distributor has received the related 12b-1 Plan-derived compensation from the Fund. In addition, were the related 12b-1 Plan of the Fund terminated by the Fund's Board of Directors in accordance with Rule 12b-1 under the '40 Act, Distributor's obligation to pay such compensation would also terminate effective upon termination of the 12b-1 Plan. 21. This Agreement will be interpreted in accordance with the law of New York. 22. This Agreement shall be terminable by the Distributor at any time after six months advance written notice to the other Parties. Equitable and the Trustees may terminate this agreement at any time upon 60 days advance written notice to the Distributor. 23. Except as otherwise specified herein, notices under this Agreement shall be sent to the following: a. Notices to Equitable should be sent to: The Equitable Life Assurance Society of the United States 200 Plaza Drive Secaucus, New Jersey 07096 Attention: Naomi J. Weinstein b. Notices to The Trustees should be sent to American Dental Association 211 East Chicago Avenue Chicago, Illinois 60611 Attention: David R. Dwyer c. Notices to The Distributor should be sent to: Franklin Templeton Distributors, Inc. 777 Mariners Island Boulevard San Mateo, CA 94404 Attention: Deborah R. Gatzek, Senior Vice President IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed: THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES By:______________________________ ___________ Name, Title Date FRANKLIN TEMPLETON DISTRIBUTORS, INC. By:______________________________ ___________ Deborah R. Gatzek, Senior Vice President Date APPENDIX A PURCHASE ORDERS INSTRUCTIONS FOR WIRING PURCHASE ORDERS TO FRANKLIN TEMPLETON DISTRIBUTORS, INC.: Wire to: First Union Bank ABA No.: 063 000 021 City, State Jacksonville, Florida Credit Templeton Wire Holding Account A/C No.: 2175009117348 Name of Fund Templeton Foreign Fund Templeton A/C No.: 4920049053 Account Registration Equitable for ADA, TPA APPENDIX B REDEMPTION ORDERS 1. FED WIRE INSTRUCTIONS FOR SETTLEMENT OF REDEMPTION ORDERS: CHASE NYC/CUST ABA #021-0000-21 A/C #037-2-417352 For the AJC of American Dental Association, Templeton Foreign Fund 2. INSTRUCTIONS FOR FACSIMILE TRANSMISSION OF REDEMPTION ORDERS TO FRANKLIN TEMPLETON DISTRIBUTORS, INC.: To the attention of Franklin Templeton Institutional Services (TPA): (415) 312-4000 or (415) 312-4153. If neither fax number is available, then please call Theresa Figone at (415) 312-5604 or (415) 312-6575. APPENDIX C DAILY PRICE INFORMATION 1. CONTACT PERSONS AND TELEPHONE NUMBERS FOR THE EQUITABLE TO TRANSMIT PRICE INFORMATION TO FRANKLIN TEMPLETON DISTRIBUTORS BY TELEPHONE: NAME OF PERSON TELEPHONE NUMBER Yeshod Naidu (primary) Phone: 800/632-2000 or 415/312-6574 Fax: 415/312-4000 or 415/312-4153 Gener Filoteo (back-up) Phone: 800/632-2000 or 415/312-6119 Fax: same as above 2. CONTACT PERSONS AND FACSIMILE TRANSMISSION NUMBERS FOR FRANKLIN TEMPLETON DISTRIBUTORS TO TRANSMIT PRICE INFORMATION TO THE EQUITABLE: NAME OF PERSON TELEPHONE NUMBER David Cohen (212) 382-8121 Robert -West (212) 307-0708 Lorraine Chevere (212) 307-0977 EX-99.3(E) 3 AMENDED AND RESTATED INVESTMENT MANAGEMENT AGREEMENT AMENDED AND RESTATED INVESTMENT MANAGEMENT AGREEMENT Amendment and Restatement dated as of May 1, 1996 to Agreement dated as of March 2, 1992 ("Original Agreement") by and among (i) the Trustees of the American Dental Association Members Retirement Trust and of the American Dental Association Members Pooled Trust for Retirement Plans (hereinafter called the "Trustees"), (ii) the Committee of Separate Account No. 191 of The Equitable Life Assurance Society of the United States ("Committee"), and (iii) The Equitable Life Assurance Society of the United States ("Equitable") in its capacity as insurer and owner of the assets of Separate Account No. 191. WHEREAS the American Dental Association Members Retirement Trust and The American Dental Association Members Pooled Trust for Retirement Plans (collectively referred to as the "Trusts"), for which the Trustees act, were established to fund the American Dental Association Members Retirement Plan and other employee benefit plans ("Plans") adopted by eligible individuals, organizations, partnerships, corporations or associations, which Plans must meet the requirements for qualification under Section 401 of the Internal Revenue Code of 1954, as amended ("Code"); WHEREAS Equitable established effective as of March 2, 1992 a separate account, designated Separate Account No. 191 ("Separate Account"), which Separate Account is used solely as a funding medium for certain amounts received or to be received under a group annuity contract between Equitable and the Trustees which was most recently amended as of December 9, 1995 ("Contract"), under which the Trustees are the holders of the Contract ("Contract Holders"); WHEREAS the assets of the Separate Account are the property of Equitable; WHEREAS the Committee was established as of March 2, 1992 to direct the investment of the assets of the Separate Account with authority to delegate such power in whole or in part to one or more Investment Managers; WHEREAS the Committee is comprised of members designated by the Contract Holders, and as of the date of this Agreement the Contract Holders have designated the Trustees as the Committee; WHEREAS the Committee delegated to Equitable certain responsibilities for managing assets of the Separate Account so as to maintain an investment of not less than 95% of the market value of said assets in shares of the Templeton Foreign Fund, a series of a registered investment company under the Investment Company Act of 1940 - 2 - ("Templeton Foreign Fund"), and up to 5% of the market value of said assets in units of Equitable's Separate Account No. 2A; WHEREAS the Committee has determined that, effective May 1, 1996, 100% of the market value of the assets of the Separate Account will be invested in shares of the Templeton Foreign Fund; and WHEREAS, the parties hereto wish to amend and restate the Original Agreement so as to appropriately reflect the new investment policy of the Separate Account and the role of Equitable with respect thereto. NOW THEREFORE, in consideration of the promises and mutual convenants herein contained, it is hereby agreed as follows: 1. Investment Instructions. The Committee hereby instructs Equitable to invest 100% of the assets of the Separate Account in shares of the Templeton Foreign Fund. The Committee may substitute one or more registered investment companies for the Templeton Foreign Fund as an investment for the Separate Account. Equitable will comply with the directions of the Committee; provided, however, that such substitution, in Equitable's reasonable discretion, must be in accordance with the standard for investments of a separate account under the New York Insurance Law and that the effective date of such substitution will have to comply with all applicable laws, including the Securities Act of 1933. 2. Committee as Fiduciary. The Committee acknowledges that Equitable no longer has the fiduciary obligations of an investment manager, as such terms are defined in the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), with respect to management of the investments of the Separate Account. 3. Proxy Voting. As owner of the assets of the Separate Account, Equitable will receive all communications sent to shareholders of the Templeton Foreign Fund, including proxies for shares held in the Separate Account. Equitable will vote such proxies only in accordance with the instructions received from participants, or in the case of the American Dental Association Members Defined Benefit Plan, from participating employers, or in the case of the American Dental Association Members Pooled Trust for Retirement Plans, from participants or trustees, as the case may be. Equitable shall not vote any shares with respect to which no instructions were received. - 3 - The Trustees will require the Templeton Foreign Fund, or its distributor, to arrange for and bear the cost of distributing proxy statements to, and soliciting instructions from, such participants and trustees, tabulating and retaining such instructions and advising Equitable of such results. 4. Responsibilities of Equitable. Equitable shall not be responsible for the operation or administration of the Trusts or Plans except as otherwise provided herein or by other written agreement, including the Administrative Services Agreement dated January 10, 1986 among Equitable, the Trustees and the Council of Insurance of the American Dental Association, as amended (the "Administrative Services Agreement"). Equitable shall discharge its duties in accordance with the requirements of ERISA, other applicable law and this Agreement. 5. Liability of Equitable. Equitable shall not be liable for any act or omission of the Committee or any other person or entity exercising a fiduciary responsibility with respect to the Separate Account, if such fiduciary responsibility has been allocated to the Committee or such other person or entity in accordance with this Agreement, the Contract, the Plans or the Trusts, except to the extent that Equitable has itself violated a fiduciary responsibility, if any, with respect to the Separate Account and except to the extent that applicable law (including ERISA) may expressly provide otherwise. 6. Indemnification. The Trustees will indemnify and hold harmless Equitable and its directors, employees and agents, from any and all expenses (including attorney's fees), losses, damages, liabilities, demands, charges, and claims of any kind whatsoever, arising directly from or directly attributable to (a) the designation of the Templeton Foreign Fund or any successor or substitute fund as an investment for the Separate Account and (b) all other actions taken or omitted to be taken by the Committee or the Trustees under this Agreement. If any claim shall be made or action or proceeding commenced that might give rise to an obligation hereunder, the indemnified party shall give prompt written notice thereof to the Trustees and, if requested by the Trustees, shall permit them, at their sole cost and expense, to assume the defense of such claim, action or proceeding. 7. Reports. Equitable shall furnish to the Trustees and the Committee such reports and information as may reasonably be requested by the Trustees, including a monthly statement as of the end of such month of the value of the Separate Account's investment in the shares of the Templeton Foreign Fund. - 4 - 8. Accounting. (a) Equitable shall keep accurate and detailed records concerning its services under this Agreement, including records of all transactions during its performance of this Agreement, and all such records shall be open to inspection at all reasonable times by the Trustees and the Committee, or their designee, and by duly authorized representatives of the Secretary of Labor and the Secretary of the Treasury acting pursuant to their authority under ERISA and the Code, respectively, and other appropriate regulatory authorities. (b) Equitable shall provide the investment accounting services for the Separate Account as required under the Contract and the Administrative Services Agreement. 9. Fees and Expenses. The fees payable to Equitable for its services hereunder are set forth in Appendix A to this Agreement. Expenses incurred in connection with the organization of the Separate Account were initially paid by Equitable and are being reimbursed from the Separate Account over a five year period, consisting of the period from March 2, 1992 through December 31, 1992 and the four consecutive calendar years beginning January 1, 1993. During the first period (March 2 - December 31, 1992), the charge to the Separate Account for all expenses, including other direct expenses, did not exceed .10% of the average daily net assets of the Separate Account during such period. Thereafter, the reimbursement of four-fifths of the organizational expenses is being amortized equally over the remaining four year period, and all other direct expenses will be deducted from the Separate Account as they are incurred. 10. Termination and Resignation. This Agreement and Equitable's services hereunder will terminate on the effective date of the termination of the Contract or the earlier termination of the Separate Account pursuant to the Contract. Equitable will dispose of the assets of the Separate Account in accordance with the instructions of the Committee. 11. Evidence of Ownership of Assets. The parties understand and agree that the shares of the Templeton Foreign Fund held in the Separate Account will not be physically issued. The shares of the Templeton Foreign Fund will be issued in book-entry form as uncertificated shares and appropriate notice will be sent to Equitable by the Templeton Foreign Fund. All income and proceeds of redemption of such shares and units will be reinvested in additional shares in accordance with Section 1 above. - 5 - 12. Miscellaneous. The provisions of this Agreement may not be terminated, changed, modified, altered, or amended in any respect except in writing signed by all of the parties hereto. 13. Governing Law. This Agreement shall be construed and enforced according to the laws of the State of Illinois and, to the extent of any federal preemption, the laws of the United States of America. 14. Binding Upon Successors. This Agreement shall be binding upon and enforceable by the successors to Equitable, the Trustees and the Committee members and any of them. 15. Notices. Notices shall be deemed effective if addressed and mailed with postage prepaid, by first class mail as follows: To the Trustees and Committee: American Dental Association 211 East Chicago Avenue Chicago, Illinois 60611 Attention: David R. Dwyer To Equitable: The Equitable Life Assurance Society of the United States 200 Plaza Drive Secaucus, New Jersey 07094 Attention: Naomi J. Weinstein 16. Authority. Each party to this Agreement represents that it has duly authorized the execution, delivery and performance of this Agreement and that neither such execution and delivery nor the performance of its obligations hereunder conflict with or violate any provision of law, rule or regulation, or any instrument to which it either is a party or to which any of its properties are subject and that this Agreement is a valid and binding obligation. - 6 - IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. Each in his capacity as (i) a Trustee of each of the American Dental Association Members Retirement Trust and the American Dental Association Members Pooled Trust for Retirement Plans and (ii) a Member of the Committee of Separate Account No. 191 of The Equitable Life Assurance Society of the United States: By_______________________________ By_______________________________ By_______________________________ By_______________________________ By_______________________________ By_______________________________ By_______________________________ By_______________________________ By_______________________________ By_______________________________ By_______________________________ By_______________________________ By_______________________________ By_______________________________ By_______________________________ By_______________________________ THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES By_________________________________ Its________________________________ APPENDIX A Fee Schedule for Separate Account No. 191 An administration fee shall be paid to Equitable with respect to the Separate Account in an amount equal to 1/12th of .15% of the aggregate amount held for the Trusts in the Separate Account, calculated as of the first day of each month, based on the aggregate amount held for the Trusts in the Separate Account as of the last day of the second previous month, and will be charged against the Separate Account unit value on a daily basis during the month. This fee will be waived to the extent that Equitable receives fees from Templeton Funds Distributor, Inc. ("Distributor") for services rendered to Distributor under an agreement dated as of April 17, 1995. EX-99.4(I) 4 RIDER NO. 8 Attached to and made part of GROUP ANNUITY CONTRACT NO. AC2100 between THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES and TRUSTEES OF THE AMERICAN DENTAL ASSOCIATION MEMBERS RETIREMENT TRUST AND OF THE AMERICAN DENTAL ASSOCIATION MEMBERS POOLED TRUST FOR RETIREMENT PLANS RIDER NO. 8 IT IS HEREBY AGREED that, as of May 1, 1996, said Contract is amended as described below: Section 2.12 is amended to read as follows: "2.12 Contributions and transfers to the ADA Foreign Fund, the Equity Index Fund and the Aggressive Equity Fund shall be invested in the shares of funds registered under the Investment Company Act of 1940 ("1940 Act") as open-end diversified management investment companies (the "Investment Company"). If net transfers and withdrawals from the ADA Foreign Fund, Equity Index Fund or the Aggressive Equity Fund exceed the cash available to pay such transfers and/or withdrawals, transfers and/or withdrawals may be deferred pending settlement of the redemption of shares from the Investment Company." New York, New York FOR THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES: Chairman and Chief President and Chief Vice President, Secretary Executive Officer Operating Officer and Associate General Counsel - ------------------------------------ -------------------------------------- Assistant Registrar Date of Issue FOR THE CONTRACTHOLDER: Trustees of the American Dental Association Members Retirement Trust and of the American Dental Association Members Pooled Trust for Retirement Plans - ---------------------------, Trustee ---------------------------, Trustee - ---------------------------, Trustee ---------------------------, Trustee - ---------------------------, Trustee ---------------------------, Trustee - ---------------------------, Trustee ---------------------------, Trustee - ---------------------------, Trustee ---------------------------, Trustee - ---------------------------, Trustee ---------------------------, Trustee - ---------------------------, Trustee ---------------------------, Trustee - ---------------------------, Trustee ---------------------------, Trustee EX-99.10(A) 5 CONSENT OF PRICE WATERHOUSE LLP CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the use in the Statement of Additional Information constituting part of this Post-Effective Amendment No. 1 to the Registration Statement No. 333-01301 on Form N-4 (the "Registration Statement") of our report dated February 7, 1996, relating to the financial statements of Separate Account Nos. 3, 4, 191 and 200 of The Equitable Life Assurance Society of the United States, and our report dated February 7, 1996, relating to the consolidated financial statements of The Equitable Life Assurance Society of the United States, which reports appear in such Statement of Additional Information, and to the incorporation by reference of our reports into the Prospectus which constitutes part of this Registration Statement. We also consent to the use in the Prospectus Supplement constituting part of this Registration Statement of our report dated February 7, 1996, relating to the financial statements of Separate Account No. 4 of The Equitable Life Assurance Society of the United States, which report appears in such Prospectus Supplement. We also consent to the references to us under the headings "Condensed Financial Information" and "Experts" in such Prospectus. PRICE WATERHOUSE LLP New York, New York April 26, 1996 EX-27.01 6 SA 3 (POOLED)
6 0000727920 Sep Acct. No. 3 (ADA) 03 The Aggressive Equity Fund 1 U. S. Dollars YEAR Dec-31-1995 Jan-01-1995 Dec-31-1995 1 278,359,964 341,203,942 2,499,839 891,904 0 344,595,685 1,122,353 0 1,770,078 2,892,431 0 0 0 0 0 0 0 0 0 341,703,254 1,552,241 729,465 0 4,967,053 (2,685,347) 75,694,748 20,301,612 93,311,013 0 0 0 0 0 0 0 32,309,957 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
EX-27.02 7 SA 4 (POOLED)
6 0000727920 Sep Acct. No. 4 (ADA) 04 The Growth Equity Fund 1 U. S. Dollars YEAR Dec-31-1995 Jan-01-1995 Dec-31-1995 1 1,831,087,485 2,121,951,694 17,234,507 3,285,960 0 2,142,472,161 10,088,399 0 7,259,221 17,347,620 0 0 0 0 0 0 0 0 0 2,125,124,541 19,610,344 (852,218) 0 16,007,109 2,751,017 260,870,246 249,038,413 512,659,676 0 0 0 0 0 0 0 460,532,192 0 0 0 0 0 0 0 0 183.07 (.18) 57.14 0.00 0.00 0.00 240.03 1.07 0 0
EX-27.03 8 SA 191 (THE FOREIGN FUND)
6 0000727920 Sep Acct. No. 191 (ADA) 191 The ADA Foreign Fund 1 U. S. Dollars YEAR Dec-31-1995 Jan-01-1995 Dec-31-1995 1 66,914,606 65,524,431 0 2,722,162 0 68,246,593 0 0 17,709 17,709 0 0 0 0 0 0 0 0 0 68,228,884 2,301,415 174,395 0 598,289 1,877,521 4,105,954 737,287 6,720,762 0 0 0 0 0 0 0 (3,812,317) 0 0 0 0 0 0 0 0 13.01 0.75 0.55 0.00 0.00 0.00 14.31 0.84 0 0
EX-27.04 9 SA 200 (THE AGGRESSIVE EQUITY FUND)
6 0000727920 Sep Acct. No. 200 (ADA) 200 The Aggressive Equity Fund 1 U. S. Dollars YEAR Dec-31-1995 Dec-01-1995 Dec-31-1995 1 76,985,878 76,787,976 61,803 0 0 76,849,779 0 0 56,341 56,341 0 0 0 0 0 0 0 0 0 76,793,438 0 0 0 56,341 (56,341) (18,654) (197,902) (272,897) 0 0 0 0 0 0 0 76,793,438 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
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