-----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, AoBPrifiUALMYTa1N9zdosskX1SPRENxyRgs6DKJ/m5rn5QanYQpb0KnOpFhI0rP xA8vpwQCTrNIfzm5wSb8Vg== 0000771726-99-000208.txt : 19991206 0000771726-99-000208.hdr.sgml : 19991206 ACCESSION NUMBER: 0000771726-99-000208 CONFORMED SUBMISSION TYPE: 485APOS PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 19991203 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SEPARATE ACCOUNT NO 45 OF EQUITABLE LIFE ASSUR SOCIETY OF US CENTRAL INDEX KEY: 0000929634 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485APOS SEC ACT: SEC FILE NUMBER: 033-83750 FILM NUMBER: 99768145 FILING VALUES: FORM TYPE: 485APOS SEC ACT: SEC FILE NUMBER: 811-08754 FILM NUMBER: 99768146 BUSINESS ADDRESS: STREET 1: 1290 AVENUE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10104 BUSINESS PHONE: 2127144595 MAIL ADDRESS: STREET 2: 1290 AVENUE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10104 485APOS 1 POST-EFFECTIVE AMENDMENT Registration No. 33-83750 Registration No. 811-8754 - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------- FORM N-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ] Pre-Effective Amendment No. [ ] Post-Effective Amendment No. 15 [X] AND/OR REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ] Amendment No. 21 [X] (Check appropriate box or boxes) ------------------------- SEPARATE ACCOUNT No. 45 of THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES (Exact Name of Registrant) ------------------------- THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES (Name of Depositor) 1290 Avenue of the Americas, New York, New York 10104 (Address of Depositor's Principal Executive Offices) Depositor's Telephone Number, including Area Code: (212) 554-1234 ------------------------- ROBIN WAGNER VICE PRESIDENT AND COUNSEL The Equitable Life Assurance Society of the United States 1290 Avenue of the Americas, New York, New York 10104 (Name and Address of Agent for Service) ------------------------- Please send copies of all communications to: PETER E. PANARITES Freedman, Levy, Kroll & Simonds 1050 Connecticut Avenue, N.W., Suite 825 Washington, D.C. 20036 ------------------------- Approximate Date of Proposed Public Offering: February 1, 2000. It is proposed that this filing will become effective (check appropriate box): [ ] Immediately upon filing pursuant to paragraph (b) of Rule 485. [ ] On (date) pursuant to paragraph (b) of Rule 485. [ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485. [X] On February 1, 2000 pursuant to paragraph (a)(1) of Rule 485. If appropriate, check the following box: [ ] This post-effective amendment designates a new effective date for previously filed post-effective amendment. Title of Securities Being Registered: Units of interest in Separate Account under variable annuity contracts. NOTE ---- This Post-Effective Amendment No. 15 ("PEA") to the Form N-4 Registration Statement No. 33-83750 ("Registration Statement") of The Equitable Life Assurance Society of the United States ("Equitable Life") and its Separate Account No. 45 is being filed solely for the purpose of including in the Registration Statement the Prospectus and Statement of Additional Information for a new version of Equitable Life's Accumulator variable and fixed deferred annuity contract, and related exhibits. The PEA does not amend or delete the Accumulator Prospectuses or Statements of Additional Information dated May 1, 1999 or October 18, 1999, any supplements thereto, or otherwise amend any other part of the Registration Statement. Equitable Accumulator SM A combination variable and fixed deferred annuity contract PROSPECTUS DATED , 2000 Please read and keep this prospectus for future reference. It contains important information that you should know before purchasing or taking any other action under your contract. Also, at the end of this prospectus you will find attached the prospectus for EQ Advisors Trust, which contains important information about its portfolios. - -------------------------------------------------------------------------------- WHAT IS THE EQUITABLE ACCUMULATOR? Equitable Accumulator is a deferred annuity contract issued by THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES. It provides for the accumulation of retirement savings and for income. The contract offers income and death benefit protection. It also offers a number of payout and distribution options. The distribution options available under the contract are the Assured Payment Option and APO Plus. You invest to accumulate value on a tax-deferred basis in one or more of our variable investment options, fixed maturity options, or the account for special dollar cost averaging ("investment options"). - ------------------------------------------------------------------------------------ VARIABLE INVESTMENT OPTIONS - ------------------------------------------------------------------------------------ FIXED INCOME OPTIONS - ------------------------------------------------------------------------------------ DOMESTIC FIXED INCOME AGGRESSIVE FIXED INCOME - ------------------------------------------------------------------------------------ o Alliance Intermediate o Alliance High Yield Government Securities o Alliance Money Market - ------------------------------------------------------------------------------------ EQUITY OPTIONS - ------------------------------------------------------------------------------------ DOMESTIC EQUITY - ------------------------------------------------------------------------------------ o Alliance Common Stock o MFS Growth with Income o Alliance Growth and Income o MFS Research o EQ/Alliance Premier Growth o Merrill Lynch Basic Value Equity o BT Equity 500 Index o EQ/Putnam Growth & Income Value o Capital Guardian Research o T. Rowe Price Equity Income o Capital Guardian U.S. Equity - ------------------------------------------------------------------------------------ INTERNATIONAL EQUITY - ------------------------------------------------------------------------------------ o Alliance Global o Morgan Stanley Emerging Markets Equity o Alliance International o T. Rowe Price International Stock o BT International Equity Index - ------------------------------------------------------------------------------------ AGGRESSIVE EQUITY - ------------------------------------------------------------------------------------ o Alliance Aggressive Stock o MFS Emerging Growth Companies o Alliance Small Cap Growth o Warburg Pincus Small Company Value o BT Small Company Index o EQ/Evergreen - ------------------------------------------------------------------------------------ ASSET ALLOCATION OPTIONS - ------------------------------------------------------------------------------------ o Alliance Conservative Investors o Merrill Lynch World Strategy o Alliance Growth Investors o EQ/Putnam Balanced o EQ/Evergreen Foundation - ------------------------------------------------------------------------------------ Alliance Equity Index (Available only under APO Plus) - ------------------------------------------------------------------------------------
You may allocate amounts to any of the variable investment options. Each variable investment option is a subaccount of our Separate Account No. 45. Each variable investment option, in turn, invests in a corresponding securities portfolio of EQ Advisors Trust. Your investment results in a variable investment option will depend on the investment performance of the related portfolio. FIXED MATURITY OPTIONS. You may allocate amounts to one or more fixed maturity options. These amounts will receive a fixed rate of interest for a specified period. Interest is earned at a guaranteed rate set by us. We make a market value adjustment (up or down) if you make transfers or withdrawals from a fixed maturity option before its maturity date. ACCOUNT FOR SPECIAL DOLLAR COST AVERAGING. This account also pays fixed interest at guaranteed rates. TYPES OF CONTRACTS. We offer the contracts for use as: o A nonqualified annuity ("NQ") for after-tax contributions o only. An individual retirement annuity ("IRA"), either traditional IRA or Roth IRA. o We offer two versions of the traditional IRA: "Rollover IRA" and "Flexible Premium IRA." The Assured Payment Option and APO Plus are available under Rollover IRA and Flexible Premium IRA contracts. We also offer two versions of the Roth IRA: "Roth Conversion IRA" and "Flexible Premium Roth IRA." o An annuity that is an investment vehicle for a qualified o defined contribution or defined benefit plan ("QP"). o An Internal Revenue Code Section 403(b) Tax-Sheltered o Annuity ("TSA") - ("Rollover TSA"). A contribution of at least $5,000 is required to purchase an NQ, Rollover IRA, Roth Conversion IRA, QP or Rollover TSA contract. For Flexible Premium IRA or Flexible Premium Roth IRA contracts, we require a contribution of $2,000 to purchase a contract. Under Rollover IRA or Flexible Premium IRA contracts you may elect the Assured Payment Option or APO Plus with a minimum initial contribution of $10,000. Registration statements relating to this offering have been filed with the Securities and Exchange Commission ("SEC"). The statement of additional information ("SAI") dated , 2000 is a part of one of the registration statements. The SAI is available free of charge. You may request one by writing to our processing office or calling 1-800-789-7771. The SAI has been incorporated by reference into this prospectus. This prospectus and the SAI can also be obtained from the SEC's Web site at http://www.sec.gov. The table of contents for the SAI appears at the back of this prospectus. THE SEC HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE CONTRACTS ARE NOT INSURED BY THE FDIC OR ANY OTHER AGENCY. THEY ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK AND ARE NOT BANK GUARANTEED. THEY ARE SUBJECT TO INVESTMENT RISKS AND POSSIBLE LOSS OF PRINCIPAL. Contents of this prospectus - ---------------- 2 - -------------------------------------------------------------------------------- EQUITABLE ACCUMULATORSM - ------------------------------------------------------------------ Index of key words and phrases 4 Who is Equitable Life? 5 How to reach us 6 Equitable Accumulator at a glance - key features 8 - ------------------------------------------------------------------ FEE TABLE 11 - ------------------------------------------------------------------ Examples 14 - ------------------------------------------------------------------ - ------------------------------------------------------------------ CONTRACT FEATURES AND BENEFITS 16 - ------------------------------------------------------------------ How you can purchase and contribute to your contract 16 Owner and annuitant requirements 21 How you can make your contributions 21 What are your investment options under the contract? 21 Allocating your contributions 27 Your benefit base 29 Annuity purchase factors 29 Our baseBUILDER option 29 Guaranteed minimum death benefit 31 Your right to cancel within a certain number of days 32 - ------------------------------------------------------------------ DETERMINING YOUR CONTRACT'S VALUE 33 - ------------------------------------------------------------------ Your account value and cash value 33 Your contract's value in the variable investment options 33 Your contract's value in the fixed maturity options 33 Your contract's value in the account for special dollar cost averaging 34 - -------------------------------------------------------------------------------- "We," "our," and "us" refer to Equitable Life. When we address the reader of this prospectus with words such as "you" and "your," we mean the person who has the right or responsibility that the prospectus is discussing at that point. This is usually the contract owner. When we use the word "contract" it also includes certificates that are issued under group contracts in some states.
- ---------- 3 - -------------------------------------------------------------------------------- - ------------------------------------------------------------------ TRANSFERRING YOUR MONEY AMONG INVESTMENT OPTIONS 35 - ------------------------------------------------------------------ Transferring your account value 35 Rebalancing your account value 35 - ------------------------------------------------------------------ ACCESSING YOUR MONEY 36 - ------------------------------------------------------------------ Assured Payment Option and APO Plus 36 Withdrawing your account value 40 How withdrawals are taken from your account value 42 How withdrawals affect your guaranteed minimum income benefit and guaranteed minimum death benefit 42 Loans under Rollover TSA contracts 43 Surrendering your contract to receive its cash value 44 When to expect payments 44 Your annuity payout options 44 - ------------------------------------------------------------------ CHARGES AND EXPENSES 48 - ------------------------------------------------------------------ Charges that Equitable Life deducts 48 Charges that EQ Advisors Trust deducts 51 Group or sponsored arrangements 51 Other distribution arrangements 51 - ------------------------------------------------------------------ PAYMENT OF DEATH BENEFIT 52 - ------------------------------------------------------------------ Your beneficiary and payment of benefit 52 How death benefit payment is made 53 Beneficiary continuation option for Rollover IRA and Flexible Premium IRA contracts 53 - ------------------------------------------------------------------ TAX INFORMATION 55 - ------------------------------------------------------------------ Overview 55 Transfers among investment options 55 Taxation of nonqualified annuities 55 Special rules for NQ contracts issued in Puerto Rico 56 Individual retirement arrangements (IRAs) 57 Special rules for nonqualified contracts in qualified plans 68 Tax-Sheltered Annuity contracts (TSAs) 68
Federal and state income tax withholding and information reporting 72 Impact of taxes to Equitable Life 74 - ------------------------------------------------------------------ MORE INFORMATION 75 - ------------------------------------------------------------------ About our Separate Account No. 45 75 About EQ Advisors Trust 75 About our fixed maturity options 76 About the general account 77 About other methods of payment 77 Dates and prices at which contract events occur 78 About your voting rights 79 About legal proceedings 80 About our independent accountants 80 Financial statements 80 Transfers of ownership, collateral assignments, loans, and borrowing 80 Distribution of the contracts 80 - ------------------------------------------------------------------ INVESTMENT PERFORMANCE 82 - ------------------------------------------------------------------ Benchmarks 82 Communicating performance data 93 - ------------------------------------------------------------------ INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE 95 - ------------------------------------------------------------------ - ------------------------------------------------------------------ APPENDICES - ------------------------------------------------------------------ I - Purchase considerations for QP contracts A-1 II - Market value adjustment example B-1 III - Guaranteed minimum death benefit example C-1 IV - Example of payments under the Assured Payment Option and APO Plus D-1 V - Assured Payment Option and APO Plus contracts issued in the state of Maryland E-1 - ------------------------------------------------------------------ STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS - ------------------------------------------------------------------
Index of key words and phrases - -------- 4 - -------------------------------------------------------------------------------- This index should help you locate more information on the terms used in this prospectus.
PAGE account for special dollar cost averaging 25 account value 33 annuitant 16 annuity payout options 44 APO Plus 38 Assured Payment Option 35 baseBUILDER 28 beneficiary 51 benefit base 28 business day 76 cash value 33 conduit IRA 60 contract date 9 contract date anniversary 9 contract year 9 contributions to Roth IRAs 64 regular contributions 64 rollover contributions 64 conversion contributions 65 direct custodian-to-custodian transfers 64 contributions to traditional IRAs 56 regular contributions 57 rollover contributions 59 direct custodian-to-custodian transfers 59 ERISA 42 fixed maturity amount 23 fixed maturity options 23
PAGE Flexible Premium IRA cover Flexible Premium Roth IRA cover guaranteed minimum death benefit 30 guaranteed minimum income benefit 28 IRA 56 IRS 54 investment options 20 loan reserve account 43 market adjusted amount 23 market value adjustment 24 maturity value 23 NQ 54 participant 20 portfolio cover processing office 6 QP 67 rate to maturity 23 Required Beginning Date 60 Rollover IRA cover Rollover TSA cover Roth Conversion IRA cover Roth IRA 63 SAI cover SEC cover TOPS 6 TSA 67 traditional IRA 56 unit 33 variable investment options 20
To make this prospectus easier to read, we sometimes use different words than in the contract or supplemental materials. This is illustrated below. Although we use different words, they have the same meaning in this prospectus as in the contract or supplemental materials. Your financial professional can provide further explanation about your contract.
PROSPECTUS CONTRACT OR SUPPLEMENTAL MATERIALS fixed maturity options Guarantee Periods (GIROs in Supplemental Materials) variable investment options Investment Funds account value Annuity Account Value rate to maturity Guaranteed Rates unit Accumulation Unit
Who is Equitable Life? - ---------------- 5 - -------------------------------------------------------------------------------- We are The Equitable Life Assurance Society of the United States ("Equitable Life"), a New York stock life insurance corporation. We have been doing business since 1859. Equitable Life is a wholly owned subsidiary of AXA Financial, Inc. (previously, The Equitable Companies Incorporated). The majority shareholder of AXA Financial, Inc. is AXA, a French holding company for an international group of insurance and related financial services companies. As a majority shareholder, and under its other arrangements with Equitable Life and Equitable Life's parent, AXA exercises significant influence over the operations and capital structure of Equitable Life and its parent. No company other than Equitable Life, however, has any legal responsibility to pay amounts that Equitable Life owes under the contract. AXA Financial, Inc. and its consolidated subsidiaries managed approximately $394.4 billion in assets as of September 30, 1999. For over 100 years Equitable Life has been among the largest insurance companies in the United States. We are licensed to sell life insurance and annuities in all fifty states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands. Our home office is located at 1290 Avenue of the Americas, New York, N.Y. 10104. - ---------- 6 - -------------------------------------------------------------------------------- HOW TO REACH US You may communicate with our Processing Office as listed below for any of the following purposes: - --------------------------------------------- FOR CONTRIBUTIONS SENT BY REGULAR MAIL: - --------------------------------------------- Equitable Accumulator P.O. Box 13014 Newark, NJ 07188-0014 - --------------------------------------------- FOR CONTRIBUTIONS SENT BY EXPRESS DELIVERY: - --------------------------------------------- Equitable Accumulator c/o Bank One, N.A. 300 Harmon Meadow Boulevard, 3rd Floor Attn: Box 13014 Secaucus, NJ 07094 - --------------------------------------------- FOR ALL OTHER COMMUNICATIONS (E.G., REQUESTS FOR TRANSFERS, WITHDRAWALS, OR REQUIRED NOTICES) SENT BY REGULAR MAIL: - --------------------------------------------- Equitable Accumulator P.O. Box 1547 Secaucus, NJ 07096-1547 - --------------------------------------------- FOR ALL OTHER COMMUNICATIONS (E.G., REQUESTS FOR TRANSFERS, WITHDRAWALS, OR REQUIRED NOTICES) SENT BY EXPRESS DELIVERY: - --------------------------------------------- Equitable Accumulator 200 Plaza Drive, 4th Floor Secaucus, NJ 07094 - --------------------------------------------- REPORTS WE PROVIDE: - --------------------------------------------- o written confirmation of financial transactions; o statement of your contract values at the close of each calendar quarter (four per year); and o annual statement of your contract values as of the close of the contract year. - ------------------------------------ TELEPHONE OPERATED PROGRAM SUPPORT ("TOPS") AND EQ ACCESS SYSTEM: - ------------------------------------ TOPS is designed to provide you with up-to-date information via touch-tone telephone. EQ Access is designed to provide this information through the Internet. You can obtain information on: o your current account value; o your current allocation percentages; o the number of units you have in the variable investment options; o rates to maturity for the fixed maturity options; and o the daily unit values for the variable investment options. You can also: o change your allocation percentages and/or transfer among the investment options; and o change your personal identification number (PIN). TOPS and EQ Access are normally available seven days a week, 24 hours a day. You may use TOPS by calling toll free 1-888-909-7770. You may use EQ Access by visiting our Web site at http://www.equitable.com and clicking on EQ Access. Of course, for reasons beyond our control, these services may sometimes be unavailable. We have established procedures to reasonably confirm that the instructions communicated by telephone or Internet are genuine. For example, we will require certain personal identification information before we will act on telephone or Internet instructions and we will provide written confirmation of your transfers. If we do not employ reasonable procedures to confirm the genuineness of telephone or Internet instructions, we may be liable for any losses arising out of any act or omission that constitutes negligence, lack of good faith, or willful misconduct. In light of our procedures, we will not be liable for following telephone or Internet instructions we reasonably believe to be genuine. - ---------- 7 - -------------------------------------------------------------------------------- - --------------------------------------------------------------- CUSTOMER SERVICE REPRESENTATIVE: - --------------------------------------------------------------- You may also use our toll-free number (1-800-789-7771) to speak with one of our customer service representatives. Our customer service representatives are available on any business day from 8:30 a.m. until 5:30 p.m., Eastern time. You should send all contributions, notices, and requests to our processing office at the address above. WE REQUIRE THAT THE FOLLOWING TYPES OF COMMUNICATIONS BE ON SPECIFIC FORMS WE PROVIDE FOR THAT PURPOSE: (1) conversion of a traditional IRA contract to a Roth Conversion IRA or Flexible Premium Roth IRA contract; (2) election of the Assured Payment Option or APO Plus; (3) election of the automatic investment program; (4) election of the rebalancing program; (5) requests for loans under Rollover TSA contracts; (6) spousal consent for loans under Rollover TSA contracts; (7) contract surrender and withdrawal requests; (8) tax withholding election; and (9) election of the beneficiary continuation option. WE ALSO HAVE SPECIFIC FORMS THAT WE RECOMMEND YOU USE FOR THE FOLLOWING TYPES OF REQUESTS: (1) address changes; (2) beneficiary changes; and (3) transfers between investment options. TO CANCEL OR CHANGE ANY OF THE FOLLOWING WE REQUIRE WRITTEN NOTIFICATION GENERALLY AT LEAST SEVEN CALENDAR DAYS BEFORE THE NEXT SCHEDULED TRANSACTION: (1) automatic investment program; (2) general dollar cost averaging; (3) rebalancing; (4) special dollar cost averaging; (5) Assured Payment Option or APO Plus; (6) substantially equal withdrawals; (7) systematic withdrawals; and (8) the date annuity payments are to begin. You must sign and date all these requests. Any written request that is not on one of our forms must include your name and your contract number along with adequate details about the notice you wish to give or the action you wish us to take. SIGNATURES: The proper person to sign forms, notices and requests would normally be the owner. If there are joint owners both must sign. Equitable Accumulator at a glance - key features - -------- 8 - -------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- PROFESSIONAL Equitable Accumulator's variable investment options invest in 30 different portfolios managed INVESTMENT by professional investment advisers. MANAGEMENT - ---------------------------------------------------------------------------------------------------------------------------- FIXED MATURITY o 10 fixed maturity options with maturities ranging from approximately 1 to 10 years. Under OPTIONS the Assured Payment Option and APO Plus, 5 additional fixed maturity options with maturities ranging from 11 to 15 years. o Each fixed maturity option offers a guarantee of principal and interest rate if you hold it to maturity. ----------------------------------------------------------------------------------------------- If you make withdrawals or transfers from a fixed maturity option before maturity, there will be a market value adjustment due to differences in interest rates. This may increase or decrease any value that you have left in that fixed maturity option. If you surrender your contract, a market value adjustment may also apply. - ---------------------------------------------------------------------------------------------------------------------------- ACCOUNT FOR SPECIAL DOLLAR Available for dollar cost averaging all or a portion of your initial contribution. COST AVERAGING - ---------------------------------------------------------------------------------------------------------------------------- TAX ADVANTAGES o On earnings inside the No tax on any dividends, interest or capital gains until you contract make withdrawals from your contract or receive annuity payments. ----------------------------------------------------------------------------------------------- o On transfers inside the No tax on transfers among investment options. contract ----------------------------------------------------------------------------------------------- If you are buying a contract to fund a retirement plan that already provides tax deferral under sections of the Internal Revenue Code (such as IRA, QP, and Rollover TSA), you should do so for the contract's features and benefits other than tax deferral. In such situations, the tax deferral of the contract does not provide additional benefits. - ---------------------------------------------------------------------------------------------------------------------------- BASEBUILDER(Reg. TM) baseBUILDER combines a guaranteed minimum income benefit with the guaranteed minimum PROTECTION death benefit provided under the contract. The guaranteed minimum income benefit provides income protection for you while the annuitant lives. The guaranteed minimum death benefit provides a death benefit for the beneficiary should the annuitant die. For Rollover IRA, Flexible Premium IRA and Rollover TSA Contracts, an additional guaranteed minimum death benefit is available under baseBUILDER where the annuitant is between ages 20 and 60 at contract issue. - ---------------------------------------------------------------------------------------------------------------------------- CONTRIBUTION AMOUNTS o NQ, Rollover IRA, Roth Conversion IRA, QP, and Rollover TSA contracts o Initial minimum: $ 5,000 o Additional minimum: $ 1,000 $100 monthly and $300 quarterly under our automatic investment program (NQ contracts) ----------------------------------------------------------------------------------------------- o Flexible Premium IRA and Flexible Premium Roth IRA contracts o Initial minimum: $ 2,000 o Additional minimum: $50 ($50 under our automatic investment program) ----------------------------------------------------------------------------------------------- o Assured Payment Option and APO Plus under Rollover IRA and Flexible Premium IRA contracts o Initial minimum: $10,000 - ----------------------------------------------------------------------------------------------------------------------------
- ----- 9 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- o Additional minimum: $1,000 -------------------------------------------------------- Maximum contribution limitations may apply. - ------------------------------------------------------------------------------- ACCESS TO YOUR MONEY o Assured Payment Option o APO Plus o Lump sum withdrawals o Several withdrawal options on a periodic basis o Loans under Rollover TSA contracts o Contract surrender You may incur a withdrawal charge for certain withdrawals or if you surrender your contract. You may also incur income tax and a tax penalty. - ------------------------------------------------------------------------------- PAYOUT ALTERNATIVES o Annuity payout options o Income Manager(Reg. TM) payout options - ------------------------------------------------------------------------------- ADDITIONAL FEATURES o Guaranteed minimum death benefit even if you do not elect baseBUILDER o Dollar cost averaging o Automatic investment program o Account value rebalancing (quarterly, semiannually, and annually) o Unlimited free transfers o Waiver of withdrawal charge for disability, terminal illness, or confinement to a nursing home - ------------------------------------------------------------------------------- FEES AND CHARGES o Daily charges on amounts invested in the variable investment options for mortality and expense risks, administrative charges and distribution charges at an annual rate of 1.55%. o Annual 0.30% benefit base charge for the optional baseBUILDER benefit until you exercise your guaranteed minimum income benefit, elect another annuity payout option or the contract date anniversary after the annuitant reaches age 85, whichever occurs first. The benefit base is described under "Your benefit base" in "Contract features and benefits." If you do not elect baseBUILDER, you still receive a guaranteed minimum death benefit under your contract at no additional charge. o Under Flexible Premium IRA and Flexible Premium Roth IRA contracts, if your account value at the end of the contract year is less than $25,000, we deduct an annual administrative charge equal to $30 or during the first two contract years 2% of your account value, if less. If your account value is $25,000 or more, we will not deduct the charge. o No sales charge deducted at the time you make contributions. - -------------------------------------------------------------------------------
- ----- 10 - -------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- FEES AND o During the first seven contract years following a CHARGES (CONTINUED) contribution, a charge will be deducted from amounts that you withdraw that exceed 15% of your account value. We use the account value on the most recent contract date anniversary to calculate this 15% amount available. The charge begins at 7% in the first contract year following a contribution. It declines by 1% each year to 1% in the seventh contract year. There is no withdrawal charge in the eighth and later contract years following a contribution. In addition, there is no withdrawal charge if the annuitant is age 86 or older when the contract is issued. Certain other exemptions apply. ------------------------------------------------------ The "contract date" is the effective date of a contract. This usually is the business day we receive your initial contribution. Your contract date will be shown in your contract. The 12-month period beginning on your contract date and each 12-month period after that date is a "contract year." The end of each 12-month period is your "contract date anniversary." ------------------------------------------------------ o We deduct a charge for taxes such as premium taxes that may be imposed in your state. This charge is generally deducted from the amount applied to an annuity payout option. o We generally deduct a $350 annuity administrative fee from amounts applied to purchase certain life annuity payout options. o Annual expenses of EQ Advisors Trust portfolios are calculated as a percentage of the average daily net assets invested in each portfolio. These expenses include management fees ranging from 0.25% to 1.15% annually, 12b-1 fees of 0.25% annually, and other expenses. - ------------------------------------------------------------------------------- ANNUITANT ISSUE AGES NQ: 0-90 Rollover IRA, Roth Conversion IRA, Flexible Premium Roth IRA, and Rollover TSA: 20-90 Flexible Premium IRA: 20-70 Assured Payment Option and APO Plus: 53 1/2-83 QP: 20-75 - -------------------------------------------------------------------------------
THE ABOVE IS NOT A COMPLETE DESCRIPTION OF ALL MATERIAL PROVISIONS OF THE CONTRACT. IN SOME CASES RESTRICTIONS OR EXCEPTIONS APPLY. ALSO, ALL FEATURES OF THE CONTRACT ARE NOT NECESSARILY AVAILABLE IN YOUR STATE OR AT CERTAIN AGES. For more detailed information we urge you to read the contents of this prospectus, as well as your contract. Please feel free to speak with your financial professional, or call us, if you have any questions. OTHER CONTRACTS We offer a variety of fixed and variable annuity contracts. They may offer features, including investment options, fees and/or charges that are different from those in the contracts offered by this prospectus. Not every contract is offered through the same distributor. Upon request, your financial professional can show you information regarding other Equitable Life annuity contracts that he or she distributes. You can also contact us to find out more about any of the Equitable Life annuity contracts. Fee table - -------- 11 - -------------------------------------------------------------------------------- The fee table below will help you understand the various charges and expenses that apply to your contract. The table reflects charges you will directly incur under the contract, as well as charges and expenses of the Portfolios that you will bear indirectly. Charges for taxes, such as premium taxes, may also apply. Also, an annuity administrative fee may apply when your annuity payments are to begin. Each of the charges and expenses is more fully described in "Charges and expenses" later in this prospectus. For a complete description of portfolio charges and expenses, please see the attached prospectus for EQ Advisors Trust. The fixed maturity options and the account for special dollar cost averaging are not covered by the fee table and examples. However, the annual administrative charge and the withdrawal charge do apply to the fixed maturity options and the account for special dollar cost averaging. A market value adjustment (up or down) may apply as a result of a withdrawal, transfer, or surrender of amounts from a fixed maturity option. - ---------------------------------------------------------------------------------------------------------------- CHARGES WE DEDUCT FROM YOUR VARIABLE INVESTMENT OPTIONS EXPRESSED AS AN ANNUAL PERCENTAGE OF DAILY NET ASSETS - ---------------------------------------------------------------------------------------------------------------- Mortality and expense risks (1) 1.10% Administrative (2) 0.25% Distribution 0.20% ---- Total annual expenses 1.55% - ---------------------------------------------------------------------------------------------------------------- FLEXIBLE PREMIUM IRA AND FLEXIBLE PREMIUM ROTH IRA CONTRACTS ONLY: CHARGES WE DEDUCT FROM YOUR ACCOUNT VALUE ON EACH CONTRACT DATE ANNIVERSARY - ---------------------------------------------------------------------------------------------------------------- Maximum annual administrative charge(3) If your account value on a contract date anniversary is less than $25,000 $ 30 If your account value on a contract date anniversary is $25,000 or more $ 0 - ---------------------------------------------------------------------------------------------------------------- CHARGES WE DEDUCT FROM YOUR ACCOUNT VALUE AT THE TIME YOU REQUEST CERTAIN TRANSACTIONS - ---------------------------------------------------------------------------------------------------------------- WITHDRAWAL CHARGE AS A PERCENTAGE OF CONTRIBUTIONS (deducted if you surrender Contract your contract or make certain withdrawals. The withdrawal charge percentage we use is year determined by the contract year in which you make the withdrawal or surrender your 1............7.00% contract. For each contribution, we consider the contract year in which we receive that 2............6.00% contribution to be "contract year 1")(4) 3............5.00% 4............4.00% 5............3.00% 6............2.00% 7............1.00% 8+...........0.00% Charge if you elect a life annuity payout option $350 - ---------------------------------------------------------------------------------------------------------------- CHARGES WE DEDUCT FROM YOUR ACCOUNT VALUE EACH YEAR IF YOU ELECT THE OPTIONAL BENEFIT - ---------------------------------------------------------------------------------------------------------------- BASEBUILDER BENEFITS CHARGE (calculated as a percentage of the benefit base. Deducted annually on each contract date anniversary)(5) 0.30% - ----------------------------------------------------------------------------------------------------------------
- ----- 12 - -------------------------------------------------------------------------------- EQ ADVISORS TRUST ANNUAL EXPENSES (AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS IN EACH PORTFOLIO)
TOTAL OTHER ANNUAL EXPENSES EXPENSES MANAGEMENT (AFTER EXPENSE (AFTER EXPENSE FEES(6) 12B-1 FEE(7) LIMITATION)(8) LIMITATION)(9) -------------- ---------------- ---------------- --------------- Alliance Aggressive Stock 0.54% 0.25% 0.04% 0.83% Alliance Common Stock 0.36% 0.25% 0.04% 0.65% Alliance Conservative Investors 0.48% 0.25% 0.06% 0.79% Alliance Equity Index 0.31% 0.25% 0.04% 0.60% Alliance Global 0.64% 0.25% 0.08% 0.97% Alliance Growth and Income 0.55% 0.25% 0.04% 0.84% Alliance Growth Investors 0.51% 0.25% 0.05% 0.81% Alliance High Yield 0.60% 0.25% 0.04% 0.89% Alliance Intermediate Government Securities 0.50% 0.25% 0.06% 0.81% Alliance International 0.90% 0.25% 0.17% 1.32% Alliance Money Market 0.35% 0.25% 0.03% 0.63% EQ/Alliance Premier Growth 0.90% 0.25% 0.00% 1.15% Alliance Small Cap Growth 0.90% 0.25% 0.06% 1.21% BT Equity 500 Index 0.25% 0.25% 0.05% 0.55% BT International Equity Index 0.35% 0.25% 0.40% 1.00% BT Small Company Index 0.25% 0.25% 0.25% 0.75% Capital Guardian Research 0.65% 0.25% 0.05% 0.95% Capital Guardian U.S. Equity 0.65% 0.25% 0.05% 0.95% EQ/Evergreen 0.75% 0.25% 0.05% 1.05% EQ/Evergreen Foundation 0.63% 0.25% 0.07% 0.95% Merrill Lynch Basic Value Equity 0.55% 0.25% 0.05% 0.85% Merrill Lynch World Strategy 0.70% 0.25% 0.25% 1.20% MFS Emerging Growth Companies 0.55% 0.25% 0.05% 0.85% MFS Growth with Income 0.55% 0.25% 0.05% 0.85% MFS Research 0.55% 0.25% 0.05% 0.85% Morgan Stanley Emerging Markets Equity 1.15% 0.25% 0.35% 1.75% EQ/Putnam Balanced 0.55% 0.25% 0.10% 0.90% EQ/Putnam Growth & Income Value 0.55% 0.25% 0.05% 0.85% T. Rowe Price Equity Income 0.55% 0.25% 0.05% 0.85% T. Rowe Price International Stock 0.75% 0.25% 0.20% 1.20% Warburg Pincus Small Company Value 0.65% 0.25% 0.10% 1.00%
Notes: (1) A portion of this charge is for providing the guaranteed minimum death benefit. (2) We reserve the right to increase this charge to a maximum annual rate of 0.35%. (3) During the first two contract years this charge is equal to the lesser of $30 or 2% of your account value if it applies. Thereafter, the charge is $30 for each contract year. (4) Deducted upon a withdrawal of amounts in excess of the 15% free withdrawal amount and upon surrender of a contract. - ----- 13 - -------------------------------------------------------------------------------- (5) This charge is for providing a guaranteed minimum income benefit in combination with the guaranteed minimum death benefit available under the contract. The charge for the 5% roll up to age 70 baseBUILDER benefit is 0.15%. The benefit base is described under "Our baseBUILDER Option" in "Contract features and benefits." (6) The management fee for each portfolio cannot be increased without a vote of that portfolio's shareholders. (7) Portfolio shares are all subject to fees imposed under the distribution plan (the "Rule 12b-1 Plan") adopted by EQ Advisors Trust pursuant to Rule 12b-1 under the Investment Company Act of 1940. The 12b-1 fee will not be increased for the life of the contracts. Prior to October 18, 1999, the total annual expenses for the Alliance Small Cap Growth portfolio were limited to 1.20% under an expense limitation arrangement related to that portfolio's Rule 12b-1 Plan. The arrangement is no longer in effect. The amounts shown have been restated to reflect the expenses that would have been incurred in 1998, absent the expense limitation arrangement. (8) The amounts shown as "Other Expenses" will fluctuate from year to year depending on actual expenses. See footnote (9) for any expense limitation agreements. On October 18, 1999 the Alliance portfolios (other than EQ/Alliance Premier Growth) became part of the portfolios of EQ Advisors Trust. The "Other Expenses" for these portfolios have been restated to reflect the estimated expenses that would have been incurred had these portfolios been portfolios of EQ Advisors Trust for the year ended December 31, 1998. The restated expenses reflect an increase of 0.01%. (9) Equitable Life, EQ Advisors Trust's manager, has entered into an expense limitation agreement with respect to certain portfolios. Under this agreement Equitable Life has agreed to waive or limit its fees and assume other expenses. Under the expense limitation agreement, total annual operating expenses of certain portfolios (other than interest, taxes, brokerage commissions, capitalized expenditures, extraordinary expenses, and 12b-1 fees) are limited as a percentage of the average daily net assets of each of the following portfolios: 0.90% for EQ/Alliance Premier Growth; 0.30% for BT Equity 500 Index; 0.75% for BT International Equity Index; 0.50% for BT Small Company Index; 0.70% for Capital Guardian Research and Capital Guardian U.S. Equity; 0.80% for EQ/Evergreen; 0.70% for EQ/Evergreen Foundation; 0.60% for Merrill Lynch Basic Value Equity, MFS Emerging Growth Companies, MFS Growth with Income, and MFS Research; 0.95% for Merrill Lynch World Strategy; 1.50% for Morgan Stanley Emerging Markets Equity; 0.65% for EQ/Putnam Balanced; 0.60% for EQ/Putnam Growth & Income Value and T. Rowe Price Equity Income; 0.95% for T. Rowe Price International Stock; and 0.75% for Warburg Pincus Small Company Value. The expenses shown for the BT International Equity Index and BT Small Company Index portfolios reflect an increase effective on May 1, 1999. Absent the expense limitation, the "Other Expenses" for 1998 on an annualized basis for each of the portfolios would have been as follows: 0.33% for BT Equity 500 Index; 0.89% for BT International Equity Index; 1.31% for BT Small Company Index; 0.26% for Merrill Lynch Basic Value Equity; 0.66% for Merrill Lynch World Strategy; 0.24% for MFS Emerging Growth Companies; 0.25% for MFS Research; 1.23% for Morgan Stanley Emerging Markets Equity; 0.45% for EQ/Putnam Balanced; 0.24% for EQ/Putnam Growth & Income Value and T. Rowe Price Equity Income; 0.40% for T. Rowe Price International Stock; and 0.27% for Warburg Pincus Small Company Value. For the following portfolios, the "Other Expenses" for 1999, absent the expense limitation, are estimated to be as follows: 0.74% for EQ/Alliance Premier Growth, Capital Guardian Research, and Capital Guardian U.S. Equity; 0.76% for EQ/Evergreen; 0.86% for EQ/Evergreen Foundation; and 0.59% for MFS Growth with Income. Initial seed capital was invested on December 31, 1998 for the EQ/Evergreen, EQ/Evergreen Foundation, and MFS Growth with Income portfolios and April 30, 1999 for the EQ/Alliance Premier Growth, Capital Guardian Research, and Capital Guardian U.S. Equity portfolios and therefore expenses have been estimated. Each portfolio may at a later date make a reimbursement to Equitable Life for any of the management fees waived or limited and other expenses assumed and paid by Equitable Life pursuant to the expense limitation agreement provided that, among other things, such portfolio has reached sufficient size to permit such reimbursement to be made and provided that the portfolio's current annual operating expenses do not exceed the operating expense limit determined for such portfolio. For more information see the prospectus for EQ Advisors Trust. - ----- 14 - -------------------------------------------------------------------------------- EXAMPLES The examples below show the expenses that a hypothetical contract owner who has purchased a Flexible Premium IRA or Flexible Premium Roth IRA contract would pay in the situations illustrated. The examples show the expenses if (1) baseBUILDER is elected with a 5% roll up to age 80 or annual ratchet to age 80 guaranteed minimum death benefit and (2) APO Plus is elected. We assume that a $1,000 contribution is invested in one of the variable investment options listed and a 5% annual return is earned on the assets in that option.(1) The annual administrative charge is based on charges that apply to a mix of estimated contract sizes, resulting in an estimated administrative charge for the purpose of these examples of $0.57 per $1,000. Since the annual administrative charge only applies under Flexible Premium IRA and Flexible Premium Roth IRA contracts, the charges shown in the examples would be lower for NQ, Rollover IRA, Roth Conversion IRA, QP, and Rollover TSA contracts. These examples should not be considered a representation of past or future expenses for each option. Actual expenses may be greater or less than those shown. Similarly, the annual rate of return assumed in the examples is not an estimate or guarantee of future investment performance. (1) EXPENSES REFLECTING BASEBUILDER ELECTION
IF YOU SURRENDER YOUR CONTRACT AT THE END OF EACH PERIOD SHOWN, THE EXPENSES WOULD BE: ------------------------------------------------- 1 YEAR 3 YEARS 5 YEARS 10 YEARS ----------- ------------ ------------ ----------- Alliance Aggressive Stock $ 94.69 $ 132.13 $ 172.40 $ 306.52 Alliance Common Stock $ 92.91 $ 126.77 $ 163.49 $ 288.86 Alliance Conservative Investors $ 94.30 $ 130.95 $ 170.44 $ 302.63 Alliance Global $ 96.08 $ 136.28 $ 179.30 $ 320.06 Alliance Growth and Income $ 94.79 $ 132.43 $ 172.91 $ 307.50 Alliance Growth Investors $ 94.49 $ 131.53 $ 171.42 $ 304.58 Alliance High Yield $ 95.29 $ 133.91 $ 175.37 $ 312.35 Alliance Intermediate Government Securities $ 94.49 $ 131.53 $ 172.42 $ 304.58 Alliance International $ 99.56 $ 146.61 $ 196.34 $ 353.12 Alliance Money Market $ 92.71 $ 126.18 $ 162.50 $ 286.88 EQ/Alliance Premier Growth $ 97.87 $ 141.59 - - Alliance Small Cap Growth $ 98.46 $ 143.37 $ 191.01 $ 342.85 BT Equity 500 Index $ 91.91 $ 123.78 $ 158.50 $ 278.91 BT International Equity Index $ 96.38 $ 137.17 $ 180.77 $ 322.94 BT Small Company Index $ 93.90 $ 129.75 $ 168.45 $ 298.71 Capital Guardian Research $ 95.88 $ 135.69 - - Capital Guardian U.S. Equity $ 95.88 $ 135.69 - - EQ/Evergreen $ 96.88 $ 138.66 - - EQ/Evergreen Foundation $ 95.88 $ 135.69 - - Merrill Lynch Basic Value Equity $ 94.89 $ 132.71 $ 173.39 $ 308.48 IF YOU DO NOT SURRENDER YOUR CONTRACT AT THE END OF EACH PERIOD SHOWN, THE EXPENSES WOULD BE: ------------------------------------------------ 1 YEAR 3 YEARS 5 YEARS 10 YEARS ----------- ---------- ------------ ------------ Alliance Aggressive Stock $ 27.84 $ 85.60 $ 146.23 $ 311.41 Alliance Common Stock $ 26.06 $ 80.24 $ 137.32 $ 293.75 Alliance Conservative Investors $ 27.45 $ 84.42 $ 144.27 $ 307.52 Alliance Global $ 29.23 $ 89.75 $ 153.13 $ 324.95 Alliance Growth and Income $ 27.94 $ 85.90 $ 146.74 $ 312.39 Alliance Growth Investors $ 27.64 $ 85.00 $ 145.25 $ 309.47 Alliance High Yield $ 28.44 $ 87.38 $ 149.20 $ 317.24 Alliance Intermediate Government Securities $ 27.64 $ 85.00 $ 145.25 $ 309.47 Alliance International $ 32.71 $ 100.08 $ 170.17 $ 358.01 Alliance Money Market $ 25.86 $ 79.65 $ 136.33 $ 291.77 EQ/Alliance Premier Growth $ 31.02 $ 95.06 - - Alliance Small Cap Growth $ 31.61 $ 96.84 $ 164.84 $ 347.74 BT Equity 500 Index $ 25.06 $ 77.25 $ 132.33 $ 283.80 BT International Equity Index $ 29.53 $ 90.64 $ 154.60 $ 327.83 BT Small Company Index $ 27.05 $ 83.22 $ 142.28 $ 303.60 Capital Guardian Research $ 29.03 $ 89.16 - - Capital Guardian U.S. Equity $ 29.03 $ 89.16 - - EQ/Evergreen $ 30.03 $ 92.13 - - EQ/Evergreen Foundation $ 29.03 $ 89.16 - - Merrill Lynch Basic Value Equity $ 28.04 $ 86.18 $ 147.22 $ 313.37
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IF YOU SURRENDER YOUR CONTRACT AT THE END OF EACH PERIOD SHOWN, THE EXPENSES WOULD BE: ------------------------------------------------- 1 YEAR 3 YEARS 5 YEARS 10 YEARS ----------- ------------ ------------ ----------- Merrill Lynch World Strategy $ 98.36 $ 143.07 $ 190.52 $ 341.90 MFS Emerging Growth Companies $ 94.89 $ 132.71 $ 173.39 $ 308.48 MFS Growth with Income $ 94.89 $ 132.71 - - MFS Research $ 94.89 $ 132.71 $ 173.39 $ 308.48 Morgan Stanley Emerging Markets Equity $ 103.82 $ 159.20 $ 216.95 $ 392.22 EQ/Putnam Balanced $ 95.39 $ 134.20 $ 175.85 $ 313.31 EQ/Putnam Growth & Income Value $ 94.89 $ 132.71 $ 173.39 $ 308.48 T. Rowe Price Equity Income $ 94.89 $ 132.71 $ 173.39 $ 308.48 T. Rowe Price International Stock $ 98.36 $ 143.07 $ 190.52 $ 341.90 Warburg Pincus Small Company Value $ 96.38 $ 137.17 $ 180.77 $ 322.94 IF YOU DO NOT SURRENDER YOUR CONTRACT AT THE END OF EACH PERIOD SHOWN, THE EXPENSES WOULD BE: ------------------------------------------------ 1 YEAR 3 YEARS 5 YEARS 10 YEARS ----------- ---------- ------------ ------------ Merrill Lynch World Strategy $ 31.51 $ 96.54 $ 164.35 $ 346.79 MFS Emerging Growth Companies $ 28.04 $ 86.18 $ 147.22 $ 313.37 MFS Growth with Income $ 28.04 $ 86.18 - - MFS Research $ 28.04 $ 86.18 $ 147.22 $ 313.37 Morgan Stanley Emerging Markets Equity $ 36.97 $ 112.67 $ 190.78 $ 397.11 EQ/Putnam Balanced $ 28.54 $ 87.67 $ 149.68 $ 318.20 EQ/Putnam Growth & Income Value $ 28.04 $ 86.18 $ 147.22 $ 313.37 T. Rowe Price Equity Income $ 28.04 $ 86.18 $ 147.22 $ 313.37 T. Rowe Price International Stock $ 31.51 $ 96.54 $ 164.35 $ 346.79 Warburg Pincus Small Company Value $ 29.53 $ 90.64 $ 154.60 $ 327.83
(2) EXPENSES REFLECTING APO PLUS ELECTION
IF YOU SURRENDER YOUR CONTRACT AT THE END IF YOU DO NOT SURRENDER YOUR CONTRACT AT OF EACH PERIOD SHOWN, THE EXPENSES THE END OF EACH PERIOD SHOWN, THE WOULD BE: EXPENSES WOULD BE: ------------------------------------------- ------------------------------------------ 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS --------- ---------- ---------- ----------- --------- ---------- ---------- ---------- Alliance Common Stock $92.91 $120.53 $150.67 $258.01 $22.91 $70.53 $120.67 $258.01 Alliance Equity Index $92.41 $119.03 $148.16 $252.96 $22.41 $69.03 $118.16 $252.96
- ---------- (1) The amount accumulated from the $1,000 contribution could not be paid in the form of an annuity payout option at the end of any of the periods shown in the examples. This is because if the amount applied to purchase an annuity payout option is less than $2,000, or the initial payment is less than $20, we may pay the amount to you in a single sum instead of payments under an annuity payout option. See "Accessing your money." IF YOU ELECT A VARIABLE IMMEDIATE ANNUITY PAYOUT OPTION: Assuming an annuity payout option could be issued (see note (1) above), and you elect a Variable Immediate Annuity the expenses shown in the example for "if you do not surrender your contract" would, in each case, be increased by $4.43 based on the average amount applied to annuity payout options in 1998. See "Annuity administrative fee" in "Charges and expenses." Contract features and benefits - -------- 16 - -------------------------------------------------------------------------------- HOW YOU CAN PURCHASE AND CONTRIBUTE TO YOUR CONTRACT You may purchase a contract by making payments to us that we call "contributions." We require a minimum contribution amount for each type of contract purchased. The following table summarizes our rules regarding contributions to your contract. All ages in the table refer to the age of the annuitant named in the contract. - ------------------------------------------------------------------------------ The "annuitant" is the person who is the measuring life for determining contract benefits. The annuitant is not necessarily the contract owner. - ------------------------------------------------------------------------------
AVAILABLE CONTRACT FOR ANNUITANT MINIMUM LIMITATIONS ON TYPE ISSUE AGES CONTRIBUTIONS SOURCE OF CONTRIBUTIONS CONTRIBUTIONS NQ o 0 through 90 o $5,000 (initial) o After-tax money. o For annuitants up to age 83 at contract o 0 through 85 in o $1,000 (additional) o Paid to us by check or issue, additional New York and transfer of contract contributions may be Pennsylvania value in a tax-deferred made up to age 84. exchange under Section 1035 of the o For annuitants age 84 Internal Revenue Code. and older at contract issue, additional contributions may be made up to one year beyond the annuitant's issue age.
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AVAILABLE CONTRACT FOR ANNUITANT MINIMUM LIMITATIONS ON TYPE ISSUE AGES CONTRIBUTIONS SOURCE OF CONTRIBUTIONS CONTRIBUTIONS Flexible 20 through 70 o $2,000 (initial) o "Regular" traditional o No regular IRA Premium IRA IRA contributions. contributions in the o $50 (additional after calendar year you turn the first contract year) o Rollovers from a age 70 1/2 and qualified plan. thereafter. o Rollovers from a TSA. o Total regular o Rollovers from another contributions may traditional individual not exceed $2,000 for retirement a year. arrangement. o No additional rollover o Direct custodian- or direct transfer to-custodian transfers contributions after from another age 71. traditional individual o Rollover and direct retirement arrangement. transfer contributions after age 70 1/2 must be net of required minimum distributions. Although we accept rollover and direct transfer contributions under the Flexible Premium IRA contract, we intend that this contract be used for ongoing regular contributions.
- ----- 18 - --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------- AVAILABLE CONTRACT FOR ANNUITANT MINIMUM LIMITATIONS ON TYPE ISSUE AGES CONTRIBUTIONS SOURCE OF CONTRIBUTIONS CONTRIBUTIONS - ------------------------------------------------------------------------------------------------------------------------- Rollover IRA o 20 through 90 o $5,000 (initial) o Rollovers from a o For annuitants up to qualified plan. age 83 at contract o 20 through 85 in o $1,000 (additional) issue, additional New York and o Rollovers from a TSA. contributions may be Pennsylvania made up to age 84. o Rollovers from another traditional individual o For annuitants age 84 retirement and older at contract arrangement. issue, additional o Direct contributions may be custodian-to-custodian made up to one year transfers from another beyond your issue age. traditional individual o Contributions after retirement age 70 1/2 must be net arrangement. of required minimum distributions. o Regular IRA contributions are not permitted. Only rollover and direct transfer contributions are permitted under the Rollover IRA contract. - ------------------------------------------------------------------------------------------------------------------------- Flexible o 20 through 90 o $2,000 (initial) o Regular after-tax o For annuitants up to Premium contributions. age 83 at contract Roth IRA o 20 through 85 in o $50 (additional after issue, additional contributions may be New York and the first contract year) o Rollovers from another made up to age 84. Pennsylvania Roth IRA. o Conversion rollovers o For annuitants age 84 from a traditional IRA. and older at contract issue, o Direct transfers from additional another Roth IRA. contributions may be made up to one year beyond your issue age. o Contributions are subject to income limits and other tax rules. See "Contributions to Roth IRAs" in "Tax Information." Although we accept rollover and direct transfer contributions under the Flexible Premium Roth IRA contract, we intend that this contract be used for ongoing regular contributions. - -------------------------------------------------------------------------------------------------------------------------
- ----- 19 - --------------------------------------------------------------------------------
AVAILABLE CONTRACT FOR ANNUITANT MINIMUM LIMITATIONS ON TYPE ISSUE AGES CONTRIBUTIONS SOURCE OF CONTRIBUTIONS CONTRIBUTIONS Roth o 20 through 90 o $5,000 (initial) o Rollovers from another o For annuitants up to Conversion IRA Roth IRA. age 83 at contract o 20 through 85 in o $1,000 (additional) issue, additional New York and o Conversion rollovers contributions may be Pennsylvania from a traditional IRA. made up to age 84. o Direct transfers from another Roth IRA. o For annuitants age 84 and older at contract issue, additional contributions may be made up to one year beyond your issue age. o Conversion rollovers after age 70 1/2 must be net of required minimum distributions for the traditional IRA you are rolling over. o You cannot roll over funds from a traditional IRA if your adjusted gross income is $100,000 or more. o Regular after-tax contributions are not permitted. Only rollover and direct transfer contributions are permitted under the Roth Conversion IRA contract. - -------------------------------------------------------------------------------------------------------------------------
- ----- 20 - --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------- AVAILABLE CONTRACT FOR ANNUITANT MINIMUM LIMITATIONS ON TYPE ISSUE AGES CONTRIBUTIONS SOURCE OF CONTRIBUTIONS CONTRIBUTIONS - ------------------------------------------------------------------------------------------------------------------------- QP 20 through 75 o $5,000 (initial) o Only transfer o Regular ongoing contributions from an payroll contributions o $1,000 (additional) existing qualified plan are not permitted. trust as a change of o No additional transfer investment vehicle contributions after under the plan. age 76. o The plan must be o For defined benefit qualified under Section plans, employee 401(a) of the Internal contributions are not Revenue Code. permitted. o For 401(k) plans, o Contributions after transferred age 70 1/2 must be net contributions may only of any required include employee minimum distributions. pre-tax contributions. Rollover TSA o 20 through 90 o $5,000 (initial) o Rollovers from another o For annuitants up to TSA contract or age 83 at contract o 20 through 85 in o $1,000 (additional) arrangement. issue, additional New York and contributions may be Pennsylvania o Rollovers from a made up to age 84. traditional IRA which was a "conduit" for o For annuitants age 84 TSA funds previously and older at contract issue, rolled over. additional contributions may be made up to one year o Direct transfers from beyond your issue age. another contract or arrangement under o Contributions after age Section 403(b) of the 70 1/2 must be net of Internal Revenue Code, required minimum complying with IRS distributions. Revenue Ruling 90-24.
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- ------------------------------------------------------------------------------------------------------------------------- AVAILABLE CONTRACT FOR ANNUITANT MINIMUM LIMITATIONS ON TYPE ISSUE AGES CONTRIBUTIONS SOURCE OF CONTRIBUTIONS CONTRIBUTIONS - ------------------------------------------------------------------------------------------------------------------------- Rollover 53 1/2 through 83 o $10,000 (initial) o Rollovers from a o Additional rollover or IRA or qualified plan. direct transfer Flexible o $1,000 (additional) contributions may be Premium o Rollovers from a TSA. made until the earlier IRA with of age 84 or within Assured o Rollovers from another seven years from the Payment traditional individual end of the fixed period. Option or retirement APO Plus arrangement. o Contributions after age o Direct 70 1/2 must be net of custodian-to-custodian required minimum transfers from another distributions. traditional individual retirement arrangement. - -------------------------------------------------------------------------------------------------------------------------
See "Tax information" for a more detailed discussion of sources of contributions and certain contribution limitations. We may refuse to accept any contribution if the sum of all contributions under all Equitable Accumulator contracts with the same annuitant would then total more than $1,500,000. We reserve the right to limit aggregate contributions made after the first contract year to 150% of first-year contributions. We may also refuse to accept any contribution if the sum of all contributions under all Equitable Life annuity accumulation contracts that you own would then total more than $2,500,000. For information on when contributions are credited under your contract see "Dates and prices at which contract events occur" in "More information" later in this prospectus. - ---------- 22 - -------------------------------------------------------------------------------- OWNER AND ANNUITANT REQUIREMENTS Under NQ contracts, the annuitant can be different than the owner. A joint owner may also be named. Only natural persons can be joint owners. This means that an entity such as a corporation cannot be a joint owner. Under all IRA and Rollover TSA contracts, the owner and annuitant must be the same person. Under QP contracts, the owner must be the trustee of the qualified plan and the annuitant must be the plan participant/employee. See Appendix I for more information on QP contracts. ----------------------------------------------------------------------------- A "participant" is an individual who is currently, or was formerly, participating in an eligible employer's QP or TSA plan. ----------------------------------------------------------------------------- HOW YOU CAN MAKE YOUR CONTRIBUTIONS Except as noted below, contributions must be by check drawn on a U.S. bank, in U.S. dollars, and made payable to Equitable Life. We do not accept third-party checks endorsed to us except for rollover contributions, tax-free exchanges or trustee checks that involve no refund. All checks are subject to our ability to collect the funds. We reserve the right to reject a payment if it is received in an unacceptable form. Additional contributions may also be made under our automatic investment program. This method of payment is discussed in detail in "More information" later in this prospectus. Your initial contribution must generally be accompanied by an application and any other form we need to process the payments. If any information is missing or unclear, we will try to obtain that information. If we are unable to obtain all of the information we require within five business days after we receive an incomplete application or form, we will inform the financial professional submitting the application on your behalf. We will then return the contribution to you unless you specifically direct us to keep your contribution until we receive the required information. ----------------------------------------------------------------------------- Our "business day" is any day the New York Stock Exchange is open for trading. ----------------------------------------------------------------------------- SECTION 1035 EXCHANGES You may apply the value of an existing nonqualified deferred annuity contract (or life insurance or endowment contract) to purchase an Equitable Accumulator NQ contract in a tax-free exchange if you follow certain procedures as shown in the form that we require you to use. Also see "Tax information" later in this prospectus. WHAT ARE YOUR INVESTMENT OPTIONS UNDER THE CONTRACT? Your investment options are the variable investment options, the fixed maturity options, and the account for special dollar cost averaging. VARIABLE INVESTMENT OPTIONS Your investment results in any one of the variable investment options will depend on the investment performance of the underlying portfolios. Listed below are the currently available portfolios, their investment objectives, and their advisers. ----------------------------------------------------------------------------- You can choose from among the variable investment options. ----------------------------------------------------------------------------- - ----- 23 - --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------- PORTFOLIOS OF EQ ADVISORS TRUST - ---------------------------------------------------------------------------------------------------------------------- PORTFOLIO NAME OBJECTIVE ADVISER - ---------------------------------- ------------------------------------------------- --------------------------------- Alliance Aggressive Stock Long-term growth of capital Alliance Capital Management L.P. - ---------------------------------------------------------------------------------------------------------------------- Alliance Common Stock Long-term growth of capital and increasing Alliance Capital Management L.P. income - ---------------------------------------------------------------------------------------------------------------------- Alliance Conservative Investors High total return without, in the adviser's Alliance Capital Management L.P. opinion, undue risk to principal - ---------------------------------------------------------------------------------------------------------------------- Alliance Equity Index Total return (before deduction of portfolio Alliance Capital Management L.P. (available only under APO Plus) expenses) that approximates the total return performance of the Standard & Poor's 500 Composite Index - ---------------------------------------------------------------------------------------------------------------------- Alliance Global Long-term growth of capital Alliance Capital Management L.P. - ---------------------------------------------------------------------------------------------------------------------- Alliance Growth and Income High total return through a combination of Alliance Capital Management L.P. current income and capital appreciation - ---------------------------------------------------------------------------------------------------------------------- Alliance Growth Investors High total return consistent with the adviser's Alliance Capital Management L.P. determination of reasonable risk - ---------------------------------------------------------------------------------------------------------------------- Alliance High Yield High return by maximizing current income and, Alliance Capital Management L.P. to the extent consistent with that objective, capital appreciation Alliance Intermediate High current income consistent with relative Alliance Capital Management L.P. Government Securities stability of principal - ---------------------------------------------------------------------------------------------------------------------- Alliance International Long-term growth of capital Alliance Capital Management L.P. - ---------------------------------------------------------------------------------------------------------------------- Alliance Money Market High level of current income while preserving Alliance Capital Management L.P. assets and maintaining liquidity - ---------------------------------------------------------------------------------------------------------------------- EQ/Alliance Premier Growth Long-term growth of capital Alliance Capital Management L.P. - ---------------------------------------------------------------------------------------------------------------------- Alliance Small Cap Growth Long-term growth of capital Alliance Capital Management L.P. - ---------------------------------------------------------------------------------------------------------------------- BT Equity 500 Index Replicate as closely as possible (before Bankers Trust Company deduction of portfolio expenses) the total return of the Standard & Poor's 500 Composite Stock Price Index - ---------------------------------------------------------------------------------------------------------------------- BT International Equity Index Replicate as closely as possible (before Bankers Trust Company deduction of portfolio expenses) the total return of the Morgan Stanley Capital International Europe, Australia, Far East Index - ----------------------------------------------------------------------------------------------------------------------
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PORTFOLIOS OF EQ ADVISORS TRUST (CONTINUED) - -------------------------------------------------------------------------------------------------------------------------------- PORTFOLIO NAME OBJECTIVE ADVISER - -------------------------------------------------------------------------------------------------------------------------------- BT Small Company Index Replicate as closely as possible (before Bankers Trust Company deduction of portfolio expenses) the total return of the Russell 2000 Index - -------------------------------------------------------------------------------------------------------------------------------- Capital Guardian Research Long-term growth of capital Capital Guardian Trust Company - -------------------------------------------------------------------------------------------------------------------------------- Capital Guardian U.S. Equity Long-term growth of capital Capital Guardian Trust Company - -------------------------------------------------------------------------------------------------------------------------------- EQ/Evergreen Capital appreciation Evergreen Asset Management Corp. - -------------------------------------------------------------------------------------------------------------------------------- EQ/Evergreen Foundation In order of priority, reasonable income, Evergreen Asset Management Corp. conservation of capital, and capital appreciation - -------------------------------------------------------------------------------------------------------------------------------- Merrill Lynch Basic Value Equity Capital appreciation and secondarily, income Merrill Lynch Asset Management, L.P. - -------------------------------------------------------------------------------------------------------------------------------- Merrill Lynch World Strategy High total investment return Merrill Lynch Asset Management, L.P. - -------------------------------------------------------------------------------------------------------------------------------- MFS Emerging Growth Long-term capital growth Massachusetts Financial Services Company Companies - -------------------------------------------------------------------------------------------------------------------------------- MFS Growth with Income Reasonable current income and long-term Massachusetts Financial Services Company growth of capital and income - -------------------------------------------------------------------------------------------------------------------------------- MFS Research Long-term growth of capital and future income Massachusetts Financial Services Company - -------------------------------------------------------------------------------------------------------------------------------- Morgan Stanley Emerging Long-term capital appreciation Morgan Stanley Asset Management Markets Equity - -------------------------------------------------------------------------------------------------------------------------------- EQ/Putnam Balanced Balanced investment Putnam Investment Management, Inc. - -------------------------------------------------------------------------------------------------------------------------------- EQ/Putnam Growth & Income Capital growth, current income is a secondary Putnam Investment Management, Inc. Value objective - -------------------------------------------------------------------------------------------------------------------------------- T. Rowe Price Equity Income Substantial dividend income and also capital T. Rowe Price Associates, Inc. appreciation - -------------------------------------------------------------------------------------------------------------------------------- T. Rowe Price International Long-term growth of capital Rowe Price-Fleming International, Inc. Stock - -------------------------------------------------------------------------------------------------------------------------------- Warburg Pincus Small Company Long-term capital appreciation Warburg Pincus Asset Management, Inc. Value - --------------------------------------------------------------------------------------------------------------------------------
- ---------- 25 - -------------------------------------------------------------------------------- Other important information about the portfolios is included in the prospectus for EQ Advisors Trust attached at the end of this prospectus. FIXED MATURITY OPTIONS We offer fixed maturity options with maturity dates ranging from one to ten years. You can allocate your contributions to one or more of these fixed maturity options. Under the Assured Payment Option and APO Plus, we offer additional fixed maturity options with maturity dates ranging from eleven to fifteen years. We provide distributions during the fixed period under the Assured Payment Option and APO Plus by allocating your contributions to fixed maturity options that mature in consecutive order. These amounts become part of our general account assets. They will accumulate interest at the "rate to maturity" for each fixed maturity option. The total amount you allocate to and accumulate in each fixed maturity option is called the "fixed maturity amount." The fixed maturity options are generally not available in contracts issued in Maryland. In Maryland the fixed maturity options are only available under the Assured Payment Option and APO Plus which are issued as separate contracts rather than as a part of a Rollover IRA or Flexible Premium IRA contract. See Appendix V for more information on the Assured Payment Option and APO Plus contracts available in Maryland. - ----------------------------------------------------------------------------- Fixed maturity options range from one to ten years to maturity. Assured Payment Option and APO Plus offer additional fixed maturity options for years eleven to fifteen. - ----------------------------------------------------------------------------- The rate to maturity you will receive for each fixed maturity option is the rate to maturity in effect for new contributions allocated to that fixed maturity option on the date we apply your contribution. If you make any withdrawals or transfers from a fixed maturity option before the maturity date, we will make a "market value adjustment" that may increase or decrease any fixed maturity amount you have left in that fixed maturity option. We discuss the market value adjustment below and in greater detail later in this prospectus in "More information." On the maturity date of a fixed maturity option your fixed maturity amount, assuming you have not made any withdrawals or transfers, will equal your contribution to that fixed maturity option plus interest, at the rate to maturity for that contribution, to the date of the calculation. This is the fixed maturity option's "maturity value." Before maturity, the current value we will report for your fixed maturity amounts will reflect a market value adjustment. Your current value will reflect the market value adjustment that we would make if you were to withdraw all of your fixed maturity amounts on the date of the report. We call this your "market adjusted amount." FIXED MATURITY OPTIONS AND MATURITY DATES. We currently offer fixed maturity options ending on February 15th for each of the maturity years 2001 through 2010. Not all of these fixed maturity options will be available for annuitant ages 76 and older. See "Allocating your contributions" below. As fixed maturity options expire, we expect to add maturity years so that generally 10 fixed maturity options are available at any time. Under the Assured Payment Option and APO Plus, we offer additional fixed maturity options ending on February 15th for each of the maturity years 2011 through 2015. We will not accept allocations to a fixed maturity option if on the date the contribution is to be applied: o the fixed maturity option's maturity date is within the current calendar year; or o the rate to maturity is 3%. YOUR CHOICES AT THE MATURITY DATE. We will notify you on or before December 31st of the year before each of your fixed maturity options is scheduled to mature. At that time, you may choose to have one of the following take place on - ---------- 26 - -------------------------------------------------------------------------------- the maturity date, as long as none of the conditions listed above or in "Allocating your contributions," below would apply: (a) transfer the maturity value into another available fixed maturity option or into any of the variable investment options; or (b) withdraw the maturity value (there may be a withdrawal charge). If we do not receive your choice on or before the fixed maturity option's maturity date, we will automatically transfer your maturity value into the fixed maturity option that will mature next. MARKET VALUE ADJUSTMENT. If you make any withdrawals (including transfers, surrender of your contract, or when we make deductions for charges) from a fixed maturity option before it matures we will make a market value adjustment, which will increase or decrease any fixed maturity amount you have in that fixed maturity option. The amount of the adjustment will depend on two factors: (a) the difference between the rate to maturity that applies to the amount being withdrawn and the rate to maturity in effect at that time for new allocations to that same fixed maturity option, and (b) the length of time remaining until the maturity date. In general, if interest rates rise from the time that you originally allocate an amount to a fixed maturity option to the time that you take a withdrawal, the market value adjustment will be negative. Likewise, if interest rates drop at the end of that time, the market value adjustment will be positive. Also, the amount of the market value adjustment, either up or down, will be greater the longer the time remaining until the fixed maturity option's maturity date. Therefore, it is possible that the market value adjustment could greatly reduce your value in the fixed maturity options, particularly in the fixed maturity options with later maturity dates. We provide an illustration of the market adjusted amount of specified maturity values, an explanation of how we calculate the market value adjustment, and information concerning our general account and investments purchased with amounts allocated to the fixed maturity options, in "More information" later in this prospectus. Appendix II of this prospectus provides an example of how the market value adjustment is calculated. OFF MATURITY DATE PAYMENTS. Under Assured Payment Option and APO Plus, you may choose to receive payments monthly, quarterly or annually. If you choose annual payments, generally your payments will be made on February 15th as each fixed maturity option matures. You may instead choose to have your annual payments made in a month other than February. We refer to payments we make on an annual basis in any month other than February and monthly or quarterly payments, as payments made "off maturity dates." If you choose to have your payments made off maturity dates, we will be required to begin making your payments before the maturity date of a fixed maturity option. In planning for these payments we will allocate a portion of your initial contribution or account value to the separate account for the fixed maturity options, but not to the fixed maturity options contained in the separate account. We will credit these amounts with interest at rates that will not be less than 3%. After that, as each fixed maturity option expires we will transfer your maturity value from the expired fixed maturity option and hold the maturity value in the separate account. We will credit interest to these amounts at the same rate as the rate to maturity that was credited in the expired fixed maturity option. These amounts will then be used to provide for payments off maturity dates during the fixed period. - ----------------------------------------------------------------------------- Whether you choose monthly, quarterly, or annual payments, your payments will be made on the 15th day of the month. - ----------------------------------------------------------------------------- We will not make a market value adjustment to the amounts held in the separate account to provide for payments off maturity dates. - ---------- 27 - -------------------------------------------------------------------------------- ACCOUNT FOR SPECIAL DOLLAR COST AVERAGING The account for special dollar cost averaging is part of our general account. We pay interest at guaranteed rates in this account. We will credit interest to the amounts that you have in the account for special dollar cost averaging every day. We set the interest rates periodically, according to procedures that we have. We reserve the right to change these procedures. We guarantee to pay our current interest rate that is in effect on the date that your contribution is allocated to this account. Your guaranteed interest rate for the time period you select will be shown in your contract. The rate will never be less than 3%. - ---------- 28 - -------------------------------------------------------------------------------- THE CONTRACT FEATURES AND BENEFITS DESCRIBED BELOW DO NOT APPLY WHEN THE ASSURED PAYMENT OPTION OR APO PLUS IS IN EFFECT UNDER A ROLLOVER IRA OR FLEXIBLE PREMIUM IRA CONTRACT. FOR INFORMATION REGARDING YOUR CONTRACT BENEFITS UNDER THE ASSURED PAYMENT OPTION OR APO PLUS, SEE "ACCESSING YOUR MONEY - ASSURED PAYMENT OPTION AND APO PLUS." ALLOCATING YOUR CONTRIBUTIONS You may choose from among three ways to allocate your contributions under your contract: self-directed, principal assurance, or dollar cost averaging. SELF-DIRECTED ALLOCATION You may allocate your contributions to one or more, or all, of the variable investment options and fixed maturity options. Allocations must be in whole percentages and you may change your allocations at any time. However, the total of your allocations must equal 100%. If the annuitant is age 76 or older, you may allocate contributions to fixed maturity options if their maturities are five years or less. Also, you may not allocate amounts to fixed maturity options with maturity dates that are later than the February 15th immediately following the date annuity payments are to begin. PRINCIPAL ASSURANCE ALLOCATION Under this allocation program you select a fixed maturity option. We specify the portion of your initial contribution to be allocated to that fixed maturity option in an amount that will cause the maturity value to equal the amount of your entire initial contribution on the fixed maturity option's maturity date. The maturity date you select generally may not be later than 10 years, or earlier than 7 years from your contract date. You allocate the rest of your contribution to the variable investment options however you choose. For example, if your initial contribution is $10,000, and on November 1, 1999 you chose the fixed maturity option with a maturity date of February 15, 2009, since the rate to maturity was 5.68% on November 1, 1999, we would have allocated $5,987.74 to that fixed maturity option and the balance to your choice of variable investment options. On the maturity date your value in the fixed maturity option would be $10,000. The principal assurance allocation is only available for annuitant ages 75 or younger when the contract is issued. If you are purchasing a Rollover IRA, Flexible Premium IRA, QP, or Rollover TSA contract, before you select a maturity year that would extend beyond the year in which you will reach age 70 1/2, you should consider whether your value in the variable investment options, or your other traditional IRA or TSA funds are sufficient to meet your required minimum distributions. See "Tax information." You may not elect principal assurance if the special dollar cost averaging program is in effect. DOLLAR COST AVERAGING We offer two dollar cost averaging programs. Each program allows you to gradually allocate amounts to the variable investment options by periodically transferring approximately the same dollar amount to the variable investment options you select. This will cause you to purchase more units if the unit's value is low and fewer units if the unit's value is high. Therefore, you may get a lower average cost per unit over the long term. These plans of investing, however, do not guarantee that you will earn a profit or be protected against losses. - ----------------------------------------------------------------------------- Units measure your value in each variable investment option. - ----------------------------------------------------------------------------- SPECIAL DOLLAR COST AVERAGING PROGRAMS. Under the special dollar cost averaging program, you may choose to allocate all or a portion of your initial contribution to the account for special dollar cost averaging. However, you must allocate at least $2,000 to the account for special - ---------- 29 - -------------------------------------------------------------------------------- dollar cost averaging for this program. In Pennsylvania we refer to this program as "enhanced rate special dollar cost averaging." You may have your account value transferred to any of the variable investment options. We will transfer amounts from the account for special dollar cost averaging into the variable investment options over the time period that you select. We offer time periods of 6, 12, or 18 months. We may also offer other time periods. Your financial professional can provide information on the time periods currently available in your state, or you may contact our processing office. You may only select one time period. Each time period has a different interest rate. Once you select a time period, you may not change it. Currently, your account value will be transferred from the account for special dollar cost averaging into the variable investment options on a monthly basis. We may offer this program in the future with transfers on a different basis. We will transfer all amounts out of the account for special dollar cost averaging by the end of the chosen time period. The transfer date will be the same day of the month as the contract date, but not later than the 28th day of the month. If you choose to allocate only a portion of your initial contribution to the account for special dollar cost averaging, the remaining balance of your initial contribution will be allocated to the variable investment options or fixed maturity options according to your instructions. You may not allocate additional contributions to the account for special dollar cost averaging. - ----------------------------------------------------------------------------- The account for special dollar cost averaging provides guaranteed interest. - ----------------------------------------------------------------------------- The only amounts that should be transferred from the account for special dollar cost averaging are your regularly scheduled transfers to the variable investment options. If you request to transfer or withdraw any other amounts, we will transfer all of the value that you have remaining in the account for special dollar cost averaging to the investment options according to the allocation percentages we have on file for you. As a result, you will no longer be able to participate in the special dollar cost averaging program. You may also ask us to cancel your participation at any time. In the state of Oregon where the account for special dollar cost averaging is not available, we offer a special dollar cost averaging program in the Alliance Money Market option for allocation of your entire initial contribution. Under this program we will not deduct the mortality and expense risks, administrative charges and distribution charges from assets in the Alliance Money Market option. You may not allocate amounts other than your initial contribution to this program. GENERAL DOLLAR COST AVERAGING PROGRAM. If your value in the Alliance Money Market option is at least $5,000, you may choose, at any time, to have a specified dollar amount or percentage of your value transferred from that option to the other variable investment options. You can select to have transfers made on a monthly, quarterly, or annual basis. The transfer date will be the same calendar day of the month as the contract date, but not later than the 28th day of the month. You can also specify the number of transfers or instruct us to continue making the transfers until all amounts in the Alliance Money Market option have been transferred out. The minimum amount that we will transfer each time is $250. The maximum amount we will transfer is equal to your value in the Alliance Money Market option at the time the program is elected, divided by the number of transfers scheduled to be made. If, on any transfer date, your value in the Alliance Money Market option is equal to or less than the amount you have elected to have transferred, the entire amount will be transferred. The general dollar cost averaging program will then end. You may change the transfer amount once each contract year or cancel this program at any time. ---------------------------------------- You may not elect dollar cost averaging if you are participating in the rebalancing program. See "Transferring your money among investment options." - ---------- 30 - -------------------------------------------------------------------------------- YOUR BENEFIT BASE The benefit base is used to calculate the guaranteed minimum income benefit, the 5% roll up to age 80, and the 5% roll up to age 70 guaranteed minimum death benefits. See "Our baseBUILDER option" and "Guaranteed minimum death benefit" below. The benefit base is equal to: o your initial contribution and any additional contributions to the contract; plus o daily interest; o a deduction that reflects any withdrawals you make (the amount of the deduction is described under "How withdrawals affect your guaranteed minimum income benefit and guaranteed minimum death benefit" in "Accessing your money"); less o a deduction for any withdrawal charge remaining when you exercise your guaranteed minimum income benefit; and less o a deduction for any outstanding loan plus accrued interest on the date that you exercise your guaranteed minimum income benefit (applies to Rollover TSA only). The effective annual interest rate credited to the benefit base is: o 5% for the benefit base with respect to the variable investment options (other than the Alliance Money Market and Alliance Intermediate Government Securities options) and the account for special dollar cost averaging; and o 3% for the benefit base with respect to the Alliance Money Market and Alliance Intermediate Government Securities options, the fixed maturity options and the loan reserve account. No interest is credited after the annuitant is age 80 (age 70 if the 5% roll up to age 70 is elected). - ----------------------------------------------------------------------------- Your benefit base is not an account value or a cash value. - ----------------------------------------------------------------------------- ANNUITY PURCHASE FACTORS Annuity purchase factors are the factors applied to determine your periodic payments under the guaranteed minimum income benefit, annuity payout options as well as to determine allocation of your contributions under the Assured Payment Option and APO Plus. The guaranteed minimum income benefit is discussed under "Our baseBUILDER option" and annuity payout options, Assured Payment Option and APO Plus are all discussed in, "Accessing your money" later in this prospectus. The guaranteed annuity purchase factors are those factors specified in your contract. The current annuity purchase factors are those factors that are in effect at any given time. Annuity purchase factors are based on interest rates, mortality tables, frequency of payments, the form of annuity benefit, and the annuitant's (and any joint annuitant's) age and sex in certain instances. OUR BASEBUILDER OPTION The baseBUILDER option offers you a guaranteed minimum income benefit combined with the guaranteed minimum death benefit available under the contract. For Rollover IRA, Flexible Premium IRA, and Rollover TSA contracts where the annuitant is between ages 20 and 60 at contract issue, and where you elect the baseBUILDER option, we offer an additional guaranteed minimum death benefit of a 5% rollup to age 70. The baseBUILDER benefit is available if the annuitant is between the ages of 20 and 75 at the time the contract is issued. There is an additional charge for the baseBUILDER benefit which is described under "baseBUILDER benefit charge" in "Charges and expenses." The guaranteed minimum income benefit component of baseBUILDER is described below. Whether you elect baseBUILDER or not, the guaranteed minimum death benefit is provided under the contract. The guaranteed minimum death benefit is described under "Guaranteed minimum death benefit." baseBUILDER is currently not available in New York. The guaranteed minimum income benefit guarantees you a minimum amount of fixed income for your life (or the life of a joint annuitant, if applicable) under our life annuity payout option. For more information on the life annuity payout option, see "Your annuity payout options" in "Accessing your money" later in this prospectus. - ---------- 31 - -------------------------------------------------------------------------------- - ----------------------------------------------------------------------------- The guaranteed minimum income benefit should be regarded as a safety net only. It provides income protection if you elect an income payout while the annuitant is alive. - ----------------------------------------------------------------------------- When you exercise the guaranteed minimum income benefit, the annual lifetime income that you will receive under the life annuity payout option will be the greater of (i) your guaranteed minimum income benefit which is calculated by applying your benefit base at guaranteed annuity purchase factors, or (ii) the income provided by applying your actual account value at our then current annuity purchase factors. When you elect to receive annual lifetime income, your contract will terminate and you will receive a life annuity payout option. You will begin receiving payments one payment period after the life annuity payout option is issued. Payments end with the last payment before the annuitant's (or joint annuitant's, if applicable) death. There is no continuation of benefits following the annuitant's (or joint annuitant's, if applicable) death. Before you elect baseBUILDER, you should consider the fact that the guaranteed minimum income benefit is based on conservative actuarial factors. Therefore, even if your account value is less than your benefit base, you may generate more income by applying your account value to current annuity purchase factors. We will make this comparison for you when the need arises. ILLUSTRATIONS OF GUARANTEED MINIMUM INCOME BENEFIT. The table below illustrates the guaranteed minimum income benefit amounts per $100,000 of initial contribution, for a male annuitant age 60 (at issue) on the contract date anniversaries indicated, using the guaranteed annuity purchase factors as of the date of this prospectus, assuming no additional contributions, withdrawals, or loans under Rollover TSA contracts, and assuming there were no allocations to the Alliance Money Market, Alliance Intermediate Government Securities options, or the fixed maturity options.
GUARANTEED MINIMUM CONTRACT DATE INCOME BENEFIT - ANNUAL INCOME ANNIVERSARY AT EXERCISE PAYABLE FOR LIFE 10 $10,816 15 $16,132
EXERCISE OF GUARANTEED MINIMUM INCOME BENEFIT. On each contract date anniversary that you are eligible to exercise the guaranteed minimum income benefit, we will send you an eligibility notice illustrating how much income could be provided as of the contract anniversary. You may notify us within 30 days following the contract date anniversary if you want to exercise the guaranteed minimum income benefit. You must return your contract to us in order to exercise this benefit. The amount of income you actually receive will be determined when we receive your request to exercise the benefit. You will begin receiving payments one payment period after the life annuity payout contract is issued. You (or the successor annuitant/owner, if applicable) will be eligible to exercise the guaranteed minimum income benefit as follows: o If the annuitant was at least age 20 and no older than age 44 when the contract was issued, you are eligible to exercise the guaranteed minimum income benefit within 30 days following each contract date anniversary beginning with the 15th contract date anniversary. o If the annuitant was at least age 45 and no older than age 49 when the contract was issued, you are eligible to exercise the guaranteed minimum income benefit within 30 days following each contract date anniversary after the annuitant is age 60. o If the annuitant was at least age 50 and no older than age 75 when the contract was issued, you are eligible to exercise the guaranteed minimum income benefit within 30 days following each contract date anniversary beginning with the 10th contract date anniversary. - ---------- 32 - -------------------------------------------------------------------------------- Please note: (i) the latest date you may exercise the guaranteed minimum income benefit is the contract date anniversary following the annuitant's 85th birthday; (ii) if the annuitant was age 75 when the contract was issued, the only time you may exercise the guaranteed minimum income benefit is within 30 days following the first contract date anniversary that it becomes available; and (iii) if the annuitant was older than age 60 at the time an IRA, QP or Rollover TSA contract was issued, the baseBUILDER may not be an appropriate feature because the minimum distributions required by tax law must begin before the guaranteed minimum income benefit can be exercised. For QP and Rollover TSA contracts, if you are eligible to exercise your guaranteed minimum income benefit, we will first roll over amounts in such contract to a Rollover IRA contract. You will be the owner of the Rollover IRA contract. GUARANTEED MINIMUM DEATH BENEFIT A guaranteed minimum death benefit is provided as part of the baseBUILDER benefit. A guaranteed minimum death benefit is also provided under your contract even if you do not elect baseBUILDER. In this case, the baseBUILDER benefit charge does not apply. GUARANTEED MINIMUM DEATH BENEFIT APPLICABLE FOR ANNUITANT AGES 0 THROUGH 79 AT ISSUE OF NQ CONTRACTS; 20 THROUGH 79 AT ISSUE OF ROLLOVER IRA, ROTH CONVERSION IRA, FLEXIBLE PREMIUM ROTH IRA, AND ROLLOVER TSA CONTRACTS; 20 THROUGH 70 AT ISSUE OF FLEXIBLE PREMIUM IRA CONTRACTS; AND 20 THROUGH 75 AT ISSUE OF QP CONTRACTS. You must elect either the "5% roll up to age 80" (or, if available, the 5% roll up to age 70) or the "annual ratchet to age 80" guaranteed minimum death benefit when you apply for a contract. Once you have made your election, you may not change it. 5% ROLL UP TO AGE 80. This guaranteed minimum death benefit is calculated using the benefit base described earlier in "Your benefit base." This guaranteed minimum death benefit is not available in New York. 5% ROLL UP TO AGE 70. This is an optional guaranteed minimum death benefit available for ages 20 through 60 at issue of Rollover IRA, Flexible Premium IRA, and TSA contracts if baseBUILDER is also elected. Your guaranteed minimum death benefit will be calculated as described above under "5% roll up to age 80" except that interest will be credited only through age 70. ANNUAL RATCHET TO AGE 80. On the contract date, your guaranteed minimum death benefit equals your initial contribution. Then, on each contract date anniversary, we will determine your guaranteed minimum death benefit by comparing your current guaranteed minimum death benefit to your account value on that contract date anniversary. If your account value is higher than your guaranteed minimum death benefit, we will increase your guaranteed minimum death benefit to equal your account value. On the other hand, if your account value on the contract date anniversary is less than your guaranteed minimum death benefit, we will not adjust your guaranteed minimum death benefit either up or down. If you make additional contributions, we will increase your current guaranteed minimum death benefit by the dollar amount of the contribution on the date the contribution is allocated to your investment options. If you take a withdrawal from your contract, we will reduce your guaranteed minimum death benefit on the date you take the withdrawal. GUARANTEED MINIMUM DEATH BENEFIT APPLICABLE FOR ANNUITANT AGES 80 THROUGH 90 AT ISSUE OF NQ, ROLLOVER IRA, ROTH CONVERSION IRA, FLEXIBLE PREMIUM ROTH IRA, AND ROLLOVER TSA CONTRACTS. On the contract date, your guaranteed minimum death benefit equals your initial contribution. Thereafter, it will be increased by the dollar amount of any additional - ---------- 33 - -------------------------------------------------------------------------------- contributions. We will reduce your guaranteed minimum death benefit if you take any withdrawals. ---------------------------------------- Please see "How withdrawals affect your guaranteed minimum income benefit and guaranteed minimum death benefit" in "Accessing your money" for information on how withdrawals affect your guaranteed minimum death benefit. For contracts issued in New York, the guaranteed minimum death benefit at the annuitant's death will never be less than your value in the variable investment options, plus the sum of the fixed maturity amounts in each fixed maturity option. See Appendix III for an example of how we calculate the guaranteed minimum death benefit. YOUR RIGHT TO CANCEL WITHIN A CERTAIN NUMBER OF DAYS If for any reason you are not satisfied with your contract, you may return it to us for a refund. To exercise this cancellation right you must mail the contract directly to our Processing Office within 10 days after you receive it. If state law requires, this "free look" period may be longer. Generally, your refund will equal your account value under the contract and will reflect (i) any investment gain or loss in the variable investment options (less the daily charges we deduct), (ii) any positive or negative market value adjustments in the fixed maturity options, and (iii) any guaranteed interest in the account for special dollar cost averaging, through the date we receive your contract. Some states require that we refund the full amount of your contribution (not reflecting (i), (ii) or (iii) above). For any IRA contract returned to us within seven days after you receive it, we are required to refund the full amount of your contribution. We may require that you wait six months before you may apply for a contract with us again if: o you cancel your contract during the free look period; or o you change your mind before you receive your contract whether we have received your contribution or not. Please see "Tax information" for possible consequences of cancelling your contract. In addition to the cancellation right described above, if you fully convert an existing traditional IRA contract to a Roth Conversion IRA or Flexible Premium Roth IRA contract, you may cancel your Roth Conversion IRA contract and return to a Rollover IRA or Flexible Premium IRA contract, whichever applies. Our Processing Office, or your financial professional, can provide you with the cancellation instructions. Determining your contract's value - ---------------- 34 - -------------------------------------------------------------------------------- YOUR ACCOUNT VALUE AND CASH VALUE Your "account value" is the total of the (i) values you have in the variable investment options, (ii) market adjusted amounts in the fixed maturity options, (iii) value in the account for special dollar cost averaging, and (iv) value you have in the loan reserve account (applies for Rollover TSA contracts only). These amounts are subject to certain fees and charges discussed in "Charges and expenses." Under Rollover TSA contracts, if you have any outstanding loan, your account value will include any amount in the loan reserve account. Your contract also has a "cash value." At any time before annuity payments begin, your contract's cash value is equal to the account value less (i) the total amount or a pro rata portion of the annual administrative charge (applicable for Flexible Premium IRA and Flexible Premium Roth IRA contracts only); (ii) any applicable withdrawal charges; and (iii) the amount of any outstanding loan plus accrued interest (applicable to Rollover TSA contracts only). Please see "Surrendering your contract to receive its cash value" in "Accessing your money." YOUR CONTRACT'S VALUE IN THE VARIABLE INVESTMENT OPTIONS Each variable investment option invests in shares of a corresponding portfolio. Your value in each variable investment option is measured by "units." The value of your units will increase or decrease as though you had invested it in the corresponding portfolio's shares directly. Your value, however, will be reduced by the amount of the fees and charges that we deduct under the contract. The unit value for each variable investment option depends on the investment performance of that option, less daily charges for: (i) mortality and expense risks; (ii) administrative expenses; and (iii) distribution charges. On any day, your value in any variable investment option equals the number of units credited to that option, adjusted for any units purchased for or deducted from your contract under that option, multiplied by that day's value for one unit. The number of your contract units in any variable investment option does not change unless they are: (i) increased to reflect additional contributions; (ii) decreased to reflect a withdrawal (plus applicable withdrawal charges); (iii) increased to reflect a transfer into, or decreased to reflect a transfer out of a variable investment option; and (iv) decreased to reflect a transfer of your loan amount to the loan reserve account under a Rollover TSA contract. In addition, when we deduct the baseBUILDER benefit charge the number of units credited to your contract will be reduced. Your units are also reduced under Flexible Premium IRA and Flexible Premium Roth IRA contracts when we deduct the annual administrative charge. A description of how unit values are calculated is found in the SAI. YOUR CONTRACT'S VALUE IN THE FIXED MATURITY OPTIONS Your value in each fixed maturity option at any time before the maturity date is the market adjusted amount in each option. This is equivalent to your fixed maturity amount increased or decreased by the market value adjustment. Your value, therefore, may be higher or lower than your contributions (less withdrawals) accumulated at the rate to maturity. At the maturity date, your value in the fixed maturity option will equal its maturity value. Your value will also include any amounts held in the separate account to provide for payments off maturity dates under the Assured Payment Option and APO Plus. - ---------- 35 - -------------------------------------------------------------------------------- YOUR CONTRACT'S VALUE IN THE ACCOUNT FOR SPECIAL DOLLAR COST AVERAGING Your value in the account for special dollar cost averaging at any time will equal your initial contribution allocated to that option, plus interest, less the sum of all amounts that have been transferred to the variable investment options you have selected. 3 Transferring your money among investment options - ---------------- 36 - -------------------------------------------------------------------------------- TRANSFERRING YOUR ACCOUNT VALUE At any time before the date annuity payments are to begin, you can transfer some or all of your account value among the investment options, subject to the following: o You may not transfer any amount to the account for special dollar cost averaging. o You may not transfer to a fixed maturity option that matures in the current calendar year, or that has a rate to maturity of 3%. o If the annuitant is 76 or older, you must limit your transfers to fixed maturity options to those with maturities of five years or less. Also, the maturity dates may be no later than the February 15th immediately following the date annuity payments are to begin. o If you make transfers out of a fixed maturity option other than at its maturity date the transfer may cause a market value adjustment. o A transfer request while the Assured Payment Option or APO Plus is in effect will terminate the option. You may request a transfer in writing, or by telephone using TOPS or online by using EQ Access. You must send in all written transfer requests directly to our processing office. Transfer requests should specify: (1) the contract number, (2) the dollar amounts or percentages of your current account value to be transferred, and (3) the investment options to and from which you are transferring. We may, at any time, restrict the use of market timers and other agents acting under a power of attorney who are acting on behalf of more than one contract owner. Any agreements to use market timing services to make transfers are subject to our rules in effect at that time. We will confirm all transfers in writing. REBALANCING YOUR ACCOUNT VALUE We currently offer a rebalancing program that you can use to automatically reallocate your account value among the variable investment options. You must tell us: (a) the percentage you want invested in each variable investment option (whole percentages only), and (b) how often you want the rebalancing to occur (quarterly, semiannually, or annually on a contract year basis. Rebalancing will occur on the same day of the month as the contract date). While your rebalancing program is in effect, we will transfer amounts among each variable investment option so that the percentage of your account value that you specify is invested in each option at the end of each rebalancing date. Your entire account value in the variable investment options must be included in the rebalancing program. - ----------------------------------------------------------------------------- Rebalancing does not assure a profit or protect against loss. You should periodically review your allocation percentages as your needs change. You may want to discuss the rebalancing program with your financial professional or other financial adviser before electing the program. - ----------------------------------------------------------------------------- You may elect the rebalancing program at any time. You may also change your allocation instructions or cancel the program at any time. If you request a transfer while the rebalancing program is in effect, we will process the transfer as requested; the rebalancing program will remain in effect unless you request that it be canceled in writing. You may not elect the rebalancing program if you are participating in a dollar cost averaging program or if the Assured Payment Option or APO Plus are in effect. Rebalancing is not available for amounts you have allocated in the fixed maturity options. Accessing your money - ---------------- 37 - -------------------------------------------------------------------------------- ASSURED PAYMENT OPTION AND APO PLUS (Rollover IRA and Flexible Premium IRA contracts only) We offer two options, the Assured Payment Option and APO Plus, under which you may receive distributions from your Rollover IRA or Flexible Premium IRA contract. If you choose one of these two distribution options you will receive guaranteed payments for a specified period of time we call the "fixed period." When the fixed period ends you will continue to receive payments for as long as you are living. You can elect the Assured Payment Option or APO Plus in the application or at a later date, provided that your account value is at least $10,000 at the time of election. Assured Payment Option and APO Plus benefits will differ for contracts issued in Maryland. See Appendix V at the end of this prospectus for more information. ASSURED PAYMENT OPTION HOW WE ALLOCATE YOUR CONTRIBUTIONS. In order to provide for the payments you receive during the fixed period, we allocate a portion of your initial contribution or account value to fixed maturity options that mature in consecutive date order. The remaining portion is allocated to your choice of a single life or joint and survivor life contingent annuity to provide for the payments you will receive after the fixed period. The payments are intended to pay out your entire account value by the end of the fixed period. - ----------------------------------------------------------------------------- The life contingent annuity provides for the payments after the fixed period ends. - ----------------------------------------------------------------------------- We determine the allocation of your contributions based on a number of factors. They are: o the amount of your contribution; o annuity purchase factors; and o the fixed period. We then allocate your initial contribution among: (1) The separate account containing: (i) the fixed maturity options; and (ii) amounts held to provide payments to you off maturity dates; and (2) the life contingent annuity. We will allocate your additional contributions in the same manner. Additional contributions will increase the level of your future payments. You may not change this allocation. While the Assured Payment Option is in effect, no amounts may be allocated to the variable investment options and the account for special dollar cost averaging. If you are using funds from multiple sources to purchase the Rollover IRA or Flexible Premium IRA contract with the Assured Payment Option in effect, we will allocate your contributions to the Alliance Money Market option until we receive all amounts under the contract. Once all amounts are received we will then apply them under the Assured Payment Option. PAYMENTS. The payments you receive will increase by 10% every three years during the fixed period on each third anniversary of the payment start date. After the end of the fixed period, your first payment under the life contingent annuity will be 10% greater than the final payment made under the fixed period. Whether you choose monthly, quarterly or annual payments, you will usually begin receiving payments one payment period after the contract date anniversary on which you elected to begin payments under your option, unless you elect otherwise, as described under "Off maturity date payments" earlier in this prospectus. Your payments will always be made on the 15th day of the month. However, if you are age 53 1/2 or older, you must defer the date your payments will start until you are age 59 1/2. If you are at least age 59 1/2 at the time the Assured Payment Option is elected you may choose to defer the date your payments will start. Generally, you may defer payments for a period of up to 72 months after you make your election. This is called the deferral period. Deferral of the payment start date permits you to lock in rates at a time when you may consider current rates - ---------- 38 - -------------------------------------------------------------------------------- to be high, while permitting you to delay receiving payments if you have no immediate need to receive income under your contract. - ----------------------------------------------------------------------------- The deferral period together with the fixed period may be referred to as a "liquidity period." You will be able to make withdrawals before the end of the fixed period. You may also choose to surrender your contract for its cash value while keeping the life contingent annuity in effect. - ----------------------------------------------------------------------------- Before you decide to defer payments, you should consider the fact that the amount of income you purchase is based on the rates to maturity in effect on the date we allocate your contribution. Therefore, if rates rise during the deferral period, your payments may be less than they would have been if you had elected the Assured Payment Option at a later date. Deferral of the payment start date is not available if you are older than age 80. If your deferred payment start date is after you reach age 70 1/2, you should consider the effect that deferral may have on your required minimum distributions. See Appendix IV for an example of how payments are made under the Assured Payment Option. If you are age 701 1/2 or older, your payments during the fixed period are designed to meet required minimum distributions under your contract. We determine the amount of the payments based on the value in each fixed maturity option and the assigned value of the life contingent annuity for tax purposes. If at any time your payment under the Assured Payment Option would be less than the minimum amount required to be distributed under minimum distribution rules, we will notify you of the difference. You may then choose to have an additional amount withdrawn under your contract. We will treat such withdrawal as a lump sum withdrawal. However, no withdrawal charge will apply. We will then adjust your future scheduled payments so that the minimum distribution rules are met. You also have the option to take the amount from other traditional IRA funds you may have. FIXED PERIOD. The fixed period based on your age at the time the contract is issued (or your age at the time the Assured Payment Option is elected) will be as follows:
- ------------------------------------------------ AGE* FIXED PERIOD - ------------------------------------------------ 59 1/2 through 70 15 years 71 through 75 12 years 76 through 80 9 years 81 through 83 6 years - ------------------------------------------------
If you defer the date payments will start, your fixed period will be as follows:
FIXED PERIOD BASED ON DEFERRAL PERIOD --------------------------------- 1-36 37-60 61-72 AGE* MONTHS MONTHS MONTHS - --------------------------------------------------------- 53 1/2 through 70 12 years 9 years 9 years 71 through 75 9 years 9 years N/A 76 through 80 6 years 6 years N/A 81 through 83 N/A N/A N/A
* For joint and survivor payments, the fixed period is based on the age of the younger annuitant. PURCHASE RESTRICTIONS FOR JOINT AND SURVIVOR PAYMENTS. If you elect payments on a joint and survivor basis: o the joint annuitant must be your spouse; and o neither you nor the joint annuitant can be over age 83. PAYMENTS AFTER THE FIXED PERIOD. After the end of the fixed period, we will continue your payments under the life contingent annuity if either you or the joint annuitant is living. Payments continue throughout your lifetime (or the lifetime of the joint annuitant, if joint and survivor payments are elected) on the same payment schedule (either monthly, quarterly or annually) as the payments you received during the fixed period. The portion of your contribution allocated to the life contingent annuity does not have a cash value or an account value and, therefore, does not provide for withdrawals. ----------------------------------------------------------------------------- THERE IS NO DEATH BENEFIT PROVIDED UNDER THE LIFE CONTINGENT ANNUITY AND PAYMENTS ARE MADE TO YOU ONLY IF YOU (OR THE JOINT ANNUITANT) ARE LIVING WHEN THE PAYMENTS ARE SCHEDULED TO BEGIN. THESE - ---------- 39 - -------------------------------------------------------------------------------- PAYMENTS ARE ONLY MADE DURING YOUR LIFETIME AND, IF APPLICABLE, THE LIFETIME OF THE JOINT ANNUITANT. THEREFORE, YOU SHOULD CONSIDER THE POSSIBILITY THAT NO PAYMENTS WILL BE MADE UNDER THE LIFE CONTINGENT ANNUITY IF YOU (OR THE JOINT ANNUITANT) DO NOT SURVIVE TO THE DATE PAYMENTS ARE TO BEGIN. Under the life contingent annuity you may elect single life or joint and survivor payments. Joint and survivor payments are available on a 100%, one-half or two-thirds to survivor basis. Your first payment under the life contingent annuity will be 10% greater than the final payment under the fixed period. After the fixed period we will increase your payments annually on each anniversary of the payment start date under the life contingent annuity. We will base this increase on the annual increase in the Consumer Price Index, but it will never be greater than 3% per year. ALLOCATION OF WITHDRAWALS. Only lump sum withdrawals are permitted under the Assured Payment Option. We will subtract your withdrawal from all remaining fixed maturity options to which your account value is allocated as well as from amounts held in the separate account to provide for payments off maturity dates. As a result we will reduce the amount of your payments and the length of your fixed period. We will also begin making payments to you under the life contingent annuity at an earlier date. In order to achieve this result we will withdraw additional amounts over the amount of the withdrawal you requested. These amounts will be taken from the separate account which contains the fixed maturity options and from amounts held to provide for payments off maturity dates. The amounts are then allocated to the life contingent annuity. The exact additional amount we withdraw will depend on how much is necessary to assure that the same pattern of payments will continue in reduced amounts for your life and the life of the joint annuitant. The first increase in your payments will take place no later than the date of the next planned increase. Withdrawals are subject to a withdrawal charge and will have a 10% free withdrawal amount available. No withdrawal charges will apply to the payments made during the fixed period or a withdrawal made to meet the minimum distribution requirement under the contract. DEATH BENEFIT. If a death benefit becomes payable during the fixed period we will pay the death benefit amount to the designated beneficiary. The death benefit amount is the greater of: (1) your account value; and (2) the sum of the fixed maturity amounts in each fixed maturity option plus any amounts to provide for payments off maturity dates. We will not make any payments under the life contingent annuity after your death unless you have elected payments on a joint and survivor basis. If you elect joint and one-half or joint and two-thirds to survivor payments, at your death or the joint annuitant's death, we will reduce the payments by one-half or one-third, whichever applies. ----------------------------------------------------------------------------- A death benefit is never payable under the life contingent annuity. The death benefit applies only during the fixed period. ----------------------------------------------------------------------------- TERMINATION. The Assured Payment Option will be terminated if you: (1) cancel the option at any time by sending a written request satisfactory to us; or (2) submit an additional contribution and you do not want it allocated under the Assured Payment Option; or (3) request a transfer of your account value; or (4) request a change in the date the payments are to start under the life contingent annuity. Once the Assured Payment Option has ended, the life contingent annuity will remain in effect and payments will be made if you or the joint annuitant, are living on the date payments are to start. No additional amounts will be allocated under the life contingent annuity. You may elect to restart the Assured Payment Option by submitting a written request satisfactory to us, but no sooner than three years after the option was terminated. If you own an Equitable - ---------- 40 - -------------------------------------------------------------------------------- Accumulator Rollover IRA or Flexible Premium IRA contract and you elected the Assured Payment Option at age 70 1/2 or older and subsequently terminate this option, required minimum distributions must continue to be made under your contract. Before terminating the Assured Payment Option, you should consider the implications this may have under the minimum distribution requirements. See "Tax Information." ANNUITY PAYOUT OPTIONS AND SURRENDERING THE CONTRACT. Once your contract is surrendered or an annuity payout option is chosen, we will return the contract to you with a notation that the life contingent annuity is still in effect. You may not surrender the life contingent annuity. APO PLUS APO Plus is a variation of the Assured Payment Option. Except as indicated below, APO Plus operates under the same guidelines as the Assured Payment Option. Under APO Plus you will be able to keep a portion of your value in the Alliance Common Stock option or the Alliance Equity Index option, whichever one you choose. Once you have selected a variable investment option it may not be changed. You may not elect APO Plus if the Assured Payment Option is already in effect. APO Plus allows you to remain invested in the variable investment option for longer than would be possible if you had applied your entire account value all at once to the Assured Payment Option or to an annuity payout option. HOW WE ALLOCATE YOUR CONTRIBUTIONS. We allocate a portion of your initial contribution or account value to the Assured Payment Option. Under the Assured Payment Option amounts are allocated in the same manner as described above. Your remaining account value is allocated to the variable investment option you select. Periodically during the fixed period we transfer a portion of your value in the variable investment option to the fixed maturity options to increase your guaranteed level payments under the Assured Payment Option. The amount allocated under the Assured Payment Option will provide for level payments. The amount of the level payments are equal to the amount of the initial payment that would have been provided if you had allocated your entire initial contribution or account value under the Assured Payment Option. The difference between the amount required for level payments and the amount required for increasing payments provided under the Assured Payment Option, is allocated to the variable investment option you selected. If you have any value in the fixed maturity options at the time this option is elected, a market value adjustment may apply as a result of such amounts being transferred to activate the Assured Payment Option. FIXED PERIOD. The fixed period and deferral period schedule shown for the Assured Payment Option will also apply under APO Plus. On the third February 15th following the date your first payment is made during the fixed period, a portion of your value in the variable investment option may be transferred to the Assured Payment Option in order to increase your level payments. If you elect a deferral period of three years or more, a portion of your value in the variable investment option will be allocated to the Assured Payment Option on the February 15th before the date your first payment is made. If your payments are to be made on February 15th, the date of the first payment will be counted as the first February 15th for the purpose of this transfer to the Assured Payment Option. The transfer of amounts to the Assured Payment Option is repeated each third year during the fixed period. The first increase in payments will be reflected in the payment made to you after three full years of payments and then every three years after that. Immediately following your last payment during the fixed period, your remaining value in the variable investment option is first allocated to the life contingent annuity to change the level payments previously purchased to increasing payments. These increasing payments will increase each year based on the annual increase in the Consumers Price Index, but never greater than 3%. If you have any value remaining after the increasing payments are purchased, this amount is allocated to the life contingent annuity to further increase your lifetime payments. If your - ---------- 41 - -------------------------------------------------------------------------------- value in the variable investment option is insufficient to purchase the increasing payments, then the level payments previously purchased will be raised as much as possible. While APO Plus provides you with a minimum amount of level guaranteed lifetime payments under the Assured Payment Option, the total amount of income that you will receive over time will depend on the investment performance of the variable investment option which you selected. It will also depend on the current rates to maturity and the cost of the life contingent annuity, which also varies. As a result, the combined amount of guaranteed lifetime income you receive under APO Plus may be more or less than the amount that could have been purchased if your entire initial contribution or account value had been allocated to the Assured Payment Option. See Appendix IV for an example of the payments purchased under APO Plus. ALLOCATION OF ADDITIONAL CONTRIBUTIONS. Any additional contributions you make may only be allocated to the variable investment option. We do not permit additional contributions after the end of the fixed period. WITHDRAWALS. If you take a lump sum withdrawal or if a lump sum withdrawal is made to satisfy minimum distribution requirements such withdrawal will be taken from your value in the variable investment option unless you specify otherwise. If there is insufficient value in the variable investment option any additional amount will be taken from the separate account containing the fixed maturity options and from amounts held to provide for payments off maturity dates, in the same manner as described above for the Assured Payment Option. DEATH BENEFIT. If a death benefit becomes payable during the fixed period we will pay the death benefit amount to the designated beneficiary. The death benefit amount is equal to the greater of: (1) your value in the fixed maturity options; and (2) the separate account containing the fixed maturity amounts in each fixed maturity option plus any amounts held to provide for payments off maturity dates. When the greater of (1) and (2) above is determined, the value in the variable investment option is added. A death benefit is never payable under the life contingent annuity. TERMINATION OF APO PLUS. You may terminate APO Plus at any time by submitting a written request satisfactory to us. You may choose one of the following two options if you terminate APO Plus: (1) your contract will operate under the Equitable Accumulator Rollover IRA or Flexible Premium IRA rules; or (2) you may elect the Assured Payment Option. If you elect the Assured Payment Option, your remaining value in the variable investment option will be allocated to the fixed maturity options, the separate account to provide for payments off maturity dates, and the life contingent annuity. A market value adjustment may apply for any amounts allocated from a fixed maturity option. At least 45 days prior to the end of each three-year period, we will send you a quote indicating how much future income could be provided under the Assured Payment Option. The quote would be based on your current account value, current rates to maturity for the fixed maturity options, and current purchase rates under the life contingent annuity as of the date of the quote. The actual amount of future income you would receive depends on the rates in effect on the day you switch to the Assured Payment Option. WITHDRAWING YOUR ACCOUNT VALUE You have several ways to withdraw your account value before annuity payments begin. The table below shows the methods available under each type of contract. More information follows the table. For the tax consequences of withdrawals, see "Tax information." - ---------- 42 - --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------ METHOD OF WITHDRAWAL - ------------------------------------------------------------------------------------ SUBSTANTIALLY MINIMUM CONTRACT LUMP SUM SYSTEMATIC EQUAL DISTRIBUTION - ------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------ NQ Yes Yes No No - ------------------------------------------------------------------------------------ Rollover IRA* Yes Yes Yes Yes - ------------------------------------------------------------------------------------ Flexible Premium IRA* Yes Yes Yes Yes - ------------------------------------------------------------------------------------ Roth Conversion IRA Yes Yes Yes No - ------------------------------------------------------------------------------------ Flexible Premium Roth IRA Yes Yes Yes No - ------------------------------------------------------------------------------------ QP Yes No No Yes - ------------------------------------------------------------------------------------ Rollover TSA Yes** No No Yes - ------------------------------------------------------------------------------------
* If Assured Payment Option or APO Plus is elected, only lump sum withdrawals are available. ** For some Rollover TSA contracts, your ability to take withdrawals, loans or surrender your contract may be limited. You must provide withdrawal restriction information when you apply for a contract. See "Tax Sheltered Annuity contracts (TSAs)" in "Tax information." LUMP SUM WITHDRAWALS (All contracts) You may take lump sum withdrawals from your account value at any time. (Rollover TSA contracts may have restrictions.) The minimum amount you may withdraw is $1,000. If you request to withdraw more than 90% of a contract's current cash value we will treat it as a request to surrender the contract for its cash value. See "Surrendering your contract to receive its cash value" below. Lump sum withdrawals in excess of the 15% (10% under Assured Payment Option or APO Plus) free withdrawal amount (see "15% free withdrawal amount" in "Charges and expenses") may be subject to a withdrawal charge. Under Rollover TSA contracts, if a loan is outstanding, you may only take lump sum withdrawals as long as the cash value remaining after any withdrawal equals at least 10% of the outstanding loan plus accrued interest. SYSTEMATIC WITHDRAWALS (NQ and all IRA contracts) You may take systematic withdrawals of a particular dollar amount or a particular percentage of your account value. You may take systematic withdrawals on a monthly, quarterly, or annual basis as long as the withdrawals do not exceed the following percentages of your account value: 1.2% monthly, 3.6% quarterly, and 15.0% annually. The minimum amount you may take in each systematic withdrawal is $250. If the amount withdrawn would be less than $250 on the date a withdrawal is to be taken, we will not make a payment and we will terminate your systematic withdrawal election. We will make the withdrawals on any day of the month that you select as long as it is not later than the 28th day of the month. If you do not select a date, we will make the withdrawals on the same calendar day of the month as the contract date. You must wait at least 28 days after your contract is issued before your systematic withdrawals can begin. You may elect to take systematic withdrawals at any time. If you own an IRA contract, you may elect this withdrawal method only if you are between ages 59 1/2 and 70 1/2. You may not elect the systematic withdrawal method if you have balances in the account for special dollar cost averaging. You may change the payment frequency, or the amount or percentage of your systematic withdrawals, once each contract year. However, you may not change the amount or percentage in any contract year in which you have already taken a lump sum withdrawal. You can cancel the systematic withdrawal option at any time. Systematic withdrawals are not subject to a withdrawal charge, except to the extent that, when added to a lump sum withdrawal previously taken in the same contract year, the systematic withdrawal exceeds the 15% free withdrawal amount. SUBSTANTIALLY EQUAL WITHDRAWALS (All IRA contracts) The substantially equal withdrawals option allows you to receive distributions from your account value without triggering the 10% additional federal tax penalty, which normally applies to distributions made before age 59 1/2. See "Tax information." Once you begin to take substantially - ---------- 43 - -------------------------------------------------------------------------------- equal withdrawals, you should not stop them or change the pattern of your withdrawals until the later of age 59 1/2 or five full years after the first withdrawal. If you stop or change the withdrawals or take a lump sum withdrawal, you may be liable for the 10% federal tax penalty that would have otherwise been due on prior withdrawals made under this option and for any interest on those withdrawals. You may elect to take substantially equal withdrawals at any time before age 59 1/2. We will make the withdrawal on any day of the month that you select as long as it is not later than the 28th day of the month. You may not elect to receive the first payment in the same contract year in which you took a lump sum withdrawal. We will calculate the amount of your substantially equal withdrawals. The payments will be made monthly, quarterly, or annually as you select. These payments will continue until we receive written notice from you to cancel this option or you take a lump sum withdrawal. You may elect to start receiving substantially equal withdrawals again, but the payments may not restart in the same contract year in which you took a lump sum withdrawal. We will calculate the new withdrawal amount. You may not elect substantially equal withdrawals if you have balances in the account for special dollar cost averaging. Substantially equal withdrawals are not subject to a withdrawal charge. MINIMUM DISTRIBUTION WITHDRAWALS (Rollover IRA, Flexible Premium IRA, QP, and Rollover TSA contracts only - See "Tax information") We offer the minimum distribution withdrawal option to help you meet required minimum distributions under federal income tax rules. You may elect this option in the year in which you reach age 70 1/2. The minimum amount we will pay out is $250. You may elect the method you want us to use to calculate your minimum distribution withdrawals from the choices we offer. Currently, minimum distribution withdrawal payments will be made annually. We do not impose a withdrawal charge on minimum distribution withdrawals except if when added to a lump sum withdrawal previously taken in the same contract year, the minimum distribution withdrawal exceeds the 15% free withdrawal amount. We will calculate your annual payment based on your account value at the end of the prior calendar year based on the method you choose. Under Rollover TSA contracts, you may not elect minimum distribution withdrawals if a loan is outstanding. ----------------------------------------------------------------------------- For Rollover IRA, Flexible Premium IRA, QP, and Rollover TSA contracts, we will send a form outlining the distribution options available before you reach age 701/2 (if you have not begun your annuity payments before that time). ----------------------------------------------------------------------------- HOW WITHDRAWALS ARE TAKEN FROM YOUR ACCOUNT VALUE Unless you specify otherwise, we will subtract your withdrawals on a pro rata basis from your value in the variable investment options. If there is insufficient value or no value in the variable investment options, any additional amount of the withdrawal required or the total amount of the withdrawal will be withdrawn from the fixed maturity options in order of the earliest maturity date(s) first. A market value adjustment may apply. HOW WITHDRAWALS AFFECT YOUR GUARANTEED MINIMUM INCOME BENEFIT AND GUARANTEED MINIMUM DEATH BENEFIT Withdrawals will reduce your guaranteed benefits on either a dollar-for-dollar basis or on a pro rata basis as explained below: INCOME BENEFIT AND DEATH BENEFIT 5% roll up to age 80 or age 70 - If you elect the 5% roll up to age 80 or 5% roll up to age 70 guaranteed minimum death benefit, your benefit base and current guaranteed minimum death benefit will be reduced on a - ---------- 44 - -------------------------------------------------------------------------------- dollar-for-dollar basis as long as the sum of your withdrawals in a contract year is 5% or less of the applicable guaranteed minimum death benefit on the most recent contract date anniversary. Once you take a withdrawal that causes the sum of your withdrawals in a contract year to exceed 5% of the applicable guaranteed minimum death benefit on the most recent contract date anniversary, that withdrawal and any subsequent withdrawals in that same contract year will reduce your benefit base and current guaranteed minimum death benefit on a pro rata basis. The timing of your withdrawals and whether they exceed the 5% threshold described above can have a significant impact on your guaranteed minimum income benefit or guaranteed minimum death benefit. Annual ratchet to age 80 - If you elect the annual ratchet to age 80 guaranteed minimum death benefit, each withdrawal will always reduce your benefit base and current guaranteed minimum death benefit on a pro rata basis. Annuitant issue ages 80 through 90 - If your contract was issued when the annuitant was between ages 80 and 90, each withdrawal will always reduce your benefit base and current guaranteed minimum death benefit on a pro rata basis. ---------------------------------------- Reduction on a dollar-for-dollar basis means that your current benefit will be reduced by the dollar amount of the withdrawal. Reduction on a pro rata basis means that we calculate the percentage of your current account value that is being withdrawn and we reduce your current benefit by that same percentage. For example, if your account value is $30,000 and you withdraw $12,000, you have withdrawn 40% of your account value. If your guaranteed minimum death benefit was $40,000 before the withdrawal, it would be reduced by $16,000 ($40,000 x.40) and your new guaranteed minimum death benefit after the withdrawal would be $24,000 ($40,000 - $16,000). LOANS UNDER ROLLOVER TSA CONTRACTS You may take loans from a Rollover TSA unless restricted by the employer who provided the Rollover TSA funds. If you cannot take a loan, or cannot take a loan without approval from the employer who provided the funds, we will have this information in our records based on what you and the employer who provided the funds told us when you purchased your contract. The employer must also tell us whether special employer plan rules of the Employee Retirement Income Security Act of 1974 ("ERISA") apply. We will not permit you to take a loan while you are taking minimum distribution withdrawals. You should read the terms and conditions on our loan request form carefully before taking out a loan. Under Rollover TSA contracts subject to ERISA, you may only take a loan with the written consent of your spouse. Your contract contains further details of the loan provision. Also, see "Tax information" for general rules applicable to loans. We will permit you to have only one loan outstanding at a time. The minimum loan amount is $1,000. The maximum amount is $50,000 or, if less, 50% of your account value, subject to any limits under the federal income tax rules. The term of a loan is five years. However, if you use the loan to acquire your primary residence, the term is 10 years. The term may not extend beyond the earliest of: (1) the date annuity payments begin, (2) the date the contract terminates, and (3) the date a death benefit is paid (the outstanding loan will be deducted from the death benefit amount). Interest will accrue daily on your outstanding loan at a rate we set. The loan interest rate will be equal to the Moody's Corporate Bond Yield Averages for Baa bonds for the calendar month ending two months before the first day of the calendar quarter in which the rate is determined. LOAN RESERVE ACCOUNT. On the date your loan is processed, we will transfer the amount of your loan to the loan reserve account. Unless you specify otherwise, we will subtract your loan on a pro rata basis from your value in the - ---------- 45 - -------------------------------------------------------------------------------- variable investment options. If there is insufficient value or no value in the variable investment options, any additional amount of the loan will be subtracted from the fixed maturity options in order of the earliest maturity date(s) first. A market value adjustment may apply. We will credit interest to the amount in the loan reserve account at a rate of 2% lower than the loan interest rate that applies for the time your loan is outstanding. On each contract date anniversary after the date the loan is processed, we will transfer the amount of interest earned in the loan reserve account to the variable investment options on a pro rata basis. When you make a loan repayment, unless you specify otherwise, we will transfer the dollar amount of the loan repaid from the loan reserve account to the investment options according to the allocation percentages we have on our records. SURRENDERING YOUR CONTRACT TO RECEIVE ITS CASH VALUE You may surrender your contract to receive its cash value at any time while the annuitant is living and before you begin to receive annuity payments. (Rollover TSA contracts may have restrictions.) For a surrender to be effective, we must receive your written request and your contract at our Processing Office. We will determine your cash value on the date we receive the required information. All benefits under the contract will terminate as of that date. You may receive your cash value in a single sum payment or apply it to one or more of the annuity payout options. See "Your annuity payout options" below. For the tax consequences of surrenders, see "Tax information." WHEN TO EXPECT PAYMENTS Generally, we will fulfill requests for payments out of the variable investment options within seven calendar days after the date of the transaction to which the request relates. These transactions may include applying proceeds to a variable annuity, payment of a death benefit, payment of any amount you withdraw (less any withdrawal charge) and, upon surrender, payment of the cash value. We may postpone such payments or applying proceeds for any period during which: (1) the New York Stock Exchange is closed or restricts trading, (2) sales of securities or determination of the fair value of a variable investment option's assets is not reasonably practicable because of an emergency, or (3) the SEC, by order, permits us to defer payment to protect people remaining in the variable investment options. We can defer payment of any portion of your value in the fixed maturity options and the account for special dollar cost averaging (other than for death benefits) for up to six months while you are living. We also may defer payments for a reasonable amount of time (not to exceed 10 days) while we are waiting for a contribution check to clear. All payments are made by check and are mailed to you (or the payee named in a tax-free exchange) by U.S. mail, unless you request that we use an express delivery service at your expense. YOUR ANNUITY PAYOUT OPTIONS Equitable Accumulator offers you several choices of annuity payout options. Some enable you to receive fixed annuity payments, which can be either level or increasing, and others enable you to receive variable annuity payments. You can choose from among the annuity payout options listed below. For QP and Rollover TSA, you may receive only a life annuity with a 10 year period certain. Other restrictions may apply, depending on the type of contract you own or the annuitant's age. In addition, you may receive only fixed level life annuity payments if you elect the guaranteed minimum income benefit under baseBUILDER. - ---------- 46 - -------------------------------------------------------------------------------- - ------------------------------------------------------------- Fixed annuity payout options Life annuity Life annuity with period certain Life annuity with refund certain Period certain annuity - ------------------------------------------------------------- Variable Immediate Annuity Life annuity (not available payout options in New York) Life annuity with period certain - ------------------------------------------------------------- Income Manager payout Life annuity with period options (available for certain annuitants age 83 or less Period certain annuity at contract issue) - -------------------------------------------------------------
o Life annuity: An annuity that guarantees payments for the rest of the annuitant's life. Payments end with the last monthly payment before the annuitant's death. Because there is no continuation of benefits following the annuitant's death with this payout option, it provides the highest monthly payment of any of the life annuity options, so long as the annuitant is living. o Life annuity with period certain: An annuity that guarantees payments for the rest of the annuitant's life. If the annuitant dies before the end of a selected period of time ("period certain"), payments continue to the beneficiary for the balance of the period certain. The period certain cannot extend beyond the annuitant's life expectancy. A life annuity with a period certain is the form of annuity under the contracts that you will receive if you do not elect a different payout option. In this case, the period certain will be based on the annuitant's age and will not exceed 10 years. o Life annuity with refund certain: An annuity that guarantees payments for the rest of the annuitant's life. If the annuitant dies before the amount applied to purchase the annuity option has been recovered, payments to the beneficiary will continue until that amount has been recovered. This payout option is available only as a fixed annuity. o Period certain annuity: An annuity that guarantees payments for a specific period of time, usually 5, 10, 15, or 20 years. This guaranteed period may not exceed the annuitant's life expectancy. This option does not guarantee payments for the rest of the annuitant's life. It does not permit any repayment of the unpaid principal, so you cannot elect to receive part of the payments as a single sum payment with the rest paid in monthly annuity payments. This payout option is available only as a fixed annuity. The life annuity, life annuity with period certain, and life annuity with refund certain payout options are available on a single life or joint and survivor life basis. The joint and survivor life annuity guarantees payments for the rest of the annuitant's life and, after the annuitant's death, payments continue to the survivor. We may offer other payout options not outlined here. Your financial professional can provide details. FIXED ANNUITY PAYOUT OPTION With fixed annuities, we guarantee fixed annuity payments that will be based either on the tables of guaranteed annuity purchase factors in your contract or on our then current annuity purchase factors, whichever is more favorable for you. VARIABLE IMMEDIATE ANNUITY PAYOUT OPTIONS Variable Immediate Annuities are described in a separate prospectus that is available from your financial professional. Before you select a Variable Immediate Annuity payout option, you should read the prospectus which contains important information that you should know. Variable annuities may be funded through your choice of variable investment options investing in portfolios of EQ Advisors Trust. The contract also offers a fixed annuity option that can be elected in combination with the variable annuity payout options. The amount of each variable annuity payment will fluctuate, depending upon the performance of the variable investment options, and whether the actual rate of investment return is higher or lower than an assumed base rate. - ---------- 47 - -------------------------------------------------------------------------------- INCOME MANAGER PAYOUT OPTIONS The Income Manager payout annuity contracts differ from the other payout annuity contracts. The other payout annuity contracts provide higher or lower income levels, but do not have all the features of the Income Manager payout annuity contract. You may request an illustration of the Income Manager payout annuity contract from your financial professional. Income Manager payout options are described in a separate prospectus that is available from your financial professional. Before you select an Income Manager payout option, you should read the prospectus which contains important information that you should know. Both Income Manager payout options provide guaranteed level payments (NQ and IRA contracts). The Income Manager (life annuity with period certain) also provides guaranteed increasing payments (NQ contracts only). You may not elect a period certain Income Manager payout option unless withdrawal charges are no longer in effect under your Equitable Accumulator. For QP and Rollover TSA contracts, if you want to elect an Income Manager payout option, we will first roll over amounts in such contract to a Rollover IRA contract. You will be the owner of the Rollover IRA contract. You may choose to apply only part of the account value of your Equitable Accumulator contract to an Income Manager payout annuity. In this case, we will consider any amounts applied as a withdrawal from your Equitable Accumulator and we will deduct any applicable withdrawal charge. For the tax consequences of withdrawals, see "Tax information." Depending upon your circumstances, the purchase of an Income Manager contract may be done on a tax-free basis. Please consult your tax adviser. THE AMOUNT APPLIED TO PURCHASE AN ANNUITY PAYOUT OPTION The amount applied to purchase an annuity payout option varies, depending on the payout option that you choose, and the timing of your purchase as it relates to any withdrawal charges or market value adjustments. If amounts in a fixed maturity option are used to purchase any annuity payout option, prior to the maturity date, a market value adjustment will apply. o For the fixed annuity payout options and Variable Immediate Annuity payout options, no withdrawal charge is imposed if you select a life annuity, life annuity with period certain or life annuity with refund certain. o For the fixed annuity payout option, the withdrawal charge applicable under your Equitable Accumulator is imposed if you select a period certain. If the period certain is more than 5 years, then the withdrawal charge deducted will not exceed 5% of the account value. For the Income Manager payout options, the following applies: o No withdrawal charge is imposed under the Equitable Accumulator. If the withdrawal charge that otherwise would have been applied to your account value under your Equitable Accumulator is greater than 2% of the contributions that remain in your contract at the time you purchase your payout option, the withdrawal charges under the Income Manager will apply. For this purpose, the year in which your account value is applied to the payout option will be "contract year 1." SELECTING AN ANNUITY PAYOUT OPTION When you select a payout option, we will issue you a separate written agreement confirming your right to receive annuity payments. We require you to return your contract before annuity payments begin unless you are applying only some of your account value to an Income Manager contract. The contract owner and annuitant must meet the issue age and payment requirements. You can choose the date annuity payments begin but it may not be earlier than thirteen months from the Equitable Accumulator contract date. Except with respect to the Income Manager annuity payout options, where payments are made on the 15th day of each month, you can change - ---------- 48 - -------------------------------------------------------------------------------- the date your annuity payments are to begin anytime before that date as long as you do not choose a date later than the 28th day of any month. Also, that date may not be later than: (i) if the annuitant was not older than age 83 when the contract was issued, the contract date anniversary that follows the annuitant's 90th birthday; (ii) if the annuitant was age 84 but not older than age 88 when the contract was issued the annuitant's age at issue plus seven years; and (iii) if the annuitant was age 89 or 90 when the contract was issued, age 95. (iv) for contracts issued in New York, by the annuitant's 90th birthday. The above may be different in some states. Before the last date by which your annuity payments must begin, we will notify you by letter. Once you have selected an annuity payout option and payments have begun, no change can be made other than; (i) transfers (if permitted in the future) among the variable investment options if a Variable Immediate Annuity payout option is selected; and (ii) withdrawals or contract surrender (subject to a market value adjustment) if an Income Manager annuity payout option is chosen. The amount of the annuity payments will depend on the amount applied to purchase the annuity and the applicable annuity purchase factors, discussed earlier. In no event will you ever receive payments under a fixed option or an initial payment under a variable option of less than the minimum amounts guaranteed by the contract. If, at the time you elect a payout option, the amount to be applied is less than $2,000 or the initial payment under the form elected is less than $20 monthly, we reserve the right to pay the account value in a single sum rather than as payments under the payout option chosen. Charges and expenses - ---------------- 49 - -------------------------------------------------------------------------------- CHARGES THAT EQUITABLE LIFE DEDUCTS We deduct the following charges each day from the net assets of each variable investment option. These charges are reflected in the unit values of each variable investment option: o A mortality and expense risks charge o An administrative charge o A distribution charge We deduct the following charges from your account value. When we deduct these charges from your variable investment options, we reduce the number of units credited to your contract: o On each contract date anniversary - an annual administrative charge if applicable (Flexible Premium IRA and Flexible Premium Roth IRA contracts only). o At the time you make certain withdrawals or surrender your contract - a withdrawal charge. o If you elect the optional benefit - a charge for the optional baseBUILDER benefit. o At the time annuity payments are to begin - charges for state premium and other applicable taxes. An annuity administrative fee may also apply. More information about these charges appears below. We will not increase these charges for the life of your contract, except as noted. We may reduce certain charges under group or sponsored arrangements. See "Group or sponsored arrangements" below. To help with your retirement planning, we may offer other annuities with different charges, benefits, and features. Please contact your financial professional for more information. MORTALITY AND EXPENSE RISKS CHARGE We deduct a daily charge from the net assets in each variable investment option to compensate us for mortality and expense risks, including the guaranteed minimum death benefit. The daily charge is equivalent to an annual rate of 1.10% of the net assets in each variable investment option. The mortality risk we assume is the risk that annuitants as a group will live for a longer time than our actuarial tables predict. If that happens, we would be paying more in annuity income than we planned. We also assume a risk that the mortality assumptions reflected in our guaranteed annuity payment tables, shown in each contract, will differ from actual mortality experience. Lastly, we assume a mortality risk to the extent that at the time of death, the guaranteed minimum death benefit exceeds the cash value of the contract. The expense risk we assume is the risk that it will cost us more to issue and administer the contracts than we expect. ADMINISTRATIVE CHARGE We deduct a daily charge from the net assets in each variable investment option. The charge, together with the annual administrative charge described below, is to compensate us for administrative expenses under the contracts. The daily charge is equivalent to an annual rate of 0.25% of the net assets in each variable investment option. We reserve the right under the contracts to increase this charge to an annual rate of 0.35%. DISTRIBUTION CHARGE We deduct a daily charge from the net assets in each variable investment option to compensate us for a portion of our sales expenses under the contracts. The daily charge is equivalent to an annual rate of 0.20% of the net assets in each variable investment option. ANNUAL ADMINISTRATIVE CHARGE (FLEXIBLE PREMIUM IRA AND FLEXIBLE PREMIUM ROTH IRA CONTRACTS ONLY) Under Flexible Premium IRA and Flexible Premium Roth IRA contracts, we deduct an administrative charge from your account value on each contract date anniversary. We deduct the charge if your account value on the last business day of the contract year is less than $25,000. If your account value on such date is $25,000 or more, we do not deduct the charge. During the first two contract years, the charge is - ---------- 50 - -------------------------------------------------------------------------------- equal to $30 or, if less, 2% of your account value. The charge is $30 for contract years three and later. We will deduct this charge from your value in the variable investment options on a pro rata basis. If there is not enough value in the variable investment options, we will deduct all or a portion of the charge from the fixed maturity options in order of the earliest maturity date(s) first. If you surrender your contract during the contract year we will deduct a pro rata portion of the charge. WITHDRAWAL CHARGE A withdrawal charge applies in two circumstances: (1) if you make one or more withdrawals during a contract year that, in total, exceed the 15% free withdrawal amount, described below, or (2) if you surrender your contract to receive its cash value. The withdrawal charge equals a percentage of the contributions withdrawn. The percentage that applies depends on how long each contribution has been invested in the contract. We determine the withdrawal charge separately for each contribution according to the following table:
CONTRACT YEAR 1 2 3 4 5 6 7 8+ Percentage of contribution 7% 6% 5% 4% 3% 2% 1% 0%
If the Assured Payment Option or APO Plus is in effect, the withdrawal charge is equal to a percentage of the contributions withdrawn minus any amounts allocated to the life contingent annuity. For purposes of calculating the withdrawal charge, we treat the contract year in which we receive a contribution as "contract year 1." Amounts withdrawn up to the free withdrawal amount are not considered withdrawal of any contribution. We also treat contributions that have been invested the longest as being withdrawn first. We treat contributions as withdrawn before earnings for purposes of calculating the withdrawal charge. However, federal income tax rules treat earnings under your contract as withdrawn first. See "Tax information." In order to give you the exact dollar amount of the withdrawal you request, we deduct the amount of the withdrawal and the withdrawal charge from your account value. Any amount deducted to pay withdrawal charges is also subject to that same withdrawal charge percentage. We deduct the charge in proportion to the amount of the withdrawal subtracted from each investment option. The withdrawal charge helps cover our sales expenses. For annuitants that are ages 84 and 85 when the contract is issued in New York State, the withdrawal charge will be computed in the same manner as for other contracts, except that the withdrawal charge schedule will be different. For these New York contracts, the withdrawal charge schedule will be 5% of each contribution made in the first contract year, decreasing by 1% each subsequent contract year to 0% in the sixth and later contract years. The withdrawal charge does not apply in the circumstances described below. ANNUITANT AGES 86 THROUGH 90 WHEN THE CONTRACT IS ISSUED. The withdrawal charge does not apply under the contract if the annuitant is age 86 or older when the contract is issued. 15% FREE WITHDRAWAL AMOUNT. Each contract year you can withdraw up to 15% of your account value without paying a withdrawal charge. The 15% free withdrawal amount is determined using your account value on the most recent contract date anniversary, minus any other withdrawals made during the contract year. The 15% free withdrawal amount does not apply if you surrender your contract. The free withdrawal amount is 10% of your account value under the Assured Payment Option and APO Plus. Note the following special rule for NQ contracts issued to a charitable remainder trust, the free withdrawal amount will equal the greater of: (1) the current account value, less - ---------- 51 - -------------------------------------------------------------------------------- contributions that have not been withdrawn (earnings in the contract), and (2) the 15% free withdrawal amount defined above. Minimum distributions. The withdrawal charge does not apply to withdrawals taken under our minimum distribution withdrawal option. However, those withdrawals are counted towards the 15% free withdrawal amount if you also make a lump sum withdrawal in any contract year. Disability, terminal illness or confinement to nursing home. The withdrawal charge also does not apply if: o The annuitant has qualified to receive Social Security disability benefits as certified by the Social Security Administration; or o We receive proof satisfactory to us (including certification by a licensed physician) that the annuitant's life expectancy is six months or less; or o The annuitant has been confined to a nursing home for more than 90 days (or such other period, as required in your state) as verified by a licensed physician. A nursing home for this purpose means one that is (a) approved by Medicare as a provider of skilled nursing care service, or (b) licensed as a skilled nursing home by the state or territory in which it is located (it must be within the United States, Puerto Rico, or U.S. Virgin Islands) and meets all of the following: - its main function is to provide skilled, intermediate, or custodial nursing care; - it provides continuous room and board to three or more persons; - it is supervised by a registered nurse or licensed practical nurse; - it keeps daily medical records of each patient; - it controls and records all medications dispensed; and - its primary service is other than to provide housing for residents. We reserve the right to impose a withdrawal charge, in accordance with your contract and applicable state law, if the disability is caused by a preexisting condition or a condition that began within 12 months of the contract date. Some states may not permit us to waive the withdrawal charge in the above circumstances, or may limit the circumstances for which the withdrawal charge may be waived. Your financial professional can provide more information or you may contact our Processing Office. BASEBUILDER BENEFIT CHARGE If you elect the baseBUILDER combined guaranteed minimum income benefit and guaranteed minimum death benefit, we deduct a charge annually from your account value on each contract date anniversary until such time as you exercise the guaranteed minimum income benefit, elect another annuity payout option, or the contract date anniversary after the annuitant reaches age 85, whichever occurs first. The charge is equal to 0.30% (0.15% if the 5% roll up to age 70 baseBUILDER combined benefit is elected) of the benefit base in effect on the contract date anniversary. We will deduct this charge from your value in the variable investment options on a pro rata basis. If there is not enough value in the variable investment options, we will deduct all or a portion of the charge from the fixed maturity options in order of the earliest maturity date(s) first. A market value adjustment may apply. CHARGES FOR STATE PREMIUM AND OTHER APPLICABLE TAXES We deduct a charge for applicable taxes such as premium taxes that may be imposed in your state. Generally, we deduct the charge from the amount applied to provide an annuity payout option. The current tax charge that might be imposed varies by state and ranges from 0% to 3.5% (1% in Puerto Rico and 5% in the U.S. Virgin Islands). ANNUITY ADMINISTRATIVE FEE We deduct a fee of $350 from the amount to be applied to purchase a Variable Immediate Annuity. - ---------- 52 - -------------------------------------------------------------------------------- CHARGES THAT EQ ADVISORS TRUST DEDUCTS EQ Advisors Trust deducts charges for the following types of fees and expenses: o Management fees ranging from 0.25% to 1.15%. o 12b-1 fees of 0.25%. o Operating expenses, such as trustees' fees, independent auditors' fees, legal counsel fees, administrative service fees, custodian fees, and liability insurance. o Investment-related expenses, such as brokerage commissions. These charges are reflected in the daily share price of each portfolio. Since shares of EQ Advisors Trust are purchased at their net asset value, these fees and expenses are, in effect, passed on to the variable investment options and are reflected in their unit values. For more information about these charges, please refer to the prospectus for EQ Advisors Trust following this prospectus. GROUP OR SPONSORED ARRANGEMENTS For certain group or sponsored arrangements, we may reduce the withdrawal charge or the mortality and expense risks charge, or change the minimum initial contribution requirements. We also may change the guaranteed minimum income benefit and the guaranteed minimum death benefit, or offer variable investment options that invest in shares of EQ Advisors Trust that are not subject to the 12b-1 fee. Group arrangements include those in which a trustee or an employer, for example, purchases contracts covering a group of individuals on a group basis. Group arrangements are not available for IRA contracts. Sponsored arrangements include those in which an employer allows us to sell contracts to its employees or retirees on an individual basis. Our costs for sales, administration, and mortality generally vary with the size and stability of the group or sponsoring organization, among other factors. We take all these factors into account when reducing charges. To qualify for reduced charges, a group or sponsored arrangement must meet certain requirements, such as requirements for size and number of years in existence. Group or sponsored arrangements that have been set up solely to buy contracts or that have been in existence less than six months will not qualify for reduced charges. We also may establish different rates to maturity for the fixed maturity options under different classes of contracts for group or sponsored arrangements. We will make these and any similar reductions according to our rules in effect when we approve a contract for issue. We may change these rules from time to time. Any variation will reflect differences in costs or services and will not be unfairly discriminatory. Group or sponsored arrangements may be governed by federal income tax rules, ERISA, or both. We make no representations with regard to the impact of these and other applicable laws on such programs. We recommend that employers, trustees, and others purchasing or making contracts available for purchase under such programs seek the advice of their own legal and benefits advisers. OTHER DISTRIBUTION ARRANGEMENTS We may reduce or eliminate charges when sales are made in a manner that result in savings of sales and administrative expenses, such as sales through persons who are compensated by clients for recommending investments and who receive no commission or reduced commissions in connection with the sale of the contracts. We will not permit a reduction or elimination of charges where it would be unfairly discriminatory. Payment of death benefit - ---------------- 53 - -------------------------------------------------------------------------------- YOUR BENEFICIARY AND PAYMENT OF BENEFIT You designate your beneficiary when you apply for your contract. You may change your beneficiary at any time. The change will be effective on the date the written request for the change is received in our processing office. We are not responsible for any beneficiary change request that we do not receive. We will send you a written confirmation when we receive your request. Under jointly owned contracts, the surviving owner is considered the beneficiary, and will take the place of any other beneficiary. You may be limited as to the beneficiary you can designate in a Rollover TSA contract. In a QP contract, the beneficiary must be the trustee. The death benefit is equal to your account value, or, if greater, the guaranteed minimum death benefit. The guaranteed minimum death benefit is part of your contract, whether you select the baseBUILDER benefit or not. We determine the amount of the death benefit as of the date we receive satisfactory proof of the annuitant's death and any required instructions for the method of payment. Under Rollover TSA contracts we will deduct the amount of any outstanding loan plus accrued interest from the amount of the death benefit. The death benefit payable under the Assured Payment Option or APO Plus is described earlier in this prospectus. See "Assured Payment Option and APO Plus." EFFECT OF THE ANNUITANT'S DEATH If the annuitant dies before the annuity payments begin, we will pay the death benefit to your beneficiary. Generally, the death of the annuitant terminates the contract. However, a beneficiary who is the surviving spouse of the owner/annuitant can choose to be treated as the successor owner/annuitant and continue the contract. Only a spouse can be a successor owner/annuitant. A successor owner/annuitant can only be named under NQ and IRA contracts. For Rollover IRA and Flexible Premium IRA contracts, a beneficiary who is not a surviving spouse may be able to have limited ownership as discussed under "Beneficiary continuation option for Rollover IRA and Flexible Premium IRA contracts" below. WHEN AN NQ CONTRACT OWNER DIES BEFORE THE ANNUITANT Under certain conditions the owner can change after the original owner's death. When you are not the annuitant under an NQ contract and you die before annuity payments begin, the beneficiary named to receive the death benefit upon the annuitant's death will automatically become the successor owner. If you do not want the beneficiary to be the successor owner, you should name a successor owner. You may name a specific successor owner that will become the successor owner at any time by sending satisfactory notice to our Processing Office. If the contract is jointly owned and the first owner to die is not the annuitant, the surviving owner becomes the sole contract owner. This person will be considered the successor owner for purposes of the distribution rules described in this section. The surviving owner automatically takes the place of any other beneficiary designation. Unless the surviving spouse of the owner who has died (or in the case of a joint ownership situation, the surviving spouse of the first owner to die) is the successor owner for this purpose, the entire interest in the contract must be distributed under the following rules: o The cash value of the contract must be fully paid to the designated beneficiary (new owner) by December 31st of the fifth calendar year after your death (or in a joint ownership situation, the death of the first owner to die). o The successor owner may instead elect to receive the cash value as a life annuity (or payments for a period certain of not longer than the new owner's life expectancy). Payments must begin no later than December 31st following the calendar year of the non-annuitant owner's death. Unless this alternative is elected, we will pay any cash value on December 31st of the fifth calendar year following the year of your death (or the death of the first owner to die). - ---------- 54 - -------------------------------------------------------------------------------- o If the surviving spouse is the successor owner or joint owner, the spouse may elect to continue the contract. No distributions are required as long as the surviving spouse and annuitant are living. HOW DEATH BENEFIT PAYMENT IS MADE We will pay the death benefit to the beneficiary in the form of the annuity payout option you have chosen. If you have not chosen an annuity payout option as of the time of the annuitant's death, the beneficiary will receive the death benefit in a single sum. However, subject to any exceptions in the contract, our rules and any applicable requirements under federal income tax rules, the beneficiary may elect to apply the death benefit to one or more annuity payout options we offer at the time. See "Your annuity payout options" in "Accessing your money" earlier in this prospectus. Please note that if you are both the contract owner and the annuitant, you may elect only a life annuity or an annuity that does not extend beyond the life expectancy of the beneficiary. SUCCESSOR OWNER AND ANNUITANT If you are both the contract owner and the annuitant, and your spouse is the sole beneficiary or the joint owner, then your spouse may elect to receive the death benefit or continue the contract as successor owner/annuitant. If your surviving spouse decides to continue the contract, then on the contract date anniversary following your death, we will increase the account value to equal your current guaranteed minimum death benefit, if it is higher than the account value. The increase in the account value will be allocated to the investment options according to the allocation percentages we have on file for your contract. Thereafter, withdrawal charges will no longer apply to this amount. Withdrawal charges will apply if you make additional contributions. These additional contributions will be withdrawn only after all other amounts have been withdrawn. In determining whether the guaranteed minimum death benefit will continue to grow, we will use your surviving spouse's age (as of the contract date anniversary). BENEFICIARY CONTINUATION OPTION FOR ROLLOVER IRA AND FLEXIBLE PREMIUM IRA CONTRACTS Upon your death under a Rollover IRA or Flexible Premium IRA contract, a nonspouse beneficiary may generally elect to keep the contract in your name and receive distributions under the contract instead of the death benefit being paid in a single sum. If you die AFTER the "required beginning date" (see "Tax information") for required minimum distributions, the contract will continue if: (a) you were receiving minimum distribution withdrawals from this contract; and (b) the pattern of minimum distribution withdrawals you chose was based in part on the life of the designated beneficiary. The withdrawals will then continue to be paid to the beneficiary on the same basis as you chose before your death. We will be able to tell your beneficiary whether this option is available to them. You should contact our Processing Office for further information. If you die BEFORE the "Required Beginning Date" (and therefore you were not taking minimum distribution withdrawals under the contract), an eligible beneficiary may take minimum distribution withdrawals under the contract. We will increase the account value to equal the death benefit if the death benefit is greater than the account value. That amount will be used to provide the withdrawals. If the eligible beneficiary elects as described in the next paragraph, these withdrawals will begin by December 31st of the calendar year following your death. These withdrawals will be based on the beneficiary's life expectancy. If there is more than one beneficiary, the shortest life expectancy is used. An eligible beneficiary can choose instead to continue the contract in your name without having to take annual withdrawals. If the beneficiary chooses this option, all amounts must be distributed from the contract by December 31, of the fifth calendar year following your death. - ---------- 55 - -------------------------------------------------------------------------------- The designated beneficiary must be a natural person and of legal age at the time of election. The beneficiary must elect this option within 30 days following the date we receive proof of your death. This option may not be elected if the Assured Payment Option or APO Plus were in effect at the time of your death. The death benefit will be paid to the beneficiary according to our standard procedures, unless an election is made within 30 days to: (1) receive the death benefit; (2) continue the contract and take annual withdrawals as described above; or (3) defer payment of the account value for up to five years. While the contract continues in your name, the beneficiary may make transfers among the investment options. However, additional contributions will not be permitted and the guaranteed minimum income benefit and the death benefit (including the guaranteed minimum death benefit) provisions will no longer be in effect. Although the only withdrawals that will be permitted are minimum distribution withdrawals, the beneficiary may choose at any time to withdraw all of the account value and no withdrawal charges will apply. Tax information - ---------------- 56 - -------------------------------------------------------------------------------- OVERVIEW In this part of the prospectus, we discuss the current federal income tax rules that generally apply to Equitable Accumulator contracts owned by United States taxpayers. The tax rules can differ, depending on the type of contract, whether NQ, Rollover IRA, Flexible Premium IRA, Roth Conversion IRA, Flexible Premium Roth IRA, QP, or Rollover TSA. Therefore, we discuss the tax aspects of each type of contract separately. Federal income tax rules include the United States laws in the Internal Revenue Code, and Treasury Department Regulations and Internal Revenue Service ("IRS") interpretations of the Internal Revenue Code. These tax rules may change. We cannot predict whether, when, or how these rules could change. Any change could affect contracts purchased before the change. We cannot provide detailed information on all tax aspects of the contracts. Moreover, the tax aspects that apply to a particular person's contract may vary depending on the facts applicable to that person. We do not discuss state income and other state taxes, federal income tax, and withholding rules for non-U.S. taxpayers, or federal gift and estate taxes. Transfers of the contract, rights under the contract, or payments under the contract may be subject to gift or estate taxes. You should not rely only on this document, but should consult your tax adviser before your purchase. If you are buying a contract to fund a retirement plan that already provides tax deferral under sections of the Internal Revenue Code (IRA, QP, and Rollover TSA), you should do so for the contract's features and benefits other than tax deferral. In such situations, the tax deferral of the contract does not provide additional benefits. TRANSFERS AMONG INVESTMENT OPTIONS You can make transfers among investment options inside the contract without triggering taxable income. TAXATION OF NONQUALIFIED ANNUITIES CONTRIBUTIONS You may not deduct the amount of your contributions to a nonqualified annuity contract. CONTRACT EARNINGS Generally, you are not taxed on contract earnings until you receive a distribution from your contract, whether as a withdrawal or as an annuity payment. However, earnings are taxable, even without a distribution: o if a contract fails investment diversification requirements as specified in federal income tax rules (these rules are based on or are similar to those specified for mutual funds under the securities laws); o if you transfer a contract, for example, as a gift to someone other than your spouse (or former spouse); o if you use a contract as security for a loan (in this case, the amount pledged will be treated as a distribution); and o if the owner is other than an individual (such as a corporation, partnership, trust, or other non-natural person). All nonqualified deferred annuity contracts that Equitable Life and its affiliates issue to you during the same calendar year are linked together and treated as one contract for calculating the taxable amount of any distribution from any of those contracts. ANNUITY PAYMENTS Once annuity payments begin, a portion of each payment is taxable as ordinary income. You get back the remaining portion without paying taxes on it. This is your "investment in the contract." Generally, your investment in the contract equals the contributions you made, less any amounts you previously withdrew that were not taxable. For fixed annuity payments, the tax-free portion of each payment is determined by (1) dividing your investment in the contract by the total amount you are expected to receive out of the contract, and (2) multiplying the result by the amount - ---------- 57 - -------------------------------------------------------------------------------- of the payment. For variable annuity payments, your investment in the contract divided by the number of expected payments is your tax-free portion of each payment. Once you have received the amount of your investment in the contract, all payments after that are fully taxable. If payments under a life annuity stop because the annuitant dies, there is an income tax deduction for any unrecovered investment in the contract. PAYMENTS MADE BEFORE ANNUITY PAYMENTS BEGIN If you make withdrawals before annuity payments begin under your contract, they are taxable to you as ordinary income if there are earnings in the contract. Generally, earnings are your account value less your investment in the contract. If you withdraw an amount which is more than the earnings in the contract as of the date of the withdrawal, the balance of the distribution is treated as a return of your investment in the contract and is not taxable. CONTRACTS PURCHASED THROUGH EXCHANGES You may purchase your NQ contract through an exchange of another contract. Normally, exchanges of contracts are taxable events. The exchange will not be taxable under Section 1035 of the Internal Revenue Code if: o the contract that is the source of the funds you are using to purchase the NQ contract is another nonqualified deferred annuity contract or life insurance or endowment contract. o the owner and the annuitant are the same under the source contract and the Equitable Accumulator NQ contract. If you are using a life insurance or endowment contract the owner and the insured must be the same on both sides of the exchange transaction. The tax basis of the source contract carries over to the Equitable Accumulator NQ contract. SURRENDERS If you surrender or cancel the contract, the distribution is taxable as ordinary income (not capital gain) to the extent it exceeds your investment in the contract. DEATH BENEFIT PAYMENTS MADE TO A BENEFICIARY AFTER YOUR DEATH For the rules applicable to death benefits, see "Payment of death benefit" earlier in this prospectus. The tax treatment of a death benefit taken as a single sum is generally the same as the tax treatment of a withdrawal from or surrender of your contract. The tax treatment of a death benefit taken as annuity payments is generally the same as the tax treatment of annuity payments under your contract. EARLY DISTRIBUTION PENALTY TAX If you take distributions before you are age 59 1/2 a penalty tax of 10% of the taxable portion of your distribution applies in addition to the income tax. The extra penalty tax does not apply to pre-age 59 1/2 distributions made: o on or after your death; or o because you are disabled (special federal income tax definition); or o in the form of substantially equal periodic annuity payments for your life (or life expectancy) or the joint lives (or joint life expectancy) of you and a beneficiary. SPECIAL RULES FOR NQ CONTRACTS ISSUED IN PUERTO RICO Under current law we treat income from NQ contracts as U.S. source. A Puerto Rico resident is subject to U.S. taxation on such U.S. source income. Only Puerto Rico source income of Puerto Rico residents is excludable from U.S. taxation. Income from NQ contracts is also subject to Puerto Rico tax. The calculation of the taxable portion of amounts distributed from a contract may differ in the two jurisdictions. Therefore, you might have to file both U.S. and Puerto Rico tax returns, showing different amounts of income from the contract for each tax return. Puerto Rico generally provides a credit against Puerto Rico tax for U.S. tax paid. Depending on your personal situation and the timing of the different tax liabilities, you may not be able to take full advantage of this credit. - ---------- 58 - -------------------------------------------------------------------------------- INDIVIDUAL RETIREMENT ARRANGEMENTS (IRAS) GENERAL "IRA" stands for individual retirement arrangement. There are two basic types of such arrangements, individual retirement accounts and individual retirement annuities. In an individual retirement account, a trustee or custodian holds the assets for the benefit of the IRA owner. The assets can include mutual funds and certificates of deposit. In an individual retirement annuity, an insurance company issues an annuity contract that serves as the IRA. There are two basic types of IRAs, as follows: o Traditional IRAs, typically funded on a pre-tax basis including SEP-IRAs and SIMPLE-IRAs, issued and funded in connection with employer-sponsored retirement plans; and o Roth IRAs, first available in 1998, funded on an after-tax basis. Regardless of the type of IRA, your ownership interest in the IRA cannot be forfeited. You or your beneficiaries who survive you are the only ones who can receive the IRA's benefits or payments. You can hold your IRA assets in as many different accounts and annuities as you would like, as long as you meet the rules for setting up and making contributions to IRAs. However, if you own multiple IRAs, you may be required to combine IRA values or contributions for tax purposes. For further information about individual retirement arrangements, you can read Internal Revenue Service Publication 590 ("Individual Retirement Arrangements (IRAs)"). This publication is usually updated annually, and can be obtained from any IRS district office or the IRS website (http://www.irs.ustreas.gov). Equitable Life designs its traditional IRA contracts to qualify as "individual retirement annuities" under Section 408(b) of the Internal Revenue Code. You may purchase the contract as a traditional IRA or Roth IRA. The traditional IRAs we offer are the Rollover IRA and Flexible Premium IRA. The versions of the Roth IRA available are the Roth Conversion IRA and Flexible Premium Roth IRA. This prospectus contains the information that the IRS requires you to have before you purchase an IRA. This section of the prospectus covers some of the special tax rules that apply to IRAs. The next section covers Roth IRAs. Education IRAs are not discussed in this prospectus because they are not available in individual retirement annuity form. The Equitable Accumulator IRA contract has been approved by the IRS as to form for use as a traditional IRA. This IRS approval is a determination only as to the form of the annuity. It does not represent a determination of the merits of the annuity as an investment. The IRS approval does not address every feature possibly available under the Equitable Accumulator IRA contract. Although we do not have IRS approval as to form, we believe that the version of the Roth IRA currently offered complies with the requirements of the Internal Revenue Code. CANCELLATION You can cancel an Equitable Accumulator IRA contract by following the directions under "Your right to cancel within a certain number of days" in "Contract features and benefits" earlier in the prospectus. You can cancel an Equitable Accumulator Roth Conversion IRA contract issued as a result of a full conversion of an Equitable Accumulator Rollover IRA or Flexible Premium IRA contract by following the instructions in the request for full conversion form. The form is available from our Processing Office or your financial professional. If you cancel an IRA contract, we may have to withhold tax, and we must report the transaction to the IRS. A contract cancellation could have an unfavorable tax impact. TRADITIONAL INDIVIDUAL RETIREMENT ANNUITIES (TRADITIONAL IRAS) CONTRIBUTIONS TO TRADITIONAL IRAS. Individuals may make three different types of contributions to a traditional IRA: o regular contributions out of earned income or compensation; or o tax-free "rollover" contributions; or - ---------- 59 - -------------------------------------------------------------------------------- o direct custodian-to-custodian transfers from other traditional IRAs ("direct transfers"). Regular traditional IRA, direct transfer, and rollover contributions may be made to a Flexible Premium IRA contract. We only permit direct transfer and rollover contributions under a Rollover IRA contract. See "Rollovers and transfers" below. REGULAR CONTRIBUTIONS TO TRADITIONAL IRAS LIMITS ON CONTRIBUTIONS. Generally, $2,000 is the maximum amount that you may contribute to all IRAs (including Roth IRAs) in any taxable year. When your earnings are below $2,000, your earned income or compensation for the year is the most you can contribute. This $2,000 limit does not apply to rollover contributions or direct custodian-to-custodian transfers into a traditional IRA. You cannot make regular traditional IRA contributions for the tax year in which you reach age 70 1/2 or any tax year after that. SPECIAL RULES FOR SPOUSES. If you are married and file a joint income tax return, you and your spouse may combine your compensation to determine the amount of regular contributions you are permitted to make to traditional IRAs (and Roth IRAs discussed below). Even if one spouse has no compensation or compensation under $2,000, married individuals filing jointly can contribute up to $4,000 for any taxable year to any combination of traditional IRAs and Roth IRAs. (Any contributions to Roth IRAs reduce the ability to contribute to traditional IRAs and vice versa.) The maximum amount may be less if earned income is less and the other spouse has made IRA contributions. No more than a combined total of $2,000 can be contributed annually to either spouse's traditional and Roth IRAs. Each spouse owns his or her traditional IRAs and Roth IRAs even if the other spouse funded the contributions. A working spouse age 70 1/2 or over can contribute up to the lesser of $2,000 or 100% of "earned income" to a traditional IRA for a nonworking spouse until the year in which the nonworking spouse reaches age 70 1/2. DEDUCTIBILITY OF CONTRIBUTIONS. The amount of traditional IRA contributions that you can deduct for a tax year depends on whether you are covered by an employer-sponsored tax-favored retirement plan, as defined under special federal income tax rules. Your Form W-2 will indicate whether or not you are covered by such a retirement plan. IF YOU ARE NOT COVERED BY A RETIREMENT PLAN DURING ANY PART OF THE YEAR, you can make fully deductible contributions to your traditional IRAs for each tax year up to $2,000 or, if less, your earned income. IF YOU ARE COVERED BY A RETIREMENT PLAN DURING ANY PART OF THE YEAR, and your adjusted gross income (AGI) is BELOW THE LOWER DOLLAR FIGURE IN A PHASE-OUT RANGE, you can make fully deductible contributions to your traditional IRAs. For each tax year, your fully deductible contribution can be up to $2,000 or, if less, your earned income. IF YOU ARE COVERED BY A RETIREMENT PLAN DURING ANY PART OF THE YEAR, and your AGI falls within a PHASE-OUT range, you can make PARTIALLY DEDUCTIBLE CONTRIBUTIONS to your traditional IRAs. IF YOU ARE COVERED BY A RETIREMENT PLAN DURING ANY PART OF THE YEAR, and your AGI falls ABOVE THE HIGHER FIGURE IN THE PHASE-OUT RANGE, you may not deduct any of your regular contributions to your traditional IRAs. If you are single and covered by a retirement plan during any part of the taxable year, the deduction for traditional IRA contributions phases out with AGI between $31,000 and $41,000 in 1999. This range will increase every year until 2005 when the range is $50,000-$60,000. If you are married and file a joint return, and you are covered by a retirement plan during any part of the taxable year, the deduction for traditional IRA contributions phases out with AGI between $51,000 and $61,000 in 1999. This range will increase every year until 2007 when the range is $80,000-$100,000. - ---------- 60 - -------------------------------------------------------------------------------- Married individuals filing separately and living apart at all times are not considered married for purposes of this deductible contribution calculation. Generally, the active participation in an employer-sponsored retirement plan of an individual is determined independently for each spouse. Where spouses have "married filing jointly" status, however, the maximum deductible traditional IRA contribution for an individual who is not an active participant (but whose spouse is an active participant) is phased out for taxpayers with AGI of between $150,000 and $160,000. To determine the deductible amount of the contribution in 1999, you determine AGI and subtract $31,000 if you are single, or $51,000 if you are married and file a joint return with your spouse. The resulting amount is your excess AGI. You then determine the limit on the deduction for traditional IRA contributions using the following formula: ($10,000-excess AGI) times $2,000 (or earned Equals the adjusted - ------------------------------ deductible divided by $10,000 x income, if less) = contribution limit
NONDEDUCTIBLE REGULAR CONTRIBUTIONS. If you are not eligible to deduct part or all of the traditional IRA contribution, you may still make nondeductible contributions on which earnings will accumulate on a tax-deferred basis. The combined deductible and nondeductible contributions to your traditional IRA (or the nonworking spouse's traditional IRA) may not, however, exceed the maximum $2,000 per person limit. See "Excess contributions" below. You must keep your own records of deductible and nondeductible contributions in order to prevent double taxation on the distribution of previously taxed amounts. See "Withdrawals, payments and transfers of funds out of traditional IRAs" below. If you are making nondeductible contributions in any taxable year, or you have made nondeductible contributions to a traditional IRA in prior years and are receiving distributions from any traditional IRA, you must file the required information with the IRS. Moreover, if you are making nondeductible traditional IRA contributions, you must retain all income tax returns and records pertaining to such contributions until interests in all traditional IRAs are fully distributed. WHEN YOU CAN MAKE REGULAR CONTRIBUTIONS. If you file your tax returns on a calendar year basis like most taxpayers, you have until the April 15 return filing deadline (without extensions) of the following calendar year to make your regular traditional IRA contributions for a tax year. EXCESS CONTRIBUTIONS Excess contributions to IRAs are subject to a 6% excise tax for the year in which made and for each year after until withdrawn. The following are excess contributions to IRAs: o regular contributions of more than $2,000; or o regular contributions of more than earned income for the year, if that amount is under $2,000; or o regular contributions to a traditional IRA made after you reach age 70 1/2; or o rollover contributions of amounts which are not eligible to be rolled over. For example, after-tax contributions to a qualified plan or minimum distributions required to be made after age 70 1/2. You can avoid the excise tax by withdrawing an excess contribution (rollover or regular) before the due date (including extensions) for filing your federal income tax return for the year. If it is an excess regular traditional IRA contribution, you cannot take a tax deduction for the amount withdrawn. You do not have to include the excess contribution withdrawn as part of your income. It is also not subject to the 10% additional penalty tax on early distributions, discussed below under "Early distribution penalty tax." You do have to withdraw any earnings that are attributed to the excess contribution. The withdrawn earnings would be included in your gross income and could be subject to the 10% penalty tax. Even after the due date for filing your return, you may withdraw an excess rollover contribution, without income inclusion or 10% penalty, if: - ---------- 61 - -------------------------------------------------------------------------------- (1) the rollover was from a qualified retirement plan to a traditional IRA; (2) the excess contribution was due to incorrect information that the plan provided; and (3) you took no tax deduction for the excess contribution. RECHARACTERIZATIONS Amounts that have been contributed as traditional IRA funds may subsequently be treated as Roth IRA funds. Special federal income tax rules allow you to change your mind again and have amounts that are subsequently treated as Roth IRA funds, once again treated as traditional IRA funds. You do this by using the forms we prescribe. This is referred to as having "recharacterized" your contribution. ROLLOVERS AND TRANSFERS Rollover contributions may be made to a traditional IRA from these sources: o qualified plans; o TSAs (including Internal Revenue Code Section 403(b)(7) custodial accounts); and o other traditional IRAs. Any amount contributed to a traditional IRA after you reach age 70 1/2 must be net of your required minimum distribution for the year in which the rollover or direct transfer contribution is made. ROLLOVERS FROM QUALIFIED PLANS OR TSAS There are two ways to do rollovers: o Do it yourself You actually receive a distribution that can be rolled over and you roll it over to a traditional IRA within 60 days after the date you receive the funds. The distribution from your qualified plan or TSA will be net of 20% mandatory federal income tax withholding. If you want, you can replace the withheld funds yourself and roll over the full amount. o Direct rollover You tell your qualified plan trustee or TSA issuer/custodian/fiduciary to send the distribution directly to your traditional IRA issuer. Direct rollovers are not subject to mandatory federal income tax withholding. All distributions from a TSA or qualified plan are eligible rollover distributions, unless the distribution is: o only after-tax contributions you made to the plan; or o "required minimum distributions" after age 70 1/2 or separation from service; or o substantially equal periodic payments made at least annually for your life (or life expectancy) or the joint lives (or joint life expectancies) of you and your designated beneficiary; or o a hardship withdrawal; or o substantially equal periodic payments made for a specified period of 10 years or more; or o corrective distributions that fit specified technical tax rules; or o loans that are treated as distributions; or o a death benefit payment to a beneficiary who is not your surviving spouse; or o a qualified domestic relations order distribution to a beneficiary who is not your current spouse or former spouse. ROLLOVERS FROM TRADITIONAL IRAS TO TRADITIONAL IRAS You may roll over amounts from one traditional IRA to one or more of your other traditional IRAs if you complete the transaction within 60 days after you receive the funds. You may make such a rollover only once in every 12-month period for the same funds. Trustee-to-trustee or custodian-to-custodian direct transfers are not rollover transactions. You can make these more frequently than once in every 12-month period. The surviving spouse beneficiary of a deceased individual can roll over or directly transfer an inherited traditional IRA to one or more other traditional IRAs. Also, in some cases, - ---------- 62 - -------------------------------------------------------------------------------- traditional IRAs can be transferred on a tax-free basis between spouses or former spouses as a result of a court-ordered divorce or separation decree. WITHDRAWALS, PAYMENTS AND TRANSFERS OF FUNDS OUT OF TRADITIONAL IRAS. NO FEDERAL INCOME TAX LAW RESTRICTIONS ON WITHDRAWALS. You can withdraw any or all of your funds from a traditional IRA at any time. You do not need to wait for a special event like retirement. TAXATION OF PAYMENTS. Earnings in traditional IRAs are not subject to federal income tax until you or your beneficiary receive them. Taxable payments or distributions include withdrawals from your contract, surrender of your contract, and annuity payments from your contract. Death benefits are also taxable. Except as discussed below, the total amount of any distribution from a traditional IRA must be included in your gross income as ordinary income. If you have ever made nondeductible IRA contributions to any traditional IRA (it does not have to be to this particular traditional IRA contract), those contributions are recovered tax free when you get distributions from any traditional IRA. You must keep permanent tax records of all of your nondeductible contributions to traditional IRAs. At the end of any year in which you have received a distribution from any traditional IRA, you calculate the ratio of your total nondeductible traditional IRA contributions (less any amounts previously withdrawn tax free) to the total account balances of all traditional IRAs you own at the end of the year plus all traditional IRA distributions made during the year. Multiply this by all distributions from the traditional IRA during the year to determine the nontaxable portion of each distribution. In addition, a distribution is not taxable if: o the amount received is a withdrawal of excess contributions, as described under "Excess contributions" above; or o the entire amount received is rolled over to another traditional IRA (see "Rollovers and transfers" above); or o in certain limited circumstances, where the traditional IRA acts as a "conduit," you roll over the entire amount into a qualified plan or TSA that accepts rollover contributions. To get this conduit traditional IRA treatment: o the source of funds you used to establish the traditional IRA must have been a rollover contribution from a qualified plan; and o the entire amount received from the traditional IRA (including any earnings on the rollover contribution) must be rolled over into another qualified plan within 60 days of the date received. Similar rules apply in the case of a TSA. However, you may lose conduit treatment if you make an eligible rollover distribution contribution to a traditional IRA and you commingle this contribution with other contributions. In that case, you may not be able to roll over these eligible rollover distribution contributions and earnings to another qualified plan or TSA at a future date. The Rollover IRA contract can be used as a conduit IRA if amounts are not commingled. Distributions from a traditional IRA are not eligible for favorable five-year averaging (or, in some cases, ten-year averaging and long-term capital gain treatment) available to certain distributions from qualified plans. REQUIRED MINIMUM DISTRIBUTIONS LIFETIME REQUIRED MINIMUM DISTRIBUTIONS. You must start taking annual distributions from your traditional IRAs beginning at age 70 1/2. WHEN YOU HAVE TO TAKE THE FIRST REQUIRED MINIMUM DISTRIBUTION. The first required minimum distribution is for the calendar year in which you turn age 70 1/2. You have the choice to take this first required minimum distribution during the calendar year you actually reach age 70 1/2, or to delay taking it until the first three-month period in the next calendar year (January 1 - April 1). Distributions must start no later than your Required Beginning Date, which is April 1st of the calendar year after the calendar year in which you turn age 70 1/2. If you choose to delay taking the - ---------- 63 - -------------------------------------------------------------------------------- first annual minimum distribution, then you will have to take two minimum distributions in that year - the delayed one for the first year and the one actually for that year. Once minimum distributions begin, they must be made at some time each year. HOW YOU CAN CALCULATE REQUIRED MINIMUM DISTRIBUTIONS. There are two approaches to taking required minimum distributions - "account-based" or "annuity-based." Account-based method. If you choose an account-based method, you divide the value of your traditional IRA as of December 31st of the past calendar year by a life expectancy factor from IRS tables. This gives you the required minimum distribution amount for that particular IRA for that year. The required minimum distribution amount will vary each year as the account value and your life expectancy factors change. You have a choice of life expectancy factors, depending on whether you choose a method based only on your life expectancy, or the joint life expectancies of you and another individual. You can decide to "recalculate" your life expectancy every year by using your current life expectancy factor. You can decide instead to use the "term certain" method, where you reduce your life expectancy by one every year after the initial year. If your spouse is your designated beneficiary for the purpose of calculating annual account-based required minimum distributions, you can also annually recalculate your spouse's life expectancy if you want. If you choose someone who is not your spouse as your designated beneficiary for the purpose of calculating annual account-based required minimum distributions, you have to use the term certain method of calculating that person's life expectancy. If you pick a nonspouse designated beneficiary, you may also have to do another special calculation. You can later apply your traditional IRA funds to a life annuity-based payout. You can only do this if you already chose to recalculate your life expectancy annually (and your spouse's life expectancy if you select a spousal joint annuity). For example, if you anticipate exercising your guaranteed minimum income benefit or selecting any other form of life annuity payout after you are age 70 1/2, you must have elected to recalculate life expectancies. Annuity-based method. If you choose an annuity-based method, you do not have to do annual calculations. You apply the account value to an annuity payout for your life or the joint lives of you and a designated beneficiary, or for a period certain not extending beyond applicable life expectancies. DO YOU HAVE TO PICK THE SAME METHOD TO CALCULATE YOUR REQUIRED MINIMUM DISTRIBUTIONS FOR ALL OF YOUR TRADITIONAL IRAS AND OTHER RETIREMENT PLANS? No. If you want, you can choose a different method and a different beneficiary for each of your traditional IRAs and other retirement plans. For example, you can choose an annuity payout from one IRA, a different annuity payout from a qualified plan, and an account-based annual withdrawal from another IRA. WILL WE PAY YOU THE ANNUAL AMOUNT EVERY YEAR FROM YOUR TRADITIONAL IRA BASED ON THE METHOD YOU CHOOSE? No, unless you affirmatively select an annuity payout option or an account-based withdrawal option such as our minimum distribution withdrawal option. Because the options we offer do not cover every option permitted under federal income tax rules, you may prefer to do your own required minimum distribution calculations for one or more of your traditional IRAs. WHAT IF YOU TAKE MORE THAN YOU NEED TO FOR ANY YEAR? The required minimum distribution amount for your traditional IRAs is calculated on a year-by-year basis. There are no carry-back or carry-forward provisions. Also, you cannot apply required minimum distribution amounts you take from your qualified plans to the amounts you have to take from your traditional IRAs and vice versa. However, the IRS will let you calculate the required minimum distribution for each traditional IRA that you maintain, using the method that you picked for that particular IRA. You can add these required minimum distribution amount calculations together. As long as the total amount you take out every year satisfies your overall traditional IRA required minimum distribution - ---------- 64 - -------------------------------------------------------------------------------- amount, you may choose to take your annual required minimum distribution from any one or more traditional IRAs that you own. WHAT IF YOU TAKE LESS THAN YOU NEED TO FOR ANY YEAR? Your IRA could be disqualified, and you could have to pay tax on the entire value. Even if your IRA is not disqualified, you could have to pay a 50% penalty tax on the shortfall (required amount for traditional IRAs less amount actually taken). It is your responsibility to meet the required minimum distribution rules. We will remind you when our records show that your age 70 1/2 is approaching. If you do not select a method with us, we will assume you are taking your required minimum distribution from another traditional IRA that you own. WHAT ARE THE REQUIRED MINIMUM DISTRIBUTION PAYMENTS AFTER YOU DIE? If you die after either (a) the start of annuity payments, or (b) your Required Beginning Date, your beneficiary must receive payment of the remaining values in the contract at least as rapidly as under the distribution method before your death. In some circumstances, your surviving spouse may elect to become the owner of the traditional IRA and halt distributions until he or she reaches age 70 1/2. If you die before your Required Beginning Date and before annuity payments begin, federal income tax rules require complete distribution of your entire value in the contract within five years after your death. Payments to a designated beneficiary over the beneficiary's life or over a period certain that does not extend beyond the beneficiary's life expectancy are also permitted, if these payments start within one year of your death. A surviving spouse beneficiary can also (a) delay starting any payments until you would have reached age 70 1/2 or (b) roll over your traditional IRA into his or her own traditional IRA. SUCCESSOR ANNUITANT AND OWNER If your spouse is the sole primary beneficiary and elects to become the successor annuitant and owner, no death benefit is payable until your surviving spouse's death. PAYMENTS TO A BENEFICIARY AFTER YOUR DEATH IRA death benefits are taxed the same as IRA distributions. REQUIRED MINIMUM DISTRIBUTIONS UNDER THE ASSURED PAYMENT OPTION AND APO PLUS Although the life contingent annuity portion of the Assured Payment Option and APO Plus does not have a cash value, it will be assigned a value for tax purposes. This value will generally be changed each year. When you determine the amount of account-based required minimum distributions from your traditional IRA this value must be included. This must be done even though the life contingent annuity may not be providing a source of funds to satisfy the required minimum distribution. You will generally be required to determine your required minimum distribution by annually recalculating your life expectancy. The Assured Payment Option and APO Plus will not be available if you have previously made a different election. Recalculation is no longer required once the only payments you or your spouse receive are under the life contingent annuity. If you surrender your contract, or withdraw any remaining account value before your payments under the life contingent annuity begin, it may be necessary for you to satisfy your required minimum distribution by moving forward the start date of payments under your life contingent annuity. Or to the extent available, you have to take distributions from other traditional IRA funds you may have. Or, you may convert your traditional IRA life contingent annuity under the contract to a nonqualified life contingent annuity. This would be viewed as a distribution of the value of the life contingent annuity from your traditional IRA, and therefore, would be a taxable event. However, since the life contingent annuity would no longer be part of the traditional IRA, you would not have to include its value when determining future required minimum distributions. If you have elected a joint and survivor form of the life contingent annuity, the joint annuitant must be your spouse. You must determine your required minimum distribution by annually recalculating both your life expectancy and your - ---------- 65 - -------------------------------------------------------------------------------- spouse's life expectancy. The Assured Payment Option and APO Plus will not be available if you have previously made a different election. Once the only payments you or your spouse are receiving are under the life contingent annuity recalculation is no longer required. In the event of your death or the death of your spouse the value of such annuity will change. For this reason, it is important that someone tell us if you or your spouse dies before the life contingent annuity has started payments so that a lower valuation can be made. Otherwise, a higher tax value may result in an overstatement of the amount that would be necessary to satisfy your required minimum distribution amount. Allocation of funds to the life contingent annuity may prevent the contract from later receiving conduit IRA treatment. BORROWING AND LOANS ARE PROHIBITED TRANSACTIONS You cannot get loans from a traditional IRA. You cannot use a traditional IRA as collateral for a loan or other obligation. If you borrow against your IRA or use it as collateral, its tax-favored status will be lost as of the first day of the tax year in which this prohibited event occurs. If this happens, you must include the value of the traditional IRA in your federal gross income. Also, the early distribution penalty tax of 10% will apply if you have not reached age 59 1/2 before the first day of that tax year. EARLY DISTRIBUTION PENALTY TAX A penalty tax of 10% of the taxable portion of a distribution applies to distributions from a traditional IRA made before you reach age 59 1/2. The extra penalty tax does not apply to pre-age 59 1/2 distributions made: o on or after your death; or o because you are disabled (special federal income tax definition); or o used to pay certain extraordinary medical expenses (special federal income tax definition); or o used to pay medical insurance premiums for unemployed individuals (special federal income tax definition); or o used to pay certain first-time home buyer expenses (special federal income tax definition; $10,000 lifetime total limit for these distributions from all your traditional and Roth IRAs); or o used to pay certain higher education expenses (special federal income tax definition); or o in the form of substantially equal periodic payments made at least annually over your life (or your life expectancy), or over the joint lives of you and your beneficiary (or your joint life expectancy) using an IRS-approved distribution method. To meet this last exception, you could elect to apply your contract value to an Income Manager (life annuity with a period certain) payout annuity contract (level payments version). You could also elect the substantially equal withdrawals option. We will calculate the substantially equal annual payments under a method we select based on guidelines issued by the IRS (currently contained in IRS Notice 89-25, Question and Answer 12). Although substantially equal withdrawals and Income Manager payments are not subject to the 10% penalty tax, they are taxable as discussed in "Withdrawals, payments and transfers of funds out of traditional IRAs" above. Once substantially equal withdrawals or Income Manager annuity payments begin, the distributions should not be stopped or changed until the later of your reaching age 59 1/2 or five years after the date of the first distribution, or the penalty tax, including an interest charge for the prior penalty avoidance, may apply to all prior distributions under either option. Also, it is possible that the IRS could view any additional withdrawal or payment you take from your contract as changing your pattern of substantially equal withdrawals or Income Manager payments for purposes of determining whether the penalty applies. ROTH INDIVIDUAL RETIREMENT ANNUITIES (ROTH IRAS) This section of the prospectus covers some of the special tax rules that apply to Roth IRAs. If the rules are the same as those that apply to the traditional IRA, we will refer you to the same topic under "traditional IRAs." - ---------- 66 - -------------------------------------------------------------------------------- The Equitable Accumulator Roth IRA contract is designed to qualify as a Roth individual retirement annuity under Sections 408A and 408(b) of the Internal Revenue Code. CONTRIBUTIONS TO ROTH IRAS Individuals may make four different types of contributions to a Roth IRA: o regular after-tax contributions out of earnings; or o taxable rollover contributions from traditional IRAs ("conversion" contributions); or o tax-free rollover contributions from other Roth IRAs; or o tax-free direct custodian-to-custodian transfers from other Roth IRAs ("direct transfers"). Regular after-tax, direct transfer, and rollover contributions may be made to a Flexible Premium Roth IRA contract. We only permit direct transfer and rollover contributions under the Roth Conversion IRA contract. See "Rollovers and direct transfers" below. If you use the forms we require, we will also accept traditional IRA funds which are subsequently recharacterized as Roth IRA funds following special federal income tax rules. REGULAR CONTRIBUTIONS TO ROTH IRAS LIMITS ON REGULAR CONTRIBUTIONS. Generally, $2,000 is the maximum amount that you may contribute to all IRAs (including Roth IRAs) in any taxable year. This $2,000 limit does not apply to rollover contributions or direct custodian-to-custodian transfers into a Roth IRA. Any contributions to Roth IRAs reduce your ability to contribute to traditional IRAs and vice versa. When your earnings are below $2,000, your earned income or compensation for the year is the most you can contribute. If you are married and file a joint income tax return, you and your spouse may combine your compensation to determine the amount of regular contributions you are permitted to make to Roth IRAs and traditional IRAs. See the discussion above under traditional IRAs. With a Roth IRA, you can make regular contributions when you reach 70 1/2, as long as you have sufficient earnings. But, you cannot make contributions for any year that: o your federal income tax filing status is "married filing jointly" and your adjusted gross income is over $160,000; or o your federal income tax filing status is "single" and your adjusted gross income is over $110,000. However, you can make regular Roth IRA contributions in reduced amounts when: o your federal income tax filing status is "married filing jointly" and your adjusted gross income is between $150,000 and $160,000; or o your federal income tax filing status is "single" and your adjusted gross income is between $95,000 and $110,000. If you are married and filing separately and your adjusted gross income is between $0 and $10,000 the amount of regular contributions you are permitted to make is phased out. If your adjusted gross income is more than $10,000 you cannot make regular Roth IRA contributions. WHEN YOU CAN MAKE CONTRIBUTIONS. Same as traditional IRAs. DEDUCTIBILITY OF CONTRIBUTIONS. Roth IRA contributions are not tax deductible. ROLLOVERS AND DIRECT TRANSFERS What is the difference between rollover and direct transfer transactions? You may make rollover contributions to a Roth IRA from only two sources: o another Roth IRA ("tax-free rollover contribution"); or o another traditional IRA, including a SEP-IRA or SIMPLE-IRA, in a taxable conversion rollover ("conversion contribution"). You may not make contributions to a Roth IRA from a qualified plan under Section 401(a) of the Internal Revenue Code, or a TSA under Section 403(b) of the Internal Revenue - ---------- 67 - -------------------------------------------------------------------------------- Code. You may make direct transfer contributions to a Roth IRA only from another Roth IRA. The difference between a rollover transaction and a direct transfer transaction is the following: in a rollover transaction you actually take possession of the funds rolled over, or are considered to have received them under tax law in the case of a change from one type of plan to another. In a direct transfer transaction, you never take possession of the funds, but direct the first Roth IRA custodian, trustee, or issuer to transfer the first Roth IRA funds directly to Equitable Life, as the Roth IRA issuer. You can make direct transfer transactions only between identical plan types (for example, Roth IRA to Roth IRA). You can also make rollover transactions between identical plan types. However, you can only use rollover transactions between different plan types (for example, traditional IRA to Roth IRA). You may make both Roth IRA to Roth IRA rollover transactions and Roth IRA to Roth IRA direct transfer transactions. This can be accomplished on a completely tax-free basis. However, you may make Roth IRA to Roth IRA rollover transactions only once in any 12-month period for the same funds. Trustee-to-trustee or custodian-to-custodian direct transfers can be made more frequently than once a year. Also, if you send us the rollover contribution to apply it to a Roth IRA, you must do so within 60 days after you receive the proceeds from the original IRA to get rollover treatment. The surviving spouse beneficiary of a deceased individual can roll over or directly transfer an inherited Roth IRA to one or more other Roth IRAs. In some cases, Roth IRAs can be transferred on a tax-free basis between spouses or former spouses as a result of a court-ordered divorce or separation decree. CONVERSION CONTRIBUTIONS TO ROTH IRAS. In a conversion rollover transaction, you withdraw (or are considered to have withdrawn) all or a portion of funds from a traditional IRA you maintain and convert it to a Roth IRA within 60 days after you receive (or are considered to have received) the traditional IRA proceeds. Unlike a rollover from a traditional IRA to another traditional IRA, the conversion rollover transaction is not tax-free. Instead, the distribution from the traditional IRA is generally fully taxable. For this reason, we are required to withhold 10% federal income tax from the amount converted unless you elect out of such withholding. If you have ever made nondeductible regular contributions to any traditional IRA - whether or not it is the traditional IRA you are converting - a pro rata portion of the distribution is tax free. There is, however, no early distribution penalty tax on the traditional IRA withdrawal that you are converting to a Roth IRA, even if you are under age 59 1/2. You cannot make conversion contributions to a Roth IRA for any taxable year in which your adjusted gross income exceeds $100,000. For this purpose, your adjusted gross income is computed without the gross income stemming from the traditional IRA conversion. You also cannot make conversion contributions to a Roth IRA for any taxable year in which your federal income tax filing status is "married filing separately." Finally, you cannot make conversion contributions to a Roth IRA to the extent that the funds in your traditional IRA are subject to the annual required minimum distribution rule applicable to traditional IRAs beginning at age 70 1/2. WITHDRAWALS, PAYMENTS AND TRANSFERS OF FUNDS OUT OF ROTH IRAS No federal income tax law restrictions on withdrawals. You can withdraw any or all of your funds from a Roth IRA at any time; you do not need to wait for a special event like retirement. DISTRIBUTIONS FROM ROTH IRAS Distributions include withdrawals from your contract, surrender of your contract, and annuity payments from your contract. Death benefits are also distributions. The following distributions from Roth IRAs are free of income tax: o Rollover from a Roth IRA to another Roth IRA; - ---------- 68 - -------------------------------------------------------------------------------- o Direct transfers from a Roth IRA to another Roth IRA; o Qualified distributions from a Roth IRA; and o Return of excess contributions or amounts recharacterized to a traditional IRA. QUALIFIED DISTRIBUTIONS FROM ROTH IRAS. Qualified distributions from Roth IRAs made because of one of the following four qualifying events or reasons are not includable in income: o you reach age 59 1/2; or o you die; or o you become disabled (special federal income tax definition); or o your distribution is a "qualified first-time homebuyer distribution" (special federal income tax definition; $10,000 lifetime total limit for these distributions from all of your traditional and Roth IRAs). You also have to meet a five-year aging period. A qualified distribution is any distribution made after the five-taxable-year period beginning with the first taxable year for which you made any contribution to any Roth IRA (whether or not the one from which the distribution is being made). It is not possible to have a tax-free qualified distribution before the year 2003 because of the five-year aging requirement. NONQUALIFIED DISTRIBUTIONS FROM ROTH IRAS. Nonqualified distributions from Roth IRAs are distributions that do not meet the qualifying event and five-year aging period tests described above. Such distributions are potentially taxable as ordinary income. Nonqualified distributions receive return-of-investment-first treatment. Only the difference between the amount of the distribution and the amount of contributions to all of your Roth IRAs is taxable. You have to reduce the amount of contributions to all of your Roth IRAs to reflect any previous tax-free recoveries. You must keep your own records of regular and conversion contributions to all Roth IRAs to assure appropriate taxation. You may have to file information on your contributions to and distributions from any Roth IRA on your tax return. You may have to retain all income tax returns and records pertaining to such contributions and distributions until your interests in all Roth IRAs are distributed. Like traditional IRAs, taxable distributions from a Roth IRA are not entitled to the special favorable five-year averaging method (or, in certain cases, favorable ten-year averaging and long-term capital gain treatment) available in certain cases to distributions from qualified plans. REQUIRED MINIMUM DISTRIBUTIONS AT DEATH Same as traditional IRA under "What are the required minimum distribution payments after you die?" Lifetime required minimum distributions do not apply. PAYMENTS TO A BENEFICIARY AFTER YOUR DEATH Distributions to a beneficiary generally receive the same tax treatment as if the distribution had been made to you. BORROWING AND LOANS ARE PROHIBITED TRANSACTIONS Same as traditional IRA. EXCESS CONTRIBUTIONS Same as traditional IRA, except that regular contributions made after age 70 1/2 are not excess contributions. Excess rollover contributions to Roth IRAs are contributions not eligible to be rolled over (for example, conversion contributions from a traditional IRA if your adjusted gross income is in excess of $100,000 in the conversion year). You can withdraw or recharacterize any contribution to a Roth IRA before the due date (including extensions) for filing your federal income tax return for the tax year. If you do this, you must also withdraw or recharacterize any earnings attributable to the contribution. EARLY DISTRIBUTION PENALTY TAX Same as traditional IRA. For Roth IRAs, special penalty rules may apply to amounts withdrawn attributable to 1998 conversion rollovers. - ---------- 69 - -------------------------------------------------------------------------------- SPECIAL RULES FOR NONQUALIFIED CONTRACTS IN QUALIFIED PLANS Under QP contracts your plan administrator or trustee notifies you as to tax consequences. See Appendix I. TAX-SHELTERED ANNUITY CONTRACTS (TSAS) GENERAL This section of the prospectus covers some of the special tax rules that apply to TSA contracts under Section 403(b) of the Internal Revenue Code (TSAs). If the rules are the same as those that apply to another kind of contract, for example, traditional IRAs, we will refer you to the same topic under "traditional IRAs." CONTRIBUTIONS TO TSAS There are two ways you can make contributions to this Equitable Accumulator Rollover TSA contract: o a rollover from another TSA contract or arrangement that meets the requirements of Section 403(b) of the Internal Revenue Code, or o a full or partial direct transfer of assets ("direct transfer") from another contract or arrangement that meets the requirements of Section 403(b) of the Internal Revenue Code by means of IRS Revenue Ruling 90-24. With appropriate written documentation satisfactory to us, we will accept rollover contributions from "conduit IRAs" for TSA funds. If you make a direct transfer, you must fill out our transfer form. EMPLOYER-REMITTED CONTRIBUTIONS. The Equitable Accumulator Rollover TSA contract does not accept employer-remitted contributions. However, we provide the following discussion as part of our description of restrictions on the distribution of funds directly transferred, which include employer-remitted contributions to other TSAs. Employer-remitted contributions to TSAs made through the employer's payroll are subject to annual limits. (Tax-free transfer or tax-deferred rollover contributions from another 403(b) arrangement are not subject to these annual contribution limits.) Commonly, some or all of the contributions made to a TSA are made under a salary reduction agreement between the employee and the employer. These contributions are called "salary reduction" or "elective deferral" contributions. However, a TSA can also be wholly or partially funded through nonelective employer contributions or after-tax employee contributions. Amounts attributable to salary reduction contributions to TSAs are generally subject to withdrawal restrictions. Also, all amounts attributable to investments in a 403(b)(7) custodial account are subject to withdrawal restrictions discussed below. ROLLOVER OR DIRECT TRANSFER CONTRIBUTIONS. You may make rollover contributions to your Equitable Accumulator Rollover TSA contract from TSAs under Section 403(b) of the Internal Revenue Code. Generally, you may make a rollover contribution to a TSA when you have a distributable event from an existing TSA as a result of your: o termination of employment with the employer who provided the TSA funds; or o reaching age 59 1/2 even if you are still employed; or o disability (special federal income tax definition). A transfer occurs when changing the funding vehicle, even if there is no distributable event. Under a direct transfer, you do not receive a distribution. We accept direct transfers of TSA funds under Revenue Ruling 90-24 only if: o you give us acceptable written documentation as to the source of the funds, and o the Equitable Accumulator contract receiving the funds has provisions at least as restrictive as the source contract. Before you transfer funds to an Equitable Accumulator Rollover TSA contract, you may have to obtain your employer's authorization or demonstrate that you do not need employer authorization. For example, the transferring TSA may be subject to Title I of ERISA, if the employer makes matching contributions to salary reduction contributions - ---------- 70 - -------------------------------------------------------------------------------- made by employees. In that case, the employer must continue to approve distributions from the plan or contract. Your contribution to the Equitable Accumulator Rollover TSA must be net of the required minimum distribution for the tax year in which we issue the contract if: o you are or will be at least age 70 1/2 in the current calendar year, and o you have separated from service with the employer who provided the funds to purchase the TSA you are transferring or rolling over to the Equitable Accumulator Rollover TSA. This rule applies regardless of whether the source of funds is a: o rollover by check of the proceeds from another TSA; or o direct rollover from another TSA; or o direct transfer under Revenue Ruling 90-24 from another TSA. Further, you must use the same elections regarding recalculation of your life expectancy (and if applicable, your spouse's life expectancy) if you have already begun to receive required minimum distributions from or with respect to the TSA from which you are making your contribution to the Equitable Accumulator Rollover TSA. You must also elect or have elected a minimum distribution calculation method requiring recalculation of your life expectancy (and if applicable, your spouse's life expectancy) if you elect an annuity payout for the funds in this contract subsequent to this year. DISTRIBUTIONS FROM TSAS GENERAL. Depending on the terms of the employer plan and your employment status, you may have to get your employer's consent to take a loan or withdrawal. Your employer will tell us this when you establish the TSA through a direct transfer. WITHDRAWAL RESTRICTIONS. If this is a Revenue Ruling 90-24 direct transfer, we will treat all amounts transferred to this contract and any future earnings on the amount transferred as not eligible for withdrawal until one of the following events happens: o you are separated from service with the employer who provided the funds to purchase the TSA you are transferring to the Equitable Accumulator Rollover TSA; o you reach age 59 1/2; or o you die; or o you become disabled (special federal income tax definition); or o you take a hardship withdrawal (special federal income tax definition). If any portion of the funds directly transferred to your TSA contract is attributable to amounts that you invested in a 403(b)(7) custodial account, such amounts, including earnings, are subject to withdrawal restrictions. With respect to the portion of the funds that were never invested in a 403(b)(7) custodial account, these restrictions apply to the salary reduction (elective deferral) contributions to a TSA annuity contract you made and any earnings on them. These restrictions do not apply to the amount directly transferred to your TSA contract that represents your December 31, 1988 account balance attributable to salary reduction contributions to a TSA annuity contract and earnings. To take advantage of this grandfathering you must properly notify us in writing at our Processing Office of your December 31, 1988 account balance if you have qualifying amounts transferred to your TSA contract. THIS PARAGRAPH APPLIES ONLY TO PARTICIPANTS IN A TEXAS OPTIONAL RETIREMENT PROGRAM. Texas Law permits withdrawals only after one of the following distributable events occur: (1) the requirements for minimum distribution (discussed under "Required minimum distributions" below) are met; or (2) death; or (3) retirement; or - ---------- 71 - -------------------------------------------------------------------------------- (4) termination of employment in all Texas public institutions of higher education. For you to make a withdrawal, we must receive a properly completed written acknowledgement from the employer. If a distributable event occurs before you are vested, we will refund to the employer any amounts provided by an employer's first-year matching contribution. We reserve the right to change these provisions without your consent, but only to the extent necessary to maintain compliance with applicable law. Loans are not permitted under Texas Optional Retirement Programs. TAX TREATMENT OF DISTRIBUTIONS. Amounts held under TSAs are generally not subject to federal income tax until benefits are distributed. Distributions include withdrawals from your TSA contract and annuity payments from your TSA contract. Death benefits paid to a beneficiary are also taxable distributions. Unless an exception applies, amounts distributed from TSAs are includable in gross income as ordinary income. Distributions from TSAs may be subject to 20% federal income tax withholding. See "Federal and state income tax withholding and information reporting" below. In addition, TSA distributions may be subject to additional tax penalties. If you have made after-tax contributions, you will have a tax basis in your TSA contract, which will be recovered tax-free. Since we do not track your investment in the contract, if any, it is your responsibility to determine how much of the distribution is taxable. DISTRIBUTIONS BEFORE ANNUITY PAYMENTS BEGIN. On a total surrender, the amount received in excess of the investment in the contract is taxable. We will report the total amount of the distribution. The amount of any partial distribution from a TSA prior to the annuity starting date is generally taxable, except to the extent that the distribution is treated as a withdrawal of after-tax contributions. Distributions are normally treated as pro rata withdrawals of after-tax contributions and earnings on those contributions. ANNUITY PAYMENTS. If you elect an annuity payout option, you will recover any investment in the contract as each payment is received by dividing the investment in the contract by an expected return determined under an IRS table prescribed for qualified annuities. The amount of each payment not excluded from income under this exclusion ratio is fully taxable. The full amount of the payments received after your investment in the contract is recovered is fully taxable. If you (and your beneficiary under a joint and survivor annuity) die before recovering the full investment in the contract, a deduction is allowed on your (or your beneficiary's) final tax return. PAYMENTS TO A BENEFICIARY AFTER YOUR DEATH Death benefit distributions from a TSA generally receive the same tax treatment as distributions during your lifetime. In some instances, distributions from a TSA made to your surviving spouse may be rolled over to a traditional IRA. LOANS FROM TSAS You may take loans from a TSA unless restricted by the employer (for example, under an employer plan subject to ERISA). If you cannot take a loan, or cannot take a loan without approval from the employer who provided the funds, we will have this information in our records based on what you and the employer who provided the TSA funds told us when you purchased your contract. Loans are generally not treated as a taxable distribution. If the amount of the loan exceeds permissible limits under federal income tax rules when made, the amount of the excess is treated (solely for tax purposes) as a taxable distribution. Additionally, if the loan is not repaid at least quarterly, amortizing (paying down) interest and principal, the amount not repaid when due will be treated as a taxable distribution. Under Proposed Treasury Regulations the entire unpaid balance of the loan is includable in income in the year of the default. TSA loans are subject to federal income tax limits and may also be subject to the limits of the plan from which the funds came. Federal income tax rule requirements apply even if the plan is not subject to ERISA. For example, loans offered by TSAs are subject to the following conditions: - ---------- 72 - -------------------------------------------------------------------------------- o The amount of a loan to a participant, when combined with all other loans to the participant from all qualified plans of the employer, cannot exceed the lesser of (1) the greater of $10,000 or 50% of the participant's nonforfeitable accrued benefits and (2) $50,000 reduced by the excess (if any) of the highest outstanding loan balance over the previous twelve months over the outstanding loan balance of plan loans on the date the loan was made. o In general, the term of the loan cannot exceed five years unless the loan is used to acquire the participant's primary residence. Equitable Accumulator Rollover TSA contracts have a term limit of 10 years for loans used to acquire the participant's primary residence. o All principal and interest must be amortized in substantially level payments over the term of the loan, with payments being made at least quarterly. The amount borrowed and not repaid may be treated as a distribution if: o the loan does not qualify under the conditions above; o the participant fails to repay the interest or principal when due; or o in some instances, the participant separates from service with the employer who provided the funds or the plan is terminated. In this case, the participant may have to include the unpaid amount due as ordinary income. In addition, the 10% early distribution penalty tax may apply. The amount of the unpaid loan balance is reported to the IRS on Form 1099-R as a distribution. TAX-DEFERRED ROLLOVERS AND DIRECT TRANSFERS You may roll over any "eligible rollover distribution" from a TSA into another eligible retirement plan, either directly or within 60 days of your receiving the distribution. To the extent rolled over, a distribution remains tax-deferred. You may roll over a distribution from a TSA to another TSA or to a traditional IRA. A spousal beneficiary may roll over death benefits only to a traditional IRA. The taxable portion of most distributions will be eligible for rollover, except as specifically excluded under federal income tax rules. Distributions that you cannot roll over generally include periodic payments for life or for a period of 10 years or more, hardship withdrawals, and required minimum distributions under federal income tax rules. Direct transfers of TSA funds from one TSA to another under Revenue Ruling 90-24 are not distributions. REQUIRED MINIMUM DISTRIBUTIONS Same as traditional IRA with these differences: WHEN YOU HAVE TO TAKE THE FIRST REQUIRED MINIMUM DISTRIBUTION. The minimum distribution rules force TSA participants to start calculating and taking annual distributions from their TSAs by a required date. Generally, you must take the first required minimum distribution for the calendar year in which you turn age 70 1/2. You may be able to delay the start of required minimum distributions for all or part of your account balance until after age 70 1/2, as follows: o For TSA participants who have not retired from service with the employer who provided the funds for the TSA by the calendar year the participant turns age 70 1/2, the required beginning date for minimum distributions is extended to April 1 following the calendar year of retirement. o TSA plan participants may also delay the start of required minimum distributions to age 75 of the portion of their account value attributable to their December 31, 1986 TSA account balance, even if retired at age 70 1/2. We will know whether or not you qualify for this exception because it will only apply to people who establish their Equitable Accumulator Rollover TSA by direct Revenue Ruling 90-24 transfers. If you do not give us the amount of your December 31, 1986 account balance that is being transferred to the Equitable Accumulator Rollover TSA on the form used to establish the TSA, you do not qualify. - ---------- 73 - -------------------------------------------------------------------------------- SPOUSAL CONSENT RULES This will only apply to you if you establish your Equitable Accumulator Rollover TSA by direct Revenue Ruling 90-24 transfer. Your employer will tell us on the form used to establish the TSA whether or not you need to get spousal consent for loans, withdrawals, or other distributions. If you do, you will need such consent if you are married when you request a withdrawal under the TSA contract. In addition, unless you elect otherwise with the written consent of your spouse, the retirement benefits payable under the plan must be paid in the form of a qualified joint and survivor annuity. A qualified joint and survivor annuity is payable for the life of the annuitant with a survivor annuity for the life of the spouse in an amount not less than one-half of the amount payable to the annuitant during his or her lifetime. In addition, if you are married, the beneficiary must be your spouse, unless your spouse consents in writing to the designation of another beneficiary. If you are married and you die before annuity payments have begun, payments will be made to your surviving spouse in the form of a life annuity unless at the time of your death a contrary election was in effect. However, your surviving spouse may elect, before payments begin, to receive payments in any form permitted under the terms of the TSA contract and the plan of the employer who provided the funds for the TSA. EARLY DISTRIBUTION PENALTY TAX A penalty tax of 10% of the taxable portion of a distribution applies to distributions from a TSA before you reach age 59 1/2. This is in addition to any income tax. There are exceptions to the extra penalty tax. No penalty tax applies to pre-age 59 1/2 distributions made: o on or after your death; or o because you are disabled (special federal income tax definition); or o to pay for certain extraordinary medical expenses (special federal income tax definition); or o if you are separated from service, any form of payout after you are age 55; or o only if you are separated from service, a payout in the form of substantially equal periodic payments made at least annually over your life (or your life expectancy), or over the joint lives of you and your beneficiary (or your joint life expectancy) using an IRS-approved distribution method. FEDERAL AND STATE INCOME TAX WITHHOLDING AND INFORMATION REPORTING We must withhold federal income tax from distributions from annuity contracts. You may be able to elect out of this income tax withholding in some cases. Generally, we do not have to withhold if your distributions are not taxable. The rate of withholding will depend on the type of distribution and, in certain cases, the amount of your distribution. Any income tax withheld is a credit against your income tax liability. If you do not have sufficient income tax withheld or do not make sufficient estimated income tax payments, you may incur penalties under the estimated income tax rules. You must file your request not to withhold in writing before the payment or distribution is made. Our Processing Office will provide forms for this purpose. You cannot elect out of withholding unless you provide us with your correct Taxpayer Identification Number and a United States residence address. You cannot elect out of withholding if we are sending the payment out of the United States. You should note the following special situations: o We might have to withhold on amounts we pay under a free look or cancellation. o We are generally required to withhold on conversion rollovers of traditional IRAs to Roth IRAs, as it is considered a withdrawal from the traditional IRA and is taxable. o We are required to withhold on the gross amount of a distribution from a Roth IRA unless you elect out of withholding. This may result in tax being withheld even though the Roth IRA distribution is not taxable in whole or in part. - ---------- 74 - -------------------------------------------------------------------------------- Special withholding rules apply to foreign recipients and United States citizens residing outside the United States. We do not discuss these rules here. Certain states have indicated that state income tax withholding will also apply to payments from the contracts made to residents. In some states, you may elect out of state withholding, even if federal withholding applies. Generally, an election out of federal withholding will also be considered an election out of state withholding. If you need more information concerning a particular state or any required forms, call our Processing Office at the toll-free number. FEDERAL INCOME TAX WITHHOLDING ON PERIODIC ANNUITY PAYMENTS We withhold differently on "periodic" and "non-periodic" payments. For a periodic annuity payment, for example, unless you specify a different number of withholding exemptions, we withhold assuming that you are married and claiming three withholding exemptions. If you do not give us your correct Taxpayer Identification Number, we withhold as if you are single with no exemptions. Based on the assumption that you are married and claiming three withholding exemptions, if you receive less than $14,700 in periodic annuity payments in 1999, your payments will generally be exempt from federal income tax withholding. You could specify a different choice of withholding exemption or request that tax be withheld. Your withholding election remains effective unless and until you revoke it. You may revoke or change your withholding election at any time. FEDERAL INCOME TAX WITHHOLDING ON NON-PERIODIC ANNUITY PAYMENTS (WITHDRAWALS) For a non-periodic distribution (total surrender or partial withdrawal), we generally withhold at a flat 10% rate. We apply that rate to the taxable amount in the case of nonqualified contracts, and to the payment amount in the case of IRAs and Roth IRAs. You cannot elect out of withholding if the payment is an eligible rollover distribution from a qualified plan or TSA. If a non-periodic distribution from a qualified plan or TSA is not an eligible rollover distribution then the 10% withholding rate applies. MANDATORY WITHHOLDING FROM TSA AND QUALIFIED PLAN DISTRIBUTIONS Unless you have the distribution go directly to the new plan, eligible rollover distributions from qualified plans and TSAs are subject to mandatory 20% withholding. An eligible rollover distribution from a TSA can be rolled over to another TSA or a traditional IRA. An eligible rollover distribution from a qualified plan can be rolled over to another qualified plan or traditional IRA. All distributions from a TSA or qualified plan are eligible rollover distributions unless they are on the following list of exceptions: o any after-tax contributions you made to the plan; or o any distributions which are required minimum distributions after age 70 1/2 or separation from service; or o hardship withdrawals; or o substantially equal periodic payments made at least annually for your life (or life expectancy) or the joint lives (or joint life expectancy) of you and your designated beneficiary; or o substantially equal periodic payments made for a specified period of 10 years or more; or o corrective distributions that fit specified technical tax rules; or o loans that are treated as distributions; or o a death benefit payment to a beneficiary who is not your surviving spouse; or o a qualified domestic relations order distribution to a beneficiary who is not your current spouse or former spouse. A death benefit payment to your surviving spouse, or a qualified domestic relations order distribution to your current or former spouse, may be a distribution subject to mandatory 20% withholding. - ---------- 75 - -------------------------------------------------------------------------------- IMPACT OF TAXES TO EQUITABLE LIFE The contracts provide that we may charge Separate Account No. 45 for taxes. We do not now, but may in the future set up reserves for such taxes. More information - ---------------- 76 - -------------------------------------------------------------------------------- ABOUT OUR SEPARATE ACCOUNT NO. 45 Each variable investment option is a subaccount of our Separate Account No. 45. We established Separate Account No. 45 in 1994 under special provisions of the New York Insurance Law. These provisions prevent creditors from any other business we conduct from reaching the assets we hold in our variable investment options for owners of our variable annuity contracts. We are the legal owner of all of the assets in Separate Account No. 45 and may withdraw any amounts that exceed our reserves and other liabilities with respect to variable investment options under our contracts. The results of Separate Account No. 45's operations are accounted for without regard to Equitable Life's other operations. Separate Account No. 45 is registered under the Investment Company Act of 1940 and is classified by that act as a "unit investment trust." The SEC, however, does not manage or supervise Equitable Life or Separate Account No. 45. Each subaccount (variable investment option) within Separate Account No. 45 invests solely in class IB shares issued by the corresponding portfolio of EQ Advisors Trust. We reserve the right subject to compliance with laws that apply: (1) to add variable investment options to, or to remove variable investment options from, Separate Account No. 45, or to add other separate accounts; (2) to combine any two or more variable investment options; (3) to transfer the assets we determine to be the shares of the class of contracts to which the contracts belong from any variable investment option to another variable investment option; (4) to operate Separate Account No. 45 or any variable investment option as a management investment company under the Investment Company Act of 1940 (in which case, charges and expenses that otherwise would be assessed against an underlying mutual fund would be assessed against Separate Account No. 45 or a variable investment option directly); (5) to deregister Separate Account No. 45 under the Investment Company Act of 1940; (6) to restrict or eliminate any voting rights as to Separate Account No. 45; and (7) to cause one or more variable investment options to invest some or all of their assets in one or more other trusts or investment companies. ABOUT EQ ADVISORS TRUST EQ Advisors Trust is registered under the Investment Company Act of 1940. It is classified as an "open-end management investment company," more commonly called a mutual fund. EQ Advisors Trust issues different shares relating to each portfolio. Equitable Life serves as the investment manager of EQ Advisors Trust. As such, Equitable Life oversees the activities of the investment advisers with respect to EQ Advisors Trust and is responsible for retaining or discontinuing the services of those advisers. (Prior to September 1999 EQ Financial Consultants, Inc., the predecessor to AXA Advisors, LLC and an affiliate of Equitable Life, served as investment manager to EQ Advisors Trust.) EQ Advisors Trust commenced operations on May 1, 1997. For periods prior to October 18, 1999 the Alliance portfolios (other than EQ/Alliance Premier Growth) were part of The Hudson River Trust. On October 18, 1999, these portfolios became corresponding portfolios of EQ Advisors Trust. EQ Advisors Trust does not impose sales charges or "loads" for buying and selling its shares. All dividends and other distributions on a trust's shares are reinvested in full. The Board of Trustees of EQ Advisors Trust may establish additional portfolios or eliminate existing portfolios at any time. More detailed information about EQ Advisors Trust, their investment objectives, policies, restrictions, risks, expenses, their Rule 12b-1 Plan relating to its Class IB shares, and other aspects of its operations, appears in the prospectus for EQ Advisors Trust attached at the end of this prospectus, or in its SAI which is available upon request. - ---------- 77 - -------------------------------------------------------------------------------- ABOUT OUR FIXED MATURITY OPTIONS Rates to maturity and price per $100 of maturity value We can determine the amount required to be allocated to one or more fixed maturity options in order to produce specified maturity values. For example, we can tell you how much you need to allocate per $100 of maturity value. The rates to maturity for new allocations as of November 1, 1999 and the related price per $100 of maturity value were as follows:
FIXED MATURITY OPTIONS WITH FEBRUARY 15TH RATE TO MATURITY PRICE MATURITY DATE OF AS OF PER $100 OF MATURITY YEAR NOVEMBER 1, 1999 MATURITY VALUE 2000 3.03% $ 99.14 2001 4.34% $ 94.65 2002 4.84% $ 89.73 2003 5.09% $ 84.92 2004 5.20% $ 80.44 2005 5.33% $ 75.96 2006 5.42% $ 71.73 2007 5.50% $ 67.66 2008 5.61% $ 63.58 2009 5.68% $ 59.83
Available under the Assured Payment Option and APO Plus
FIXED MATURITY OPTIONS WITH FEBRUARY 15TH RATE TO MATURITY PRICE MATURITY DATE OF AS OF PER $100 OF MATURITY YEAR NOVEMBER 1, 1999 MATURITY VALUE 2010 5.42% $ 58.07 2011 5.42% $ 55.08 2012 5.42% $ 52.25 2013 5.42% $ 49.56 2014 5.42% $ 47.01
How we determine the market value adjustment We use the following procedure to calculate the market value adjustment (up or down) we make if you withdraw all of your value from a fixed maturity option before its maturity date. (1) We determine the market adjusted amount on the date of the withdrawal as follows: (a) We determine the fixed maturity amount that would be payable on the maturity date, using the rate to maturity for the fixed maturity option. (b) We determine the period remaining in your fixed maturity option (based on the withdrawal date) and convert it to fractional years based on a 365-day year. For example, three years and 12 days becomes 3.0329. (c) We determine the current rate to maturity that applies on the withdrawal date to new allocations to the same fixed maturity option. (d) We determine the present value of the fixed maturity amount payable at the maturity date, using the period determined in (b) and the rate determined in (c). (2) We determine the fixed maturity amount as of the current date. (3) We subtract (2) from the result in (1)(d). The result is the market value adjustment applicable to such fixed maturity option, which may be positive or negative. ----------------------------------------------------------------------------- Your market adjusted amount is the present value of the maturity value discounted at the rate to maturity in effect for new contributions to that same fixed maturity option on the date of the calculation. ----------------------------------------------------------------------------- If you withdraw only a portion of the amount in a fixed maturity option, the market value adjustment will be a percentage of the market value adjustment that would have applied if you had withdrawn the entire value in that fixed maturity option. This percentage is equal to the percentage of the value in the fixed maturity option that you are withdrawing. Any withdrawal charges that are deducted from a fixed maturity option will result in a market value adjustment calculated in the same way. See Appendix I for an example. For purposes of calculating the rate to maturity for new allocations to a fixed maturity option (see (1)(c) above), we use the rate we have in effect for new allocations to that - ---------- 78 - -------------------------------------------------------------------------------- fixed maturity option. We use this rate even if new allocations to that option would not be accepted at that time. This rate will not be less than 3%. If we do not have a rate to maturity in effect for a fixed maturity option to which the "current rate to maturity" in (1)(c) would apply, we will use the rate at the next closest maturity date. If we are no longer offering new fixed maturity options, the "current rate to maturity" will be determined in accordance with our procedures then in effect. We reserve the right to add up to 0.25% to the current rate in (1)(c) above for purposes of calculating the market value adjustment only. INVESTMENTS UNDER THE FIXED MATURITY OPTIONS Amounts allocated to the fixed maturity options are held in a "nonunitized" separate account we have established under the New York Insurance Law. This separate account provides an additional measure of assurance that we will make full payment of amounts due under the fixed maturity options. Under New York Insurance Law, the portion of the separate account's assets equal to the reserves and other contract liabilities relating to the contracts are not chargeable with liabilities from any other business we may conduct. We own the assets of the separate account, as well as any favorable investment performance on those assets. You do not participate in the performance of the assets held in this separate account. We may, subject to state law that applies, transfer all assets allocated to the separate account to our general account. We guarantee all benefits relating to your value in the fixed maturity options, regardless of whether assets supporting fixed maturity options are held in a separate account or our general account. We have no specific formula for establishing the rates to maturity for the fixed maturity options. We expect the rates to be influenced by, but not necessarily correspond to, among other things, the yields that we can expect to realize on the separate account's investments from time to time. Our current plans are to invest in fixed-income obligations, including corporate bonds, mortgage-backed and asset-backed securities, and government and agency issues having durations in the aggregate consistent with those of the fixed maturity options. Although the above generally describes our plans for investing the assets supporting our obligations under the fixed maturity options under the contracts, we are not obligated to invest those assets according to any particular plan except as we may be required to by state insurance laws. We will not determine the rates to maturity we establish by the performance of the nonunitized separate account. ABOUT THE GENERAL ACCOUNT Our general account supports all of our policy and contract guarantees, including those that apply to the fixed maturity options and the account for special dollar cost averaging, as well as our general obligations. The general account is subject to regulation and supervision by the Insurance Department of the State of New York and to the insurance laws and regulations of all jurisdictions where we are authorized to do business. Because of exemptions and exclusionary provisions that apply, interests in the general account have not been registered under the Securities Act of 1933, nor is the general account an investment company under the Investment Company Act of 1940. However, the market value adjustment interests under the contracts are registered under the Securities Act of 1933. We have been advised that the staff of the SEC has not reviewed the portions of this prospectus that relate to the general account (other than market value adjustment interests). The disclosure with regard to the general account, however, may be subject to certain provisions of the federal securities laws relating to the accuracy and completeness of statements made in prospectuses. ABOUT OTHER METHODS OF PAYMENT - ---------- 79 - -------------------------------------------------------------------------------- AUTOMATIC INVESTMENT PROGRAM - FOR NQ, FLEXIBLE PREMIUM IRA, AND FLEXIBLE PREMIUM ROTH IRA CONTRACTS ONLY You may use our automatic investment program, or "AIP," to have a specified amount automatically deducted from a checking account, money market account, or credit union checking account and contributed as an additional contribution into an NQ, Flexible Premium IRA or Flexible Premium Roth IRA contract on a monthly or quarterly basis. AIP is not available for Rollover IRA, Roth Conversion IRA, QP, or Rollover TSA contracts. It is also not available under the Assured Payment Option or APO Plus. For NQ contracts, the minimum amounts we will deduct are $100 monthly and $300 quarterly. Under Flexible Premium IRA and Flexible Premium Roth IRA contracts, the minimum amount is $50. AIP additional contributions may be allocated to any of the variable investment options and available fixed maturity options, but not the account for special dollar cost averaging. You choose the day of the month you wish to have your account debited. However, you may not choose a date later than the 28th day of the month. You may cancel AIP at any time by notifying our Processing Office. We are not responsible for any debits made to your account before the time written notice of cancellation is received at our Processing Office. DATES AND PRICES AT WHICH CONTRACT EVENTS OCCUR We describe below the general rules for when, and at what prices, events under your contract will occur. Other portions of this prospectus describe circumstances that may cause exceptions. We generally do not repeat those exceptions below. BUSINESS DAY Our business day is any day the New York Stock Exchange is open for trading. Our business day ends at 4:00 p.m., Eastern time for purposes of determining the date when contributions are applied and any other transaction requests are processed. Contributions will be applied and any other transaction requests will be processed when they are received along with all the required information. o If your contribution, transfer, or any other transaction request, containing all the required information, reaches us on a non-business day or after 4:00 p.m. on a business day, we will use the next business day. o A loan request under your Rollover TSA contract will be processed on the first business day of the month following the date on which the properly completed loan request form is received. o If your transaction is set to occur on the same day of the month as the contract date and that date is the 29th, 30th or 31st of the month, then the transaction will occur on the 1st day of the next month. o When a charge is to be deducted on a contract date anniversary that is a non-business day, we will deduct the charge on the next business day. - ---------- 80 - -------------------------------------------------------------------------------- CONTRIBUTIONS AND TRANSFERS o Contributions allocated to the variable investment options are invested at the value next determined after the close of the business day. o Contributions allocated to a fixed maturity option will receive the rate to maturity in effect for that fixed maturity option on that business day. o Initial contributions allocated to the account for special dollar cost averaging receive the interest rate in effect on that business day. At certain times, we may offer the opportunity to lock in the interest rate for an initial contribution to be received under Section 1035 exchanges and trustee to trustee transfers. Your registered representative can provide information or you can call our processing office. o Transfers to or from variable investment options will be made at the value next determined after the close of the business day. o Transfers to a fixed maturity option will be based on the rate to maturity in effect for that fixed maturity option on the business day of the transfer. ABOUT YOUR VOTING RIGHTS As the owner of the shares of EQ Advisors Trust we have the right to vote on certain matters involving the portfolios, such as: o the election of trustees; o the formal approval of independent auditors selected for EQ Advisors Trust; or o any other matters described in the prospectus for EQ Advisors Trust or requiring a shareholders' vote under the Investment Company Act of 1940. We will give contract owners the opportunity to instruct us how to vote the number of shares attributable to their contracts if a shareholder vote is taken. If we do not receive instructions in time from all contract owners, we will vote the shares of a portfolio for which no instructions have been received in the same proportion as we vote shares of that portfolio for which we have received instructions. We will also vote any shares that we are entitled to vote directly because of amounts we have in a portfolio in the same proportions that contract owners vote. VOTING RIGHTS OF OTHERS Currently, we control EQ Advisors Trust. EQ Advisors Trust shares are sold to our separate accounts and an affiliated qualified plan trust. In addition, shares of EQ Advisors Trust are held by separate accounts of insurance companies both affiliated and unaffiliated with us. Shares held by these separate accounts will probably be voted according to the instructions of the owners of insurance policies and contracts issued by those insurance companies. While this will dilute the effect of the voting instructions of the contract owners, we currently do not foresee any disadvantages because of this. The Board of Trustees of EQ Advisors Trust intends to monitor events in order to identify any material irreconcilable conflicts that may arise and to determine what action, if any, should be taken in response. If we believe that a response to any of those events insufficiently protects our contract owners, we will see to it that appropriate action is taken. SEPARATE ACCOUNT NO. 45 VOTING RIGHTS If actions relating to Separate Account No. 45 require contract owner approval, contract owners will be entitled to one vote for each unit they have in the variable investment options. Each contract owner who has elected a variable annuity payout option may cast the number of votes equal to the dollar amount of reserves we are holding for that annuity in a variable investment option divided by the annuity unit value for that option. We will cast votes attributable to any amounts we have in the variable investment options in the same proportion as votes cast by contract owners. CHANGES IN APPLICABLE LAW The voting rights we describe in this prospectus are created under applicable federal securities laws. To the extent that those laws or the regulations published under those laws eliminate the necessity to submit matters for approval by - ---------- 81 - -------------------------------------------------------------------------------- persons having voting rights in separate accounts of insurance companies, we reserve the right to proceed in accordance with those laws or regulations. ABOUT LEGAL PROCEEDINGS Equitable Life and its affiliates are parties to various legal proceedings. In our view, none of these proceedings is likely to have a material adverse effect upon Separate Account No. 45, our ability to meet our obligations under the contracts, or the distribution of the contracts. ABOUT OUR INDEPENDENT ACCOUNTANTS The consolidated financial statements of Equitable Life incorporated in this prospectus by reference to the Annual Report on Form 10-K at December 31, 1998 and 1997, and for the three years ended December 31, 1998, have been so incorporated in reliance on the report of PricewaterhouseCoopers LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. FINANCIAL STATEMENTS The financial statements of Separate Account No. 45, as well as the consolidated financial statements of Equitable Life, are in the SAI. The SAI is available free of charge. You may request one by writing to our processing office or calling 1-800-789-7771. TRANSFERS OF OWNERSHIP, COLLATERAL ASSIGNMENTS, LOANS, AND BORROWING You can transfer ownership of an NQ contract at any time before annuity payments begin. We will continue to treat you as the owner until we receive notification of any change at our Processing Office. You cannot assign your NQ contract as collateral or security for a loan. Loans are also not available under your NQ contract. In some cases, an assignment or change of ownership may have adverse tax consequences. See "Tax information" earlier in this prospectus. You cannot assign or transfer ownership of an IRA, QP, or Rollover TSA contract except by surrender to us. Loans are not available and you cannot assign IRA and QP contracts as security for a loan or other obligation. If the employer that provided the funds does not restrict them, loans are available under a Rollover TSA contract. For limited transfers of ownership after the owner's death see "Beneficiary continuation option for Rollover IRA and Flexible Premium IRA contracts" in "Payment of death benefit" earlier in this prospectus. You may direct the transfer of the values under your IRA, QP, or Rollover TSA contract to another similar arrangement. Under federal income tax rules, in the case of such a transfer, we will impose a withdrawal charge, if one applies. DISTRIBUTION OF THE CONTRACTS AXA Advisors, LLC ("AXA Advisors"), the successor to EQ Financial Consultants, Inc. and an affiliate of Equitable Life, is the distributor of the contracts and has responsibility for sales and marketing functions for Separate Account No. 45. AXA Advisors serves as the principal underwriter of Separate Account No. 45. AXA Advisors is registered with the SEC as a broker-dealer and is a member of the National Association of Securities Dealers, Inc. AXA Advisors' principal business address is 1290 Avenue of the Americas, New York, New York 10104. Pursuant to a Distribution and Servicing Agreement between AXA Advisors, Equitable Life, and certain of Equitable Life's separate accounts, including Separate Account No. 45, Equitable Life paid AXA Advisors distribution fees of $325,380 for 1998, as the distributor of certain contracts and as the principal underwriter of certain separate accounts including Separate Account No. 45. Before May 1, 1998, Equitable Distributors, Inc. ("EDI"), also an indirect, wholly owned subsidiary of Equitable Life, served as the distributor of the contracts and the principal underwriter of Separate Account No. 45. Pursuant to a Distribution Agreement between Equitable Life, certain of Equitable Life's separate accounts, including Separate Account No. 45, and EDI, Equitable Life paid EDI distribution fees of $9,444,621 for 1997 and $888,486 for 1996 as the - ---------- 82 - -------------------------------------------------------------------------------- distributor of certain contracts and as the principal underwriter of certain separate accounts including Separate Account No. 45. The contracts will be sold by financial professionals who are registered representatives of AXA Advisors and its affiliates, who are also our licensed insurance agents. AXA Advisors may also receive compensation and reimbursement for its marketing services under the terms of its distribution agreement with Equitable Life. The offering of the contracts is intended to be continuous. Investment performance - ---------------- 83 - -------------------------------------------------------------------------------- We provide the following tables to show five different measurements of the investment performance of the variable investment options and/or the portfolios in which they invest. We include these tables because they may be of general interest to you. THE RESULTS SHOWN REFLECT PAST PERFORMANCE. THEY DO NOT INDICATE HOW THE VARIABLE INVESTMENT OPTIONS MAY PERFORM IN THE FUTURE. THEY ALSO DO NOT REPRESENT THE RESULTS EARNED BY ANY PARTICULAR INVESTOR. YOUR RESULTS WILL DIFFER. Table 1 shows the average annual total return of the variable investment options. Average annual total return is the annual rate of growth that would be necessary to achieve the ending value of a contribution invested in the variable investment options for the periods shown. Table 2 shows the growth of a hypothetical $1,000 investment in the variable investment options over the periods shown. Both Tables 1 and 2 take into account all fees and charges under the contract, including the withdrawal charge, the optional baseBUILDER benefit charge, the annual administrative charge under Flexible Premium IRA and Flexible Premium Roth IRA contracts, but do not reflect the charges for any applicable taxes such as premium taxes or any applicable annuity administrative fee. Tables 3, 4, and 5 show the rates of return of the variable investment options on an annualized, cumulative, and year-by-year basis. These tables take into account all fees and charges under the contract, but do not reflect the withdrawal charge, the optional baseBUILDER benefits charge, the annual administrative charge or the charges for any applicable taxes such as premium taxes or any applicable annuity administrative fee. If the charges were reflected they would effectively reduce the rates of return shown. In all cases the results shown are based on the actual historical investment experience of the portfolios in which the variable investment options invest. In some cases, the results shown relate to periods when the variable investment options and/or the contracts were not available. In those cases, we adjusted the results of the portfolios to reflect the charges under the contracts that would have applied had the investment options and/or contracts been available. The contracts are being offered for the first time in 2000. For the "Alliance" portfolios (other than EQ/Alliance Premier Growth), we have adjusted the results prior to October 1996, when Class IB shares for these portfolios were not available, to reflect the 12b-1 fees currently imposed. Finally, the results shown for the Alliance Money Market and Alliance Common Stock options for periods before March 22, 1985 reflect the results of the variable investment options that preceded them. The "Since portfolio inception" figures for these options are based on the date of inception of the preceding variable investment options. We have adjusted these results to reflect the maximum investment advisory fee payable for the portfolios, as well as an assumed charge of 0.06% for direct operating expenses. EQ Advisors Trust commenced operations on May 1, 1997. For periods prior to October 18, 1999 the Alliance portfolios (other than EQ/Alliance Premier Growth) were part of The Hudson River Trust. On October 18, 1999, these portfolios became corresponding portfolios of EQ Advisors Trust. In each case, the performance shown is for the indicated EQ Advisors Trust portfolio, and any predecessors it may have had. All rates of return presented are time-weighted and include reinvestment of investment income, including interest and dividends. BENCHMARKS Tables 3 and 4 compare the performance of variable investment options to market indices that serve as benchmarks. Market indices are not subject to any charges for investment advisory fees, brokerage commission or other operating expenses typically associated with a managed portfolio. Also, they do not reflect other contract charges such as the mortality and expense risks charge, administrative charge and distribution charge or any withdrawal or optional benefit charge. Comparisons with these benchmarks, therefore, may be of limited use. We include them because they are widely known and may help you to understand the universe of securities from which each - ---------- 84 - -------------------------------------------------------------------------------- portfolio is likely to select its holdings. Benchmark data reflect the reinvestment of dividend income. The benchmarks include: ALLIANCE AGGRESSIVE STOCK: 50% Russell 2000 Index and 50% Standard & Poor's Mid-Cap Total Return Index. ALLIANCE COMMON STOCK: Standard & Poor's 500 Index. ALLIANCE CONSERVATIVE INVESTORS: 70% Lehman Treasury Bond Composite Index and 30% Standard & Poor's 500 Index. ALLIANCE EQUITY INDEX: Standard & Poor's 500 Index. ALLIANCE GLOBAL: Morgan Stanley Capital International World Index. ALLIANCE GROWTH AND INCOME: 75% Standard & Poor's 500 Index and 25% Value Line Convertibles Index. ALLIANCE GROWTH INVESTORS: 70% Standard & Poor's 500 Index and 30% Lehman Government/Corporate Bond Index. ALLIANCE HIGH YIELD: Merrill Lynch High Yield Master Index. ALLIANCE INTERMEDIATE GOVERNMENT SECURITIES: Lehman Intermediate Government Bond Index. ALLIANCE INTERNATIONAL: Morgan Stanley Capital International Europe, Australia, Far East Index. ALLIANCE MONEY MARKET: Salomon Brothers Three-Month T-Bill Index. EQ/ALLIANCE PREMIER GROWTH: Standard & Poor's 500 Index. ALLIANCE SMALL CAP GROWTH: Russell 2000 Growth Index. BT EQUITY 500 INDEX: Standard & Poor's 500 Index. BT INTERNATIONAL EQUITY INDEX: Morgan Stanley Capital International Europe, Australia, Far East Index. BT SMALL COMPANY INDEX: Russell 2000 Index. CAPITAL GUARDIAN RESEARCH: Standard & Poor's 500 Index. CAPITAL GUARDIAN U.S. EQUITY: Standard & Poor's 500 Index. EQ/EVERGREEN: Russell 2000 Index. EQ/EVERGREEN FOUNDATION: 60% Standard & Poor's 500 Index/40% Lehman Brothers Aggregate Bond Index. MERRILL LYNCH BASIC VALUE EQUITY: Standard & Poor's 500 Index. MERRILL LYNCH WORLD STRATEGY: 36% Standard & Poor's 500 Index/24% Morgan Stanley Capital International Europe, Australia, Far East Index/21% Salomon Brothers U.S. Treasury Bond 1 Year+ 14% Salomon Brothers World Government Bond (excluding U.S.)/and 5% Three-Month U.S. Treasury Bill. MFS EMERGING GROWTH COMPANIES: Russell 2000 Index. MFS GROWTH WITH INCOME: Standard & Poor's 500 Index. MFS RESEARCH: Standard & Poor's 500 Index. MORGAN STANLEY EMERGING MARKETS EQUITY: Morgan Stanley Capital International Emerging Markets Free Price Return Index. EQ/PUTNAM BALANCED: 60% Standard & Poor's 500 Index and 40% Lehman Government/ Corporate Bond Index. EQ/PUTNAM GROWTH & INCOME VALUE: Standard & Poor's 500 Index. T. ROWE PRICE EQUITY INCOME: Standard & Poor's 500 Index. T. ROWE PRICE INTERNATIONAL STOCK: Morgan Stanley Capital International Europe, Australia, Far East Index. WARBURG PINCUS SMALL COMPANY VALUE: Russell 2000 Index. LIPPER SURVEY. The Lipper Variable Insurance Products Performance Analysis Survey (Lipper Survey) records the performance of a large group of variable annuity products, including managed separate accounts of insurance companies. According to Lipper Analytical Services, Inc. (Lipper), the data are presented net of investment management fees, direct operating expenses and asset-based charges applicable under annuity contracts. Lipper data provide a more accurate picture than market benchmarks of the Equitable Accumulator performance relative to other variable annuity products. - ----- 85 - -------------------------------------------------------------------------------- TABLE 1 AVERAGE ANNUAL TOTAL RETURN UNDER A CONTRACT SURRENDERED ON DECEMBER 31, 1998:
LENGTH OF INVESTMENT PERIOD SINCE SINCE 1 3 5 10 OPTION PORTFOLIO VARIABLE INVESTMENT OPTIONS YEAR YEARS YEARS YEARS INCEPTION* INCEPTION** Alliance Aggressive Stock (10.47)% 4.73% 6.50% 15.22% 10.13% 14.12% Alliance Common Stock 17.52% 21.66% 16.99% 14.37% 23.68% 12.78% Alliance Conservative Investors 2.60% 4.66% 4.16% - 7.00% 5.32% Alliance Equity Index 16.25% 21.88% - - 23.52% 19.68% Alliance Global 10.23% 9.92% 9.21% 10.57% 11.81% 7.94% Alliance Growth and Income 9.32% 16.59% 12.83% - 17.70% 11.79% Alliance Growth Investors 7.65% 10.16% 8.83% - 12.90% 11.89% Alliance High Yield (15.71)% 5.35% 4.98% 6.75% 6.96% 5.98% Alliance Intermediate Government Securities ( 3.31)% 0.14% - - 1.66% 2.33% Alliance International ( 0.58)% (0.54)% - - 1.50% 1.79% Alliance Money Market ( 5.62)% (0.77)% (0.19)% 0.69% ( 0.38)% 2.67% Alliance Small Cap Growth (14.80)% - - - 4.49% 4.49% BT Equity 500 Index 13.73% - - - 13.73% 13.73% BT International Equity Index 8.87% - - - 8.87% 8.87% BT Small Company Index (12.74)% - - - (12.74)% (12.74)% Merrill Lynch Basic Value Equity 0.65% - - - 9.68% 9.68% Merrill Lynch World Strategy ( 3.93)% - - - ( 0.57)% ( 0.57)% MFS Emerging Growth Companies 22.78% - - - 26.93% 26.93% MFS Research 12.74% - - - 16.64% 16.64% Morgan Stanley Emerging Markets Equity (36.59)% - - - (37.44)% (40.49)% EQ/Putnam Balanced 0.88% - - - 8.30% 8.30% EQ/Putnam Growth & Income Value 1.85% - - - 9.96% 9.96% T. Rowe Price Equity Income ( 1.77)% - - - 11.07% 11.07% T. Rowe Price International Stock 2.70% - - - ( 0.52)% ( 0.52)% Warburg Pincus Small Company Value (20.17)% - - - ( 3.20)% ( 3.20)%
- ---------- * The variable investment option inception dates are: Alliance Aggressive Stock, Alliance Common Stock, Alliance Conservative Investors, Alliance Equity Index, Alliance Global, Alliance Growth and Income, Alliance Growth Investors, Alliance High Yield, Alliance Intermediate Government Securities, Alliance International, and Alliance Money Market (May 1, 1995); Alliance Small Cap Growth, Merrill Lynch Basic Value Equity, Merrill Lynch World Strategy, MFS Emerging Growth Companies, MFS Research, T. Rowe Price Equity Income, T. Rowe Price International Stock, and Warburg Pincus Small Company Value (May 1, 1997); Morgan Stanley Emerging Markets Equity (September 2, 1997); BT Equity 500 Index, BT International Equity Index, and BT Small Company Index (December 31, 1997). The inception dates for the variable investment options that became available on or after December 31, 1998 and are therefore not shown in this table are: EQ/Evergreen, EQ/Evergreen Foundation, and MFS Growth with Income (December 31, 1998); EQ/Alliance Premier Growth, Capital Guardian Research, and Capital Guardian U.S. Equity (April 30, 1999). ** The inception dates for the portfolios underlying the Alliance variable investment options are for portfolios of The Hudson River Trust, the assets of which became assets of corresponding portfolios of EQ Advisors Trust on October 18, 1999. The portfolio inception dates are: Alliance Aggressive Stock (January 27, 1986); Alliance Common Stock (January 13, 1976); Alliance Conservative Investors and Alliance Growth Investors (October 2, 1989); Alliance Equity Index (March 1, 1994); Alliance Global (August 27, 1987); Alliance Growth & Income (October 1, 1993); Alliance High Yield (January 2, 1987); Alliance Intermediate Government Securities (April 1, 1991); Alliance International (April 3, 1995); Alliance Money Market (July 13, 1981); Alliance Small Cap Growth, Merrill Lynch Basic Value Equity, Merrill Lynch World Strategy, MFS Emerging Growth Companies, MFS Research, T. Rowe Price Equity Income, T. Rowe Price International Stock, and Warburg Pincus Small Company Value (May 1, 1997); BT Equity 500 Index, BT International Equity Index, and BT Small Company Index (December 31, 1997); and Morgan Stanley Emerging Markets Equity (August 20, 1997). The inception dates for the portfolios that became available on or after December 31, 1998 and are therefore not shown in the tables are: EQ/Evergreen, EQ/Evergreen Foundation, and MFS Growth with Income (December 31, 1998); EQ/Alliance Premier Growth, Capital Guardian Research, and Capital Guardian U.S. Equity (April 30, 1999). - ----- 86 - -------------------------------------------------------------------------------- TABLE 2 GROWTH OF $1,000 UNDER A CONTRACT SURRENDERED ON DECEMBER 31, 1998:
LENGTH OF INVESTMENT PERIOD SINCE 1 3 5 10 PORTFOLIO VARIABLE INVESTMENT OPTIONS YEAR YEARS YEARS YEARS INCEPTION* Alliance Aggressive Stock $ 895.30 $ 1,148.65 $ 1,370.02 $ 4,123.96 $ 5,512.44 Alliance Common Stock $ 1,175.19 $ 1,800.84 $ 2,191.35 $ 3,828.00 $ 15,816.10 Alliance Conservative Investors $ 1,026.03 $ 1,146.29 $ 1,225.89 - $ 1,614.54 Alliance Equity Index $ 1,162.55 $ 1,810.59 N/A - $ 2,383.71 Alliance Global $ 1,102.28 $ 1,328.24 $ 1,553.67 $ 2,730.42 $ 2,378.75 Alliance Growth and Income $ 1,093.16 $ 1,584.73 $ 1,829.00 - $ 1,795.25 Alliance Growth Investors $ 1,076.50 $ 1,336.70 $ 1,526.88 - $ 2,826.15 Alliance High Yield $ 842.87 $ 1,169.39 $ 1,275.30 $ 1,920.89 $ 2,007.19 Alliance Intermediate Government Securities $ 966.94 $ 1,004.17 $ 999.86 - $ 1,195.73 Alliance International $ 994.18 $ 983.81 - - $ 1,068.53 Alliance Money Market $ 943.81 $ 977.16 $ 990.72 $ 1,071.07 $ 1,584.05 Alliance Small Cap Growth $ 851.98 - - - $ 1,076.07 BT Equity 500 Index $ 1,137.26 - - - $ 1,137.26 BT International Equity Index $ 1,088.65 - - - $ 1,088.65 BT Small Company Index $ 872.56 - - - $ 872.56 Merrill Lynch Basic Value Equity $ 1,006.53 - - - $ 1,166.68 Merrill Lynch World Strategy $ 960.67 - - - $ 990.45 MFS Emerging Growth Companies $ 1,227.81 - - - $ 1,488.76 MFS Research $ 1,127.36 - - - $ 1,292.89 Morgan Stanley Emerging Markets Equity $ 634.13 - - - $ 492.51 EQ/Putnam Balanced $ 1,008.78 - - - $ 1,142.30 EQ/Putnam Growth & Income Value $ 1,018.49 - - - $ 1,171.59 T. Rowe Price Equity Income $ 982.32 - - - $ 1,191.41 T. Rowe Price International Stock $ 1,027.01 - - - $ 991.40 Warburg Pincus Small Company Value $ 798.28 - - - $ 947.11
- ---------- * Portfolio inception dates are shown in Table 1. - ----- 87 - -------------------------------------------------------------------------------- TABLE 3 ANNUALIZED RATES OF RETURN FOR PERIODS ENDED DECEMBER 31, 1998:
SINCE PORTFOLIO 1 YEAR 3 YEARS 5 YEARS 10 YEARS 20 YEARS INCEPTION* ALLIANCE AGGRESSIVE STOCK (1.50)% 8.75% 9.45% 16.75% - 15.65% Lipper Mid-Cap Growth 12.16% 16.33% 14.87% 15.44% - 13.69% Benchmark 8.28% 17.77% 15.56% 16.49% - 14.78% ALLIANCE COMMON STOCK 27.06% 25.31% 19.72% 16.50% 16.48% 14.30% Lipper Growth 22.86% 22.23% 18.63% 16.72% 16.30% 16.01% Benchmark 28.58% 28.23% 24.06% 19.21% 17.76% 15.98% ALLIANCE CONSERVATIVE INVESTORS 11.84% 8.71% 7.43% - - 8.02% Lipper Flexible Portfolio 14.20% 15.62% 14.31% - - 12.55% Benchmark 15.59% 14.45% 13.37% - - 12.08% ALLIANCE EQUITY INDEX 25.77% 25.31% - - - 22.10% Lipper S&P 500 Index 28.05% 27.67% - - - 24.31% Benchmark 28.58% 28.23% - - - 24.79% ALLIANCE GLOBAL 19.62% 13.82% 12.20% 12.74% - 10.53% Lipper Global 14.34% 14.67% 11.98% 11.21% - 9.64% Benchmark 24.34% 17.77% 15.68% 10.66% - 9.55% ALLIANCE GROWTH AND INCOME 18.69% 20.33% 15.70% - - 14.74% Lipper Growth & Income 15.61% 21.25% 18.35% - - 17.89% Benchmark 20.10% 23.99% 21.07% - - 20.48% ALLIANCE GROWTH INVESTORS 16.99% 14.05% 11.86% - - 13.98% Lipper Flexible Portfolio 14.20% 15.62% 14.31% - - 12.55% Benchmark 22.85% 22.69% 19.96% - - 15.55% ALLIANCE HIGH YIELD (6.85)% 9.35% 8.01% 9.16% - 8.51% Lipper High Current Yield (0.44)% 8.21% 7.37% 9.34% - 8.97% Benchmark 3.66% 9.11% 9.01% 11.08% - 10.72% ALLIANCE INTERMEDIATE GOVERNMENT SECURITIES 5.81% 4.34% 3.50% - - 5.19% Lipper Intermediate Government 7.68% 6.21% 5.91% - - 7.25% Benchmark 8.49% 6.74% 6.45% - - 7.60% ALLIANCE INTERNATIONAL 8.59% 3.69% - - - 5.55% Lipper International 13.02% 9.94% - - - 10.74% Benchmark 20.00% 9.00% - - - 9.68% ALLIANCE MONEY MARKET 3.45% 3.47% 3.28% 3.69% - 5.16% Lipper Money Market 4.84% 4.87% 4.77% 5.20% - 6.77% Benchmark 5.05% 5.18% 5.11% 5.44% - 6.76%
- ----- 88 - -------------------------------------------------------------------------------- TABLE 3 (CONTINUED) ANNUALIZED RATES OF RETURN FOR PERIODS ENDED DECEMBER 31, 1998:
SINCE PORTFOLIO 1 YEAR 3 YEARS 5 YEARS 10 YEARS 20 YEARS INCEPTION* ALLIANCE SMALL CAP GROWTH (5.92)% - - - - 10.31% Lipper Small Company Growth (0.33)% - - - - 16.72% Benchmark 1.23% - - - - 16.58% BT EQUITY 500 INDEX 23.19% - - - - 23.19% Lipper S&P 500 Index 26.78% - - - - 26.78% Benchmark 28.58% - - - - 28.58% BT INTERNATIONAL EQUITY INDEX 18.23% - - - - 18.23% Lipper International 12.17% - - - - 12.17% Benchmark 20.00% - - - - 20.00% BT SMALL COMPANY INDEX (3.82)% - - - - (3.82)% Lipper Small Cap 1.53% - - - - 1.53% Benchmark (2.54)% - - - - (2.54)% MERRILL LYNCH BASIC VALUE EQUITY 9.85% - - - - 15.52% Lipper Growth & Income 15.54% - - - - 21.32% Benchmark 28.58% - - - - 31.63% MERRILL LYNCH WORLD STRATEGY 5.17% - - - - 5.28% Lipper Global Flexible Portfolio 9.34% - - - - 11.15% Benchmark 19.55% - - - - 20.00% MFS EMERGING GROWTH COMPANIES 32.43% - - - - 32.76% Lipper Mid-Cap 15.97% - - - - 22.72% Benchmark (2.54)% - - - - 14.53% MFS RESEARCH 22.18% - - - - 22.51% Lipper Growth 25.82% - - - - 28.73% Benchmark 28.58% - - - - 31.63% MORGAN STANLEY EMERGING MARKET EQUITY (28.15)% - - - - (33.75)% Lipper Emerging Markets (30.50)% - - - - (36.28)% Benchmark (25.34)% - - - - (28.92)% EQ/PUTNAM BALANCED 10.08% - - - - 14.14% Lipper Balanced 14.61% - - - - 17.83% Benchmark 21.36% - - - - 23.48% EQ/PUTNAM GROWTH & INCOME VALUE 11.07% - - - - 15.80% Lipper Growth & Income 15.54% - - - - 21.32% Benchmark 28.58% - - - - 31.63%
- ----- 89 - -------------------------------------------------------------------------------- TABLE 3 (CONTINUED) ANNUALIZED RATES OF RETURN FOR PERIODS ENDED DECEMBER 31, 1998:
SINCE PORTFOLIO 1 YEAR 3 YEARS 5 YEARS 10 YEARS 20 YEARS INCEPTION* T. ROWE PRICE EQUITY INCOME 7.38% - - - - 16.90% Lipper Equity Income 10.76% - - - - 19.07% Benchmark 28.58% - - - - 31.63% T. ROWE PRICE INTERNATIONAL STOCK 11.94% - - - - 5.35% Lipper International 12.17% - - - - 9.06% Benchmark 20.00% - - - - 13.43% WARBURG PINCUS SMALL COMPANY VALUE (11.40)% - - - - 2.64% Lipper Small Cap 1.53% - - - - 16.77% Benchmark (2.54)% - - - - 14.53%
- ---------- * Portfolio inception dates are shown in Table 1. - ----- 90 - -------------------------------------------------------------------------------- TABLE 4 CUMULATIVE RATES OF RETURN FOR PERIODS ENDED DECEMBER 31, 1998:
SINCE PORTFOLIO 1 YEAR 3 YEARS 5 YEARS 10 YEARS 20 YEARS INCEPTION* ALLIANCE AGGRESSIVE STOCK (1.50)% 28.61% 57.06% 370.43% - 554.90% Lipper Mid-Cap Growth 12.16% 58.64% 102.73% 334.88% - 448.32% Benchmark 8.28% 63.35% 106.12% 360.30% - 494.67% ALLIANCE COMMON STOCK 27.06% 96.76% 145.97% 360.62% 2,012.51% 2,051.70% Lipper Growth 22.86% 84.52% 138.97% 388.00% 2,185.68% 3,490.04% Benchmark 28.58% 110.85% 193.91% 479.62% 2,530.43% 2,919.92% ALLIANCE CONSERVATIVE INVESTORS 11.84% 28.48% 43.09% - - 104.01% Lipper Flexible Portfolio 14.20% 55.28% 97.15% - - 202.48% Benchmark 15.59% 49.92% 87.28% - - 187.40% ALLIANCE EQUITY INDEX 25.77% 96.77% - - - 162.61% Lipper S&P 500 Index 28.05% 108.12% - - - 186.34% Benchmark 28.58% 110.85% - - - 192.17% ALLIANCE GLOBAL 19.62% 47.45% 77.82% 231.81% - 211.41% Lipper Global 14.34% 51.58% 77.94% 194.96% - 188.08% Benchmark 24.34% 63.34% 107.19% 175.31% - 181.57% ALLIANCE GROWTH AND INCOME 18.69% 74.22% 107.30% - - 105.82% Lipper Growth & Income 15.61% 79.05% 133.95% - - 139.10% Benchmark 20.10% 90.62% 160.09% - - 166.00% ALLIANCE GROWTH INVESTORS 16.99% 48.35% 75.11% - - 235.42% Lipper Flexible Portfolio 14.20% 55.28% 97.15% - - 202.48% Benchmark 22.85% 84.68% 148.41% - - 280.88% ALLIANCE HIGH YIELD (6.85)% 30.77% 47.03% 140.33% - 166.31% Lipper High Current Yield (0.44)% 26.80% 43.00% 145.62% - 182.21% Benchmark 3.66% 29.90% 53.96% 186.01% - 239.69% ALLIANCE INTERMEDIATE GOVERNMENT SECURITIES 5.81% 13.60% 18.74% - - 48.04% Lipper Intermediate Government 7.68% 19.84% 33.36% - - 72.35% Benchmark 8.49% 21.61% 36.71% - - 76.55% ALLIANCE INTERNATIONAL 8.59% 11.47% - - - 22.40% Lipper International 13.02% 33.62% - - - 47.74% Benchmark 20.00% 29.52% - - - 41.40% ALLIANCE MONEY MARKET 3.45% 10.77% 17.51% 43.62% - 140.91% Lipper Money Market 4.84% 15.34% 26.25% 66.09% - 214.68% Benchmark 5.05% 16.35% 28.27% 69.88% - 214.45%
- ----- 91 - -------------------------------------------------------------------------------- TABLE 4 (CONTINUED) CUMULATIVE RATES OF RETURN FOR PERIODS ENDED DECEMBER 31, 1998:
SINCE PORTFOLIO 1 YEAR 3 YEARS 5 YEARS 10 YEARS 20 YEARS INCEPTION* ALLIANCE SMALL CAP GROWTH (5.92)% - - - - 17.79% Lipper Small Company Growth (0.33)% - - - - 28.98% Benchmark 1.23% - - - - 29.23% BT EQUITY 500 INDEX 23.19% - - - - 23.19% Lipper S&P 500 Index 26.78% - - - - 26.78% Benchmark 28.58% - - - - 28.58% BT INTERNATIONAL EQUITY INDEX 18.23% - - - - 18.23% Lipper International 12.17% - - - - 12.23% Benchmark 20.00% - - - - 20.00% BT SMALL COMPANY INDEX (3.82)% - - - - (3.82)% Lipper Small Cap 1.53% - - - - 1.49% Benchmark (2.54)% - - - - (2.54)% MERRILL LYNCH BASIC VALUE EQUITY 9.85% - - - - 27.22% Lipper Growth & Income 15.54% - - - - 15.59% Benchmark 28.58% - - - - 57.60% MERRILL LYNCH WORLD STRATEGY 5.17% - - - - 8.97% Lipper Global Flexible Portfolio 9.34% - - - - 19.41% Benchmark 19.55% - - - - 33.33% MFS EMERGING GROWTH COMPANIES 32.43% - - - - 60.45% Lipper Mid-Cap 15.97% - - - - 42.16% Benchmark (2.54)% - - - - 25.40% MFS RESEARCH 22.18% - - - - 40.31% Lipper Growth 25.82% - - - - 52.86% Benchmark 28.58% - - - - 57.60% MORGAN STANLEY EMERGING MARKETS EQUITY (28.15)% - - - - (42.98)% Lipper Emerging Markets (30.50)% - - - - (45.67)% Benchmark (25.34)% - - - - (36.71)% EQ/PUTNAM BALANCED 10.08% - - - - 24.70% Lipper Balanced 14.61% - - - - 31.59% Benchmark 21.36% - - - - 42.22% EQ/PUTNAM GROWTH & INCOME VALUE 11.07% - - - - 27.73% Lipper Growth & Income 15.54% - - - - 38.49% Benchmark 28.58% - - - - 57.60%
- ----- 92 - -------------------------------------------------------------------------------- TABLE 4 (CONTINUED) CUMULATIVE RATES OF RETURN FOR PERIODS ENDED DECEMBER 31, 1998:
SINCE PORTFOLIO 1 YEAR 3 YEARS 5 YEARS 10 YEARS 20 YEARS INCEPTION* T. ROWE PRICE EQUITY INCOME 7.38% - - - - 29.77% Lipper Equity Income 10.76% - - - - 33.92% Benchmark 28.58% - - - - 57.60% T. ROWE PRICE INTERNATIONAL STOCK 11.94% - - - - 9.09% Lipper International 12.17% - - - - 15.88% Benchmark 20.00% - - - - 23.42% WARBURG PINCUS SMALL COMPANY VALUE (11.40)% - - - - 4.44% Lipper Small Cap 1.53% - - - - 29.95% Benchmark (2.54)% - - - - 25.40%
- ---------- * Portfolio inception dates are shown in Table 1. - ----- 93 - -------------------------------------------------------------------------------- TABLE 5 YEAR-BY-YEAR RATES OF RETURN:
1989 1990 1991 1992 1993 Alliance Aggressive Stock 40.93% 6.21% 83.52% (4.91)% 14.65% Alliance Common Stock 23.35% (9.77)% 35.41% 1.36% 22.59% Alliance Conservative Investors 2.62% 4.45% 17.73% 3.82% 8.82% Alliance Equity Index - - - - - Alliance Global 24.47% (7.76)% 28.21% (2.30)% 29.75% Alliance Growth and Income - - - - (0.71)% Alliance Growth Investors 3.36% 8.67% 46.23% 3.01% 13.20% Alliance High Yield 3.25% (2.90)% 22.23% 10.29% 20.94% Alliance Intermediate Government Securities - - 10.75% 3.69% 8.56% Alliance International - - - - - Alliance Money Market 7.23% 6.29% 4.28% 1.70% 1.11% Alliance Small Cap Growth - - - - - BT Equity 500 Index - - - - - BT International Equity Index - - - - - BT Small Company Index - - - - - Merrill Lynch Basic Value Equity - - - - - Merrill Lynch World Strategy - - - - - MFS Emerging Growth Companies - - - - - MFS Research - - - - - Morgan Stanley Emerging Markets Equity - - - - - EQ/Putnam Balanced - - - - - EQ/Putnam Growth & Income Value - - - - - T. Rowe Price Equity Income - - - - - T. Rowe Price International Stock - - - - - Warburg Pincus Small Company Value - - - - - 1994 1995 1996 1997 1998 Alliance Aggressive Stock (5.54)% 29.28% 19.99% 8.82% ( 1.50)% Alliance Common Stock (3.89)% 30.08% 22.03% 26.90% 27.06% Alliance Conservative Investors (5.82)% 18.25% 3.30% 11.20% 11.84% Alliance Equity Index (0.43)% 34.04% 20.17% 30.19% 25.77% Alliance Global 3.35% 16.69% 12.53% 9.55% 19.62% Alliance Growth and Income (2.36)% 21.85% 17.92% 24.48% 18.69% Alliance Growth Investors (4.89)% 24.11% 10.57% 14.68% 16.99% Alliance High Yield (4.53)% 17.77% 20.66% 16.34% ( 6.85)% Alliance Intermediate Government Securities (6.09)% 11.30% 1.90% 5.37% 5.81% Alliance International - 9.81% 7.82% ( 4.79)% 8.59% Alliance Money Market 2.15% 3.85% 3.43% 3.53% 3.45% Alliance Small Cap Growth - - - 25.21%+ ( 5.92)% BT Equity 500 Index - - - - 23.19% BT International Equity Index - - - - 18.23% BT Small Company Index - - - - ( 3.82)% Merrill Lynch Basic Value Equity - - - 15.81%+ 9.85% Merrill Lynch World Strategy - - - 3.62%+ 5.17% MFS Emerging Growth Companies - - - 21.15%+ 32.43% MFS Research - - - 14.84%+ 22.18% Morgan Stanley Emerging Markets Equity - - - (20.64)%+ (28.15)% EQ/Putnam Balanced - - - 13.28%+ 10.08% EQ/Putnam Growth & Income Value - - - 15.00%+ 11.07% T. Rowe Price Equity Income - - - 20.85%+ 7.38% T. Rowe Price International Stock - - - ( 2.54)%+ 11.94% Warburg Pincus Small Company Value - - - 17.88%+ (11.40)%
- ---------- + Returns for these portfolios represent less than 12 months of performance. The returns are as of each portfolio inception date as shown in Table 1. - ---------- 94 - -------------------------------------------------------------------------------- COMMUNICATING PERFORMANCE DATA In reports or other communications to contract owners or in advertising material, we may describe general economic and market conditions affecting our variable investment options and the portfolios and may compare the performance or ranking of those options and the portfolios with: o those of other insurance company separate accounts or mutual funds included in the rankings prepared by Lipper Analytical Services, Inc., Morningstar, Inc., VARDS, or similar investment services that monitor the performance of insurance company separate accounts or mutual funds; o other appropriate indices of investment securities and averages for peer universes of mutual funds; or o data developed by us derived from such indices or averages. We also may furnish to present or prospective contract owners advertisements or other communications that include evaluations of a variable investment option or portfolio by nationally recognized financial publications. Examples of such publications are: Barron's Investment Management Weekly Morningstar's Variable Money Management Letter Annuity Sourcebook Investment Dealers Digest Business Week National Underwriter Forbes Pension & Investments Fortune USA Today Institutional Investor Investor's Business Daily Money The New York Times Kiplinger's Personal Finance The Wall Street Journal Financial Planning The Los Angeles Times Investment Adviser The Chicago Tribune Lipper compiles performance data for peer universes of funds with similar investment objectives in its Lipper Survey. Morningstar, Inc. compiles similar data in the Morningstar Variable Annuity/Life Report (Morningstar Report). The Lipper Survey records performance data as reported to it by over 800 mutual funds underlying variable annuity and life insurance products. It divides these actively managed portfolios into 25 categories by portfolio objectives. The Lipper Survey contains two different universes, which reflect different types of fees in performance data: o The "separate account" universe reports performance data net of investment management fees, direct operating expenses and asset-based charges applicable under variable life and annuity contracts; and o The "mutual fund" universe reports performance net only of investment management fees and direct operating expenses, and therefore reflects only charges that relate to the underlying mutual fund. The Morningstar Variable Annuity/Life Report consists of nearly 700 variable life and annuity funds, all of which report their data net of investment management fees, direct operating expenses and separate account level charges. VARDS is a monthly reporting service that monitors approximately 2,500 variable life and variable annuity funds on performance and account information. YIELD INFORMATION Current yield for the Alliance Money Market option will be based on net changes in a hypothetical investment over a given seven-day period, exclusive of capital changes, and then "annualized" (assuming that the same seven-day result would occur each week for 52 weeks). Current yield for the Alliance High Yield option and Alliance Intermediate Government Securities option will be based on net changes in a hypothetical investment over a given 30-day period, exclusive of capital changes, and then "annualized" (assuming that the same 30-day result would occur each month for 12 months). "Effective yield" is calculated in a similar manner, but when annualized, any income earned by the investment is assumed to be reinvested. The "effective yield" will be slightly higher than the "current yield" because any earnings are compounded weekly for the Alliance Money Market option. The current yields and effective yields assume the deduction of all contract charges and expenses other than the withdrawal charge, the optional baseBUILDER benefits charge, the annual administrative charge, and any charge for - ---------- 95 - -------------------------------------------------------------------------------- taxes such as premium tax. The yields and effective yields for the Alliance Money Market option, when used for the special dollar cost averaging program, assume that no contract charges are deducted. For more information, see "Yield Information for the Alliance Money Market Option, Alliance High Yield Option, and Alliance Intermediate Government Securities Option" in the SAI. 10 Incorporation of certain documents by reference - ---------------- 96 - -------------------------------------------------------------------------------- Equitable Life's annual report on Form 10-K for the year ended December 31, 1998, a current report on Form 8-K dated April 8, 1999, and a quarterly report on Form 10-Q for the quarter ended September 30, 1999, are considered to be a part of this prospectus because they are incorporated by reference. After the date of this prospectus and before we terminate the offering of the securities under this prospectus, all documents or reports we file with the SEC under the Securities Exchange Act of 1934 ("Exchange Act") will be considered to become part of this prospectus because they are incorporated by reference. Any statement contained in a document that is or becomes part of this prospectus, will be considered changed or replaced for purposes of this prospectus if a statement contained in this prospectus changes or is replaced. Any statement that is considered to be a part of this prospectus because of its incorporation will be considered changed or replaced for the purpose of this prospectus if a statement contained in any other subsequently filed document that is considered to be part of this prospectus changes or replaces that statement. After that, only the statement that is changed or replaced will be considered to be part of this prospectus. We file our Exchange Act documents and reports, including our annual and quarterly reports on Form 10-K and quarterly reports on Form 10-Q, electronically according to EDGAR under CIK No. 0000727920. The SEC maintains a Web site that contains reports, proxy and information statements, and other information regarding registrants that file electronically with the SEC. The address of the site is http://www.sec.gov. Upon written or oral request, we will provide, free of charge, to each person to whom this prospectus is delivered, a copy of any or all of the documents considered to be part of this prospectus because they are incorporated herein. This does not include exhibits not specifically incorporated by reference into the text of such documents. Requests for documents should be directed to The Equitable Life Assurance Society of the United States, 1290 Avenue of the Americas, New York, New York 10104. Attention: Corporate Secretary (telephone: (212) 554-1234). Appendix I: Purchase considerations for QP contracts - -------- A-1 - -------------------------------------------------------------------------------- Trustees who are considering the purchase of an Equitable Accumulator QP contract should discuss with their tax advisers whether this is an appropriate investment vehicle for the employer's plan. Trustees should consider whether the plan provisions permit the investment of plan assets in the QP contract, the distribution of such an annuity, the purchase of the guaranteed minimum income benefit, and the payment of death benefits in accordance with the requirements of the federal income tax rules. The QP contract and this prospectus should be reviewed in full, and the following factors, among others, should be noted. Assuming continued plan qualification and operation, earnings on qualified plan assets will accumulate value on a tax-deferred basis even if the plan is not funded by the Equitable Accumulator QP contract or another annuity. Therefore, you should purchase an Equitable Accumulator QP Contract to fund a plan for the contract's features and benefits other than tax deferral. This QP contract accepts transfer contributions only and not regular, ongoing payroll contributions. For 401(k) plans under defined contribution plans, no employee after-tax contributions are accepted. Under defined benefit plans, we will not accept rollovers from a defined contribution plan to a defined benefit plan. We will only accept transfers from a defined benefit plan or a change of investment vehicles in the plan. For defined benefit plans, the maximum percentage of actuarial value of the plan participant/employee's normal retirement benefit that can be funded by a QP contract is 80%. The account value under a QP contract may at any time be more or less than the lump sum actuarial equivalent of the accrued benefit for a defined benefit plan participant/employee. Equitable Life does not guarantee that the account value under a QP contract will at any time equal the actuarial value of 80% of a participant/employee's accrued benefit. If overfunding of a plan occurs, withdrawals from the QP contract may be required. A withdrawal charge and/or market value adjustment may apply. Further, Equitable Life will not perform or provide any plan recordkeeping services with respect to the QP contracts. The plan's administrator will be solely responsible for performing or providing for all such services. There is no loan feature offered under the QP contracts, so if the plan provides for loans and a participant/employee takes a loan from the plan, other plan assets must be used as the source of the loan and any loan repayments must be credited to other investment vehicles and/or accounts available under the plan. Given that required minimum distributions must generally commence from the plan for annuitants after age 70 1/2, trustees should consider that: o The QP contract may not be an appropriate purchase for annuitants approaching or over age 70 1/2; and o The guaranteed minimum income benefit under baseBUILDER may not be an appropriate feature for annuitants who are older than age 60 1/2 when the contract is issued. Finally, because the method of purchasing the QP contract and the features of the QP contract may appeal more to plan participants/employees who are older and tend to be highly paid, and because certain features of the QP contract are available only to plan participants/employees who meet certain minimum and/or maximum age requirements, plan trustees should discuss with their advisers whether the purchase of the QP contract would cause the plan to engage in prohibited discrimination in contributions, benefits or otherwise. Appendix II: Market value adjustment example - -------- B-1 - -------------------------------------------------------------------------------- The example below shows how the market value adjustment would be determined and how it would be applied to a withdrawal, assuming that $100,000 was allocated on February 15, 2000 to a fixed maturity option with a maturity date of February 15, 2009 (nine years later) at a rate to maturity of 7.00%, resulting in a maturity value of $183,846 on the maturity date. We further assume that a withdrawal of $50,000 is made four years later on February 15, 2004.
ASSUMED RATE TO MATURITY ON FEBRUARY 15, 2004 5.00% 9.00% AS OF FEBRUARY 15, 2004 (BEFORE WITHDRAWAL) (1) Market adjusted amount $144,048 $ 119,487 (2) Fixed maturity amount $131,080 $ 131,080 (3) Market value adjustment: (1) - (2) $ 12,968 $ (11,593) ON FEBRUARY 15, 2004 (AFTER WITHDRAWAL) (4) Portion of market value adjustment associated with withdrawal: (3) x [$50,000/(1)] $ 4,501 $ (4,851) (5) Reduction in fixed maturity amount: [$50,000 - (4)] $ 45,499 $ 54,851 (6) Fixed maturity amount: (2) - (5) $ 85,581 $ 76,229 (7) Maturity value $120,032 $ 106,915 (8) Market adjusted amount of (7) $ 94,048 $ 69,487
You should note that under this example if a withdrawal is made when rates have increased from 7.00% to 9.00% (right column), a portion of a negative market value adjustment is realized. On the other hand, if a withdrawal is made when rates have decreased from 7.00% to 5.00% (left column), a portion of a positive market value adjustment is realized. Appendix III: Guaranteed minimum death benefit example - -------- C-1 - -------------------------------------------------------------------------------- The death benefit under the contracts is equal to the account value or, if greater, the guaranteed minimum death benefit. The following illustrates the guaranteed minimum death benefit calculation. Assuming $100,000 is allocated to the variable investment options (with no allocation to the Alliance Money Market option, Alliance Intermediate Government Securities option or the fixed maturity options), no additional contributions, no transfers and no withdrawals, and no loans under a Rollover TSA contract, the guaranteed minimum death benefit for an annuitant age 45 would be calculated as follows:
END OF 5% ROLL UP TO AGE 80 ANNUAL RATCHET TO AGE 80 CONTRACT GUARANTEED MINIMUM GUARANTEED MINIMUM YEAR ACCOUNT VALUE DEATH BENEFIT(1) DEATH BENEFIT 1 $105,000 $ 105,000(1) $ 105,000(3) 2 $115,500 $ 110,250(2) $ 115,500(3) 3 $129,360 $ 115,763(2) $ 129,360(3) 4 $103,488 $ 121,551(1) $ 129,360(4) 5 $113,837 $ 127,628(1) $ 129,360(4) 6 $127,497 $ 134,010(1) $ 129,360(4) 7 $127,497 $ 140,710(1) $ 129,360(4)
The account values for contract years 1 through 7 are based on hypothetical rates of return of 5.00%, 10.00%, 12.00%, (20.00)%, 10.00%, 12.00% and 0.00%. We are using these rates solely to illustrate how the benefit is determined. The return rates bear no relationship to past or future investment results. 5% ROLL UP TO AGE 80 (1) At the end of contract year 1, and again at the end of contract years 4 through 7, the death benefit will be equal to the guaranteed minimum death benefit. (2) At the end of contract years 2 and 3, the death benefit will be equal to the current account value since it is higher than the current guaranteed minimum death benefit. ANNUAL RATCHET TO AGE 80 (3) At the end of contract years 1 through 3, the guaranteed minimum death benefit is equal to the current account value. (4) At the end of contract years 4 through 7, the guaranteed minimum death benefit is equal to the guaranteed minimum death benefit at the end of the prior year since it is equal to or higher than the current account value. Appendix IV: Example of payments under the Assured Payment Option and APO Plus - -------- D-1 - -------------------------------------------------------------------------------- The second column in the chart below illustrates the payments for a male age 70 who purchased the Assured Payment Option on August 2, 1999 with a single contribution of $100,000, with increasing annual payments. The payments are to commence on August 15, 2000. It assumes that the fixed period is 15 years and that the life contingent annuity will provide payments on a single life basis. Based on the rates to maturity for the fixed maturity options and the current purchase rate for the life contingent annuity, on August 2, 1999, the initial payment would be $6,763.29 and would increase in each three-year period to a final payment of $9,902.13. The first payment under the life contingent annuity would be $10,892.34. The rates to maturity as of August 2, 1999 for fixed maturity options maturing on February 15, 2000 through 2014 are: 3.47%, 4.51%, 5.01%, 5.40%, 5.47%, 5.59%, 5.69%, 5.72%, 5.82%, 5.85%, 5.58%, 5.58%, 5.58%, 5.58%, and 5.58%, respectively. Alternatively as shown in the third and fourth columns, this individual could purchase APO Plus with the same $100,000 contribution, with the same fixed period and the life contingent annuity on a single life basis. Assuming election of the Alliance Common Stock option based on the rates to maturity for the fixed maturity options and the current purchase rate for the life contingent annuity, on August 2, 1999, the same initial payment of $6,763.29 would be purchased under APO Plus. However, unlike the payment under the Assured Payment Option that will increase every three years, this initial payment under APO Plus is not guaranteed to increase. Therefore, only $78,856.38 is needed to purchase the initial payment stream, and the remaining $21,143.62 is invested in the variable investment options. Any future increase in payments under APO Plus will depend on the investment performance in the Alliance Common Stock option. Assuming hypothetical average annual rates of return of 0% and 8% (after deduction of charges) for the variable investment option, the value in the variable investment option would grow to $21,143.62 and $27,764.53 respectively as of February 15, 2003. A portion of this amount is used to purchase the increase in the payments for the fourth year. The remainder will stay in the variable investment option to be drawn upon for the purchase of increases in payments at for each third year thereafter during the fixed period and at the end of the fixed period under the life contingent annuity. Based on the rates to maturity for the fixed maturity options and purchase rates for the life contingent annuity as of August 2, 1999, the third and fourth columns illustrate the increasing payments that would be purchased under APO Plus assuming 0% and 8% rates of return respectively. Under both options, while you are living payments increase annually after the 16th year under the life contingent annuity based on the increase, if any, in the Consumer Price Index, but in no event greater than 3% per year. ANNUAL PAYMENTS
GUARANTEED INCREASING ILLUSTRATIVE ILLUSTRATIVE PAYMENTS UNDER THE PAYMENTS UNDER PAYMENTS UNDER YEARS ASSURED PAYMENT OPTION APO PLUS AT 0% APO PLUS AT 8% 1-3 $ 6,763.29 $ 6,763.29 $ 6,763.29 4-6 $ 7,439.62 $ 7,090.83 $ 7,605.72 7-9 $ 8,183.58 $ 7,485.98 $ 8,478.16 10-12 $ 9,001.94 $ 7,888.32 $ 9,385.79 13-15 $ 9,902.13 $ 8,261.36 $ 10,283,71 16 $ 10,892.34 $ 8,547.58 $ 11,095.54
- ----- D-2 - -------------------------------------------------------------------------------- As described above, a portion of the illustrated contribution is applied to the life contingent annuity. This amount will generally be larger under the Assured Payment Option than under APO Plus. Also, a larger portion of the contribution will be allocated to fixed maturity options under the former than the latter. In this illustration, $79,857.86 is allocated under the Assured Payment Option to the fixed maturity options and under APO Plus, $67,531.44 is allocated to the fixed maturity options. In addition, under APO Plus $21,143.62 is allocated to the variable investment option. The balance of the $100,000 ($20,142.14 and $11,324.94, respectively) is applied to the life contingent annuity. The rates of return of 0% and 8% are for illustrative purposes only and are not intended to represent an expected or guaranteed rate of return. Your investment results will vary. Payments will also depend on the the rates to maturity and life contingent annuity purchase rates in effect on the day the contribution is applied. It is assumed that no lump sum withdrawals are taken. Appendix V: Assured Payment Option and APO Plus contracts issued in the state of Maryland - -------- E-1 - -------------------------------------------------------------------------------- THE FOLLOWING INFORMATION SPECIFIES THE VARIATIONS THAT RELATE TO THE ASSURED PAYMENT OPTION AND APO PLUS CONTRACTS ISSUED IN MARYLAND. The Assured Payment Option and APO Plus (available only as traditional IRAs) are issued as separate contracts rather than as a distribution option under a Rollover IRA or Flexible Premium IRA contract. You may purchase an Assured Payment Option of APO Plus contract with a minimum single contribution of $10,000. You may also choose to apply the account value from a Flexible Premium IRA or Rollover IRA contract to purchase an Assured Payment Option or APO Plus contract. Your account value will be applied as a single contribution. We will allocate your single contribution in the same manner as described under "Assured Payment Option and APO Plus" earlier in this prospectus. You are not permitted to make additional contributions under the Assured Payment Option and APO Plus. PAYMENTS. Your payments must begin within 13 months after the contract date. You may not elect to defer your payments. DEATH BENEFIT. If you die during the fixed period, we will continue payments to your designated beneficiary. Your beneficiary may choose to discontinue the payments and receive a lump sum amount. If the lump sum is elected within one year of your death, the amount will be equal the death benefit payable under the Assured Payment Option and APO Plus. TERMINATING THE CONTRACT. You may choose to terminate the contract by surrendering the contract as described under "Surrendering your contract to receive its cash value." We will return the contract to you with a notation that the life contingent annuity is still in effect. The date payments are to start under the life contingent annuity will be moved forward. TAX INFORMATION. The Assured Payment Option and APO Plus contracts have not been submitted to the IRS for approval as to form for use as a traditional IRA. Statement of additional information - -------------------------------------------------------------------------------- TABLE OF CONTENTS
PAGE Unit Values 2 Custodian and Independent Accountants 3 Yield Information for the Alliance Money Market Option, Alliance High Yield Option, and Alliance Intermediate Government Securities Option 3 Financial Statements 4
HOW TO OBTAIN AN EQUITABLE ACCUMULATOR STATEMENT OF ADDITIONAL INFORMATION FOR SEPARATE ACCOUNT NO. 45 Send this request form to: Equitable Accumulator P.O. Box 1547 Secaucus, NJ 07096-1547 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Please send me an Equitable Accumulator SAI for Separate Account No. 45 dated October 18, 1999. - ------------------------------------------------------------------------------ Name: - ------------------------------------------------------------------------------ Address: - ------------------------------------------------------------------------------ City State Zip EQUITABLE ACCUMULATOR(SM) A combination variable and fixed deferred annuity contract THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES 1290 AVENUE OF THE AMERICAS NEW YORK, NEW YORK 10104 STATEMENT OF ADDITIONAL INFORMATION FEBRUARY __, 2000 - -------------------------------------------------------------------------------- This statement of additional information ("SAI") is not a prospectus. It should be read in conjunction with the related Equitable Accumulator prospectus, dated February __, 2000. That prospectus provides detailed information concerning the contracts and the variable investment options, as well as the fixed maturity options, that fund the contracts. Each variable investment option is a subaccount of Equitable Life's Separate Account No. 45. The fixed maturity options are part of Equitable Life's general account. Definitions of special terms used in the SAI are found in the prospectus. A copy of the prospectus is available free of charge by writing the processing office (Post Office Box 1547, Secaucus, NJ 07096-1547), by calling 1-800-789-7771 toll free, or by contacting your financial professional. TABLE OF CONTENTS Unit Values 2 Custodian and Independent Accountants 2 Yield Information for the Alliance Money Market Option, Alliance High Yield Option, and Alliance Intermediate Government Securities Option 2 Financial Statements 4 Copyright 2000 The Equitable Life Assurance Society of the United States. All rights reserved. Accumulator is a service mark of The Equitable Life Assurance Society of the United States. IM-95-02 SAI (2000) - -------------------------------------------------------------------------------- 2 - -------------------------------------------------------------------------------- UNIT VALUES Unit values are determined at the end of each valuation period for each of the variable investment options. We may offer other annuity contracts and certificates which will have their own unit values for the variable investment options. They may be different from the unit values for the Equitable Accumulator. The unit value for a variable investment option for any valuation period is equal to: (i) the unit value for the preceding valuation period multiplied by (ii) the net investment factor for that option for that valuation period. A valuation period is each business day together with any preceding non-business days. The net investment factor is: (a/b) - c where: (a) is the value of the variable investment option's shares of the corresponding portfolio at the end of the valuation period. Any amounts allocated to or withdrawn from the option for the valuation period are not taken into account. For this purpose, we use the share value reported to us by EQ Advisors Trust. (b) is the value of the variable investment option's shares of the corresponding portfolio at the end of the preceding valuation period. (Any amounts allocated or withdrawn for that valuation period are taken into account.) (c) is the daily mortality and expense risks charge and administrative charge and distribution charge relating to the contracts, times the number of calendar days in the valuation period. These daily charges are at an effective annual rate not to exceed a total of 1.65%. CUSTODIAN AND INDEPENDENT ACCOUNTANTS Equitable Life is the custodian for the shares of EQ Advisors Trust owned by Separate Account No. 45. The financial statements of Separate Account No. 45 as at December 31, 1998 and for the periods ended December 31, 1998 and 1997, and the consolidated financial statements of Equitable Life as at December 31, 1998 and 1997 and for each of the three years ended December 31, 1998 included in this SAI have been so included in reliance on the reports of PricewaterhouseCoopers LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. YIELD INFORMATION FOR THE ALLIANCE MONEY MARKET OPTION, ALLIANCE HIGH YIELD OPTION, AND ALLIANCE INTERMEDIATE GOVERNMENT SECURITIES OPTION ALLIANCE MONEY MARKET OPTION The Alliance Money Market option calculates yield information for seven-day periods. The seven-day current yield calculation is based on a hypothetical contract with one unit at the beginning of the period. To determine the seven-day rate of return, the net change in the unit value is computed by subtracting the unit value at the beginning of the period from a unit value, exclusive of capital changes, at the end of the period. The net change is then reduced by the average administrative charge factor (explained below). This reduction is made to recognize the deduction of the annual administrative charge under the Flexible Premium IRA and Flexible Premium Roth IRA contracts, which is not reflected in the unit value. Unit values reflect all other accrued expenses of the Alliance Money Market option but do not reflect any withdrawal charges, the optional benefit charge, or charges for applicable taxes such as state or local premium taxes. Under the Alliance Money Market special dollar cost averaging program, unit values also do not reflect the mortality and expense risks charge and the administrative charge. The adjusted net change is divided by the unit value at the beginning of the period to obtain what is called the adjusted base period rate of return. This seven-day adjusted base period return is then multiplied by 365/7 to produce an - -------------------------------------------------------------------------------- 3 - -------------------------------------------------------------------------------- annualized seven-day current yield figure carried to the nearest one-hundredth of one percent. The actual dollar amount of the annual administrative charge that is deducted from the Alliance Money Market option will vary for each contract depending upon the percentage of the account value allocated to the Alliance Money Market option. To determine the effect of the annual administrative charge on the yield, we start with the total dollar amounts of the charges deducted from the option during the 12-month period ending on the last day of the prior year. The amount is multiplied by 7/365 to produce an average administrative charge factor which is used in all weekly yield computations for the ensuing year. The average administrative charge factor is then divided by the number of Alliance Money Market units as of the end of the prior calendar year, and the resulting quotient is deducted from the net change in unit value for the seven-day period. The effective yield is obtained by modifying the current yield to take into account the compounding nature of the Alliance Money Market option's investments, as follows: the unannualized adjusted base period return is compounded by adding one to the adjusted base period return, raising the sum to a power equal to 365 divided by 7, and subtracting one from the result, i.e., effective yield = (base period return + 1 )365/7 - 1. The Alliance Money Market option yields will fluctuate daily. Accordingly, yields for any given period do not necessarily represent future results. In addition, the value of units of the Alliance Money Market option will fluctuate and not remain constant. ALLIANCE HIGH YIELD OPTION AND ALLIANCE INTERMEDIATE GOVERNMENT SECURITIES OPTION The Alliance High Yield option and Alliance Intermediate Government Securities option calculate yield information for 30-day periods. The 30-day current yield calculation is based on a hypothetical contract with one unit at the beginning of the period. To determine the 30-day rate of return, the net change in the unit value is computed by subtracting the unit value at the beginning of the period from a unit value, exclusive of capital changes, at the end of the period. The net change is then reduced by the average administrative charge factor (explained below). This reduction is made to recognize the deduction of the annual administrative charge under the Flexible Premium IRA and Flexible Premium Roth IRA contracts, which is not reflected in the unit value. Unit values reflect all other accrued expenses of the Alliance High Yield option and Alliance Intermediate Government Securities option but do not reflect any withdrawal charges, the optional benefit charge or charges for applicable taxes such as state or local premium taxes. The adjusted net change is divided by the unit value at the beginning of the period to obtain the adjusted base period rate of return. This 30-day adjusted base period return is then multiplied by 365/30 to produce an annualized 30-day current yield figure carried to the nearest one-hundredth of one percent. The actual dollar amount of the annual administrative charge that is deducted from the Alliance High Yield option and Alliance Intermediate Government Securities option will vary for each contract depending upon the percentage of the account value allocated to the Alliance High Yield option and Alliance Intermediate Government Securities option. To determine the effect of the annual administrative charge on the yield, we start with the total dollar amounts of the charges deducted from the option during the 12-month period ending on the last day of the prior year. The amount is multiplied by 30/365 to produce an average administrative charge factor which is used in all 30-day yield computations for the ensuing year. The average administrative charge factor is then divided by the number of Alliance High Yield and Alliance Intermediate Government Securities units as of the end of the prior calendar year, and the resulting quotient is deducted from the net change in unit value for the 30-day period. The yields for the Alliance High Yield option and Alliance Intermediate Government Securities option will fluctuate daily. Accordingly, the yields for any given period do not necessarily represent future results. In addition, the value of units of the - -------------------------------------------------------------------------------- 4 - -------------------------------------------------------------------------------- Alliance High Yield option and Alliance Intermediate Government Securities option will fluctuate and not remain constant. ALLIANCE MONEY MARKET OPTION, ALLIANCE HIGH YIELD OPTION, AND ALLIANCE INTERMEDIATE GOVERNMENT SECURITIES OPTION YIELD INFORMATION The yields for the Alliance Money Market option, Alliance High Yield option, and Alliance Intermediate Government Securities option reflect charges that are not normally reflected in the yields of other investments. Therefore, they may be lower when compared with yields of other investments. The yields for the Alliance Money Market option, Alliance High Yield option, and Alliance Intermediate Government Securities option should not be compared to the return on fixed rate investments which guarantee rates of interest for specified periods, such as the fixed maturity options. Nor should the yields be compared to the yields of money market options made available to the general public. Because the Equitable Accumulator contracts described in the prospectus are being offered for the first time in 2000, no yield information is presented. FINANCIAL STATEMENTS The consolidated financial statements of Equitable Life included herein should be considered only as bearing upon the ability of Equitable Life to meet its obligations under the contracts. THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES SEPARATE ACCOUNT NO. 45 INDEX TO FINANCIAL STATEMENTS Report of Independent Accountants ..................................... FS-2 Financial Statements: Statements of Assets and Liabilities, December 31, 1998 ............ FS-3 Statements of Operations for the Year Ended December 31, 1998 ...... FS-6 Statements of Changes in Net Assets for the Years Ended December 31, 1998 and 1997 ....................................... FS-9 Notes to Financial Statements ...................................... FS-15 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Accountants ..................................... F-1 Consolidated Financial Statements: Consolidated Balance Sheets, December 31, 1998 and 1997 ............ F-2 Consolidated Statements of Earnings, Years Ended December 31, 1998, 1997 and 1996 .......................................... F-3 Consolidated Statements of Shareholder's Equity, Years Ended December 31, 1998, 1997 and 1996 ................................................... F-4 Consolidated Statements of Cash Flows, Years Ended December 31, 1998, 1997 and 1996 .............................................. F-5 Notes to Consolidated Financial Statements ......................... F-6 FS-1 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors of The Equitable Life Assurance Society of the United States and Contractowners of Separate Account No. 45 of The Equitable Life Assurance Society of the United States In our opinion, the accompanying statements of assets and liabilities and the related statements of operations and of changes in net assets present fairly, in all material respects, the financial position of the Alliance Money Market Fund, Alliance Intermediate Government Securities Fund, Alliance High Yield Fund, Alliance Growth & Income Fund, Alliance Equity Index Fund, Alliance Common Stock Fund, Alliance Global Fund, Alliance International Fund, Alliance Aggressive Stock Fund, Alliance Small Cap Growth Fund, Alliance Conservative Investors Fund, Alliance Growth Investors Fund, ("Hudson River Trust funds") and T. Rowe Price Equity Income Fund, EQ/Putnam Growth & Income Value Fund, BT Equity 500 Index Fund, Merrill Lynch Basic Value Equity Fund, MFS Research Fund, BT International Equity Index Fund, T. Rowe Price International Stock Fund, Morgan Stanley Emerging Markets Equity Fund, Warburg Pincus Small Company Value Fund, BT Small Company Index Fund, MFS Emerging Growth Companies Fund, EQ/Putnam Balanced Fund and Merrill Lynch World Strategy Fund ("EQ Advisors Trust funds"), separate investment funds of The Equitable Life Assurance Society of the United States ("Equitable Life") Separate Account No. 45 at December 31, 1998 and the results of each of their operations and changes in each of their net assets for the periods indicated, in conformity with generally accepted accounting principles. These financial statements are the responsibility of Equitable Life's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of shares owned in The Hudson River Trust and in The EQ Advisors Trust at December 31, 1998 with the transfer agent, provide a reasonable basis for the opinion expressed above. PricewaterhouseCoopers LLP New York, New York February 8, 1999 FS-2 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES SEPARATE ACCOUNT NO. 45 STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 1998
FIXED INCOME SERIES: ------------------------------------------ ALLIANCE ALLIANCE INTERMEDIATE MONEY GOVERNMENT ALLIANCE MARKET SECURITIES HIGH FUND FUND YIELD FUND ------------ ------------ ------------ ASSETS Investments in shares of the Trusts -- at market value (Note 1) Cost: $162,642,654 ....................... $162,027,740 38,988,768 ....................... $39,087,424 79,874,329 ....................... $68,956,617 52,351,834 ....................... 38,500,311 ....................... 179,571,303 ....................... 51,702,567 ....................... 367,878 ....................... 40,156,608 ....................... Receivable for Trust shares sold ............ -- -- -- Receivable for policy-related transactions .. 4,052,521 284,956 281,931 ------------ ----------- ----------- Total Assets ................................ 166,080,261 39,372,380 69,238,548 ------------ ----------- ----------- LIABILITIES Payable for Trust shares purchased ................................ 4,071,280 311,491 285,060 Payable for policy-related transactions ............................. -- -- -- Amount retained by Equitable Life in Separate Account No. 45 (Note 5) .................. 51,090 37,552 17,444 ------------ ----------- ----------- Total Liabilities ........................... 4,122,370 349,043 302,504 ------------ ----------- ----------- NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS ... $161,957,891 $39,023,337 $68,936,044 ============ =========== =========== EQUITY SERIES: ------------------------------------------------------------------------------------ MERRILL T. ROWE EQ/PUTNAM ALLIANCE LYNCH PRICE GROWTH & ALLIANCE BT EQUITY EQUITY BASIC VALUE EQUITY INCOME GROWTH & 500 INDEX INDEX EQUITY INCOME FUND VALUE FUND INCOME FUND FUND FUND FUND ------------ ------------ ------------ ------------ ------------ ----------- ASSETS Investments in shares of the Trusts -- at market value (Note 1) Cost: $162,642,654 ....................... 38,988,768 ....................... 79,874,329 ....................... 52,351,834 ....................... $54,352,075 38,500,311 ....................... $41,327,548 179,571,303 ....................... $194,812,344 51,702,567 ....................... $57,083,310 367,878 ....................... $429,900 40,156,608 ....................... $40,154,990 Receivable for Trust shares sold ............ -- -- -- -- -- -- Receivable for policy-related transactions .. 192,690 169,537 886,818 1,978,165 12,773 297,870 ----------- ----------- ------------ ----------- -------- ----------- Total Assets ................................ 54,544,765 41,497,085 195,699,162 59,061,475 442,673 40,452,860 ----------- ----------- ------------ ----------- -------- ----------- LIABILITIES Payable for Trust shares purchased .......... 192,690 169,537 914,736 1,978,218 13,332 297,913 Payable for policy related transactions...... -- -- -- -- -- -- Amount retained by Equitable Life in Separate Account No. 45 (Note 5) .................. 38,209 31,750 144,163 59,481 8,903 24,813 ----------- ----------- ------------ ----------- -------- ----------- Total Liabilities ........................... 230,899 201,287 1,058,899 2,037,699 22,235 322,726 ----------- ----------- ------------ ----------- -------- ----------- NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS ... $54,313,866 $41,295,798 $194,640,263 $57,023,776 $420,438 $40,130,134 =========== =========== ============ =========== ======== ===========
- ------------------- See Notes to Financial Statements. FS-3 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES SEPARATE ACCOUNT NO. 45 STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) DECEMBER 31, 1998
EQUITY SERIES (CONTINUED): --------------------------------------------------------- ALLIANCE COMMON MFS ALLIANCE ALLIANCE STOCK RESEARCH GLOBAL INTERNATIONAL FUND FUND FUND FUND ------------ ------------ ------------ ------------ ASSETS Investments in shares of the Trusts -- at market value (Note 1) Cost: $614,422,976 ....................... $673,522,100 46,867,524 ....................... $53,094,944 62,242,799 ....................... $66,482,102 19,182,262 ....................... $20,109,775 5,069,139 ....................... 28,158,931 ....................... 5,282,220 ....................... 158,195,007 ....................... Receivable for Trust shares sold ............ -- -- -- 1,621,423 Receivable for policy-related transaction ... 3,169,259 789,675 223,087 -- ------------ ----------- ----------- ----------- Total Assets ................................ 676,691,359 53,884,619 66,705,189 21,731,198 ------------ ----------- ----------- ----------- LIABILITIES Payable for Trust shares sold ............... 3,174,080 789,704 228,019 -- Payable for policy-related transactions ..... -- -- -- 1,629,516 Amount retained by Equitable Life in Separate Account No. 45 (Note 5) .................. 15,873 11,321 69,713 23,074 ------------ ----------- ----------- ----------- Total Liabilities ........................... 3,189,953 801,025 297,732 1,652,590 ------------ ----------- ----------- ----------- NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS ... $673,501,406 $53,083,594 $66,407,457 $20,078,608 ============ =========== =========== =========== EQUITY SERIES (CONTINUED): --------------------------------------------------------- MORGAN T. ROWE STANLEY BT PRICE EMERGING ALLIANCE INTERNATIONAL INTERNATIONAL MARKETS AGGRESSIVE EQUITY STOCK EQUITY STOCK INDEX FUND FUND FUND ------------ ------------ ------------ ------------ ASSETS Investments in shares of the Trusts -- at market value (Note 1) Cost: $614,422,976 ....................... 46,867,524 ....................... 62,242,799 ....................... 19,182,262 ....................... 5,069,139 ....................... $5,353,580 28,158,931 ....................... $29,654,895 5,282,220 ....................... $4,273,794 158,195,007 ....................... $147,616,537 Receivable for Trust shares sold ............ 228,451 -- -- -- Receivable for policy-related transaction ... -- 158,444 25,127 305,836 ---------- ----------- ---------- ------------ Total Assets ................................ 5,582,031 29,813,339 4,298,921 147,922,373 ---------- ----------- ---------- ------------ LIABILITIES Payable for Trust shares sold ............... -- 158,443 26,143 313,060 Payable for policy-related transactions ..... 228,419 -- -- -- Amount retained by Equitable Life in Separate Account No. 45 (Note 5) .................. 6,600 22,436 8,961 11,344 ---------- ----------- ---------- ------------ Total Liabilities ........................... 235,019 180,879 35,104 324,404 ---------- ----------- ---------- ------------ NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS ... $5,347,012 $29,632,460 $4,263,817 $147,597,969 ========== =========== ========== ============
- ------------------ See Notes to Financial Statements. FS-4 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES SEPARATE ACCOUNT NO. 45 STATEMENTS OF ASSETS AND LIABILITIES (CONCLUDED) DECEMBER 31, 1998
EQUITY SERIES (CONCLUDED): ------------------------------------------------------ WARBURG MFS PINCUS ALLIANCE EMERGING SMALL SMALL CAP BT SMALL GROWTH COMPANY GROWTH COMPANY COMPANIES VALUE FUND FUND INDEX FUND FUND ------------ ----------- ----------- ------------ ASSETS Investments in shares of the Trusts -- at market value (Note 1) Cost: $ 41,502,596............................... $37,275,602 42,123,172............................. $40,301,314 5,078,731............................. $5,098,116 61,770,493............................. $73,588,750 50,900,433............................. 33,319,831............................. 120,367,795............................. 5,865,231............................. Receivable for Trust shares sold.................. -- -- -- -- Receivable for policy-related transactions........ 87,152 1,031,150 41,271 834,313 ------------ ---------- ----------- ------------ Total Assets...................................... 37,362,754 41,332,464 5,139,387 74,423,063 ------------ ---------- ----------- ------------ LIABILITIES Payable for Trust shares purchased................ 87,151 1,035,757 41,271 834,334 Payable for policy-related transactions.......... -- -- -- -- Amount retained by Equitable Life in Separate Account No. 45 (Note 5)........................ 25,995 51,378 6,603 24,127 ------------ ---------- ----------- ------------ Total Liabilities................................. 113,146 1,087,135 47,874 858,461 ------------ ---------- ----------- ------------ NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS......... $37,249,608 $40,245,329 $5,091,513 $73,564,602 =========== =========== ========== ============ ASSET ALLOCATION SERIES: ------------------------------------------------------- MERRILL ALLIANCE ALLIANCE LYNCH CONSERVATIVE EQ/PUTNAM GROWTH WORLD INVESTORS BALANCED INVESTORS STRATEGY FUND FUND FUND FUND ----------- ------------ ------------- ----------- ASSETS Investments in shares of the Trusts -- at market value (Note 1) Cost: $ 41,502,596............................. 42,123,172............................. 5,078,731............................. 61,770,493............................. 50,900,433............................. $51,458,514 33,319,831............................. $34,637,097 120,367,795............................. $126,599,682 5,865,231............................. $5,947,148 Receivable for Trust shares sold.................. -- -- -- -- Receivable for policy-related transactions........ 445,717 649,638 394,969 45,950 ----------- ----------- ------------ ---------- Total Assets...................................... 51,904,231 35,286,735 126,994,651 5,993,098 ----------- ----------- ------------ ---------- LIABILITIES Payable for Trust shares purchased................ 447,264 649,660 435,647 45,950 Payable for policy-related transactions.......... -- -- -- -- Amount retained by Equitable Life in Separate Account No. 45 (Note 5)........................ 141,475 16,519 79,665 5,185 ----------- ----------- ------------ ---------- Total Liabilities................................. 588,739 666,179 515,312 51,135 ----------- ----------- ------------ ---------- NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS......... $51,315,492 $34,620,556 $126,479,339 $5,941,963 =========== =========== ============ ==========
- ------------------- See Notes to Financial Statements. FS-5 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES SEPARATE ACCOUNT NO. 45 STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1998
FIXED INCOME SERIES: ---------------------------------------- ALLIANCE ALLIANCE INTERMEDIATE ALLIANCE MONEY GOVERNMENT HIGH MARKET SECURITIES YIELD FUND FUND FUND ----------- ---------- ------------- INCOME AND EXPENSES: Investment Income (Note 2): Dividends from the Trusts .............$5,658,138 $1,260,940 $ 5,454,605 Expenses (Note 3): Asset-based charges 737,652 268,963 542,692 ---------- ---------- ----------- NET INVESTMENT INCOME (LOSS) ................ 4,920,486 991,977 4,911,913 ---------- ---------- ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 2): Realized gain (loss) on investments ...... Realized gain distribution from the ...... 149,548 255,764 (1,040,219) Trusts ................................ 4,257 -- 1,292,662 ---------- ---------- ----------- NET REALIZED GAIN (LOSS) .................... 153,805 255,764 252,443 ---------- ---------- ----------- Unrealized appreciation (depreciation) on investments: Beginning of period ...................... (465,201) 21,939 (786,186) End of period ............................ (614,915) 98,656 (10,917,712) ---------- ---------- ----------- Change in unrealized appreciation ........ (depreciation) during the period ...... (149,714) 76,717 (10,131,526) ---------- ---------- ----------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON .. INVESTMENTS .............................. 4,091 332,481 (9,879,083) ---------- ---------- ----------- NET INCREASE (DECREASE) IN NET ASSETS .... RESULTING FROM OPERATIONS ................$4,924,577 $1,324,458 $(4,967,170) ========== ========== =========== EQUITY SERIES: ----------------------------------------------------------------------------------- T.ROWE MERRILL PRICE EQ/PUTNAM ALLIANCE ALLIANCE LYNCH EQUITY GROWTH & GROWTH & BT EQUITY EQUITY BASIC VALUE INCOME INCOME INCOME 500 INDEX INDEX EQUITY FUND FUND VALUE FUND FUND FUND FUND ---------- ----------- ------------ ----------- --------- ----------- INCOME AND EXPENSES: Investment Income (Note 2): Dividends from the Trusts .............$ 871,348 $ 348,923 $ 382,870 $ 254,693 $ 2,310 $ 377,168 Expenses (Note 3): Asset-based charges 394,056 298,502 1,602,233 203,672 2,588 269,948 ---------- ---------- ----------- ---------- ------- ---------- NET INVESTMENT INCOME (LOSS) ................ 477,292 50,421 (1,219,363) 51,021 (278) 107,220 ---------- ---------- ----------- ---------- ------- ---------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 2): Realized gain (loss) on investments ...... Realized gain distribution from the ...... 43,764 (69,351) 2,807,006 (262,278) 5,225 (175,666) Trusts ................................ 1,120,050 315,112 15,440,331 -- 112 1,307,680 ---------- ---------- ----------- ---------- ------- ---------- NET REALIZED GAIN (LOSS) .................... 1,163,814 245,761 18,247,337 (262,278) 5,337 1,132,014 ---------- ---------- ----------- ---------- ------- ---------- Unrealized appreciation (depreciation) on investments: Beginning of period ...................... 980,406 191,128 5,616,378 -- 4,722 (64,333) End of period ............................ 2,000,241 2,827,238 15,241,041 5,380,743 62,022 (1,617) ---------- ---------- ----------- ---------- ------- ---------- Change in unrealized appreciation ........ (depreciation) during the period ...... 1,019,835 2,636,110 9,624,663 5,380,743 57,300 62,716 ---------- ---------- ----------- ---------- ------- ---------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON .. INVESTMENTS .............................. 2,183,649 2,881,871 27,872,000 5,118,465 62,637 1,194,730 ---------- ---------- ----------- ---------- ------- ========== NET INCREASE (DECREASE) IN NET ASSETS .... RESULTING FROM OPERATIONS ................$2,660,941 $2,932,292 $26,652,637 $5,169,486 $62,359 $1,301,950 ========== ========== =========== ========== ======= ==========
- ------------------- See Notes to Financial Statements. FS-6 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES SEPARATE ACCOUNT NO. 45 STATEMENTS OF OPERATIONS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 1998
EQUITY SERIES (CONTINUED): ----------------------------------------------------------- ALLIANCE COMMON MFS ALLIANCE ALLIANCE STOCK RESEARCH GLOBAL INTERNATIONAL FUND FUND FUND FUND ------------- ----------- ----------- ------------ INCOME AND EXPENSES: Investment Income (Note 2): Dividends from the Trusts ............. $ 2,403,283 $ 131,068 $ 598,042 $ 340,200 Expenses (Note 3): Asset-based charges ................... 5,424,534 307,489 589,611 215,726 ------------ ---------- ---------- ----------- NET INVESTMENT INCOME (LOSS) ................ (3,021,251) (176,421) 8,431 124,474 ------------ ---------- ---------- ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 2): Realized gain (loss) on investments ...... 10,230,950 60,560 749,415 (1,566,752) Realized gain distribution from the Trusts 79,194,636 -- 4,143,459 3,718 ------------ ---------- ---------- ----------- NET REALIZED GAIN (LOSS) .................... 89,425,586 60,560 4,892,874 (1,563,034) ------------ ---------- ---------- ----------- Unrealized appreciation (depreciation) on investments: Beginning of period ...................... 23,451,447 37,510 (244,398) (2,137,851) End of period ............................ 59,099,124 6,227,419 4,239,304 927,513 ------------ ---------- ---------- ----------- Change in unrealized appreciation (depreciation) during the period ........ 35,647,677 6,189,909 4,483,702 3,065,364 ------------ ---------- ---------- ----------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS .............................. 125,073,263 6,250,469 9,376,576 1,502,330 ------------ ---------- ---------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ................... $122,052,012 $6,074,048 $9,385,007 $ 1,626,804 ============ ========== ========== =========== EQUITY SERIES (CONTINUED): ------------------------------------------------------- MORGAN T. ROWE STANLEY BT PRICE EMERGING ALLIANCE INTERNATIONAL INTER- MARKETS AGGRESSIVE EQUITY NATIONAL EQUITY STOCK INDEX FUND STOCK FUND FUND FUND ----------- ----------- ----------- ------------ INCOME AND EXPENSES: Investment Income (Note 2): Dividends from the Trusts ............. $ 66,107 $ 245,522 $ 16,085 $ 586,576 Expenses (Note 3): Asset-based charges ................... 22,058 217,929 35,466 1,537,723 -------- ---------- ----------- ----------- NET INVESTMENT INCOME (LOSS) ................ 44,049 27,593 (19,381) (951,147) -------- ---------- ----------- ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 2): Realized gain (loss) on investments ...... (38,281) 73,956 (337,130) (1,170,454) Realized gain distribution from the Trusts -- 228 -- 6,889,454 -------- ---------- ----------- ----------- NET REALIZED GAIN (LOSS) .................... (38,281) 74,184 (337,130) 5,719,000 -------- ---------- ----------- ----------- Unrealized appreciation (depreciation) on investments: Beginning of period ...................... -- (576,978) (238,282) (3,851,402) End of period ............................ 284,441 1,495,964 (1,008,425) 10,578,470) -------- ---------- ----------- ----------- Change in unrealized appreciation (depreciation) during the period ........ 284,441 2,072,942 (770,143) (6,727,068) -------- ---------- ----------- ----------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS .............................. 246,160 2,147,126 (1,107,273) (1,008,068) -------- ---------- ----------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ................... $290,209 $2,174,719 $(1,126,654) $(1,959,215) ======== ========== =========== ===========
- ------------------ See Notes to Financial Statements. FS-7 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES SEPARATE ACCOUNT NO. 45 STATEMENTS OF OPERATIONS (CONCLUDED) FOR THE YEAR ENDED DECEMBER 31, 1998
EQUITY SERIES (CONCLUDED): --------------------------------------------------- WARBURG PINCUS MFS SMALL ALLIANCE BT SMALL EMERGING COMPANY SMALL CAP COMPANY GROWTH VALUE GROWTH INDEX COMPANIES FUND FUND FUND FUND ----------- ----------- -------- ------------ INCOME AND EXPENSES: Investment Income (Note 2): Dividends from the Trusts .................... $ 172,128 $ 716 $ 34,326 $ 901 Expenses (Note 3): Asset-based charges .......................... 355,215 336,205 20,638 373,152 ----------- ----------- -------- ----------- NET INVESTMENT INCOME (LOSS) ....................... (183,087) (335,489) 13,688 (372,251) ----------- ----------- -------- ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 2): Realized gain (loss) on investments ............. (395,526) (513,118) (50,161) 163,114 Realized gain distribution from the Trusts ...... -- -- 65,264 -- ----------- ----------- -------- ----------- NET REALIZED GAIN (LOSS) ........................... (395,526) (513,118) 15,103 163,114 ----------- ----------- -------- ----------- Unrealized appreciation (depreciation) on investments: Beginning of period ............................. (300,436) (344,436) -- (259,194) End of period ................................... (4,226,993) (1,821,859) 19,385 11,818,257 ----------- ----------- -------- ----------- Change in unrealized appreciation (depreciation)during the period ................ (3,926,557) (1,477,423) 19,385 12,077,451 ----------- ----------- -------- ----------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS ..................................... (4,322,083) (1,990,541) 34,488 12,240,565 ----------- ----------- -------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ...................................... $(4,505,170) $(2,326,030) $ 48,176 $11,868,314 =========== =========== ======== =========== ASSET ALLOCATION SERIES: ---------------------------------------------------- ALLIANCE MERRILL CONSERVA- ALLIANCE LYNCH TIVE EQ/PUTNAM GROWTH WORLD INVESTORS BALANCED INVESTORS STRATEGY FUND FUND FUND FUND ---------- ----------- ----------- --------- INCOME AND EXPENSES: Investment Income (Note 2): Dividends from the Trusts .................... $1,373,189 $ 593,087 $ 1,887,685 $ 42,482 Expenses (Note 3): Asset-based charges .......................... 387,733 194,358 1,064,812 31,672 ---------- ---------- ----------- --------- NET INVESTMENT INCOME (LOSS) ....................... 985,456 398,729 822,873 10,810 ---------- ---------- ----------- --------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 2): Realized gain (loss) on investments ............. 568,518 (130,136) 736,026 (38,321) Realized gain distribution from the Trusts ...... 2,571,769 355,759 9,800,094 -- ---------- ---------- ----------- --------- NET REALIZED GAIN (LOSS) ........................... 3,140,287 225,623 10,536,120 (38,321) ---------- ---------- ----------- --------- Unrealized appreciation (depreciation) on investments: Beginning of period ............................. 482,745 73,582 1,685,711 (129,123) End of period ................................... 558,081 1,317,266 6,231,888 81,917 ---------- ---------- ----------- --------- Change in unrealized appreciation (depreciation)during the period ................ 75,336 1,243,684 4,546,177 211,040 ---------- ---------- ----------- --------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS ..................................... 3,215,623 1,469,307 15,082,297 172,719 ---------- ---------- ----------- --------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ...................................... $4,201,079 $1,868,036 $15,905,170 $ 183,529 ========== ========== =========== =========
- ------------------- See Notes to Financial Statements. FS-8 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES SEPARATE ACCOUNT NO. 45 STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31,
FIXED INCOME SERIES: ------------------------------- ALLIANCE MONEY MARKET FUND ------------------------------- 1998 1997 ------------ ------------ INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income......................................... $ 4,920,486 $ 2,322,115 Net realized gain (loss)...................................... 153,805 64,275 Change in unrealized appreciation (depreciation) of investments (149,714) (267,302) ------------ ------------ Net increase (decrease) in net assets from operations......... 4,924,577 2,119,088 ------------ ------------ FROM CONTRACTOWNERS TRANSACTIONS: Contributions and Transfers: Contributions............................................... 216,826,115 137,532,670 Transfers from other Funds and Guaranteed Interest Rate Account (Note 1).......................................... 113,746,706 55,819,439 ------------ ------------ Total..................................................... 330,572,821 193,352,109 ------------ ------------ WITHDRAWAL AND TRANSFERS: Benefits and other policy transactions........................ 10,986,665 1,577,365 Withdrawal and administrative charges......................... 230,600 618,083 Transfers to other Funds and Guaranteed Interest Rate Account (Note 1)............................................ 243,665,058 144,167,408 ------------ ------------ Total....................................................... 254,882,323 146,362,856 ------------ ------------ Net increase in net assets from Contractowners transactions................................................ 75,690,498 46,989,253 ------------ ------------ NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE LIFE IN SEPARATE ACCOUNT NO. 45 (NOTE 5)........................... (15,545) (46,770) ------------ ------------ INCREASE IN NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS ........... 80,599,530 49,061,571 NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS, BEGINNING OF PERIOD........................................... 81,358,361 32,296,790 ------------ ------------ NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS, END OF PERIOD................................................. $161,957,891 $ 81,358,361 ============ ============ FIXED INCOME SERIES: --------------------------- ALLIANCE INTERMEDIATE GOVERNMENT SECURITIES FUND -------------------------- 1998 1997 ----------- ----------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income......................................... $ 991,977 $ 303,709 Net realized gain (loss)...................................... 255,764 12,754 Change in unrealized appreciation (depreciation) of investments 76,717 58,654 ----------- ----------- Net increase (decrease) in net assets from operations......... 1,324,458 375,117 ----------- ----------- FROM CONTRACTOWNERS TRANSACTIONS: Contributions and Transfers: Contributions............................................... 19,720,434 5,416,131 Transfers from other Funds and Guaranteed Interest Rate Account (Note 1).......................................... 20,781,791 3,270,944 ----------- ----------- Total..................................................... 40,502,225 8,687,075 ----------- ----------- WITHDRAWAL AND TRANSFERS: Benefits and other policy transactions........................ 1,040,600 189,517 Withdrawal and administrative charges......................... 73,339 128,377 Transfers to other Funds and Guaranteed Interest Rate Account (Note 1)............................................ 12,745,544 1,145,902 ----------- ----------- Total....................................................... 13,859,483 1,463,796 ----------- ----------- Net increase in net assets from Contractowners transactions................................................ 26,642,742 7,223,279 ----------- ----------- NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE LIFE IN SEPARATE ACCOUNT NO. 45 (NOTE 5)........................... (6,113) (12,130) ----------- ----------- INCREASE IN NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS ........... 27,961,087 7,586,266 NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS, BEGINNING OF PERIOD........................................... 11,062,250 3,475,984 ----------- ----------- NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS, END OF PERIOD................................................. $39,023,337 $11,062,250 ============ =========== FIXED INCOME SERIES: ------------------------------ ALLIANCE HIGH YIELD FUND (a) ----------------------------- 1998 1997 ------------ ----------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income......................................... $ 4,911,913 $ 601,148 Net realized gain (loss)...................................... 252,443 783,323 Change in unrealized appreciation (depreciation) of investments (10,131,526) (786,186) ------------ ----------- Net increase (decrease) in net assets from operations......... (4,967,170) 598,285 ------------ ----------- FROM CONTRACTOWNERS TRANSACTIONS: Contributions and Transfers: Contributions............................................... 47,559,333 13,779,925 Transfers from other Funds and Guaranteed Interest Rate Account (Note 1).......................................... 47,655,636 22,095,921 ------------ ----------- Total..................................................... 95,214,969 35,875,846 ------------ ----------- WITHDRAWAL AND TRANSFERS: Benefits and other policy transactions........................ 2,110,668 161,257 Withdrawal and administrative charges......................... 128,063 45,545 Transfers to other Funds and Guaranteed Interest Rate Account (Note 1)............................................ 37,545,562 17,780,088 ------------ ----------- Total....................................................... 39,784,293 17,986,890 ------------ ----------- Net increase in net assets from Contractowners transactions................................................ 55,430,676 17,888,956 ------------ ----------- NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE LIFE IN SEPARATE ACCOUNT NO. 45 (NOTE 5)........................... (8,801) (5,902) ------------ ----------- INCREASE IN NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS ........... 50,454,705 18,481,339 NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS, BEGINNING OF PERIOD........................................... 18,481,339 -- ------------ ----------- NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS, END OF PERIOD................................................. $ 68,936,044 $18,481,339 ============= ============
- ------------------- See Notes to Financial Statements. (a) Commenced operations on May 1, 1997. FS-9 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES SEPARATE ACCOUNT NO. 45 STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31,
EQUITY SERIES: ------------------------------------------------------- T. ROWE PRICE EQUITY EQ/PUTNAM GROWTH & INCOME FUND (a) INCOME VALUE FUND (a) -------------------------- -------------------------- 1998 1997 1998 1997 ----------- ----------- ------------ ----------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss).......... $ 477,292 $ 78,818 $ 50,421 $ 21,273 Net realized gain (loss).............. 1,163,814 54,535 245,761 54,646 Change in unrealized appreciation (depreciation) of investments....... 1,019,835 980,406 2,636,110 191,128 ----------- ----------- ------------ ----------- Net increase (decrease) in net assets from operations.............. 2,660,941 1,113,759 2,932,292 267,047 ----------- ----------- ------------ ----------- FROM CONTRACTOWNERS TRANSACTIONS: Contributions and Transfers: Contributions....................... 26,813,091 13,813,772 22,432,656 10,975,199 Transfers from other Funds and Guaranteed Interest Rate Account (Note 1).......................... 10,252,099 4,356,204 6,980,421 3,217,543 ----------- ----------- ------------ ----------- Total............................. 37,065,190 18,169,976 29,413,077 14,192,742 ----------- ----------- ------------ ----------- WITHDRAWAL AND TRANSFERS: Benefits and other policy transactions......................... 1,205,409 86,052 1,300,000 58,925 Withdrawal and administrative charges.. 109,823 40,797 90,762 32,578 Transfers to other Funds and Guaranteed Interest Rate Account (Note 1)................ 3,039,300 183,349 3,822,075 180,506 ----------- ----------- ------------ ----------- Total................................ 4,354,532 310,198 5,212,837 272,009 ----------- ----------- ------------ ----------- Net increase in net assets from Contractowners transactions.......... 32,710,658 17,859,778 24,200,240 13,920,733 NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE LIFE IN SEPARATE ACCOUNT NO. 45 (NOTE 5)....... (26,248) (5,022) (22,154) (2,360) ----------- ----------- ------------ ----------- INCREASE IN NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS......................... 35,345,351 18,968,515 27,110,378 14,185,420 NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS, BEGINNING OF PERIOD.................... 18,968,515 -- 14,185,420 -- ----------- ----------- ------------ ----------- NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS, END OF PERIOD.......................... $54,313,866 $18,968,515 $ 41,295,798 $14,185,420 =========== =========== ============ =========== EQUITY SERIES: ------------------------------------------------------------- ALLIANCE BT EQUITY ALLIANCE GROWTH & INCOME 500 INDEX EQUITY INDEX FUND FUND (b) FUND (a) ------------------------- ---------- ------------------ 1998 1997 1998 1998 1997 ----------- ---------- ---------- ------- ------ INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss).......... $ (1,219,363) $ (95,244) $ 51,021 $ (278) $ 187 Net realized gain (loss).............. 18,247,337 6,014,564 (262,278) 5,337 1,392 Change in unrealized appreciation (depreciation) of investments....... 9,624,663 4,852,142 5,380,743 57,300 4,722 ----------- ---------- ---------- ------- ------ Net increase (decrease) in net assets from operations.............. 26,652,637 10,771,462 5,169,486 62,359 6,301 ----------- ---------- ---------- ------- ------ FROM CONTRACTOWNERS TRANSACTIONS: Contributions and Transfers: Contributions....................... 69,137,309 58,696,016 38,685,440 69,113 77,031 Transfers from other Funds and Guaranteed Interest Rate Account (Note 1).................. 25,662,665 16,269,895 24,595,843 198,702 15,328 ----------- ---------- ---------- ------- ------ Total............................. 94,799,974 74,965,911 63,281,283 267,815 92,359 ----------- ---------- ---------- ------- ------ WITHDRAWAL AND TRANSFERS: Benefits and other policy transactions......................... 5,922,537 1,455,357 533,098 -- -- Withdrawal and administrative charges.. 501,695 425,279 13,875 380 -- Transfers to other Funds and Guaranteed Interest Rate Account (Note 1)................ 14,167,225 4,907,606 10,862,244 4,913 -- ----------- ---------- ---------- ------- ------ Total................................ 20,591,457 6,788,242 11,409,217 5,293 -- ----------- ---------- ---------- ------- ------ Net increase in net assets from Contractowners transactions.......... 74,208,517 68,177,669 51,872,066 262,522 92,359 NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE LIFE IN SEPARATE ACCOUNT NO. 45 (NOTE 5)....... (101,665) (94,285) (17,776) (1,961) (1,142) ----------- ---------- ---------- ------- ------ INCREASE IN NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS......................... 100,759,489 78,854,846 57,023,776 322,920 97,518 NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS, BEGINNING OF PERIOD.................... 93,880,774 15,025,928 -- 97,518 -- ----------- ---------- ---------- ------- ------ NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS, END OF PERIOD.......................... $194,640,263 $93,880,774 $57,023,776 $420,438 $97,518 ============ =========== =========== ======== =======
- ------------------- See Notes to Financial Statements. (a) Commenced operations on May 1, 1997. (b) Commenced operations on January 1, 1998. FS-10 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES SEPARATE ACCOUNT NO. 45 STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31,
EQUITY SERIES (CONTINUED): --------------------------------------------------------- MERRILL LYNCH ALLIANCE BASIC VALUE COMMON EQUITY FUND (a) STOCK FUND -------------------------- ---------------------------- 1998 1997 1998 1997 ----------- ---------- ------------ ------------ INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss)..................... $ 107,220 $ 20,510 $ (3,021,251) $ (1,209,624) Net realized gain (loss)......................... 1,132,014 47,779 89,425,586 27,433,324 Change in unrealized appreciation (depreciation) of investments................................. 62,716 (64,333) 35,647,677 22,094,993 ----------- ----------- ------------ ------------ Net increase (decrease) in net assets from operations 1,301,950 3,956 122,052,012 48,318,693 ----------- ----------- ------------ ------------ FROM CONTRACTOWNERS TRANSACTIONS: Contributions and Transfers: Contributions.................................. 24,093,025 8,075,199 222,706,977 175,880,351 Transfers from other Funds and Guaranteed Interest Rate Account (Note 1)............... 9,221,650 1,941,071 88,116,261 61,077,537 ----------- ----------- ------------ ------------ Total.......................................... 33,314,675 10,016,270 310,823,238 236,957,888 ----------- ----------- ------------ ------------ WITHDRAWAL AND TRANSFERS: Benefits and other policy transactions........... 967,509 9,691 20,666,466 4,271,079 Withdrawal and administrative charges............ 69,854 17,792 1,652,840 1,459,175 Transfers to other Funds and Guaranteed Interest Rate Account (Note 1).......................... 3,287,976 137,464 56,065,697 35,438,036 ----------- ----------- ------------ ------------ Total.......................................... 4,325,339 164,947 78,385,003 41,168,290 ----------- ----------- ------------ ------------ Net increase in net assets from Contractowners transactions................................... 28,989,336 9,851,323 232,438,235 195,789,598 ----------- ----------- ------------ ------------ NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE LIFE IN SEPARATE ACCOUNT NO. 45 (NOTE 5) (15,592) (839) (298,491) (305,436) ----------- ----------- ------------ ------------ INCREASE IN NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS................................... 30,275,694 9,854,440 354,191,756 243,802,855 NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS, BEGINNING OF PERIOD.............................. 9,854,440 -- 319,309,650 75,506,795 ----------- ----------- ------------ ------------ NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS, END OF PERIOD.................................... $40,130,134 $ 9,854,440 $673,501,406 $319,309,650 =========== =========== ============ ============ EQUITY SERIES (CONTINUED): ------------------------------------------------------ MFS RESEARCH ALLIANCE FUND (a) GLOBAL FUND ------------------------- -------------------------- 1998 1997 1998 1997 ----------- ----------- ----------- ----------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss)..................... $ (176,421) $ (15,339) $ 8,431 $ 328,372 Net realized gain (loss)......................... 60,560 101,923 4,892,874 2,837,865 Change in unrealized appreciation (depreciation) of investments................................. 6,189,909 37,510 4,483,702 (443,882) ----------- ----------- ----------- ----------- Net increase (decrease) in net assets from operations 6,074,048 124,094 9,385,007 2,722,355 ----------- ----------- ----------- ----------- FROM CONTRACTOWNERS TRANSACTIONS: Contributions and Transfers: Contributions.................................. 28,178,818 9,502,168 20,084,493 20,384,580 Transfers from other Funds and Guaranteed Interest Rate Account (Note 1)............... 10,528,629 2,602,553 7,177,452 7,792,945 ----------- ----------- ----------- ----------- Total.......................................... 38,707,447 12,104,721 27,261,945 28,177,525 ----------- ----------- ----------- ----------- WITHDRAWAL AND TRANSFERS: Benefits and other policy transactions........... 1,059,377 28,630 1,765,622 621,118 Withdrawal and administrative charges............ 74,772 23,738 190,033 155,169 Transfers to other Funds and Guaranteed Interest Rate Account (Note 1).......................... 2,504,801 209,610 6,748,641 6,961,429 ----------- ----------- ----------- ----------- Total.......................................... 3,638,950 261,978 8,704,296 7,737,716 ----------- ----------- ----------- ----------- Net increase in net assets from Contractowners transactions................................... 35,068,497 11,842,743 18,557,649 20,439,809 ----------- ----------- ----------- ----------- NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE LIFE IN SEPARATE ACCOUNT NO. 45 (NOTE 5) (23,737) (2,051) (44,868) (28,799) ----------- ----------- ----------- ----------- INCREASE IN NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS................................... 41,118,808 11,964,786 27,897,788 23,133,365 NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS, BEGINNING OF PERIOD.............................. 11,964,786 -- 38,509,669 15,376,304 ----------- ----------- ----------- ----------- NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS, END OF PERIOD.................................... $53,083,594 $11,964,786 $66,407,457 $38,509,669 =========== =========== =========== ===========
- ------------------- See Notes to Financial Statements. (a) Commenced operations on May 1, 1997. FS-11 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES SEPARATE ACCOUNT NO. 45 STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31,
EQUITY SERIES (CONTINUED): ---------------------------------------------------------------------- BT INTER- NATIONAL EQUITY T. ROWE PRICE ALLIANCE INDEX INTERNATIONAL INTERNATIONAL FUND STOCK FUND 1998 (c) FUND (a) ------------------------- ---------- ------------------------- 1998 1997 1998 1998 1997 ----------- ----------- ---------- ----------- ----------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income.................. $ 124,474 $ 288,466 $ 44,049 $ 27,593 $ (45,798) Net realized gain (loss)............... (1,563,034) 1,093,826 (38,281) 74,184 (53,503) Change in unrealized appreciation (depreciation) of investments........ 3,065,364 (2,169,239) 284,441 2,072,942 (576,978) ----------- ----------- ---------- ----------- ----------- Net increase (decrease) in net assets from operations........................... 1,626,804 (786,947) 290,209 2,174,719 (676,279) ----------- ----------- ---------- ----------- ----------- FROM CONTRACTOWNERS TRANSACTIONS: Contributions and Transfers: Contributions........................ 4,384,851 9,574,522 3,655,757 13,036,180 9,658,570 Transfers from other Funds and Guaranteed Interest Rate Account (Note 1)........................... 44,058,459 18,180,472 2,070,284 10,402,147 5,113,170 ----------- ----------- ---------- ----------- ----------- Total..................................... 48,443,310 27,754,994 5,726,041 23,438,327 14,771,740 ----------- ----------- ---------- ----------- ----------- WITHDRAWAL AND TRANSFERS: Benefits and other policy transactions......................... 810,093 341,327 22,805 754,896 37,224 Withdrawal and administrative charges.. 82,131 97,083 2,573 64,687 22,024 Transfers to other Funds and Guaranteed Interest Rate Account (Note 1)............................. 45,566,819 18,593,662 642,046 7,759,247 1,416,476 ----------- ----------- ---------- ----------- ----------- Total................................... 46,459,043 19,032,072 667,424 8,578,830 1,475,724 ----------- ----------- ---------- ----------- ----------- Net increase in net assets from Contractowners transactions.......... 1,984,267 8,722,922 5,058,617 14,859,497 13,296,016 ----------- ----------- ---------- ----------- ----------- NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE LIFE IN SEPARATE ACCOUNT NO. 45 (NOTE 5)........................ (15,805) (36,637) (1,814) (18,463) (3,030) ----------- ----------- ---------- ----------- ----------- INCREASE IN NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS......................... 3,595,266 7,899,338 5,347,012 17,015,753 12,616,707 NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS, BEGINNING OF PERIOD.................... 16,483,342 8,584,004 -- 12,616,707 -- ----------- ----------- ---------- ----------- ----------- NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS, END OF PERIOD.......................... $20,078,608 $16,483,342 $5,347,012 $29,632,460 $12,616,707 ============ ============ =========== ============ ============ EQUITY SERIES (CONTINUED): ------------------------------------------------------- MORGAN STANLEY EMERGING MARKETS ALLIANCE EQUITY AGGRESSIVE STOCK FUND (b) FUND ------------------------- ---------------------------- 1998 1997 1998 1997 ----------- ----------- ------------- ------------ INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income.................. $ (19,381) $ 1,234 $ (951,147) $ (880,189) Net realized gain (loss)............... (337,130) (26,406) 5,719,000 9,879,526 Change in unrealized appreciation (depreciation) of investments........ (770,143) (238,282) (6,727,068) (1,686,216) ----------- ----------- ------------ ------------ Net increase (decrease) in net assets from operations........................... (1,126,654) (263,454) (1,959,215) 7,313,121 ----------- ----------- ------------ ------------ FROM CONTRACTOWNERS TRANSACTIONS: Contributions and Transfers: Contributions........................ 2,708,321 1,617,148 45,526,795 66,019,813 Transfers from other Funds and Guaranteed Interest Rate Account (Note 1)........................... 1,357,280 889,247 12,684,235 17,726,363 ----------- ----------- ------------ ------------ Total..................................... 4,065,601 2,506,395 58,211,030 83,746,176 ----------- ----------- ------------ ------------ WITHDRAWAL AND TRANSFERS: Benefits and other policy transactions......................... 59,492 -- 5,047,753 1,854,804 Withdrawal and administrative charges.. 7,737 394 540,786 482,491 Transfers to other Funds and Guaranteed Interest Rate Account (Note 1)............................. 857,518 2,488 20,928,020 11,669,668 ----------- ----------- ------------ ------------ Total................................... 924,747 2,882 26,516,559 14,006,963 ----------- ----------- ------------ ------------ Net increase in net assets from Contractowners transactions.......... 3,140,854 2,503,513 31,694,471 69,739,213 ----------- ----------- ------------ ------------ NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE LIFE IN SEPARATE ACCOUNT NO. 45 (NOTE 5)........................ 10,524 (966) 35,035 (111,908) ----------- ----------- ------------ ------------- INCREASE IN NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS......................... 2,024,724 2,239,093 29,770,291 76,940,426 NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS, BEGINNING OF PERIOD.................... 2,239,093 -- 117,827,678 40,887,252 ----------- ----------- ------------ ------------- NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS, END OF PERIOD.......................... $ 4,263,817 $ 2,239,093 $147,597,969 $117,827,678 =========== =========== ============ ============
- ------------------- See Notes to Financial Statements. (a) Commenced operations on May 1, 1997. (b) Commenced operations on August 20, 1997. (c) Commenced operations on January 1, 1998. FS-12 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES SEPARATE ACCOUNT NO. 45 STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31,
EQUITY SERIES (CONCLUDED): -------------------------------------------------------- WARBURG PINCUS SMALL ALLIANCE COMPANY VALUE SMALL CAP GROWTH FUND (a) FUND (a) --------------------------- --------------------------- 1998 1997 1998 1997 ------------ ----------- ----------- ----------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income......................... $ (183,087) $ (64,437) $ (335,489) $ (49,856) Net realized gain (loss)...................... (395,526) 338,068 (513,118) 440,546 Change in unrealized appreciation (depreciation) of investments............... (3,926,557) (300,436) (1,477,423) (344,436) ----------- ----------- ----------- ----------- Net increase (decrease) in net assets from operations.................................. (4,505,170) (26,805) (2,326,030) 46,254 ----------- ----------- ----------- ----------- FROM CONTRACTOWNERS TRANSACTIONS: Contributions and Transfers: Contributions............................... 17,316,209 17,791,841 22,333,800 12,116,331 Transfers from other Funds and Guaranteed Interest Rate Account (Note 1)............ 10,231,935 11,695,862 10,827,569 5,602,864 ----------- ----------- ----------- ----------- Total............................................ 27,548,144 29,487,703 33,161,369 17,719,195 ----------- ----------- ----------- ----------- WITHDRAWAL AND TRANSFERS: Benefits and other policy transactions........ 1,086,279 134,692 1,022,179 20,842 Withdrawal and administrative charges......... 103,922 23,284 78,365 8,570 Transfers to other Funds and Guaranteed Interest Rate Account (Note 1).............. 9,358,044 4,520,417 5,823,960 1,504,600 ----------- ----------- ----------- ----------- Total............................................ 10,548,245 4,678,393 6,924,504 1,534,012 ----------- ----------- ----------- ----------- Net increase in net assets from Contractowners transactions.................................. 16,999,899 24,809,310 26,236,865 16,185,183 ----------- ----------- ----------- ----------- NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE LIFE IN SEPARATE ACCOUNT NO. 45 (NOTE 5)...................................... (17,047) (10,579) 106,435 (3,378) ----------- ----------- ----------- ----------- INCREASE IN NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS................................ 12,477,682 24,771,926 24,017,270 16,228,059 NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS, BEGINNING OF PERIOD........................... 24,771,926 -- 16,228,059 -- ----------- ----------- ----------- ----------- NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS, END OF PERIOD................................. $37,249,608 $24,771,926 $40,245,329 $16,228,059 =========== =========== =========== =========== EQUITY SERIES (CONCLUDED): ---------------------------------------- BT SMALL COMPANY MFS EMERGING GROWTH INDEX COMPANIES FUND (b) FUND (a) ---------- --------------------------- 1998 1998 1997 ---------- ----------- ----------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income......................... $ 13,688 $ (372,251) $ (15,821) Net realized gain (loss)...................... 15,103 163,114 327,209 Change in unrealized appreciation (depreciation) of investments............... 19,385 12,077,451 (259,194) ---------- ----------- ----------- Net increase (decrease) in net assets from operations.................................. 48,176 11,868,314 52,194 ---------- ----------- ----------- FROM CONTRACTOWNERS TRANSACTIONS: Contributions and Transfers: Contributions............................... 4,131,338 40,723,333 9,607,211 Transfers from other Funds and Guaranteed Interest Rate Account (Note 1)............ 1,311,488 16,938,315 3,864,604 ---------- ----------- ----------- Total............................................ 5,442,826 57,661,648 13,471,815 ---------- ----------- ----------- WITHDRAWAL AND TRANSFERS: Benefits and other policy transactions........ 21,074 1,543,076 45,537 Withdrawal and administrative charges......... 1,781 76,137 14,345 Transfers to other Funds and Guaranteed Interest Rate Account (Note 1).............. 375,472 6,249,256 1,527,808 ---------- ----------- ----------- Total............................................ 398,327 7,868,469 1,587,690 ---------- ----------- ----------- Net increase in net assets from Contractowners transactions.................................. 5,044,499 49,793,179 11,884,125 ---------- ----------- ----------- NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE LIFE IN SEPARATE ACCOUNT NO. 45 (NOTE 5)...................................... (1,162) (31,251) (1,959) ---------- ----------- ----------- INCREASE IN NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS................................ 5,091,513 61,630,242 11,934,360 NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS, BEGINNING OF PERIOD........................... -- 11,934,360 -- ---------- ----------- ----------- NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS, END OF PERIOD................................. $5,091,513 $73,564,602 $11,934,360 ========== ============ ===========
- ------------------- See Notes to Financial Statements. (a) Commenced operations on May 1, 1997. (b) Commenced operations on January 1, 1998. FS-13 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES SEPARATE ACCOUNT NO. 45 STATEMENTS OF CHANGES IN NET ASSETS (CONCLUDED) FOR THE YEARS ENDED DECEMBER 31,
ASSET ALLOCATION SERIES: ------------------------------------------------------- ALLIANCE CONSERVATIVE EQ/PUTNAM INVESTORS FUND BALANCED FUND (a) --------------------------- ------------------------ 1998 1997 1998 1997 ----------- ----------- ----------- ---------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income............................. $ 985,456 $ 481,754 $ 398,729 $ 51,548 Net realized gain (loss).......................... 3,140,287 687,695 225,623 45,528 Change in unrealized appreciation (depreciation) of investments.................................. 75,336 478,094 1,243,684 73,582 ----------- ----------- ----------- ---------- Net increase (decrease) in net assets from operations...................................... 4,201,079 1,647,543 1,868,036 170,658 ----------- ----------- ----------- ---------- FROM CONTRACTOWNERS TRANSACTIONS: Contributions and Transfers: Contributions................................... 21,651,343 10,862,780 20,768,914 4,294,496 Transfers from other Funds and Guaranteed Interest Rate Account (Note 1)................ 13,282,997 3,151,066 9,211,559 1,721,220 ----------- ----------- ----------- ---------- Total......................................... 34,934,340 14,013,846 29,980,473 6,015,716 ----------- ----------- ----------- ---------- WITHDRAWAL AND TRANSFERS: Benefits and other policy transactions............ 1,883,884 567,547 567,437 17,533 Withdrawal and administrative charges............. 117,513 138,461 42,998 15,293 Transfers to other Funds and Guaranteed Interest Rate Account (Note 1).................. 7,120,635 1,428,179 2,636,967 120,099 ----------- ----------- ----------- ---------- Total........................................... 9,122,032 2,134,187 3,247,402 152,925 ----------- ----------- ----------- ---------- Net increase in net assets from Contractowners transactions.................................... 25,812,308 11,879,659 26,733,071 5,862,791 ----------- ----------- ----------- ---------- NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE LIFE IN SEPARATE ACCOUNT NO. 45 (NOTE 5) (26,353) (57,026) (13,517) (483) ----------- ----------- ----------- ---------- INCREASE IN NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS.................................... 29,987,034 13,470,176 28,587,590 6,032,966 NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS, BEGINNING OF PERIOD............... 21,328,458 7,858,282 6,032,966 -- ----------- ----------- ----------- ---------- NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS, END OF PERIOD..................... $51,315,492 $21,328,458 $34,620,556 $6,032,966 =========== =========== =========== ========== ASSET ALLOCATION SERIES: ------------------------------------------------------- ALLIANCE GROWTH MERRILL LYNCH WORLD INVESTORS FUND STRATEGY FUND (a) --------------------------- ------------------------ 1998 1997 1998 1997 ------------ ----------- ---------- ---------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income............................. $ 822,873 $ 736,541 $ 10,810 $ 2,974 Net realized gain (loss).......................... 10,536,120 3,620,598 (38,321) 24,219 Change in unrealized appreciation (depreciation) of investments.................................. 4,546,177 1,844,488 211,040 (129,123) ------------ ----------- ---------- ---------- Net increase (decrease) in net assets from operations...................................... 15,905,170 6,201,627 183,529 (101,930) ------------ ----------- ---------- ---------- FROM CONTRACTOWNERS TRANSACTIONS: Contributions and Transfers: Contributions................................... 44,347,044 32,084,069 2,756,653 2,043,811 Transfers from other Funds and Guaranteed Interest Rate Account (Note 1)................ 13,494,160 7,981,423 1,208,993 561,601 ------------ ----------- ---------- ---------- Total......................................... 57,841,204 40,065,492 3,965,646 2,605,412 ------------ ----------- ---------- ---------- WITHDRAWAL AND TRANSFERS: Benefits and other policy transactions............ 3,711,360 1,014,211 125,335 3,514 Withdrawal and administrative charges............. 325,958 421,582 13,717 2,597 Transfers to other Funds and Guaranteed Interest Rate Account (Note 1).................. 9,119,743 2,744,848 463,447 84,455 ------------ ----------- ---------- ---------- Total........................................... 13,157,061 4,180,641 602,499 90,566 ------------ ----------- ---------- ---------- Net increase in net assets from Contractowners transactions.................................... 44,684,143 35,884,851 3,363,147 2,514,846 ------------ ----------- ---------- ---------- NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE LIFE IN SEPARATE ACCOUNT NO. 45 (NOTE 5) (93,008) (111,839) (17,508) (121) ------------ ----------- ---------- ---------- INCREASE IN NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS.................................... 60,496,305 41,974,639 3,529,168 2,412,795 NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS, BEGINNING OF PERIOD............... 65,983,034 24,008,395 2,412,795 -- ------------ ----------- ---------- ---------- NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS, END OF PERIOD..................... $126,479,339 $65,983,034 $5,941,963 $2,412,795 ============ =========== ========== ==========
- ------------------- See Notes to Financial Statements. (a) Commenced operations on May 1, 1997. FS-14 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES SEPARATE ACCOUNT NO. 45 NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1998 1. General The Equitable Life Assurance Society of the United States (Equitable Life) Separate Account No. 45 (the Account) is organized as a unit investment trust, a type of investment company, and is registered with the Securities and Exchange Commission under the Investment Company Act of 1940 (the 1940 Act). Alliance Capital Management L.P., an indirect majority owned subsidiary of Equitable Life, manages The Hudson River Trust (HRT) and is the investment adviser for all of the investment funds of HRT. EQ Financial Consultants, Inc., ("EQFC") is a wholly owned subsidiary of Equitable Life. EQFC manages the EQ Advisors Trust (EQAT) and has overall responsibility for general management and administration of EQAT. The Account consists of 25 investment funds (Funds): Alliance Money Market Fund, Alliance Intermediate Government Securities Fund, Alliance High Yield Fund, T. Rowe Price Equity Income Fund, EQ/Putnam Growth & Income Value Fund, Alliance Growth & Income Fund, BT Equity 500 Index Fund, Alliance Equity Index Fund, Merrill Lynch Basic Value Equity Fund, Alliance Common Stock Fund, MFS Research Fund, Alliance Global Fund, Alliance International Fund, BT International Equity Index Fund, T. Rowe Price International Stock Fund, Morgan Stanley Emerging Markets Equity Fund, Alliance Aggressive Stock Fund, Warburg Pincus Small Company Value Fund, Alliance Small Cap Growth Fund, BT Small Company Index Fund, MFS Emerging Growth Companies Fund, Alliance Conservative Investors Fund, EQ/Putnam Balanced Fund, Alliance Growth Investors Fund and Merrill Lynch World Strategy Fund. The assets in each Fund are invested in shares of a corresponding portfolio (Portfolio) of a mutual fund, Class 1A and 1B shares of HRT or Class 1B shares of EQAT (collectively, the "Trusts"). Class 1A and 1B shares are offered by the Trusts at net asset value. Both classes of shares are subject to fees for investment management and advisory services and other Trust expenses. Class 1B shares are subject to distribution fees imposed under a distribution plan (herein the "Rule 12b-1 Plans") adopted pursuant to Rule 12b-1 under the 1940 Act, as amended. The Rule 12b-1 Plans provide that the Trusts, on behalf of each Fund, may charge annually up to 0.25% of the average daily net assets of a Fund attributable to its Class 1B shares in respect of activities primarily intended to result in the sale of the Class 1B shares. These fees are reflected in the net asset value of the shares. Class 1A shares of HRT continue to be purchased by contracts in-force prior to May 1, 1997. The Trusts are open-ended, diversified management investment companies that sell their shares to separate accounts of insurance companies. Each Portfolio has separate investment objectives. EQFC earns fees from both Trusts under distribution agreements held with the Trusts. EQFC also earns fees under an investment management agreement with EQAT. Alliance earns fees under an investment advisory agreement with the HRT. The Account is used to fund benefits for the Equitable Accumulator and Income Manager Accumulator non-qualified deferred variable annuities which combine the portfolios in the Account with guaranteed fixed rate options, and the Equitable Accumulator IRA and Income Manager Accumulator IRA, which offer the same investment options as Equitable Accumulator and Income Manager Accumulator for the non-qualified market. The Equitable Accumulator and Income Manager Accumulator are also available for purchase by certain types of qualified plans. The Equitable Accumulator (IRA, NQ and QP) and Income Manager Accumulator (IRA, NQ and QP), collectively referred to as the Contracts, are offered under group and individual variable annuity forms. All Contracts are issued by Equitable Life. The assets of the Account are the property of Equitable Life. However, the portion of the Account's assets attributable to the Contracts will not be chargeable with liabilities arising out of any other business Equitable Life may conduct. Receivable/Payable for policy-related transactions represent amounts due to/from general account predominately related to premiums, surrenders and death benefit. Contractowners may allocate amounts in their individual accounts to the Funds of the Account, and/or to the guaranteed interest account of Equitable Life's General Account, and/or to other Separate Accounts. The net assets of any Fund of the Account may not be less than the aggregate of the Contractowners' accounts allocated to that Fund. Additional assets are set aside in Equitable Life's General Account to provide for other policy benefits, as required under the state insurance law. Equitable Life's General Account is subject to creditor rights. Included in the Withdrawal and Administrative Charges line of the Statements of Changes in Net Assets are certain administrative charges which are deducted from the Contractowners account value. FS-15 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES SEPARATE ACCOUNT NO. 45 NOTES TO FINANCIAL STATEMENTS (CONTINUED) December 31, 1998 2. Significant Accounting Policies The accompanying financial statements are prepared in conformity with generally accepted accounting principles (GAAP). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Investments are made in shares of the Trust and are valued at the net asset values per share of the respective Portfolios. The net asset value is determined by the Trust using the market or fair value of the underlying assets of the Portfolio less liabilities. Investment transactions in the Trusts are recorded on the trade date. Realized gains and losses include (1) gains and losses on redemptions of the Trust's shares (determined on the identified cost basis) and (2) Trust distributions representing the net realized gains on Trust investment transactions which are distributed by the Trusts at the end of each year and automatically reinvested in additional shares. Dividends are recorded by HRT at the end of each quarter and by EQAT in the fourth quarter on the ex-dividend date. Capital gains are distributed by the Trust at the end of each year. No federal income tax based on net income or realized and unrealized capital gains is currently applicable to Contracts participating in the Account by reason of applicable provisions of the Internal Revenue Code and no federal income tax payable by Equitable Life is expected to affect the unit value of Contracts participating in the Account. Accordingly, no provision for income taxes is required. However, Equitable Life retains the right to charge for any federal income tax incurred which is attributable to the Account if the law is changed. 3. Asset Charges Charges are made directly against the net assets of the Account and are reflected daily in the computation of the unit values of the Contracts. Under the Contracts, Equitable Life charges for mortality and expense risks at an annual rate of 1.10% of daily net assets for Equitable Accumulator Contracts (0.90% for Income Manager Accumulator Contracts). In addition, asset-based administrative charges are also charged to the account at an annual rate of 0.25% of daily net assets. The charges may be retained in the Account by Equitable Life and participate in the net investment results of the Trusts. The aggregate of these charges may not exceed a total effective annual rate of 1.35% for Equitable Accumulator (1.15% for Income Manager Accumulator). Trust shares are valued at their net asset value with investment advisory or management fees, the 12b-1 fee, and other expenses of the Trust, in effect, passed on to the Account and reflected in the accumulation unit values of the Contracts. 4. Contributions, Transfers and Charges Net accumulation units issued and redeemed during the periods indicated were: DECEMBER 31, DECEMBER 31, 1998 1997 -------------- -------------- ALLIANCE MONEY MARKET FUND (IN THOUSANDS) -------------------------- -------------- Net Issued (Redeemed) Class A 115bp .......... (89) (374) Net Issued (Redeemed) Class B 0bp ............ 853 1,178 Net Issued (Redeemed) Class B 115bp .......... 399 794 Net Issued (Redeemed) Class B 135bp .......... 1,566 -- ALLIANCE INTERMEDIATE GOVERNMENT SECURITIES FUND - -------------------------------------------------- Net Issued (Redeemed) Class A 115bp .......... 111 161 Net Issued (Redeemed) Class B 115bp .......... 734 345 Net Issued (Redeemed) Class B 135bp .......... 928 -- FS-16 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES SEPARATE ACCOUNT NO. 45 NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1998 4. Contributions, Transfers and Charges (Continued) Net accumulation units issued and redeemed during the periods indicated were: DECEMBER 31, DECEMBER 31, 1998 1997 -------------- -------------- ALLIANCE HIGH YIELD FUND (a) (IN THOUSANDS) ---------------------------- Net Issued (Redeemed) Class A 115bp..... 75 98 Net Issued (Redeemed) Class B 115bp..... 946 505 Net Issued (Redeemed) Class B 135bp..... 801 -- T. ROWE PRICE EQUITY INCOME FUND (a) ------------------------------------ Net Issued (Redeemed) Class B 115bp..... 1,537 1,565 Net Issued (Redeemed) Class B 135bp..... 1,059 -- EQ/PUTNAM GROWTH & INCOME FUND (a) ---------------------------------- Net Issued (Redeemed) Class B 115bp..... 1,117 1,230 Net Issued (Redeemed) Class B 135bp..... 867 -- ALLIANCE GROWTH & INCOME FUND ----------------------------- Net Issued (Redeemed) Class A 115bp..... 48 2,377 Net Issued (Redeemed) Class B 115bp..... 2,016 1,829 Net Issued (Redeemed) Class B 135bp..... 1,854 -- BT EQUITY 500 INDEX (c) ------------------------ Net Issued (Redeemed) Class B 115bp..... 2,189 -- Net Issued (Redeemed) Class B 135bp..... 2,246 -- ALLIANCE EQUITY INDEX FUND (a) ------------------------------ Net Issued (Redeemed) Class A 115bp..... -- -- Net Issued (Redeemed) Class B 115bp..... 9 5 Net Issued (Redeemed) Class B 135bp..... 2 -- MERRILL LYNCH BASIC VALUE FUND (a) ---------------------------------- Net Issued (Redeemed) Class B 115bp..... 1,278 849 Net Issued (Redeemed) Class B 135bp..... 1,010 -- ALLIANCE COMMON STOCK FUND -------------------------- Net Issued (Redeemed) Class A 115bp..... (35) 620 Net Issued (Redeemed) Class B 115bp..... 582 519 Net Issued (Redeemed) Class B 135bp..... 550 -- - ---------- (a) Commenced operations on May 1, 1997. (b) Commenced operations on August 20, 1997. (c) Commenced operations on January 1, 1998. FS-17 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES SEPARATE ACCOUNT NO. 45 NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1998 4. Contributions, Transfers and Charges (Continued) Net accumulation units issued and redeemed during the periods indicated were: DECEMBER 31, DECEMBER 31, 1998 1997 ------------- ------------- MFS RESEARCH FUND (a) (IN THOUSANDS) --------------------- Net Issued (Redeemed) Class B 115bp .... 1,244 1,039 Net Issued (Redeemed) Class B 135bp .... 1,479 -- ALLIANCE GLOBAL FUND -------------------- Net Issued (Redeemed) Class A 115bp .... (103) 444 Net Issued (Redeemed) Class B 115bp .... 360 308 Net Issued (Redeemed) Class B 135bp .... 354 -- ALLIANCE INTERNATIONAL FUND --------------------------- Net Issued (Redeemed) Class A 115bp .... (150) 438 Net Issued (Redeemed) Class B 115bp .... 153 285 Net Issued (Redeemed) Class B 135bp .... 166 -- BT INTERNATIONAL EQUITY INDEX (c) --------------------------------- Net Issued (Redeemed) Class B 115bp .... 209 -- Net Issued (Redeemed) Class B 135bp .... 242 -- T. ROWE PRICE INTERNATIONAL STOCK FUND (a) ------------------------------------------ Net Issued (Redeemed) Class B 115bp .... 704 1,291 Net Issued (Redeemed) Class B 113bp .... 705 -- MORGAN STANLEY EMERGING MARKETS FUND (b) ---------------------------------------- Net Issued (Redeemed) Class B 115bp .... 285 282 Net Issued (Redeemed) Class B 135bp .... 177 -- ALLIANCE AGGRESSIVE STOCK FUND ------------------------------ Net Issued (Redeemed) Class A 115bp .... (160) 641 Net Issued (Redeemed) Class B 115bp .... 311 369 Net Issued (Redeemed) Class B 135bp .... 293 -- - ------------------ (a) Commenced operations on May 1, 1997. (b) Commenced operations on August 20, 1997. (c) Commenced operations on January 1, 1998. FS-18 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES SEPARATE ACCOUNT NO. 45 NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1998 4. Contributions, Transfers and Charges (Concluded) Net accumulation units issued and redeemed during the periods indicated were: DECEMBER 31, DECEMBER 31, 1998 1997 ------------- ------------ WARBURG PINCUS SMALL COMPANY FUND (a) (IN THOUSANDS) ------------------------------------- Net Issued (Redeemed) Class B 115bp........... 888 2,096 Net Issued (Redeemed) Class B 135bp........... 560 -- Net Issued (Redeemed) Class B 135bp........... 1,448 -- ALLIANCE SMALL CAP GROWTH FUND (a) -------------------------------------- Net Issued (Redeemed) Class A 115bp........... 106 208 Net Issued (Redeemed) Class B 115bp........... 1,222 1,084 Net Issued (Redeemed) Class B 135bp........... 775 -- MFS EMERGING GROWTH COMPANIES FUND (a) ------------------------------------- Net Issued (Redeemed) Class B 115bp........... 1,637 982 Net Issued (Redeemed) Class B 135bp........... 1,942 -- BT SMALL COMPANY INDEX FUND (b) ------------------------------------ Net Issued (Redeemed) Class B 115bp........... 243 -- Net Issued (Redeemed) Class B 135bp........... 284 -- ALLIANCE CONSERVATIVE INVESTORS FUND -------------------------------------- Net Issued (Redeemed) Class A 115bp........... 52 356 Net Issued (Redeemed) Class B 115bp........... 565 295 Net Issued (Redeemed) Class B 135bp........... 659 -- EQ/PUTNAM BALANCED FUND (a) -------------------------------- Net Issued (Redeemed) Class B 115bp........... 1,094 531 Net Issued (Redeemed) Class B 135bp........... 1,136 -- ALLIANCE GROWTH INVESTORS FUND --------------------------------- Net Issued (Redeemed) Class A 115bp........... (81) 682 Net Issued (Redeemed) Class B 115bp........... 778 581 Net Issued (Redeemed) Class B 135bp........... 694 -- MERRILL LYNCH WORLD STRATEGY FUND (a) ---------------------------------------- Net Issued (Redeemed) Class B 115bp........... 170 232 Net Issued (Redeemed) Class B 135bp........... 140 -- - ------------------ (a) Commenced operations on May 1, 1997. (b) Commenced operations on January 1, 1998. (c) Units were made available for sale on May 1, 1998. FS-19 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES SEPARATE ACCOUNT NO. 45 NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1998 5. Amounts retained by Equitable Life in Separate Account No. 45 The amount retained by Equitable Life in the Account arises principally from (1) contributions from Equitable Life, (2) mortality and expense charges and asset-based administrative charges accumulated in the account, and (3) that portion, determined ratably, of the Account's investment results applicable to those assets in the Account in excess of the net assets for the Contracts. Amounts retained by Equitable Life are not subject to charges for mortality and expense risks and asset-based administrative expenses. Amounts retained by Equitable Life in the Account may be transferred at any time by Equitable Life to its General Account. The following table shows the contributions (withdrawals) in net amounts retained by Equitable Life by investment fund: YEARS ENDED DECEMBER 31, ------------------------------ INVESTMENT FUND 1998 1997 --------------- ------------------------------ Alliance Money Market Fund ..................... $ (908,916) $(240,000) Alliance Intermediate Government Securities Fund (293,270) (60,000) Alliance High Yield Fund(1) .................... (593,703) 10,000 T. Rowe Price Equity Income Fund(1) ............ (397,541) -- EQ/Putnam Growth & Income Value Fund(1) ........ (300,588) -- Alliance Growth & Income Fund .................. (1,926,708) (250,000) BT Equity 500 Index Fund(3) .................... (161,967) -- Alliance Equity Index Fund ..................... (2,128) 5,000 Merrill Lynch Basic Value Equity Fund(1) ....... (268,189) -- Alliance Common Stock Fund ..................... (6,883,461) (840,000) MFS Research Fund(1) ........................... (329,924) -- Alliance Global Fund ........................... (708,300) (185,000) Alliance International Fund .................... (298,470) (120,000) BT International Equity Index Fund(3) .......... (17,272) -- T. Rowe Price International Stock Fund(1) ...... (223,491) -- Morgan Stanley Emerging Markets Equity Fund(2) . (17,574) -- Alliance Aggressive Stock Fund ................. (1,947,808) (435,000) Warburg Pincus Small Company Value Fund(1) ..... (365,698) -- Alliance Small Cap Growth Fund(1) .............. (232,599) 10,000 BT Small Company Index Fund(3) ................. (15,197) -- MFS Emerging Growth Companies Fund(1) .......... (389,504) -- Alliance Conservative Investors Fund ........... (415,465) (87,000) EQ/Putnam Balanced Fund(1) ..................... (196,023) -- Alliance Growth Investors Fund ................. (1,444,473) (185,000) Merrill Lynch World Strategy Fund(1) ........... (45,763) -- - ------------------- (1) Commenced operations on May 1, 1997.- (2) Commenced operations on August 20, 1997. (3) Commenced operations on January 1, 1998. FS-20 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES SEPARATE ACCOUNT NO. 45 NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1998 6. Accumulation Unit Values Shown below is accumulation unit value information for a unit outstanding throughout the period shown.
YEARS ENDED DECEMBER 31, ---------------------------------------------- 1998 1997 1996 ----------- ----------- ---------- ALLIANCE MONEY MARKET FUND - -------------------------- Class A 115bp Unit value, beginning of period.............. $25.85 $24.81 $23.83 Class A 115bp Unit value, end of period.................... $26.92 $25.85 $24.81 Class B 0bp Unit value, beginning of period (a)............ $31.27 $30.25 -- Class B 0bp Unit value, end of period (a) ................. $32.86 $31.27 -- Class B 115bp Unit value, beginning of period (b).......... $25.85 $25.17 -- Class B 115bp Unit value, end of period (b)................ $26.85 $25.85 -- Class B 135bp Unit value, beginning of period (c).......... $25.31 -- -- Class B 135bp Unit value, end of period (c)................ $25.92 -- -- Number of units outstanding, end of period (000's): Class A 115bp........................................... 839 928 1,302 Class B 0bp............................................. 2,031 1,178 -- Class B 115bp........................................... 1,193 794 -- Class B 135bp........................................... 1,566 -- -- ALLIANCE INTERMEDIATE GOVERNMENT SECURITIES FUND - ------------------------------------------------ Class A 115bp Unit value, beginning of period.............. $14.60 $13.77 $13.42 Class A 115bp Unit value, end of period.................... $15.55 $14.60 $13.77 Class B 115bp Unit value, beginning of period (b).......... $14.58 $13.88 -- Class B 115bp Unit value, end of period (b)................ $15.49 $14.58 -- Class B 135bp Unit value, beginning of period (c).......... $14.59 -- -- Class B 135bp Unit value, end of period (c)................ $15.25 -- -- Number of units outstanding, end of period (000's): Class A 115bp........................................... 524 413 252 Class B 115bp........................................... 1,079 345 -- Class B 135bp........................................... 929 -- -- ALLIANCE HIGH YIELD FUND - ------------------------ Class A 115bp Unit value, beginning of period (a).......... $30.73 $26.95 -- Class A 115bp Unit value, end of period (a)................ $28.81 $30.73 -- Class B 115bp Unit value, beginning of period (a).......... $30.63 $26.91 -- Class B 115bp Unit value, end of period (a)................ $28.65 $30.63 -- Class B 135bp Unit value, beginning of period (c).......... $31.54 -- -- Class B 135bp Unit value, end of period (c)................ $27.96 -- -- Number of units outstanding, end of period (000's): Class A 115bp........................................... 173 98 -- Class B 115bp........................................... 1,451 505 -- Class B 135bp........................................... 801 -- --
- ------------------- (a) Commenced operations on May 1, 1997. (b) Units were made available for sale on May 1, 1997. (c) Units were made available for sale on May 1, 1998. FS-21 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES SEPARATE ACCOUNT NO. 45 NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1998 6. Accumulation Unit Values (Continued) Shown below is accumulation unit value information for a unit outstanding throughout the period shown.
YEARS ENDED DECEMBER 31, ------------------------------------------ 1998 1997 1996 ----------- ----------- ---------- C> T. ROWE PRICE EQUITY INCOME FUND (a) - ------------------------------------ Class B 115bp Unit value, beginning of period.............. $12.12 $10.00 -- Class B 115bp Unit value, end of period.................... $13.07 $12.12 -- Class B 135bp Unit value, beginning of period (c).......... $13.19 -- -- Class B 135bp Unit value, end of period (c)................ $13.02 -- -- Number of units outstanding, end of period (000's): Class B 115bp........................................... 3,102 1,565 -- Class B 135bp........................................... 1,059 -- -- EQ/PUTNAM GROWTH & INCOME VALUE FUND (a) - ---------------------------------------- Class B 115bp Unit value, beginning of period.............. $11.53 $10.00 -- Class B 115bp Unit value, end of period.................... $12.86 $11.53 -- Class B 135bp Unit value, beginning of period (c) ......... $12.86 -- -- Class B 135bp Unit value, end of period (c) ............... $12.82 -- -- Number of units outstanding, end of period (000's): Class B 115bp........................................... 2,347 1,230 -- Class B 135bp........................................... 867 -- -- ALLIANCE GROWTH & INCOME FUND - ----------------------------- Class A 115bp Unit value, beginning of period.............. $17.83 $14.23 $11.99 Class A 115bp Unit value, end of period.................... $21.30 $17.83 $14.23 Class B 115bp Unit value, beginning of period (b).......... $17.80 $14.67 -- Class B 115bp Unit value, end of period (b)................ $21.22 $17.80 -- Class B 135bp Unit value, beginning of period (c).......... $19.99 -- -- Class B 135bp Unit value, end of period (c)................ $20.99 -- -- Number of units outstanding, end of period (000's): Class A 115bp........................................... 3,481 3,433 1,056 Class B 115bp........................................... 3,845 1,829 -- Class B 135bp........................................... 1,853 -- -- BT EQUITY 500 INDEX FUND (c) - ---------------------------- Class B 115bp Unit value, beginning of period.............. $10.00 -- -- Class B 115bp Unit value, end of period.................... $12.37 -- -- Class B 135bp Unit value, beginning of period (c).......... $11.28 -- -- Class B 135bp Unit value, end of period (c)................ $12.34 -- -- Number of units outstanding, end of period (000's): Class B 115bp........................................... 2,189 -- -- Class B 135bp........................................... 2,426 -- --
- ------------------- (a) Commenced operations on May 1, 1997. (b) Units were made available for sale on May 1, 1997. (c) Units were made available for sale on May 1, 1998. FS-22 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES SEPARATE ACCOUNT NO. 45 NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1998 6. Accumulation Unit Values (Continued) Shown below is accumulation unit value information for a unit outstanding throughout the period shown.
YEARS ENDED DECEMBER 31, ---------------------------------------------- 1998 1997 1996 ----------- ----------- ---------- ALLIANCE EQUITY INDEX FUND (a) - ------------------------------ Class A 115bp Unit value, beginning of period.............. $21.41 $17.62 -- Class A 115bp Unit value, end of period.................... $27.11 $21.41 -- Class B 115bp Unit value, beginning of period.............. $21.38 $17.62 -- Class B 115bp Unit value, end of period.................... $26.99 $21.38 -- Class B 135bp Unit value, beginning of period (d).......... $24.44 -- -- Class B 135bp Unit value, end of period (d)................ $26.73 -- -- Number of units outstanding, end of period (000's): Class A 115bp........................................... -- -- -- Class B 115bp........................................... 14 5 -- Class B 135bp........................................... 2 -- -- MERRILL LYNCH BASIC VALUE EQUITY FUND (a) - ----------------------------------------- Class B 115bp Unit value, beginning of period (b).......... $11.61 $10.00 -- Class B 115bp Unit value, end of period (b)................ $12.81 $11.61 -- Class B 135bp Unit value, beginning of period (d).......... $13.70 -- -- Class B 135bp Unit value, end of period (d)................ $12.76 -- -- Number of units outstanding, end of period (000's): Class B 115bp........................................... 2,127 849 -- Class B 135bp........................................... 1,009 -- -- ALLIANCE COMMON STOCK FUND - -------------------------- Class A 115bp Unit value, beginning of period.............. $195.37 $152.96 $124.52 Class A 115bp Unit value, end of period.................... $249.88 $195.37 $152.96 Class B 115bp Unit value, beginning of period (b).......... $194.74 $153.35 -- Class B 115bp Unit value, end of period (b)................ $248.45 $194.74 -- Class B 135bp Unit value, beginning of period (d).......... $211.50 -- -- Class B 135bp Unit value, end of period (d)................ $237.18 -- -- Number of units outstanding, end of period (000's): Class A 115bp........................................... 1,079 1,114 494 Class B 115bp........................................... 1,101 519 -- Class B 135bp........................................... 550 -- --
- ------------------- (a) Commenced operations on May 1, 1997. (b) Units were made available for sale on May 1, 1997. (c) Commenced operations on January 1, 1998. (d) Units were made available for sale on May 1, 1998. FS-23 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES SEPARATE ACCOUNT NO. 45 NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1998 6. Accumulation Unit Values (Continued) Shown below is accumulation unit value information for a unit outstanding throughout the period shown.
YEARS ENDED DECEMBER 31, ---------------------------------------------- 1998 1997 1996 ----------- ----------- ---------- MFS RESEARCH FUND (a) - --------------------- Class B 115bp Unit value, beginning of period.............. $11.52 $10.00 -- Class B 115bp Unit value, end of period.................... $14.13 $11.52 -- Class B 135bp Unit value, beginning of period (d).......... $13.53 -- -- Class B 135bp Unit value, end of period (d)................ $14.08 -- -- Number of units outstanding, end of period (000's): Class B 115bp........................................... 2,283 1,039 -- Class B 135bp........................................... 1,479 -- -- ALLIANCE GLOBAL FUND - -------------------- Class A 115bp Unit value, beginning of period.............. $27.85 $25.25 $22.29 Class A 115bp Unit value, end of period.................... $33.53 $27.85 $25.25 Class B 115bp Unit value, beginning of period (c).......... $27.76 $24.87 -- Class B 115bp Unit value, end of period (c)................ $33.34 $27.76 -- Class B 135bp Unit value, beginning of period (d).......... $31.57 -- -- Class B 135bp Unit value, end of period (d)................ $32.58 -- -- Number of units outstanding, end of period (000's): Class A 115bp........................................... 971 1,074 609 Class B 115bp........................................... 668 308 -- Class B 135bp........................................... 354 -- -- ALLIANCE INTERNATIONAL FUND - --------------------------- Class A 115bp Unit value, beginning of period.............. $11.48 $11.98 $11.03 Class A 115bp Unit value, end of period.................... $12.54 $11.48 $11.98 Class B 115bp Unit value, beginning of period (c).......... $11.46 $11.86 -- Class B 115bp Unit value, end of period (c)................ $12.49 $11.46 -- Class B 135bp Unit value, beginning of period (d).......... $13.41 -- -- Class B 135bp Unit value, end of period (d)................ $12.40 -- -- Number of units outstanding, end of period (000's): Class A 115bp........................................... 1,001 1,151 717 Class B 115bp........................................... 438 285 -- Class B 135bp........................................... 166 -- --
- ------------------- (a) Commenced operations on May 1, 1997. (b) Commenced operations on January 1, 1998. (c) Units were made available for sale on May 1, 1997. (d) Units were made available for sale on May 1, 1998. FS-24 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES SEPARATE ACCOUNT NO. 45 NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1998 6. Accumulation Unit Values (Continued) Shown below is accumulation unit value information for a unit outstanding throughout the period shown.
YEARS ENDED DECEMBER 31, ---------------------------------------------- 1998 1997 1996 ----------- ----------- ---------- BT INTERNATIONAL EQUITY INDEX FUND (c) - -------------------------------------- Class B 115bp Unit value, beginning of period.............. $10.00 -- -- Class B 115bp Unit value, end of period.................... $11.87 -- -- Class B 135bp Unit value, beginning of period (e).......... $11.50 -- -- Class B 135bp Unit value, end of period (e)................ $11.85 -- -- Number of units outstanding, end of period (000's): Class B 115bp........................................... 209 -- -- Class B 135bp........................................... 242 -- -- T. ROWE PRICE INTERNATIONAL STOCK FUND (a) - ------------------------------------------ Class B 115bp Unit value, beginning of period.............. $9.77 $10.00 -- Class B 115bp Unit value, end of period.................... $10.98 $9.77 -- Class B 135bp Unit value, beginning of period (e).......... $11.13 -- -- Class B 135bp Unit value, end of period (e)................ $10.95 -- -- Number of units outstanding, end of period (000's): Class B 115bp........................................... 1,995 1,291 -- Class B 135bp........................................... 705 -- -- MORGAN STANLEY EMERGING MARKETS EQUITY FUND (b) - ----------------------------------------------- Class B 115bp Unit value, beginning of period.............. $7.95 $10.00 -- Class B 115bp Unit value, end of period.................... $5.73 $7.95 -- Class B 135bp Unit value, beginning of period(e)........... $8.23 -- -- Class B 135bp Unit value, end of period (e)................ $5.72 -- -- Number of units outstanding, end of period (000's): Class B 115bp........................................... 567 282 -- Class B 135bp........................................... 177 -- -- ALLIANCE AGGRESSIVE STOCK FUND - ------------------------------ Class A 115bp Unit value, beginning of period.............. $72.23 $65.94 $54.59 Class A 115bp Unit value, end of period.................... $71.60 $72.23 $65.94 Class B 115bp Unit value, beginning of period (d).......... $72.00 $62.84 -- Class B 115bp Unit value, end of period (d)................ $71.21 $72.00 -- Class B 135bp Unit value, beginning of period (e).......... $79.87 -- -- Class B 135bp Unit value, end of period (e)................ $69.37 -- -- Number of units outstanding, end of period (000's): Class A 115bp........................................... 1,101 1,261 620 Class B 115bp........................................... 680 369 -- Class B 135bp........................................... 293 -- --
- ------------------- (a) Commenced operations on May 1, 1997. (b) Commenced operations on August 20, 1997. (c) Commenced operations on January 1, 1998. (d) Units were made available for sale May 1, 1997. (e) Units were made available for sale on May 1, 1998. FS-25 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES SEPARATE ACCOUNT NO. 45 NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1998 6. Accumulation Unit Values (Continued) Shown below is accumulation unit value information for a unit outstanding throughout the period shown.
YEARS ENDED DECEMBER 31, ---------------------------------------------- 1998 1997 1996 ----------- ----------- ---------- WARBURG PINCUS SMALL COMPANY VALUE FUND (a) - ------------------------------------------- Class B 115bp Unit value, beginning of period.............. $11.82 $10.00 -- Class B 115bp Unit value, end of period.................... $10.52 $11.82 -- Class B 135bp Unit value, beginning of period (c).......... $12.72 -- -- Class B 135bp Unit value, end of period (c)................ $10.48 -- -- Number of units outstanding, end of period (000's): Class B 115bp........................................... 2,984 2,096 -- Class B 135bp........................................... 560 -- -- ALLIANCE SMALL CAP GROWTH FUND (a) - ---------------------------------- Class A 115bp Unit value, beginning of period.............. $12.57 $10.00 -- Class A 115bp Unit value, end of period.................... $11.90 $12.57 -- Class B 115bp Unit value, beginning of period.............. $12.55 $10.00 -- Class B 115bp Unit value, end of period.................... $11.86 $12.55 -- Class B 135bp Unit value, beginning of period (c).......... $14.29 -- -- Class B 135bp Unit value, end of period (c)................ $11.82 -- -- Number of units outstanding, end of period (000's): Class A 115bp........................................... 314 208 -- Class B 115bp........................................... 2,306 1,084 -- Class B 135bp........................................... 775 -- -- BT SMALL COMPANY INDEX FUND (b) - ------------------------------- Class B 115bp Unit value, beginning of period.............. $10.00 -- -- Class B 115bp Unit value, end of period.................... $9.66 -- -- Class B 135bp Unit value, beginning of period (c).......... $10.97 -- -- Class B 135bp Unit value, end of period (c)................ $9.64 -- -- Number of units outstanding, end of period (000's): Class B 115bp........................................... 244 -- -- Class B 135bp........................................... 284 -- -- MFS EMERGING GROWTH FUND (a) - ---------------------------- Class B 115bp Unit value, beginning of period.............. $12.15 $10.00 -- Class B 115bp Unit value, end of period.................... $16.16 $12.15 -- Class B 135bp Unit value, beginning of period (c).......... $14.42 -- -- Class B 135bp Unit value, end of period (c)................ $16.10 -- -- Number of units outstanding, end of period (000's): Class B 115bp........................................... 2,619 982 -- Class B 135bp........................................... 1,942 -- --
- ------------------- (a) Commenced operations on May 1, 1997. (b) Commenced operations on January 1, 1998. (c) Units were made available for sale on May 1, 1998. FS-26 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES SEPARATE ACCOUNT NO. 45 NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1998 6. Accumulation Unit Values (Continued) Shown below is accumulation unit value information for a unit outstanding throughout the period shown.
YEARS ENDED DECEMBER 31, ---------------------------------------------- 1998 1997 1996 ----------- ----------- ---------- ALLIANCE CONSERVATIVE INVESTORS FUND - ------------------------------------ Class A 115bp Unit value, beginning of period.............. $19.26 $17.21 $16.55 Class A 115bp Unit value, end of period.................... $21.68 $19.26 $17.21 Class B 115bp Unit value, beginning of period (b).......... $19.23 $17.33 -- Class B 115bp Unit value, end of period (b)................ $21.60 $19.23 -- Class B 135bp Unit value, beginning of period (c).......... $20.06 -- -- Class B 135bp Unit value, end of period (c)................ $21.20 -- -- Number of units outstanding, end of period (000's): Class A 115bp........................................... 865 813 457 Class B 115bp........................................... 860 295 -- Class B 135bp........................................... 659 -- -- EQ/PUTNAM BALANCED FUND (a) - --------------------------- Class B 115bp Unit value, beginning of period.............. $11.36 $10.00 -- Class B 115bp Unit value, end of period.................... $12.56 $11.36 -- Class B 135bp Unit value, beginning of period (c).......... $12.29 -- -- Class B 135bp Unit value, end of period (c)................ $12.51 -- -- Number of units outstanding, end of period (000's): Class B 115bp........................................... 1,625 531 -- Class B 135bp........................................... 1,136 -- -- ALLIANCE GROWTH INVESTORS FUND - ------------------------------ Class A 115bp Unit value, beginning of period.............. $30.31 $26.26 $23.59 Class A 115bp Unit value, end of period.................... $35.70 $30.31 $26.26 Class B 115bp Unit value, beginning of period (b).......... $30.22 $26.23 -- Class B 115bp Unit value, end of period (b)................ $35.50 $30.22 -- Class B 135bp Unit value, beginning of period (c).......... $32.93 -- -- Class B 135bp Unit value, end of period (c)................ $34.84 -- -- Number of units outstanding, end of period (000's): Class A 115bp........................................... 1,515 1,596 914 Class B 115bp........................................... 1,359 581 -- Class B 135bp........................................... 694 -- --
- ------------------- (a) Commenced operations on May 1, 1997. (b) Units were made available for sale on May 1, 1997. (c) Units were made available for sale on May 1, 1998. FS-27 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES SEPARATE ACCOUNT NO. 45 NOTES TO FINANCIAL STATEMENTS (CONCLUDED) DECEMBER 31, 1998 6. Accumulation Unit Values (Concluded) Shown below is accumulation unit value information for a unit outstanding throughout the period shown.
YEARS ENDED DECEMBER 31, ---------------------------------------------- 1998 1997 1996 ----------- ----------- ---------- MERRILL LYNCH WORLD STRATEGY FUND (a) - ------------------------------------- Class B 115bp Unit value, beginning of period.............. $10.39 $10.00 -- Class B 115bp Unit value, end of period.................... $10.97 $10.39 -- Class B 135bp Unit value, beginning of period (b).......... $11.31 -- -- Class B 135bp Unit value, end of period (b)................ $10.94 -- -- Number of units outstanding, end of period (000's): Class B 115bp........................................... 402 232 -- Class B 135bp........................................... 140 -- --
- ------------------- (a) Commenced operations on May 1, 1997. (b) Units were made available for sale on May 1, 1998. FS-28 Report of Independent Accountants To the Board of Directors and Shareholder of The Equitable Life Assurance Society of the United States In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of earnings, of shareholder's equity and comprehensive income and of cash flows present fairly, in all material respects, the financial position of The Equitable Life Assurance Society of the United States and its subsidiaries ("Equitable Life") at December 31, 1998 and 1997, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles. These financial statements are the responsibility of Equitable Life's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. As discussed in Note 2 to the consolidated financial statements, Equitable Life changed its method of accounting for long-lived assets in 1996. /s/PricewaterhouseCoopers LLP - ----------------------------- PricewaterhouseCoopers LLP New York, New York February 8, 1999 F-1 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1998 AND 1997
1998 1997 ----------------- ----------------- (In Millions) ASSETS Investments: Fixed maturities: Available for sale, at estimated fair value............................. $ 18,993.7 $ 19,630.9 Held to maturity, at amortized cost..................................... 125.0 - Mortgage loans on real estate............................................. 2,809.9 2,611.4 Equity real estate........................................................ 1,676.9 2,495.1 Policy loans.............................................................. 2,086.7 2,422.9 Other equity investments.................................................. 713.3 951.5 Investment in and loans to affiliates..................................... 928.5 731.1 Other invested assets..................................................... 808.2 612.2 ----------------- ----------------- Total investments..................................................... 28,142.2 29,455.1 Cash and cash equivalents................................................... 1,245.5 300.5 Deferred policy acquisition costs........................................... 3,563.8 3,236.6 Amounts due from discontinued operations.................................... 2.7 572.8 Other assets................................................................ 3,051.9 2,687.4 Closed Block assets......................................................... 8,632.4 8,566.6 Separate Accounts assets.................................................... 43,302.3 36,538.7 ----------------- ----------------- Total Assets................................................................ $ 87,940.8 $ 81,357.7 ================= ================= LIABILITIES Policyholders' account balances............................................. $ 20,889.7 $ 21,579.5 Future policy benefits and other policyholders' liabilities................. 4,694.2 4,553.8 Short-term and long-term debt............................................... 1,181.7 1,716.7 Other liabilities........................................................... 3,474.3 3,267.2 Closed Block liabilities.................................................... 9,077.0 9,073.7 Separate Accounts liabilities............................................... 43,211.3 36,306.3 ----------------- ----------------- Total liabilities..................................................... 82,528.2 76,497.2 ----------------- ----------------- Commitments and contingencies (Notes 11, 13, 14, 15 and 16) SHAREHOLDER'S EQUITY Common stock, $1.25 par value 2.0 million shares authorized, issued and outstanding........................................................... 2.5 2.5 Capital in excess of par value.............................................. 3,110.2 3,105.8 Retained earnings........................................................... 1,944.1 1,235.9 Accumulated other comprehensive income...................................... 355.8 516.3 ----------------- ----------------- Total shareholder's equity............................................ 5,412.6 4,860.5 ----------------- ----------------- Total Liabilities and Shareholder's Equity.................................. $ 87,940.8 $ 81,357.7 ================= =================
See Notes to Consolidated Financial Statements. F-2 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES CONSOLIDATED STATEMENTS OF EARNINGS YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
1998 1997 1996 ----------------- ----------------- ----------------- (In Millions) REVENUES Universal life and investment-type product policy fee income...................................................... $ 1,056.2 $ 950.6 $ 874.0 Premiums...................................................... 588.1 601.5 597.6 Net investment income......................................... 2,228.1 2,282.8 2,203.6 Investment gains (losses), net................................ 100.2 (45.2) (9.8) Commissions, fees and other income............................ 1,503.0 1,227.2 1,081.8 Contribution from the Closed Block............................ 87.1 102.5 125.0 ----------------- ----------------- ----------------- Total revenues.......................................... 5,562.7 5,119.4 4,872.2 ----------------- ----------------- ----------------- BENEFITS AND OTHER DEDUCTIONS Interest credited to policyholders' account balances.......... 1,153.0 1,266.2 1,270.2 Policyholders' benefits....................................... 1,024.7 978.6 1,317.7 Other operating costs and expenses............................ 2,201.2 2,203.9 2,075.7 ----------------- ----------------- ----------------- Total benefits and other deductions..................... 4,378.9 4,448.7 4,663.6 ----------------- ----------------- ----------------- Earnings from continuing operations before Federal income taxes, minority interest and cumulative effect of accounting change................................. 1,183.8 670.7 208.6 Federal income taxes.......................................... 353.1 91.5 9.7 Minority interest in net income of consolidated subsidiaries.. 125.2 54.8 81.7 ----------------- ----------------- ----------------- Earnings from continuing operations before cumulative effect of accounting change................................. 705.5 524.4 117.2 Discontinued operations, net of Federal income taxes.......... 2.7 (87.2) (83.8) Cumulative effect of accounting change, net of Federal income taxes................................................ - - (23.1) ----------------- ----------------- ----------------- Net Earnings.................................................. $ 708.2 $ 437.2 $ 10.3 ================= ================= =================
See Notes to Consolidated Financial Statements. F-3 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY AND COMPREHENSIVE INCOME YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
1998 1997 1996 ----------------- ----------------- ----------------- (In Millions) Common stock, at par value, beginning and end of year......... $ 2.5 $ 2.5 $ 2.5 ----------------- ----------------- ----------------- Capital in excess of par value, beginning of year............. 3,105.8 3,105.8 3,105.8 Additional capital in excess of par value..................... 4.4 - - ----------------- ----------------- ----------------- Capital in excess of par value, end of year................... 3,110.2 3,105.8 3,105.8 Retained earnings, beginning of year.......................... 1,235.9 798.7 788.4 Net earnings.................................................. 708.2 437.2 10.3 ----------------- ----------------- ----------------- Retained earnings, end of year................................ 1,944.1 1,235.9 798.7 ----------------- ----------------- ----------------- Accumulated other comprehensive income, beginning of year........................................... 516.3 177.0 361.4 Other comprehensive income.................................... (160.5) 339.3 (184.4) ----------------- ----------------- ----------------- Accumulated other comprehensive income, end of year........... 355.8 516.3 177.0 ----------------- ----------------- ----------------- Total Shareholder's Equity, End of Year....................... $ 5,412.6 $ 4,860.5 $ 4,084.0 ================= ================= ================= COMPREHENSIVE INCOME Net earnings.................................................. $ 708.2 $ 437.2 $ 10.3 ----------------- ----------------- ----------------- Change in unrealized gains (losses), net of reclassification adjustment.................................................. (149.5) 343.7 (206.6) Minimum pension liability adjustment.......................... (11.0) (4.4) 22.2 ----------------- ----------------- ----------------- Other comprehensive income.................................... (160.5) 339.3 (184.4) ----------------- ----------------- ----------------- Comprehensive Income.......................................... $ 547.7 $ 776.5 $ (174.1) ================= ================= =================
See Notes to Consolidated Financial Statements. F-4 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
1998 1997 1996 ----------------- ----------------- ----------------- (In Millions) Net earnings.................................................. $ 708.2 $ 437.2 $ 10.3 Adjustments to reconcile net earnings to net cash provided by operating activities: Interest credited to policyholders' account balances........ 1,153.0 1,266.2 1,270.2 Universal life and investment-type product policy fee income......................................... (1,056.2) (950.6) (874.0) Investment (gains) losses................................... (100.2) 45.2 9.8 Change in Federal income tax payable........................ 123.1 (74.4) (197.1) Other, net.................................................. (324.9) 169.4 330.2 ----------------- ----------------- ----------------- Net cash provided by operating activities..................... 503.0 893.0 549.4 ----------------- ----------------- ----------------- Cash flows from investing activities: Maturities and repayments................................... 2,289.0 2,702.9 2,275.1 Sales....................................................... 16,972.1 10,385.9 8,964.3 Purchases................................................... (18,578.5) (13,205.4) (12,559.6) Decrease (increase) in short-term investments............... 102.4 (555.0) 450.3 Decrease in loans to discontinued operations................ 660.0 420.1 1,017.0 Sale of subsidiaries........................................ - 261.0 - Other, net.................................................. (341.8) (612.6) (281.0) ----------------- ----------------- ----------------- Net cash provided (used) by investing activities.............. 1,103.2 (603.1) (133.9) ----------------- ----------------- ----------------- Cash flows from financing activities: Policyholders' account balances: Deposits.................................................. 1,508.1 1,281.7 1,925.4 Withdrawals............................................... (1,724.6) (1,886.8) (2,385.2) Net (decrease) increase in short-term financings............ (243.5) 419.9 (.3) Repayments of long-term debt................................ (24.5) (196.4) (124.8) Payment of obligation to fund accumulated deficit of discontinued operations................................... (87.2) (83.9) - Other, net.................................................. (89.5) (62.7) (66.5) ----------------- ----------------- ----------------- Net cash used by financing activities......................... (661.2) (528.2) (651.4) ----------------- ----------------- ----------------- Change in cash and cash equivalents........................... 945.0 (238.3) (235.9) Cash and cash equivalents, beginning of year.................. 300.5 538.8 774.7 ----------------- ----------------- ----------------- Cash and Cash Equivalents, End of Year........................ $ 1,245.5 $ 300.5 $ 538.8 ================= ================= ================= Supplemental cash flow information Interest Paid............................................... $ 130.7 $ 217.1 $ 109.9 ================= ================= ================= Income Taxes Paid (Refunded)................................ $ 254.3 $ 170.0 $ (10.0) ================= ================= =================
See Notes to Consolidated Financial Statements. F-5 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1) ORGANIZATION The Equitable Life Assurance Society of the United States ("Equitable Life") is a wholly owned subsidiary of The Equitable Companies Incorporated (the "Holding Company"). Equitable Life's insurance business is conducted principally by Equitable Life and its wholly owned life insurance subsidiaries, Equitable of Colorado ("EOC"), and, prior to December 31, 1996, Equitable Variable Life Insurance Company ("EVLICO"). Effective January 1, 1997, EVLICO was merged into Equitable Life, which continues to conduct the Company's insurance business. Equitable Life's investment management business, which comprises the Investment Services segment, is conducted principally by Alliance Capital Management L.P. ("Alliance"), in which Equitable Life has a 57.7% ownership interest, and Donaldson, Lufkin & Jenrette, Inc. ("DLJ"), an investment banking and brokerage affiliate in which Equitable Life has a 32.5% ownership interest. AXA ("AXA"), a French holding company for an international group of insurance and related financial services companies, is the Holding Company's largest shareholder, owning approximately 58.5% at December 31, 1998 (53.4% if all securities convertible into, and options on, common stock were to be converted or exercised). The Insurance segment offers a variety of traditional, variable and interest-sensitive life insurance products, disability income, annuity products, mutual fund and other investment products to individuals and small groups. It also administers traditional participating group annuity contracts with conversion features, generally for corporate qualified pension plans, and association plans which provide full service retirement programs for individuals affiliated with professional and trade associations. This segment includes Separate Accounts for individual insurance and annuity products. The Investment Services segment includes Alliance, the results of DLJ which are accounted for on an equity basis, and, through June 10, 1997, Equitable Real Estate Investment Management, Inc. ("EREIM"), a real estate investment management subsidiary which was sold. Alliance provides diversified investment fund management services to a variety of institutional clients, including pension funds, endowments, and foreign financial institutions, as well as to individual investors, principally through a broad line of mutual funds. This segment includes institutional Separate Accounts which provide various investment options for large group pension clients, primarily deferred benefit contribution plans, through pooled or single group accounts. DLJ's businesses include securities underwriting, sales and trading, merchant banking, financial advisory services, investment research, venture capital, correspondent brokerage services, online interactive brokerage services and asset management. DLJ serves institutional, corporate, governmental and individual clients both domestically and internationally. EREIM provided real estate investment management services, property management services, mortgage servicing and loan asset management, and agricultural investment management. 2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation and Principles of Consolidation The accompanying consolidated financial statements are prepared in conformity with generally accepted accounting principles ("GAAP") which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The accompanying consolidated financial statements include the accounts of Equitable Life and its wholly owned life insurance subsidiary (collectively, the "Insurance Group"); non-insurance subsidiaries, principally Alliance and EREIM (see Note 5); and those partnerships and joint ventures in which Equitable Life or its subsidiaries has control F-6 and a majority economic interest (collectively, including its consolidated subsidiaries, the "Company"). The Company's investment in DLJ is reported on the equity basis of accounting. Closed Block assets, liabilities and results of operations are presented in the consolidated financial statements as single line items (see Note 7). Unless specifically stated, all other footnote disclosures contained herein exclude the Closed Block related amounts. All significant intercompany transactions and balances except those with the Closed Block and discontinued operations (see Note 8) have been eliminated in consolidation. The years "1998," "1997" and "1996" refer to the years ended December 31, 1998, 1997 and 1996, respectively. Certain reclassifications have been made in the amounts presented for prior periods to conform these periods with the 1998 presentation. Closed Block On July 22, 1992, Equitable Life established the Closed Block for the benefit of certain individual participating policies which were in force on that date. The assets allocated to the Closed Block, together with anticipated revenues from policies included in the Closed Block, were reasonably expected to be sufficient to support such business, including provision for payment of claims, certain expenses and taxes, and for continuation of dividend scales payable in 1991, assuming the experience underlying such scales continues. Assets allocated to the Closed Block inure solely to the benefit of the Closed Block policyholders and will not revert to the benefit of the Holding Company. No reallocation, transfer, borrowing or lending of assets can be made between the Closed Block and other portions of Equitable Life's General Account, any of its Separate Accounts or any affiliate of Equitable Life without the approval of the New York Superintendent of Insurance (the "Superintendent"). Closed Block assets and liabilities are carried on the same basis as similar assets and liabilities held in the General Account. The excess of Closed Block liabilities over Closed Block assets represents the expected future post-tax contribution from the Closed Block which would be recognized in income over the period the policies and contracts in the Closed Block remain in force. Discontinued Operations Discontinued operations include the Group Non-Participating Wind-Up Annuities ("Wind-Up Annuities") and the Guaranteed Interest Contract ("GIC") lines of business. An allowance was established for the premium deficiency reserve for Wind-Up Annuities and estimated future losses of the GIC line of business. Management reviews the adequacy of the allowance each quarter and believes the allowance for future losses at December 31, 1998 is adequate to provide for all future losses; however, the quarterly allowance review continues to involve numerous estimates and subjective judgments regarding the expected performance of Discontinued Operations Investment Assets. There can be no assurance the losses provided for will not differ from the losses ultimately realized. To the extent actual results or future projections of the discontinued operations differ from management's current best estimates and assumptions underlying the allowance for future losses, the difference would be reflected in the consolidated statements of earnings in discontinued operations. In particular, to the extent income, sales proceeds and holding periods for equity real estate differ from management's previous assumptions, periodic adjustments to the allowance are likely to result (see Note 8). Accounting Changes In June 1997, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosures about Segments of an Enterprise and Related Information". SFAS No. 131 establishes standards for public companies to report information about operating segments in annual and interim financial statements issued to shareholders. It also specifies related disclosure requirements for products and services, geographic areas and major customers. Generally, financial information must be reported using the basis management uses to make operating decisions and to evaluate business performance. The Company implemented SFAS No. 131 effective December 31, 1998 and continues to identify two operating segments to reflect its major businesses: Insurance and Investment Services. While the segment descriptions are the same as those previously reported, certain amounts have been reattributed between the two reportable segments. Prior period comparative segment information has been restated. F-7 In March 1998, the American Institute of Certified Public Accountants ("AICPA") issued Statement of Position ("SOP") 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use," which requires capitalization of external and certain internal costs incurred to obtain or develop internal-use computer software during the application development stage. The Company applied the provisions of SOP 98-1 prospectively effective January 1, 1998. The adoption of SOP 98-1 did not have a material impact on the Company's consolidated financial statements. Capitalized internal-use software is amortized on a straight-line basis over the estimated useful life of the software. The Company implemented SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," as of January 1, 1996. SFAS No. 121 requires long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate the carrying value of such assets may not be recoverable. Effective with SFAS No. 121's adoption, impaired real estate is written down to fair value with the impairment loss being included in investment gains (losses), net. Before implementing SFAS No. 121, valuation allowances on real estate held for the production of income were computed using the forecasted cash flows of the respective properties discounted at a rate equal to the Company's cost of funds. Adoption of the statement resulted in the release of valuation allowances of $152.4 million and recognition of impairment losses of $144.0 million on real estate held for production of income. Real estate which management intends to sell or abandon is classified as real estate held for sale. Valuation allowances on real estate held for sale continue to be computed using the lower of depreciated cost or estimated fair value, net of disposition costs. Initial adoption of the impairment requirements of SFAS No. 121 to other assets to be disposed of resulted in a charge for the cumulative effect of an accounting change of $23.1 million, net of a Federal income tax benefit of $12.4 million, due to the writedown to fair value of building improvements relating to facilities vacated in 1996. New Accounting Pronouncements In October 1998, the FASB issued SFAS No. 134, "Accounting for Mortgage-Backed Securities Retained after the Securitization of Mortgage Loans Held for Sale by a Mortgage Banking Enterprise," which amends existing accounting and reporting standards for certain activities of mortgage banking enterprises and other enterprises that conduct operations that are substantially similar to the primary operations of a mortgage banking enterprise. This statement is effective for the first fiscal quarter beginning after December 15, 1998. This statement is not expected to have a material impact on the Company's consolidated financial statements. In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," which establishes accounting and reporting standards for derivative instruments, including certain derivatives embedded in other contracts, and for hedging activities. It requires all derivatives to be recognized on the balance sheet at fair value. The accounting for changes in the fair value of a derivative depends on its intended use. Derivatives not used in hedging activities must be adjusted to fair value through earnings. Changes in the fair value of derivatives used in hedging activities will, depending on the nature of the hedge, either be offset in earnings against the change in fair value of the hedged item attributable to the risk being hedged or recognized in other comprehensive income until the hedged item affects earnings. For all hedging activities, the ineffective portion of a derivative's change in fair value will be immediately recognized in earnings. SFAS No. 133 requires adoption in fiscal years beginning after June 15, 1999 and permits early adoption as of the beginning of any fiscal quarter following issuance of the statement. Retroactive application to financial statements of prior periods is prohibited. The Company expects to adopt SFAS No. 133 effective January 1, 2000. Adjustments resulting from initial adoption of the new requirements will be reported in a manner similar to the cumulative effect of a change in accounting principle and will be reflected in net income or accumulated other comprehensive income based upon existing hedging relationships, if any. Management currently is assessing the impact of adoption. However, Alliance's adoption is not expected to have a significant impact on the Company's consolidated balance sheet or statement of earnings. Also, since most of DLJ's derivatives are carried at fair values, the Company's consolidated earnings and financial position are not expected to be significantly affected by DLJ's adoption of the new requirements. F-8 In late 1998, the AICPA issued SOP 98-7, "Deposit Accounting: Accounting for Insurance and Reinsurance Contracts that Do Not Transfer Insurance Risk". This SOP, effective for fiscal years beginning after June 15, 1999, provides guidance to both the insured and insurer on how to apply the deposit method of accounting when it is required for insurance and reinsurance contracts that do not transfer insurance risk. The SOP does not address or change the requirements as to when deposit accounting should be applied. SOP 98-7 applies to all entities and all insurance and reinsurance contracts that do not transfer insurance risk except for long-duration life and health insurance contracts. This SOP is not expected to have a material impact on the Company's consolidated financial statements. In December 1997, the AICPA issued SOP 97-3, "Accounting by Insurance and Other Enterprises for Insurance-Related Assessments". SOP 97-3 provides guidance for assessments related to insurance activities and requirements for disclosure of certain information. SOP 97-3 is effective for financial statements issued for periods beginning after December 31, 1998. Restatement of previously issued financial statements is not required. SOP 97-3 is not expected to have a material impact on the Company's consolidated financial statements. Valuation of Investments Fixed maturities identified as available for sale are reported at estimated fair value. Fixed maturities, which the Company has both the ability and the intent to hold to maturity, are stated principally at amortized cost. The amortized cost of fixed maturities is adjusted for impairments in value deemed to be other than temporary. Valuation allowances are netted against the asset categories to which they apply. Mortgage loans on real estate are stated at unpaid principal balances, net of unamortized discounts and valuation allowances. Valuation allowances are based on the present value of expected future cash flows discounted at the loan's original effective interest rate or the collateral value if the loan is collateral dependent. However, if foreclosure is or becomes probable, the measurement method used is collateral value. Real estate, including real estate acquired in satisfaction of debt, is stated at depreciated cost less valuation allowances. At the date of foreclosure (including in-substance foreclosure), real estate acquired in satisfaction of debt is valued at estimated fair value. Impaired real estate is written down to fair value with the impairment loss being included in investment gains (losses), net. Valuation allowances on real estate held for sale are computed using the lower of depreciated cost or current estimated fair value, net of disposition costs. Depreciation is discontinued on real estate held for sale. Prior to the adoption of SFAS No. 121, valuation allowances on real estate held for production of income were computed using the forecasted cash flows of the respective properties discounted at a rate equal to the Company's cost of funds. Policy loans are stated at unpaid principal balances. Partnerships and joint venture interests in which the Company does not have control or a majority economic interest are reported on the equity basis of accounting and are included either with equity real estate or other equity investments, as appropriate. Common stocks are carried at estimated fair value and are included in other equity investments. Short-term investments are stated at amortized cost which approximates fair value and are included with other invested assets. F-9 Cash and cash equivalents includes cash on hand, amounts due from banks and highly liquid debt instruments purchased with an original maturity of three months or less. All securities are recorded in the consolidated financial statements on a trade date basis. Net Investment Income, Investment Gains, Net and Unrealized Investment Gains (Losses) Net investment income and realized investment gains (losses) (collectively, "investment results") related to certain participating group annuity contracts which are passed through to the contractholders are reflected as interest credited to policyholders' account balances. Realized investment gains (losses) are determined by specific identification and are presented as a component of revenue. Changes in valuation allowances are included in investment gains (losses). Unrealized investment gains and losses on equity securities and fixed maturities available for sale held by the Company are accounted for as a separate component of accumulated comprehensive income, net of related deferred Federal income taxes, amounts attributable to discontinued operations, participating group annuity contracts and deferred policy acquisition costs ("DAC") related to universal life and investment-type products and participating traditional life contracts. Recognition of Insurance Income and Related Expenses Premiums from universal life and investment-type contracts are reported as deposits to policyholders' account balances. Revenues from these contracts consist of amounts assessed during the period against policyholders' account balances for mortality charges, policy administration charges and surrender charges. Policy benefits and claims that are charged to expense include benefit claims incurred in the period in excess of related policyholders' account balances. Premiums from participating and non-participating traditional life and annuity policies with life contingencies generally are recognized as income when due. Benefits and expenses are matched with such income so as to result in the recognition of profits over the life of the contracts. This match is accomplished by means of the provision for liabilities for future policy benefits and the deferral and subsequent amortization of policy acquisition costs. For contracts with a single premium or a limited number of premium payments due over a significantly shorter period than the total period over which benefits are provided, premiums are recorded as income when due with any excess profit deferred and recognized in income in a constant relationship to insurance in force or, for annuities, the amount of expected future benefit payments. Premiums from individual health contracts are recognized as income over the period to which the premiums relate in proportion to the amount of insurance protection provided. Deferred Policy Acquisition Costs The costs of acquiring new business, principally commissions, underwriting, agency and policy issue expenses, all of which vary with and are primarily related to the production of new business, are deferred. DAC is subject to recoverability testing at the time of policy issue and loss recognition testing at the end of each accounting period. For universal life products and investment-type products, DAC is amortized over the expected total life of the contract group (periods ranging from 25 to 35 years and 5 to 17 years, respectively) as a constant percentage of estimated gross profits arising principally from investment results, mortality and expense margins and surrender charges based on historical and anticipated future experience, updated at the end of each accounting period. The effect on the amortization of DAC of revisions to estimated gross profits is reflected in earnings in the period such estimated gross profits are revised. The effect on the DAC asset that would result from realization of unrealized gains (losses) is recognized with an offset to accumulated other comprehensive income in consolidated shareholder's equity as of the balance sheet date. F-10 For participating traditional life policies (substantially all of which are in the Closed Block), DAC is amortized over the expected total life of the contract group (40 years) as a constant percentage based on the present value of the estimated gross margin amounts expected to be realized over the life of the contracts using the expected investment yield. At December 31, 1998, the expected investment yield, excluding policy loans, generally ranged from 7.29% grading to 6.5% over a 20 year period. Estimated gross margin includes anticipated premiums and investment results less claims and administrative expenses, changes in the net level premium reserve and expected annual policyholder dividends. The effect on the amortization of DAC of revisions to estimated gross margins is reflected in earnings in the period such estimated gross margins are revised. The effect on the DAC asset that would result from realization of unrealized gains (losses) is recognized with an offset to accumulated comprehensive income in consolidated shareholder's equity as of the balance sheet date. For non-participating traditional life and annuity policies with life contingencies, DAC is amortized in proportion to anticipated premiums. Assumptions as to anticipated premiums are estimated at the date of policy issue and are consistently applied during the life of the contracts. Deviations from estimated experience are reflected in earnings in the period such deviations occur. For these contracts, the amortization periods generally are for the total life of the policy. For individual health benefit insurance, DAC is amortized over the expected average life of the contracts (10 years for major medical policies and 20 years for disability income ("DI") products) in proportion to anticipated premium revenue at time of issue. Policyholders' Account Balances and Future Policy Benefits Policyholders' account balances for universal life and investment-type contracts are equal to the policy account values. The policy account values represents an accumulation of gross premium payments plus credited interest less expense and mortality charges and withdrawals. For participating traditional life policies, future policy benefit liabilities are calculated using a net level premium method on the basis of actuarial assumptions equal to guaranteed mortality and dividend fund interest rates. The liability for annual dividends represents the accrual of annual dividends earned. Terminal dividends are accrued in proportion to gross margins over the life of the contract. For non-participating traditional life insurance policies, future policy benefit liabilities are estimated using a net level premium method on the basis of actuarial assumptions as to mortality, persistency and interest established at policy issue. Assumptions established at policy issue as to mortality and persistency are based on the Insurance Group's experience which, together with interest and expense assumptions, includes a margin for adverse deviation. When the liabilities for future policy benefits plus the present value of expected future gross premiums for a product are insufficient to provide for expected future policy benefits and expenses for that product, DAC is written off and thereafter, if required, a premium deficiency reserve is established by a charge to earnings. Benefit liabilities for traditional annuities during the accumulation period are equal to accumulated contractholders' fund balances and after annuitization are equal to the present value of expected future payments. Interest rates used in establishing such liabilities range from 2.25% to 11.5% for life insurance liabilities and from 2.25% to 13.5% for annuity liabilities. During the fourth quarter of 1996 a loss recognition study of participating group annuity contracts and conversion annuities ("Pension Par") was completed which included management's revised estimate of assumptions, such as expected mortality and future investment returns. The study's results prompted management to establish a premium deficiency reserve which decreased earnings from continuing operations and net earnings by $47.5 million ($73.0 million pre-tax). Individual health benefit liabilities for active lives are estimated using the net level premium method and assumptions as to future morbidity, withdrawals and interest. Benefit liabilities for disabled lives are estimated using the present value of benefits method and experience assumptions as to claim terminations, expenses and interest. F-11 During the fourth quarter of 1996, the Company completed a loss recognition study of the DI business which incorporated management's revised estimates of future experience with regard to morbidity, investment returns, claims and administration expenses and other factors. The study indicated DAC was not recoverable and the reserves were not sufficient. Earnings from continuing operations and net earnings decreased by $208.0 million ($320.0 million pre-tax) as a result of strengthening DI reserves by $175.0 million and writing off unamortized DAC of $145.0 million related to DI products issued prior to July 1993. The determination of DI reserves requires making assumptions and estimates relating to a variety of factors, including morbidity and interest rates, claims experience and lapse rates based on then known facts and circumstances. Such factors as claim incidence and termination rates can be affected by changes in the economic, legal and regulatory environments and work ethic. While management believes its Pension Par and DI reserves have been calculated on a reasonable basis and are adequate, there can be no assurance reserves will be sufficient to provide for future liabilities. Claim reserves and associated liabilities for individual DI and major medical policies were $938.6 million and $886.7 million at December 31, 1998 and 1997, respectively. Incurred benefits (benefits paid plus changes in claim reserves) and benefits paid for individual DI and major medical policies (excluding reserve strengthening in 1996) are summarized as follows:
1998 1997 1996 ----------------- ---------------- ----------------- (In Millions) Incurred benefits related to current year.......... $ 202.1 $ 190.2 $ 189.0 Incurred benefits related to prior years........... 22.2 2.1 69.1 ----------------- ---------------- ----------------- Total Incurred Benefits............................ $ 224.3 $ 192.3 $ 258.1 ================= ================ ================= Benefits paid related to current year.............. $ 17.0 $ 28.8 $ 32.6 Benefits paid related to prior years............... 155.4 146.2 153.3 ----------------- ---------------- ----------------- Total Benefits Paid................................ $ 172.4 $ 175.0 $ 185.9 ================= ================ =================
Policyholders' Dividends The amount of policyholders' dividends to be paid (including those on policies included in the Closed Block) is determined annually by Equitable Life's board of directors. The aggregate amount of policyholders' dividends is related to actual interest, mortality, morbidity and expense experience for the year and judgment as to the appropriate level of statutory surplus to be retained by Equitable Life. At December 31, 1998, participating policies, including those in the Closed Block, represent approximately 19.9% ($49.3 billion) of directly written life insurance in force, net of amounts ceded. Federal Income Taxes The Company files a consolidated Federal income tax return with the Holding Company and its consolidated subsidiaries. Current Federal income taxes are charged or credited to operations based upon amounts estimated to be payable or recoverable as a result of taxable operations for the current year. Deferred income tax assets and liabilities are recognized based on the difference between financial statement carrying amounts and income tax bases of assets and liabilities using enacted income tax rates and laws. Separate Accounts Separate Accounts are established in conformity with the New York State Insurance Law and generally are not chargeable with liabilities that arise from any other business of the Insurance Group. Separate Accounts assets are subject to General Account claims only to the extent the value of such assets exceeds Separate Accounts liabilities. F-12 Assets and liabilities of the Separate Accounts, representing net deposits and accumulated net investment earnings less fees, held primarily for the benefit of contractholders, and for which the Insurance Group does not bear the investment risk, are shown as separate captions in the consolidated balance sheets. The Insurance Group bears the investment risk on assets held in one Separate Account; therefore, such assets are carried on the same basis as similar assets held in the General Account portfolio. Assets held in the other Separate Accounts are carried at quoted market values or, where quoted values are not available, at estimated fair values as determined by the Insurance Group. The investment results of Separate Accounts on which the Insurance Group does not bear the investment risk are reflected directly in Separate Accounts liabilities. For 1998, 1997 and 1996, investment results of such Separate Accounts were $4,591.0 million, $3,411.1 million and $2,970.6 million, respectively. Deposits to Separate Accounts are reported as increases in Separate Accounts liabilities and are not reported in revenues. Mortality, policy administration and surrender charges on all Separate Accounts are included in revenues. Employee Stock Option Plan The Company accounts for stock option plans sponsored by the Holding Company, DLJ and Alliance in accordance with the provisions of Accounting Principles Board Opinion ("APB") No. 25, "Accounting for Stock Issued to Employees," and related interpretations. In accordance with the Statement, compensation expense is recorded on the date of grant only if the current market price of the underlying stock exceeds the option price. See Note 22 for the pro forma disclosures for the Holding Company, DLJ and Alliance required by SFAS No. 123, "Accounting for Stock-Based Compensation". F-13 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, 1998 Fixed Maturities: Available for Sale: Corporate.......................... $ 14,520.8 $ 793.6 $ 379.6 $ 14,934.8 Mortgage-backed.................... 1,807.9 23.3 .9 1,830.3 U.S. Treasury securities and U.S. government and agency securities................ 1,464.1 107.6 .7 1,571.0 States and political subdivisions.. 55.0 9.9 - 64.9 Foreign governments................ 363.3 20.9 30.0 354.2 Redeemable preferred stock......... 242.7 7.0 11.2 238.5 ----------------- ----------------- ---------------- ----------------- Total Available for Sale............... $ 18,453.8 $ 962.3 $ 422.4 $ 18,993.7 ================= ================= ================ ================= Held to Maturity: Corporate......... $ 125.0 $ - $ - $ 125.0 ================= ================= ================ ================= Equity Securities: Common stock......................... $ 58.3 $ 114.9 $ 22.5 $ 150.7 ================= ================= ================ ================= December 31, 1997 Fixed Maturities: Available for Sale: Corporate.......................... $ 14,850.5 $ 785.0 $ 74.5 $ 15,561.0 Mortgage-backed.................... 1,702.8 23.5 1.3 1,725.0 U.S. Treasury securities and U.S. government and agency securities................ 1,583.2 83.9 .6 1,666.5 States and political subdivisions.. 52.8 6.8 .1 59.5 Foreign governments................ 442.4 44.8 2.0 485.2 Redeemable preferred stock......... 128.0 6.7 1.0 133.7 ----------------- ----------------- ---------------- ----------------- Total Available for Sale............... $ 18,759.7 $ 950.7 $ 79.5 $ 19,630.9 ================= ================= ================ ================= Equity Securities: Common stock......................... $ 408.4 $ 48.7 $ 15.0 $ 442.1 ================= ================= ================ =================
For publicly traded fixed maturities and equity securities, estimated fair value is determined using quoted market prices. For fixed maturities without a readily ascertainable market value, the Company determines an estimated fair value using a discounted cash flow approach, including provisions for credit risk, generally based on the assumption such securities will be held to maturity. Estimated fair values for equity securities, substantially all of which do not have a readily ascertainable market value, have been determined by the Company. Such estimated fair values do not necessarily represent the values for which these securities could have been sold at the dates of the consolidated balance sheets. At December 31, 1998 and 1997, securities without a readily ascertainable market value having an amortized cost of $3,539.9 million and $3,759.2 million, respectively, had estimated fair values of $3,748.5 million and $3,903.9 million, respectively. F-14 The contractual maturity of bonds at December 31, 1998 is shown below:
Available for Sale ------------------------------------ Amortized Estimated Cost Fair Value ---------------- ----------------- (In Millions) Due in one year or less................................................ $ 324.8 $ 323.4 Due in years two through five.......................................... 3,778.2 3,787.9 Due in years six through ten........................................... 6,543.4 6,594.1 Due after ten years.................................................... 5,756.8 6,219.5 Mortgage-backed securities............................................. 1,807.9 1,830.3 ---------------- ----------------- Total.................................................................. $ 18,211.1 $ 18,755.2 ================ =================
Corporate bonds held to maturity with an amortized cost and estimated fair value of $125.0 million are due in one year or less. Bonds not due at a single maturity date have been included in the above table in the year of final maturity. Actual maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. The Insurance Group's fixed maturity investment portfolio includes corporate high yield securities consisting of public high yield bonds, redeemable preferred stocks and directly negotiated debt in leveraged buyout transactions. The Insurance Group seeks to minimize the higher than normal credit risks associated with such securities by monitoring concentrations in any single issuer or a particular industry group. Certain of these corporate high yield securities are classified as other than investment grade by the various rating agencies, i.e., a rating below Baa or National Association of Insurance Commissioners ("NAIC") designation of 3 (medium grade), 4 or 5 (below investment grade) or 6 (in or near default). At December 31, 1998, approximately 15.1% of the $18,336.1 million aggregate amortized cost of bonds held by the Company was considered to be other than investment grade. In addition, the Insurance Group is an equity investor in limited partnership interests which primarily invest in securities considered to be other than investment grade. Fixed maturity investments with restructured or modified terms are not material. Investment valuation allowances and changes thereto are shown below:
1998 1997 1996 ----------------- ---------------- ----------------- (In Millions) Balances, beginning of year........................ $ 384.5 $ 137.1 $ 325.3 SFAS No. 121 release............................... - - (152.4) Additions charged to income........................ 86.2 334.6 125.0 Deductions for writedowns and asset dispositions............................... (240.1) (87.2) (160.8) ----------------- ---------------- ----------------- Balances, End of Year.............................. $ 230.6 $ 384.5 $ 137.1 ================= ================ ================= Balances, end of year comprise: Mortgage loans on real estate.................... $ 34.3 $ 55.8 $ 50.4 Equity real estate............................... 196.3 328.7 86.7 ----------------- ---------------- ----------------- Total.............................................. $ 230.6 $ 384.5 $ 137.1 ================= ================ =================
F-15 At December 31, 1998, the carrying value of fixed maturities which are non-income producing for the twelve months preceding the consolidated balance sheet date was $60.8 million. At December 31, 1998 and 1997, mortgage loans on real estate with scheduled payments 60 days (90 days for agricultural mortgages) or more past due or in foreclosure (collectively, "problem mortgage loans on real estate") had an amortized cost of $7.0 million (0.2% of total mortgage loans on real estate) and $23.4 million (0.9% of total mortgage loans on real estate), respectively. The payment terms of mortgage loans on real estate may from time to time be restructured or modified. The investment in restructured mortgage loans on real estate, based on amortized cost, amounted to $115.1 million and $183.4 million at December 31, 1998 and 1997, respectively. Gross interest income on restructured mortgage loans on real estate that would have been recorded in accordance with the original terms of such loans amounted to $10.3 million, $17.2 million and $35.5 million in 1998, 1997 and 1996, respectively. Gross interest income on these loans included in net investment income aggregated $8.3 million, $12.7 million and $28.2 million in 1998, 1997 and 1996, respectively. Impaired mortgage loans (as defined under SFAS No. 114) along with the related provision for losses were as follows:
December 31, ---------------------------------------- 1998 1997 ------------------- ------------------- (In Millions) Impaired mortgage loans with provision for losses.................. $ 125.4 $ 196.7 Impaired mortgage loans without provision for losses............... 8.6 3.6 ------------------- ------------------- Recorded investment in impaired mortgage loans..................... 134.0 200.3 Provision for losses............................................... (29.0) (51.8) ------------------- ------------------- Net Impaired Mortgage Loans........................................ $ 105.0 $ 148.5 =================== ===================
Impaired mortgage loans without provision for losses are loans where the fair value of the collateral or the net present value of the expected future cash flows related to the loan equals or exceeds the recorded investment. Interest income earned on loans where the collateral value is used to measure impairment is recorded on a cash basis. Interest income on loans where the present value method is used to measure impairment is accrued on the net carrying value amount of the loan at the interest rate used to discount the cash flows. Changes in the present value attributable to changes in the amount or timing of expected cash flows are reported as investment gains or losses. During 1998, 1997 and 1996, respectively, the Company's average recorded investment in impaired mortgage loans was $161.3 million, $246.9 million and $552.1 million. Interest income recognized on these impaired mortgage loans totaled $12.3 million, $15.2 million and $38.8 million ($.9 million, $2.3 million and $17.9 million recognized on a cash basis) for 1998, 1997 and 1996, respectively. The Insurance Group's investment in equity real estate is through direct ownership and through investments in real estate joint ventures. At December 31, 1998 and 1997, the carrying value of equity real estate held for sale amounted to $836.2 million and $1,023.5 million, respectively. For 1998, 1997 and 1996, respectively, real estate of $7.1 million, $152.0 million and $58.7 million was acquired in satisfaction of debt. At December 31, 1998 and 1997, the Company owned $552.3 million and $693.3 million, respectively, of real estate acquired in satisfaction of debt. Depreciation of real estate held for production of income is computed using the straight-line method over the estimated useful lives of the properties, which generally range from 40 to 50 years. Accumulated depreciation on real estate was $374.8 million and $541.1 million at December 31, 1998 and 1997, respectively. Depreciation expense on real estate totaled $30.5 million, $74.9 million and $91.8 million for 1998, 1997 and 1996, respectively. F-16 4) JOINT VENTURES AND PARTNERSHIPS Summarized combined financial information for real estate joint ventures (25 and 29 individual ventures as of December 31, 1998 and 1997, respectively) and for limited partnership interests accounted for under the equity method, in which the Company has an investment of $10.0 million or greater and an equity interest of 10% or greater, is as follows:
December 31, ------------------------------------ 1998 1997 ---------------- ----------------- (In Millions) BALANCE SHEETS Investments in real estate, at depreciated cost........................ $ 913.7 $ 1,700.9 Investments in securities, generally at estimated fair value........... 636.9 1,374.8 Cash and cash equivalents.............................................. 85.9 105.4 Other assets........................................................... 279.8 584.9 ---------------- ----------------- Total Assets........................................................... $ 1,916.3 $ 3,766.0 ================ ================= Borrowed funds - third party........................................... $ 367.1 $ 493.4 Borrowed funds - the Company........................................... 30.1 31.2 Other liabilities...................................................... 197.2 284.0 ---------------- ----------------- Total liabilities...................................................... 594.4 808.6 ---------------- ----------------- Partners' capital...................................................... 1,321.9 2,957.4 ---------------- ----------------- Total Liabilities and Partners' Capital................................ $ 1,916.3 $ 3,766.0 ================ ================= Equity in partners' capital included above............................. $ 312.9 $ 568.5 Equity in limited partnership interests not included above............. 442.1 331.8 Other.................................................................. .7 4.3 ---------------- ----------------- Carrying Value......................................................... $ 755.7 $ 904.6 ================ =================
1998 1997 1996 ----------------- ---------------- ----------------- (In Millions) STATEMENTS OF EARNINGS Revenues of real estate joint ventures............. $ 246.1 $ 310.5 $ 348.9 Revenues of other limited partnership interests.... 128.9 506.3 386.1 Interest expense - third party..................... (33.3) (91.8) (111.0) Interest expense - the Company..................... (2.6) (7.2) (30.0) Other expenses..................................... (197.0) (263.6) (282.5) ----------------- ---------------- ----------------- Net Earnings....................................... $ 142.1 $ 454.2 $ 311.5 ================= ================ ================= Equity in net earnings included above.............. $ 59.6 $ 76.7 $ 73.9 Equity in net earnings of limited partnership interests not included above..................... 22.7 69.5 35.8 Other.............................................. - (.9) .9 ----------------- ---------------- ----------------- Total Equity in Net Earnings....................... $ 82.3 $ 145.3 $ 110.6 ================= ================ =================
F-17 5) NET INVESTMENT INCOME AND INVESTMENT GAINS (LOSSES) The sources of net investment income are summarized as follows:
1998 1997 1996 ----------------- ---------------- ----------------- (In Millions) Fixed maturities................................... $ 1,489.0 $ 1,459.4 $ 1,307.4 Mortgage loans on real estate...................... 235.4 260.8 303.0 Equity real estate................................. 356.1 390.4 442.4 Other equity investments........................... 83.8 156.9 122.0 Policy loans....................................... 144.9 177.0 160.3 Other investment income............................ 185.7 181.7 217.4 ----------------- ---------------- ----------------- Gross investment income.......................... 2,494.9 2,626.2 2,552.5 Investment expenses.............................. (266.8) (343.4) (348.9) ----------------- ---------------- ----------------- Net Investment Income.............................. $ 2,228.1 $ 2,282.8 $ 2,203.6 ================= ================ =================
Investment gains (losses), net, including changes in the valuation allowances, are summarized as follows:
1998 1997 1996 ----------------- ---------------- ----------------- (In Millions) Fixed maturities................................... $ (24.3) $ 88.1 $ 60.5 Mortgage loans on real estate...................... (10.9) (11.2) (27.3) Equity real estate................................. 74.5 (391.3) (79.7) Other equity investments........................... 29.9 14.1 18.9 Sale of subsidiaries............................... (2.6) 252.1 - Issuance and sales of Alliance Units............... 19.8 - 20.6 Issuance and sale of DLJ common stock.............. 18.2 3.0 - Other.............................................. (4.4) - (2.8) ----------------- ---------------- ----------------- Investment Gains (Losses), Net..................... $ 100.2 $ (45.2) $ (9.8) ================= ================ =================
Writedowns of fixed maturities amounted to $101.6 million, $11.7 million and $29.9 million for 1998, 1997 and 1996, respectively, and writedowns of equity real estate subsequent to the adoption of SFAS No. 121 amounted to $136.4 million for 1997. In the fourth quarter of 1997, the Company reclassified $1,095.4 million depreciated cost of equity real estate from real estate held for the production of income to real estate held for sale. Additions to valuation allowances of $227.6 million were recorded upon these transfers. Additionally, in fourth quarter 1997, $132.3 million of writedowns on real estate held for production of income were recorded. For 1998, 1997 and 1996, respectively, proceeds received on sales of fixed maturities classified as available for sale amounted to $15,961.0 million, $9,789.7 million and $8,353.5 million. Gross gains of $149.3 million, $166.0 million and $154.2 million and gross losses of $95.1 million, $108.8 million and $92.7 million, respectively, were realized on these sales. The change in unrealized investment gains (losses) related to fixed maturities classified as available for sale for 1998, 1997 and 1996 amounted to $(331.7) million, $513.4 million and $(258.0) million, respectively. For 1998, 1997 and 1996, investment results passed through to certain participating group annuity contracts as interest credited to policyholders' account balances amounted to $136.9 million, $137.5 million and $136.7 million, respectively. F-18 On June 10, 1997, Equitable Life sold EREIM (other than its interest in Column Financial, Inc.) ("ERE") to Lend Lease Corporation Limited ("Lend Lease"), a publicly traded, international property and financial services company based in Sydney, Australia. The total purchase price was $400.0 million and consisted of $300.0 million in cash and a $100.0 million note which was paid in 1998. The Company recognized an investment gain of $162.4 million, net of Federal income tax of $87.4 million as a result of this transaction. Equitable Life entered into long-term advisory agreements whereby ERE continues to provide substantially the same services to Equitable Life's General Account and Separate Accounts, for substantially the same fees, as provided prior to the sale. Through June 10, 1997 and for the year ended December 31, 1996, respectively, the businesses sold reported combined revenues of $91.6 million and $226.1 million and combined net earnings of $10.7 million and $30.7 million. In 1996, Alliance acquired the business of Cursitor Holdings L.P. and Cursitor Holdings Limited (collectively, "Cursitor") for approximately $159.0 million. The purchase price consisted of $94.3 million in cash, 1.8 million of Alliance's publicly traded units ("Alliance Units"), 6% notes aggregating $21.5 million payable ratably over four years, and additional consideration to be determined at a later date but currently estimated to not exceed $10.0 million. The excess of the purchase price, including acquisition costs and minority interest, over the fair value of Cursitor's net assets acquired resulted in the recognition of intangible assets consisting of costs assigned to contracts acquired and goodwill of approximately $122.8 million and $38.3 million, respectively. The Company recognized an investment gain of $20.6 million as a result of the issuance of Alliance Units in this transaction. On June 30, 1997, Alliance reduced the recorded value of goodwill and contracts associated with Alliance's acquisition of Cursitor by $120.9 million. This charge reflected Alliance's view that Cursitor's continuing decline in assets under management and its reduced profitability, resulting from relative investment underperformance, no longer supported the carrying value of its investment. As a result, the Company's earnings from continuing operations before cumulative effect of accounting change for 1997 included a charge of $59.5 million, net of a Federal income tax benefit of $10.0 million and minority interest of $51.4 million. The remaining balance of intangible assets is being amortized over its estimated useful life of 20 years. At December 31, 1998, the Company's ownership of Alliance Units was approximately 56.7%. F-19 Net unrealized investment gains (losses), included in the consolidated balance sheets as a component of accumulated comprehensive income and the changes for the corresponding years, are summarized as follows:
1998 1997 1996 ----------------- ---------------- ----------------- (In Millions) Balance, beginning of year......................... $ 533.6 $ 189.9 $ 396.5 Changes in unrealized investment gains (losses).... (242.4) 543.3 (297.6) Changes in unrealized investment losses (gains) attributable to: Participating group annuity contracts.......... (5.7) 53.2 - DAC............................................ 13.2 (89.0) 42.3 Deferred Federal income taxes.................. 85.4 (163.8) 48.7 ----------------- ---------------- ----------------- Balance, End of Year............................... $ 384.1 $ 533.6 $ 189.9 ================= ================ ================= Balance, end of year comprises: Unrealized investment gains on: Fixed maturities............................... $ 539.9 $ 871.2 $ 357.8 Other equity investments....................... 92.4 33.7 31.6 Other, principally Closed Block................ 111.1 80.9 53.1 ----------------- ---------------- ----------------- Total........................................ 743.4 985.8 442.5 Amounts of unrealized investment gains attributable to: Participating group annuity contracts........ (24.7) (19.0) (72.2) DAC.......................................... (127.8) (141.0) (52.0) Deferred Federal income taxes................ (206.8) (292.2) (128.4) ----------------- ---------------- ----------------- Total.............................................. $ 384.1 $ 533.6 $ 189.9 ================= ================ =================
6) ACCUMULATED OTHER COMPREHENSIVE INCOME Accumulated other comprehensive income represents cumulative gains and losses on items that are not reflected in earnings. The balances for the years 1998, 1997 and 1996 are as follows:
1998 1997 1996 ----------------- ---------------- ----------------- (In Millions) Unrealized gains on investments.................... $ 384.1 $ 533.6 $ 189.9 Minimum pension liability.......................... (28.3) (17.3) (12.9) ----------------- ---------------- ----------------- Total Accumulated Other Comprehensive Income............................. $ 355.8 $ 516.3 $ 177.0 ================= ================ =================
F-20 The components of other comprehensive income for the years 1998, 1997 and 1996 are as follows:
1998 1997 1996 ----------------- ---------------- ----------------- (In Millions) Net unrealized gains (losses) on investment securities: Net unrealized gains (losses) arising during the period..................................... $ (186.1) $ 564.0 $ (249.8) Reclassification adjustment for (gains) losses included in net earnings....................... (56.3) (20.7) (47.8) ----------------- ---------------- ----------------- Net unrealized gains (losses) on investment securities....................................... (242.4) 543.3 (297.6) Adjustments for policyholder liabilities, DAC and deferred Federal income taxes............................. 92.9 (199.6) 91.0 ----------------- ---------------- ----------------- Change in unrealized gains (losses), net of reclassification and adjustments................. (149.5) 343.7 (206.6) Change in minimum pension liability................ (11.0) (4.4) 22.2 ----------------- ---------------- ----------------- Total Other Comprehensive Income................... $ (160.5) $ 339.3 $ (184.4) ================= ================ =================
7) CLOSED BLOCK Summarized financial information for the Closed Block follows:
December 31, -------------------------------------- 1998 1997 ----------------- ----------------- (In Millions) Assets Fixed Maturities: Available for sale, at estimated fair value (amortized cost, $4,149.0 and $4,059.4)........................................... $ 4,373.2 $ 4,231.0 Mortgage loans on real estate........................................ 1,633.4 1,341.6 Policy loans......................................................... 1,641.2 1,700.2 Cash and other invested assets....................................... 86.5 282.0 DAC.................................................................. 676.5 775.2 Other assets......................................................... 221.6 236.6 ----------------- ----------------- Total Assets......................................................... $ 8,632.4 $ 8,566.6 ================= ================= Liabilities Future policy benefits and policyholders' account balances........... $ 9,013.1 $ 8,993.2 Other liabilities.................................................... 63.9 80.5 ----------------- ----------------- Total Liabilities.................................................... $ 9,077.0 $ 9,073.7 ================= =================
F-21
1998 1997 1996 ----------------- ---------------- ----------------- (In Millions) Revenues Premiums and other revenue......................... $ 661.7 $ 687.1 $ 724.8 Investment income (net of investment expenses of $15.5, $27.0 and $27.3).............. 569.7 574.9 546.6 Investment losses, net............................. .5 (42.4) (5.5) ----------------- ---------------- ----------------- Total revenues............................... 1,231.9 1,219.6 1,265.9 ----------------- ---------------- ----------------- Benefits and Other Deductions Policyholders' benefits and dividends.............. 1,082.0 1,066.7 1,106.3 Other operating costs and expenses................. 62.8 50.4 34.6 ----------------- ---------------- ----------------- Total benefits and other deductions.......... 1,144.8 1,117.1 1,140.9 ----------------- ---------------- ----------------- Contribution from the Closed Block................. $ 87.1 $ 102.5 $ 125.0 ================= ================ =================
At December 31, 1998 and 1997, problem mortgage loans on real estate had an amortized cost of $5.1 million and $8.1 million, respectively, and mortgage loans on real estate for which the payment terms have been restructured had an amortized cost of $26.0 million and $70.5 million, respectively. Impaired mortgage loans (as defined under SFAS No. 114) along with the related provision for losses were as follows:
December 31, ------------------------------------ 1998 1997 ---------------- ----------------- (In Millions) Impaired mortgage loans with provision for losses...................... $ 55.5 $ 109.1 Impaired mortgage loans without provision for losses................... 7.6 .6 ---------------- ----------------- Recorded investment in impaired mortgages.............................. 63.1 109.7 Provision for losses................................................... (10.1) (17.4) ---------------- ----------------- Net Impaired Mortgage Loans............................................ $ 53.0 $ 92.3 ================ =================
During 1998, 1997 and 1996, the Closed Block's average recorded investment in impaired mortgage loans was $85.5 million, $110.2 million and $153.8 million, respectively. Interest income recognized on these impaired mortgage loans totaled $4.7 million, $9.4 million and $10.9 million ($1.5 million, $4.1 million and $4.7 million recognized on a cash basis) for 1998, 1997 and 1996, respectively. Valuation allowances amounted to $11.1 million and $18.5 million on mortgage loans on real estate and $15.4 million and $16.8 million on equity real estate at December 31, 1998 and 1997, respectively. As of January 1, 1996, the adoption of SFAS No. 121 resulted in the recognition of impairment losses of $5.6 million on real estate held for production of income. Writedowns of fixed maturities amounted to $3.5 million and $12.8 million for 1997 and 1996, respectively. Writedowns of equity real estate subsequent to the adoption of SFAS No. 121 amounted to $28.8 million for 1997. In the fourth quarter of 1997, $72.9 million depreciated cost of equity real estate held for production of income was reclassified to equity real estate held for sale. Additions to valuation allowances of $15.4 million were recorded upon these transfers. Additionally, in fourth quarter 1997, $28.8 million of writedowns on real estate held for production of income were recorded. Many expenses related to Closed Block operations are charged to operations outside of the Closed Block; accordingly, the contribution from the Closed Block does not represent the actual profitability of the Closed Block operations. Operating costs and expenses outside of the Closed Block are, therefore, disproportionate to the business outside of the Closed Block. F-22 8) DISCONTINUED OPERATIONS Summarized financial information for discontinued operations follows:
December 31, -------------------------------------- 1998 1997 ----------------- ----------------- (In Millions) Assets Mortgage loans on real estate........................................ $ 553.9 $ 635.2 Equity real estate................................................... 611.0 874.5 Other equity investments............................................. 115.1 209.3 Other invested assets................................................ 24.9 152.4 ----------------- ----------------- Total investments.................................................. 1,304.9 1,871.4 Cash and cash equivalents............................................ 34.7 106.8 Other assets......................................................... 219.0 243.8 ----------------- ----------------- Total Assets......................................................... $ 1,558.6 $ 2,222.0 ================= ================= Liabilities Policyholders' liabilities........................................... $ 1,021.7 $ 1,048.3 Allowance for future losses.......................................... 305.1 259.2 Amounts due to continuing operations................................. 2.7 572.8 Other liabilities.................................................... 229.1 341.7 ----------------- ----------------- Total Liabilities.................................................... $ 1,558.6 $ 2,222.0 ================= =================
1998 1997 1996 ----------------- ---------------- ----------------- (In Millions) Revenues Investment income (net of investment expenses of $63.3, $97.3 and $127.5)............. $ 160.4 $ 188.6 $ 245.4 Investment gains (losses), net..................... 35.7 (173.7) (18.9) Policy fees, premiums and other income............. (4.3) .2 .2 ----------------- ---------------- ----------------- Total revenues..................................... 191.8 15.1 226.7 Benefits and other deductions...................... 141.5 169.5 250.4 Earnings added (losses charged) to allowance for future losses................................ 50.3 (154.4) (23.7) ----------------- ---------------- ----------------- Pre-tax loss from operations....................... - - - Pre-tax earnings from releasing (loss from strengthening) of the allowance for future losses........................................... 4.2 (134.1) (129.0) Federal income tax (expense) benefit............... (1.5) 46.9 45.2 ----------------- ---------------- ----------------- Earnings (Loss) from Discontinued Operations....... $ 2.7 $ (87.2) $ (83.8) ================= ================ =================
The Company's quarterly process for evaluating the allowance for future losses applies the current period's results of the discontinued operations against the allowance, re-estimates future losses and adjusts the allowance, if appropriate. Additionally, as part of the Company's annual planning process which takes place in the fourth quarter of each year, investment and benefit cash flow projections are prepared. These updated assumptions and estimates resulted in a release of allowance in 1998 and strengthening of allowance in 1997 and 1996. F-23 In the fourth quarter of 1997, $329.9 million depreciated cost of equity real estate was reclassified from equity real estate held for production of income to real estate held for sale. Additions to valuation allowances of $79.8 million were recognized upon these transfers. Additionally, in fourth quarter 1997, $92.5 million of writedowns on real estate held for production of income were recognized. Benefits and other deductions includes $26.6 million, $53.3 million and $114.3 million of interest expense related to amounts borrowed from continuing operations in 1998, 1997 and 1996, respectively. Valuation allowances amounted to $3.0 million and $28.4 million on mortgage loans on real estate and $34.8 million and $88.4 million on equity real estate at December 31, 1998 and 1997, respectively. As of January 1, 1996, the adoption of SFAS No. 121 resulted in a release of existing valuation allowances of $71.9 million on equity real estate and recognition of impairment losses of $69.8 million on real estate held for production of income. Writedowns of equity real estate subsequent to the adoption of SFAS No. 121 amounted to $95.7 million and $12.3 million for 1997 and 1996, respectively. At December 31, 1998 and 1997, problem mortgage loans on real estate had amortized costs of $1.1 million and $11.0 million, respectively, and mortgage loans on real estate for which the payment terms have been restructured had amortized costs of $3.5 million and $109.4 million, respectively. Impaired mortgage loans (as defined under SFAS No. 114) along with the related provision for losses were as follows:
December 31, ------------------------------------ 1998 1997 ---------------- ----------------- (In Millions) Impaired mortgage loans with provision for losses...................... $ 6.7 $ 101.8 Impaired mortgage loans without provision for losses................... 8.5 .2 ---------------- ----------------- Recorded investment in impaired mortgages.............................. 15.2 102.0 Provision for losses................................................... (2.1) (27.3) ---------------- ----------------- Net Impaired Mortgage Loans............................................ $ 13.1 $ 74.7 ================ =================
During 1998, 1997 and 1996, the discontinued operations' average recorded investment in impaired mortgage loans was $73.3 million, $89.2 million and $134.8 million, respectively. Interest income recognized on these impaired mortgage loans totaled $4.7 million, $6.6 million and $10.1 million ($3.4 million, $5.3 million and $7.5 million recognized on a cash basis) for 1998, 1997 and 1996, respectively. At December 31, 1998 and 1997, discontinued operations had carrying values of $50.0 million and $156.2 million, respectively, of real estate acquired in satisfaction of debt. F-24 9) SHORT-TERM AND LONG-TERM DEBT Short-term and long-term debt consists of the following:
December 31, -------------------------------------- 1998 1997 ----------------- ----------------- (In Millions) Short-term debt...................................................... $ 179.3 $ 422.2 ----------------- ----------------- Long-term debt: Equitable Life: 6.95% surplus notes scheduled to mature 2005....................... 399.4 399.4 7.70% surplus notes scheduled to mature 2015....................... 199.7 199.7 Other.............................................................. .3 .3 ----------------- ----------------- Total Equitable Life........................................... 599.4 599.4 ----------------- ----------------- Wholly Owned and Joint Venture Real Estate: Mortgage notes, 5.91% - 12.00%, due through 2017................... 392.2 676.6 ----------------- ----------------- Alliance: Other.............................................................. 10.8 18.5 ----------------- ----------------- Total long-term debt................................................. 1,002.4 1,294.5 ----------------- ----------------- Total Short-term and Long-term Debt.................................. $ 1,181.7 $ 1,716.7 ================= =================
Short-term Debt Equitable Life has a $350.0 million bank credit facility available to fund short-term working capital needs and to facilitate the securities settlement process. The credit facility consists of two types of borrowing options with varying interest rates and expires in September 2000. The interest rates are based on external indices dependent on the type of borrowing and at December 31, 1998 range from 5.23% to 7.75%. There were no borrowings outstanding under this bank credit facility at December 31, 1998. Equitable Life has a commercial paper program with an issue limit of $500.0 million. This program is available for general corporate purposes used to support Equitable Life's liquidity needs and is supported by Equitable Life's existing $350.0 million bank credit facility. At December 31, 1998, there were no borrowings outstanding under this program. During July 1998, Alliance entered into a $425.0 million five-year revolving credit facility with a group of commercial banks which replaced a $250.0 million revolving credit facility. Under the facility, the interest rate, at the option of Alliance, is a floating rate generally based upon a defined prime rate, a rate related to the London Interbank Offered Rate ("LIBOR") or the Federal Funds Rate. A facility fee is payable on the total facility. During September 1998, Alliance increased the size of its commercial paper program from $250.0 million to $425.0 million. Borrowings from these two sources may not exceed $425.0 million in the aggregate. The revolving credit facility provides backup liquidity for commercial paper issued under Alliance's commercial paper program and can be used as a direct source of borrowing. The revolving credit facility contains covenants which require Alliance to, among other things, meet certain financial ratios. As of December 31, 1998, Alliance had commercial paper outstanding totaling $179.5 million at an effective interest rate of 5.5% and there were no borrowings outstanding under Alliance's revolving credit facility. Long-term Debt Several of the long-term debt agreements have restrictive covenants related to the total amount of debt, net tangible assets and other matters. The Company is in compliance with all debt covenants. F-25 The Company has pledged real estate, mortgage loans, cash and securities amounting to $640.2 million and $1,164.0 million at December 31, 1998 and 1997, respectively, as collateral for certain short-term and long-term debt. At December 31, 1998, aggregate maturities of the long-term debt based on required principal payments at maturity for 1999 and the succeeding four years are $322.8 million, $6.9 million, $1.7 million, $1.8 million and $2.0 million, respectively, and $668.0 million thereafter. 10) FEDERAL INCOME TAXES A summary of the Federal income tax expense in the consolidated statements of earnings is shown below:
1998 1997 1996 ----------------- ---------------- ----------------- (In Millions) Federal income tax expense (benefit): Current.......................................... $ 283.3 $ 186.5 $ 97.9 Deferred......................................... 69.8 (95.0) (88.2) ----------------- ---------------- ----------------- Total.............................................. $ 353.1 $ 91.5 $ 9.7 ================= ================ =================
The Federal income taxes attributable to consolidated operations are different from the amounts determined by multiplying the earnings before Federal income taxes and minority interest by the expected Federal income tax rate of 35%. The sources of the difference and the tax effects of each are as follows:
1998 1997 1996 ----------------- ---------------- ----------------- (In Millions) Expected Federal income tax expense................ $ 414.3 $ 234.7 $ 73.0 Non-taxable minority interest...................... (33.2) (38.0) (28.6) Adjustment of tax audit reserves................... 16.0 (81.7) 6.9 Equity in unconsolidated subsidiaries.............. (39.3) (45.1) (32.3) Other.............................................. (4.7) 21.6 (9.3) ----------------- ---------------- ----------------- Federal Income Tax Expense......................... $ 353.1 $ 91.5 $ 9.7 ================= ================ =================
The components of the net deferred Federal income taxes are as follows:
December 31, 1998 December 31, 1997 --------------------------------- --------------------------------- Assets Liabilities Assets Liabilities --------------- ---------------- --------------- --------------- (In Millions) Compensation and related benefits...... $ 235.3 $ - $ 257.9 $ - Other.................................. 27.8 - 30.7 - DAC, reserves and reinsurance.......... - 231.4 - 222.8 Investments............................ - 364.4 - 405.7 --------------- ---------------- --------------- --------------- Total.................................. $ 263.1 $ 595.8 $ 288.6 $ 628.5 =============== ================ =============== ===============
F-26 The deferred Federal income taxes impacting operations reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The sources of these temporary differences and the tax effects of each are as follows:
1998 1997 1996 ----------------- ---------------- ----------------- (In Millions) DAC, reserves and reinsurance...................... $ (7.7) $ 46.2 $ (156.2) Investments........................................ 46.8 (113.8) 78.6 Compensation and related benefits.................. 28.6 3.7 22.3 Other.............................................. 2.1 (31.1) (32.9) ----------------- ---------------- ----------------- Deferred Federal Income Tax Expense (Benefit)................................ $ 69.8 $ (95.0) $ (88.2) ================= ================ =================
The Internal Revenue Service (the "IRS") is in the process of examining the Holding Company's consolidated Federal income tax returns for the years 1992 through 1996. Management believes these audits will have no material adverse effect on the Company's results of operations. 11) REINSURANCE AGREEMENTS The Insurance Group assumes and cedes reinsurance with other insurance companies. The Insurance Group evaluates the financial condition of its reinsurers to minimize its exposure to significant losses from reinsurer insolvencies. Ceded reinsurance does not relieve the originating insurer of liability. The effect of reinsurance (excluding group life and health) is summarized as follows:
1998 1997 1996 ----------------- ---------------- ----------------- (In Millions) Direct premiums.................................... $ 438.8 $ 448.6 $ 461.4 Reinsurance assumed................................ 203.6 198.3 177.5 Reinsurance ceded.................................. (54.3) (45.4) (41.3) ----------------- ---------------- ----------------- Premiums........................................... $ 588.1 $ 601.5 $ 597.6 ================= ================ ================= Universal Life and Investment-type Product Policy Fee Income Ceded.......................... $ 75.7 $ 61.0 $ 48.2 ================= ================ ================= Policyholders' Benefits Ceded...................... $ 85.9 $ 70.6 $ 54.1 ================= ================ ================= Interest Credited to Policyholders' Account Balances Ceded................................... $ 39.5 $ 36.4 $ 32.3 ================= ================ =================
Beginning in May 1997, the Company began reinsuring on a yearly renewal term basis 90% of the mortality risk on new issues of certain term, universal and variable life products. During 1996, the Company's retention limit on joint survivorship policies was increased to $15.0 million. Effective January 1, 1994, all in force business above $5.0 million was reinsured. The Insurance Group also reinsures the entire risk on certain substandard underwriting risks as well as in certain other cases. The Insurance Group cedes 100% of its group life and health business to a third party insurance company. Premiums ceded totaled $1.3 million, $1.6 million and $2.4 million for 1998, 1997 and 1996, respectively. Ceded death and disability benefits totaled $15.6 million, $4.3 million and $21.2 million for 1998, 1997 and 1996, respectively. Insurance liabilities ceded totaled $560.3 million and $593.8 million at December 31, 1998 and 1997, respectively. F-27 12) EMPLOYEE BENEFIT PLANS The Company sponsors qualified and non-qualified defined benefit plans covering substantially all employees (including certain qualified part-time employees), managers and certain agents. The pension plans are non-contributory. Equitable Life's benefits are based on a cash balance formula or years of service and final average earnings, if greater, under certain grandfathering rules in the plans. Alliance's benefits are based on years of credited service, average final base salary and primary social security benefits. The Company's funding policy is to make the minimum contribution required by the Employee Retirement Income Security Act of 1974 ("ERISA"). Components of net periodic pension cost (credit) for the qualified and non-qualified plans are as follows:
1998 1997 1996 ----------------- ---------------- ----------------- (In Millions) Service cost....................................... $ 33.2 $ 32.5 $ 33.8 Interest cost on projected benefit obligations..... 129.2 128.2 120.8 Actual return on assets............................ (175.6) (307.6) (181.4) Net amortization and deferrals..................... 6.1 166.6 43.4 ----------------- ---------------- ----------------- Net Periodic Pension Cost (Credit)................. $ (7.1) $ 19.7 $ 16.6 ================= ================ =================
The plan's projected benefit obligation under the qualified and non-qualified plans was comprised of:
December 31, ------------------------------------ 1998 1997 ---------------- ----------------- (In Millions) Benefit obligation, beginning of year.................................. $ 1,801.3 $ 1,765.5 Service cost........................................................... 33.2 32.5 Interest cost.......................................................... 129.2 128.2 Actuarial (gains) losses............................................... 108.4 (15.5) Benefits paid.......................................................... (138.7) (109.4) ---------------- ----------------- Benefit Obligation, End of Year........................................ $ 1,933.4 $ 1,801.3 ================ =================
The funded status of the qualified and non-qualified pension plans is as follows:
December 31, ------------------------------------ 1998 1997 ---------------- ----------------- (In Millions) Plan assets at fair value, beginning of year........................... $ 1,867.4 $ 1,626.0 Actual return on plan assets........................................... 338.9 307.5 Contributions.......................................................... - 30.0 Benefits paid and fees................................................. (123.2) (96.1) ---------------- ----------------- Plan assets at fair value, end of year................................. 2,083.1 1,867.4 Projected benefit obligations.......................................... 1,933.4 1,801.3 ---------------- ----------------- Projected benefit obligations less than plan assets.................... 149.7 66.1 Unrecognized prior service cost........................................ (7.5) (9.9) Unrecognized net loss from past experience different from that assumed.................................................... 38.7 95.0 Unrecognized net asset at transition................................... 1.5 3.1 ---------------- ----------------- Prepaid Pension Cost.................................................. $ 182.4 $ 154.3 ================ =================
The discount rate and rate of increase in future compensation levels used in determining the actuarial present value of projected benefit obligations were 7.0% and 3.83%, respectively, at December 31, 1998 and 7.25% and 4.07%, respectively, at December 31, 1997. As of January 1, 1998 and 1997, the expected long-term rate of return on assets for the retirement plan was 10.25%. F-28 The Company recorded, as a reduction of shareholders' equity an additional minimum pension liability of $28.3 million and $17.3 million, net of Federal income taxes, at December 31, 1998 and 1997, respectively, primarily representing the excess of the accumulated benefit obligation of the qualified pension plan over the accrued liability. The pension plan's assets include corporate and government debt securities, equity securities, equity real estate and shares of group trusts managed by Alliance. Prior to 1987, the qualified plan funded participants' benefits through the purchase of non-participating annuity contracts from Equitable Life. Benefit payments under these contracts were approximately $31.8 million, $33.2 million and $34.7 million for 1998, 1997 and 1996, respectively. The Company provides certain medical and life insurance benefits (collectively, "postretirement benefits") for qualifying employees, managers and agents retiring from the Company (i) on or after attaining age 55 who have at least 10 years of service or (ii) on or after attaining age 65 or (iii) whose jobs have been abolished and who have attained age 50 with 20 years of service. The life insurance benefits are related to age and salary at retirement. The costs of postretirement benefits are recognized in accordance with the provisions of SFAS No. 106. The Company continues to fund postretirement benefits costs on a pay-as-you-go basis and, for 1998, 1997 and 1996, the Company made estimated postretirement benefits payments of $28.4 million, $18.7 million and $18.9 million, respectively. The following table sets forth the postretirement benefits plan's status, reconciled to amounts recognized in the Company's consolidated financial statements:
1998 1997 1996 ----------------- ---------------- ----------------- (In Millions) Service cost....................................... $ 4.6 $ 4.5 $ 5.3 Interest cost on accumulated postretirement benefits obligation.............................. 33.6 34.7 34.6 Net amortization and deferrals..................... .5 1.9 2.4 ----------------- ---------------- ----------------- Net Periodic Postretirement Benefits Costs......... $ 38.7 $ 41.1 $ 42.3 ================= ================ =================
December 31, ------------------------------------ 1998 1997 ---------------- ----------------- (In Millions) Accumulated postretirement benefits obligation, beginning of year.............................................................. $ 490.8 $ 388.5 Service cost........................................................... 4.6 4.5 Interest cost.......................................................... 33.6 34.7 Contributions and benefits paid........................................ (28.4) 72.1 Actuarial (gains) losses............................................... (10.2) (9.0) ---------------- ----------------- Accumulated postretirement benefits obligation, end of year............ 490.4 490.8 Unrecognized prior service cost........................................ 31.8 40.3 Unrecognized net loss from past experience different from that assumed and from changes in assumptions.................... (121.2) (140.6) ---------------- ----------------- Accrued Postretirement Benefits Cost................................... $ 401.0 $ 390.5 ================ =================
Since January 1, 1994, costs to the Company for providing these medical benefits available to retirees under age 65 are the same as those offered to active employees and medical benefits will be limited to 200% of 1993 costs for all participants. F-29 The assumed health care cost trend rate used in measuring the accumulated postretirement benefits obligation was 8.0% in 1998, gradually declining to 2.5% in the year 2009, and in 1997 was 8.75%, gradually declining to 2.75% in the year 2009. The discount rate used in determining the accumulated postretirement benefits obligation was 7.0% and 7.25% at December 31, 1998 and 1997, respectively. If the health care cost trend rate assumptions were increased by 1%, the accumulated postretirement benefits obligation as of December 31, 1998 would be increased 4.83%. The effect of this change on the sum of the service cost and interest cost would be an increase of 4.57%. If the health care cost trend rate assumptions were decreased by 1% the accumulated postretirement benefits obligation as of December 31, 1998 would be decreased by 5.6%. The effect of this change on the sum of the service cost and interest cost would be a decrease of 5.4%. 13) DERIVATIVES AND FAIR VALUE OF FINANCIAL INSTRUMENTS Derivatives The Insurance Group primarily uses derivatives for asset/liability risk management and for hedging individual securities. Derivatives mainly are utilized to reduce the Insurance Group's exposure to interest rate fluctuations. Accounting for interest rate swap transactions is on an accrual basis. Gains and losses related to interest rate swap transactions are amortized as yield adjustments over the remaining life of the underlying hedged security. Income and expense resulting from interest rate swap activities are reflected in net investment income. The notional amount of matched interest rate swaps outstanding at December 31, 1998 and 1997, respectively, was $880.9 million and $1,353.4 million. The average unexpired terms at December 31, 1998 ranged from 1 month to 4.3 years. At December 31, 1998, the cost of terminating swaps in a loss position was $8.0 million. Equitable Life has implemented an interest rate cap program designed to hedge crediting rates on interest-sensitive individual annuities contracts. The outstanding notional amounts at December 31, 1998 of contracts purchased and sold were $8,450.0 million and $875.0 million, respectively. The net premium paid by Equitable Life on these contracts was $54.8 million and is being amortized ratably over the contract periods ranging from 1 to 5 years. Income and expense resulting from this program are reflected as an adjustment to interest credited to policyholders' account balances. Substantially all of DLJ's activities related to derivatives are, by their nature trading activities which are primarily for the purpose of customer accommodations. DLJ enters into certain contractual agreements referred to as derivatives or off-balance-sheet financial instruments involving futures, forwards and options. DLJ's derivative activities consist of writing over-the-counter ("OTC") options to accommodate its customer needs, trading in forward contracts in U.S. government and agency issued or guaranteed securities and in futures contracts on equity-based indices, interest rate instruments and currencies and issuing structured products based on emerging market financial instruments and indices. DLJ's involvement in swap contracts and commodity derivative instruments is not significant. Fair Value of Financial Instruments The Company defines fair value as the quoted market prices for those instruments that are actively traded in financial markets. In cases where quoted market prices are not available, fair values are estimated using present value or other valuation techniques. The fair value estimates are made at a specific point in time, based on available market information and judgments about the financial instrument, including estimates of the timing and amount of expected future cash flows and the credit standing of counterparties. Such estimates do not reflect any premium or discount that could result from offering for sale at one time the Company's entire holdings of a particular financial instrument, nor do they consider the tax impact of the realization of unrealized gains or losses. In many cases, the fair value estimates cannot be substantiated by comparison to independent markets, nor can the disclosed value be realized in immediate settlement of the instrument. Certain financial instruments are excluded, particularly insurance liabilities other than financial guarantees and investment contracts. Fair market value of off-balance-sheet financial instruments of the Insurance Group was not material at December 31, 1998 and 1997. F-30 Fair values for mortgage loans on real estate are estimated by discounting future contractual cash flows using interest rates at which loans with similar characteristics and credit quality would be made. Fair values for foreclosed mortgage loans and problem mortgage loans are limited to the estimated fair value of the underlying collateral if lower. Fair values of policy loans are estimated by discounting the face value of the loans from the time of the next interest rate review to the present, at a rate equal to the excess of the current estimated market rates over the current interest rate charged on the loan. The estimated fair values for the Company's association plan contracts, supplementary contracts not involving life contingencies ("SCNILC") and annuities certain, which are included in policyholders' account balances, and guaranteed interest contracts are estimated using projected cash flows discounted at rates reflecting expected current offering rates. The estimated fair values for variable deferred annuities and single premium deferred annuities ("SPDA"), which are included in policyholders' account balances, are estimated by discounting the account value back from the time of the next crediting rate review to the present, at a rate equal to the excess of current estimated market rates offered on new policies over the current crediting rates. Fair values for long-term debt are determined using published market values, where available, or contractual cash flows discounted at market interest rates. The estimated fair values for non-recourse mortgage debt are determined by discounting contractual cash flows at a rate which takes into account the level of current market interest rates and collateral risk. The estimated fair values for recourse mortgage debt are determined by discounting contractual cash flows at a rate based upon current interest rates of other companies with credit ratings similar to the Company. The Company's carrying value of short-term borrowings approximates their estimated fair value. The following table discloses carrying value and estimated fair value for financial instruments not otherwise disclosed in Notes 3, 7 and 8:
December 31, -------------------------------------------------------------------- 1998 1997 --------------------------------- --------------------------------- Carrying Estimated Carrying Estimated Value Fair Value Value Fair Value --------------- ---------------- --------------- --------------- (In Millions) Consolidated Financial Instruments: Mortgage loans on real estate.......... $ 2,809.9 $ 2,961.8 $ 2,611.4 $ 2,822.8 Other limited partnership interests.... 562.6 562.6 509.4 509.4 Policy loans........................... 2,086.7 2,370.7 2,422.9 2,493.9 Policyholders' account balances - investment contracts................. 12,892.0 13,396.0 12,611.0 12,714.0 Long-term debt......................... 1,002.4 1,025.2 1,294.5 1,257.0 Closed Block Financial Instruments: Mortgage loans on real estate.......... 1,633.4 1,703.5 1,341.6 1,420.7 Other equity investments............... 56.4 56.4 86.3 86.3 Policy loans........................... 1,641.2 1,929.7 1,700.2 1,784.2 SCNILC liability....................... 25.0 25.0 27.6 30.3 Discontinued Operations Financial Instruments: Mortgage loans on real estate.......... 553.9 599.9 655.5 779.9 Fixed maturities....................... 24.9 24.9 38.7 38.7 Other equity investments............... 115.1 115.1 209.3 209.3 Guaranteed interest contracts.......... 37.0 34.0 37.0 34.0 Long-term debt......................... 147.1 139.8 296.4 297.6
F-31 14) COMMITMENTS AND CONTINGENT LIABILITIES The Company has provided, from time to time, certain guarantees or commitments to affiliates, investors and others. These arrangements include commitments by the Company, under certain conditions: to make capital contributions of up to $142.9 million to affiliated real estate joint ventures; and to provide equity financing to certain limited partnerships of $287.3 million at December 31, 1998, under existing loan or loan commitment agreements. Equitable Life is the obligor under certain structured settlement agreements which it had entered into with unaffiliated insurance companies and beneficiaries. To satisfy its obligations under these agreements, Equitable Life owns single premium annuities issued by previously wholly owned life insurance subsidiaries. Equitable Life has directed payment under these annuities to be made directly to the beneficiaries under the structured settlement agreements. A contingent liability exists with respect to these agreements should the previously wholly owned subsidiaries be unable to meet their obligations. Management believes the satisfaction of those obligations by Equitable Life is remote. The Insurance Group had $24.7 million of letters of credit outstanding at December 31, 1998. 15) LITIGATION Major Medical Insurance Cases Equitable Life agreed to settle, subject to court approval, previously disclosed cases involving lifetime guaranteed renewable major medical insurance policies issued by Equitable Life in five states. Plaintiffs in these cases claimed that Equitable Life's method for determining premium increases breached the terms of certain forms of the policies and was misrepresented. In certain cases plaintiffs also claimed that Equitable Life misrepresented to policyholders that premium increases had been approved by insurance departments, and that it determined annual rate increases in a manner that discriminated against the policyholders. In December 1997, Equitable Life entered into a settlement agreement, subject to court approval, which would result in creation of a nationwide class consisting of all persons holding, and paying premiums on, the policies at any time since January 1, 1988 and the dismissal with prejudice of the pending actions and the resolution of all similar claims on a nationwide basis. Under the terms of the settlement, which involves approximately 127,000 former and current policyholders, Equitable Life would pay $14.2 million in exchange for release of all claims and will provide future relief to certain current policyholders by restricting future premium increases, estimated to have a present value of $23.3 million. This estimate is based upon assumptions about future events that cannot be predicted with certainty and accordingly the actual value of the future relief may vary. In October 1998, the court entered a judgment approving the settlement agreement and, in November, a member of the national class filed a notice of appeal of the judgment. In January 1999, the Court of Appeals granted Equitable Life's motion to dismiss the appeal. Life Insurance and Annuity Sales Cases A number of lawsuits are pending as individual claims and purported class actions against Equitable Life and its subsidiary insurance companies Equitable Variable Life Insurance Company ("EVLICO," which was merged into Equitable Life effective January 1, 1997) and The Equitable of Colorado, Inc. ("EOC"). These actions involve, among other things, sales of life and annuity products for varying periods from 1980 to the present, and allege, among other things, sales practice misrepresentation primarily involving: the number of premium payments required; the propriety of a product as an investment vehicle; the propriety of a product as a replacement of an existing policy; and failure to disclose a product as life insurance. Some actions are in state courts and others are in U.S. District Courts in varying jurisdictions, and are in varying stages of discovery and motions for class certification. F-32 In general, the plaintiffs request an unspecified amount of damages, punitive damages, enjoinment from the described practices, prohibition against cancellation of policies for non-payment of premium or other remedies, as well as attorneys' fees and expenses. Similar actions have been filed against other life and health insurers and have resulted in the award of substantial judgments, including material amounts of punitive damages, or in substantial settlements. Although the outcome of litigation cannot be predicted with certainty, particularly in the early stages of an action, The Equitable's management believes that the ultimate resolution of these cases should not have a material adverse effect on the financial position of The Equitable. The Equitable's management cannot make an estimate of loss, if any, or predict whether or not any such litigation will have a material adverse effect on The Equitable's results of operations in any particular period. Discrimination Case Equitable Life is a defendant in an action, certified as a class action in September 1997, in the United States District Court for the Northern District of Alabama, Southern Division, involving alleged discrimination on the basis of race against African-American applicants and potential applicants in hiring individuals as sales agents. Plaintiffs seek a declaratory judgment and affirmative and negative injunctive relief, including the payment of back-pay, pension and other compensation. Although the outcome of litigation cannot be predicted with certainty, The Equitable's management believes that the ultimate resolution of this matter should not have a material adverse effect on the financial position of The Equitable. The Equitable's management cannot make an estimate of loss, if any, or predict whether or not such matter will have a material adverse effect on The Equitable's results of operations in any particular period. Alliance Capital In July 1995, a class action complaint was filed against Alliance North American Government Income Trust, Inc. (the "Fund"), Alliance and certain other defendants affiliated with Alliance, including the Holding Company, alleging violations of Federal securities laws, fraud and breach of fiduciary duty in connection with the Fund's investments in Mexican and Argentine securities. The original complaint was dismissed in 1996; on appeal, the dismissal was affirmed. In October 1996, plaintiffs filed a motion for leave to file an amended complaint, alleging the Fund failed to hedge against currency risk despite representations that it would do so, the Fund did not properly disclose that it planned to invest in mortgage-backed derivative securities and two Fund advertisements misrepresented the risks of investing in the Fund. In October 1998, the U.S. Court of Appeals for the Second Circuit issued an order granting plaintiffs' motion to file an amended complaint alleging that the Fund misrepresented its ability to hedge against currency risk and denying plaintiffs' motion to file an amended complaint containing the other allegations. Alliance believes that the allegations in the amended complaint, which was filed in February 1999, are without merit and intends to defend itself vigorously against these claims. While the ultimate outcome of this matter cannot be determined at this time, Alliance's management does not expect that it will have a material adverse effect on Alliance's results of operations or financial condition. DLJSC DLJSC is a defendant along with certain other parties in a class action complaint involving the underwriting of units, consisting of notes and warrants to purchase common shares, of Rickel Home Centers, Inc. ("Rickel"), which filed a voluntary petition for reorganization pursuant to Chapter 11 of the Bankruptcy Code. The complaint seeks unspecified compensatory and punitive damages from DLJSC, as an underwriter and as an owner of 7.3% of the common stock, for alleged violation of Federal securities laws and common law fraud for alleged misstatements and omissions contained in the prospectus and registration statement used in the offering of the units. DLJSC is defending itself vigorously against all the allegations contained in the complaint. Although there can be no assurance, DLJ's management does not believe that the ultimate outcome of this litigation will have a material adverse effect on DLJ's consolidated financial condition. Due to the early stage of this litigation, based on the information currently available to it, DLJ's management cannot predict whether or not such litigation will have a material adverse effect on DLJ's results of operations in any particular period. F-33 DLJSC is a defendant in a purported class action filed in a Texas State Court on behalf of the holders of $550 million principal amount of subordinated redeemable discount debentures of National Gypsum Corporation ("NGC"). The debentures were canceled in connection with a Chapter 11 plan of reorganization for NGC consummated in July 1993. The litigation seeks compensatory and punitive damages for DLJSC's activities as financial advisor to NGC in the course of NGC's Chapter 11 proceedings. Trial is expected in early May 1999. DLJSC intends to defend itself vigorously against all the allegations contained in the complaint. Although there can be no assurance, DLJ's management does not believe that the ultimate outcome of this litigation will have a material adverse effect on DLJ's consolidated financial condition. Based upon the information currently available to it, DLJ's management cannot predict whether or not such litigation will have a material adverse effect on DLJ's results of operations in any particular period. DLJSC is a defendant in a complaint which alleges that DLJSC and a number of other financial institutions and several individual defendants violated civil provisions of RICO by inducing plaintiffs to invest over $40 million in The Securities Groups, a number of tax shelter limited partnerships, during the years 1978 through 1982. The plaintiffs seek recovery of the loss of their entire investment and an approximately equivalent amount of tax-related damages. Judgment for damages under RICO are subject to trebling. Discovery is complete. Trial has been scheduled for May 17, 1999. DLJSC believes that it has meritorious defenses to the complaints and will continue to contest the suits vigorously. Although there can be no assurance, DLJ's management does not believe that the ultimate outcome of this litigation will have a material adverse effect on DLJ's consolidated financial condition. Based upon the information currently available to it, DLJ's management cannot predict whether or not such litigation will have a material adverse effect on DLJ's results of operations in any particular period. DLJSC is a defendant along with certain other parties in four actions involving Mid-American Waste Systems, Inc. ("Mid-American"), which filed a voluntary petition for reorganization pursuant to Chapter 11 of the Bankruptcy Code in January 1997. Three actions seek rescission, compensatory and punitive damages for DLJSC's role in underwriting notes of Mid-American. The other action, filed by the Plan Administrator for the bankruptcy estate of Mid-American, alleges that DLJSC is liable as an underwriter for alleged misrepresentations and omissions in the prospectus for the notes, and liable as financial advisor to Mid-American for allegedly failing to advise Mid-American about its financial condition. DLJSC believes that it has meritorious defenses to the complaints and will continue to contest the suits vigorously. Although there can be no assurance, DLJ's management does not believe that the ultimate outcome of this litigation will have a material adverse effect on DLJ's consolidated financial condition. Based upon information currently available to it, DLJ's management cannot predict whether or not such litigation will have a material adverse effect on DLJ's results of operations in any particular period. Other Matters In addition to the matters described above, the Holding Company and its subsidiaries are involved in various legal actions and proceedings in connection with their businesses. Some of the actions and proceedings have been brought on behalf of various alleged classes of claimants and certain of these claimants seek damages of unspecified amounts. While the ultimate outcome of such matters cannot be predicted with certainty, in the opinion of management no such matter is likely to have a material adverse effect on the Company's consolidated financial position or results of operations. 16) LEASES The Company has entered into operating leases for office space and certain other assets, principally data processing equipment and office furniture and equipment. Future minimum payments under noncancelable leases for 1999 and the succeeding four years are $98.7 million, $92.7 million, $73.4 million, $59.9 million, $55.8 million and $550.1 million thereafter. Minimum future sublease rental income on these noncancelable leases for 1999 and the succeeding four years is $7.6 million, $5.6 million, $4.6 million, $2.3 million, $2.3 million and $25.4 million thereafter. F-34 At December 31, 1998, the minimum future rental income on noncancelable operating leases for wholly owned investments in real estate for 1999 and the succeeding four years is $189.2 million, $177.0 million, $165.5 million, $145.4 million, $122.8 million and $644.7 million thereafter. 17) OTHER OPERATING COSTS AND EXPENSES Other operating costs and expenses consisted of the following:
1998 1997 1996 ----------------- ---------------- ----------------- (In Millions) Compensation costs................................. $ 772.0 $ 721.5 $ 704.8 Commissions........................................ 478.1 409.6 329.5 Short-term debt interest expense................... 26.1 31.7 8.0 Long-term debt interest expense.................... 84.6 121.2 137.3 Amortization of policy acquisition costs........... 292.7 287.3 405.2 Capitalization of policy acquisition costs......... (609.1) (508.0) (391.9) Rent expense, net of sublease income............... 100.0 101.8 113.7 Cursitor intangible assets writedown............... - 120.9 - Other.............................................. 1,056.8 917.9 769.1 ----------------- ---------------- ----------------- Total.............................................. $ 2,201.2 $ 2,203.9 $ 2,075.7 ================= ================ =================
During 1997 and 1996, the Company restructured certain operations in connection with cost reduction programs and recorded pre-tax provisions of $42.4 million and $24.4 million, respectively. The amounts paid during 1998, associated with cost reduction programs, totaled $22.6 million. At December 31, 1998, the liabilities associated with cost reduction programs amounted to $39.4 million. The 1997 cost reduction program included costs related to employee termination and exit costs. The 1996 cost reduction program included restructuring costs related to the consolidation of insurance operations' service centers. Amortization of DAC in 1996 included a $145.0 million writeoff of DAC related to DI contracts. 18) INSURANCE GROUP STATUTORY FINANCIAL INFORMATION Equitable Life is restricted as to the amounts it may pay as dividends to the Holding Company. Under the New York Insurance Law, the Superintendent has broad discretion to determine whether the financial condition of a stock life insurance company would support the payment of dividends to its shareholders. For 1998, 1997 and 1996, statutory net income (loss) totaled $384.4 million, $(351.7) million and $(351.1) million, respectively. Statutory surplus, capital stock and Asset Valuation Reserve ("AVR") totaled $4,728.0 million and $3,907.1 million at December 31, 1998 and 1997, respectively. No dividends have been paid by Equitable Life to the Holding Company to date. At December 31, 1998, the Insurance Group, in accordance with various government and state regulations, had $25.6 million of securities deposited with such government or state agencies. The differences between statutory surplus and capital stock determined in accordance with Statutory Accounting Principles ("SAP") and total shareholders' equity on a GAAP basis are primarily attributable to: (a) inclusion in SAP of an AVR intended to stabilize surplus from fluctuations in the value of the investment portfolio; (b) future policy benefits and policyholders' account balances under SAP differ from GAAP due to differences between actuarial assumptions and reserving methodologies; (c) certain policy acquisition costs are expensed under SAP but deferred under GAAP and amortized over future periods to achieve a matching of revenues and expenses; (d) Federal income taxes are generally accrued under SAP based upon revenues and expenses in the Federal income tax return while under GAAP deferred taxes are provided for timing differences between recognition of revenues and expenses for financial reporting and income tax purposes; (e) valuation of assets under SAP and GAAP differ due to different investment valuation and depreciation methodologies, as well as the deferral of interest-related realized capital gains and losses on fixed income investments; and (f) differences in the accrual methodologies for post-employment and retirement benefit plans. F-35 19) BUSINESS SEGMENT INFORMATION The Company's operations consist of Insurance and Investment Services. The Company's management evaluates the performance of each of these segments independently and allocates resources based on current and future requirements of each segment. Management evaluates the performance of each segment based upon operating results adjusted to exclude the effect of unusual or non-recurring events and transactions and certain revenue and expense categories not related to the base operations of the particular business net of minority interest. Information for all periods is presented on a comparable basis. Intersegment investment advisory and other fees of approximately $61.8 million, $84.1 million and $129.2 million for 1998, 1997 and 1996, respectively, are included in total revenues of the Investment Services segment. These fees, excluding amounts related to discontinued operations of $.5 million, $4.2 million and $13.3 million for 1998, 1997 and 1996, respectively, are eliminated in consolidation. The following tables reconcile each segment's revenues and operating earnings to total revenues and earnings from continuing operations before Federal income taxes and cumulative effect of accounting change as reported on the consolidated statements of earnings and the segments' assets to total assets on the consolidated balance sheets, respectively.
Investment Insurance Services Elimination Total --------------- ----------------- --------------- ---------------- (In Millions) 1998 Segment revenues..................... $ 4,029.8 $ 1,438.4 $ (5.7) $ 5,462.5 Investment gains..................... 64.8 35.4 - 100.2 --------------- ----------------- --------------- ---------------- Total Revenues....................... $ 4,094.6 $ 1,473.8 $ (5.7) $ 5,562.7 =============== ================= =============== ================ Pre-tax operating earnings........... $ 688.6 $ 284.3 $ - $ 972.9 Investment gains , net of DAC and other charges.............. 41.7 27.7 - 69.4 Pre-tax minority interest............ - 141.5 - 141.5 --------------- ----------------- --------------- ---------------- Earnings from Continuing Operations......................... $ 730.3 $ 453.5 $ - $ 1,183.8 =============== ================= =============== ================ Total Assets......................... $ 75,626.0 $ 12,379.2 $ (64.4) $ 87,940.8 =============== ================= =============== ================ 1997 Segment revenues..................... $ 3,990.8 $ 1,200.0 $ (7.7) $ 5,183.1 Investment gains (losses)............ (318.8) 255.1 - (63.7) --------------- ----------------- --------------- ---------------- Total Revenues....................... $ 3,672.0 $ 1,455.1 $ (7.7) $ 5,119.4 =============== ================= =============== ================ Pre-tax operating earnings........... $ 507.0 $ 258.3 $ - $ 765.3 Investment gains (losses), net of DAC and other charges.............. (292.5) 252.7 - (39.8) Non-recurring costs and expenses..... (41.7) (121.6) - (163.3) Pre-tax minority interest............ - 108.5 - 108.5 --------------- ----------------- --------------- ---------------- Earnings from Continuing Operations......................... $ 172.8 $ 497.9 $ - $ 670.7 =============== ================= =============== ================ Total Assets......................... $ 67,762.4 $ 13,691.4 $ (96.1) $ 81,357.7 =============== ================= =============== ================
F-36
Investment Insurance Services Elimination Total --------------- ----------------- --------------- ---------------- (In Millions) 1996 Segment revenues..................... $ 3,789.1 $ 1,105.5 $ (12.6) $ 4,882.0 Investment gains (losses)............ (30.3) 20.5 - (9.8) --------------- ----------------- --------------- ---------------- Total Revenues....................... $ 3,758.8 $ 1,126.0 $ (12.6) $ 4,872.2 =============== ================= =============== ================ Pre-tax operating earnings........... $ 337.1 $ 224.6 $ - $ 561.7 Investment gains (losses), net of DAC and other charges.............. (37.2) 16.9 - (20.3) Reserve strengthening and DAC writeoff........................... (393.0) - - (393.0) Non-recurring costs and expenses........................... (22.3) (1.1) - (23.4) Pre-tax minority interest............ - 83.6 - 83.6 --------------- ----------------- --------------- ---------------- Earnings (Loss) from Continuing Operations.............. $ (115.4) $ 324.0 $ - $ 208.6 =============== ================= =============== ================
20) QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) The quarterly results of operations for 1998 and 1997 are summarized below:
Three Months Ended ------------------------------------------------------------------------------ March 31 June 30 September 30 December 31 ----------------- ----------------- ------------------ ------------------ (In Millions) 1998 Total Revenues................ $ 1,470.2 $ 1,422.9 $ 1,297.6 $ 1,372.0 ================= ================= ================== ================== Earnings from Continuing Operations before Cumulative Effect of Accounting Change........ $ 212.8 $ 197.0 $ 136.8 $ 158.9 ================= ================= ================== ================== Net Earnings.................. $ 213.3 $ 198.3 $ 137.5 $ 159.1 ================= ================= ================== ================== 1997 Total Revenues................ $ 1,266.0 $ 1,552.8 $ 1,279.0 $ 1,021.6 ================= ================= ================== ================== Earnings from Continuing Operations before Cumulative Effect of Accounting Change........ $ 117.4 $ 222.5 $ 145.1 $ 39.4 ================= ================= ================== ================== Net Earnings (Loss)........... $ 114.1 $ 223.1 $ 144.9 $ (44.9) ================= ================= ================== ==================
Net earnings for the three months ended December 31, 1997 includes a charge of $212.0 million related to additions to valuation allowances on and writeoffs of real estate of $225.2 million, and reserve strengthening on discontinued operations of $84.3 million offset by a reversal of prior years tax reserves of $97.5 million. F-37 21) INVESTMENT IN DLJ At December 31, 1998, the Company's ownership of DLJ interest was approximately 32.5%. The Company's ownership interest will be further reduced upon the issuance of common stock after the vesting of forfeitable restricted stock units acquired by and/or the exercise of options granted to certain DLJ employees. DLJ restricted stock units represents forfeitable rights to receive approximately 5.2 million shares of DLJ common stock through February 2000. The results of operations of DLJ are accounted for on the equity basis and are included in commissions, fees and other income in the consolidated statements of earnings. The Company's carrying value of DLJ is included in investment in and loans to affiliates in the consolidated balance sheets. Summarized balance sheets information for DLJ, reconciled to the Company's carrying value of DLJ, are as follows:
December 31, ------------------------------------ 1998 1997 ---------------- ----------------- (In Millions) Assets: Trading account securities, at market value............................ $ 13,195.1 $ 16,535.7 Securities purchased under resale agreements........................... 20,063.3 22,628.8 Broker-dealer related receivables...................................... 34,264.5 28,159.3 Other assets........................................................... 4,759.3 3,182.0 ---------------- ----------------- Total Assets........................................................... $ 72,282.2 $ 70,505.8 ================ ================= Liabilities: Securities sold under repurchase agreements............................ $ 35,775.6 $ 36,006.7 Broker-dealer related payables......................................... 26,161.5 26,127.2 Short-term and long-term debt.......................................... 3,997.6 3,249.5 Other liabilities...................................................... 3,219.8 2,860.9 ---------------- ----------------- Total liabilities...................................................... 69,154.5 68,244.3 DLJ's company-obligated mandatorily redeemed preferred securities of subsidiary trust holding solely debentures of DLJ...... 200.0 200.0 Total shareholders' equity............................................. 2,927.7 2,061.5 ---------------- ----------------- Total Liabilities, Cumulative Exchangeable Preferred Stock and Shareholders' Equity................................................. $ 72,282.2 $ 70,505.8 ================ ================= DLJ's equity as reported............................................... $ 2,927.7 $ 2,061.5 Unamortized cost in excess of net assets acquired in 1985 and other adjustments................................................ 23.7 23.5 The Holding Company's equity ownership in DLJ.......................... (1,002.4) (740.2) Minority interest in DLJ............................................... (1,118.2) (729.3) ---------------- ----------------- The Company's Carrying Value of DLJ.................................... $ 830.8 $ 615.5 ================ =================
F-38 Summarized statements of earnings information for DLJ reconciled to the Company's equity in earnings of DLJ is as follows:
1998 1997 ---------------- ----------------- (In Millions) Commission, fees and other income...................................... $ 3,184.7 $ 2,430.7 Net investment income.................................................. 2,189.1 1,652.1 Dealer, trading and investment gains, net.............................. 33.2 557.7 ---------------- ----------------- Total revenues......................................................... 5,407.0 4,640.5 Total expenses including income taxes.................................. 5,036.2 4,232.2 ---------------- ----------------- Net earnings........................................................... 370.8 408.3 Dividends on preferred stock........................................... 21.3 12.2 ---------------- ----------------- Earnings Applicable to Common Shares................................... $ 349.5 $ 396.1 ================ ================= DLJ's earnings applicable to common shares as reported................. $ 349.5 $ 396.1 Amortization of cost in excess of net assets acquired in 1985.......... (.8) (1.3) The Holding Company's equity in DLJ's earnings......................... (136.8) (156.8) Minority interest in DLJ............................................... (99.5) (109.1) ---------------- ----------------- The Company's Equity in DLJ's Earnings................................. $ 112.4 $ 128.9 ================ =================
22) ACCOUNTING FOR STOCK-BASED COMPENSATION The Holding Company sponsors a stock option plan for employees of Equitable Life. DLJ and Alliance each sponsor their own stock option plans for certain employees. The Company has elected to continue to account for stock-based compensation using the intrinsic value method prescribed in APB No. 25. Had compensation expense for the Holding Company, DLJ and Alliance Stock Option Incentive Plan options been determined based on SFAS No. 123's fair value based method, the Company's pro forma net earnings for 1998, 1997 and 1996 would have been:
1998 1997 1996 --------------- --------------- --------------- (In Millions) Net Earnings: As reported............................................. $ 708.2 $ 437.2 $ 10.3 Pro forma............................................... 678.4 426.3 3.3
The fair values of options granted after December 31, 1994, used as a basis for the above pro forma disclosures, were estimated as of the dates of grant using the Black-Scholes option pricing model. The option pricing assumptions for 1998, 1997 and 1996 are as follows:
Holding Company DLJ Alliance ------------------------------ ------------------------------- ---------------------------------- 1998 1997 1996 1998 1997 1996 1998 1997 1996 --------- ---------- --------- ---------- -------------------- ---------------------- ----------- Dividend yield...... 0.32% 0.48% 0.80% 0.69% 0.86% 1.54% 6.50% 8.00% 8.00% Expected volatility. 28% 20% 20% 40% 33% 25% 29% 26% 23% Risk-free interest rate.............. 5.48% 5.99% 5.92% 5.53% 5.96% 6.07% 4.40% 5.70% 5.80% Expected life in years.......... 5 5 5 5 5 5 7.2 7.2 7.4 Weighted average fair value per option at grant-date........ $22.64 $12.25 $6.94 $16.27 $10.81 $4.03 $3.86 $2.18 $1.35
F-39 A summary of the Holding Company, DLJ and Alliance's option plans is as follows:
Holding Company DLJ Alliance ----------------------------- ----------------------------- ----------------------------- Weighted Weighted Weighted Average Average Average Exercise Exercise Exercise Price of Price of Price of Shares Options Shares Options Units Options (In Millions) Outstanding (In Millions) Outstanding (In Millions) Outstanding --------------- ------------- --------------- ------------- ----------------------------- Balance as of January 1, 1996........ 6.7 $20.27 18.4 $13.50 9.6 $ 8.86 Granted................ .7 $24.94 4.2 $16.27 1.4 $12.56 Exercised.............. (.1) $19.91 - (.8) $ 6.82 Expired................ - - - Forfeited.............. (.6) $20.21 (.4) $13.50 (.2) $ 9.66 --------------- ------------- --------------- Balance as of December 31, 1996...... 6.7 $20.79 22.2 $14.03 10.0 $ 9.54 Granted................ 3.2 $41.85 6.4 $30.54 2.2 $18.28 Exercised.............. (1.6) $20.26 (.2) $16.01 (1.2) $ 8.06 Forfeited.............. (.4) $23.43 (.2) $13.79 (.4) $10.64 --------------- ------------- --------------- Balance as of December 31, 1997...... 7.9 $29.05 28.2 $17.78 10.6 $11.41 Granted................ 4.3 $66.26 1.5 $38.59 2.8 $26.28 Exercised.............. (1.1) $21.18 (1.4) $14.91 (.9) $ 8.91 Forfeited.............. (.4) $47.01 (.1) $17.31 (.2) $13.14 --------------- ------------- --------------- Balance as of December 31, 1998...... 10.7 $44.00 28.2 $19.04 12.3 $14.94 =============== ============= ===============
F-40 Information about options outstanding and exercisable at December 31, 1998 is as follows:
Options Outstanding Options Exercisable ---------------------------------------------------- ----------------------------------- Weighted Average Weighted Weighted Range of Number Remaining Average Number Average Exercise Outstanding Contractual Exercise Exercisable Exercise Prices (In Millions) Life (Years) Price (In Millions) Price --------------------------------------- ----------------- ---------------- ------------------- --------------- Holding Company ---------------------- $18.125 -$27.75 3.7 5.19 $20.97 3.0 $20.33 $28.50 -$45.25 3.0 8.68 $41.79 - $50.63 -$66.75 2.1 9.21 $52.73 - $81.94 -$82.56 1.9 9.62 $82.56 - ----------------- ------------------- $18.125 -$82.56 10.7 7.75 $44.00 3.0 $20.33 ================= ================= ================ ==================== ============== DLJ ---------------------- $13.50 -$25.99 22.3 7.1 $14.59 21.4 $15.05 $26.00 -$38.99 5.0 8.8 $33.94 - $39.00 -$52.875 .9 9.4 $44.65 - ----------------- ------------------- $13.50 -$52.875 28.2 7.5 $19.04 21.4 $15.05 ================= ================== ============== ===================== ============= Alliance ---------------------- $ 3.03 -$ 9.69 3.1 4.5 $ 8.03 2.4 $ 7.57 $ 9.81 -$10.69 2.0 5.3 $10.05 1.6 $10.07 $11.13 -$13.75 2.4 7.5 $11.92 1.0 $11.77 $18.47 -$18.78 2.0 9.0 $18.48 .4 $18.48 $22.50 -$26.31 2.8 9.9 $26.28 - - ----------------- ------------------- $ 3.03 -$26.31 12.3 7.2 $14.94 5.4 $ 9.88 ================= =================== ============= ===================== =============
F-41 PART C OTHER INFORMATION Item 24. Financial Statements and Exhibits. (a) Financial Statements included in Part B. 1. Separate Account No. 45: - Report of Independent Accountants - PricewaterhouseCoopers LLP; - Statements of Assets and Liabilities for the Year Ended December 31, 1998 - Statements of Operations for the Year Ended December 31, 1998; - Statements of Changes in Net Assets for the Years Ended December 31, 1998 and 1997; and - Notes to Financial Statements. 2. The Equitable Life Assurance Society of the United States: - Report of Independent Accountants - PricewaterhouseCoopers LLP; - Consolidated Balance Sheets as of December 31, 1998 and 1997; - Consolidated Statements of Earnings for Years Ended December 31, 1998, 1997 and 1996; - Consolidated Statements of Equity for Years Ended December 31, 1998, 1997 and 1996; - Consolidated Statements of Cash Flows for Years Ended December 31, 1998, 1997 and 1996; and - Notes to Consolidated Financial Statements. (b) Exhibits. The following exhibits are filed herewith: 1. Resolutions of the Board of Directors of The Equitable Life Assurance Society of the United States ("Equitable") authorizing the establishment of the Registrant, previously refiled with this Registration Statement on Form N-4 (File No. 33-83750) on February 27, 1998. 2. Not applicable. 3. (a) Form of Distribution Agreement among Equitable Distributors, Inc., Separate Account No. 45 and Equitable Life Assurance Society of the United States, previously refiled electronically with this Registration Statement on Form N-4 (File No. 33-83750) on February 27, 1998. (b) Distribution and Servicing Agreement among Equico Securities, Inc. (now AXA Advisors, LLC), The Equitable Life Assurance Society of the United States and Equitable Variable Life Insurance Company, dated as of May 1, 1994, incorporated herein by reference to Exhibit 3(c) to the Registration Statement on Form N-4 (File No. 2-30070) on February 14, 1995. (c) Letter of Agreement for Distribution Agreement among The Equitable Life Assurance Society of the United States and EQ Financial Consultants, Inc. (now AXA Advisors, LLC), dated April 20, 1998, previously filed with this Registration Statement, File No. 33-83750 on May 1, 1998. C-1 4. (a) Form of group annuity contract no. 1050-94IC, previously refiled electronically with this Registration Statement on Form N-4 (File No. 33-83750) on February 27, 1998. (b) Forms of group annuity certificate nos. 94ICA and 94ICB, previously refiled electronically with this Registration Statement on Form N-4 (File No. 33-83750) on February 27, 1998. (c) Forms of endorsement nos. 94ENIRAI, 94ENNQI and 94ENMVAI to contract no. 1050-94IC and data pages nos. 94ICA/BIM and 94ICA/BMVA, previously refiled electronically with this Registration Statement on Form N-4 (File No. 33-83750) on February 27, 1998. (d) Forms of data pages no. 94ICA/BIM (IRA) and (NQ), previously refiled electronically with this Registration Statement on Form N-4 (File No. 33-83750) on February 27, 1998. (e) Form of endorsement no. 95ENLCAI to contract no. 1050-94IC and data pages no. 94ICA/BLCA, previously refiled electronically with this Registration Statement on Form N-4 (File No. 33-83750) on February 27, 1998. (f) Forms of data pages for Rollover IRA, IRA Assured Payment Option, IRA Assured Payment Option Plus, Accumulator, Assured Growth Plan, Assured Growth Plan (Flexible Income Program), Assured Payment Plan (Period Certain) and Assured Payment Plan (Life with a Period Certain), previously filed with this Registration Statement No. 33-83750 on August 31, 1995. (g) Forms of data pages for Rollover IRA, IRA Assured Payment Option Plus and Accumulator, previously filed with this Registration Statement No. 33-83750 on April 23, 1996. (h) Form of Guaranteed Minimum Income Benefit Endorsement to Contract Form No. 10-50-94IC and the Certificates under the Contract, previously filed with this Registration Statement No. 33-83750 on April 23, 1996. (i) Form of data pages for Accumulator and Rollover IRA, previously filed with this Registration Statement No. 33-83750 on October 15, 1996. (j) Forms of data pages for Accumulator and Rollover IRA, previously filed with this Registration Statement No. 33-83750 on April 30, 1997. (k) Forms of data pages for Accumulator and Rollover IRA, previously filed with this Registration Statement No. 33-83750 on December 31, 1997. (l) Form of endorsement No. 98Roth to Contract Form No. 1050-94IC and the Certificates under the Contract, previously filed with this Registration Statement No. 33-83750 on December 31, 1997. (m) Form of data pages No. 94ICB and 94ICBMVA for Equitable Accumulator (IRA) Certificates, previously filed with this Registration Statement on Form N-4 (File No. 33-83750) on February 27, 1998. (n) Form of data pages No. 94ICB and 94ICBMVA for Equitable Accumulator (NQ) Certificates, previously filed with this Registration Statement on Form N-4 (File No. 33-83750) on February 27, 1998. (o) Form of data pages No. 94ICB and 94ICBMVA for Equitable Accumulator (QP) Certificates, previously filed with this Registration Statement on Form N-4 (File No. 33-83750) on February 27, 1998. (p) Form of data pages No. 94ICB, 94ICBMVA and 94ICBLCA for Assured Payment Option Certificates, previously filed with this Registration Statement on Form N-4 (File No. 33-83750) on February 27, 1998. (q) Form of data pages No. 94ICB, 94ICBMVA and 94ICBLCA for APO Plus Certificates, previously filed with this Registration Statement on Form N-4 (File No. 33-83750) on February 27, 1998. (r) Form of Endorsement applicable to Defined Benefit Qualified Plan Certificates No. 98ENDQPI, previously filed with this Registration Statement File No. 33-83750 on May 1, 1998. (s) Form of Endorsement applicable to Non-Qualified Certificates No. 98ENJONQI, previously filed with this Registration Statement on Form N-4 (File No. 33-83750) on February 27, 1998. (t) Form of Endorsement applicable to Charitable Remainder Trusts No. 97ENCRTI, previously filed with this Registration Statement on Form N-4 (File No. 33-83750) on February 27, 1998. (u) Form of Guaranteed Interest Account endorsement no. 98ENGAIAII, and data pages 94ICA/B, incorporated herein by reference to Exhibit No. 4(r) to the Registration Statement on Form N-4 (File No. 333-05593) filed on May 1, 1998. (v) Form of Equitable Accumulator TSA Data pages, previously filed with this Registration Statement File No. 33-83750 on May 22, 1998. (w) Form of Endorsement Applicable to TSA Data Certificates, incorporated by reference to Exhibit 4(t) to the Registration Statement on Form N-4 (File No. 333-05593) filed on May 22, 1998. (x) Form of data pages for Equitable Accumulator (IRA, NQ, QP, and TSA), previously filed with this Registration Statement File No. 33-83750 on November 30, 1998. (y) Form of data pages (as revised) for Equitable Accumulator (IRA, NQ, QP, and TSA), previously filed with this Registration Statement File No. 33-83750 on December 28, 1998. (z) Form of Endorsement No. 98ENIRAI-IM to Contract No. 1050-94IC and the Certificates under the Contract, previously filed with this Registration Statement File No. 33-83750 on December 28, 1998. (a)(a)(i) Form of Data Pages for Equitable Accumulator Flexible Premium IRA, previously filed with this Registration Statement File No. 33-83750 on April 30, 1999. (a)(a)(ii) Form of data pages for Equitable Accumulator Flexible Premium Roth IRA, previously filed with this Registration Statement File No. 33-83750 on April 30, 1999. (b)(b) Form of data pages for Equitable Accumulator NQ, QP and TSA, previously filed with this Registration Statement File No. 33-83750 on April 30, 1999. (c)(c) Form of data pages for new version of Equitable Accumulator. 5. (a) Forms of application used with the IRA, NQ and Fixed Annuity Markets, previously refiled electronically with this Registration Statement on Form N-4 (File No. 33-83750) on February 27, 1998. (b)(i) Forms of Enrollment Form/Application for Rollover IRA, Choice Income Plan and Accumulator, previously filed with this Registration Statement No. 33-83750 on April 23, 1996. C-2 (b)(ii) Form of Enrollment Form/Application for Equitable Accumulator (IRA, NQ and QP), incorporated herein by reference to Exhibit No. 5(e) to the Registration Statement on Form N-4 (File No. 333-05593) filed on May 1, 1998. (c) Forms of Enrollment Form/Application for Accumulator and Rollover IRA, previously filed with this Registration Statement No. 33-83750 on April 30, 1997. (d) Forms of Enrollment Form/Application for Accumulator and Rollover IRA, previously filed with this Registration Statement No. 33-83750 on December 31, 1997. (e) Form of Enrollment Form/Application No. 126737 (5/98) for Equitable Accumulator (IRA, NQ and QP), previously filed with this Registration Statement on Form N-4 (File No. 33-83750) on February 27, 1998. (f) Form of Enrollment Form/Application for Equitable Accumulator (IRA, NQ, QP, and TSA), previously filed with this Registration Statement File No. 33-83750 on May 22, 1998. (g) Form of Enrollment Form/Application for Equitable Accumulator (IRA, NQ, QP, and TSA), previously filed with this Registration Statement File No. 33-83750 on November 30, 1998. (h) Form of Enrollment Form/Application for Equitable Accumulator (as revised) for (IRA, NQ, QP, and TSA), previously filed with this Registration Statement File No. 33-83750 on December 28, 1998. (i) Form of Enrollment Form/Application for Equitable Accumulator, previously filed with this Registration Statement File No. 33-83750 on April 30, 1999. 6. (a) Restated Charter of Equitable, as amended January 1, 1997, previously filed with this Registration Statement No. 33-83750 on March 6, 1997. (b) By-Laws of Equitable, as amended November 21, 1996, previously filed with this Registration Statement No. 33-83750 on March 6, 1997. 7. Not applicable. 8. Form of Participation Agreement among EQ Advisors Trust, Equitable, Equitable Distributors, Inc. and EQ Financial Consultants, Inc., incorporated by reference to the Registration Statement of EQ Advisors Trust on Form N-1A. (File Nos. 333-17217 and 811-07953). 9. (a) Opinion and Consent of Jonathan Gaines, Esq., Vice President and Associate General Counsel of Equitable, as to the legality of the securities being offered, previously filed with this Registration Statement No. 33-83750 on April 29, 1997. (b) Opinion and Consent of Mary P. Breen, Esq., Vice President and Associate General Counsel of Equitable, as to the legality of the securities being registered, previously filed with this Registration Statement No. 33-83750 on February 27, 1998. (c) Opinion and Consent of Robin Wagner, Esq., Vice President and Counsel of Equitable, as to the legality of the securities being registered. 10. (a) Consent of PricewaterhouseCoopers LLP. (b) Powers of Attorney, previously filed with this Registration Statement File No. 33-83750 on April 30, 1999. (c) Power of Attorney. 11. Not applicable. 12. Not applicable. 13. (a) Formulae for Determining Money Market Fund Yield for a Seven-Day Period for the INCOME MANAGER, previously refiled with this Registration Statement on Form N-4 (File No. 33-83750) on February 27, 1998. (b) Formulae for Determining Cumulative and Annualized Rates of Return for the INCOME MANAGER, previously refiled with this Registration Statement on Form N-4 (File No. 33-83750) on February 27, 1998. (c) Formulae for Determining Standardized Performance Value and Annualized Average Performance Ratio for INCOME MANAGER Certificates, previously refiled with this Registration Statement on Form N-4 (File No. 33-83750) on February 27, 1998. C-3 Item 25: Directors and Officers of Equitable. Set forth below is information regarding the directors and principal officers of Equitable. Equitable's address is 1290 Avenue of Americas, New York, New York 10104. The business address of the persons whose names are preceded by an asterisk is that of Equitable. POSITIONS AND NAME AND PRINCIPAL OFFICES WITH BUSINESS ADDRESS EQUITABLE - ---------------- --------- DIRECTORS Francoise Colloc'h Director AXA 23, Avenue Matignon 75008 Paris, France Henri de Castries Director AXA 23, Avenue Matignon 75008 Paris, France Joseph L. Dionne Director The McGraw-Hill Companies 1221 Avenue of the Americas New York, NY 10020 Denis Duverne Director AXA 23, Avenue Matignon 75008 Paris, France Jean-Rene Fourtou Director Rhone-Poulenc S.A. 25 Quai Paul Doumer 92408 Courbevoie Cedex, France Norman C. Francis Director Xavier University of Louisiana 7325 Palmetto Street New Orleans, LA 70125 C-4 POSITIONS AND NAME AND PRINCIPAL OFFICES WITH BUSINESS ADDRESS EQUITABLE - ---------------- --------- Donald J. Greene Director LeBouef, Lamb, Greene & MacRae 125 West 55th Street New York, NY 10019-4513 John T. Hartley Director Harris Corporation 1025 NASA Boulevard Melbourne, FL 32919 John H.F. Haskell Jr. Director Warburg Dillion Read LLC 535 Madison Avenue New York, NY 10028 Mary R. (Nina) Henderson Director International Plaza P.O. Box 8000 Englewood Cliffs, NJ 07632-9976 W. Edwin Jarmain Director Jarmain Group Inc. 121 King Street West Suite 2525 Toronto, Ontario M5H 3T9, Canada George T. Lowy Director Cravath, Swaine & Moore 825 Eighth Avenue New York, NY 10019 C-5 POSITIONS AND NAME AND PRINCIPAL OFFICES WITH BUSINESS ADDRESS EQUITABLE - ---------------- --------- Didier Pineau-Valencienne Director Schneider S.A. 64-70 Avenue Jean-Baptiste Clement 92646 Boulogne-Billancourt Cedex France George J. Sella, Jr. Director P.O. Box 397 Newton, NJ 07860 Peter J. Tobin Director St. John's University 8000 Utopia Parkway Jamaica, NY 11439 Dave H. Williams Director Alliance Capital Management Corporation 1345 Avenue of the Americas New York, NY 10105 OFFICER-DIRECTORS - ----------------- *Michael Hegarty President, Chief Operating Officer and Director *Edward D. Miller Chairman of the Board, Chief Executive Officer and Director * Stanley B. Tulin Vice Chairman of the Board, Chief Financial Officer and Director OTHER OFFICERS - -------------- *Leon Billis Executive Vice President and Chief Information Officer *Derry Bishop Executive Vice President and Chief Agency Officer *Harvey Blitz Senior Vice President *Robert T. Brockbank Executive Vice President and AXA Group Deputy Chief Information Officer *Kevin R. Byrne Senior Vice President and Treasurer *John A. Caroselli Executive Vice President *Alvin H. Fenichel Senior Vice President and Controller C-6 POSITIONS AND NAME AND PRINCIPAL OFFICES WITH BUSINESS ADDRESS EQUITABLE - ---------------- --------- *Paul J. Flora Senior Vice President and Auditor *Robert E. Garber Executive Vice President and General Counsel *James D. Goodwin Vice President *Edward J. Hayes Senior Vice President *Mark A. Hug Senior Vice President *Donald R. Kaplan Senior Vice President and Chief Compliance Officer and Associate General Counsel *Michael S. Martin Executive Vice President and Chief Marketing Officer *Richard J. Matteis Executive Vice President *Peter D. Noris Executive Vice President and Chief Investment Officer *Brian S. O'Neil Executive Vice President *Anthony C. Pasquale Senior Vice President *Pauline Sherman Senior Vice President, Secretary and Associate General Counsel *Samuel B. Shlesinger Senior Vice President *Richard V. Silver Senior Vice President and Deputy General Counsel *Jose Suquet Senior Executive Vice President and Chief Distribution Officer *Naomi Weinstein Vice President *Gregory Wilcox Executive Vice President *R. Lee Wilson Executive Vice President *Maureen K. Wolfson Vice President C-7 Item 26. Persons Controlled by or Under Common Control with the Insurance Company or Registrant. Separate Account No. 45 of The Equitable Life Assurance Society of the United States (the "Separate Account") is a separate account of Equitable. Equitable, a New York stock life insurance company, is a wholly owned subsidiary of AXA Financial, Inc. (the "Holding Company"), a publicly traded company. The largest stockholder of the Holding Company is AXA which as of October 4, 1999 beneficially owned 58.1% of the Holding Company's outstanding common stock. AXA is able to exercise significant influence over the operations and capital structure of the Holding Company and its subsidiaries, including Equitable. AXA, a French company, is the holding company for an international group of insurance and related financial services companies. C-8 ORGANIZATION CHART OF EQUITABLE'S AFFILIATES AXA Financial, Inc. (formerly the Equitable Companies, Incorporated) (1991) (Delaware) Donaldson Lufkin & Jenrette, Inc. (1933) (Delaware) (39.7%) (See Addendum B(1) for subsidiaries) AXA Client Solutions, LLC (1999) (Delaware) AXA Distribution Holding Corporation (1999) (Delaware) AXA Advisors, LLC (formerly EQ Financial Consultants, Inc. (1971) Delaware)(a)(b) Equitable Life Assurance Society of the United States (1989) (New York)(a)(b) Donaldson, Lufkin & Jenrette, Inc. (1985 by EIC; 1993 by EHC) (Delaware) (34.4%) (See Addendum B(1) for subsidiaries) The Equitable of Colorado, Inc. (l983) (Colorado) EVLICO, INC. (1995) (Delaware) EVLICO East Ridge, Inc. (1995) (California) GP/EQ Southwest, Inc. (1995) (Texas) Franconom, Inc. (1985) (Pennsylvania) Frontier Trust Company (1987) (North Dakota) Gateway Center Buildings, Garage, and Apartment Hotel, Inc. (inactive) (pre-l970) (Pennsylvania) Equitable Deal Flow Fund, L.P. Equitable Managed Assets (Delaware) EREIM LP Associates (99%) EML Associates, L.P. (19.8%) Alliance Capital Management L.P. (2.7% limited partnership interest) ACMC, Inc. (1991) (Delaware)(s) Alliance Capital Management L.P. (1988) (Delaware) (39.1% limited partnership interest) EVCO, Inc. (1991) (New Jersey) EVSA, Inc. (1992) (Pennsylvania) Prime Property Funding, Inc. (1993) (Delaware) Wil Gro, Inc. (1992) (Pennsylvania) Equitable Underwriting and Sales Agency (Bahamas) Limited (1993) (Bahamas) Equitable Distributors, Inc. (1988) Delaware(a) (a) Registered Broker/Dealer (b) Registered Investment Advisor C-9 AXA Financial, Inc. (cont.) Donaldson Lufkin & Jenrette, Inc. (cont.) AXA Client Solutions, LLC (cont.) AXA Distribution Holding Corp. (cont.) Equitable Life Assurance Society of the United States (cont.) Fox Run, Inc. (1994) (Massachusetts) STCS, Inc. (1992) (Delaware) CCMI Corporation (1994) (Maryland) FTM Corporation (1994) (Maryland) Equitable BJVS, Inc. (1992) (California) Equitable Rowes Wharf, Inc. (1995) (Massachusetts) Camelback JVS, Inc. (1995) (Arizona) ELAS Realty, Inc. (1996) (Delaware) 100 Federal Street Realty Corporation (Massachusetts) Equitable Structured Settlement Corporation (1996) (Delaware) Prime Property Funding II, Inc. (1997) (Delaware) Sarasota Prime Hotels, Inc. (1997) (Florida) ECLL, Inc. (1997) (Michigan) Equitable Holdings LLC (1997) (New York) (into which Equitable Holding Corporation was merged in 1997) ELAS Securities Acquisition Corp. (l980) (Delaware) 100 Federal Street Funding Corporation (Massachusetts) EquiSource of New York, Inc. (1986) (New York) (See Addendum A for subsidiaries) Equitable Casualty Insurance Company (l986) (Vermont) EREIM LP Corp. (1986) (Delaware) EREIM LP Associates (1%) EML Associates (.02%) (a) Registered Broker/Dealer (b) Registered Investment Advisor C-10 AXA Financial, Inc. (cont.) Donaldson Lufkin & Jenrette, Inc. (cont.) AXA Client Solutions, LLC (cont.) AXA Distribution Holding Corp. (cont.) The Equitable Life Assurance Society of the United States (cont.) Equitable Holdings, LLC (cont.) Equitable JVS, Inc. (1988) (Delaware) Astor/Broadway Acquisition Corp. (1990) (New York) Astor Times Square Corp. (1990) (New York) PC Landmark, Inc. (1990) (Texas) Equitable JVS II, Inc. (1994) (Maryland) EJSVS, Inc. (1995) (New Jersey) Donaldson, Lufkin & Jenrette, Inc. (1985 by EIC; 1993 by EQ and EHC) (Delaware) (34.4%) (See Addendum B(1) for subsidiaries) JMR Realty Services, Inc. (1994) (Delaware) Equitable Investment Corporation (l97l) (New York) Stelas North Carolina Limited Partnership (50% limited partnership interest) (l984) Equitable JV Holding Corporation (1989) (Delaware) Alliance Capital Management Corporation (l991) (Delaware) (b) (See Addendum B(2) for subsidiaries) Equitable Capital Management Corporation (l985) (Delaware) (b) Alliance Capital Management L.P. (1988) (Delaware) (14.7% limited partnership interest) EQ Services, Inc. (1992) (Delaware) EREIM Managers Corp. (1986) (Delaware) ML/EQ Real Estate Portfolio, L.P. EML Associates, L.P. (a) Registered Broker/Dealer (b) Registered Investment Advisor C-11 ORGANIZATION CHART OF EQUITABLE'S AFFILIATES ADDENDUM A - SUBSIDIARY OF EQUITABLE HOLDINGS, LLC HAVING MORE THAN FIVE SUBSIDIARIES ------------------------------------------------------- EquiSource of New York, Inc. (formerly Traditional Equinet Business Corporation of New York) has the following subsidiaries that are brokerage companies to make available to Equitable Agents within each state traditional (non-equity) products and services not manufactured by Equitable: EquiSource of Alabama, Inc. (1986) (Alabama) EquiSource of Arizona, Inc. (1986) (Arizona) EquiSource of Arkansas, Inc. (1987) (Arkansas) EquiSource Insurance Agency of California, Inc. (1987) (California) EquiSource of Colorado, Inc. (1986) (Colorado) EquiSource of Delaware, Inc. (1986) (Delaware) EquiSource of Hawaii, Inc. (1987) (Hawaii) EquiSource of Maine, Inc. (1987) (Maine) EquiSource Insurance Agency of Massachusetts, Inc. (1988) (Massachusetts) EquiSource of Montana, Inc. (1986) (Montana) EquiSource of Nevada, Inc. (1986) (Nevada) EquiSource of New Mexico, Inc. (1987) (New Mexico) EquiSource of Pennsylvania, Inc. (1986) (Pennsylvania) EquiSource of Puerto Rico, Inc. (1997) (Puerto Rico) EquiSource Insurance Agency of Utah, Inc. (1986) (Utah) EquiSource of Washington, Inc. (1987) (Washington) EquiSource of Wyoming, Inc. (1986) (Wyoming) C-12 ORGANIZATION CHART OF EQUITABLE'S AFFILIATES ADDENDUM B - INVESTMENT SUBSIDIARIES HAVING MORE THAN FIVE SUBSIDIARIES ------------------------------------ Donaldson, Lufkin & Jenrette, Inc. has the following subsidiaries, and approximately 150 other subsidiaries, most of which are special purpose subsidiaries (the number fluctuates according to business needs): Donaldson, Lufkin & Jenrette, Securities Corporation (1985) (Delaware) (a) (b) Wood, Struthers & Winthrop Management Corp. (1985) (Delaware) (b) Autranet, Inc. (1985) (Delaware) (a) DLJ Real Estate, Inc. DLJ Capital Corporation (b) DLJ Mortgage Capital, Inc. (1988) (Delaware) Alliance Capital Management Corporation (as general partner) (b) has the following subsidiaries: Alliance Capital Management L.P. (1988) (Delaware) (b) Alliance Capital Management Corporation of Delaware, Inc. (Delaware) Alliance Fund Services, Inc. (Delaware) (a) Alliance Fund Distributors, Inc. (Delaware) (a) Alliance Capital Oceanic Corp. (Delaware) Alliance Capital Management Australia Pty. Ltd. (Australia) Meiji - Alliance Capital Corp. (Delaware) (50%) Alliance Capital (Luxembourg) S.A. (99.98%) Alliance Eastern Europe Inc. (Delaware) Alliance Barra Research Institute, Inc. (Delaware) (50%) Alliance Capital Management Canada, Inc. (Canada) (99.99%) Alliance Capital Management (Brazil) Llda Alliance Capital Global Derivatives Corp. (Delaware) Alliance International Fund Services S.A. (Luxembourg) Alliance Capital Management (India) Ltd. (Delaware) Alliance Capital Mauritius Ltd. Alliance Corporate Finance Group, Incorporated (Delaware) Equitable Capital Diversified Holdings, L.P. I Equitable Capital Diversified Holdings, L.P. II Curisitor Alliance L.L.C. (Delaware) Curisitor Holdings Limited (UK) Alliance Capital Management (Japan), Inc. Alliance Capital Management (Asia) Ltd. Alliance Capital Management (Turkey), Ltd. Cursitor Alliance Management Limited (UK) (a) Registered Broker/Dealer (b) Registered Investment Advisor C-13 AXA GROUP CHART The information listed below is dated as of January 1, 1999; percentages shown represent voting power. The name of the owner is noted when AXA indirectly controls the company. AXA INSURANCE AND REINSURANCE BUSINESS HOLDING COMPANY COUNTRY VOTING POWER - ------- ------- ------------ AXA Assurances IARD France 100% by AXA France Assurance AXA Assurances Vie France 88.1% by AXA France Assurance and 11.9% by AXA Collectives AXA Courtage IARD France 100% by AXA France Assurance and AXA Global Risks AXA Conseil Vie France 100% by AXA France Assurance AXA Conseil IARD France 100% by AXA France Assurance AXA Direct France 100% by AXA Direct Assurances IARD France 100% by AXA Direct Direct Assurances Vie France 100% by AXA Direct Tellit Vie Germany 100% by AKA-CKAG Axiva France 100% by AXA France Assurance and AXA Conseil Vie Juridica France 100% by AXA France Assurance AXA Assistance France France 100% by AXA Assistance SA AXA Collectives France AXA France Assurance, AXA Assurances IARD and AXA Courtage IARD Mutuelle Societe Beaujon France 100% by AXA Lor Finance France 99.3% by AXA Jour Finance France 100% by AXA Conseil and by AXA Assurances IARD Financiere 45 France 99.8% by AXA Mofipar France 99.9% by AXA NSM Vie France 40.1% by AXA France Assurance Saint Georges Re France 100% by France Assurance AXA Global Risks France 100% owned by AXA France Assurance, AXA Courtage Assurance Mutuelle, and AXA Assurances IARD Mutuelle Argovie France 94% by Axiva AXA Assistance SA France 76.8% by AXA and 23.2% by AXA France Assurance S.P.S. Reassurance France 69.9% by AXA Reassurance AXA Participations France 50% by AXA, 25% by AXA Global Risks and 25% by AXA Courtage IARD Colisee Excellence France 100% by Financiere Mermoz Financiere Mermoz France 100% by AXA C-14 COMPANY COUNTRY VOTING POWER - ------- ------- ------------ AXA Assistance SA France 76.8% by AXA and 23.2% by AXA France Assurance S.P.S. Reassurance France 69.9% by AXA Reassurance AXA Participations France 50% by AXA, 25% by AXA Global Risks and 25% by AXA Courtage IARD Colisee Excellence France 100% by Financiere Mermoz Financiere Mermoz France 100% by AXA AXA France Assurance France 100% by AXA Thema Vie France 99.6% by Axiva AXA-Colonia Konzern AG (AXA- CKAG) Germany 39.7% by Vinci BV, 25.6% by Kolnische Verwaltungs and 9.4% by AXA Finaxa Belgium Belgium 100% by AXA AXA Belgium Belgium 86.1% by Royale Belge and 13.9% by Parcolvi De Kortrijske Verzekering Belgium 99.8% by AXA Belgium Juris Belgium 100% owned by AXA Belgium Royale Belge Belgium 51.2% by AXA Holdings Belgium, 44.5% by AXA and 3.2% by AKA Global Risks Royale Belge 1994 Belgium 97.8% by Royale Belge and 2% by UAB UAB Belgium 100% by Royale Belge Ardenne Prevoyante Belgium 99.4% by Royale Belge GB Lex Belgium 55% by Royale Belge, 25% by Royale Belge 1994, 10% by Juridica and 10% by AXA Conseil IARD Royale Belge Re Belgium 100% by Royale Belge Parcolvi Belgium 100% by Vinci Belgium Holding BV Vinci Belgium Belgium 99.5% by Vinci BV Finaxa Luxembourg Luxembourg 100% AXA Assurance IARD Luxembourg Luxembourg 100% by AXA Holding Luxembourg AXA Assurance Vie Luxembourg Luxembourg 100% by AXA Holding Luxembourg Royale UAP Luxembourg 100% by AXA Holding Luxembourg Paneurolife Luxembourg 90% by different companies of the AXA Group Paneurore Luxembourg 100% by different companies of the AXA Group Crealux Luxembourg 100% by Royale Belge Futur Re Luxembourg 100% by AXA Global Risks AXA Holding Luxembourg Luxembourg 100% by Royale Belge AXA Aurora Spain 30% owned by AXA and 40% by AXA Participations Reaseguros Aurora Vida SA de Spain 97% owned by Aurora Iberica SA Seguros y Reaseguros de Seguros y Reaseguros and 1.5% by AXA Hilo Direct Seguros y Reaseguros Spain 71.4% by AXA Aurora Ayuda Legal Spain 88% by AXA Aurora Iberica SA de Seguros y Reaseguros and 12% by Aurora Vida AXA Aurora Iberica SA de Spain 99.8% by AXA Aurora Seguros y Reaseguros AXA Assicurazioni Italy 83.7% owned by AXA, 12% by Grupo UAP Italiana, 2.2% by AXA Conseil Vie and 2.1% by AXA Collectives Eurovita Italy 30% owned by AXA Assicurazioni, 19% by AXA Conseil Vie and 19% by AXA Collectives Gruppo UAP Italia (GUI) Italy 97% by AXA Participations and 3% by AXA Collectives UAP Vita Italy 62% by AXA Allsecures Vita Italy 100% by AXA AXA Equity & Law Plc U.K. 99.9% by AXA AXA Equity & Law Life U.K. 100% by Sun Life Holdings Plc Assurance Society Sun Life lle de Man U.K. 100% owned by Sun Life Assurance AXA Global Risks U.K. 51% owned by AXA Global Risks (France) and 49% by AXA Courtage IARD Sun Life and Provincial U.K. 71.6% by AXA and AXA Holdings (SLPH) Equity & Law Plc Sun Life Corporation Plc U.K. 100% by AXA Sun Life Holdings Plc Sun Life Assurance Society Plc U.K. 100% by AXA Sun Life Holdings Plc AXA Provincial Insurance U.K. 100% by SLPH English & Scottish U.K. 100% by AXA UK AXA UK U.K. 100% by AXA Servco U.K. 100% by AXA Sun Life Holdings Plc AXA Sun Life Plc U.K. 100% by AXA Sun Life Holdings Plc AXA Leven The Nether- 100% by Nieuw Rotterdam lands Verzekeringen AXA Nederland BV The Nether- 55.4% by Royale Belge and 38.9% lands by Gelderland BV UNIROBE Groep BV The Nether- 100% by UAP Nieuw Rotterdam lands Holding AXA Levensverzekeringen The Nether- 100% by UAP Nieuw Rotterdam lands Verzekeringen AXA Schade The Nether- 100% by UAP Nieuw Rotterdam lands Verzekeringen Societe Generale d'Assistance The Nether- 100% by AXA Assistance Holding lands Gelderland BV The Nether- 100% by Royale Belge lands AXA Zorg The Nether- 100% by UAP Nieuw Rotterdam lands Verzekeringen Vinci BV The Nether- 100% by AXA lands AXA Portugal Companhia de Portugal 96.2% by different companies Serguros SA of the AXA Group AXA Portugal Companhia de Portugal 87.6% by AXA Conseil Vie and Serguros de Vida SA 7.5% by AXA Participations AXA Compagnie d' Assurances Switzerland 100% by AXA Participations AXA Compagnie d' Assurances Switzerland 95% by AXA Participations sur la Vie AXA Al Amane Assurances Morocco 52% by AXA Participations and 15% by Empargne Croissance AXA Canada Inc. Canada 100% by AXA Empargne Croissance Morocco 99.3% by AXA Al Amane Assurances Colonia Nordstern Leben Germany 50% by AXA-CKAG and 50% by Colonia Nordstern Versicherungs Kolnische Verwaltungs Germany 67.7% by Vinci BV, 23% by AXA Colonia Konzern AG and 8.8% by AXA Sicher Direkt Versicherung Germany 50% by AXA Direct and 50% by AXA-CKAG AXA Colonia Krankenversicherung Germany 51% by AXA-CKAG, 39.6% by AXA Colonia Lebenversicherung and 12% by Deutsche Arzleversicherung Colonia Nordstern Versicherungs Germany 100% by AXA-CKAG C-15 COMPANY COUNTRY VOTING POWER - ------- ------- ------------ AXA non life Insurance Cy. Ltd. Japan 100% by AXA Direct AXA Life Insurance Japan 100% by AXA Dongbu AXA Life Korea 50% by AXA Insurance Co. Ltd. Sime AXA Berhad Malaysia 30% owned by AXA and AXA Reassurance AXA Insurance Investment Singapore 88.7% by AXA and 11.41% by AXA Holdings Pte Ltd Courtage IARD AXA Life Insurance Singapore 100% owned by AXA AXA Insurance Hong Kong 82.5% owned by AXA Investment Holdings Pte Ltd and 17.5% by AXA National Mutual Asia Ltd Hong Kong 53.8% by National Mutual Holdings, Ltd and 20% by Detura The Equitable Companies U.S.A. 43% by AXA, Financiere 45 Incorporated 3.2%, Lorfinance 6.4%, AXA Equity & Law Life Association Society 4.1% and AXA Reassurance 2.9% and 0.4% by Societe Beaujon The Equitable Life Assurance U.S.A. 100% owned by The Equitable Society of the United States Companies Incorporated (ELAS) National Mutual Holdings Ltd Australia 42.1% by AXA and 8.9% by AXA Equity & Law Life Assurance Society The National Mutual Life Australia 100% owned by National Mutual Association of Australasia Holdings Ltd National Mutual International Australia 100% owned by National Mutual Holdings Ltd Australian Casualty & Life Ltd Australia 100% owned by National Mutual Holdings Ltd National Mutual Health Australia 100% owned by National Mutual Insurance Pty Ltd Holdings Ltd Detura Hong Kong 75% by National Mutual Holdings AXA Insurance Pte Ltd Singapore 100% by AXA Insurance Investment Holdings Pte Ltd AXA Reinsurance Asia Pte Ltd Singapore 100% by AXA Reassurance C-16 COMPANY COUNTRY VOTING POWER - ------- ------- ------------ AXA Reassurance France 100% owned by AXA, AXA Assurances IARD and AXA Global Risks AXA Re Finance France 79% owned by AXA Reassurance AXA Cessions France 100% by AXA AXA Reinsurance U.K. Plc U.K. 100% owned by AXA Re U.K. Holding AXA Re U.K. Company Limited U.K. 100% owned by AXA Reassurance AXA Reinsurance Company U.S.A. 100% owned by AXA America AXA America U.S.A. 100% owned by AXA Reassurance AXA Gobal Risks US U.S.A. 96.4% by AXA Global Risks and 3.6% by Colonia Nordstern Versicherungs AG AXA Re Life Insurance Company U.S.A. 100% owned by AXA America C.G.R.M. Monaco 100% owned by AXA Reassurance Nordstern Colonia Osterreich Austria 88.5% by Colonia Nordstern Versicherungs and 11.5% by Colonia Nordstern Leben Royale Belge International Belgium 100% by Royale Belge Investissement AXA Holding Belgium Belgium 75% by AXA, 17.7% by AXA Global Risks and 7.4% by Various Companies of the Group Assurances de la Poste Belgium 50% by Royale Belge Assurances de la Poste Vie Belgium 50% by Royale Belge AXA Asset Management LTD U.K. 91% by AXA Investment Managers and 9% by National Mutual Funds Management AXA Sun Life Holdings Plc U.K. 100% by SLPH C-17 AXA FINANCIAL BUSINESS COMPANY COUNTRY VOTING POWER - ------- ------- ------------ Compagnie Financiere de Paris France 100% AXA and the Mutuelles (C.F.P.) AXA Banque France 98.7% owned by Compagnie Financiere de Paris AXA Credit France 65% owned by Compagnie Financiere de Paris AXA Gestion FCP France 100% owned by AXA Investment Managers Paris Sofapi France 100% owned by Compagnie Financiere de Paris Soffim Holding France 100% owned by Compagnie Financiere de Paris Sofinad France 100% by Compagnie Financiere de Paris Banque des Tuileries France 100% by Compagnie Financiere de Paris Banque de marches et d'arbitrage France 18.5% by AXA and 8.2% by AXA Courtage IARD AXA Investment Managers France 100% by various companies AXA Investment Managers Paris France 100% owned by AXA Investment Managers Colonia Bausbykasse Germany 66.7% by AXA-CKAG and 31.1% by Colonia Nordstern Leben Banque IPPA Belgium 99.9% by Royale Belge Royal Belge Investissement Belgium 100% by Royale Belge ANHYP Belgium 98.8% by Royale Belge AXA Sun Life Asset Management U.K. 66.7% owned by SLPH and 33.3% by AXA Asset Management Ltd. C-18 COMPANY COUNTRY VOTING POWER - ------- ------- ------------ Alliance Capital Management U.S.A. 57.7% held by ELAS Donaldson Lufkin & Jenrette U.S.A. 70.9% owned by Equitable Holdings Corp. and ELAS National Mutual Funds Australia 100% owned by National Management (Global) Ltd Mutual Holdings Ltd C-19 AXA REAL ESTATE BUSINESS COMPANY COUNTRY VOTING POWER - ------- ------- ------------ S.G.C.I. France 100% by AXA Transaxim France 100% owned by Compagnie Parisienne de Participations Compagnie Parisienne de France 100% owned by Sofinad Participations (C.P.P.) Monte Scopeto France 100% owned by Compagnie Parisienne de Participations Colisee Jeuneurs France 99.9% by Colisee Suresnes Colisee Delcasse France 100% by Colisee Suresnes Colisee Victoire France 99.7% by S.G.C.I. Colisee Suresnes France 100% by Various Companies and the Mutuelles Colisee 21 Matignon France 99.4% by S.G.C.I. and 0.6% by AXA C-20 COMPANY COUNTRY VOTING POWER - ------- ------- ------------ Colisee Saint Georges France 100% by SGCI AXA Millesimes France 92.9% owned by AXA and the Mutuelles AXA Immobiller France 100% by AXA C-21 ORGANIZATION CHART OF EQUITABLE'S AFFILIATES NOTES ----- 1. The year of formation or acquisition and state or country of incorporation of each affiliate is shown. 2. The chart omits certain relatively inactive special purpose real estate subsidiaries, partnerships, and joint ventures formed to operate or develop a single real estate property or a group of related properties, and certain inactive name-holding corporations. 3. All ownership interests on the chart are 100% common stock ownership except: (a) AXA Financial, Inc.'s 39.7% interest in Donaldson, Lufkin & Jenrette, Inc., and Equitable Holdings, LLC's 34.4% interest in same; (b) as noted for certain partnership interests; (c) Equitable Life's ACMC, Inc.'s and Equitable Capital Management Corporation's limited partnership interests in Alliance Capital Management L.P.; and (d) as noted for certain subsidiaries of Alliance Capital Management Corp. of Delaware, Inc. 4. The following entities are not included in this chart because, while they have an affiliation with The Equitable, their relationship is not the ongoing equity-based form of control and ownership that is characteristic of the affiliations on the chart, and, in the case of the first entity, it is under the direction of at least a majority of "outside" trustees: EQ Advisors Trust Separate Accounts 5. This chart was last revised on October 1, 1999. C-22 Item 27. Number of Contractowners There are no owners of the new version of Equitable Accumulator contracts to be offered by the registrant under this Registration Statement (File No. 33-83750) as amended. Item 28. Indemnification (a) Indemnification of Directors and Officers The By-Laws of The Equitable Life Assurance Society of the United States ("Equitable Life") provide, in Article VII, as follows: 7.4 Indemnification of Directors, Officers and Employees. (a) To the extent permitted by the law of the State of New York and subject to all applicable requirements thereof: (i) any person made or threatened to be made a party to any action or proceeding, whether civil or criminal, by reason of the fact that he or she, or his or her testator or intestate, is or was a director, officer or employee of the Company shall be indemnified by the Company; (ii) any person made or threatened to be made a party to any action or proceeding, whether civil or criminal, by reason of the fact that he or she, or his or her testator or intestate serves or served any other organization in any capacity at the request of the Company may be indemnified by the Company; and (iii) the related expenses of any such person in any of said categories may be advanced by the Company. (b) To the extent permitted by the law of the State of New York, the Company may provide for further indemnification or advancement of expenses by resolution of shareholders of the Company or the Board of Directors, by amendment of these By-Laws, or by agreement. (Business Corporation Law ss.721-726; Insurance Law ss.1216) The directors and officers of Equitable Life are insured under policies issued by Lloyd's of London, X.L. Insurance Company and ACE Insurance Company. The annual limit on such policies is $100 million, and the policies insure the officers and directors against certain liabilities arising out of their conduct in such capacities. (b) Indemnification of Principal Underwriter To the extent permitted by law of the State of New York and subject to all applicable requirements thereof, AXA Advisors, LLC has undertaken to indemnify each of its directors and officers who is made or threatened to be made a party to any action or proceeding, whether civil or criminal, by reason of the fact the director or officer, or his or her testator or intestate, is or was a director or officer of AXA Advisors, LLC. (c) Undertaking Insofar as indemnification for liability arising under the Securities Act of 1933 ("Act") may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. Item 29. Principal Underwriters (a) AXA Advisors, LLC, an affiliate of Equitable, is the principal underwriter for Separate Account No. 45. The principal business address of AXA Advisors, LLC is 1290 Avenue of the Americas, NY, NY 10104. (b) Set forth below is certain information regarding the directors and principal officers of AXA Advisors, LLC. The business address of the persons whose names are preceded by an asterisk is that of AXA Advisors, LLC. C-23 NAME AND PRINCIPAL POSITIONS AND OFFICES BUSINESS ADDRESS WITH UNDERWRITER (AXA ADVISORS, LLC) - ---------------- ----------------------------------- *Michael S. Martin Chairman of the Board and Director *Michael F. McNelis President, Chief Operating Officer and Director *Martin J. Telles Executive Vice President and Chief Marketing Officer *Derry E. Bishop Executive Vice President and Director *Harvey E. Blitz Executive Vice President and Director *G. Patrick McGunagle Executive Vice President and Director *Michael J. Laughlin Director *Richard V. Silver Director *Mark R. Wutt Director Edward J. Hayes Executive Vice President 200 Plaza Drive Secaucus, NJ 07096 *Craig A. Junkins Executive Vice President *Peter D. Noris Executive Vice President *Mark A. Silberman Senior Vice President and Chief Financial Officer Stephen T. Burnthall Senior Vice President 6435 Shiloh Road Suite A Alpharetta, GA 30005 Richard Magaldi Senior Vice President 6435 Shiloh Road Suite A Alpharetta, GA 30005 *Donna M. Dazzo First Vice President *Robin K. Murray First Vice President *James Bodowitz Vice President and Counsel *Michael Brzozowski Vice President and Compliance Director *Mark D. Godolsky Vice President and Controller *Linda J. Galasso Assistant Secretary *Francesca Divone Assistant Secretary (c) The information under "Distribution of the Certificates" in the Prospectus forming a part of this Registration Statement is incorporated herein by reference. Item 30. Location of Accounts and Records The records required to be maintained by Section 31(a) of the Investment Company Act of 1940 and Rules 31a-1 to 31a-3 thereunder are maintained by Equitable at 1290 Avenue of the Americas, New York, C-24 New York 10104, 135 West 50th Street, New York, NY 10020, and 200 Plaza Drive, Secaucus, NJ 07096. The policies files will be kept at Vantage Computer System, Inc., 301 W. 11th Street, Kansas City, Mo. 64105. Item 31. Management Services Not applicable. Item 32. Undertakings The Registrant hereby undertakes: (a) to file a post-effective amendment to this registration statement as frequently as is necessary to ensure that the audited financial statements in the registration statement are never more than 16 months old for so long as payments under the variable annuity contracts may be accepted; (b) to include either (1) as part of any application to purchase a contract offered by the prospectus, a space that an applicant can check to request a Statement of Additional Information, or (2) a postcard or similar written communication affixed to or included in the prospectus that the applicant can remove to send for a Statement of Additional Information; (c) to deliver any Statement of Additional Information and any financial statements required to be made available under this Form promptly upon written or oral request. Equitable represents that the fees and charges deducted under the Certificates described in this Registration Statement, in the aggregate, in each case, are reasonable in relation to the services rendered, the expenses to be incurred, and the risks assumed by Equitable under the respective Certificates. Equitable bases its representation on its assessment of all of the facts and circumstances, including such relevant factors as: the nature and extent of such services, expenses and risks, the need for Equitable to earn a profit, the degree to which the Certificates include innovative features, and regulatory standards for the grant of exemptive relief under the Investment Company Act of 1940 used prior to October 1996, including the range of industry practice. This representation applies to all certificates sold pursuant to this Registration Statement, including those sold on the terms specifically described in the prospectuses contained herein, or any variations therein, based on supplements, endorsements, data pages, or riders to any certificate or prospectus, or otherwise. The Registrant hereby represents that it is relying on the November 28, 1988 no-action letter (Ref. No. IP-6-88) relating to variable annuity contracts offered as funding vehicles for retirement plans meeting the requirements of Section 403(b) of the Internal Revenue Code. Registrant further represents that it will comply with the provisions of paragraphs (1)-(4) of that letter. C-25 SIGNATURES As required by the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant has caused this amendment to the Registration Statement to be signed on its behalf, in the City and State of New York, on this 2nd day of December, 1999. SEPARATE ACCOUNT No. 45 OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES (Registrant) By: The Equitable Life Assurance Society of the United States By: /s/ Naomi J. Weinstein --------------------------------- Naomi J. Weinstein Vice President The Equitable Life Assurance Society of the United States C-26 SIGNATURES As required by the Securities Act of 1933 and the Investment Company Act of 1940, the Depositor certifies that it has duly caused this amendment to the Registration Statement to be signed on its behalf, in the City and State of New York, on this 2nd day of December, 1999. THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES (Depositor) By: /s/ Naomi J. Weinstein --------------------------------- Naomi J. Weinstein Vice President The Equitable Life Assurance Society of the United States As required by the Securities Act of 1933, this amendment to the Registration Statement has been signed by the following persons in the capacities and on the date indicated: PRINCIPAL EXECUTIVE OFFICERS: Edward D. Miller Chairman of the Board, Chief Executive Officer and Director *Michael Hegarty President, Chief Operating Officer and Director PRINCIPAL FINANCIAL OFFICER: *Stanley B. Tulin Vice Chairman of the Board, Chief Financial Officer and Director PRINCIPAL ACCOUNTING OFFICER: *Alvin H. Fenichel Senior Vice President and Controller *DIRECTORS: Francoise Colloc'h Donald J. Greene George T. Lowy Henri de Castries John T. Hartley Edward D. Miller Joseph L. Dionne John H.F. Haskell, Jr. Didier Pineau-Valencienne Denis Duverne Michael Hegarty George J. Sella, Jr. Jean-Rene Fourtou Mary R. (Nina) Henderson Peter J. Tobin Norman C. Francis W. Edwin Jarmain Stanley B. Tulin Dave H. Williams *By: /s/ Naomi J. Weinstein ------------------------ Naomi J. Weinstein Attorney-in-Fact December 2, 1999 C-27 EXHIBIT INDEX EXHIBIT NO. TAG VALUE - ----------- --------- 4(c)(c) Form of data pages EX-99.4cc 9(c) Opinion and Consent of Counsel EX-99.9c 10(a) Consent of PricewaterhouseCoopers LLP EX-99.10a 10(c) Power of Attorney EX-99.10c C-28 EX-99.4CC 2 FORM OF DATA PAGES ACCUMULATOR (NQ) DATA PART A -- THIS PART LISTS YOUR PERSONAL DATA. OWNER: JOHN DOE ANNUITANT: JOHN DOE Age: 60 Sex: Male CONTRACT: GROUP ANNUITY CONTRACT NO. AC 6725 CERTIFICATE NUMBER: 00000 ENDORSEMENTS ATTACHED: Minimum Income Benefit Endorsement Endorsement Applicable to Non-Qualified Certificates Endorsement Applicable to Market Value Adjustment Terms Rider to Endorsement Applicable to Market Value Adjustment Terms ISSUE DATE: February 1, 2000 CONTRACT DATE: February 1, 2000 ANNUITY COMMENCEMENT DATE: February 1, 2030 THE MAXIMUM MATURITY AGE IS AGE 90 -- SEE SECTION 7.03. The Annuity Commencement Date may not be later than the Processing Date which follows the Annuitant's 90th birthday. GUARANTEED BENEFITS: Combined Guaranteed Minimum Income Benefit and Guaranteed Minimum Death Benefit (5% Roll Up to Age 80) BENEFICIARY: JANE DOE No. 94ICIA Data page 1 (2/00) DATA PAGES (CONT'D) PART B -- THIS PART DESCRIBES CERTAIN PROVISIONS OF YOUR CERTIFICATE. INITIAL CONTRIBUTION RECEIVED (SEE SECTION 3.02): $10,000.00 INVESTMENT OPTIONS AVAILABLE (SEE PART II); YOUR ALLOCATION IS ALSO SHOWN. INVESTMENT OPTIONS ALLOCATION (SEE SECTION 3.01) - ------------------ ----------------------------- o Alliance Conservative Investors Fund o Alliance Growth Investors Fund o Alliance Growth & Income Fund o Alliance Common Stock Fund o Alliance Global Fund o Alliance International Fund o Alliance Aggressive Stock Fund o Alliance Small Cap Growth Fund o Alliance Money Market Fund $2,500.00 o Alliance Intermediate Government Securities Fund o Alliance High Yield Fund o BT Equity 500 Index Fund o BT Small Company Index Fund o BT International Equity Index Fund o Capital Guardian Research Fund o Capital Guardian U.S. Equity Fund o EQ/Alliance Premier Growth Fund o EQ/Evergreen Fund o EQ/Evergreen Foundation Fund o EQ/Putnam Balanced Fund o EQ/Putnam Growth & Income Value Fund o MFS Emerging Growth Companies Fund o MFS Growth with Income Fund o MFS Research Fund $2,500.00 o Merrill Lynch Basic Value Equity Fund o Merrill Lynch World Strategy Fund $2,500.00 o Morgan Stanley Emerging Markets Equity Fund o T. Rowe Price Equity Income Fund o T. Rowe Price International Stock Fund o Warburg Pincus Small Company Value Fund $2,500.00 O GUARANTEE PERIODS (CLASS II) EXPIRATION DATE AND GUARANTEED RATE February 15, 2001 February 15, 2002 February 15, 2003 February 15, 2004 February 15, 2005 February 15, 2006 February 15, 2007 February 15, 2008 February 15, 2009 February 15, 2010 ---------------------------------------- Total: $10,000.00 No. 94ICIA Data page 2 (2/00) DATA PAGES (CONT'D) Investment Options shown are Investment Funds of our Separate Account No. 45 and Guarantee Periods shown are in the Guaranteed Period Account. See Endorsement Applicable to Market Value Adjustment Terms. "TYPES" OF INVESTMENT OPTIONS (SEE SECTION 4.02): Not applicable GUARANTEED INTEREST ACCOUNT (SEE SECTION 2.01): Not available under this Certificate BUSINESS DAY (SEE SECTION 1.05): A Business Day for this Certificate will mean generally any day on which the New York Stock Exchange is open for trading. PROCESSING DATES (SEE SECTION 1.20): A Processing Date is each Contract Date anniversary. AVAILABILITY OF INVESTMENT OPTIONS (SEE SECTION 2.04): (See Data pages, Part C; Allocation Restrictions) ALLOCATION OF CONTRIBUTIONS (SEE SECTION 3.01): Except as indicated below, your initial and any subsequent Contributions are allocated according to your instructions. If you selected Principal Assurance a portion of your initial Contribution is allocated by us to a Guarantee Period you have selected. The remaining portion of your initial Contribution is allocated to the Investment Funds according to your instructions. Any subsequent Contributions will be allocated according to your instructions. (See Data pages, Part C; Allocation Restrictions) CONTRIBUTION LIMITS (SEE SECTION 3.02): Initial Contribution minimum: $5,000. Subsequent Contribution minimum: $1,000. Subsequent Contributions can be made at any time up until the Annuitant attains age 84. We may refuse to accept any Contribution if the sum of all Contributions under your Certificate would then total more than $1,500,000. We reserve the right to limit aggregate Contributions made after the first Contract Year to 150% of first year Contributions. We may also refuse to accept any Contribution if the sum of all Contributions under all Equitable Life annuity accumulation certificates/contracts that you own would then total more than $2,500,000. TRANSFER RULES (SEE SECTION 4.02): Transfers among the Investment Options may be made at any time during the Contract Year. ALLOCATION OF WITHDRAWALS (SEE SECTION 5.01): Lump Sum Withdrawals - You must provide withdrawal instructions indicating from which Investment Options the Lump Sum Withdrawal and any withdrawal charge will be taken; Systematic Withdrawals - Unless you specify otherwise, Systematic Withdrawals will be withdrawn on a pro rata basis from your Annuity Account Value in the Investment Funds. If there is insufficient value or no value in the Investment Funds, any additional amount required or the total amount of the withdrawal, as applicable, will be withdrawn from the Guarantee Periods in order of the earliest Expiration Date(s) first. No. 94ICIA Data page 3 (2/00) DATA PAGES (CONT'D) WITHDRAWAL RESTRICTIONS (SEE SECTION 5.01): Systematic Withdrawals - May not start sooner than 28 days after issue of this Certificate. You may elect to receive Systematic Withdrawals on a monthly, quarterly or annual basis subject to a maximum of 1.2% monthly, 3.6% quarterly and 15.0% annually of the Annuity Account Value as of the Transaction Date. MINIMUM WITHDRAWAL AMOUNT (SEE SECTION 5.01): Lump Sum Withdrawals minimum - $1,000; Systematic Withdrawals minimum - $250. MINIMUM AMOUNT OF ANNUITY ACCOUNT VALUE AFTER A WITHDRAWAL (SEE SECTION 5.02): Requests for a withdrawal must be for either (a) 90% or less of the Cash Value or (b) 100% of the Cash Value (surrender of the Certificate). We will NOT exercise our rights, described in Sections 5.02(b) and 5.02(c), to terminate the Certificate. DEATH BENEFIT AMOUNT (SEE SECTION 6.01): The death benefit is equal to the Annuity Account Value or, if greater, the Guaranteed Minimum Death Benefit defined below. Guaranteed Minimum Death Benefit 5% to Age 80 Roll Up - On the Contract Date, the Guaranteed Minimum Death Benefit is equal to the initial Contribution. Thereafter, the Guaranteed Minimum Death Benefit is credited each day with interest at an annual effective rate of 5% (3% for amounts in the Alliance Money Market Fund, Alliance Intermediate Government Securities Funds, and the Guarantee Periods) through the Annuitant's age 80 (or at the Annuitant's death, if earlier) and 0% thereafter. The Guaranteed Minimum Death Benefit is also adjusted for any subsequent Premiums, transfers into the Investment Funds, and transfers and withdrawals from such Funds. EFFECT OF WITHDRAWALS OR TRANSFERS UNDER ROLL-UP OPTION: The current Guaranteed Minimum Death Benefit will be reduced on a dollar-for-dollar basis as long as the sum of your withdrawals and transfers in any Contract Year is 5% or less of the beginning of Contract Year Guaranteed Minimum Death Benefit. Once a withdrawal or transfer is made that causes cumulative withdrawals and transfers in a Contract Year to exceed 5% of the beginning of Contract Year Guaranteed Minimum Death Benefit, that withdrawal or transfer and any subsequent withdrawals and transfers in that Contract Year will cause a pro rata reduction to occur. SUCCESSOR OWNER/ANNUITANT: If the Successor Owner/Annuitant option is elected and exercised, upon the Annuitant's death the Annuity Account Value will be increased to the then current Guaranteed Minimum Death Benefit if such amount is greater. The increase, if any, will be allocated in accordance with the current No. 94ICIA Data page 4 (2/00) DATA PAGES (CONT'D) instructions on file. In determining whether the Guaranteed Minimum Death Benefit will continue to grow, we will use the age (as of the Processing Date) of the Successor Owner/Annuitant. NORMAL FORM OF ANNUITY (SEE SECTION 7.04): Life Annuity 10 Year Period Certain AMOUNT OF ANNUITY BENEFIT (SEE SECTION 7.05): The amount applied to provide the Annuity Benefit will be (1) the Annuity Account Value for any life annuity form or (2) the Cash Value for any period certain only annuity form except that if the period certain is more than five years the amount applied will be no less than 95% of the Annuity Account Value. INTEREST RATE TO BE APPLIED IN ADJUSTING FOR MISSTATEMENT OF AGE OR SEX (SEE SECTION 7.06): 6% per year MINIMUM AMOUNT TO BE APPLIED TO AN ANNUITY (SEE SECTION 7.06): $2,000, as well as minimum of $20 for initial monthly annuity payment. GUARANTEED MINIMUM INCOME BENEFIT (SEE SECTION 7.08): The Annuitant may apply the Annuity Account Value during the period of time indicated below to purchase a minimum amount of guaranteed lifetime income under our fixed Life Annuity payout option. The Life Annuity payout option provides annuity payments while the Annuitant is living. Payments end with the last payment made before the Annuitant's death. The following paragraphs describe the conditions for exercise of the Guaranteed Minimum Income Benefit. The Guaranteed Minimum Income Benefit is available only if it is exercised within 30 days following the 10th or later Contract Date anniversary under this Contract. However, it may not be exercised later than the Annuitant's age 85. On the Transaction Date that the Annuitant exercises the Guaranteed Minimum Income Benefit, the annual lifetime income that will be provided under the fixed Life Annuity payout option will be the greater of (i) the Guaranteed Minimum Income Benefit, and (ii) the amount of income that would be provided by application of the Annuity Account Value as of the Transaction Date at our then current annuity purchase factors. Guaranteed Minimum Income Benefit Benefit Base - Guaranteed Minimum Income Benefit benefit base is equal to the initial Contribution. Thereafter, the Guaranteed Minimum Income Benefit benefit base is credited each day with interest at an annual effective rate of 5% (3% for amounts in the Alliance Money Market Fund, Alliance Intermediate Government Securities Funds, and the Guarantee Periods) through the Annuitant's age 80 (or at the Annuitant's death, if earlier) and 0% thereafter. The Guaranteed Minimum Income Benefit benefit base is also adjusted for any subsequent Contributions, transfers into the Investment Funds, and transfers and withdrawals from such Funds. The Guaranteed Minimum Income Benefit benefit is applied to guaranteed minimum annuity purchase factors to determine the Guaranteed Minimum Income Benefit. The guaranteed No. 94ICIA Data page 5 (2/00) DATA PAGES (CONT'D) minimum annuity purchase factors are based on (i) interest at 2.5% and (ii) mortality tables that assume increasing longevity. The Guaranteed Minimum Income Benefit benefit base does not create an Annuity Account Value or a Cash Value and is used solely for purposes of calculating the Guaranteed Minimum Income Benefit. WITHDRAWAL CHARGES (SEE SECTION 8.01): A withdrawal charge will be imposed as a percentage of each Contribution made to the extent that a withdrawal exceeds the Free Corridor Amount as discussed in Section 8.01 or, if the Certificate is surrendered to receive the Cash Value. We determine the withdrawal charge separately for each Contribution in accordance with the table below. Current and Maximum Percentage of Contract Year Contributions ------------- ------------- 1 7.00% 2 6.00% 3 5.00% 4 4.00% 5 3.00% 6 2.00% 7 1.00% 8 and later 0.00% The applicable withdrawal charge percentage is determined by the Contract Year in which the withdrawal is made or the Certificate is surrendered, beginning with "Contract Year 1" with respect to each Contribution withdrawn or surrendered. For purposes of the table, for each Contribution, the Contract Year in which we receive that Contribution is "Contract Year 1." Withdrawal charges will be deducted from the Investment Options from which each withdrawal is made in proportion to the amount being withdrawn from each Investment Option. FREE CORRIDOR AMOUNT (SEE SECTION 8.01): 15% of Annuity Account Value at the beginning of the Contract Year minus any amount previously withdrawn during the Contract Year. Amounts withdrawn up to the Free Corridor Amount will not be deemed a withdrawal of Contributions. Withdrawals in excess of the Free Corridor Amount will be deemed withdrawals of Contributions in the order in which they were made (that is, the first-in, first-out basis will apply). The Free Corridor Amount does not apply when calculating the withdrawal charge applicable upon a surrender. No. 94ICIA Data page 6 (2/00) DATA PAGES (CONT'D) NO WITHDRAWAL CHARGE WILL APPLY IN THESE EVENTS: 1. the Annuitant has qualified to receive Social security disability benefits as certified by the Social Security Administration; or 2. we receive proof satisfactory to us that the Annuitant's life expectancy is six months or less (such proof must include, but is not limited to, certification by a licensed physician); or 3. the Annuitant has been confined to a nursing home for more than a 90 day period (or such other period, if required in your state) as verified by a licensed physician. A nursing home for this purpose means one which is (i) approved by Medicare as a provider of skilled nursing care services, or (ii) licensed as a skilled nursing home by the state or territory in which it is located (it must be within the United States, Puerto Rico, U.S. Virgin Islands, or Guam and meets all the following: o its main function is to provide skilled, intermediate or custodial nursing care; o it provides continuous room and board to three or more persons; o it is supervised by a registered nurse or practical nurse; o it keeps daily medical records of each patient; o it controls and records all medications dispensed; and o its primary service is other than to provide housing for residents. 4. the Successor Owner/Annuitant option is elected and exercised, and the Successor Owner/ Annuitant withdraws contributions made by Annuitant, prior to the Annuitant's death. The withdrawal charge will apply with respect to a Contribution if the condition as described above existed at the time the Contribution was remitted or if the condition began within the 12 month period following remittance (excluding the 4th listed exemption). CHARGES DEDUCTED FROM ANNUITY ACCOUNT VALUE (SEE SECTION 8.02): (a) Combined Guaranteed Minimum Income Benefit and Guaranteed Minimum Death Benefit Charge: For providing the Combined Guaranteed Minimum Income Benefit and Guaranteed Minimum Death Benefit we will deduct annually on each Processing Date an amount equal to 0.30% of the Guaranteed Minimum Income Benefit benefit base (described above) in effect on such Processing Date. 0.30% is the maximum we will charge. (b) Charges for State Premium and Other Applicable Taxes: A charge for applicable taxes, such as state or local premium taxes generally will be deducted from the amount applied to provide an Annuity Benefit under Section 7.02. In certain states, however, we may deduct the charge from Contributions rather than at the Annuity Commencement Date. The above charges will be deducted from the Annuity Account Value in the Investment Funds on a pro rata basis. If there is insufficient value in the Investment Funds, all or a portion of the charges will be deducted from the Annuity Account Value with respect to the Guarantee Periods in order of the earliest Expiration Date(s) first. No. 94ICIA Data page 7 (2/00) NUMBER OF FREE TRANSFERS (SEE SECTION 8.03): Unlimited DAILY SEPARATE ACCOUNT CHARGES (SEE SECTION 8.04): Mortality and Expense Risks Charge: Current and Maximum Annual rate of 1.10% (equivalent to a daily rate of 0.003032%). Administration Charge: Current and Maximum Annual rate of 0.25% (equivalent to a daily rate of 0.000692%). We reserve the right to increase this charge to an annual rate of 0.35%. Distribution Charge: Current and Maximum Annual rate of 0.20% (equivalent to a daily rate of 0.000556%). No. 94ICIA Data page 8 (2/00) DATA PAGES (CONT'D) PART C -- THIS PART LISTS THE TERMS WHICH APPLY TO THE ENDORSEMENT APPLICABLE TO MARKET VALUE ADJUSTMENT TERMS (MVA ENDORSEMENT). ALLOCATION RESTRICTIONS (SEE SECTION 3.01): If the Annuitant is age 76 or older, allocations may be made only to Guarantee Periods with maturities of five years or less; however, in no event may allocations be made to Guarantee Periods with maturities beyond the February 15th immediately following the Annuity Commencement Date. TRANSFERS AT EXPIRATION DATE (SEE ITEM 1 OF MVA ENDORSEMENT): If no election is made with respect to amounts in the Guaranteed Period Account as of the Expiration Date, such amounts will be transferred into the Guarantee Period with the earliest Expiration Date. MARKET VALUE ADJUSTMENT (MVA) ON TRANSFERS AND WITHDRAWALS (SEE ITEM 2 OF MVA ENDORSEMENT): The MVA (positive or negative) resulting from a withdrawal or transfer of a portion of the amount in a Guarantee Period will be a percentage of the MVA that would be applicable upon a withdrawal of all of the Annuity Account Value from a Guarantee Period. This percentage is determined by (i) dividing the amount of the withdrawal or transfer from the Guarantee Period by (ii) the Annuity Account Value in such Guarantee Period prior to the withdrawal or transfer. TRANSFER RULES (SEE SECTION 4.02): Transfers may not be made to a Guarantee Period maturing in the current calendar year. Guarantee Periods to which transfers may be made are limited based on the attained age of the Annuitant (see Allocation Restrictions above). MVA FORMULA (SEE ITEM 3 OF MVA ENDORSEMENT): The Guaranteed Rate for new allocations to a Guarantee Period is the rate we have in effect for this purpose even if new allocations to that Guarantee Period would not be accepted at the time. This rate will not be less than 3%. The current rate percentage we use in item (c) of the formula is 0.00%. For purposes of calculating the MVA only, we reserve the right to add up to 0.25% to such current rate percentage. SEPARATE ACCOUNT (SEE ITEM 5 OF MVA ENDORSEMENT): The portion of the assets of Separate Account No. 46 equal to the reserves and other contract liabilities will not be chargeable with liabilities which arise out of any other business we conduct. No. 94ICBMVA Data page 9 (2/00) Guaranteed Minimum Income Benefit Table of Guaranteed Minimum Annuity Purchase Factors For Initial Level Annual Income Single Life - Male Election Age Purchase Factors ----------- ---------------- 60 5.15% 61 5.26 62 5.38 63 5.51 64 5.64 65 5.79 66 5.94 67 6.10 68 6.27 69 6.45 70 6.64 71 6.84 72 7.06 73 7.28 74 7.51 75 7.76 76 8.03 77 8.31 78 8.61 79 8.93 80 9.27 81 9.64 82 10.02 83 10.43 84 10.87 85 11.34 Interest Basis: 2.5% Non-participating Mortality: 1983 Individual Annuity Mortality Table "a" for Male projected with modified Scale G. Factors required for annuity forms not shown in the above table will be calculated by us on the same actuarial basis. No. 94ICIA (2/00) EX-99.9C 3 OPINION AND CONSENT OF COUNSEL ROBIN WAGNER Vice President and Counsel (212) 314-3962 Fax: (212) 707-7927 [EQUITABLE AXA LOGO] LAW DEPARTMENT December 1, 1999 The Equitable Life Assurance Society of the United States 1290 Avenue of the Americas New York, New York 10104 Dear Sirs: This opinion is furnished in connection with the filing by The Equitable Life Assurance Society of the United States ("Equitable Life") and Separate Account No. 45 of Equitable Life ("Separate Account No. 45") of the Form N-4 Registration Statement of Equitable Life and Separate Account No. 45 under the Securities Act of 1933 (File No. 33-83750) and of the Registration Statement of Separate Account No. 45 under the Investment Company Act of 1940 included in the same Form N-4. The Registration Statement covers an indefinite number of units of interest ("Units") in Separate Account No. 45. The Units are purchased with contributions received under individual annuity contracts and certificates Equitable Life offers under a group annuity contract (collectively, the "Certificates"). As described in the Prospectuses included in the Registration Statement, the Certificates are designed to provide for retirement income benefits. I have examined such corporate records of Equitable Life and provisions of the New York insurance law as are relevant to authorization and issuance of the Certificates and such other documents and laws as I consider appropriate. On the basis of such examination, it is my opinion that: 1. Equitable Life is a corporation duly organized and validly existing under the laws of the State of New York. 2. Separate Account No. 45 was duly established pursuant to the provisions of the New York Insurance Law. THE EQUITABLE LIFE ASSURANCE SOCIETY 1290 AVENUE OF THE AMERICAS, NEW YORK, NEW YORK 10104 The Equitable Life Assurance Society of the United States December 1, 1999 Page 2 3. The assets of Separate Account No. 45 are owned by Equitable Life; Equitable Life is not a trustee with respect thereto. Under New York law, the income, gains and losses, whether or not realized, from assets allocated to Separate Account No. 45 must be credited to or charged against such account, without regard to the other income, gains or losses of Equitable Life. 4. The Certificates provide that the portion of the assets of Separate Account No. 45 equal to the reserves and other contract liabilities with respect to Separate Account No. 45 will not be chargeable with liabilities arising out of any other business Equitable Life may conduct and that Equitable Life reserves the right to transfer assets of Separate Account No. 45 in excess of such reserves and contract liabilities to the general account of Equitable Life. 5. The Certificates (including any Units credited thereunder) will be duly authorized, and when issued in accordance with applicable regulatory approvals, will represent validly issued and binding obligations of Equitable Life. I hereby consent to the use of this opinion as an exhibit to the Registration Statement. Very truly yours, /s/ Robin Wagner ---------------------------- Robin Wagner EX-99.10A 4 CONSENT OF PRICEWATERHOUSECOOPERS 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. 15 to this Registration Statement No. 33-83750 on Form N-4 (the "Registration Statement") of (1) our report dated February 8, 1999 relating to the financial statements of Separate Account No. 45 of The Equitable Life Assurance Society of the United States for the year ended December 31, 1998, and (2) our report dated February 8, 1999 relating to the consolidated financial statements of The Equitable Life Assurance Society of the United States for the year ended December 31, 1998, which report appears 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 incorporation by reference in the Prospectus of our reports dated February 8, 1999 appearing on page F-1 and page F-53 of The Equitable Life Assurance Society of the United States' Annual Report on Form 10-K for the year ended December 31, 1998. We also consent to the references to us under the headings "Custodian and Independent Accountants" in the Statement of Additional Information and "About our independent accountants" in the Prospectus. PricewaterhouseCoopers LLP New York, New York December 2, 1999 EX-99.10C 5 1999 POWER OF ATTORNEY POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or Director of The Equitable Life Assurance Society of the United States (the "Company"), a New York stock life insurance company, hereby constitutes and appoints, Mark A. Hug, James D. Goodwin, Pauline Sherman, Michael F. McNelis, Naomi J. Weinstein, Maureen K. Wolfson, Mildred Oliver, Mary P. Breen and each of them (with full power to each of them to act alone), his or her true and lawful attorney-in-fact and agent, with full power of substitution to each, for him or her and on his or her behalf and in his or her name, place and stead, to execute and file any of the documents referred to below relating to registrations under the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Company Act of 1940 with respect to any insurance or annuity contracts or other agreements providing for allocation of amounts to Separate Accounts of the Company, and related units or interests in Separate Accounts: registration statements on any form or forms under the Securities Act of 1933 and the Investment Company Act of 1940 and annual reports on any form or forms under the Securities Exchange Act of 1934, and any and all amendments and supplements thereto, with all exhibits and all instruments necessary or appropriate in connection therewith, each of said attorneys-in-fact and agents and his, her or their substitutes being empowered to act with or without the others, and to have full power and authority to do or cause to be done in the name and on behalf of the undersigned each and every act and thing requisite and necessary or appropriate with respect thereto to be done in and about the premises in order to effectuate the same, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand this 11th day of August, 1999. /s/ Alvin H. Fenichel --------------------- Alvin H. Fenichel 59838v2 -----END PRIVACY-ENHANCED MESSAGE-----