-----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, K4QI1ndweMrEYk5Frn+429fjP3vKliGK1d64IR4vgxgSHLaMD7ZHP5ct7IS4dtDG m8Gf3TinIyaSXjLfaGTvbA== 0000771726-98-000096.txt : 19980519 0000771726-98-000096.hdr.sgml : 19980519 ACCESSION NUMBER: 0000771726-98-000096 CONFORMED SUBMISSION TYPE: 497 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19980518 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES /NY/ CENTRAL INDEX KEY: 0000727920 STANDARD INDUSTRIAL CLASSIFICATION: INSURANCE AGENTS BROKERS & SERVICES [6411] IRS NUMBER: 135570651 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 497 SEC ACT: SEC FILE NUMBER: 033-76030 FILM NUMBER: 98626763 BUSINESS ADDRESS: STREET 1: 1290 AVENUE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10104 BUSINESS PHONE: 2125541234 MAIL ADDRESS: STREET 1: 787 SEVENTH AVE CITY: NEW YORK STATE: NY ZIP: 10019 497 1 DESCRIPTIVE MATERIALS FOR RIA N-4 ---------- [LOGO](TM) Retirement ---------- Investment ---------- Account(R) ---------- Retirement Investment Account (RIA) is an investment vehicle for the assets of employee retirement plans (employer plans) that meet the requirements of Section 401(a) of the Internal Revenue Code of 1986, as amended (Code), and whose funds are maintained by trusts described in Section 501(a) of the Code. In addition, some of these employer plans meet the requirements of the Employee Retirement Income Security Act of 1974, as amended (ERISA). RIA is offered under a group annuity contract issued by THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES. Under RIA, employers may choose from the investment options (Investment Options) listed below. These Investment Options include the Guaranteed Interest Account, which is part of Equitable's general account and pays interest at guaranteed fixed rates and twenty five investment funds (Investment Funds) of the separate accounts noted below.
- --------------------------------------------------------------------------------------------------------------------------- Investment Funds ---------------- - --------------------------------------------------------------------------------------------------------------------------- Pooled Separate Accounts Separate Account No. 51 Separate Account No. 66 (available in July, 1998) o Alliance Bond, Separate Account o Alliance Money Market o T. Rowe Price Equity No. 13 -- Pooled o Alliance Intermediate Income o Alliance Balanced, Separate Government Securities o EQ/Putnam Growth & Account No. 10 -- Pooled o Alliance Quality Bond Income Value o Alliance Common Stock, o Alliance High Yield o Merrill Lynch Basic Value Separate Account No. 4 -- Pooled o Alliance Growth & Income Equity o Alliance Aggressive Stock, o Alliance Equity Index o MFS Research Separate Account No. 3 -- Pooled o Alliance Global o T. Rowe Price International Stock o Alliance International o Morgan Stanley Emerging o Alliance Small Cap Markets Equity Growth o Warburg Pincus Small o Alliance Conservative Investors Company Value o Alliance Growth Investors o MFS Emerging Growth Companies o EQ/Putnam Balanced o Merrill Lynch World Strategy
We invest each Investment Fund of Separate Account No. 51 in Class IA Shares of a corresponding portfolio (Portfolio) of the Hudson River Trust (HRT). Beginning in early July, 1998, we will invest each Investment Fund of Separate Account No. 66 in Class IB Shares of a corresponding portfolio (Portfolio) of The EQ Advisors Trust (EQAT). HRT and EQAT (Trusts) are two mutual funds whose shares are purchased by the separate accounts of insurance companies. The prospectuses for HRT and EQAT directly following this prospectus, describe the investment objectives, policies and risks of the Portfolios. The Investment Funds relating to EQAT will be available in early July 1998. Employer plan assets invested in a Fund will fluctuate in value with the investment performance of that Fund. The Alliance Bond Fund is available only to employer plans that signed an agreement to invest monies in the Alliance Bond Fund prior to June 1, 1994. This prospectus provides important information you should be aware of before investing. You should read it carefully and retain it for future reference. This prospectus is not valid unless it is attached to the current prospectuses for HRT and EQAT, which should also be read carefully and maintained for future reference. Additional information is included in the Statement of Additional Information (SAI) dated May 1, 1998 which has been filed with the Securities and Exchange Commission. The SAI has been incorporated by reference into this prospectus. A table of contents for the SAI appears at the end of this prospectus. To obtain a copy of the SAI free of charge, complete the SAI request form at the back of this prospectus and mail it to us, or call or write: The Equitable Life Assurance Society of the United States -- RIA Service Office Attn. SAI Request 200 Plaza Drive Secaucus, NJ 07094-3689 or call (800) 967-4560 (201) 583-2302 (Business Days, 9 A.M. to 5 P.M. Eastern time) or fax (201) 583-2304, 2305, or 2306 THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. Keep this prospectus for future reference. May 1, 1998 - -------------------------------------------------------------------------------- 888-1154 Cat. No. 127659 Copyright 1998 The Equitable Life Assurance Society of the United States. All rights reserved. - -------------------------------------------------------------------------------- TABLE OF CONTENTS - -------------------------------------------------------------------------------- Part I -- RIA Summary Page 3 Equitable Life 3 RIA Terms 3 Participation and Funding Requirements 4 Miscellaneous 4 Investment Options 4 Charges and Fees 4 Cash Available to a Participant under RIA before Retirement 5 Benefit Payments 5 Fee Tables 5 Condensed Financial Information 10 Investment Policies and Objectives 14 Contributions, Transfers and Withdrawals 16 Loans 16 Communications with Us 16 Part II -- Charges and Fees Page 17 Charges Which Are Reflected in Reductions in the Unit Value 17 Charges Which Reduce the Number of Units in RIA 18 Part III -- Equitable Life and Its Funds Page 20 Equitable Life 20 About Our Funds 20 Trusts 20 Purchase and Redemption of Units 21 How We Determine the Unit Value 21 Investment Objectives and Policies 21 Alliance Bond Fund 22 Alliance Balanced Fund 23 Alliance Common Stock Fund 24 Alliance Aggressive Stock Fund 25 Investment Management 26 HRT's Manager and Investment Adviser 26 EQAT's Manager 26 EQAT's Investment Advisers 27 Rates of Return 28 Inception Dates and Comparative Benchmarks 28 Annualized Rates of Return 30 Cumulative Rates of Return 32 Year-by-Year Rates of Return 34 Part IV -- The Guaranteed Interest Account Page 35 General 35 The Guarantees 35 Current and Minimum Interest Rates 35 Classes of Employer Plans 35 Charges and Fees 35 Deferred Payout Provision 36 Illustration of Deferred Payout Provision 37 Part V -- Provisions of RIA and Retirement Benefits Page 38 Contributions; Frequency and Amount 38 Rollover or Transfer from a Plan 38 Selecting Investment Options 38 Allocation Choices 38 Transfer Provisions 38 Special Rules Applicable to Plans That May Invest in the Alliance Bond Fund 39 Loan Provision 40 Benefit Payments General 40 Cash Distributions 41 Annuity Benefits 41 Amount of Fixed-Annuity Payments 41 Payment of Annuity 41 Assignment and Alienation 41 Creditors' Claims 41 When We Pay Proceeds 41 Periodic Reports 42 If a Plan Fails to Qualify 42 Modification or Contract Discontinuance/ Termination 42 Part VI -- Miscellaneous Matters Page 43 How We Are Regulated 43 Commissions and Service Fees 43 Year 2000 Progress 43 Copies of the Master Retirement Trust Agreement 43 Fiduciaries 43 Acceptance 44 HRT and EQAT Voting Rights 44 Separate Account Voting Rights 44 Voting Rights of Others 44 Changes in Applicable Law 44 Our Rights 44 Legal Proceedings 44 Experts 44 Where to Get Additional Information 45 Changes in Funding Vehicle 45 Part VII -- Tax and ERISA Considerations Page 46 Tax Aspects of Contributions to a Plan 46 Tax Aspects of Distributions from a Plan 47 Certain Rules Applicable to Plan Loans 49 Impact of Taxes to Equitable Life 50 Certain Rules Applicable to Plans Designed to Comply with Section 404(c) of ERISA 50 Part VIII -- Participant Recordkeeping Services (Optional) Page 51 Services Provided 51 Investment Options 51 Fees 51 Enrollment 51 SAI Table of Contents Page 52 SAI Request Form Page 52 2 - -------------------------------------------------------------------------------- PART I -- RIA SUMMARY - -------------------------------------------------------------------------------- Equitable Life We are The Equitable Life Assurance Society of the United States. "We," "us" or "Equitable Life" refers to us. We are a New York stock life insurance company that has been in business since 1859. RIA Terms RIA is an investment program designed for employer plans that qualify for tax-favored treatment under Section 401(a) of the Code. Eligible employer plans include defined benefit plans, defined contribution plans or profit-sharing plans, including 401(k) plans. RIA is composed of two group annuity contracts (Contracts), a Master Retirement Trust agreement, a participation or installation agreement, an optional participant recordkeeping services (PRS) agreement and twenty-six investment options. The trustee of the Master Retirement Trust has entered into the two Contracts with us to implement RIA. Currently, The Chase Manhattan Bank, N.A. acts as trustee under the Master Retirement Trust. The sole responsibility of Chase Manhattan Bank, N.A. is to serve as a party to the Contracts. It has no responsibility for the administration of RIA. The Investment Funds of Separate Account No. 51 are the Alliance Money Market Fund, Alliance Intermediate Government Securities Fund, Alliance Quality Bond Fund, Alliance High Yield Fund, Alliance Growth & Income Fund, Alliance Equity Index Fund, Alliance Global Fund, Alliance International Fund, Alliance Small Cap Growth Fund, Alliance Conservative Investors Fund and Alliance Growth Investors Fund. Each invests in corresponding Portfolios of HRT. The Investment Funds of Separate Account No. 66 are: T. Rowe Price Equity Income Fund, EQ/Putnam Growth & Income Value Fund, Merrill Lynch Basic Value Equity Fund, MFS Research Fund, T. Rowe Price International Stock Fund, Morgan Stanley Emerging Markets Equity Fund, Warburg Pincus Small Company Value Fund, MFS Emerging Growth Companies Fund, EQ/Putnam Balanced Fund and Merrill Lynch World Strategy Fund. Each invests in corresponding Portfolios of EQAT. The other Investment Funds are held in pooled separate accounts as follows: The Alliance Bond Fund is our Separate Account No. 13 -- Pooled. The Alliance Balanced Fund is our Separate Account No. 10 -- Pooled. The Alliance Common Stock Fund is our Separate Account No. 4 -- Pooled. The Alliance Aggressive Stock Fund is our Separate Account No. 3 -- Pooled. A participant-directed employer plan is an employer plan that by its terms permits investment directions by participants for contribution allocations or transfers of account accumulations among investment options. The provisions of one of the Contracts govern this plan. A trustee-directed employer plan permits these same directions to be made only by the employer, a trustee or any named fiduciary or an authorized delegate of the plan. The provisions of the other Contract govern this plan. At our sole discretion, a trustee-directed plan may change its participation basis to a participant-directed plan. An employer is an employer, a plan trustee or other named fiduciary, or an authorized delegate, of the plan. The employer is specified in the RIA adoption documents. The plan trustee is generally responsible for instructing us as to the investment of plan contributions (including allocations and transfers) and withdrawals, and receives amounts withdrawn from RIA. A Business Day is any day on which Equitable Life is open and the New York Stock Exchange is open for trading. We are closed on national business holidays, Martin Luther King, Jr. Day and the Friday after Thanksgiving. We may also choose to close on the day immediately preceding or following a national business holiday or due to emergency conditions. Our Business Day ends at 4:00 p.m. Eastern time. A Transaction Date is the Business Day we receive a contribution at the RIA contribution processing office with properly completed and signed allocation instructions, or a properly completed and signed written or facsimile request for a financial transaction at the RIA Service Office. (For the addresses, see the inside back cover of this prospectus.) An exclusive funding employer plan is one which uses RIA as the exclusive funding vehicle for the assets of an employer plan. The annual amount of contributions must be at least $10,000. Subject to our sole discretion, a partial funding employer plan is one which uses RIA as a partial investment funding vehicle for an employer plan. The aggregate amount of contributions in the initial participation year must be at least $50,000 and the annual aggregate amount of contributions thereafter must be at least $25,000. An exclusive funding employer plan may not change its participation basis to that of a partial funding employer plan, 3 or vice versa, unless the underwriting and other requirements referred to above are satisfied and approved by us. We reserve: o the right to change these amounts in the future for new sales only; and o the right to impose higher annual minimums for certain plans. We will give you advance notice of any such changes. The employer or plan sponsor, as the case may be, is responsible for determining whether RIA is a suitable funding vehicle and should carefully read the prospectus and installation documents before signing a participation or installation agreement. Note to participants: This prospectus describes RIA as it is generally available to employer plans. However, the terms and conditions of the employer's plan govern which aspects of RIA are available to participants. Therefore, the employer's plan may be different from the features of RIA described in this prospectus. Note to employers: Equitable Life's duties and responsibilities are limited to those described in this prospectus. Except as explicitly set forth in the PRS program, we do not provide administrative services in connection with an employer plan. See Part VIII -- Participant Recordkeeping Services (Optional). In addition, no Equitable Life Representative or firm operated by an Equitable Life Representative is authorized to solicit or agree to perform plan administrative services in his capacity as an Equitable Life Representative. If an employer or trustee engages an Equitable Life Representative to provide administrative support services to an employer plan, the employer or trustee engages that Equitable Life Representative as its representative rather than Equitable Life's. Equitable Life is not liable to any employer, trustee or employer plan for any damages arising from or in connection with any plan administration services performed or agreed to be performed by an Equitable Life Representative. Participation and Funding Requirements You may participate in RIA as either an exclusive funding employer plan or a partial funding employer plan, subject to our sole discretion and underwriting standards and on a case-by-case basis. To enroll in RIA, a partnership, sole proprietor or corporation must adopt the Master Retirement Trust as part of its employer plan, and the employer must execute the participation or installation agreement and provide us with certain plan information. No contributions will be accepted until the Transaction Date on which we accept the enrollment of the employer plan. Miscellaneous This prospectus describes units of interest (Units) in the Funds which are registered under the Securities Act of 1933 (Registered Units). Pursuant to an exemption under the Securities Act of 1933, the Units maintained by corporate or governmental entities (corporate plans) are not Registered Units. In all other respects, Registered Units are identical to unregistered Units. Investment Options There are twenty-six investment options available for employers to fund their plans. They are listed on page one of this prospectus and include the twenty-five Intestment Funds and the Guaranteed Interest Account. The prospectuses for HRT and EQAT directly following this prospectus describe the investment objectives, policies and risks of the available Portfolios. The investment objectives and policies of the Alliance Bond Fund, Alliance Balanced Fund, Alliance Common Stock Fund and Alliance Aggressive Stock Fund are described in this prospectus under Part III -- Equitable Life and Its Funds and in the SAI under Part I -- Fund Information. If the Employer or Plan Trustee does not select all twenty-six Investment Options in the RIA program, your choices will be limited to the Investment Options selected. If the Plan is intended to comply with the requirements of ERISA Section 404(c), the Employer or the Plan Trustee is responsible for making sure that the Investment Options chosen constitute a broad range of investment choices as required by the Department of Labor (DOL) Section 404(c) regulations. See "Certain Rules Applicable to Plans Designed to Comply with Section 404(c) of ERISA" in Part VII - -- Tax and ERISA Considerations. Charges and Fees Investment Management and Financial Accounting Fee for the Alliance Bond, Alliance Balanced, Alliance Common Stock and Alliance Aggressive Stock Funds. An investment management and financial accounting fee equal to 0.50% of the assets in the Alliance Bond, Alliance Balanced, Alliance Common Stock and Alliance Aggressive Stock Funds, is reflected in the daily Unit value for each of these Funds. The Alliance Bond, Alliance Balanced, Alliance Common Stock and Alliance Aggressive Stock Funds incur certain commissions, fees and expenses, including audit, custody and other expenses, as part of their portfolio transactions and overall operation of these Funds are reflected in the Unit values. Separate Account Administrative Charge for the Investment Funds of Separate Account No. 51. An administrative charge at an annual rate of 0.05% of the assets is reflected in the daily Unit value for each Investment Fund of Separate Account No. 51. HRT and EQAT Charges. Investment advisory fees and other expenses of HRT and EQAT are charged daily against their assets. These charges are reflected in the Portfolio's daily share price and in the Unit value for the Investment Funds of Separate Account No. 51 and Separate Account No. 66. 4 Ongoing Operations Fee. The Ongoing Operations Fee, which is paid monthly, is based on a declining scale which starts at a maximum annual rate of 1.25% of the combined balances of all of the Investment Options in which the employer plan assets are allocated. Participant Recordkeeping Services. If the employer elects to enroll in RIA's PRS program, there is an annual charge of $25 per participant under the employer plan. The charge is applied on a pro rata basis against the combined balances of all the Investment Options in which the employer plan assets are invested and is deducted monthly. See Part VIII -- Participant Recordkeeping Services (Optional). Loan Fee. We charge an employer plan a loan fee in an amount equal to 1% of the loan principal amount on the Transaction Date a loan is made. Contingent Withdrawal Charge. We impose a contingent withdrawal charge against withdrawals made from RIA at any time up to and including the ninth anniversary of the date on which the employer plan began its participation in RIA. The maximum contingent withdrawal charge is 6% of the employer plan assets withdrawn. Outstanding loan balances are included in the plan's assets for purposes of assessing the contingent withdrawal charge. See Part II -- Charges and Fees -- Contingent Withdrawal Charge. Fixed Annuity Administrative Charge. If a fixed annuity under RIA is elected by or on behalf of a participant or by a beneficiary, an administrative charge of $175 will be deducted from the amount of the employer plan proceeds applied to purchase the annuity. Premium Tax Charge. At the time an amount is applied to an annuity distribution option, we currently deduct a charge based on any applicable state or local taxes imposed on the transaction. We reserve the right to deduct any such charge from each contribution or from withdrawals. The current premium tax rate that might be imposed ranges from 0% to 2.25%. The rate is 1% in Puerto Rico and 5% in the Virgin Islands. Direct Billing. Subject to a written agreement between Equitable Life and an employer, the employer has the option of being billed directly for the Ongoing Operations Fee and, if applicable, the fee for PRS. We reserve the right to change certain of the charges and fees discussed above. However, the investment advisory fees for the Portfolios of HRT and EQAT cannot be changed without a vote of that Portfolio's shareholders. Cash Available to a Participant under RIA before Retirement The amount of any cash payments that may be available to a participant before retirement will depend on the terms of the employer plan and will be affected by the charges to the employer plan and investment performance of the Funds. Certain cash withdrawals by a participant that are permitted under an employer plan prior to retirement may give rise to tax penalties or other adverse tax consequences. See Part II -- Charges and Fees, Part V -- Provisions of RIA and Retirement Benefits and Part VII -- Tax and ERISA Considerations. Benefit Payments At retirement, in accordance with the employer plan, a participant can receive fixed annuity payments funded through our general account, a lump sum payment or a combination of both. RIA does not offer variable annuity payments. The amount available for retirement benefits will depend upon the amount invested in the Guaranteed Interest Account and the Funds and the investment performance of the Funds, and may be affected by charges to the employer plan. See Part V -- Provisions of RIA and Retirement Benefits. Disability and death benefits are provided in accordance with the employer plan; RIA does not have separate disability or death benefit provisions. We pay benefit distribution payments withdrawn from RIA to the plan trustee of the employer plan. Fee Tables The purpose of these Tables is to assist you in understanding the various costs and expenses which may affect employer plan balances participating in the Funds. See Part II -- Charges and Fees and Part V -- Provisions of RIA and Retirement Benefits for a description of fees for optional PRS, loan fees, annuity purchase charges and state or local tax charges. If an annuity benefit is elected under RIA, a $175 annuity benefit charge will be imposed and a charge for any applicable premium taxes will be deducted from the amount applied to provide an annuity benefit. The Tables reflect annualized expenses of the Funds including, for Separate Account Nos. 51 and 66, the corresponding Portfolio. Annualized expenses for the Funds of Separate Account Nos. 51 and 66 are for the period ended December 31, 1997. As explained in Part IV, the Guaranteed Interest Account is not a Fund. Therefore, the only expenses shown in the Table which apply to the Guaranteed Interest Account are the "Contingent Withdrawal Charge" and the "Ongoing Operations Fee." In addition, there is a loan fee charged against the Guaranteed Interest Account which is equal to 1% of the principal amount of the loan. Certain expenses and fees shown in these Tables may not apply to your plan. To determine whether a particular item in a Table applies (and the actual amount, if any), consult the portion of the prospectus indicated in the notes. 5
- ------------------------------------------------------------------------------------------------------------------------------------ Pooled Separate Accounts - ------------------------------------------------------------------------------------------------------------------------------------ Alliance Alliance Alliance Alliance Bond Balanced Common Aggressive Fund Fund Stock Fund Stock Fund - ------------------------------------------------------------------------------------------------------------------------------------ Participating Plan Transaction Expenses: Sales Load on Purchases............................................. ---------------------- None -------------------------- Maximum Contingent Withdrawal Charge (as a percentage of plan balances) (1)............................................. ------------------- 6% Maximum ----------------------- Maximum Annual Ongoing Operations Fee (as a percentage of plan balances) (2)............................................. ----------------- 1.25% Maximum ---------------------- Separate Account Annual Expenses: Administrative Charge .............................................. None None None None Annual Investment Management Fee Including Financial Accounting Fees (as a percentage of plan balances in each Fund) ............. 0.50% 0.50% 0.50% 0.50% - ------------------------------------------------------------------------------------------------------------------------------------ Total Separate Account Annual Expenses (3) ....................... 0.50% 0.50% 0.50% 0.50% - ------------------------------------------------------------------------------------------------------------------------------------ Trust Annual Expenses: ---------------- not applicable ---------------------- ====================================================================================================================================
(1) The contingent withdrawal charge is waived in certain circumstances. The charge reduces to 2% of the amount withdrawn in the ninth participation year and cannot be imposed after the ninth anniversary of a plan's participation in RIA. See Part II -- Charges and Fees -- Contingent Withdrawal Charge. (2) The annual Ongoing Operations Fee is applied on a decremental scale, declining to 0.50% on the portion of plan balances over $1,000,000, except for plans that adopted RIA before February 9, 1986. See Part II -- Charges and Fees. (3) The Total Separate Account Annual Expenses are reflected in the Unit value.
- ------------------------------------------------------------------------------------------------------------------------------------ Investment Funds of Separate Account No. 51 - ------------------------------------------------------------------------------------------------------------------------------------ Alliance Alliance Intermediate Alliance Money Government Alliance Alliance Growth & Alliance Market Securities Quality Bond High Yield Income Equity Index - ----------------------------------------------------------------------------------------------------------------------------------- Participating Plan Transaction Expenses: Sales on Load on Purchases................... ------------------------------------- None -------------------------------------- Maximum Contingent Withdrawal Charge (as a percentage of plan balances)(1)............ ---------------------------------- 6% Maximum ----------------------------------- Maximum Annual Ongoing Operations Fee (as a percentage of plan balances) (2)........... --------------------------------- 1.25% Maximum --------------------------------- Separate Account Annual Expenses: Administrative Charge (3)(4)................. ------------------------------------- 0.05% ------------------------------------- HRT Annual Expenses: Investment Advisory Fee (5) ................. 0.35% 0.50% 0.53% 0.60% 0.55% 0.32% Other Expenses .............................. 0.04% 0.06% 0.05% 0.04% 0.04% 0.04% - ------------------------------------------------------------------------------------------------------------------------------------ Total Annual Expenses for HRT(4)(5)(6) .... 0.39% 0.56% 0.58% 0.64% 0.59% 0.36% ====================================================================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------ Alliance Alliance Alliance Alliance Alliance Small Cap Conservative Growth Global International Growth Investors Investors - ----------------------------------------------------------------------------------------------------------------------------------- Participating Plan Transaction Expenses: Sales on Load on Purchases................... -------------------------------- None -------------------------------- Maximum Contingent Withdrawal Charge (as a percentage of plan balances)(1)............ ----------------------------- 6% Maximum ----------------------------- Maximum Annual Ongoing Operations Fee (as a percentage of plan balances) (2)........... --------------------------- 1.25% Maximum ---------------------------- Separate Account Annual Expenses: Administrative Charge (3)(4)................. -------------------------------- 0.05% ------------------------------- HRT Annual Expenses: Investment Advisory Fee (5) ................. 0.65% 0.90% 0.90% 0.48% 0.52% Other Expenses .............................. 0.08% 0.18% 0.05% 0.07% 0.05% - ------------------------------------------------------------------------------------------------------------------------------------ Total Annual Expenses for HRT(4)(5)(6) .... 0.73% 1.08% 0.95% 0.55% 0.57% ====================================================================================================================================
See Notes following tables. 6
Investment Funds of Separate Account No. 66 - ------------------------------------------------------------------------------------------------------------------------------------ EQ/Putnam T. Rowe Price T. Rowe Price Growth & EQ/Putnam International Equity Income Income Value Balanced MFS Research Stock Portfolio Portfolio Portfolio Portfolio Portfolio - ------------------------------------------------------------------------------------------------------------------------------------ Participating Plan Transaction Expenses: Sales on Load on Purchases................... --------------------------------- None ----------------------------------- Maximum Contingent Withdrawal Charge (as a percentage of plan balances)(1)............. ------------------------------- 6% Maximum ------------------------------- Maximum Annual Ongoing Operations Fee (as a percentage of plan balances) (2)........... ---------------------------- 1.25% Maximum ------------------------------- Separate Account Annual Expenses: Administrative Charge ....................... --------------------------------- None ----------------------------------- EQAT Annual Expenses: Investment Advisory Fee ....................... 0.75% 0.55% 0.55% 0.55% 0.55% Rule 12b-1 Fee (7)............................. 0.25% 0.25% 0.25% 0.25% 0.25% Other Expenses ................................ 0.20% 0.05% 0.05% 0.10% 0.05% - ------------------------------------------------------------------------------------------------------------------------------------ Total EQAT Annual Expenses (4)(8) 1.20% 0.85% 0.85% 0.90% 0.85% ====================================================================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------ MFS Emerging Morgan Stanley Merrill Lynch Growth Emerging Warburg Pincus World Merrill Lynch Companies Markets Equity Small Company Strategy Basic Value Portfolio Portfolio Value Portfolio Portfolio Equity Portfolio - ------------------------------------------------------------------------------------------------------------------------------------ Participating Plan Transaction Expenses: Sales on Load on Purchases................... ---------------------------------- None ----------------------------------- Maximum Contingent Withdrawal Charge (as a percentage of plan balances)(1)............ ------------------------------- 6% Maximum -------------------------------- Maximum Annual Ongoing Operations Fee (as a percentage of plan balances) (2)........... ----------------------------- 1.25% Maximum ------------------------------- Separate Account Annual Expenses: Administrative Charge ....................... ---------------------------------- None ----------------------------------- EQAT Annual Expenses: Investment Advisory Fee ....................... 0.55% 1.15% 0.65% 0.70% 0.55% Rule 12b-1 Fee (7)............................. 0.25% 0.25% 0.25% 0.25% 0.25% Other Expenses ................................ 0.05% 0.35% 0.10% 0.25% 0.05% - ------------------------------------------------------------------------------------------------------------------------------------ Total EQAT Annual Expenses (4)(8) 0.85% 1.75% 1.00% 1.20% 0.85% ====================================================================================================================================
Notes: (1) The contingent withdrawal charge is waived in certain circumstances. The charge reduces to 2% of the amount withdrawn in the ninth participation year and cannot be imposed after the ninth anniversary of a plan's participation in RIA. See Part II -- Charges and Fees -- Contingent Withdrawal Charge. (2) The annual ongoing operations fee is applied on a decremental scale, declining to 0.50% on the portion of plan balances over $1,000,000, except for plans that adopted RIA before February 9, 1986. See Part II -- Charges and Fees. (3) Separate Account expenses are shown as a percentage of each Investment Fund's average value. We reserve the right to increase the separate account administrative charge upon 90 days written notice to the employer. See Part II -- Charges and Fees. (4) The Separate Account Annual Expenses and HRT or EQAT Annual Expenses are reflected in the Unit value. (5) Effective May 1, 1997, a new Investment Advisory Agreement was entered into between HRT and Alliance Capital Management L.P., HRT's Investment Adviser, which effected changes in HRT's management fee and expense structure. See HRT's prospectus for more information. The table above reflecting HRT's expenses is based on average portfolio net assets for the year ended December 31, 1997 and has been restated to reflect (i) the fees that would have been paid to Alliance if the current advisory agreement had been in effect as of January 1, 1997 and (ii) estimated accounting expenses for the year ending December 31, 1997. (6) The investment advisory fee for each HRT Portfolio may vary from year to year depending upon the average daily net assets of the respective Portfolio of HRT. The maximum investment advisory fees, however, cannot be increased without a vote of that Portfolio's shareholders. The other direct operating expenses will also fluctuate from year to year depending on actual expenses. Expenses of HRT are shown as a percentage of each Portfolio's average net assets. See "HRT Charges to Portfolios" in Part II. (7) The Class IB shares of EQAT are subject to fees imposed under distribution plans (herein, the "Rule 12b-1 Plans") adopted by EQAT pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended. The Rule 12b-1 Plans provide that EQAT, on behalf of each Portfolio, may pay annually up to 0.25% of the average daily net assets of a Portfolio attributable to its Class IB shares 7 in respect of activities primarily intended to result in the sale of the Class IB shares. The 12b-1 fee will not be increased for the life of the Contracts. (8) All EQAT Portfolios commenced operations on May 1, 1997 except the Morgan Stanley Emerging Markets Equity Portfolio, which commenced operations on August 20, 1997. The maximum investment management and advisory fees for each EQAT Portfolio cannot be increased without a vote of that Portfolio's shareholders. The amounts shown as "Other Expenses" will fluctuate from year to year depending on actual expenses, however, EQ Financial Consultants, Inc. ("EQ Financial"), EQAT's manager, has entered into an expense limitation agreement with respect to each Portfolio, ("Expense Limitation Agreement") pursuant to which EQ Financial has agreed to waive or limit its fees and assume other expenses. So that total annual operating expenses of each Portfolio (other than interest, taxes, brokerage commissions, capitalized expenditures, extraordinary expenses and 12b-1 fees) are limited for the respective average daily net assets of each Portfolio as follows: 0.60% for Merrill Lynch Basic Value Equity, MFS Research, MFS Emerging Growth Companies, EQ/Putnam Growth & Income Value and T. Rowe Price Equity Income; 0.65% for EQ/Putnam Balanced; 0.75% for Warburg Pincus Small Company Value; 0.95% for Merrill Lynch World Strategy and T. Rowe Price International Stock; and 1.50% for Morgan Stanley Emerging Markets Equity. Absent the expense limitation, "Other Expenses" for 1997 on an annualized basis for each of the Portfolios would have been as follows: 0.80% for Warburg Pincus Small Company Value; 0.94% for T. Rowe Price Equity Income; 0.95% for EQ/Putnam Growth & Income Value; 0.98% for MFS Research; 1.02% for MFS Emerging Growth Companies; 1.09% for Merrill Lynch Basic Value Equity; 1.21% for Morgan Stanley Emerging Markets Equity; 1.56% for T. Rowe Price International Stock; 1.75% for EQ/Putnam Balanced; and 2.10% for Merrill Lynch World Strategy. Each Portfolio may at a later date make a reimbursement to EQ Financial for any of the management fees waived or limited and other expenses assumed and paid by EQ Financial 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. See the EQAT prospectus for more information. 8 Examples - -------- The examples below show the expenses that a plan would pay in two hypothetical situations, assuming a single investment of $1,000 in each Fund listed and a 5% annual return on assets. For purposes of these examples, the ongoing operations fee is computed by reference to the actual aggregate annual ongoing operations fee as a percentage of total assets held under the Contracts invested in Registered Units. The expenses shown would be lower for corporate plans which generally have greater total assets. See Note (2) to the Tables on pages 6 and 7. These examples assume that no loan has been taken and do not reflect PRS or annuity benefit charges or a charge for premium taxes, none of which may apply to any particular Participant.
- ------------------------------------------------------------------------------------------------------------------------------------ If the entire employer plan balance is If the entire employer plan balance is not withdrawn at the end of each period shown, withdrawn at the end of each period shown, the expense would be: the expense would be: 1 Year 3 Years 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years - ------------------------------------------------------------------------------------------------------------------------------------ HRT Alliance Money Market 74.95 95.38 116.52 150.73 12.71 39.58 68.49 150.73 Alliance Intermediate Gov't. Securities 76.62 100.53 125.38 170.33 14.48 45.01 77.75 170.33 Alliance Stable Value 74.56 94.17 114.43 146.07 12.30 38.30 66.30 146.07 Alliance Bond 75.54 97.20 119.65 157.69 13.34 41.50 71.76 157.69 Alliance Quality Bond 76.81 101.14 126.42 172.61 14.69 45.65 78.84 172.61 Alliance High Yield 77.40 102.95 129.52 179.44 15.32 45.57 82.09 179.44 Alliance Growth & Income 76.91 101.44 126.93 173.75 14.80 45.97 79.38 173.75 Alliance Equity Index 74.66 94.47 114.95 147.24 12.40 38.62 66.84 147.24 Alliance Common Stock 75.54 97.20 119.65 157.69 13.34 41.50 71.76 157.69 Alliance Global 78.28 105.67 134.17 189.60 16.26 50.43 86.95 189.60 Alliance International 81.71 116.17 152.08 228.26 19.90 61.52 105.68 228.26 Alliance Aggressive Stock 75.54 97.20 119.65 157.69 13.34 41.50 71.76 157.69 Alliance Small Cap Growth 80.43 112.28 145.46 214.06 18.55 57.41 98.76 214.06 Alliance Conservative Investors 76.52 100.23 124.86 169.18 14.38 44.70 77.21 169.18 Alliance Balanced 75.54 97.20 119.65 157.69 13.34 41.50 71.76 157.69 Alliance Growth Investors 76.71 100.84 125.90 171.47 14.59 45.33 78.30 171.47 EQAT T. Rowe Price International Stock 82.88 119.76 21.15 65.31 T. Rowe Price Equity Income 79.46 109.28 17.51 54.24 EQ/Putnam Growth & Income Value 79.46 109.28 17.51 54.24 EQ/Putnam Balanced 79.95 110.78 18.03 55.83 MFS Research 79.46 109.28 17.51 54.24 MFS Emerging Growth Companies 79.46 109.28 17.51 54.24 Morgan Stanley Emerging Markets Equity 88.27 136.08 26.88 82.53 Warburg Pincus Small Company Value 80.92 113.78 19.07 58.99 Merrill Lynch World Strategy 82.88 119.76 21.15 65.31 Merrill Lynch Basic Value Equity 79.46 109.28 17.51 54.24
The examples above should not be considered a representation of past or future expenses for each Fund. Actual expenses may be greater or less than those shown above. Similarly, the annual rate of return assumed in the examples is not an estimate or guarantee of future investment performance. 9 Condensed Financial Information The following tables give information about income, expenses and capital changes of the Alliance Bond, Alliance Balanced, Alliance Common Stock and Alliance Aggressive Stock Funds, and Unit values of the Investment Funds of Separate Account No. 51, attributable to a Registered Unit outstanding for the periods indicated, along with other supplementary data. Registered Units have been offered under RIA in the Alliance Bond, Alliance Balanced, Alliance Common Stock and Alliance Aggressive Stock Funds as of May 1, 1992, January 23, 1985, April 8, 1985 and July 7, 1986, respectively. Registered and Non-Registered Units for the Investment Funds of Separate Account No. 51 were first offered under RIA on June 1, 1994. Non-registered Units have been offered under RIA in the Alliance Bond Fund since 1991, the Alliance Balanced and Alliance Common Stock Funds since 1983 and the Alliance Aggressive Stock Fund since 1986. Condensed Financial Information for the Portfolios is contained in the prospectuses for HRT and EQAT which directly follow this prospectus. High portfolio turnover rates may result in additional transaction and brokerage expenses which are reflected in the Unit values. The selected per unit data and ratios for the years ended December 31, 1997, 1996, 1995, 1994 and 1993 have been audited by Price Waterhouse LLP, independent accountants, as stated in their report on the Financial Statements contained in Part III of the SAI. The selected per unit data and ratios for each of the periods ended prior to December 31, 1993 were audited by other independent accountants. The financial statements of the separate accounts as well as the Consolidated Financial Statements of Equitable Life are contained in the SAI. These tables should be read in conjunction with the Financial Statements. 10
Separate Account No. 13 -- Pooled (Alliance Bond Fund) of The Equitable Life Assurance Society of the United States Income, Expenses and Capital Changes Per Registered Unit Outstanding During the Period Indicated and Other Supplementary Data (Note F) - ------------------------------------------------------------------------------------------------------------------------------------ Year Ended December 31, ----------------------------------------------------------------- May 1, 1992 - 1997 1996 1995 1994 1993 December 31, 1992 ------------------------------------------------------------------------------------------- Income................................... $ 3.29 $ 3.09 $ 3.07 $ 2.32 $ 2.18 $0.59 Expenses (Note B)........................ (0.25) (0.25) (0.23) (0.12) -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Net investment income ................... 3.04 2.84 2.84 2.20 2.18 0.59 Net realized and unrealized gain (loss) on investments (Note C)............... 0.79 (1.49) 3.72 (2.99) 1.65 2.37 - ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in Alliance Bond Fund Unit Value.................. 3.83 1.35 6.56 (0.79) 3.83 2.96 Alliance Bond Fund Unit Value (Note A): Beginning of Period................. 50.26 48.91 42.35 43.14 39.31 36.35 - ------------------------------------------------------------------------------------------------------------------------------------ End of Period....................... $54.09 $ 50.26 $ 48.91 $ 42.35 $ 43.14 $ 39.31 ==================================================================================================================================== Ratio of expenses to average net assets attributable to Units (Note B)........ 0.50% 0.50% 0.50% 0.36% N/A N/A Ratio of net investment income to average net assets attributable to Units...... 5.89% 5.81% 6.17% 5.12% 5.17% 6.00% (Note D) Number of registered Alliance Bond Fund Units outstanding at end of period.... 2,021 2,698 2,392 1,632 545 288 Portfolio turnover rate (Note E)......... 188% 137% 288% 264% 254% 151% ====================================================================================================================================
See Notes following tables.
Separate Account No. 10 -- Pooled (Alliance Balanced Fund) of The Equitable Life Assurance Society of the United States Income, Expenses and Capital Changes Per Registered Unit Outstanding During the Periods Indicated and Other Supplementary Data (Note F) - ------------------------------------------------------------------------------------------------------------------------------------ Year Ended December 31, ------------------------------------------------------------------------------------------------------ 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 ------------------------------------------------------------------------------------------------------ Income ..................... $ 4.41 $ 3.60 $ 3.18 $ 2.63 $ 2.67 $ 2.69 $ 2.63 $ 3.08 $ 3.04 $ 2.30 Expenses (Note B) .......... (0.56) (0.50) (0.43) (0.23) -- -- -- -- -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Net investment income ...... 3.85 3.10 2.75 2.40 2.67 2.69 2.63 3.08 3.04 2.30 Net realized and unrealized gain (loss) on investments (Note C) ... 10.33 7.66 13.34 (9.48) 7.28 (4.51) 20.34 (3.17) 8.66 3.44 - ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in Alliance Balanced Fund Unit Value .............. 14.18 10.76 16.09 (7.08) 9.95 (1.82) 22.97 (0.09) 11.70 5.74 Alliance Balanced Fund Unit Value (Note A): Beginning of Period ... 105.62 94.86 78.77 85.85 75.90 77.72 54.75 54.84 43.14 37.40 - ------------------------------------------------------------------------------------------------------------------------------------ End of Period ......... $119.80 $105.62 $ 94.86 $ 78.77 $ 85.85 $ 75.90 $ 77.72 $ 54.75 $ 54.84 $ 43.14 ==================================================================================================================================== Ratio of expenses to average net assets attributable to Units (Note B) ................ 0.50% 0.50% 0.50% 0.30% N/A N/A N/A N/A N/A N/A Ratio of net investment income to average net assets attributable to Units ................... 3.42% 3.13% 3.19% 2.94% 3.31% 3.68% 4.15% 5.78% 6.12% 5.70% Number of registered Alliance Balanced Fund Units outstanding at end Units of period ......... 38,304 52,080 73,979 86,914 87,242 81,860 80,964 86,377 86,942 67,815 Portfolio turnover rate (Note E) ........... 165% 177% 170% 107% 102% 90% 114% 199% 175% 172% ====================================================================================================================================
See Notes following tables. 11
Separate Account No. 4 -- Pooled (Alliance Common Stock Fund) of The Equitable Life Assurance Society of the United States Income, Expenses and Capital Changes Per Registered Unit Outstanding During the Periods Indicated and Other Supplementary Data (Note F) - ------------------------------------------------------------------------------------------------------------------------------------ Year Ended December 31, ------------------------------------------------------------------------------------------------------- 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 ------------------------------------------------------------------------------------------------------- Income ..................... $ 3.39 $ 2.99 $ 3.98 $ 3.83 $ 3.69 $ 3.13 $ 2.74 $ 3.82 $ 3.42 $ 2.52 Expenses (Note B) .......... (3.11) (2.51) (2.03) (1.00) -- -- -- -- -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Net investment income ...... 0.28 0.48 1.95 2.83 3.69 3.13 2.74 3.82 3.42 2.52 Net realized and unrealized gain (loss) on investments (Note C) ................ 144.74 80.65 108.54 (8.98) 56.16 1.86 96.86 (26.92) 62.70 19.19 - ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in Alliance Common Stock Fund Unit Value ......... 145.02 81.13 110.49 (6.15) 59.85 4.99 99.60 (23.10) 66.12 21.71 Alliance Common Stock Fund Unit Value (Note A): Beginning of Period ... 538.54 457.41 346.92 353.07 293.22 288.23 188.63 211.73 145.61 123.90 - ------------------------------------------------------------------------------------------------------------------------------------ End of Period ......... $683.56 $538.54 $457.41 $346.92 $353.07 $293.22 $288.23 $188.63 $211.73 $145.61 ==================================================================================================================================== Ratio of expenses to average net assets attributable to Units (Note B) ................ 0.50% 0.50% 0.50% 0.30% N/A N/A N/A N/A N/A N/A Ratio of net investment income to average net assets attributable to Units ................... 0.05% 0.10% 0.49% 0.81% 1.17% 1.13% 1.14% 2.02% 1.85% 1.84% Number of registered Alliance Common Stock Fund Units outstanding at end of period ........ 21,142 24,332 25,937 27,438 24,924 23,331 20,799 18,286 14,129 8,461 Portfolio turnover rate (Note E) ........... 62% 105% 108% 91% 82% 68% 66% 93% 113% 101% ====================================================================================================================================
See Notes following tables.
Separate Account No. 3 -- Pooled (Alliance Aggressive Stock Fund) of The Equitable Life Assurance Society of the United States Income, Expenses and Capital Changes Per Registered Unit Outstanding During the Periods Indicated and Other Supplementary Data (Note F) - ------------------------------------------------------------------------------------------------------------------------------------ Year Ended December 31, ------------------------------------------------------------------------------------------------------ 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 ------------------------------------------------------------------------------------------------------ Income ..................... $ 1.08 $ 1.33 $ 0.98 $ 0.71 $ 1.01 $ 1.21 $ 1.06 $ 1.03 $ 1.06 $ 0.60 Expenses (Note B) .......... (1.13) (0.98) (0.75) (0.37) -- -- -- -- -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Net investment income (loss).................. (0.05) 0.35 0.23 0.34 1.01 1.21 1.06 1.03 1.06 0.60 Net realized and unrealized gain (loss) on investments (Note C) ... 25.34 38.04 40.49 (5.81) 17.43 (4.23) 55.15 4.45 17.77 0.35 - ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in Alliance Aggressive Stock Fund Unit Value ... 25.29 38.39 40.72 (5.47) 18.44 (3.02) 56.21 5.48 18.83 0.95 Alliance Aggressive Stock Fund Unit Value (Note A): Beginning of Period ... 209.06 170.67 129.95 135.42 116.98 120.00 63.79 58.31 39.48 38.53 - ------------------------------------------------------------------------------------------------------------------------------------ End of Period ......... $234.35 $209.06 $170.67 $129.95 $135.42 $116.98 $120.00 $63.79 $58.31 $39.48 ==================================================================================================================================== Ratio of expenses to average net assets attributable to Units (Note B) ................ 0.50% 0.50% 0.50% 0.30% N/A N/A N/A N/A N/A N/A Ratio of net investment income (loss) to average net assets attributable to Units ... (0.02)% 0.18% 0.15% 0.25% 0.82% 1.09% 1.11% 1.72% 2.09% 1.47% Number of registered Alliance Aggressive Stock Fund Units outstanding at end of period ........... 27,762 26,777 26,043 26,964 23,440 21,917 14,830 8,882 5,519 3,823 Portfolio turnover rate (Note E) ........... 176% 118% 137% 94% 83% 71% 63% 48% 92% 103% ====================================================================================================================================
See Notes following tables. 12 Notes: A. The values for a Registered Alliance Bond Fund, Alliance Balanced Fund, Alliance Common Stock Fund and Alliance Aggressive Stock Fund Unit on May 1, 1992, January 23, 1985, April 8, 1985 and July 7, 1986, the first date on which payments were allocated to purchase Registered Units in each Fund, were $36.35, $28.07, $84.15 and $44.82, respectively. B. Certain expenses under RIA are borne directly by employer plans participating in RIA. Accordingly, those charges and fees discussed under Part II -- Charges and Fees are not included above and did not affect the Fund Unit values. Those charges and fees are recovered through an appropriate reduction in the number of Units credited to each employer plan participating in the Fund unless the charges and fees are billed directly to the employer. The dollar amount recovered is included in the expenses in the Statements of Operations and Changes in Net Assets for each Fund, which appear in Part III -- Financial Statements of the SAI. As of June 1, 1994, the Annual Investment Management and Financial Accounting Fee is deducted from the assets of the Alliance Bond, Alliance Balanced, Alliance Common Stock and Alliance Aggressive Stock Funds and is reflected in the computation of their unit values. If all charges and fees had been made directly against employer plan assets in the Funds and had been reflected in the computation of Fund Unit Value, RIA Registered Unit expenses would have amounted to $ 0.68, $ 1.73, $ 9.33 and $ 3.42 for the year ended December 31, 1997 on a per Unit basis for the Alliance Bond, Alliance Balanced, Alliance Common Stock and Alliance Aggressive Stock Funds, respectively. For the same reporting periods, the ratio of expenses to average net assets attributable to Registered Units would have been (on an annualized basis) 1.32%, 1.54%, 1.53% and 1.53% for the Alliance Bond, Alliance Balanced, Alliance Common Stock and Alliance Aggressive Stock Funds, respectively. C. See Note 2 to Financial Statements of Separate Account Nos. 13 (Pooled), 10 (Pooled), 4 (Pooled), 3 (Pooled) and 51 which appear in Part III of the SAI. D. Annualized basis. E. The portfolio turnover rate excludes all short-term U.S. Government securities and all other securities whose maturities at the time of acquisition were one year or less. The rate stated is the annual turnover rate for the entire Separate Account Nos. 13 -- Pooled, 10 -- Pooled, 4 -- Pooled and 3 -- Pooled. F. Income, expenses, gains and losses shown above pertain only to employer plans' accumulations attributable to RIA Registered Units. Other plans and trusts also participate in Separate Account Nos. 13 -- Pooled, 10 -- Pooled, 4 -- Pooled and 3 -- Pooled and may have operating results and other supplementary data different from those shown above.
Separate Account No. 51 (Pooled) Unit Values - ------------------------------------------------------------------------------------------------------------------------------------ Alliance Inter- Alliance mediate Alliance Alliance Alliance Alliance Alliance Money Government Quality High Growth Equity Alliance Inter- Market Securities Bond Yield & Income Index Global national Fund Fund Fund Fund Fund Fund Fund Fund ---- ---- ---- ---- ---- ---- ---- ---- Unit Value as of: December 31, 1994 ............ $102.65 $ 98.94 $ 99.83 $ 98.99 $ 99.81 $101.71 $ 99.84 $ -- December 31, 1995 ............ $108.49 $112.07 $116.76 $118.64 $123.78 $138.75 $118.56 $104.60 December 31, 1996 ............ $114.22 $116.24 $122.96 $145.72 $148.57 $169.72 $135.81 $114.80 December 31, 1997 ............ $120.35 $124.66 $134.14 $172.55 $188.22 $224.89 $151.41 $111.24 Number of Registered Units Outstanding at December 31, 1997 ......... 1,351 783 270 1,414 6,083 7,176 9,726 1,531 - ------------------------------------------------------------------------------------------------------------------------------------ Alliance Alliance Conser- Alliance Small Cap vative Growth Growth Investors Investors Fund Fund Fund ---- ---- ---- Unit Value as of: December 31, 1994 ............ $ -- $ 99.83 $ 99.52 December 31, 1995 ............ $ -- $120.14 $125.70 December 31, 1996 ............ $ -- $126.33 $141.48 December 31, 1997 ............ $114.18 $142.97 $165.12 Number of Registered Units Outstanding at December 31, 1997 ......... 2,235 689 8,419 - ------------------------------------------------------------------------------------------------------------------------------------
13 Investment Policies and Objectives The investment objectives and policies of the Alliance Bond, Alliance Balanced, Alliance Common Stock and Alliance Aggressive Stock Funds are summarized below. Similarly, the investment objectives and policies of the corresponding Portfolios of HRT and EQAT are summarized for each of the Investment Funds of Separate Account Nos. 51 and 66. Investment policies and objectives are explained in more detail in this prospectus under Part III -- Equitable Life and Its Funds and in the SAIs under Part I -- Fund Information, and, with respect to the Portfolios, in the HRT and EQAT prospectuses and SAIs. Investment objectives and policies can be expected to affect the rate of return for the Fund and the market and financial risks to which the Fund is subject. There is no assurance that the objectives described below will be met. The Alliance Bond Fund invests primarily in publicly traded fixed-income securities, such as bonds, debentures and notes. Its objective is to achieve maximum total return, consistent with investment quality, with less volatility than a long-term bond account. The weighted average duration of the total portfolio will be between one and five years. The Alliance Balanced Fund invests primarily in common stocks, other equity-type instruments, longer-term fixed-income securities, publicly traded debt securities and short-term money market instruments. Its objective is to achieve both appreciation of capital and current income. The Alliance Common Stock Fund invests primarily in common stocks and other equity-type securities, generally issued by intermediate- and large-sized companies. Its objective is to achieve long-term capital growth. The Alliance Aggressive Stock Fund invests primarily in securities of medium- and smaller-sized companies (with capitalizations generally between $50 million to $1.5 billion) perceived to have greater growth potential than larger companies. Its objective is to achieve long-term capital growth, consistent with investment quality. Contributions allocated to these Portfolios will fluctuate, and may be worth more or less than their original value when you redeem your contract or make withdrawals.
- ------------------------------------------------------------------------------------------------------------------------------- Portfolio Trust Investment Policy Objective - ------------------------------------------------------------------------------------------------------------------------------- Alliance Money Market HRT Primarily high-quality short-term money market High level of current income instruments. while preserving assets and maintaining liquidity. - ------------------------------------------------------------------------------------------------------------------------------- Alliance Intermediate HRT Primarily debt securities issued or guaranteed High current income consistent Government by the U.S. Government, its agencies and with relative stability of Securities instrumentalities. Each investment will have a principal. final maturity of not more than 10 years or a duration not exceeding that of a 10-year Treasury note. - ------------------------------------------------------------------------------------------------------------------------------- Alliance Quality Bond HRT Primarily investment grade fixed-income High current income consistent securities. with preservation of capital. - ------------------------------------------------------------------------------------------------------------------------------- Alliance High Yield HRT Primarily a diversified mix of high-yield, High return by maximizing current fixed-income securities involving greater income and, to the extent consistent volatility of price and risk of principal with that objective, capital and income than high-quality fixed-income appreciation. securities. The medium- and lower-quality debt securities in which the Portfolio may invest are known as "junk bonds." - ------------------------------------------------------------------------------------------------------------------------------- Alliance Growth & Income HRT Primarily income producing common stocks and High total return through a securities convertible into common stocks. combination of current income and capital appreciation. - ------------------------------------------------------------------------------------------------------------------------------- Alliance Equity Index HRT Selected securities in the S&P 500 Index (the Total return performance (before "Index") which the adviser believes will, in trust expenses and Separate the aggregate, approximate the performance Account annual expenses) that results of the Index. approximates the investment performance of the Index (including reinvestment of dividends) at risk level consistent with that of the Index. - ------------------------------------------------------------------------------------------------------------------------------- Alliance Global HRT Primarily equity securities of non-United Long-term growth of capital. States as well as United States companies. - ------------------------------------------------------------------------------------------------------------------------------- Alliance International HRT Primarily equity securities selected Long-term growth of capital. principally to permit participation in non-United States companies with prospects for growth. - -------------------------------------------------------------------------------------------------------------------------------
14
- ------------------------------------------------------------------------------------------------------------------------------- Portfolio Trust Investment Policy Objective - ------------------------------------------------------------------------------------------------------------------------------- Alliance Small Cap HRT Primarily common stocks and other equity-type Long-term growth of capital Growth securities issued by smaller-sized companies with strong growth potential. - ------------------------------------------------------------------------------------------------------------------------------- Alliance Conservative HRT Diversified mix of publicly traded, High total return without, in the Investors fixed-income and equity securities; asset mix adviser's opinion, undue risk to and security selection are primarily based upon principal factors expected to reduce risk. The Portfolio is generally expected to hold approximately 70% of its assets in fixed-income securities and 30% in equity securities. - ------------------------------------------------------------------------------------------------------------------------------- Alliance Growth HRT Diversified mix of publicly traded, High total return consistent with Investors fixed-income and equity securities; asset mix the adviser's determination of and security selection based upon factors reasonable risk expected to increase possibility of high long-term return. The Portfolio is generally expected to hold approximately 70% of its assets in equity securities and 30% in fixed-income securities. - ------------------------------------------------------------------------------------------------------------------------------- T. Rowe Price EQAT Primarily common stocks of established Long-term growth of capital International Stock non-United States companies. - ------------------------------------------------------------------------------------------------------------------------------- T. Rowe Price Equity EQAT Primarily dividend paying common stocks of Substantial dividend income and Income established companies. also capital appreciation - ------------------------------------------------------------------------------------------------------------------------------- EQ/Putnam Growth & EQAT Primarily common stocks that offer potential Capital growth and, secondarily, Income Value for capital growth and may, consistent with the current income Portfolio Portfolio's investment objective, invest in common stocks that offer potential for current income. - ------------------------------------------------------------------------------------------------------------------------------- EQ/Putnam Balanced EQAT A well-diversified portfolio of stocks and Balanced investment bonds that will produce both capital growth and current income. - ------------------------------------------------------------------------------------------------------------------------------- MFS Research EQAT A substantial portion of assets invested in Long-term growth of capital and common stock or securities convertible into future income common stock of companies believed by the Adviser to possess better than average prospects for long-term growth. - ------------------------------------------------------------------------------------------------------------------------------- MFS Emerging Growth EQAT Primarily (i.e., at least 80% of its assets Long-term growth of capital Companies under normal circumstances) in common stocks of emerging growth companies that the Adviser believes are early in their life cycle but which have the potential to become major enterprises. - ------------------------------------------------------------------------------------------------------------------------------- Morgan Stanley Emerging EQAT Primarily equity securities of emerging market Long-term capital appreciation Markets Equity country issuers with a focus on those in which the Adviser believes the economies are developing strongly and in which the markets are becoming more sophisticated. - ------------------------------------------------------------------------------------------------------------------------------- Warburg Pincus Small EQAT Primarily in a portfolio of equity securities Long-term capital appreciation Company Value of small capitalization companies (i.e., companies having market capitalizations of $1 billion or less at the time of initial purchase) that the Adviser considers to be relatively undervalued. - ------------------------------------------------------------------------------------------------------------------------------- Merrill Lynch World EQAT Primarily equity and fixed-income securities, High total investment return Strategy including convertible securities, of U.S. and foreign issuers. - ------------------------------------------------------------------------------------------------------------------------------- Merrill Lynch Basic EQAT Primarily equity securities that the Capital appreciation and, Value Equity Portfolio adviser believes are undervalued and secondarily, income therefore represent basic investment value. - -------------------------------------------------------------------------------------------------------------------------------
15 Contributions, Transfers and Withdrawals All contributions under an employer plan should be sent to the "contributions only" address listed at the end of this prospectus. All contributions made by check must be drawn on a bank in the U.S., cleared through the Federal Reserve System, in U.S. dollars and made payable to Equitable Life. All checks are accepted subject to collection. Third party checks endorsed to Equitable Life are not acceptable forms of payment except in cases of a rollover from a qualified plan or a trustee check that involves no refund. Equitable Life reserves the right to reject a payment if an unacceptable form of payment is received. We will process transactions in accordance with instructions received from the employer/plan sponsor. We will allocate contributions among and process withdrawals from one or more investment options by dollar amount. We will transfer accumulated invested amounts among the investment options in any whole number percentage or by dollar amount. All transactions are effective as of the Transaction Date. Changes in the allocation percentages of contributions made subsequent to the initial allocation among the Investment Options and transfers of accumulated invested amounts among the Investment Options may be made subject to our consent, but when permitted, are made without charge and are not subject to tax liability. See Part IV -- The Guaranteed Interest Account and Part V -- Provisions of RIA and Retirement Benefits -- Allocation Choices and Transfer Provisions. Withdrawals from any Fund for purposes of transfers among Investment Options, loan transactions (see below) or to provide benefits under RIA are made by the redemption of Units. In all cases, the value of a Unit changes in accordance with the investment experience of the Fund. Fund investment performance does not affect the number of Units owned in a Fund at any one time. Loans Plan loans are available in our RIA program to the plan trustees of the employer plan. We pay the loan amount to the plan trustees of the employer plan. It is the responsibility of the plan administrator, the plan trustees and/or the employer, and not Equitable Life, to properly administer any loan made to the plan participants in accordance with the provisions of the plan and to the extent allowed by the Code and ERISA. See Part V -- Provisions of RIA and Retirement Benefits. Communications with Us Equitable Life Representatives are available for information and assistance and can answer questions about RIA. Information and daily Fund Unit values may be obtained by calling the RIA Service Office, toll-free, at 1-800-967-4560. Written communications, including requests for contribution allocation changes, loans, transfers or withdrawals, must be sent directly to us at the RIA Service Office listed on the inside back cover of this prospectus. Transaction requests must be made by the authorized person for the employer plan as shown on our records (referred to herein as the employer, as explained above), in a written or facsimile form acceptable to us and signed by the employer. All requests will be effective on the Transaction Date. In certain cases, transfers may not be effected until approved by us. See Part V -- Provisions of RIA and Retirement Benefits -- Allocation Choices and Transfer Provisions. We will honor your properly completed transaction requests received via facsimile only if we receive a properly completed transaction request form. The request form must be signed by an individual who the plan trustees have previously authorized in writing. We are not responsible for determining the accuracy of a transmission and are not liable for any consequences, including, but not limited to, investment losses and lost investment gains, resulting from a faulty or incomplete transmission. If your request form is not properly completed, we will contact you within 24 hours of our receipt of your facsimile. We will use our best efforts to acknowledge receipt of a facsimile transmission, but our failure to acknowledge or a failure in your receipt of such acknowledgment will not invalidate your transaction request. If you do not receive acknowledgment of your facsimile within 24 hours, contact the RIA Service Office at the toll-free 800 number. 16 - -------------------------------------------------------------------------------- PART II -- CHARGES AND FEES - -------------------------------------------------------------------------------- There are two general types of expenses you may incur under RIA. The first includes expenses which are reflected as reductions in the Unit values of the Funds. These charges apply to all amounts invested in RIA, including amounts being distributed under installment payout options. The second type of charge is typically stated in terms of a defined percentage or dollar amount and is deducted by reducing the number of Units in the appropriate Funds and the number of dollars in the GIA. No deductions are made from contributions for sales expenses. We reserve the right (1) to change from time to time the charges and fees described in this prospectus upon prior notice to the employer and (2) to establish separate fee schedules for requested non-routine administrative services and for newly scheduled services not presently contemplated under the Contracts. Under Part V -- Provisions of RIA and Retirement Benefits, we discuss a $175 annuity benefit charge and the possible application of a charge for state tax which may arise if an annuity benefit is elected under RIA. We also discuss the operation of the Ongoing Operations Fee and the Contingent Withdrawal Charge in the event a loan is outstanding. The Ongoing Operations Fee and the Participant Recordkeeping Services Charge, each described under Charges Which Reduce the Number of Units in RIA, can be paid either under a direct billing arrangement we have with the employer or by redeeming the number of Units in each Fund applicable to the employer plan or, finally, by reducing the amount of proceeds payable under the employer plan. Charges Which Are Reflected in Reductions in the Unit Value HRT and EQAT Charges to Portfolios Investment advisory fees charged daily against the Trusts' assets, direct operating expenses of the Trusts (such as trustees' fees, expenses of independent auditors and legal counsel, bank and custodian charges and liability insurance), and certain investment-related expenses of the Trusts (such as brokerage commissions and other expenses related to the purchase and sale of securities) are reflected in each Portfolio's daily share price. The maximum investment advisory fees paid annually by the Portfolios cannot be increased without a vote of that Portfolio's shareholders. Investment advisory fees are established under investment advisory agreements between HRT and its investment manager, Alliance, and between EQAT, EQ Financial, as Manager and the EQAT Advisers. All of these fees and expenses are described more fully in the prospectuses of HRT and EQAT attached hereto. Since shares are purchased at their net asset value, these fees and expenses are, in effect, passed on to the Separate Account and are reflected in the Accumulation Unit Values for the Investment Funds. The maximum investment advisory fees are as follows: - -------------------------------------------------------------------------------- Maximum Investment Advisory Fee HRT Portfolio (Annual Rate) - -------------------------------------------------------------------------------- Alliance Money Market 0.350% Alliance Intermediate Government Securities 0.500% Alliance Quality Bond 0.525% Alliance High Yield 0.600% Alliance Growth & Income 0.550% Alliance Equity Index 0.325% Alliance Global 0.675% Alliance International 0.900% Alliance Small Cap Growth 0.900% Alliance Conservative Investors 0.475% Alliance Growth Investors 0.550% - -------------------------------------------------------------------------------- Maximum Investment Management and Advisory Fee EQAT Portfolio (Annual Rate) - -------------------------------------------------------------------------------- T. Rowe Price International Stock 0.75% T. Rowe Price Equity Income 0.55% EQ/Putnam Growth & Income Value 0.55% EQ/Putnam Balanced 0.55% MFS Research 0.55% MFS Emerging Growth Companies 0.55% Morgan Stanley Emerging Markets Equity 1.15% Warburg Pincus Small Company Value 0.65% Merrill Lynch World Strategy 0.70% Merrill Lynch Basic Value Equity 0.55% EQ Financial has entered into expense limitation agreements with EQAT with respect to each Portfolio, pursuant to which EQ Financial has agreed to waive or limit its fees and to assume other expenses so that the total annual operating expenses of each Portfolio (other than interest, taxes, brokerage commissions, other expenditures which are capitalized in accordance with generally accepted accounting principles, other extraordinary expenses not incurred in the ordinary course of each Portfolio's business and amounts pursuant to a plan adopted in accordance with Rule 12b-1 under the 1940 Act) are limited to certain 17 amounts. See the EQAT prospectus for details. The Rule 12b-1 Plans provide that EQAT, on behalf of each Portfolio, may charge annually up to 0.25% of the average daily net assets of a Portfolio attributable to its Class IB shares in respect of activities primarily intended to result in the sale of the Class IB shares. The 12b-1 fee will not be increased for existing employers, trustees or participants for whom we retain records under the RIA Contract. We make a daily charge for investment management and financial accounting fees at an annual rate equal to 0.50% of the assets in the Alliance Bond, Alliance Balanced, Alliance Common Stock and Alliance Aggressive Stock Funds that is reflected in the daily Unit values for the Funds. This is the fee charged for services as described in Part III -- Equitable Life and Its Funds. Separate Account Administrative Charge for the Investment Funds of Separate Account No. 51 We make a daily charge at an annual rate of 0.05% of the assets invested in the Investment Funds of Separate Account No. 51. The charge is designed to reimburse us for our costs in providing the administrative services in connection with the Contracts. See Part III -- Equitable Life and Its Funds. Charges Which Reduce the Number of Units in RIA Contingent Withdrawal Charge We may impose a contingent withdrawal charge (CWC) against withdrawals made from RIA at any time up to and including the ninth anniversary of the date on which the employer plan began its participation in RIA. However, a CWC will not be applied against amounts withdrawn for the purpose of making benefit distribution payments unless such withdrawals are made (i) on or after the date of discontinuance of an employer plan's participation in RIA or (ii) as a result of a full or partial termination, within the meaning of applicable Internal Revenue Service (IRS) or court interpretations. A CWC will be applied against amounts withdrawn for purposes of making benefit payments to participants who terminated employment either voluntarily or involuntarily, but only when such terminations are attributable to (i) the employer's merger with another company, (ii) the sale of the employer or (iii) the bankruptcy of the employer which leads to the full or partial termination of the plan or the discontinuance of the employer plan's participation in RIA. Outstanding loan balances are included in the plan's assets for purposes of assessing the CWC. There is no CWC on transfers between the Investment Options. However, unless otherwise agreed to in writing by an officer of Equitable Life, withdrawals from RIA for the purpose of transferring to another investment option under the employer plan will be subject to the CWC. Withdrawals from RIA for the purpose of paying plan expenses or the premium on a life insurance policy, including one held under the employer plan (See Part VI -- Miscellaneous Matters -- Commissions and Service Fees), are not considered in-service withdrawals or any other type of benefit distribution and are subject to the CWC. The amount of any CWC is determined in accordance with the rate schedule set forth below. - -------------------------------------------------------------------------------- Withdrawal in Participation Years Contingent Withdrawal Charge - -------------------------------------------------------------------------------- 1 or 2 6% of Amount Withdrawn 3 or 4 5% 5 or 6 4% 7 or 8 3% 9 2% 10 and later 0% - -------------------------------------------------------------------------------- Benefit distribution payments are those payments that become payable with respect to participants under the terms of the employer plan as follows: (1) as the result of the retirement, death or disability of a participant; (2) as the result of a participant's separation from service as defined under Section 402(d)(4)(A) of the Code; (3) in connection with a loan transaction, if the loan is repaid in accordance with its terms; (4) as a minimum distribution pursuant to Section 401(a)(9) of the Code; (5) as a hardship withdrawal pursuant to Section 401(k) of the Code; (6) pursuant to a qualified domestic relations order (QDRO) under Section 414(p) of the Code, but only if the QDRO specifically requires that the plan administrator withdraw amounts for payment to an alternate payee; (7) as a result of an in-service withdrawal attributable to the after-tax contributions of a participant; or (8) as a result of an in-service withdrawal from a profit-sharing plan after meeting a minimum number of years of service and/or participation in the plan, and the attainment of a minimum age specified in the plan. Prior to any withdrawal from RIA for benefit distribution purposes, Equitable Life reserves the right to receive from the employer and/or trustees of the plan, evidence satisfactory to it that such benefit distribution conforms to at least one of the types mentioned above. See Part V -- Provisions of RIA and Retirement Benefits. The CWC is designed to recover the unamortized sales and promotion expenses and initial enrollment expenses. Ongoing Operations Fee The Ongoing Operations Fee is based on the combined net balances (including any outstanding loan balance) of an employer plan in the Investment Options at the close of business on the last Business Day of each month. The amount of the Ongoing Operations Fee is determined under the rate schedule that applies to the employer plan. Except as discussed above, it is paid from the employer plan balances at the close of business on the last Business Day of the following month. Set forth below is the rate schedule for employer plans which adopted RIA after February 9, 1986. Information concerning the rate schedule for employer plans that adopted RIA on or before February 9, 1986 is included in the SAI under Part I -- Fund Information. 18 - -------------------------------------------------------------------------------- Combined Balance Monthly of Investment Options Rate - -------------------------------------------------------------------------------- First $ 150,000 1/12 of 1.25% Next $ 350,000 1/12 of 1.00% Next $ 500,000 1/12 of 0.75% Over $1,000,000 1/12 of 0.50% - -------------------------------------------------------------------------------- The Ongoing Operations Fee is designed to cover such expenses as Contract underwriting and issuance for employer plans, employer plan-level recordkeeping, processing transactions and benefit distributions, administratively maintaining the Investment Options, commissions, promotion of RIA, administrative costs (including certain enrollment and other servicing costs), systems development, legal and technical support, product and financial planning and part of our general overhead expenses. Administrative costs and overhead expenses include such items as salaries, rent, postage, telephone, travel, office equipment and stationery, and legal, actuarial and accounting fees. Participant Recordkeeping Services Charge The PRS is an optional service. If this service is elected, we charge a per participant annual fee of $25. The fee is deducted on a monthly basis at the rate of $2.08 per participant. The amount of the fee for an employer plan is determined at the close of business on the last Business Day of each month based on the number of participants enrolled with us at that time. Except as discussed above, we charge the amount against the combined balances of each participant in the Investment Options at the close of business on the last Business Day of the following month. The PRS fee covers expenses incurred for establishing and maintaining individual records, issuing statements and reports for individual employees and employer plans, and processing individual transactions and benefit distributions. We are not responsible for reconciling participants' individual account balances with the entire amount of the employer plan where we do not maintain individual account balances. See Part VIII -- Participant Recordkeeping Services (Optional). Loan Fee We charge a loan fee in an amount equal to 1% of the loan principal amount on the Transaction Date the plan loan is made. See Part V -- Provisions of RIA and Retirement Benefits. 19 - -------------------------------------------------------------------------------- PART III -- EQUITABLE LIFE AND ITS FUNDS - -------------------------------------------------------------------------------- Equitable Life Equitable Life is a New York stock life insurance company that has been in business since 1859. For more than 100 years we have been among the largest life insurance companies in the United States. Equitable Life has been selling annuities since the turn of the century. Our Home Office is located at 1290 Avenue of the Americas, New York, New York 10104. We are authorized to sell life insurance and annuities in all fifty states, the District of Columbia, Puerto Rico and the Virgin Islands. We maintain local offices throughout the United States. Equitable Life is a wholly owned subsidiary of The Equitable Companies Incorporated (the Holding Company). The largest stockholder of the Holding Company is AXA-UAP S.A. (AXA), a French company. As of December 31, 1997, AXA beneficially owned 58.7% of the outstanding common stock of the Holding Company. Under its investment arrangements with Equitable Life and the Holding Company, AXA is able to exercise significant influence over the operations and capital structure of the Holding Company and its subsidiaries, including Equitable Life. AXA is the holding company for an international group of insurance and related financial service companies. Equitable Life, the Holding Company and their subsidiaries managed approximately $274.1 billion of assets as of December 31, 1997, including third party assets of approximately $216.9 billion. We are one of the nation's leading pension fund managers. These assets are primarily managed for retirement and annuity programs for businesses, tax-exempt organizations and individuals. This broad customer base includes nearly half the Fortune 100, more than 42,000 small businesses, state and local retirement funds in more than half the 50 states, approximately 250,000 employees of educational and nonprofit institutions, as well as nearly 500,000 individuals. Millions of Americans are covered by Equitable Life's annuity, life and pension contracts. About Our Funds We established the Alliance Bond, Alliance Balanced, Alliance Common Stock and Alliance Aggressive Stock Funds under the Insurance Law of New York State and as separate investment accounts in 1981, 1979, 1969 and 1969, respectively. Each of these Funds is a pooled separate investment account used as an investment vehicle for contributions under tax-favored employee benefit plans participating in the Fund, including employer plans participating in RIA. The assets of the Alliance Bond, Alliance Balanced, Alliance Common Stock and Alliance Aggressive Stock Funds, consisting of separate portfolios of securities and cash items, are managed by us through one of our subsidiaries that also manages the Trust. Because of exclusionary provisions, none of the Funds is subject to regulation under the Investment Company Act of 1940, as amended (1940 Act). We established the Alliance Growth Investors, Alliance Conservative Investors and Alliance Global Funds as Investment Funds of Separate Account No. 51 under the Insurance Law of New York State in 1993. The Alliance Money Market, Alliance Intermediate Government Securities, Alliance Quality Bond, Alliance High Yield, Alliance Growth & Income and Alliance Equity Index Funds were established as Investment Funds of Separate Account No. 51 in 1994. The Alliance International Fund was established as an investment fund of Separate Account No. 51 on September 1, 1995. The Alliance Small Cap Growth Fund was established as an investment fund of Separate Account No. 51 in early June 1997. The Investment Funds of Separate Account No. 51 invest in shares of a corresponding Portfolio of HRT which are actively managed as described in the attached HRT prospectus. We intend to make the following Investment Funds of Separate Account No. 66 available in early July 1998: T. Rowe Price Equity Income, EQ/Putnam Growth & Income Value, Merrill Lynch Basic Value Equity, MFS Research, T. Rowe Price International Stock, Morgan Stanley Emerging Markets Equity, Warburg Pincus Small Company Value, MFS Emerging Growth Companies, EQ/Putnam Balanced and Merrill Lynch World Strategy Funds. The Investment Funds of Separate Account No. 66 invest in shares of a corresponding Portfolio of EQAT which are actively managed as described in the attached EQAT prospectus. The assets of the Funds are our property; however, the portion of the assets of the Funds equal to the reserves and other contract liabilities with respect to the Funds will not be chargeable with liabilities arising out of any other business we may conduct. Income, gains or losses, whether or not realized, from assets allocated to the Funds are credited to or charged against the Fund without regard to our other income, gains or losses. Trusts The Trusts are open-end, management investment companies registered under the 1940 Act, more commonly called mutual funds. As a "series" type of mutual fund, each Trust issues several different series of stock, each of which relates to a different Portfolio of that Trust. HRT commenced operations in January 1976 with a predecessor of its Alliance Common Stock Portfolio. EQAT commenced operations on May 1, 1997. The Trusts do not impose sales charges or "loads" for buying and selling their shares. All dividends and 20 other distributions on a Portfolio's shares are reinvested in full and fractional shares of the Portfolio to which they relate. Each Fund invests in either Class IA or Class IB shares of a corresponding Portfolio. HRT Portfolios sell Class IA shares to the Funds and EQAT Portfolios sell Class IB shares to the Funds. (Class IA shares of the EQAT Portfolios are not offered at this time.) All of the Portfolios, except for the Morgan Stanley Emerging Markets Equity Portfolio and Merrill Lynch World Strategy Portfolio, are diversified for 1940 Act purposes. The Trustees of HRT or EQAT may establish additional Portfolios or eliminate existing Portfolios at any time. More detailed information about the Trusts, their investment objectives, policies, restrictions, risks, expenses, multiple class distribution systems, the Rule 12b-1 distribution plan relating to Class IB shares and all other aspects of their operations, appears in HRT prospectus (beginning after this prospectus), EQAT prospectus (beginning after HRT prospectus), or in their respective Statements of Additional Information, which are available upon request. Purchase and Redemption of Units Amounts allocated to the Funds pursuant to an employer plan, with respect to contributions submitted and transfers of accumulations from other Investment Options (and in appropriate circumstances upon repayments of loans), are invested in Separate Account No. 13 -- Pooled, Separate Account No. 10 -- Pooled, Separate Account No. 4 -- Pooled or Separate Account No. 3 -- Pooled, respectively, through the purchase of Alliance Bond Fund Units, Alliance Balanced Fund Units, Alliance Common Stock Fund Units or Alliance Aggressive Stock Fund Units. Similarly, amounts allocated to the Investment Funds of Separate Account Nos. 51 and 66 are invested through the purchase of Units in those Investment Funds. The number of Units of each Fund purchased is equal to the amount of the payment allocated to that Fund, divided by that Fund's Unit value determined as of the Transaction Date. See Part I -- Fund Information in the SAI. The resulting number of Units does not vary because of any subsequent fluctuation in value, but the Unit values fluctuate to reflect the investment income, realized and unrealized capital gains and losses of the Funds (or the Trust's Portfolios), fees and expenses in connection with portfolio transactions, investment management fees, and the annual operation of the Funds. Amounts withdrawn from a Fund for the purposes of payments of employer plan benefits, transfers of accumulations to other Investment Options, loans or payments of certain charges and fees when due are effected by reducing the number of Units in the appropriate Fund. The number of Units redeemed for an employer plan for such purposes is determined by the amount to be withdrawn divided by the Unit value on the Transaction Date. How We Determine the Unit Value The Unit values (rounded to the nearest cent) of the Alliance Bond, Alliance Balanced, Alliance Common Stock and Alliance Aggressive Stock Funds were $36.35, $28.07, $84.15, and $44.82, respectively, on May 1, 1992, January 23, 1985, April 8, 1985 and July 7, 1986, respectively, the first date on which Registered Units under the Contracts were purchased in these Funds under RIA. The Unit values (rounded to the nearest cent) of the Alliance Money Market, Alliance Intermediate Government Securities, Alliance Quality Bond, Alliance High Yield, Alliance Growth & Income, Alliance Equity Index, Alliance Global, Alliance Conservative Investors and Alliance Growth Investors Funds were $10.00 on June 1, 1994, the first date on which Registered Units under the Contracts were purchased in these Funds. The Unit value (rounded to the nearest cent) of the Alliance International Fund was $100.00 on September 1, 1995, the first date on which registered Units under the Contracts were purchased in this Fund. The Unit value (rounded to the nearest cent) of the Alliance Small Cap Growth Fund was $100.000 on June 2, 1997, the first date on which Registered Units under the Contracts were purchased in this Fund. The Separate Account No. 66 Investment Funds will be available in July 1998. We calculate Unit values for the Funds at the end of each Business Day. The Unit value for the Alliance Bond, Alliance Balanced, Alliance Common Stock and Alliance Aggressive Stock Funds reflect investment performance (including related expenses) and the investment management and financial accounting fee. The Unit values for the Investment Funds of Separate Account No. 51 reflect investment performance, the Separate Account Administrative Charge and, indirectly, HRT expenses. The Unit values of Separate Account No. 66 will reflect investment performance and indirectly EQAT expenses. For each of the Funds, we determine the Unit value by multiplying the Unit value for the preceding Business Day by the "net investment factor" for that subsequent day. For a description of how the net investment factors are determined, see Part I - -- Fund Information in the SAI. When payments are invested in a Fund, the number of Units outstanding attributable to each Fund is correspondingly increased; and when amounts are withdrawn from a Fund, the number of Units outstanding attributable to that Fund is correspondingly decreased. See Part I -- Fund Information in the SAI. Investment Objectives and Policies Before deciding whether amounts will be allocated entirely to one of the Funds or entirely to the Guaranteed Interest Account, or divided among the Investment Options, the investment objectives and policies should be considered. Each Fund, or Trust Portfolio in which an Investment Fund of Separate Account No. 51 and No. 66 is invested, has different investment objectives and policies. The differ- 21 ences may affect the return of each Fund, as well as the market and financial risks of each. By market risks, we mean factors which do not necessarily relate to a particular issuer but which affect the way markets, and securities within those markets, perform. We sometimes describe market risk in terms of volatility, that is, the range and frequency of market value changes. Market risks include such things as changes in interest rates, general economic conditions and investor perceptions regarding the value of debt and equity securities. By financial risks we mean factors associated with a particular issuer which may affect the price of its securities, such as its competitive posture, its earnings and its ability to meet its debt obligations. There is no assurance that the objectives of any of the Funds will be met. All investments involve risk and there can be no guarantee against loss resulting from an investment in the Funds. Set forth below is information regarding the investment objectives and policies of the Alliance Bond, Alliance Balanced, Alliance Common Stock and Alliance Aggressive Stock Funds. Additional information regarding investment restrictions and requirements with respect to these Funds, is given in the SAI in Part I -- Fund Information. A Statement of Investments of the Alliance Bond, Alliance Balanced, Alliance Common Stock and Alliance Aggressive Stock Funds is included in the financial statements of Separate Account No. 13 -- Pooled, Separate Account No. 10 -- Pooled, Separate Account No. 4 -- Pooled and Separate Account No. 3 -- Pooled, respectively, in Part III of the SAI. Information regarding the investment objectives and policies, as well as investment restrictions and requirements, with respect to the corresponding HRT and EQAT Portfolios in which the Investment Funds of Separate Accounts No. 51 and No. 66 are invested, is included in each Trust's prospectus and SAI. A statement of investments for each of the Portfolios is included in the Trusts' financial statements in the SAI of each Trust. Alliance Bond Fund The Alliance Bond Fund invests primarily in publicly traded fixed-income securities, such as bonds, debentures and notes. Its objective is to achieve maximum total return, consistent with investment quality, with less volatility than a long-term bond account. The Alliance Bond Fund seeks to achieve its objective by investing primarily in fixed-income securities including, but not limited to, the following: obligations issued or guaranteed by the U.S. Government (such as U.S. Treasury securities), its agencies (such as the Government National Mortgage Association), or instrumentalities (such as the Federal National Mortgage Association); corporate debt securities; mortgage pass-through securities; collateralized mortgage obligations; asset-backed securities; zero coupon bonds; and equipment trust certificates. All such securities will be investment grade, i.e., rated within the four highest credit categories by S&P (AAA, AA, A or BBB) or by Moody's (Aaa, Aa, A or Baa) or, if unrated, will be of comparable investment quality as determined by our credit analysis. Bonds rated below A by S&P or Moody's are more susceptible to adverse economic conditions or changing circumstances than those rated A or higher but are regarded as having an adequate capacity to pay principal and interest. The fixed-income securities in which the Alliance Bond Fund invests have maturities less than or equal to ten years. The weighted average duration of the total portfolio will be between one and five years. Duration is a principle used in selecting portfolio securities that indicates a particular fixed-income security's price volatility. Duration is measured by taking into account all of the expected payments relating to that security and the time in the future when each payment will be made and weighting all such times by the present value of the corresponding payments. The duration of a fixed-income security with interest payments occurring prior to its maturity is always shorter than its term to maturity. In addition, given identical maturities, the lower the stated rate of interest of a fixed-income security, the longer its duration, and, conversely, the higher the stated rate of interest of a fixed-income security, the shorter its duration. We believe that the Alliance Bond Fund's policy of purchasing intermediate duration bonds significantly reduces the volatility of the Fund's unit price over that of a long-term bond account. While the Alliance Bond Fund will invest primarily in the types of fixed-income securities described above, the Alliance Bond Fund may also invest in high-quality money market securities, which may include obligations of the U.S. Government, its agencies and instrumentalities; negotiable certificates of deposit; banker's acceptances or bank time deposits; repurchase agreements; master demand notes; and other money market instruments of the type described below for the Alliance Balanced Fund. See Alliance Balanced Fund below. The Alliance Bond Fund may purchase these money market securities directly or may acquire units in our Separate Account No. 2A. See Alliance Common Stock Fund in this section. For temporary or defensive purposes, the Alliance Bond Fund may invest directly or indirectly in money market securities without limitation. The Alliance Bond Fund may purchase fixed-income securities and money market securities having adjustable rates of interest with periodic demand features. The Alliance Bond Fund may also purchase fixed-income securities and certain money market securities on a when-issued or delayed delivery basis. The price of when-issued securities is fixed at the time of commitment, but delivery and payment for such securities may take place up to 90 days after the date of the commitment. The securities so purchased are subject to market fluctuation, and no interest accrues to the purchaser during this period. When- 22 issued securities involve a risk of loss if the value of the security declines prior to the settlement date. For additional information on the instruments in which the Alliance Bond Fund invests, see Part I -- Fund Information -- Certain Investments of the Alliance Bond and Alliance Balanced Funds in the SAI. The Alliance Bond Fund is designed for participants who seek a greater rate of return than that normally provided by money market investments and less volatility than that experienced by long-term bond investments. Both the financial and market risks of an investment in the Alliance Bond Fund are expected to be less than those for the Alliance Common Stock, Alliance Balanced and Alliance Aggressive Stock Funds. Nevertheless, the Alliance Bond Fund's unit price and yield will fluctuate. Interest rate fluctuations will affect the value of Alliance Bond Fund Units but will not affect the income received from the Fund's portfolio securities. A decline in prevailing interest rates generally will increase the value of the securities held by the Alliance Bond Fund, while an increase in prevailing interest rates usually reduces the value of the Alliance Bond Fund's portfolio securities. The portfolio turnover rate for the Alliance Bond Fund cannot be accurately predicted and may be high. Alliance Balanced Fund The Alliance Balanced Fund's investment objective is to achieve both appreciation of capital and current income by investments in a diversified portfolio of common stocks, other equity-type securities and longer-term fixed-income securities, and current income by investments in publicly traded debt securities and short-term money market instruments. The investment mix is determined by the Fund manager. We will vary the portion of the Alliance Balanced Fund's assets invested in each type of security in accordance with our evaluation of economic conditions, the general level of common stock prices, anticipated interest rates and other relevant considerations, including our assessment of the risks associated with each investment medium. The Fund is subject to the risk that we may incorrectly predict changes in the relative values of the equity and debt markets. In general, publicly traded equity securities will comprise the greatest portion of the Alliance Balanced Fund's assets. At the years ended December 31, 1985 through 1997, the percentage of the Alliance Balanced Fund's assets invested in equity securities (including equity-type securities such as convertible preferred stocks or convertible debt instruments) has ranged from 50% to 57%. The Fund's non-money market debt securities will consist primarily of publicly traded securities issued or guaranteed by the United States Government or its agencies or instrumentalities, and corporate fixed-income securities, including, but not limited to, bank obligations, notes, asset-backed securities, mortgage pass-through obligations, collateralized mortgage obligations, zero coupon bonds and preferred stock. The Alliance Balanced Fund may also buy debt securities with equity features such as conversion or exchange rights, or warrants for the acquisition of stock or participations, based on revenues, sales or profits. The Alliance Balanced Fund's non-money market debt securities will be subject to the same investment quality criteria at the time of purchase, as are described above for the non-money market investments of the Alliance Bond Fund. The average maturity of the non-money market debt securities held by the Alliance Balanced Fund will vary according to market conditions and the state of interest rate cycles. The Alliance Balanced Fund may invest in money market securities through our Separate Account No. 2A or directly. See Alliance Common Stock Fund in this section. The investments the Alliance Balanced Fund makes in money market instruments will be payable only in United States dollars and will consist principally of securities issued or guaranteed by the United States Government or one of its agencies or instrumentalities, negotiable certificates of deposit, bankers' acceptances or bank time deposits, repurchase agreements (covering securities issued or guaranteed by the United States Government or one of its agencies or instrumentalities, certificates of deposit or bankers' acceptances), commercial paper that is rated Prime-1 by Moody's Investors Services, Inc. (Moody's) or A-1 or A-1 Plus by Standard & Poor's Corporation (S&P), unrated commercial paper, master demand notes or variable amount floating rate notes of any issuer that has an outstanding issue of unsecured debt that is currently rated Aa or better by Moody's or AA or better by S&P with less than one year to maturity. Such investments may include certificates of deposit and time deposits of London Branches of United States banks (these investments are usually referred to as Eurodollars) and certificates of deposit and commercial paper issued by Schedule B Banks (Canadian chartered bond subsidiaries of United States banks). For additional information concerning the debt instruments in which the Alliance Balanced Fund may invest, see Part I -- Fund Information -- Certain Investments of the Alliance Bond and Alliance Balanced Funds in the SAI. Mortgage pass-through securities and certain collateralized mortgage obligations, asset-backed securities and other debt instruments in which the Fund may invest, are subject to prepayments prior to their stated maturity. It is usually not possible to accurately predict the rate at which prepayments will be made, which rate may be affected, among other things, by changes in generally prevailing market interest rates. If prepayments occur, the Fund suffers the risk that it will not be able to reinvest the proceeds at as high a rate of interest as it had previously been receiving. Also, the Fund will incur a loss to the extent that prepayments are made for an amount that is less than the value at which the security was then being 23 carried by the Fund. Moreover, securities that may be prepaid tend to increase in value less during times of declining interest rates, and to decrease in value more during times of increasing interest rates, than do securities that are not subject to prepayment. The Fund may invest up to 10% of its total assets in securities that are not readily marketable and may invest up to 20% of its total assets in foreign securities. Certain risks of investment in illiquid or foreign securities are discussed below under Alliance Common Stock Fund. The Alliance Balanced Fund may enter into contracts for the purchase or sale of a specific foreign currency at a future date at a price set at the time of the contract. Generally, such forward contracts will be for a period of less than three months. The Fund will enter into such forward contracts for hedging purposes only. These transactions will include forward purchases or sales of foreign currencies for the purpose of protecting the dollar value of securities denominated in a foreign currency, or protecting the dollar equivalent of interest or dividends to be paid on such securities. Forward contracts are traded in the inter-bank market, and not on organized commodities or securities exchanges. Accordingly, the Fund is dependent upon the good faith and creditworthiness of the other party to the transaction, as evaluated by the Fund's manager. The Alliance Balanced Fund's investment policies permit hedging transactions, such as through the use of stock index or interest rate futures. Although the Alliance Balanced Fund currently has no plans to enter into such transactions, information about such transactions is included in the SAI under Part I -- Fund Information -- Certain Investments of the Alliance Bond and Alliance Balanced Funds. The Alliance Balanced Fund may enter into forward commitments for the purchase or sale of securities and may purchase and sell securities on a when-issued or delayed delivery basis. For more information about these investment techniques see Part I -- Fund Information -- Certain Investments of the Alliance Bond and Alliance Balanced Funds in the SAI. Because the types and proportions of the Alliance Balanced Fund's assets are expected to change frequently in accordance with market conditions, an annual portfolio turnover rate cannot be predicted. Alliance Common Stock Fund The Alliance Common Stock Fund's investment objective is to achieve long-term capital growth. We try to achieve this objective by investing in the securities of carefully selected companies we believe will share in the growth of our nation's economy -- and those of other leading industrialized countries -- over a long period. The Alliance Common Stock Fund invests in securities of companies of any capitalization but is generally invested primarily in securities of intermediate- to large-size companies. The Alliance Common Stock Fund invests primarily in common stocks and other equity-type securities (such as convertible preferred stocks or convertible debt instruments). The Alliance Common Stock Fund may use its assets to make non-equity investments. These could include non-participating and non-convertible preferred stocks, bonds and debentures. Some non-equity investments may carry certain equity features such as conversion or exchange rights or warrants for the acquisition of stocks of the same or different issuers or participations based on revenues, sales or profit. If, in light of economic conditions and the general level of stock prices, it appears that the Alliance Common Stock Fund's investment objective will not be met by buying equities, non-equity investments may be substantial. The Alliance Common Stock Fund may invest up to 10% of its total assets in securities which are restricted as to resale under Federal securities law (generally referred to as "restricted securities"). The Alliance Common Stock Fund may make temporary investments in government obligations, short-term commercial paper and other money market instruments of the types purchased by the Alliance Balanced Fund. It may buy these directly or acquire units in our Separate Account No. 2A. We established Separate Account No. 2A in 1983 to provide a more efficient means for our separate accounts to invest cash positions on a pooled basis at no additional cost. Separate Account No. 2A seeks to obtain a high level of current income, preserve its assets and maintain liquidity. It invests only in short-term securities which mature in 60 days or less from the date of purchase or which are subject to a repurchase agreement requiring repurchases in 60 days or less. Units in Separate Account No. 2A are not registered under the Securities Act of 1933 (1933 Act). Some amounts may be invested in securities which are restricted as to disposition under Federal securities law. While equity investments will be made primarily in securities of U.S. companies or foreign companies doing substantial business here, a limited portion of the Alliance Common Stock Fund's investments may be made in the securities of established foreign companies without substantial business here. The amount of these investments will not generally exceed 15% of the value of the Alliance Common Stock Fund's assets. For many foreign securities, there are dollar-denominated American Depository Receipts (ADRs), which are traded in the United States on exchanges or over-the-counter, and are issued by domestic banks. The Alliance Common Stock Fund may invest in foreign securities directly and through ADRs, and may hold some foreign securities outside the United States. The Alliance Common Stock Fund intends to invest in foreign securities only when the potential benefits to the Alliance Common Stock Fund are deemed to outweigh the risks. 24 In addition to the general risks inherent in any equity investment, and the market and financial risks discussed above, investment in the Alliance Common Stock Fund is subject to the risk of investment in foreign securities and restricted securities. Foreign investments may involve risks not present in domestic investments, such as changes in the political or economic climate of countries in which portfolio companies do business. Foreign securities may be less liquid or subject to greater price volatility than securities of domestic issuers, and foreign accounting, auditing and disclosure standards may differ from domestic standards. There may be less regulation in foreign countries of stock exchanges, brokers, banks, and listed companies than in the United States. The value of foreign investments may rise or fall because of changes in currency exchange rates or exchange controls. ADRs do not lessen the foreign exchange risk inherent to investing in the securities of foreign issuers. However, by investing in ADRs rather than directly in foreign issuers' stock, the Alliance Common Stock Fund will avoid currency risks during the settlement period for either purchases or sales. Restricted securities are generally less liquid than registered securities and market quotations for such securities may not be readily available. The Alliance Common Stock Fund may not be able to sell restricted securities except pursuant to registration under applicable Federal and state securities laws or pursuant to SEC rules which limit their sale to certain purchasers and may require that they be held by the Alliance Common Stock Fund for a specified period of time prior to resale. Because of these restrictions, at times the Alliance Common Stock Fund may not be readily able to sell them at fair market value. From time to time, the equity holdings in the Alliance Common Stock Fund may be concentrated in the securities of a relatively small number of issues. In no event will an investment be made for the Fund in securities of one issuer if such investment would cause more than 10% of the net asset value of the Alliance Common Stock Fund to be invested in the securities of such issuer, and no investment will be made for the Fund if such investment would cause more than 40% of the net asset value of the Fund to be invested in the securities of four or fewer issuers. This strategy of investment concentration may increase an investor's risk of loss in the event of a decline in the value of one of these securities while it is held in the Alliance Common Stock Fund. As of December 31, 1997, 26.5% of the Alliance Common Stock Fund's assets was held in the securities of four issuers. See Portfolio of Investments in the SAI. The Alliance Common Stock Fund will generally hold its investments for an extended period, and the annual portfolio turnover rate will normally be under 125%. Alliance Aggressive Stock Fund The Alliance Aggressive Stock Fund seeks to achieve long-term capital growth, consistent with investment quality. It will attempt to achieve this objective by investing primarily in securities of medium- and smaller-sized companies (with capitalizations generally between $50 million to $1.5 billion) which are perceived to have greater growth potential than larger companies. Most of the time, the Alliance Aggressive Stock Fund will invest primarily in common stocks of medium- and smaller-sized companies. It may also invest in securities not generally considered defined growth stocks, but that may have unusual value or potential. For example, opportunities for capital growth exist from time to time in what are believed to be cyclical industries, companies whose securities are temporarily undervalued, special situations, younger but not widely known companies and companies doing business in countries whose economies are expanding. The Alliance Aggressive Stock Fund may invest in foreign companies without substantial business activities in the United States. Industry diversification is not an objective of the Alliance Aggressive Stock Fund and it may at times be less diversified than a traditional equity portfolio. Some other equity-type investments may also be made. The Alliance Aggressive Stock Fund may also invest in short-term debt securities such as corporate notes and the types of temporary money market investments described above for the Alliance Balanced Fund. The Alliance Aggressive Stock Fund may invest up to 10% of its total assets in restricted securities. See Alliance Balanced Fund and Alliance Common Stock Fund in this section. Medium- and smaller-sized companies may be dependent on only one or two products. They may be more vulnerable to the competition from larger companies with greater resources and to economic conditions affecting their market sector. Therefore, consistent earnings may not be as likely in smaller companies as they may be in more established companies. Such companies may also be more dependent on access to equity markets to raise capital than larger companies with ability to support debt. Small- and intermediate-sized companies may be new, without long business or management histories, and perceived by the market as unproven. Their securities may be held primarily by insiders or institutional investors which may have an impact on marketability. These stocks may rise and fall more than the overall market. Foreign and restricted securities in the Alliance Aggressive Stock Fund are subject to the risks described above for the Alliance Common Stock Fund. In light of the aggressiveness of its policies and the less diversified nature of its investments, as participants near retirement, they should periodically reevaluate the amount allocated to the Alliance Aggressive Stock Fund. Many investments which we believe would have the greatest growth potential may involve greater risks than are inherent in the Alliance Common Stock Fund and the Alliance Balanced Fund. 25 In general, the annual portfolio turnover rate of the Alliance Aggressive Stock Fund is not expected to exceed 150%. Investment Management As the investment manager of the Alliance Bond, Alliance Balanced, Alliance Common Stock and Alliance Aggressive Stock Funds, we invest and reinvest the assets of these Funds in a manner consistent with the policies described in this section under Investment Objectives and Policies. In providing these services to the Alliance Bond, Alliance Balanced, Alliance Common Stock and Alliance Aggressive Stock Funds, we currently use the personnel and facilities of our majority-owned subsidiary, Alliance Capital Management L.P. (Alliance), for portfolio selection and transaction services. Alliance is also the investment adviser for the Trust. Alliance is a registered investment adviser under the Investment Advisors Act of 1940 and acts as an investment adviser to various separate accounts and general accounts of Equitable Life and other affiliated insurance companies. The securities held in the Alliance Bond, Alliance Balanced, Alliance Common Stock and Alliance Aggressive Stock Funds must be reviewed and approved by the Investment Committee of our Board of Directors. Subject to the Investment Committee's broad supervisory authority, our investment officers have been given discretion as to sales and, within specified limits, purchases of stocks, other equity securities and certain debt securities. When an investment opportunity arises that is consistent with the objectives of more than one of these Funds, investment opportunities are allocated among these Funds in an impartial manner based on certain factors such as the Funds' investment objectives and their then-current investment and cash positions. Our parent, the Holding Company, owns Donaldson, Lufkin & Jenrette, Inc. (DLJ). A DLJ subsidiary, Donaldson, Lufkin & Jenrette Securities Corporation is one of the nation's largest investment banking and securities firms. Another DLJ subsidiary, Autranet, Inc., is a securities broker that markets independently originated research to institutions. Through the Pershing Division of Donaldson, Lufkin & Jenrette Securities Corporation, DLJ supplies correspondent services, including order execution, securities clearance and other centralized financial services to numerous independent regional securities firms and banks. To the extent permitted by law, and consistent with the Alliance Bond, Alliance Balanced, Alliance Common Stock and Alliance Aggressive Stock Funds transaction practices discussed in this prospectus and the SAI, these Funds may engage in securities and other transactions with the above entities or may invest in shares of the investment companies with which those entities have affiliations. HRT's Manager and Investment Adviser HRT is managed and its Portfolios are advised by Alliance Capital Management L.P. ("Alliance"), which is registered with the SEC as an investment adviser under the Investment Advisers Act of 1940. In its role as manager of HRT, Alliance has overall responsibility for the general management and administration of HRT, including selecting the portfolio managers for HRT's Portfolios, monitoring their investment programs and results, reviewing brokerage matters, performing fund accounting, overseeing compliance by HRT with various Federal and state statutes, and carrying out the directives of its Board of Trustees. With the approval of HRT's Trustees, Alliance may enter into agreements with other companies to assist with its administrative and management responsibilities to HRT. Alliance Capital Management L.P. Alliance, a leading international investment adviser, provides investment management and consulting services to mutual funds, endowment funds, insurance companies, foreign entities, qualified and non-tax qualified corporate funds, public and private pension and profit-sharing plans, foundations and tax-exempt organizations. Alliance is a publicly traded limited partnership incorporated in Delaware. On December 31, 1997, Alliance was managing approximately $218.7 billion in assets. Alliance employs 223 investment professionals, including 83 research analysts. Portfolio managers have average investment experience of more than 14 years. All of the HRT Portfolios are advised by Alliance. As adviser, Alliance is responsible for developing the Portfolios' investment programs, making investment decisions for the Portfolios, placing all orders for the purchase and sale of those investments and performing certain limited related administrative functions. Alliance is an indirect, majority-owned subsidiary of Equitable Life, and its main office is located at 1345 Avenue of the Americas, New York, New York 10105. Additional information regarding Alliance is located in the HRT prospectus (page numbers are preceded by "HRT") which directly follows this prospectus. EQAT's Manager EQ Financial Consultants, Inc. ("EQF"), subject to the supervision and direction of the Trustees of EQAT, has overall responsibility for the general management and administration of EQAT. EQF is an investment adviser registered under the Investment Advisers Act of 1940, as amended, and a broker-dealer registered under the Securities Exchange Act of 1934, as amended ("1934 Act"). EQF currently furnishes specialized investment advice to other clients, including individuals, pension and profit-sharing plans, trusts, charitable organizations, corporations, and other business entities. EQF is a 26 Delaware corporation and an indirect, wholly owned subsidiary of Equitable Life. EQF is responsible for providing management and administrative services to EQAT and selects the investment advisers for EQAT's Portfolios, monitors EQAT Advisers' investment programs and results, reviews brokerage matters, oversees compliance by EQAT with various Federal and state statutes, and carries out the directives of its Board of Trustees. EQ Financial Consultants, Inc.'s main office is located at 1290 Avenue of the Americas, New York, NY 10104. Pursuant to a service agreement, Chase Global Funds Services Company assists EQF in the performance of its administrative responsibilities to EQAT with other necessary administrative, fund accounting and compliance services. EQAT's Investment Advisers Rowe Price-Fleming International, Inc.; T. Rowe Price Associates, Inc.; Putnam Investment Management, Inc.; Massachusetts Financial Services Company; Morgan Stanley Asset Management, Inc.; Warburg Pincus Asset Management, Inc.; and Merrill Lynch Asset Management, L.P. serve as EQAT Advisers only for their respective EQAT Portfolios. Each EQAT Adviser furnishes EQAT's manager, EQF, with an investment program (updated periodically) for each of its Portfolios, makes investment decisions on behalf of its EQAT Portfolios, places all orders for the purchase and sale of investments for the Portfolio's account with brokers or dealers selected by such Adviser and may perform certain limited related administrative functions. The assets of each Portfolio are allocated currently among the EQAT Advisers. If an EQAT Portfolio shall at any time have more than one EQAT Adviser, the allocation of an EQAT Portfolio's assets among EQAT Advisers may be changed at any time by EQF. Massachusetts Financial Services Company Massachusetts Financial Services Company (MFS) is America's oldest mutual fund organization, whose assets under management as of December 31, 1997 were approximately $70.2 billion on behalf of more than 2.7 million investors. MFS advises MFS Research, a domestic equity portfolio, and MFS Emerging Growth Companies, an aggressive equity portfolio. MFS is an indirect subsidiary of Sun Life Assurance Company of Canada and is located at 500 Boylston Street, Boston, MA 02116. Merrill Lynch Asset Management L.P. Founded in 1976, Merrill Lynch Asset Management, L.P. (MLAM) is a dedicated asset management affiliate of Merrill Lynch & Co., Inc., a financial management and advisory company with more than a century of experience. As of December 31, 1997, MLAM along with its advisory affiliates held approximately $278 billion in investment company and other portfolio assets under management. MLAM advises Merrill Lynch Basic Value Equity, a domestic equity portfolio with a value approach to investing, and Merrill Lynch World Strategy, a global flexible asset allocation portfolio that invests in equities and fixed-income securities worldwide. The company is located at 800 Scudders Mill Road, Plainsboro, NJ 08543. Morgan Stanley Asset Management Inc. Morgan Stanley Asset Management Inc. (MSAM), provides a broad range of portfolio management services to customers in the United States and abroad and serves as an investment adviser to numerous open-end and closed-end investment management companies. MSAM, together with its affiliated institutional investment management companies, had approximately $146 billion in assets under management and fiduciary care as of December 31, 1997. MSAM advises Morgan Stanley Emerging Markets Equity, an international equity portfolio. MSAM is a subsidiary of the recently merged Morgan Stanley, Dean Witter, & Co. and is located at 1221 Avenue of the Americas, New York, New York 10020. Putnam Investment Management, Inc. Putnam Investment Management, Inc. (Putnam) has been managing mutual funds since 1937. As of December 31, 1997, Putnam and its affiliates managed more than $235 billion in assets. Putnam advises EQ/Putnam Growth & Income Value, a domestic equity portfolio, and EQ/Putnam Balanced, a balanced stock and bond portfolio. Putnam is an indirect subsidiary of Marsh & McLennan Companies, Inc. and is located at One Post Office Square, Boston, MA 02109. T. Rowe Price Associates, Inc. and Rowe Price-Fleming International, Inc. Founded in 1937, T. Rowe Price provides investment management to both individuals and institutions. With its affiliates, assets under management were over $126 billion as of December 31, 1997. T. Rowe Price advises T. Rowe Price Equity Income, a domestic equity portfolio. The company is located at 100 East Pratt Street, Baltimore, MD 21202. Rowe Price-Fleming International, Inc. (Price-Fleming), was founded as a joint venture between T. Rowe Price and Robert Fleming Holdings, Ltd., a diversified British investment organization. Price-Fleming's predominately non-U.S. assets under management were the equivalent of approximately $30 billion as of December 31, 1997. Price-Fleming advises T. Rowe Price International Stock, an international equity portfolio and is located at 100 East Pratt Street, Baltimore, MD 21202. Warburg Pincus Asset Management, Inc. Warburg Pincus Asset Management, Inc. (WPAM) is a professional investment advisory firm which provides services to investment companies, employee benefit plans, endowment funds, foundations and other institutions and individuals. Assets under management were approxi- 27 mately $19.7 billion as of December 31, 1997. WPAM is indirectly controlled by Warburg, Pincus & Co., a New York partnership, which serves as a holding company of WPAM. WPAM advises Warburg Pincus Small Company Value, an aggressive equity portfolio. The company is located at 466 Lexington Avenue, New York, NY 10017. Additional information regarding each of the companies which serve as an EQAT Adviser appears in the EQAT prospectus (page numbers are preceded by "EQAT"), attached at the end of this prospectus. Rates of Return In order to show how the performance of the Funds may affect employer balances, the following tables provide a historical view of investment performance. The information presented includes performance results for each Fund including, for the Investment Funds of Separate Account Nos. 51 and 66, performance results since inception of the corresponding Portfolios, along with the appropriate benchmarks. These performance results are based on the change in the Unit value for the periods shown. Note that year-to-date figures are not annualized. Performance data for the Alliance Bond, Alliance Balanced, Alliance Common Stock and Alliance Aggressive Stock Funds reflect (i) the investment results of the Fund since inception and (ii) the investment management and financial accounting fee. We have recalculated performance prior to June 1, 1994 to reflect the deduction of this fee even though it did not apply as an asset-based charge. Performance data for the Investment Funds of Separate Account Nos. 51 and 66 reflect (i) the investment results of the corresponding Portfolios of HRT and EQAT respectively, from the date of inception of those Portfolios, (ii) the actual investment advisory fee and direct operating expenses of the relevant Portfolio and (iii) for Separate Account No. 51, the Separate Account Administrative Charge (although this latter charge was not an asset-based charge before the Portfolios were available under RIA). None of the data reflects the Ongoing Operations Fee, which may be paid by a reduction in the number of Units credited under an employer plan and applied (for employer plans enrolled in RIA on or after February 9, 1986) on a decremental scale based on employer plan balances, or loan fee, annuity benefit charge or charge for premium taxes, which may not be applicable to any particular Participant. Because rates of return do not reflect the Ongoing Operations Fee or other charges and fees applicable to employer plans under RIA, the rate of return for an employer plan would be lower if such charges and fees were reflected. For amounts allocated or transferred to a Fund, investment return and principal will fluctuate and Unit values may be worth more or less than the original cost when redeemed. Market indices are not subject to any charges for investment advisory fees typically associated with a managed portfolio. Comparisons with these benchmarks, therefore, are of limited use. We include them because they are widely known and may help you to understand the universe of securities from which each Fund is likely to select its holdings. Inception Dates and Comparative Benchmarks Alliance Money Market: May 11, 1982; Salomon Brothers Three-Month T-Bill Index (3-Month T-Bill). Alliance Intermediate Government Securities: April 1, 1991; Lehman Intermediate Government Bond Index (Lehman Intermediate Government). Alliance Bond: May 1, 1981; Lehman Intermediate Government/Corporate Bond Index (Lehman Intermediate GC). Alliance Quality Bond: October 1, 1993; Lehman Aggregate Bond Index (Lehman Aggregate). Alliance High Yield: January 2, 1987; Merrill Lynch High Yield Master Index (Master High Yield). Alliance Growth & Income: October 1, 1993; 75% Standard & Poor's 500 Index (S&P 500), and 25% Value Line Convertible Index (75% S&P 500/25% Value Line Conv.). Alliance Equity Index: March 1, 1994; S&P 500 which includes reinvested dividends. Alliance Common Stock: July 1, 1969; Standard & Poor's 500 Index (S&P 500e), which includes reinvested dividends. Alliance Global: August 31, 1987; Morgan Stanley Capital International World Index (MSCI World). Alliance International: April 3, 1995; Morgan Stanley Capital International Europe, Australia, Far East Index (MSCI EAFE). Alliance Aggressive Stock: May 1, 1969; 50% Russell 2000 Small Stock Index and 50% S&P Mid-Cap Total Return (50% Russell 2000/50% S&P Mid-Cap). Alliance Small Cap Growth: May 1, 1997; 100% Russell 2000 Growth (Russell 2000 Gr.). Alliance Conservative Investors: October 2, 1989; 70% Lehman Treasury Bond Composite Index and 30% S&P 500 (70% Lehman Treas./30% S&P 500). Alliance Balanced: June 25, 1979; 50% S&P 500 and 50% Lehman Government/Corporate Bond Index (50% S&P 500/50% Lehman Corp.). Alliance Growth Investors: October 2, 1989; 30% Lehman Government/Corporate Bond Index and 70% S&P 500 (30% Lehman Treas./70% S&P 500). T. Rowe Price International Stock: May 1, 1997; Morgan Stanley Capital International Europe, Australia, Far East Index (MSCI EAFE). T. Rowe Price Equity Income: May 1, 1997; Standard & Poor's 500 Index (S&P 500). 28 EQ/Putnam Growth & Income Value: May 1, 1997; Standard & Poor's 500 Index (S&P 500). EQ/Putnam Balanced: May 1, 1997; 60% Standard & Poor's 500 Index and 40% Lehman Government/Corporate Bond Index (60% S&P 500/40% Lehman Corp.). MFS Research: May 1, 1997; Standard & Poor's 500 Index (S&P 500). MFS Emerging Growth Companies: May 1, 1997; Russell 2000 Index (Russell 2000). Morgan Stanley Emerging Markets Equity: August 20, 1997; Morgan Stanley Capital International Emerging Markets Free Price Return Index (MSCI Emerging Markets). Warburg Pincus Small Company Value: May 1, 1997; Russell 2000 Index (Russell 2000). Merrill Lynch World Strategy: May 1, 1997; 36% S&P 500/24% MSCI EAFE/21% Salomon Brothers U.S. Treasury Bond 1 Year+/14% Salomon Brothers World Government Bond Ex U.S./5% 3-Month U.S. T-Bill (Market Composite) U.S. Merrill Lynch Basic Value Equity: May 1, 1997; Standard & Poor's 500 Index (S&P 500). The Lipper Mutual Funds Survey (Lipper) records the performance of over 7,000 mutual funds. According to Lipper Analytical Services, Inc., the data are presented net of investment management fees, direct operating expenses, and, for funds with Rule 12b-1 plans, asset-based sales charges. Lipper data provide a more accurate picture of RIA performance relative to that of other mutual funds underlying retirement plan products than the market indices. All rates of return presented are time-weighted and include reinvestment of investment income, including interest and dividends. Cumulative rates of return reflect performance over a stated period of time. Annualized rates of return represent the annual rate of growth that would have produced the same cumulative return, if performance had been constant over the entire period. The performance of the Funds does not represent the actual experience of a particular participating employer plan; the amount and timing of contributions affects individual performance, as do Fund expenses. For a discussion of charges and fees and how they are deducted from a RIA plan, see Part II -- Charges and Fees. PAST PERFORMANCE IS NOT A GUARANTEE OR INDICATION OF FUTURE RESULTS. NO PROVISIONS HAVE BEEN MADE FOR THE EFFECT OF TAXES ON INCOME AND GAINS OR UPON DISTRIBUTION. 29
Annualized Rates of Return for Periods Ended December 31, 1997: - ----------------------------------------------------------------------------------------------------------------------------------- Portfolio Since Inception 1 Year 3 Years 5 Years 10 Years 20 Years Inception Date ------------------------------------------------------------------------------------- FIXED-INCOME SERIES: Domestic Fixed Income ALLIANCE MONEY MARKET 5.37% 5.45% 4.64% 5.73% -- 7.12% 5/11/82 Lipper Money Market 4.90 5.05 4.31 5.40 -- 6.89 3-Month T-Bill 5.23 5.41 4.71 5.61 -- 6.87 ALLIANCE INTERMEDIATE GOVERNMENT SECURITIES 7.24 8.01 5.88 -- -- 6.95 4/1/91 Lipper U.S. Government 8.08 8.68 6.00 -- -- 7.19 Lehman Intermediate Government 7.72 8.65 6.39 -- -- 7.47 ALLIANCE BOND 7.62 8.50 6.44 7.96 -- 10.22 5/1/81 Lehman Intermediate GC 7.87 8.98 6.67 8.34 -- 10.58 Lipper Gen. U.S. Govt. 8.84 9.23 6.31 7.91 -- 9.77 ALLIANCE QUALITY BOND 9.09 10.35 -- -- -- 5.75 10/1/93 Lipper Corporate Bond A-Rated 9.17 10.01 -- -- -- 5.82 Lehman Aggregate 9.65 10.42 -- -- -- 6.51 Aggressive Fixed Income ALLIANCE HIGH YIELD 18.41 20.35 15.83 12.74 -- 11.98 1/2/87 Lipper High Yield 12.96 14.17 11.36 10.66 -- 9.78 Master High Yield 12.83 14.54 11.72 12.09 -- 11.39 EQUITY SERIES: Domestic Equity T. ROWE PRICE EQUITY INCOME+ -- -- -- -- -- 22.11 5/1/97 Lipper Equity Income -- -- -- -- -- 21.84 S&P 500 -- -- -- -- -- 22.55 EQ/PUTNAM GROWTH & INCOME VALUE+ -- -- -- -- -- 16.23 5/1/97 Lipper Growth & Income -- -- -- -- -- 21.37 S&P 500 -- -- -- -- -- 22.55 ALLIANCE GROWTH & INCOME 26.69 23.55 -- -- -- 15.86 10/1/93 Lipper Growth 27.14 26.49 -- -- -- 18.48 25% Value Line Conv./75% S&P 500 29.54 28.62 -- -- -- 20.14 ALLIANCE EQUITY INDEX 32.50 30.28 -- -- -- 23.31 3/1/94 Lipper S&P 500 Index 32.60 30.49 -- -- -- 23.31 S&P 500 33.36 31.15 -- -- -- 23.84 MERRILL LYNCH BASIC VALUE EQUITY+ -- -- -- -- -- 16.99 5/1/97 Lipper Growth & Income -- -- -- -- -- 21.37 S&P 500 -- -- -- -- -- 22.55 ALLIANCE COMMON STOCK 26.93 25.37 18.28 18.24 17.80% 13.63 7/1/69 Lipper Growth 25.30 25.11 16.47 15.93 15.73 11.13 S&P 500 33.36 31.15 20.27 18.05 16.66 12.55 MFS RESEARCH+ -- -- -- -- -- 16.07 5/1/97 Lipper Growth -- -- -- -- -- 21.59 S&P 500 -- -- -- -- -- 22.55 International Equity ALLIANCE GLOBAL 11.49 14.89 16.07 13.68 -- 11.64 8/31/87 Lipper Global 13.04 15.20 13.76 11.50 -- 9.10 MSCI World 15.76 16.62 15.34 10.57 -- 8.22 ALLIANCE INTERNATIONAL -3.10 -- -- -- -- 6.11 4/3/95 Lipper International 5.44 -- -- -- -- 9.87 MSCI EAFE 1.78 -- -- -- -- 6.15 T. ROWE PRICE INTERNATIONAL STOCK+ -- -- -- -- -- -1.49 5/1/97 Lipper International -- -- -- -- -- 3.41 MSCI EAFE -- -- -- -- -- 2.85 MORGAN STANLEY EMERGING MARKETS EQUITY* -- -- -- -- -- -20.16 8/20/97 Lipper Emerging Markets -- -- -- -- -- N/A MSCI Emerging Markets Free -- -- -- -- -- -21.43 - ----------------------------------------------------------------------------------------------------------------------------------- See footnotes on page 31. This table continues on next page
30
Annualized Rates of Return for Periods Ended December 31, 1997 (continued): - ----------------------------------------------------------------------------------------------------------------------------------- Portfolio Since Inception 1 Year 3 Years 5 Years 10 Years 20 Years Inception Date ------------------------------------------------------------------------------------- EQUITY SERIES (Continued): Aggressive Equity ALLIANCE AGGRESSIVE STOCK 12.10% 21.72% 14.75% 19.40% 18.28% 11.14% 5/1/69 Lipper Mid-Cap Growth 19.63 22.51 15.24 16.50 15.60 9.29 50% Russell 2000/50% S&P Mid-Cap 27.31 24.88 17.11 17.74 N/A N/A WARBURG PINCUS SMALL COMPANY VALUE+ -- -- -- -- -- 19.15 5/1/97 Lipper Small-Cap -- -- -- -- -- 30.28 Russell 2000 Growth -- -- -- -- -- 28.68 ALLIANCE SMALL CAP GROWTH+ -- -- -- -- -- 26.64 5/1/97 Lipper Small-Cap -- -- -- -- -- 30.28 Russell 2000 Growth -- -- -- -- -- 27.66 MFS EMERGING GROWTH COMPANIES+ -- -- -- -- -- 22.42 5/1/97 Lipper Mid-Cap -- -- -- -- -- 26.03 Russell 2000 -- -- -- -- -- 28.68 THE ASSET ALLOCATION SERIES: ALLIANCE CONSERVATIVE INVESTORS 13.17 12.72 8.73 -- -- 9.48 10/2/89 Lipper Income 18.69 19.44 13.14 -- -- 12.15 70% Lehman Treas./30% S&P 500 16.71 17.18 11.87 -- -- 11.39 EQ/PUTNAM BALANCED+ -- -- -- -- -- 14.38 5/1/97 Lipper Balanced -- -- -- -- -- 14.79 40% Lehman Gov't/Corp./60% S&P 500 -- -- -- -- -- 17.17 ALLIANCE BALANCED 13.42 15.00 9.40 11.99 -- 13.89 5/1/84 Lipper Balanced 19.00 19.44 13.20 12.92 -- 13.74 50% Lehman Gov't Corp./50% S&P 500 21.56 21.68 14.63 21.19 -- 14.49 ALLIANCE GROWTH INVESTORS 16.72 18.39 13.10 -- -- 15.67 10/2/89 Lipper Flexible Portfolio 18.69 19.44 13.14 -- -- 12.15 30% Lehman Gov't/Corp./70% S&P 500 26.28 25.64 17.02 -- -- 14.48 MERRILL LYNCH WORLD STRATEGY+ -- -- -- -- -- 4.70 5/1/97 Lipper Global Flexible Portfolio -- -- -- -- -- 9.56 Market Composite -- -- -- -- -- 10.81 - -----------------------------------------------------------------------------------------------------------------------------------
- ---------- *Return for this Fund is unannualized and represents less than 5 months of performance. +Return for this Fund is unannualized and represents 8 months of performance. 31
Cumulative Rates of Return for Periods Ended December 31, 1997: - ----------------------------------------------------------------------------------------------------------------------------------- Portfolio Since Inception 1 Year 3 Years 5 Years 10 Years 20 Years Inception Date ------------------------------------------------------------------------------------- FIXED-INCOME SERIES: Domestic Fixed Income ALLIANCE MONEY MARKET 5.37% 17.24% 25.48% 74.51% -- 210.22% 5/11/82 Lipper Money Market 4.90 15.84 23.52 69.20 -- 200.21 3-Month T-Bill 5.23 17.13 25.87 72.64 -- 199.34 ALLIANCE INTERMEDIATE GOVERNMENT SECURITIES 7.24 25.99 33.10 -- -- 57.38 4/1/91 Lipper U.S. Government 8.08 28.40 33.93 -- -- 59.98 Lehman Intermediate Government 7.72 28.25 36.31 -- -- 62.74 ALLIANCE BOND 7.62 27.72 36.65 115.15 -- 406.60 Lehman Intermediate GC 7.87 29.44 38.10 122.75 -- 435.22 5/1/81 Lipper Gen. U.S. Govt. 8.84 30.41 35.99 114.75 -- 389.63 ALLIANCE QUALITY BOND 9.09 34.37 -- -- -- 26.79 10/1/93 Lipper Corporate Bond A-Rated 9.17 33.20 -- -- -- 27.23 Lehman Aggregate 9.65 34.63 -- -- -- 30.78 Aggressive Fixed Income ALLIANCE HIGH YIELD 18.41 74.31 108.74 231.68 -- 247.01 1/2/87 Lipper High Yield 12.96 48.92 71.52 177.35 -- 181.23 Master High Yield 12.83 50.26 74.04 213.08 -- 227.68 EQUITY SERIES: Domestic Equity T. ROWE PRICE EQUITY INCOME -- -- -- -- -- 22.11 5/1/97 Lipper Equity Income -- -- -- -- -- 21.84 S&P 500 -- -- -- -- -- 22.55 EQ/PUTNAM GROWTH & INCOME VALUE -- -- -- -- -- 16.23 5/1/97 Lipper Growth & Income -- -- -- -- -- 21.37 S&P 500 -- -- -- -- -- 22.55 ALLIANCE GROWTH & INCOME 26.69 88.58 -- -- -- 86.90 10/1/93 Lipper Growth 27.14 102.81 -- -- -- 106.17 25% Value Line Conv./75% S&P 500 29.54 112.80 -- -- -- 118.17 ALLIANCE EQUITY INDEX 32.50 121.10 -- -- -- 123.40 3/1/94 Lipper S&P 500 Index 32.60 122.21 -- -- -- 123.31 S&P 500 33.36 125.60 -- -- -- 127.24 MERRILL LYNCH BASIC VALUE EQUITY -- -- -- -- -- 16.99 5/1/97 Lipper Growth & Income -- -- -- -- -- 21.37 S&P 500 -- -- -- -- -- 22.55 ALLIANCE COMMON STOCK 26.93 97.03 131.47 434.23 2,545.77 3,718.77 7/1/69 Lipper Growth 25.30 97.08 117.56 356.18 2,037.84 2,385.75 S&P 500 33.36 125.60 151.62 425.67 2,080.13 2,814.09 MFS RESEARCH -- -- -- -- -- 16.07 5/1/97 Lipper Growth -- -- -- -- -- 21.59 S&P 500 -- -- -- -- -- 22.55 International Equity ALLIANCE GLOBAL 11.49 51.66 110.65 260.29 -- 212.44 8/31/87 Lipper Global 13.04 53.69 92.92 205.52 -- 151.76 MSCI World 15.76 58.59 104.13 173.01 -- 126.45 ALLIANCE INTERNATIONAL -3.10 -- -- -- -- 17.69 4/3/95 Lipper International 5.44 -- -- -- -- 30.12 MSCI EAFE 1.78 -- -- -- -- 17.83 - ----------------------------------------------------------------------------------------------------------------------------------- This table continues on next page
32
Cumulative Rates of Return for Periods Ended December 31, 1997(continued): - ----------------------------------------------------------------------------------------------------------------------------------- Portfolio Since Inception 1 Year 3 Years 5 Years 10 Years 20 Years Inception Date ------------------------------------------------------------------------------------- EQUITY SERIES (Continued): International Equity T. ROWE PRICE INTERNATIONAL STOCK -- -- -- -- -- -1.49% 5/1/97 Lipper International -- -- -- -- -- 3.76 MSCI EAFE -- -- -- -- -- 2.85 MORGAN STANLEY EMERGING MARKETS 8/20/97 EQUITY -- -- -- -- -- -20.16 Lipper Emerging Markets -- -- -- -- -- -19.10 MSCI Emerging Markets Free -- -- -- -- -- -21.43 Aggressive Equity ALLIANCE AGGRESSIVE STOCK 12.10% 80.34% 100.33% 508.23% 2,770.93% 1,966.57 5/1/69 Lipper Mid-Cap Growth 19.63 84.83 105.11 371.28 2,029.53 1,580.48 50% Russell 2000/50% S&P Mid-Cap 27.31 94.76 120.25 412.08 N/A N/A WARBURG PINCUS SMALL COMPANY VALUE -- -- -- -- -- 19.15 5/1/97 Lipper Small-Cap -- -- -- -- -- 30.28 Russell 2000 Growth -- -- -- -- -- 28.68 ALLIANCE SMALL CAP GROWTH -- -- -- -- -- 26.64 5/1/97 Lipper Small-Cap -- -- -- -- -- 29.36 Russell 2000 Growth -- -- -- -- -- 27.66 MFS EMERGING GROWTH COMPANIES -- -- -- -- -- 22.42 5/1/97 Lipper Mid-Cap -- -- -- -- -- 26.03 Russell 2000 -- -- -- -- -- 28.68 THE ASSET ALLOCATION SERIES: ALLIANCE CONSERVATIVE INVESTORS 13.17 43.22 51.98 -- -- 111.03 10/2/89 Lipper Income 18.69 71.00 86.52 -- -- 160.04 70% Lehman Treas./30% S&P 500 16.71 60.91 75.18 -- -- 143.55 EQ/PUTNAM BALANCED -- -- -- -- -- 14.38 5/1/97 Lipper Balanced -- -- -- -- -- 15.83 40% Lehman Gov't/Corp./60% S&P 500 -- -- -- -- -- 17.17 ALLIANCE BALANCED 13.42 52.09 57.09 220.32 -- 1,011.81 5/1/84 Lipper Flexible Portfolio 19.00 70.61 86.33 239.04 -- 1,002.31 50% Lehman Gov't/Corp./50% S&P 500 21.56 80.14 97.96 583.14 -- 1,127.66 ALLIANCE GROWTH INVESTORS 16.72 65.93 85.05 -- -- 232.10 10/2/89 Lipper Flexible Portfolio 18.69 71.00 86.52 -- -- 160.04 30% Lehman Gov't/Corp./70% S&P 500 26.28 98.32 119.42 -- -- 205.24 MERRILL LYNCH WORLD STRATEGY -- -- -- -- -- 4.70 5/1/97 Lipper Global Flexible Portfolio -- -- -- -- -- 9.56 Market Composite -- -- -- -- -- 10.81 - -----------------------------------------------------------------------------------------------------------------------------------
33
RIA YEAR-BY-YEAR RATES OF RETURN - ------------------------------------------------------------------------------------------------------------------------------- 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 ------------------------------------------------------------------------------------------- ALLIANCE MONEY MARKET 7.27% 9.13% 8.19% 6.13% 3.48% 2.94% 3.96% 5.69% 5.28% 5.37% ALLIANCE BOND 6.21 13.29 7.82 14.45 6.03 9.21 -2.03 15.48 2.77 7.62 ALLIANCE INTERMEDIATE GOVERNMENT SECURITIES -- -- -- 12.03 5.54 10.52 -4.42 13.27 3.72 7.24 ALLIANCE HIGH YIELD 9.68 5.08 -1.15 24.40 12.26 23.08 -2.83 19.86 22.82 18.41 ALLIANCE QUALITY BOND -- -- -- -- -- -0.52 -5.15 16.97 5.31 9.09 ALLIANCE GROWTH & INCOME -- -- -- -- -- -0.27 -0.62 24.01 20.03 26.69 ALLIANCE EQUITY INDEX -- -- -- -- -- -- 1.04 36.41 22.32 32.50 ALLIANCE COMMON STOCK 16.94 44.68 -11.35 52.03 1.22 19.81 -1.94 31.85 17.74 26.93 ALLIANCE GLOBAL 10.83 26.67 -6.11 30.49 -0.56 32.06 5.18 18.78 14.55 11.49 ALLIANCE INTERNATIONAL -- -- -- -- -- -- -- 10.66 9.76 -3.10 ALLIANCE AGGRESSIVE STOCK 1.94 46.97 8.85 87.18 -3.01 15.19 -4.24 31.33 22.50 12.10 ALLIANCE SMALL CAP GROWTH -- -- -- -- -- -- -- -- -- 26.64* ALLIANCE CONSERVATIVE INVESTORS -- 3.08 6.35 19.79 5.74 10.71 -4.15 20.34 5.16 13.17 ALLIANCE BALANCED 14.78 26.48 -0.65 41.23 -2.83 12.54 -8.43 20.43 11.34 13.42 ALLIANCE GROWTH INVESTORS -- 3.98 10.56 48.84 4.88 15.20 -3.19 26.31 12.55 16.72 - ------------------- * Unannualized - ------------------------------------------------------------------------------------------------------------------------------
34 - -------------------------------------------------------------------------------- PART IV -- THE GUARANTEED INTEREST ACCOUNT - -------------------------------------------------------------------------------- General Contributions allocated to the Guaranteed Interest Account become part of our general account, which supports all of our insurance and annuity guarantees and our general obligations. Our general account, as part of our insurance and annuity operations, is subject to regulation and supervision by the Insurance Department of the State of New York and to the insurance laws and regulation of all jurisdictions in which we are authorized to do business, as discussed in Part VI -- Miscellaneous Matters. Because of applicable exemptive and exclusionary provisions, interests in our general account have not been registered under the Securities Act of 1933 nor is the general account an investment company under the 1940 Act. Accordingly, neither our general account nor any interests in our general account are subject to regulation under the Securities Act of 1933 or 1940 Act, and we have been advised that the staff of the SEC has not made a review of the information which is included in this prospectus or in the SAI relating to our general account and the Guaranteed Interest Account. These disclosures, however, may be subject to certain generally applicable provisions of the Federal securities laws relating to the accuracy and completeness of statements made in prospectuses. The Guarantees The Guaranteed Interest Account provides an investment option in which the value of the principal will not fluctuate. The amount allocated to the Guaranteed Interest Account earns interest at the current guaranteed interest rate which is an annual effective rate. After interest is credited, certain charges and fees are deducted. The value of an employer plan's investment in the Guaranteed Interest Account is, at any time, the total contributions allocated to the Guaranteed Interest Account, plus the interest earned, less (i) employer plan benefit payments, (ii) other employer plan withdrawals (including loans) and (iii) charges and fees provided for under the Contracts. Interest is credited through and allocated on the Transaction Date of any transfer or withdrawal request. Interest is credited for each day of the month on the amount maintained for the employer plan at the beginning of the day at a daily rate equivalent to the guaranteed interest rate applicable to the employer plan. The annual effective rate does not reflect deductions of fees and expenses. Current and Minimum Interest Rates Except as described below, the "current" rate is the rate of interest that we actually credit to amounts in the Guaranteed Interest Account for a given calendar year. Current rates are declared for each class of employer plans before the beginning of each calendar year. In addition to the current rate, we declare "minimum" rates for the next two calendar years. The minimum interest rates will never be lower than 4%. In general, we expect to declare current rates in any year greater than the previously declared minimum rates for that year. If the employer plan is permitted to invest in the Bond Fund, we may at times have the right to declare a lower "current" rate of interest (revised rate) which will be applicable for the remainder of the calendar year only to new amounts contributed or transferred by the employer plan to the Guaranteed Interest Account. See Part V -- Provisions of RIA and Retirement Benefits -- Special Rules Applicable to Plans that May Invest in the Alliance Bond Fund for circumstances in which a revised rate might be declared. Such revised rate will reflect market interest rates for money market instruments and other short-term investments existing at the time any such amount is contributed or transferred to the Guaranteed Interest Account without regard to any previously declared minimum rate. The current rate of interest for 1998, and the 1999 and year 2000 minimum rates of interest guaranteed for each class, are stated in the proposal documents submitted to sponsors of prospective RIA employer plans. The establishment of new classes will not decrease the rates applicable to employer plans already assigned to a previous class. The effective current rate for 1999 and the minimum rates effective for calendar years 2000 and 2001 will be declared in December 1998. Classes of Employer Plans We assign an employer plan to a "class" of employer plans upon its participation in the Master Retirement Trust in order to facilitate the determination of current and minimum guaranteed rates of interest that are applicable for that employer plan participating in our Guaranteed Interest Account. The initial class of employer plans to which an employer plan is assigned will depend on the adoption effective date. However, we reserve the right to, at any time during a calendar year, (1) close a class and begin a new class for employer plans adopting the Master Retirement Trust during the balance of the calendar year or (2) combine two or more classes of employer plans. When we begin a new class of employer plans or combine two or more classes of employer plans we will not decrease the "current" or "minimum" guaranteed rates of interest for a class once those rates have been declared. Charges and Fees The ongoing operations fee, contingent withdrawal charge, loan fee, PRS charge, annuity benefit charge and the charge for applicable state taxes discussed in Part II -- Charges and Fees apply to employer plan balances maintained in the Guaranteed Interest Account. The loan 35 fee is applied on the Transaction Date that the loan amount is paid out of the Guaranteed Interest Account. Deferred Payout Provision With respect to trustee-directed employer plans which are terminating their RIA Contract, there is a deferred payout provision. Under that provision, we can defer payment of the employer plan balance held in the Guaranteed Interest Account less the contingent withdrawal charge by paying out the balance in six installments over five years. During the deferred payout period, the balances upon which we defer payment continue to earn the current interest rate declared for each year. The ongoing operations fee continues to be deducted monthly from the balance during the deferred payout period. When the deferred payout provision is imposed, any trustee-directed employer plan benefits becoming due during the deferred payout period will not be paid from the employer plan balance in the Guaranteed Interest Account but, if sufficient funds are available, would be paid from the new funding vehicle for the trustee-directed employer plan. Participant-directed employer plans are not subject to the deferred payout provision. 36
ILLUSTRATION OF DEFERRED PAYOUT PROVISION - ------------------------------------------------------------------------------------------------------------------------------------ Transaction Date End of Year 1 End of Year 2 End of Year 3 End of Year 4 End of Year 5 - ------------------------------------------------------------------------------------------------------------------------------------ Guaranteed Interest Account Plan Assets - - Withdrawal Charge - -------------------- Distribution Amount 1 Dist. Amt. 1 = 1st Payment - -------------- 6 Dist. Amount 1 - - 1st Payment - -------------- Balance 1 Balance 1 + Interest - Operations Fee ------------------- Distribution Amount 2 Dist. Amt. 2 = 2nd Payment -------------- 5 Dist. Amount 2 - 2nd Payment -------------- Balance 2 Balance 2 + Interest - Operations Fee ------------------- Distribution Amount 3 Dist. Amt. 3 = 3rd Payment -------------- 4 Dist. Amount 3 - 3rd Payment -------------- Balance 3 Balance 3 + Interest - Operations Fee ------------------- Distribution Amount 4 Dist. Amt. 4 = 4th Payment -------------- 3 Dist. Amount 4 - 4th Payment -------------- Balance 4 Balance 4 + Interest - Operations Fee -------------------- Distribution Amount 5 Dist. Amt. 5 = 5th Payment -------------- 2 Dist. Amount 5 - 5th Payment -------------- Balance 5 Balance 5 + Interest - Operations Fee ------------------ Final Distribution
37 - -------------------------------------------------------------------------------- PART V -- PROVISIONS OF RIA AND RETIREMENT BENEFITS - -------------------------------------------------------------------------------- Contributions; Frequency and Amount When RIA is utilized as the exclusive investment funding vehicle for the assets of an employer plan, the annual aggregate amount of contributions must be at least $10,000 (exclusive funding employer plan). In our sole discretion, RIA may also be utilized as a partial investment funding vehicle for employer plans. In such cases, the aggregate amount of contributions in the initial participation year must be at least $50,000 and the annual aggregate amount of contributions thereafter must be at least $25,000 (partial funding employer plans). There is no required minimum for the amount of each contribution where employer plan contributions are made on a basis more frequent than annually. The total amount of contributions under an employer plan is limited by law. See Part VII -- Tax and ERISA Considerations. Rollover or Transfer from a Plan An employer can change the funding of an existing plan to use RIA. Before making a change, the following should be carefully considered: o The comparative costs and benefits under existing funding arrangements and under RIA; and o The amendments or changes that may have to be made in the plan if funds are transferred. To make a rollover or transfer to RIA, funds must be in cash. Therefore, any assets accumulated under an existing plan will have to be liquidated for cash. Selecting Investment Options An employer can elect to fund the employer plan with any number of the Investment Options available under the Contracts. Generally, for participant-directed plans, if the employer elects to fund the employer plan by selecting any of the Alliance Intermediate Government Securities, Alliance Quality Bond, Alliance High Yield or Alliance Conservative Investors Funds and intends for the employer plan to comply with the requirements of ERISA Section 404(c), the employer should also select the Alliance Money Market Fund. If the employer intends for the employer plan to comply with ERISA Section 404(c) and none of the Alliance Money Market, Alliance Intermediate Government Securities, Alliance Quality Bond, Alliance High Yield, Alliance Small Cap Growth or Alliance Conservative Investors Funds are selected, the employer should elect the Guaranteed Interest Account as a funding option. If the employer selects any of the Alliance Money Market, Alliance Bond, Alliance Intermediate Government Securities, Alliance Quality Bond, Alliance High Yield or Alliance Conservative Investors Funds and the Guaranteed Interest Account, certain restrictions will apply to transfers out of the Guaranteed Interest Account. The Alliance Bond Fund is available only to employer plans that signed an Agreement to participate in that Fund prior to June 1, 1994, and special transfer rules apply for these employer plans. See Special Rules Applicable to Plans That May Invest in the Alliance Bond Fund in this section. If the Employer adds any of the Investment Funds of Separate Account Nos. 51 or 66, the Alliance Bond Fund will no longer be subject to any transfer restrictions. However, transfers out of the Guaranteed Interest Account will be subject to certain restrictions. See Transfer Provisions in this section. Allocation Choices Contributions may be allocated to the Investment Options by dollar amounts or in any whole number percentages that total 100% in accordance with the allocation instructions on file. In addition to our rules, allocation changes may be subject to employer plan provisions which may limit or disallow such movements. Allocation changes may be made without charge. Except as provided below in connection with trustee-directed plans, amounts to be allocated to an Investment Option to effectuate permitted contribution allocation changes will be effective on the Transaction Date. For allocations to the Guaranteed Interest Account in connection with trustee-directed plans, any proposed change in an employer plan's contribution allocation must be provided to us by written notice at least 60 days before the effective date of the proposed change. Transfer Provisions Transfers of accumulated amounts among the Investment Options will be permitted at any time and in any amount, subject to the transfer limitations described in this section. In addition to our rules, transfers among the Investment Options may be subject to employer plan provisions which may limit or disallow such movements. Transfers among the Investment Options may be made without charge. Under certain situations, amounts transferred out of the Guaranteed Interest Account during the calendar quarter in which the request is made and the three preceding calendar quarters (transfer period) are subject to a transfer limitation described in this section. 38 Participant-directed employer plans that have elected the PRS: If the employer elects to fund the employer plan with the Guaranteed Interest Account and the Alliance Money Market, Alliance Bond, Alliance Intermediate Government Securities, Alliance Quality Bond, Alliance High Yield or Alliance Conservative Investors Funds, during any transfer period, the maximum amount that may be transferred by a participant from the Guaranteed Interest Account is equal to the greater of: (i) 25% of the amount the participant had in the Guaranteed Interest Account as of the last calendar day of the prior calendar year and (ii) the total of all amounts the participant transferred out of the Guaranteed Interest Account during the prior calendar year. Generally, this means that new participants will not be able to transfer amounts out of the Guaranteed Interest Account during the first calendar year of their participation under the Contract. If assets have been transferred from another funding vehicle by the Employer, the participant, for the remainder of that calendar year, may transfer to the Funds up to 25% of such transferred amount that the participant initially allocated to the Guaranteed Interest Account. Participant-directed employer plans that have not elected the PRS: If the employer elects to fund the employer plan with the Guaranteed Interest Account and the Alliance Money Market, Alliance Bond, Alliance Intermediate Government Securities, Alliance Quality Bond, Alliance High Yield or Alliance Conservative Investors Funds, during any transfer period the maximum amount that may be transferred from the Guaranteed Interest Account is equal to the greater of: (i) 25% of the amount the employer plan had in the Guaranteed Interest Account as of the last calendar day of the prior calendar year and (ii) the total of all amounts the employer plan transferred out of the Guaranteed Interest Account during the prior calendar year. The employer plan is responsible for monitoring this transfer limitation. If assets have been transferred from another funding vehicle by the Employer, the trustee on behalf of the participant, for the remainder of that calendar year, may transfer to the Funds up to 25% of such transferred amount that was initially allocated to the Guaranteed Interest Account. Trustee-directed plans: Transfers of accumulated amounts among the Investment Options will be permitted as determined by us in our sole discretion only. If assets have been transferred from another funding vehicle by the Employer, the plan trustee, for the remainder of that calendar year may transfer to an Investment Option up to 25% of such transferred amount that was initially allocated to the Guaranteed Interest Account. Special Rules Applicable to Plans That May Invest in the Alliance Bond Fund The Alliance Bond Fund is available only to Participant-directed employer plans that signed an agreement to participate in that Fund prior to June 1, 1994. Special transfer rules, described below, apply to these employer plans when none of the Investment Funds of Separate Account No. 51 is available (old employer plans). If the Employer for an old employer plan adds any of the Investment Funds of Separate Account No. 51, the Alliance Bond Fund will no longer be subject to any transfer restrictions. However, transfers out the Guaranteed Interest Account will be subject to certain restrictions. See Transfer Provisions in this section. Transfers to the Alliance Bond Fund: Except as described below, a plan participant in an old employer plan may elect to transfer to the Alliance Bond Fund any whole percentage up to and including 100% of the amounts arising from participant-directed contributions that are held on behalf of the plan participant under any other Investment Option. Requests to transfer amounts to the Alliance Bond Fund will be processed only if, on the Transaction Date with respect to such transfer, the current guaranteed interest rate with respect to the employer plan's Guaranteed Interest Account is higher than the then-current benchmark treasury rate. A benchmark treasury rate will be determined on the Business Day coinciding with or last preceding the 10th day of each month and will be applicable to transfer requests with Transaction Dates that occur on or after the 16th day of the month but before the 16th day of the immediately following month. The benchmark treasury rate will be equal to the Five Year Constant Maturity rate (as published in Federal Reserve Statistical Release H.15) for the Business Day on which the rate is determined. The benchmark treasury rate can also be obtained via a daily tape recording which can be accessed by calling the RIA Service Office at 1-800-967-4560. If we receive a request for a transfer of amounts into the Alliance Bond Fund that would occur on a Transaction Date on which such a transfer is not permitted, we will not process the transfer and will so notify the Employer within four Business Days. We will not redirect the transfer to another Investment Option and will not maintain any record of such request for future processing. Transfers from the Alliance Bond Fund: Except as described below, a plan participant in an old employer plan may elect to transfer any whole percentage (up to and including 100%) of the amounts held in the Alliance Bond Fund on behalf of such participant to one, or any combination, of the other Investment Options. Restrictions Affecting the Guaranteed Interest Account: We reserve the right to declare a lower revised interest rate (see Part IV -- The Guaranteed Interest Account -- Current and Minimum Interest Rates) applicable only to new contributions and transfers (allocations) being made to the Guaranteed Interest Account from any Fund available under the employer plan, if all of the following conditions exist: 39 - -- on the Transaction Date with respect to the allocation, the aggregate amount held in the Alliance Bond Fund with respect to all employer plans comprising Equitable Life's Small Pension book of business is at least 10% of the aggregate amount then held under all the contracts which fund those plans; - -- on the Transaction Date with respect to the allocation, the otherwise applicable "current" guaranteed interest rate with respect to the employer plan's Guaranteed Interest Account exceeds the benchmark treasury rate by at least 0.75%; and - -- prior allocations to the Guaranteed Interest Account for the employer plan during that calendar year equal or exceed 110% of the average annual allocations to the Guaranteed Interest Account for the employer plan during the three immediately preceding calendar years. If we declare a revised rate the employer or plan trustee may, by written notice, withdraw all or part of the amount that would be credited with such lower revised rate, without deduction of the contingent withdrawal charge. The investment, for the remainder of the calendar year, of such withdrawn or returned amounts in a funding vehicle other than RIA shall not be considered a violation of an employer plan's exclusive funding obligation provided such amount is contributed to RIA at the beginning of the following calendar year. Loan Provision Loans to plan trustees on behalf of participants are permitted in our RIA program. It is the plan administrator's responsibility to administer the loan program. See Part VII -- Tax and ERISA Considerations. The following are important features of the RIA loan provision: o A loan will be permitted only from the Guaranteed Interest Account. If the amount requested to be borrowed plus the loan fee and loan reserve we discuss below is more than the amount available in the Guaranteed Interest Account for the loan transaction, the employer can move the additional amounts necessary from one or more Funds to the Guaranteed Interest Account. o The plan administrator determines the interest rate, the maximum term and all other terms and conditions of the loan. o Repayment of loan principal and interest can be made only to the Guaranteed Interest Account. The employer must identify the portion of the repayment amount which is principal and which is interest. o Upon repayment of a loan amount, any repayment of loan principal and loan reserve (see below) taken from one or more Funds for loan purposes may be moved back to a Fund. o We charge a loan fee in an amount equal to 1% of the loan principal amount on the Transaction Date a loan is made. The Contingent Withdrawal Charge will be applied to any unpaid principal, as if the amount had been withdrawn on the day the principal payment was due. See Part II -- Charges and Fees. o The minimum amount of a loan for a participant is $1,000, and the maximum amount is 90% of the balances in all the Investment Options for a participant. An employer plan, the Code and the Department of Labor (DOL) (as described in Part VII -- Tax and ERISA Considerations) may impose additional conditions or restrictions on loan transactions. o On the Transaction Date a loan is made, we create a loan reserve account in the Guaranteed Interest Account in an amount equal to 10% of the loan amount. The 10% loan reserve is intended to cover (1) the Ongoing Operations Fee applicable to amounts borrowed, (2) the possibility of our having to deduct applicable contingent withdrawal charges (see Part II -- Charges and Fees) and (3) the deduction of any other withholdings, if required. The loan amount will not earn any interest under the Contracts while the loan is outstanding. The amount of the loan reserve will continue to earn interest at the Guaranteed Interest Account rate applicable for the employer plan. o The Ongoing Operations Fee will apply to the sum of the Investment Option balances (including the loan reserve) plus any unpaid loan principal. If the employer plan is terminated or any amount is withdrawn, or if any withdrawal from RIA results in the reduction of the 10% loan reserve amount in the Guaranteed Interest Account, during the time a loan is outstanding, the contingent withdrawal charge will be applied to any principal loan balances outstanding as well as to any employer plan balances (including the loan reserve) in the Investment Options. See Part II -- Charges and Fees. Benefit Payments General Subject to the provisions of an employer plan, proceeds for the participant may be applied to any one of the following benefit choices offered by RIA: o purchase of one of our annuities; o lump sum distribution; o use of part of the proceeds to purchase one of our annuities with the balance to be paid as a lump sum; or o permitted cash withdrawal. The amount used to purchase any one form of annuity under the Contracts, net of all applicable charges and fees, must be at least $3,500. See Part II -- Charges and Fees. We require that the amount of any benefit distribution from an employer plan that uses RIA as a partial investment 40 funding vehicle be in proportion to the amount of plan assets held in RIA unless some other method is specifically agreed upon in writing between Equitable Life and the trustees of the employer plan. Cash Distributions Requests for cash distributions must be made to us on an aggregate as opposed to a participant-by-participant basis, except for employer plans using the PRS. See Part VIII -- Participant Recordkeeping Services (Optional). Distribution checks are made payable to the trustees of the plan. The plan trustees are responsible for distribution of funds to the participant or other payee and for any applicable Federal and state income tax withholding and reporting. See Part VII - -- Tax and ERISA Considerations. Annuity Benefits Subject to the provisions of an employer plan, we have available under RIA the following forms of fixed annuities. o Life Annuity: An annuity which guarantees a lifetime income to the retired employee-participant (annuitant) and ends with the last monthly payment before the annuitant's death. There is no death benefit associated with this annuity form and it provides the highest monthly amount of any of the guaranteed life annuity forms. If this form of annuity is selected, it is possible that only one payment will be made if the annuitant dies after that payment. o Life Annuity -- Period Certain: This annuity form guarantees a lifetime income to the annuitant and, if the annuitant dies during a previously selected minimum payment period, continuation of payments to a designated beneficiary for the balance of the period. The minimum period is usually 5, 10, 15 or 20 years. o Life Annuity -- Refund Certain: This annuity form guarantees a lifetime income to the annuitant and, if the annuitant dies before the initial single premium has been recovered, payments will continue to a designated beneficiary until the single premium has been recovered. If no beneficiary survives the annuitant, the refund will be paid in one lump sum to the estate. o Period Certain Annuity: Instead of guaranteed lifetime income, this annuity form provides for payments to the annuitant over a specified period, usually 5, 10, 15 or 20 years, with payments continuing to the designated beneficiary for the balance of the period if the annuitant dies before the period expires. o Qualified Joint and Survivor Life Annuity: This annuity form guarantees lifetime income to the annuitant, and, after the annuitant's death, the continuation of income to the surviving spouse. Generally, unless a married annuitant elects otherwise with the written consent of his spouse, this will be the form of annuity payment. If this form of annuity is selected, it is possible that only one payment will be made if both the annuitant and the spouse die after that payment. All of the forms outlined above (with the exception of Qualified Joint and Survivor Life Annuity) are available as either Single or Joint life annuities. We offer other forms not outlined here. Your Equitable Life Representative can provide details. Amount of Fixed-Annuity Payments Our forms of a fixed annuity provide monthly payments of specified amounts. Fixed-annuity payments, once begun, will not change. The size of payments will depend on the form of annuity that is chosen, our annuity rate tables in effect when the first payment is made, and, in the case of a life income annuity, on the annuitant's age. The tables in our Contracts show monthly payments for each $1,000 of proceeds applied under an annuity. If our annuity rates in effect on the annuitant's retirement date would yield a larger payment, those current rates will apply instead of the tables. Our annuity rate tables are designed to determine the amounts required for the annuity benefits elected and for administrative and investment expenses and mortality and expense risks. Under our Contracts we can change the annuity rate tables every five years. Such changes would not affect annuity payments being made. Payment of Annuity Amounts in the Funds to be applied to retirement benefits are made available by the redemption of Units. The proceeds, plus any amounts in the Guaranteed Interest Account, less a $175 administrative charge and premium tax charge, if applicable, are applied to purchase the form of distribution selected. Assignment and Alienation The employer plan balances and rights under RIA cannot be assigned, sold, alienated, discounted or pledged as collateral for a loan or other obligation to any party (this reference to a loan does not apply to a loan discussed in this section under Loan Provision), except to the extent allowed by law for a Qualified Domestic Relations Order (QDRO), as that term is defined in the Code. Creditors' Claims Proceeds payable under our Contracts cannot be assigned or encumbered by the payee. All proceeds under our Contracts will be paid free from the claims of creditors to the extent allowed by law. When We Pay Proceeds Application of proceeds to an annuity and payments or withdrawals out of the Investment Options ordinarily will be made promptly after the Transaction Date. However, we can defer payments, applications and withdrawals from the Funds for any period during which the New York Stock Exchange is closed for trading, sales of securities are restricted or determination of the fair market value of 41 assets of the Funds is not reasonably practicable because of an emergency. We may also defer withdrawals from the Funds for up to 60 days and pay any withdrawals from the plan in installments in order to protect the interests of the other contract holders in a Fund. Periodic Reports We send the employer a report each quarter that shows transactions in the Investment Options during the quarter for the employer plan, the number of Units in the Funds credited to the employer plan, the Unit values and the balances in all of the Investment Options as of the end of the quarter. The employer will also receive an annual report and a semiannual report containing financial statements of the Funds and a list of the Funds' or Trust's portfolio securities. The employer automatically receives a confirmation notice following the processing of a financial Investment Option transaction. If a Plan Fails to Qualify If an employer plan fails to maintain its qualification under the Code, we can terminate the employer plan's participation under RIA. If we terminate the employer plan's participation under RIA, we will withdraw the employer plan balances from the Investment Options, less applicable charges and fees and any outstanding loan balances, and pay the amounts to the trustees of the plan. Modification or Contract Discontinuance/Termination The Contracts are group annuity contracts which may be modified between us and Chase Manhattan Bank, N.A. under the Master Retirement Trust agreement and, by such agreement, have been amended from time to time. However, no change to the Contracts can reduce annuities in the course of payment. The trustee under the Master Retirement Trust agreement at any time upon notice to us may resign and we may appoint a successor trustee. We can discontinue offering RIA at any time. Discontinuance of RIA would not affect annuities in the course of payment, but no further contributions would be accepted by us. The employer may elect to maintain Investment Options balances with us to provide annuity benefits in accordance with the terms of the Contracts. The employer may elect to discontinue the participation of the employer plan in RIA at any time upon advance written notice to us. We may elect, upon written notice to the employer, to discontinue the participation of the employer plan in RIA if (1) the employer fails to comply with any terms of the Master Retirement Trust, (2) the employer fails to make the required minimum contributions, (3) as may be agreed upon in writing between Equitable Life and the employer if the plan fails to maintain minimum amounts of funds invested in RIA, or (4) the employer fails to comply with any representations and warranties made by the employer, trustees or employer plan to Equitable Life in connection with the employer plan's participation in RIA. See Part I -- RIA Summary -- Participation and Funding Requirements. At any time on or after the participation of the employer in RIA has been discontinued, we may withdraw the entire amount of the employer plan assets held in the Investment Options, and pay them to the trustee of the employer plan, subject to our right to defer payout of amounts held in the Guaranteed Interest Account, less any applicable charges and fees and outstanding loan balances. See Part II -- Charges and Fees and Part IV -- The Guaranteed Interest Account. Reference is made to copies of the Contracts, as amended and modified, which have been filed as an exhibit to our Registration Statement, as amended from time to time, and which are incorporated by reference herein. 42 - -------------------------------------------------------------------------------- PART VI -- MISCELLANEOUS MATTERS - -------------------------------------------------------------------------------- How We Are Regulated We are regulated and supervised by the New York State Insurance Department. In addition, we are subject to the insurance laws and regulations in all jurisdictions where we are authorized to do business. We submit annual reports on our operations and finances to insurance officials in these jurisdictions. The officials review our reports to be sure we are financially sound and that we are complying with applicable laws and regulations. The Contracts have been approved by the New York State Insurance Department. Its regulation and Contract approvals do not involve any supervision of the investment policies of the Funds or the selection of investments except to determine compliance with New York insurance laws. We are also subject to various Federal securities laws and regulations. However, this does not involve supervision by the SEC of us or of the management or investment practices or policies of the Funds or the Trust portfolios. We are registered with the SEC as a broker-dealer under the Securities Exchange Act of 1934. We are also a member of the National Association of Securities Dealers, Inc. (NASD). We offer RIA through Equitable Life Representatives who are licensed by state insurance officials and, where necessary, qualified by the NASD. Commissions and Service Fees Equitable Life Representatives who assist in establishing an employer plan in RIA and providing necessary services (not including recordkeeping services) are entitled to receive commissions and service fees from us, which are paid to Equitable Life Representatives and are not in addition to the fees and charges we describe under Part II -- Charges and Fees. Any service fees paid to Equitable Life Representatives are contingent upon their providing service satisfactory to us. While the charges and fees we receive from a RIA employer plan initially may be less than the commissions and service fees paid to Equitable Life Representatives by us, it is expected that over time those charges and fees will be adequate to cover all expenses. Certain retirement plans that use RIA may allow employer plan assets to be used in part to buy life insurance policies rather than applying all of the contributions to RIA. Equitable Life Representatives will receive commissions on any such Equitable Life life insurance policies at standard rates. These commissions are subject to regulation by state law and are at rates higher than those applicable to commissions payable for placing an employer plan under RIA. Year 2000 Progress We rely upon various computer systems in order to administer RIA and operate the Investment Options. Some of these systems belong to service providers who are not affiliated with us. In 1995, we began addressing the question of whether our computer systems would recognize the year 2000 before, on or after January 1, 2000, and believe we have identified those of our systems critical to business operations that are not Year 2000 compliant. By year end 1998, we expect that the work of modifying or replacing non-compliant systems will substantially be completed and expect a comprehensive test of our Year 2000 compliance will be performed in the first half of 1999. We are in the process of seeking assurances from third party service providers that they are acting to address the Year 2000 issue with the goal of avoiding any material adverse effect on services provided to Contract Holders and on operations of the Investment Options. Any significant unresolved difficulty related to the Year 2000 compliance initiatives could have a material adverse effect on the ability to administer RIA and operate the Investment Options. Assuming the timely completion of computer modifications by us and by third-party service providers, there should be no material adverse effect on our ability to perform these functions. The Year 2000 issue may impact issuers of portfolio securities held by the Investment Options to varying degrees. We are unable to predict what impact, if any, the Year 2000 issue will have on issuers of portfolio securities held by the Investment Options. Copies of the Master Retirement Trust Agreement We give a copy of the Master Retirement Trust and participation agreement to the employer before the participation agreement is signed. It is recommended that the contents of the Master Retirement Trust and participation agreement be fully understood before the participation agreement is signed. Consultation with independent financial counsel or tax counsel regarding the suitability of the Master Retirement Trust and participation agreement is advisable, as we are not permitted to give such advice. Fiduciaries We are registered as an investment adviser under the Investment Advisors Act of 1940, and we acknowledge that we are an investment manager and a fiduciary, as defined in ERISA, with respect to employer plan assets that are allocated to the Alliance Bond, Alliance Balanced, Alliance Common Stock and Alliance Aggressive Stock Funds under RIA. 43 Acceptance The employer or plan sponsor, as the case may be, is solely responsible for determining whether RIA is a suitable funding vehicle and should, therefore, carefully read the prospectus and installation materials before the participation agreement is signed. HRT and EQAT Voting Rights As explained previously, contributions allocated to the Investment Funds of Separate Account Nos. 51 and 66 are invested in shares of the corresponding Portfolios of HRT or EQAT. Since we own the assets of the Separate Accounts, we are the legal owner of the shares and, as such, have the right to vote on certain matters. Among other things, we may vote: o to elect each Trust's Board of Trustees, o to ratify the selection of independent auditors for each Trust, and o on any other matters described in each Trust's current prospectus or requiring a vote by shareholders under the 1940 Act. Because HRT is a Massachusetts business trust, and EQAT is a Delaware business trust, annual meetings are not required. Whenever a shareholder vote is taken, we will give employer trustees or participants for whom we maintain records, as the case may be, the opportunity to instruct us how to vote the number of shares attributable to their Contracts. If we do not receive instructions in time from all shareholders, 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 an Investment Fund in the same proportions that Contract Owners vote. Each share of each Trust is entitled to one vote. Fractional shares will be counted. Voting generally is on a Portfolio-by-Portfolio basis except that shares will be voted on an aggregate basis when universal matters, such as election of Trustees and ratification of independent auditors, are voted upon. However, if the Trustees determine that shareholders in a Portfolio are not affected by a particular matter, then such shareholders generally would not be entitled to vote on that matter. Separate Account Voting Rights If actions relating to the Separate Accounts No. 51 and No. 66 require Contract Owner approval, Contract Owners will be entitled to one vote for each Accumulation Unit they have in the Investment Funds. We will cast votes attributable to any amounts we have in the Investment Funds in the same proportion as votes cast by Contract Owners. Voting Rights of Others Currently, we control each Trust. EQAT shares currently are sold only to our separate accounts. HRT shares are held by other separate accounts of ours and by insurance companies affiliated and unaffiliated with us. Shares held by these separate accounts will probably be voted according to the instructions of the owners of insurance polices and contracts issued by those insurance companies. While this will dilute the effect of the voting instructions of employers, trustees, or participants for whom we maintain records, we currently do not foresee any disadvantages arising out of this. HRT's Board of Trustees intends to monitor events in order to identify any material irreconcilable conflicts that possibly may arise and to determine what action, if any, should be taken in response. If we believe that HRT's response to any of those events insufficiently protects our employers, trustees, or participants for whom we maintain records, we will see to it that appropriate action is taken to protect them. 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 promulgated under those laws eliminate the necessity to submit matters for approval by persons having voting rights in separate accounts of insurance companies, we reserve the right to proceed in accordance with those laws or regulations. Our Rights We reserve the right to take certain actions in connection with our operations and the operations of the Funds as permitted by applicable law. If necessary, we will seek approval by participants in RIA. We have reserved all rights to our corporate name or any part of it. We may allow our Funds and other entities to use our name but we may also withdraw this right. We may unilaterally amend or modify the Contracts or the Master Retirement Trust without the consent of the employer or plan sponsor, as the case may be, in order to keep the Contracts or the Master Retirement Trust in compliance with law. Legal Proceedings Equitable Life and its affiliates are parties to various legal proceedings, none of which, in our view, is likely to have a material adverse effect upon the Separate Account, our ability to meet our obligations under RIA or the distribution of Contracts. Experts The financial statements as of December 31, 1997 and for each of the two years in the period then ended included in the SAI for Separate Account Nos. 13, 10, 4, 3 and 51, and the condensed financial information for each of the four years for Separate Account Nos. 13, 10, 4 and 3, and for each of the three years for Separate Account No. 51 in the 44 period ended December 31, 1997 included in this prospectus and the financial statements as of December 31, 1997 and for each of the three years in the period then ended included in the SAI for Equitable Life have been so included in reliance on the report of Price Waterhouse LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. Where to Get Additional Information We have filed with the SEC a registration statement relating to the Units and the offering described in this prospectus and augmented with the information in the related SAI. The registration statement, which is required by the Securities Act of 1933, contains additional information that is not required in this prospectus or SAI under the rules and regulations of the SEC. Copies of the registration statement may be obtained from the SEC's main office in Washington, D.C. upon payment of the applicable fee. Changes in Funding Vehicle A qualified retirement plan may ordinarily change the means of funding retirement benefits. Persons contemplating such a change in order to participate in RIA should carefully consider the relative advantages and disadvantages of such a change, including, in particular, comparative cost factors and benefits available under RIA and under existing investing vehicles. Such a change may affect only future contributions or may include the transfer of funds previously contributed. If funds already invested are transferred to us, they will normally be accepted only in cash, making necessary liquidation of the assets accumulated under the existing funding media. If a transfer is contemplated, it may be advisable to study the terms of the existing funding vehicle for the employer plan, with special reference to any liquidation charges or termination costs that may be incurred. 45 - -------------------------------------------------------------------------------- PART VII -- TAX AND ERISA CONSIDERATIONS - -------------------------------------------------------------------------------- Employer retirement plans that may qualify for tax-favored treatment are governed by the provisions of the Internal Revenue Code (Code) and the Employee Retirement Income Security Act (ERISA). The Code is administered by the Internal Revenue Service (IRS). ERISA is administered primarily by the Department of Labor (DOL). Provisions of the Code and ERISA include requirements for various features including: o participation, vesting and funding; o nondiscrimination; o limits on contributions and benefits; o distributions; o penalties; o duties of fiduciaries; o prohibited transactions; and o withholding, reporting and disclosure. It is the responsibility of the employer, plan trustee and plan administrator to satisfy the requirements of the Code and ERISA. This prospectus does not provide detailed tax or ERISA information. The following discussion briefly outlines the Code provisions relating to contributions to and distributions from certain tax-qualified retirement plans, although some information on other provisions is also provided. Various tax disadvantages, including penalties, may result from actions that conflict with requirements of the Code or ERISA, and regulations or other interpretations thereof. In addition, Federal tax laws and ERISA are continually under review by the Congress, and any changes in those laws, or in the regulations pertaining to those laws, may affect the tax treatment of amounts contributed to tax-qualified retirement plans or the legality of fiduciary actions under ERISA. Certain tax advantages of tax-qualified retirement plans may not be available under certain state and local tax laws. This outline does not discuss the effect of any state or local tax laws. It also does not discuss the effect of Federal estate and gift tax laws (or state and local estate, inheritance and other similar tax laws). This outline assumes that the participant does not participate in any other qualified retirement plan. Finally, it should be noted that many tax consequences depend on the particular jurisdiction or circumstances of a participant or beneficiary. The provisions of the Code and ERISA are highly complex. For complete information on these provisions, as well as all other Federal, state, local and other tax considerations, qualified legal and tax advisers should be consulted. Tax Aspects of Contributions to a Plan Corporations, partnerships and self-employed individuals can establish qualified plans for the working owners and their employees who participate in the plan. Qualified plans established by partnerships and sole proprietorships are frequently referred to as "Keogh" plans. Both employer and employee contributions to these plans are subject to a variety of limitations, some of which are discussed here briefly. See your tax adviser for more information. Violation of contribution limits may result in disqualification and/or imposition of monetary penalties. The trustee or plan administrator may make contributions on behalf of the plan participants which are deductible from the employer's Federal gross income. Employer contributions which exceed the amount currently deductible are subject to a 10% penalty tax. There are special rules for corporate plans and Keogh plans which are top heavy plans (i.e., more than 60% of the contributions or benefits are allocated to certain highly compensated employees otherwise known as key employees). The limits on the amount of contributions that can be made and/or forfeitures that can be allocated to each participant in defined contribution plans is the lesser of $30,000 or 25% of the compensation or earned income for each participant. In 1998, the employer may not consider compensation in excess of $160,000 in calculating contributions or benefits to the plan. This amount may be adjusted for cost-of-living changes in future years. For self-employed individuals, earned income is defined so as to exclude deductible contributions made to all tax-qualified retirement plans, including Keogh plans, and takes into account the deduction for one-half the individual's self-employment tax. Deductions for aggregate contributions to profit-sharing plans may not exceed 15% of all participants' compensation. Special limits on deductions for contributions to one or more defined contribution plans and one or more defined benefit plans are in effect through 1999, but will be eliminated thereafter. Special limits on contributions apply to anyone who participates in more than one qualified plan or who controls another trade or business. In addition, there is an overall limit on the total amount of contributions and benefits under all tax-qualified retirement plans in which an individual participates. 46 The deductible limits for corporate plans and Keogh plans which are defined benefit plans are based on the minimum funding standard determined by the plan actuary each year. No participant can receive a benefit which exceeds the lesser of (i) $90,000 ($130,000 as indexed for inflation for the 1998 plan year) or (ii) 100% of the participant's average compensation for the consecutive three-year period which results in the highest such average. The $90,000 limit is actuarially reduced for participants retiring prior to the social security retirement age and actuarially increased for participants retiring after the social security retirement age. Special grandfathering rules apply to certain participants whose benefits exceed the $90,000 limit. A qualified plan may allow the participant to direct the employer to make contributions which will not be included in the employee's income (elective deferrals) by entering into a salary reduction agreement with the employer under Section 401(k) of the Code. The 401(k) plan, otherwise known as a cash or deferred arrangement, must not allow withdrawals of elective deferrals and the earnings thereon prior to the earliest of the following events: (i) attainment of age 59 1/2, (ii) death, (iii) disability, (iv) certain business dispositions and plan terminations or (v) termination of employment. In addition, in-service withdrawals of elective deferrals (but not earnings after 1988) may be made in the case of financial hardship. A participant cannot elect to defer annually more than $7,000 ($10,000 as indexed for inflation in 1998) under all salary reduction arrangements with all employers in which the individual participates. Effective for plan years beginning after December 31, 1997, the formula for determining the overall limits on contributions includes compensation from the employer in the form of elective deferrals and excludable contributions under Code Section 457 or "EDC" plans and "cafeteria" plans (plans giving employees a choice between cash or specified excludable heath and welfare benefits). Effective for years beginning after December 31, 1997, employer matching contributions to a 401(k) plan for self-employed individuals are treated the same as employer matching contributions for employees. That is, they are not subject to elective deferral limits. A qualified plan must not discriminate in favor of highly compensated employees. Two special nondiscrimination rules limit contributions and benefits for highly compensated employees in the case of (1) a 401(k) plan and (2) any defined contribution plan, whether or not a 401(k) plan, which provides for employer matching contributions to employee after-tax contributions or elective deferrals. Generally, these nondiscrimination tests require an employer to compare the deferrals or the aggregate contributions, as the case may be, made by the eligible highly compensated employees with those made by the non-highly compensated employees, although alternative simplified tests will be available in 1999. Highly compensated participants include five percent owners and employees earning more than $80,000 for the prior year. (If desired the latter group can be limited to employees who are in the top 20% of all employees based on compensation.) Certain 401(k) plans can adopt a "SIMPLE 401(k)" feature which will enable the plan to meet nondiscrimination requirements without testing. The SIMPLE 401(k) feature requires the plan to meet specified contribution, vesting and exclusive plan requirements. Tax Aspects of Distributions from a Plan Amounts held under qualified plans are generally not subject to Federal income tax until benefits are distributed to the participant or other recipient. In addition, there will not be any tax liability for transfers of any part of the value of an employer plan among the Investment Options. The various types of benefit payments include withdrawals, annuity payments and lump sum distributions. Each benefit payment made to the participant or other recipient is generally fully taxable as ordinary income. An exception to this general rule is made, however, to the extent a distribution is treated as a recovery of after-tax contributions made by the participant. In addition to income tax, the taxable portion of any distribution may be subject to a 10% penalty tax. See "Penalty Tax on Premature Distributions" in this section. Income Taxation of Withdrawals The amount of any partial distribution prior to the annuity starting date is treated as ordinary income except to the extent the distribution is treated as a withdrawal of after-tax contributions. Withdrawals from a qualified plan are normally treated as pro rata withdrawals of after-tax contributions and earnings on those contributions. If the plan allowed withdrawals prior to separation from service as of May 5, 1986, however, all after-tax contributions made prior to January 1, 1987 may be withdrawn tax free prior to withdrawing any taxable amounts. As discussed in this section in "Certain Rules Applicable to Plan Loans," taking a loan or failing to repay an outstanding loan as required may, in certain situations, be treated as a taxable distribution. Income Taxation of Annuity Payments In the case of a distribution in the form of an annuity, the amount of each annuity payment is treated as ordinary income except where the participant has a cost basis in the annuity. The cost basis is equal to the amount of after-tax contributions, plus any employer contributions that had to be included in gross income in prior years. If the participant has a cost basis in the annuity, a portion of each payment received will be excluded from gross income to reflect the return of the cost basis. The remainder of each payment will be includable in gross income as ordinary income. The 47 excludable portion is based on the ratio of the participant's cost basis in the annuity on the annuity starting date to the expected return, generally determined in accordance with a statutory table, under the annuity as of such date. The full amount of the payments received after the cost basis of the annuity is recovered is fully taxable. If there is a refund feature under the annuity, the beneficiary of the refund may recover the remaining cost basis as payments are made. If the participant (and beneficiary under a joint and survivor annuity) die prior to recovering the full cost basis of the annuity, a deduction is allowed on the participant's (or beneficiary's) final tax return. Income Taxation of Lump Sum Distributions If benefits are paid in a lump sum, the payment may be eligible for the special tax treatment accorded lump sum distributions. Under the five-year averaging method (and in certain cases, favorable ten-year averaging and long-term capital gain treatment), the tax on the distribution is calculated separately from taxes on other income for that year. To qualify, the participant must have participated in the plan for at least five years and the distribution must consist of the entire balance to the credit of the participant. The distribution must be made in one taxable year of the recipient and must be made (i) after the participant has attained age 59 1/2 or (ii) on account of the participant's (a) death, (b) separation from service (not applicable to self-employed individuals) or (c) disability (applicable only to self-employed individuals). This provision will be eliminated after December 31, 1999. Eligible Rollover Distributions Many types of distributions from qualified plans are "eligible rollover distributions" that can be rolled over directly to another qualified plan or a traditional individual retirement arrangement (IRA), or rolled over to another plan or IRA within 60 days of receipt by the individual. Death benefits received by a spousal beneficiary may only be rolled over into an IRA. To the extent a distribution is rolled over, it remains tax deferred. Distributions not rolled over directly, however, are subject to 20% mandatory withholding. See "Federal Income Tax Withholding" in this section. The taxable portion of most distributions will generally be an "eligible rollover distribution" unless the distribution is one of a series of substantially equal periodic payments made (not less frequently than annually) (1) for the life (or life expectancy) of the participant or the joint lives (or joint life expectancies) of the participant and his or her designated beneficiary, or (2) for a specified period of ten years or more. Nondeductible voluntary contributions may not be rolled over. In addition, none of the following is treated as an eligible rollover distribution: o any distribution to the extent it is a required minimum distribution under Section 401(a)(9) of the Code (see "Distribution Requirements and Limits" below); o certain corrective distributions in plans subject to Sections 401(k), 401(m) or 402(g) of the Code; o certain loans that are treated as distributions under Section 72(p) of the Code; o P.S. 58 costs (incurred if the plan provides life insurance protection for participants); o dividends paid on employer securities as described in Section 404(k) of the Code; and o a distribution to a non-spousal beneficiary. If a distribution is made to a participant's surviving spouse, or to a current or former spouse under a qualified domestic relations order, the distribution may be an eligible rollover distribution, subject to mandatory 20% withholding, unless one of the exceptions described above applies. If distributions eligible for rollover are in fact rolled over, the favorable averaging rules discussed above in "Income Taxation of Lump Sum Distributions" will not be available for any future distributions made before 2000. Penalty Tax on Premature Distributions An additional 10% penalty tax is imposed on all taxable amounts distributed to a participant who has not reached age 59 1/2 unless the distribution falls within a specified exception or is rolled over into an IRA or other qualified plan. The specified exceptions are for (a) distributions made on account of the participant's death or disability, (b) distributions (which begin after separation from service) in the form of a life annuity or substantially equal periodic installments over the participant's life expectancy (or the joint life expectancy of the participant and the beneficiary), (c) distributions due to separation from active service after age 55 and (d) distributions used to pay certain extraordinary medical expenses. Federal Income Tax Withholding Mandatory Federal income tax withholding at a 20% rate will apply to all "eligible rollover distributions" unless the participant elects to have the distribution directly rolled over to another qualified plan or IRA. See the description above of "Eligible Rollover Distributions." With respect to distributions that are not eligible rollover distributions, Federal income tax must be withheld on the taxable portion of pension and annuity payments, unless the recipient elects otherwise. The rate of withholding will depend on the type of distribution and, in certain cases, the amount of the distribution. Special rules may apply to foreign recipients, or United States citizens residing outside the United States. If a recipient does not have sufficient income tax withheld, or make sufficient estimated income tax payments, the recipient may incur penalties under the estimated income tax rules. Recipients should consult their tax advisers to determine whether they should elect out of withholding. 48 Requests not to withhold Federal income tax must be made in writing prior to receiving payments and submitted in accordance with the terms of the employer plan. No election out of withholding is valid unless the recipient provides the recipient's correct Taxpayer Identification Number and a U.S. residence address. State Income Tax Withholding Certain states have indicated that pension and annuity withholding will apply to payments made to residents of such states. In some states a recipient may elect out of state income tax withholding, even if Federal withholding applies. It is not clear whether such states may require mandatory withholding with respect to eligible rollover distributions that are not rolled over (as described in this section under "Eligible Rollover Distributions"). Contact your tax adviser to see how state withholding may apply to your payment. Distribution Requirements and Limits Distributions from qualified plans generally must commence no later than April 1 of the calendar year following the calendar year in which the participant attains age 70 1/2 (or retires from the employer sponsoring the Plan if later). Five percent owners of qualified plans must commence distribution after age 70 1/2 even if they are still working. Distributions can generally be made (1) in a lump sum payment, (2) over the life of the participant, (3) over the joint lives of the participant and his or her designated beneficiary, (4) over a period not extending beyond the life expectancy of the participant or (5) over a period not extending beyond the joint life expectancies of the participant and his or her designated beneficiary. The minimum amount required to be distributed in each year after minimum distributions are required to begin is described in the Code, Treasury Regulations and IRS guidelines. If a designated beneficiary is other than a participant's spouse, certain minimum incidental benefit requirements also apply. If the participant dies after required distribution has begun, payment of the remaining interest under the plan must be made at least as rapidly as under the method used prior to the participant's death. If a participant dies before required distribution has begun, payment of the entire interest under the plan must be completed within five years after death, unless payments to a designated beneficiary begin within one year of the participant's death and are made over the beneficiary's life or over a period certain which does not extend beyond the beneficiary's life expectancy. If the surviving spouse is the designated beneficiary, the spouse may delay the commencement of such payments up until the date that the participant would have attained age 70 1/2. Distributions received by a beneficiary are generally given the same tax treatment the participant would have received if distribution had been made to the participant. If there is an insufficient distribution in any year, a 50% tax may be imposed on the amount by which the minimum required to be distributed exceeds the amount actually distributed. Failure to have distributions made as the Code and Treasury Regulations require may result in plan disqualification. Spousal Requirements In the case of many corporate and Keogh plans, if a participant is married at the time benefit payments become payable, unless the participant elects otherwise with written consent of the spouse, the benefit must be paid in the form of a qualified joint and survivor annuity (QJSA). A QJSA is an annuity payable for the life of the participant with a survivor annuity for the life of the spouse in an amount which is not less than one-half of the amount payable to the participant during his or her lifetime. In addition, most loans require that a married participant's beneficiary must be the spouse, unless the spouse consents in writing to the designation of a different beneficiary. Certain Rules Applicable to Plan Loans The following are Federal tax and ERISA rules that apply to loan provisions of all employer plans. Employer plans may have additional restrictions. Employers and participants should review these matters with their own tax advisers before requesting a loan. There will not generally be any tax liability with respect to properly made loans in accordance with an employer plan. A loan may be in violation of applicable provisions unless it complies with the following conditions: o With respect to specific loans made by the plan to a plan participant, the loan administrator determines the interest rate, the maximum term and all other terms and conditions of the loan. o In general, the term of the loan cannot exceed five years unless the loan is 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. o The amount of a loan to a participant, when aggregated with all other loans to the participant from all qualified plans of the employer, cannot exceed the greater of $10,000 or 50% of the participant's nonforfeitable accrued benefits, and cannot exceed $50,000 in any event. This $50,000 limit is reduced by the excess (if any) of the highest outstanding loan balance over the previous twelve months over the outstanding balance of plan loans on the date the loan was made. o For loans made prior to January 1, 1987 and not renewed, modified, renegotiated or extended after December 31, 1986 the $50,000 maximum aggregate loan balance is not required to be reduced, the quarterly amortization requirement does not apply, and the term of a loan may exceed five years if used to purchase the 49 principal residence of the participant or a member of his or her family, as defined in the Code. o Only 50% of the participant's vested account balance may serve as security for a loan. To the extent that a participant borrows an amount which should be secured by more than 50% of the participant's vested account balance, it is the responsibility of the trustee or plan administrator to obtain the additional security. o Loans must be available to all plan participants, former participants who still have account balances under the plan, beneficiaries and alternate payees on a reasonably equivalent basis. o Each new or renewed loan must bear a reasonable rate of interest commensurate with the interest rates charged by persons in the business of lending money for loans that would be made under similar circumstances. o Many plans provide that the participant's spouse must consent in writing to the loan. o Except to the extent permitted in accordance with the terms of a prohibited transaction exemption issued by DOL, loans are not available (i) in a Keogh (non-corporate plan to an owner-employee or a partner who owns more than 10% of a partnership or (ii) to 5% shareholders in an S corporation. o If the loan does not qualify under the conditions above, the participant fails to repay the interest or principal when due, or in some instances, if the participant separates from service or the plan is terminated, the amount borrowed or not repaid may be treated as a distribution. The participant may be required to include as ordinary income the unpaid amount due and a 10% penalty tax on early distributions may apply. The plan should report the amount of the unpaid loan balance to the IRS as a distribution. See "Tax Aspects of Distributions From a Plan" in this section. o The loan requirements and provisions of RIA shall apply regardless of the plan administrator's guidelines. Impact of Taxes to Equitable Life Under existing Federal income tax law, no taxes are payable on investment income and capital gains of the Funds that are applied to increase the reserves under the Contracts. Accordingly, Equitable Life does not anticipate that it will incur any Federal income tax liability attributable to income allocated to the variable annuity contracts participating in the Investment Funds and it does not currently impose a charge for Federal income tax on this income when it computes Unit values for the Investment Funds. If changes in Federal tax laws or interpretations thereof would result in Equitable Life being taxed, then Equitable Life may impose a charge against the Investment Funds (on some or all Contracts) to provide for payment of such taxes. Certain Rules Applicable to Plans Designed to Comply with Section 404(c) of ERISA Section 404(c) of ERISA, and the related DOL regulation, provide that if a plan participant or beneficiary exercises control over the assets in his or her plan account, plan fiduciaries will not be liable for any loss that is the direct and necessary result of the plan participant's or beneficiary's exercise of control. As a result, if the plan complies with Section 404(c) and the DOL regulation thereunder, the plan participant can make and is responsible for the results of his or her own investment decisions. Section 404(c) plans must provide, among other things, that a broad range of investment choices are available to plan participants and beneficiaries and must provide such plan participants and beneficiaries with enough information to make informed investment decisions. Compliance with the Section 404(c) regulation is completely voluntary by the plan sponsor, and the plan sponsor may choose not to comply with Section 404(c). The RIA Program provides employer plans with the broad range of investment choices and information needed in order to meet the requirements of the Section 404(c) regulation. If the plan is intended to be a Section 404(c) plan, it is, however, the plan sponsor's responsibility to see that the requirements of the DOL regulation are met. Equitable Life and its Agents shall not be responsible if a plan fails to meet the requirements of Section 404(c). 50 - -------------------------------------------------------------------------------- PART VIII -- PARTICIPANT RECORDKEEPING SERVICES (OPTIONAL) - -------------------------------------------------------------------------------- Services Provided Under the Participant Recordkeeping Services (PRS) program elected by the employer or plan trustees, we: o establish an individual participant account for each participant covered by the employer plan based on data received from the employer or trustees; o receive and deposit contributions on behalf of participants to individual participant accounts; o maintain for the employer records reflecting for each participant in the employer plan the contributions, transfers, loan transactions, withdrawals and investment experience and interest accrued, as applicable, on an individual participant's proportionate values in the employer plan; o provide to the employer for its individual participants' reports reflecting the activity in the individual participant's proportionate interest in the employer plan; and o process transfers and distributions of the participant's portion of his or her share of the employer plan assets among the Investment Options as instructed by the employer. The employer or plan trustees are responsible for providing Equitable Life with required information and for complying with our procedures relating to the PRS program. We will not be liable for errors in recordkeeping if the information provided by the employer or plan trustee is not provided on a timely basis or is incorrect. The plan administrator retains full responsibility for the income tax withholding and reporting requirements including required notices to the participants of the employer plan, as set forth in the Code and applicable Treasury Regulations. Investment Options The Employer must select the Guaranteed Interest Account when PRS is elected. Fees For this service we charge an annual fee of $25 per active participant paid in twelve equal monthly installments of $2.08. The fee is deducted from the individual participant's account at the end of each month by means of a reduction of Units out of the Investment Options and a cash withdrawal from the Guaranteed Interest Account. We retain the right to change the fee upon 30 days notice to the employer. See Part II -- Charges and Fees. Enrollment The employer may enroll for PRS at the time the employer plan is established with us under RIA or at any time thereafter upon approval by us, at our sole discretion. We have summarized the main features of PRS here, and participation in this aspect of the RIA program is subject to the terms set forth in the participation agreement (including any separate supplementary agreement) entered into between us and the employer. 51 - -------------------------------------------------------------------------------- STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS
- ------------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------- Page Part I -- Fund Information................................................................................ 2 General................................................................................................ 2 Restrictions and Requirements of the Alliance Bond, Alliance Balanced, Alliance Common Stock and Alliance Aggressive Stock Funds.................................................................. 2 Certain Investments of the Alliance Bond and Alliance Balanced Funds................................... 2 How We Determine the Unit Value........................................................................ 4 Summary of Unit Values................................................................................. 5 Alliance Money Market Yield Information................................................................ 9 Brokerage Fees and Charges for Securities Transactions................................................. 10 Ongoing Operations Fee................................................................................. 11 Part II -- Management for the Alliance Bond, Alliance Balanced, Alliance Common Stock and Alliance Aggressive Stock Funds and Equitable Life................................................. 12 Funds.................................................................................................. 12 Distribution........................................................................................... 12 Equitable Life......................................................................................... 12 Directors............................................................................................ 12 Officer-Directors.................................................................................... 13 Other Officers....................................................................................... 13 Part III -- Financial Statements.......................................................................... 14 Index.................................................................................................. 14 Financial Statements................................................................................... FSA-1 - -------------------------------------------------------------------------------------------------------------------------------
If you wish to obtain a free copy of the Statement of Additional Information, send or fax this request form to: Equitable Life -- RIA Service Office Attn: SAI Request 200 Plaza Drive Secaucus, NJ 07094-3689 Tel: (800) 967-4560 (201) 583-2302 (Business Days, 9 A.M. to 5 P.M. Eastern time) Fax: (201) 583-2304, 2305, or 2306 - -------------------------------------------------------------------------------- Please send me a copy of the Statement of Additional Information for RIA dated May 1, 1998. - -------------------------------------------------------------------------------- Name - -------------------------------------------------------------------------------- Address - -------------------------------------------------------------------------------- City State Zip Code - -------------------------------------------------------------------------------- Client Number 52 - -------------------------------------------------------------------------------- STATEMENT OF ADDITIONAL INFORMATION MAY 1, 1998 - -------------------------------------------------------------------------------- SEPARATE ACCOUNT UNITS OF INTEREST UNDER GROUP ANNUITY CONTRACTS - -------------------------------------------------------------------------------- INVESTMENTS FUNDS -----------------
- ---------------------------------------------------------------------------------------------------------------------------- POOLED SEPARATE ACCOUNTS SEPARATE ACCOUNT NO. 51 SEPARATE ACCOUNT NO. 66 o Alliance Bond, Separate Account No. 13 o Alliance Money Market o T. Rowe Price Equity Income -- Pooled o Alliance Intermediate Government o EQ/Putnam Growth & Income Value o Alliance Balanced, Separate Account Securities o Merrill Lynch Basic Value Equity No. 10 -- Pooled o Alliance Quality Bond o MFS Research o Alliance Common Stock, Separate o Alliance High Yield o T. Rowe Price International Stock Account No. 4 -- Pooled o Alliance Growth & Income o Morgan Stanley Emerging Markets Equity o Alliance Aggressive Stock, Separate o Alliance Equity Index o Warburg Pincus Small Company Value Account No. 3 -- Pooled o Alliance Global o MFS Emerging Growth Companies o Alliance International o EQ/Putnam Balanced o Alliance Small Cap Growth o Merrill Lynch World Strategy o Alliance Conservative Investors o Alliance Growth Investors
[LOGO] (TM) ---------- RETIREMENT ---------- INVESTMENT ---------- ACCOUNT(R) ----------
- ------------------------------------------------------------------------------------------------------------------------------- TABLE OF CONTENTS PAGE - ------------------------------------------------------------------------------------------------------------------------------- PART I-- FUND INFORMATION................................................................................. 2 General................................................................................................ 2 Restrictions and Requirements of the Alliance Bond, Alliance Balanced, Alliance Common Stock and Alliance Aggressive Stock Funds.................................................................. 2 Certain Investments of the Alliance Bond and Alliance Balanced Funds................................... 2 How We Determine the Unit Value........................................................................ 4 Summary of Unit Values................................................................................. 5 Alliance Money Market Yield Information................................................................ 9 Brokerage Fees and Charges for Securities Transactions................................................. 10 Ongoing Operations Fee................................................................................. 11 PART II -- MANAGEMENT FOR THE ALLIANCE BOND, ALLIANCE BALANCED, ALLIANCE COMMON STOCK AND ALLIANCE AGGRESSIVE STOCK FUNDS AND EQUITABLE LIFE................................................. 12 Funds.................................................................................................. 12 Distribution........................................................................................... 12 Equitable Life......................................................................................... 12 Directors............................................................................................ 12 Officer-Directors.................................................................................... 13 Other Officers....................................................................................... 13 PART III-- FINANCIAL STATEMENTS........................................................................... 14 Index.................................................................................................. 14 Financial Statements................................................................................... FSA-1 - -------------------------------------------------------------------------------------------------------------------------------
This Statement of Additional Information (SAI) is not a prospectus. It should be read in conjunction with the prospectus for our Retirement Investment Account (RIA), dated May 1, 1998 (PROSPECTUS), and any supplements. Terms defined in the Prospectus have the same meaning in the SAI unless the context otherwise requires. You can obtain a copy of the Prospectus, and any supplements to the Prospectus, from us free of charge by writing or calling the RIA Service Office listed on the back of this SAI, or by contacting your Equitable Life Representative. Our Home Office is located at 1290 Avenue of the Americas, New York, N.Y. 10104 (212) 554-1234. - -------------------------------------------------------------------------------- 888-1155 (5/98) Copyright 1998 The Equitable Life Assurance Society of the United States. All rights reserved. Cat. No. 127660 - -------------------------------------------------------------------------------- PART I -- FUND INFORMATION - -------------------------------------------------------------------------------- GENERAL In our Prospectus we discuss in more detail, among other things, the structure of the Alliance Bond, Alliance Balanced, Alliance Common Stock and Alliance Aggressive Stock Funds, their investment objectives and policies, including types of portfolio securities they may hold and levels of investment risks that may be involved and investment management. We also summarize certain of these matters with respect to the Investment Funds and their corresponding Portfolios. See PART I -- RIA SUMMARY and PART III -- EQUITABLE LIFE AND ITS FUNDS in the Prospectus. Here we will discuss special restrictions, requirements and transaction expenses that apply to the Alliance Bond, Alliance Balanced, Alliance Common Stock and Alliance Aggressive Stock Funds, certain investments of the Alliance Bond Fund and determination of the value of Units for all Funds, including some historical information. Investment objectives and policies, as well as restrictions, requirements and risks pertaining to the corresponding HRT and EQAT Portfolios in which the Investment Funds invest are found in their respective Prospectuses and SAIs. RESTRICTIONS AND REQUIREMENTS OF THE ALLIANCE BOND, ALLIANCE BALANCED, ALLIANCE COMMON STOCK AND ALLIANCE AGGRESSIVE STOCK FUNDS Neither the Alliance Common Stock Fund nor the Alliance Balanced Fund will make an investment in an industry if that investment would cause the Fund's holding in that industry to exceed 25% of the Fund's assets. The Alliance Bond Fund, Alliance Common Stock Fund and Alliance Aggressive Stock Funds will not purchase or write puts or calls (options). The Alliance Balanced Fund's investment policies do not prohibit hedging transactions such as through the use of put and call options and stock index or interest rate futures. However, the Alliance Balanced Fund currently has no plans to enter into such transactions. The following investment restrictions apply to the Alliance Bond, Alliance Balanced, Alliance Common Stock and Alliance Aggressive Stock Funds. None of those Funds will: o trade in foreign exchange (except transactions incidental to the settlement of purchases or sales of securities for a Fund and contracts for the purchase or sale of a specific foreign currency at a future date at a price set at the time of the contract); o make an investment in order to exercise control or management over a company; o underwrite the securities of other companies, including purchasing securities that are restricted under the 1933 Act or rules or regulations thereunder (restricted securities cannot be sold publicly until they are registered under the 1933 Act), except as stated below; o make short sales, except when the Fund has, by reason of ownership of other securities, the right to obtain securities of equivalent kind and amount that will be held so long as they are in a short position; o trade in commodities or commodity contracts (except the Alliance Balanced Fund is not prohibited from entering into hedging transactions through the use of stock index or interest rate futures); o purchase real estate or mortgages, except as stated below. The Funds may buy shares of real estate investment trusts listed on stock exchanges or reported on NASDAQ; o have more than 5% of its assets invested in the securities of any one registered investment company. A Fund may not own more than 3% of a registered investment company's outstanding voting securities. The Fund's total holdings of registered investment company securities may not exceed 10% of the value of the Fund's assets; o purchase any security on margin or borrow money except for short-term credits necessary for clearance of securities transactions; o make loans, except loans through the purchase of debt obligations or through entry into repurchase agreements; or o invest more than 10% of its total assets in restricted securities, real estate investments, or portfolio securities not readily marketable. CERTAIN INVESTMENTS OF THE ALLIANCE BOND AND ALLIANCE BALANCED FUNDS The following are brief descriptions of certain types of investments which may be made by the Alliance Bond and Alliance Balanced Funds and certain risks and investment techniques. MORTGAGE PASS-THROUGH SECURITIES. The Alliance Bond and Alliance Balanced Funds may invest in mortgage pass-through securities, which are securities representing interests in pools of mortgages. Principal and interest payments made on the mortgages in the pools are passed through to the holder of such securities. Payment of principal and interest on some mortgage pass-through securities (but not the market value of the securities themselves) may be guaranteed by the full faith and credit 2 of the U.S. Government (in the case of securities guaranteed by the Government National Mortgage Association, or "GNMA"), or guaranteed by agencies or instrumentalities of the U.S. Government (in the case of securities guaranteed by the Federal National Mortgage Association ("FNMA") or the Federal Home Loan Mortgage Corporation ("FHLMC") which are supported only by discretionary authority of the U.S. Government to purchase the agency's obligations). Mortgage pass-through securities created by non-governmental issuers (such as commercial banks, savings and loan institutions, private mortgage insurance companies, mortgage bankers, and other secondary market issuers) may be supported by various forms of insurance or guarantees, including individual loan, title, pool, and hazard insurance, and letters of credit, which may be issued by governmental entities, private insurers or the mortgage poolers. COLLATERALIZED MORTGAGE OBLIGATIONS. The Alliance Bond and Alliance Balanced Funds may invest in collateralized mortgage obligations ("CMOs"). CMOs are debt securities collateralized by underlying mortgage loans or pools of mortgage pass-through securities guaranteed by GNMA, FHLMC or FNMA and are generally issued by limited purpose finance subsidiaries of U.S. Government instrumentalities. CMOs are not, however, mortgage pass-through securities. Rather, they are pay-through securities, i.e., securities backed by the cash flow from the underlying mortgages. Investors in CMOs are not owners of the underlying mortgages, which serve as collateral for such debt securities, but are simply owners of a debt security backed by such pledged assets. CMOs are typically structured into multiple classes, with each class bearing a different stated maturity and having different payment streams. Monthly payments of principal, including prepayments, are first returned to investors holding the shortest maturity class; investors holding longer maturity classes receive principal payments only after the shorter class or classes have been retired. ASSET-BACKED SECURITIES. The Alliance Bond and Alliance Balanced Funds may purchase asset-backed securities that represent either fractional interests or participation in pools of leases, retail installment loans or revolving credit receivables held by a trust or limited purpose finance subsidiary. Such asset-backed securities may be secured by the underlying assets (such as Certificates for Automobile Receivables) or may be unsecured (such as Credit Card Receivable Securities). Depending on the structure of the asset-backed security, monthly or quarterly payments of principal and interest or interest only are passed through like mortgage pass-through securities or paid through (like CMOs) to certificate holders. Asset-backed securities may be guaranteed up to certain amounts by guarantees, insurance or letters of credit issued by a financial institution affiliated or unaffiliated with the originator of the pool. Underlying automobile sales contracts and credit card receivables are, of course, subject to prepayment (although to a lesser degree than mortgage pass-through securities), which may shorten the securities' weighted average life and reduce their overall return to certificate holders. Certificate holders may also experience delays in payment if the full amounts due on underlying loans, leases or receivables are not realized because of unanticipated legal or administrative costs of enforcing the contracts or because of depreciation or damage to the collateral (usually automobiles) securing certain contracts, or other factors. The value of these securities also may change because of changes in the market's perception of the creditworthiness of the servicing agent for the pool, the originator of the pool, or the financial institution providing credit support enhancement for the pool. If consistent with its investment objective and policies, the Alliance Bond and Alliance Balanced Funds may invest in other asset-backed securities that may be developed in the future. ZERO COUPON BONDS. The Alliance Bond and Alliance Balanced Funds may invest in zero coupon bonds. Such bonds may be issued directly by agencies and instrumentalities of the U.S. Government or by private corporations. Zero coupon bonds may originate as such or may be created by stripping an outstanding bond. Zero coupon bonds do not make regular interest payments. Instead, they are sold at a deep discount from their face value. Because a zero coupon bond does not pay current income, its price can be very volatile when interest rates change. REPURCHASE AGREEMENTS. In repurchase agreements, the Alliance Bond or Alliance Balanced Fund buys securities from a seller, usually a bank or brokerage firm, with the understanding that the seller will repurchase the securities at a higher price at a future date. During the term of the repurchase agreement the Fund retains the securities subject to the repurchase agreement as collateral securing the seller's repurchase obligation, continually monitors on a daily basis the market value of the securities subject to the agreement and requires the seller to deposit with the Fund collateral equal to any amount by which the market value of the securities subject to the repurchase agreement falls below the resale amount provided under the repurchase agreement. We evaluate the creditworthiness of sellers with whom we enter into repurchase agreements. Such transactions afford an opportunity for the Fund to earn a fixed rate of return on available cash at minimal market risk, although the Fund may be subject to various delays and risks of loss if the seller is unable to meet its obligation to repurchase. The Funds currently treat repurchase agreements maturing in more than seven days as illiquid securities. DEBT SECURITIES SUBJECT TO PREPAYMENT RISKS. Mortgage pass-through securities and certain collateralized mortgage obligations, asset-backed securities and other debt instruments in which the Alliance Balanced Fund may 3 invest are subject to prepayments prior to their stated maturity. It is usually not possible to accurately predict the rate at which prepayments will be made, which rate may be affected, among other things, by changes in generally prevailing market interest rates. If prepayments occur, the Fund suffers the risk that it will not be able to reinvest the proceeds at as high a rate of interest as it had previously been receiving. Also, the Fund will incur a loss to the extent that prepayments are made for an amount that is less than the value at which the security was then being carried by the Fund. Moreover, securities that may be prepaid tend to increase in value less during times of declining interest rates, and to decrease in value more during times of increasing interest rates, than do securities that are not subject to prepayment. WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Alliance Bond and Alliance Balanced Funds may purchase and sell securities on a when-issued or delayed delivery basis. In these transactions, securities are purchased or sold by a Fund with payment and delivery taking place in the future in order to secure what is considered to be an advantageous price or yield to the Fund at the time of entering into the transaction. However, the market value of such securities at the time of settlement may be more or less than the purchase price then payable. When a Fund engages in when-issued or delayed delivery transactions, the Fund relies on the other party to consummate the transaction. Failure to consummate the transaction may result in the Fund missing the opportunity of obtaining a price or yield considered to be advantageous. When-issued and delayed delivery transactions are generally expected to settle within three months from the date the transactions are entered into, although the Fund may close out its position prior to the settlement date. A Fund will sell on a forward settlement basis only securities it owns or has the right to acquire. FOREIGN CURRENCY FORWARD CONTRACTS. The Alliance Balanced Fund may enter into contracts for the purchase or sale of a specific foreign currency at a future date at a price set at the time of the contract. Generally, such forward contracts will be for a period of less than three months. The Fund will enter into such forward contracts for hedging purposes only. These transactions will include forward purchases or sales of foreign currencies for the purpose of protecting the dollar value of securities denominated in a foreign currency or protecting the dollar equivalent of interest or dividends to be paid on such securities. Forward contracts are traded in the inter-bank market, and not on organized commodities or securities exchanges. Accordingly, the Fund is dependent upon the good faith and creditworthiness of the other party to the transaction, as evaluated by the Fund's Manager. To the extent inconsistent with any restrictions in the SAI concerning the Fund's trading in foreign exchange, this paragraph will control. HEDGING TRANSACTIONS. The Alliance Balanced Fund may engage in hedging transactions which are designed to protect against anticipated adverse price movements in securities owned or intended to be purchased by the Fund. When interest rates go up, the market value of outstanding debt securities declines and vice versa. In recent years the volatility of the market for debt securities has increased significantly, and market prices of longer-term obligations have been subject to wide fluctuations, particularly as contrasted with those of short-term instruments. The Fund will take certain risks into consideration when determining which, if any, options or financial futures contracts it will use. If the price movements of hedged portfolio securities are in fact favorable to the Fund, the hedging transactions will tend to reduce and may eliminate the economic benefit to the Fund which otherwise would result. Also, the price movements of options and futures used for hedging purposes may not correlate as anticipated with price movements of the securities being hedged. This can make a hedge transaction less effective than anticipated and could result in a loss. The options and futures markets can sometimes become illiquid and the exchanges on which such instruments are traded may impose trading halts or delays on the exercise of options and liquidation of futures positions in certain circumstances. This could in some cases operate to the Fund's detriment. HOW WE DETERMINE THE UNIT VALUE In our Prospectus, we discuss how employer plan assets are put into and taken out of the Funds by the purchase and redemption of Units under the Contracts, respectively. See PART III -- EQUITABLE LIFE AND ITS FUNDS in the Prospectus. Here we will discuss how we determine the value of Units. When contributions are invested in the Funds, the number of Units outstanding attributable to each Fund is correspondingly increased; and when amounts are withdrawn from one of these Funds, the number of Units outstanding attributable to that Fund is correspondingly decreased. We calculate Unit values at the end of each Business Day. For the Alliance Bond, Alliance Balanced, Alliance Common Stock and Alliance Aggressive Stock Funds, the Unit values reflect investment performance and investment management and financial accounting fees. We determine the respective Unit values for these Funds by multiplying the Unit value for the preceding Business Day by the net investment factor for that subsequent day. We determine the net investment factor as follows: o First, we take the value of the Fund's assets at the close of business on the preceding Business Day. o Next, we add the investment income and capital gains, realized and unrealized, that are credited to the assets of the Fund during the Business Day for which the net investment factor is being determined. 4 o Then, we subtract the capital losses, realized and unrealized, and investment management and financial accounting fees charged to the Fund during that Business Day. o Finally, we divide this amount by the value of the Fund's assets at the close of the preceding Business Day. Prior to June 1, 1994, for the Alliance Bond, Alliance Balanced, Alliance Common Stock and Alliance Aggressive Stock Funds, the investment management and financial accounting fees were deducted monthly from employer plan balances in these Funds. Assets of the Alliance Bond, Alliance Balanced, Alliance Common Stock and Alliance Aggressive Stock Funds are valued as follows: o Common stocks and other equity-type securities listed on national securities exchanges and certain over-the-counter issues traded on the NASDAQ system are valued at the last sale price or, if no sale, at the latest available bid price. Other unlisted securities reported on the NASDAQ system are valued at inside (highest) quoted bid prices. o Foreign securities not traded directly, or in ADR form in the United States are valued at the last sale price in the local currency on an exchange in the country of origin. Foreign currency is converted into dollars at current exchange rates. o United States Treasury securities and other obligations issued or guaranteed by the United States Government, its agencies or instrumentalities are valued at representative quoted prices. o Long-term (i.e., maturing in more than a year) publicly traded corporate bonds are valued at prices obtained from a bond pricing service of a major dealer in bonds when such prices are available; however, in circumstances where it is deemed appropriate to do so, an over-the-counter or exchange quotation may be used. o Short-term debt securities maturing in 60 days or less are valued at amortized cost, which approximates market value. Short-term debt securities maturing in more than 60 days are valued at representative quoted prices. The Funds can acquire short-term debt securities directly or through the acquisition of units in our Separate Account No. 2A. See PART III -- EQUITABLE LIFE AND ITS FUNDS in the Prospectus. o Convertible preferred stocks listed on national securities exchanges are valued as of their last sale price or, if there is no last sale, at the latest available bid price. o Convertible bonds and unlisted convertible preferred stocks are valued at bid prices obtained from one or more major dealers in such securities; where there is a discrepancy between dealers, values may be adjusted based on recent premium spreads to the underlying common stock. o The unit value of Separate Account No. 2A is calculated each day the New York Stock Exchange is open for trading by dividing (i) the value of the portfolio securities and other assets of Separate Account No. 2A at the close of the business on that day (before giving effect to amounts contributed or withdrawn during that day), by (ii) the total number of units outstanding at the close of business on the preceding day. Separate Account No. 2A invests in short-term securities which mature in 60 days or less from the date of purchase or are subject to a repurchase agreement requiring repurchase in 60 days or less. The assets of Separate Account No. 2A are valued as described with respect to the Separate Accounts. The Unit value for an Investment Fund of Separate Account Nos. 51 and 66 for any Business Day together with any preceding non-Business Days (VALUATION PERIOD) is equal to the Unit value for the preceding Valuation Period multiplied by the net investment factor for that Investment Fund for that Valuation Period. The net investment factor for a Valuation Period is: (a/b) - c where: (a) is the value of the Investment Fund's shares of the corresponding Portfolio at the end of the Valuation Period before giving effect to any amounts allocated to or withdrawn from the Investment Fund for the Valuation Period. For this purpose, we use the share value reported to us by the relevant Trust. This share value is after deduction for investment advisory fees and other expenses of the Trust. (b) is the value of the Investment Fund's shares of the corresponding Portfolio at the end of the preceding Valuation Period (after any amounts are allocated or withdrawn for that Valuation Period). (c) is the daily factor for the Separate Account Administrative Charge multiplied by the number of calendar days in the Valuation Period. Our investment officers and the Trust's investment adviser determine in good faith the fair value of securities and other assets that do not have a readily available market price in accordance with accepted accounting practices and applicable laws and regulations. See PART III -- EQUITABLE LIFE AND ITS FUNDS in the Prospectus. SUMMARY OF UNIT VALUES All of the Funds were established by us pursuant to the New York Insurance Law. The Alliance Bond, Alliance Balanced, Alliance Common Stock and Alliance Aggressive Stock Funds were established in 1981, 1979, 1969 and 1969, respectively. We show in the tables below the Unit values of these Funds on the last Business Day of each year since each Fund began operations. However, 5 Units in the Funds were not made available under RIA until subsequent dates. Prior to June 1, 1994, the Unit values quoted for the Alliance Bond, Alliance Balanced, Alliance Common Stock and Alliance Aggressive Stock Funds did not reflect the deduction of the Investment Management and Financial Accounting Fee. That fee was assessed by reducing the number of Units that the employer plan had in these Funds. The Unit values shown for the periods included in the following table through the last business day of December 1993 reflect the actual performance of the Funds before the Investment Management and Financial Accounting Fee had been reflected in their computation. The Investment Management and Financial Accounting Fee is reflected in Unit values beginning with the last business day of 1994. We established the Alliance Growth Investors, Alliance Conservative Investors and Alliance Global Investors Funds as Investment Funds of Separate Account No. 51 in 1993. The Alliance Money Market, Alliance Intermediate Government Securities, Alliance Quality Bond, Alliance High Yield, Alliance Growth & Income and Alliance Equity Index Funds were established as Investment Funds of Separate Account No. 51 in 1994. The Alliance International Fund was established on September 1, 1995 and the Alliance Small Cap Growth Fund was established in early June 1997. The tables below set forth the Unit values as of the end of each year since each Fund began operations. The Investment Funds of Separate Account No. 66 will be available in early July 1998. See GENERAL in this SAI. In computing the Unit values, no provisions have been made for the effect of taxes on income and gains or upon distribution. THE UNIT VALUES REFLECT THOSE CHARGES AND FEES AS DESCRIBED IN THE RIA PROSPECTUS UNDER PART II. ALSO DESCRIBED IN PART II ARE CHARGES AND FEES WHICH ARE PAID BY THE REDUCTION OF THE NUMBER OF UNITS CREDITED TO AN EMPLOYER PLAN UNDER RIA. The following Unit values are provided to demonstrate the changes for the period shown. - -------------------------------------------------------------------------------- ALLIANCE BOND FUND (SEPARATE ACCOUNT NO. 13 -- POOLED) - -------------------------------------------------------------------------------- Last Business Last Business Day of Fund Day of Fund December Unit Value December Unit Value - -------------------------------------------------------------------------------- 1981 $11.11 1990 $32.07 1982 14.18 1991 36.89 1983 15.15 1992 39.31 1984 17.36 1993 43.14 1985 20.85 1994 42.35* 1986 23.85 1995 48.91* 1987 24.35 1996 50.26* 1988 25.99 1997 54.09* 1989 29.59 - -------------------------------------------------------------------------------- ALLIANCE BALANCED FUND (SEPARATE ACCOUNT NO. 10 -- POOLED) - -------------------------------------------------------------------------------- Last Business Last Business Day of Fund Day of Fund December Unit Value December Unit Value - -------------------------------------------------------------------------------- 1979 $11.17 1989 $ 54.84 1980 16.32 1990 54.75 1981 15.41 1991 77.72 1982 22.32 1992 75.90 1983 26.13 1993 85.85 1984 26.74 1994 78.77* 1985 33.66 1995 94.86* 1986 39.31 1996 105.62* 1987 37.40 1997 119.80* 1988 43.14 - ------------------- * These Unit values reflect the deduction of the Investment Management and Financial Accounting Fee. - -------------------------------------------------------------------------------- 6 - -------------------------------------------------------------------------------- ALLIANCE COMMON STOCK FUND (SEPARATE ACCOUNT NO. 4 -- POOLED) - -------------------------------------------------------------------------------- Last Business Last Business Day of Fund Day of Fund December Unit Value December Unit Value - -------------------------------------------------------------------------------- 1969 $15.47 1984 $ 76.85 1970 15.87 1985 102.00 1971 20.18 1986 116.67 1972 25.40 1987 123.90 1973 23.46 1988 145.61 1974 17.06 1989 211.73 1975 21.94 1990 188.63 1976 26.01 1991 288.23 1977 23.79 1992 293.22 1978 26.56 1993 353.07 1979 35.21 1994 346.92* 1980 52.91 1995 457.41* 1981 51.22 1996 538.54* 1982 64.94 1997 683.56* 1983 78.26 - -------------------------------------------------------------------------------- ALLIANCE AGGRESSIVE STOCK FUND (SEPARATE ACCOUNT NO. 3 -- POOLED) - -------------------------------------------------------------------------------- Last Business Last Business Day of Fund Day of Fund December Unit Value December Unit Value - -------------------------------------------------------------------------------- 1969 $ 8.69 1984 $ 32.41 1970 7.26 1985 38.45 1971 8.63 1986 39.27 1972 9.73 1987 38.53 1973 7.07 1988 39.48 1974 4.72 1989 58.31 1975 6.71 1990 63.79 1976 7.91 1991 120.00 1977 7.52 1992 116.98 1978 8.95 1993 135.42 1979 14.66 1994 129.95* 1980 23.81 1995 170.67* 1981 20.76 1996 209.06* 1982 27.45 1997 234.35* 1983 36.05 - ------------------- * These Unit values reflect the deduction of the Investment Management and Financial Accounting Fee. - -------------------------------------------------------------------------------- 7 - ------------------------------------------------------------------------------- ALLIANCE MONEY MARKET FUND (SEPARATE ACCOUNT NO. 51) - ------------------------------------------------------------------------------- Last Business Day of Fund December Unit Value - -------------------------------------------------------------------------------- 1994 $102.65 1995 108.49 1996 114.22 1997 120.35 - -------------------------------------------------------------------------------- ALLIANCE INTERMEDIATE GOVERNMENT SECURITIES FUND (SEPARATE ACCOUNT NO. 51) - -------------------------------------------------------------------------------- Last Business Day of Fund December Unit Value - -------------------------------------------------------------------------------- 1994 $ 98.94 1995 112.07 1996 116.24 1997 124.66 - -------------------------------------------------------------------------------- ALLIANCE QUALITY BOND FUND (SEPARATE ACCOUNT NO. 51) - -------------------------------------------------------------------------------- Last Business Day of Fund December Unit Value - -------------------------------------------------------------------------------- 1994 $ 99.83 1995 116.76 1996 122.96 1997 134.14 - -------------------------------------------------------------------------------- ALLIANCE HIGH YIELD FUND (SEPARATE ACCOUNT NO. 51) - -------------------------------------------------------------------------------- Last Business Day of Fund December Unit Value - -------------------------------------------------------------------------------- 1994 $ 98.99 1995 118.64 1996 145.72 1997 172.55 - -------------------------------------------------------------------------------- ALLIANCE GROWTH & INCOME FUND (SEPARATE ACCOUNT NO. 51) - -------------------------------------------------------------------------------- Last Business Day of Fund December Unit Value - -------------------------------------------------------------------------------- 1994 $ 99.81 1995 123.78 1996 148.57 1997 188.22 - -------------------------------------------------------------------------------- ALLIANCE EQUITY INDEX FUND (SEPARATE ACCOUNT NO. 51) - -------------------------------------------------------------------------------- Last Business Day of Fund December Unit Value - ------------------------------------------------------------------------------- 1994 $101.71 1995 138.75 1996 169.72 1997 224.89 - -------------------------------------------------------------------------------- 8 ALLIANCE GLOBAL FUND (SEPARATE ACCOUNT NO. 51) - -------------------------------------------------------------------------------- Last Business Day of Fund December Unit Value - -------------------------------------------------------------------------------- 1994 $ 99.84 1995 118.56 1996 135.81 1997 151.41 - -------------------------------------------------------------------------------- ALLIANCE INTERNATIONAL FUND (SEPARATE ACCOUNT NO. 51) - -------------------------------------------------------------------------------- Last Business Day of Fund December Unit Value - -------------------------------------------------------------------------------- 1995 $104.60 1996 114.80 1997 111.24 - -------------------------------------------------------------------------------- ALLIANCE SMALL CAP GROWTH FUND (SEPARATE ACCOUNT NO. 51) - -------------------------------------------------------------------------------- Last Business Day of Fund December Unit Value - -------------------------------------------------------------------------------- 1997 $114.18 - -------------------------------------------------------------------------------- ALLIANCE CONSERVATIVE INVESTORS FUND (SEPARATE ACCOUNT NO. 51) - -------------------------------------------------------------------------------- Last Business Day of Fund December Unit Value - -------------------------------------------------------------------------------- 1994 $ 99.83 1995 120.14 1996 126.33 1997 142.97 - -------------------------------------------------------------------------------- ALLIANCE GROWTH INVESTORS FUND (SEPARATE ACCOUNT NO. 51) - -------------------------------------------------------------------------------- Last Business Day of Fund December Unit Value - -------------------------------------------------------------------------------- 1994 $ 99.52 1995 125.70 1996 141.48 1997 165.12 - -------------------------------------------------------------------------------- ALLIANCE MONEY MARKET YIELD INFORMATION The Alliance Money Market Fund calculates yield information for seven-day periods. The seven-day current yield calculation is based on a hypothetical employer plan 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 Ongoing Operations Fee factor (explained below). This reduction is made to recognize the deduction of the Ongoing Operations Fee which is not reflected in the Unit value. See ONGOING OPERATIONS FEE in PART II -- CHARGES AND FEES of the Prospectus. Accumulation Unit Values reflect all other accrued expenses of the Alliance Money Market Fund. 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 seven-day adjusted base period return is then multiplied by 365/7 to produce an annualized seven-day current yield figure carried to the nearest one-hundredth of one percent. 9 The actual dollar amount of the Ongoing Operations Fee that is deducted from the Alliance Money Market Fund will vary for each employer plan depending upon how the plan's balance is allocated among the Investment Options. To determine the effect of the Ongoing Operations Fee on the yield, we start with the total dollar amount of the fees deducted from the Fund on the last Business Day of the prior month. This amount is multiplied by 7/30.417 to produce an average Ongoing Operations Fee factor which is used in all weekly yield computations for the ensuing quarter. The average Ongoing Operations Fee factor and the Separate Account Administrative Charge is then divided by the number of Alliance Money Market Fund Units as of the end of the prior month, 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 give effect to the compounding nature of the Alliance Money Market Fund'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 Fund yield will fluctuate daily. Accordingly, yields for any given period are not necessarily representative of future results. In addition, the value of Units of the Alliance Money Market Fund will fluctuate and not remain constant. The Alliance Money Market Fund yield reflects charges that are not normally reflected in the yields of other investments and therefore may be lower when compared with yields of other investments. Alliance Money Market Fund yields should not be compared to the return on fixed-rate investments which guarantee rates of interest for specified periods, such as the Guaranteed Interest Account or bank deposits. The yield should not be compared to the yield of money market funds made available to the general public because their yields usually are calculated on the basis of a constant $1 price per share and they pay earnings in dividends which accrue on a daily basis. The Alliance Money Market Fund's seven-day current yield for the RIA Contracts was 5.35% for the period ended December 31, 1997. The effective yield for that period was 5.49%. Because these yields reflect the deduction of the Ongoing Operations Fee and the Separate Account Administrative Charge, they are lower than the corresponding yield figures for the Alliance Money Market Portfolio which reflect only the deduction of Trust-level expenses. BROKERAGE FEES AND CHARGES FOR SECURITIES TRANSACTIONS We discuss in the Prospectus that we are the investment manager of the Alliance Bond, Alliance Balanced, Alliance Common Stock and Alliance Aggressive Stock Funds. As the investment manager of these Funds, we invest and reinvest the assets of these Funds in a manner consistent with the policies described in the Prospectus. In providing these services we currently use the personnel and facilities of our majority-owned subsidiary, Alliance, for portfolio selection and transaction services, including arranging the execution of portfolio transactions. Alliance is also the investment manager for HRT. Information on brokerage fees and charges for securities transactions for the Trust's Portfolios of HRT and EQAT is provided in their respective prospectuses. See PART III -- EQUITABLE LIFE AND ITS FUNDS -- INVESTMENT MANAGEMENT in the Prospectus. The Alliance Bond, Alliance Balanced, Alliance Common Stock and Alliance Aggressive Stock Funds are charged for securities brokers commissions, transfer taxes and other fees and expenses relating to their operation. Transactions in equity securities for a Fund are executed primarily through brokers which receive a commission paid by the Fund. Brokers are selected by Alliance. Alliance seeks to obtain the best price and execution of all orders placed for the portfolio of the Funds, considering all the circumstances. If transactions are executed in the over-the-counter market Alliance will deal with the principal market makers, unless more favorable prices or better execution is otherwise obtainable. There are occasions on which portfolio transactions for the Funds may be executed as part of concurrent authorizations to purchase or sell the same security for certain other accounts or clients advised by Alliance. Although these concurrent authorizations potentially can be either advantageous or disadvantageous to the Funds, they are effected only when it is believed that to do so is in the best interest of the Funds. When these concurrent authorizations occur, the objective is to allocate the executions among the accounts or clients in a fair manner. We try to choose only brokers which we believe will obtain the best prices and executions on securities transactions. Subject to this general requirement, we also consider the amount and quality of securities research services provided by a broker. Typical research services include general economic information and analyses and specific information on and analyses of companies, industries and markets. Factors in evaluating research services include the diversity of sources used by the broker and the broker's experience, analytical ability and professional stature. The receipt of research services from brokers tends to reduce our expenses in managing the Alliance Bond, Alliance Balanced, Alliance Common Stock and Alliance Aggressive Stock Funds. This is taken into account when setting the expense charges. Brokers who provide research services may charge somewhat higher commissions than those who do not. However, we will select only brokers whose commissions we believe are reasonable in all the circumstances. 10 We periodically evaluate the services provided by brokers and prepare internal proposals for allocating among those various brokers business for all the accounts we manage or advise. That evaluation involves consideration of the overall capacity of the broker to execute transactions, its financial condition, its past performance and the value of research services provided by the broker in servicing the various accounts advised or managed by us. Generally, we do not tell brokers that we will try to allocate a particular amount of business to them. We do occasionally let brokers know how their performance has been evaluated. Research information obtained by us may be used in servicing all clients or accounts under our management, including our general account. Similarly, not all research provided by a broker or dealer with which the Funds transact business will necessarily be used in connection with those Funds. Transactions for the Alliance Bond, Alliance Balanced, Alliance Common Stock and Alliance Aggressive Stock Funds in the over-the-counter market are normally executed as principal transactions with a dealer that is a principal market maker in the security, unless a better price or better execution can be obtained from another source. Under these circumstances, the Funds pay no commission. Similarly, portfolio transactions in money market and debt securities will normally be executed through dealers or underwriters under circumstances where the Fund pays no commission. When making securities transactions for the Alliance Bond, Alliance Balanced, Alliance Common Stock and Alliance Aggressive Stock Funds that do not involve paying a brokerage commission (such as the purchase of short-term debt securities), we seek to obtain prompt execution in an effective manner at the best price. Subject to this general objective, we may give orders to dealers or underwriters who provide investment research. None of the Funds will pay a higher price, however, and the fact that we may benefit from such research is not considered in setting the expense charges. In addition to using brokers and dealers to execute portfolio securities transactions for clients or accounts we manage, we may enter into other types of business transactions with brokers or dealers. These other transactions will be unrelated to allocation of the Funds' portfolio transactions. Our parent, the Holding Company, owns Donaldson, Lufkin & Jenrette Inc. (DLJ). A DLJ subsidiary, Donaldson, Lufkin & Jenrette Securities Corporation (DLJ SECURITIES CORP.), is one of the nation's largest investment banking and securities firms. Another DLJ subsidiary, Autranet, Inc., is a securities broker that markets independently originated research to institutions. Through the Pershing Division of DLJ Securities Corp., DLJ supplies correspondent services, including order execution, securities clearance and other centralized financial services to numerous independent regional securities firms and banks. To the extent permitted by law, and consistent with the Fund transaction practices discussed in this SAI and the Prospectus, the Alliance Bond, Alliance Balanced, Alliance Common Stock and Alliance Aggressive Stock Funds may engage in securities and other transactions with the above entities or may invest in shares of the investment companies with which those entities have affiliations. During 1996, there were no transactions effected through DLJ subsidiaries and therefore no commissions were paid. For the years ended December 31, 1997, 1996 and 1995, total brokerage commissions for Separate Account No. 10 -- Pooled were $424,352, $931,317 and $1,016,342, respectively; for Separate Account 4 -- Pooled were $3,698,148, $5,682,578 and $6,044,623, respectively; and for Separate Account No. 3 -- Pooled were $1,876,011, $1,268,209 and $1,547,073, respectively. For 1996, total brokerage commissions for Separate Account No. 13 -- Pooled were $0. For the fiscal year ended December 31, 1997, commissions of $197,851, $1,279,938 and $799,430 were paid to brokers providing research services to Separate Account No. 10 -- Pooled, Separate Account No. 4 -- Pooled and Separate Account No. 3 -- Pooled, respectively, on portfolio transactions of $254,843,012, $2,255,341,604 and $958,618,139, respectively. ONGOING OPERATIONS FEE We determine the Ongoing Operations Fee based on the combined net balances of an employer plan in all the Investment Options (including any outstanding loan balances) at the close of business on the last Business Day of each month. For employer plans that adopted RIA on or before February 9, 1986, we use the rate schedule set forth below, and apply it to the employer plan balances at the close of business on the last Business Day of the following month. For employer plans that adopted RIA after February 9, 1986 we use the rate schedule set forth in the Prospectus. See PART II -- CHARGES AND FEES in the Prospectus. - ------------------------------------------------------------- COMBINED BALANCE MONTHLY OF INVESTMENT OPTIONS RATE - ------------------------------------------------------------- First $ 150,000 1/12 of 1.25% Next $ 350,000 1/12 of 1.00% Next $ 500,000 1/12 of 0.75% Next $1,500,000 1/12 of 0.50% Over $2,500,000 1/12 of 0.25% - ------------------------------------------------------------- 11 - -------------------------------------------------------------------------------- PART II -- MANAGEMENT FOR THE ALLIANCE BOND, ALLIANCE BALANCED, ALLIANCE COMMON STOCK AND ALLIANCE AGGRESSIVE STOCK FUNDS AND EQUITABLE LIFE - -------------------------------------------------------------------------------- FUNDS In the Prospectus we give information about us, the Alliance Bond, Alliance Balanced, Alliance Common Stock and Alliance Aggressive Stock Funds and how we, together with Alliance, provide investment management for the investments and operations of these Funds. See PART III -- EQUITABLE LIFE AND ITS FUNDS in the Prospectus. The amounts of the investment management and financial accounting fees we received from employer plans participating through registered Contracts in the Alliance Balanced, Alliance Common Stock and Alliance Aggressive Stock Funds in 1997 were $24,226, $75,951, and $32,585, respectively; 1996 were $33,735, $64,279 and $26,432, respectively; in 1995 were $35,578, $55,579 and $20,636, respectively. The amount of such fees received under the Alliance Bond Fund in 1997, 1996 and 1995 were $559, $640 and $455, respectively. DISTRIBUTION EQ Financial Services, Inc. (EQF) performs all sales functions for the Separate Accounts and may be deemed to be their principal underwriter under the 1940 Act and is also the principal underwriter of the Trust. EQF is registered with the SEC as a broker-dealer under the Securities Exchange Act of 1934 (EXCHANGE ACT) and is a member of the National Association of Securities Dealers, Inc. EQF's principal business address is 1755 Broadway, New York, New York 10019. The contracts are distributed through Equitable Life's Representatives who are registered representatives of EQF. EQUITABLE LIF We are managed by a Board of Directors. See PART III -- EQUITABLE LIFE AND ITS FUNDS in the Prospectus. Our Directors, certain of our executive officers and their principal occupations are set forth below.
- ------------------------------------------------------------------------------------------------------------------------------- DIRECTORS NAME PRINCIPAL OCCUPATION - ------------------------------------------------------------------------------------------------------------------------------- Francoise Colloc'h Senior Executive Vice President, Human Resources and Communications, AXA-UAP Henri de Castries Senior Executive Vice President, Financial Services and Life Insurance Activities, AXA-UAP Joseph L. Dionne Chairman and Chief Executive Officer, The McGraw-Hill Companies Denis Duverne Senior Vice President, International, AXA-UAP William T. Esrey Chairman and Chief Executive Officer, Sprint Corporation Jean-Rene Fourtou Chairman and Chief Executive Officer, Rhone-Poulenc, S.A. Norman C. Francis President, Xavier University of Louisiana Donald J. Greene Counselor-at-Law, Partner, LeBoeuf, Lamb, Greene & MacRae John T. Hartley Director and retired Chairman and Chief Executive Officer, Harris Corporation John H. F. Haskell, Jr. Director and Managing Director, SBC Warburg Dillon Read, Inc. Mary R. (Nina) Henderson President, Bestfoods Grocery; Vice President, BESTFOODS W. Edwin Jarmain President, Jarmain Group Inc. G. Donald Johnston, Jr. Retired Chairman and Chief Executive Officer, JWT Group, Inc. George T. Lowy Counselor-at-Law, Partner, Cravath, Swaine & Moore Didier Pineau-Valencienne Chairman and Chief Executive Officer, Schneider S.A. George J. Sella, Jr. Retired Chairman of the Board and Chief Executive Officer, American Cyanamid Company Dave H. Williams Chairman and Chief Executive Officer, Alliance Capital Management, L.P. - -------------------------------------------------------------------------------------------------------------------------------
12 Unless otherwise indicated, the following persons have been involved in the management of Equitable Life in various executive positions during the last five years.
- ------------------------------------------------------------------------------------------------------------------------------- OFFICER-DIRECTORS NAME PRINCIPAL OCCUPATION - ------------------------------------------------------------------------------------------------------------------------------- Edward D. Miller Chairman of the Board and Chief Executive Officer; formerly, Senior Vice Chairman, Chase Manhattan Corporation, and prior thereto, President and Vice Chairman, Chemical Bank Stanley B. Tulin Vice Chairman of the Board and Chief Financial Officer; formerly, Chairman, Insurance Consulting and Actuarial Practice, Coopers & Lybrand Michael Hegarty President and Chief Operating Officer; formerly, Vice Chairman, Chase Manhattan Corporation - ------------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------- OTHER OFFICERS NAME PRINCIPAL OCCUPATION* - ------------------------------------------------------------------------------------------------------------------------------- Leon B. Billis Executive Vice President and Chief Information Officer Jose Suquet Senior Executive Vice President and Chief Distribution Officer Robert E. Garber Executive Vice President and General Counsel Jerome S. Golden Executive Vice President; formerly with JG Resources and BT Variable Peter D. Noris Executive Vice President and Chief Investment Officer; formerly, Vice President / Manager, Insurance Company Investment Strategies Group, Salomon Brothers, Inc. Harvey Blitz Senior Vice President and Deputy Chief Financial Officer Kevin R. Byrne Senior Vice President and Treasurer Alvin H. Fenichel Senior Vice President and Controller Paul J. Flora Senior Vice President and Auditor Mark A. Hug Senior Vice President; formerly, Vice President, Aetna Michael S. Martin Senior Vice President and Chief Marketing Officer Douglas Menkes Senior Vice President and Coroporate Actuary; formerly with Milliman & Robertson, Inc. Anthony C. Pasquale Senior Vice President Donald R. Kaplan Vice President and Chief Compliance Officer Pauline Sherman Vice President, Secretary and Associate General Counsel - -------------------------------------------------------------------------------------------------------------------------------
*Current positions listed are with Equitable Life unless otherwise specified. 13
- ------------------------------------------------------------------------------------------------------------------------------ PART III -- FINANCIAL STATEMENTS INDEX - ----------------------------------------------------------------------------------------------------------------------------- PAGE - ----------------------------------------------------------------------------------------------------------------------------- SEPARATE ACCOUNT NOS. 13 (POOLED), Report of Independent Accountants--....................................... FSA-1 10 (POOLED), 4 (POOLED), 3 (POOLED) AND 51 (POOLED) - ----------------------------------------------------------------------------------------------------------------------------- SEPARATE ACCOUNT NO. 13 (POOLED) Statement of Assets and Liabilities, December 31, 1997.................... FSA-2 ------------------------------------------------------------------------------------ Statements of Operations and Changes in Net Assets for the Years Ended December 31, 1997 and 1996.......................................... FSA-3 ------------------------------------------------------------------------------------ Portfolio of Investments, December 31, 1997............................... FSA-4 - ----------------------------------------------------------------------------------------------------------------------------- SEPARATE ACCOUNT NO. 10 (POOLED) Statement of Assets and Liabilities, December 31, 1997.................... FSA-6 ------------------------------------------------------------------------------------ Statements of Operations and Changes in Net Assets for the Years Ended December 31, 1997 and 1996.......................................... FSA-7 ------------------------------------------------------------------------------------ Portfolio of Investments, December 31, 1997............................... FSA-8 - ----------------------------------------------------------------------------------------------------------------------------- SEPARATE ACCOUNT NO. 4 (POOLED) Statement of Assets and Liabilities, December 31, 1997.................... FSA-25 ------------------------------------------------------------------------------------ Statements of Operations and Changes in Net Assets for the Years Ended December 31, 1997 and 1996.......................................... FSA-26 ------------------------------------------------------------------------------------ Portfolio of Investments, December 31, 1997............................... FSA-27 - ----------------------------------------------------------------------------------------------------------------------------- SEPARATE ACCOUNT NO. 3 (POOLED) Statement of Assets and Liabilities, December 31, 1997.................... FSA-32 ------------------------------------------------------------------------------------ Statements of Operations and Changes in Net Assets for the Years Ended December 31, 1997 and 1996.......................................... FSA-33 ------------------------------------------------------------------------------------ Portfolio of Investments, December 31, 1997............................... FSA-34 - ----------------------------------------------------------------------------------------------------------------------------- SEPARATE ACCOUNT NO. 51 (POOLED) Statements of Assets and Liabilities, December 31, 1997................... FSA-38 ------------------------------------------------------------------------------------ Statements of Operations and Changes in Net Assets for the Years Ended December 31, 1997 and 1996.......................................... FSA-41 - ----------------------------------------------------------------------------------------------------------------------------- SEPARATE ACCOUNT NOS. 13 (POOLED), Notes to Financial Statements............................................. FSA-46 10 (POOLED), 4 (POOLED), 3 (POOLED) AND 51 (POOLED) - ----------------------------------------------------------------------------------------------------------------------------- THE EQUITABLE LIFE ASSURANCE Report of Independent Accountants-- ...................................... F-1 ------------------------------------------------------------------------------------ SOCIETY OF THE UNITED STATES Consolidated Balance Sheets as of December 31, 1997 and 1996 ............. F-2 ------------------------------------------------------------------------------------ Consolidated Statements of Earnings for the Years Ended December 31, 1997, 1996 and 1995 ......................................... F-3 ------------------------------------------------------------------------------------ Consolidated Statements of Shareholder's Equity for the Years Ended December 31, 1997, 1996 and 1995 ................................... F-4 ------------------------------------------------------------------------------------ Consolidated Statements of Cash Flows for the Years Ended December 31, 1997, 1996 and 1995 ......................................... F-5 ------------------------------------------------------------------------------------ Notes to Consolidated Financial Statements ............................... F-6 - ----------------------------------------------------------------------------------------------------------------------------- The financial statements of the Funds reflect fees, charges and other expenses of the Separate Accounts applicable to Contracts under RIA as in effect during the periods covered, as well as the expense charges made in accordance with the terms of all other contracts participating in the respective Funds. - -----------------------------------------------------------------------------------------------------------------------------
14 ================================================================================ SEPARATE ACCOUNT NOS. 13 (POOLED), 10 (POOLED), 4 (POOLED), 3 (POOLED) AND 51 (POOLED) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Report of Independent Accountants - -------------------------------------------------------------------------------- To the Board of Directors of The Equitable Life Assurance Society of the United States and the Contractowners of Separate Account Nos. 13, 10, 4 and 3 of The Equitable Life Assurance Society of the United States In our opinion, the accompanying statements of assets and liabilities, including the portfolio of investments, and the related statements of operations and changes in net assets and the selected per unit data (included under Condensed Financial Information in the prospectus of the Retirement Investment Account) present fairly, in all material respects, the financial position of Separate Account Nos. 13 (Pooled) (Alliance Bond Fund), 10 (Pooled) (Alliance Balanced Fund), 4 (Pooled) (Alliance Common Stock Fund) and 3 (Pooled) (Alliance Aggressive Stock Fund) of The Equitable Life Assurance Society of the United States ("Equitable Life") at December 31, 1997 and each of their results of operations, the changes in net assets for each of the two years in the period then ended and the selected per unit data for the periods presented, in conformity with generally accepted accounting principles. These financial statements and the selected per unit data (hereafter referred to as "financial statements") are the responsibility of Equitable Life's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 1997 by correspondence with the custodian and brokers and the application of alternative auditing procedures where confirmations from brokers were not received, provide a reasonable basis for the opinion expressed above. Price Waterhouse LLP New York, New York February 10, 1998 FSA-1 ================================================================================ SEPARATE ACCOUNT NO. 13 (POOLED) (THE ALLIANCE BOND FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Statement of Assets and Liabilities December 31, 1997 - --------------------------------------------------------------------------------
ASSETS: Investments (Notes 2 and 3): Long-term debt securities-- at value (amortized cost: $109,988,701)...... $111,433,112 Participation in Separate Account No. 2A-- at amortized cost, which approximates market value, equivalent to 3,783 units at $270.27........ 1,022,502 Receivables: Interest................................................................. 1,352,890 Other.................................................................... 17,215 - --------------------------------------------------------------------------------------------- Total assets........................................................... 113,825,719 - --------------------------------------------------------------------------------------------- LIABILITIES: Payables: Custodian Payable........................................................ 12,825 Due to Equitable Life's General Account.................................. 1,447,671 Investment management fees payable....................................... 79 Accrued expenses............................................................ 13,118 - --------------------------------------------------------------------------------------------- Total liabilities...................................................... 1,473,693 - --------------------------------------------------------------------------------------------- NET ASSETS.................................................................. $112,352,026 =============================================================================================
See Notes to Financial Statements. FSA-2 ================================================================================ SEPARATE ACCOUNT NO. 13 (POOLED) (THE ALLIANCE BOND FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Statements of Operations and Changes in Net Assets
- ---------------------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 1997 1996 - ---------------------------------------------------------------------------------------------------------------- FROM OPERATIONS: INVESTMENT INCOME (NOTE 2)-- Interest.................................. $ 8,163,837 $11,040,900 EXPENSES (NOTE 4)...................................................... (690,004 ) (970,909 ) - --------------------------------------------------------------------------------------------------------------- NET INVESTMENT INCOME.................................................. 7,473,833 10,069,991 - --------------------------------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 2): Realized gain (loss) from security transactions ....................... 1,189,685 (634,764 ) - --------------------------------------------------------------------------------------------------------------- Unrealized appreciation (depreciation) of investments: Beginning of year................................................... 694,679 6,646,163 End of year......................................................... 1,444,411 694,679 - --------------------------------------------------------------------------------------------------------------- Change in unrealized appreciation/depreciation ........................ 749,732 (5,951,484 ) - --------------------------------------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS................. 1,939,417 (6,586,248 ) - --------------------------------------------------------------------------------------------------------------- Increase in net assets attributable to operations...................... 9,413,250 3,483,743 - --------------------------------------------------------------------------------------------------------------- FROM CONTRIBUTIONS AND WITHDRAWALS: Contributions.......................................................... 30,905,572 48,188,476 Withdrawals............................................................ (62,636,625 ) (130,604,690 ) - --------------------------------------------------------------------------------------------------------------- Decrease in net assets attributable to contributions and withdrawals... (31,731,053 ) (82,416,214 ) - --------------------------------------------------------------------------------------------------------------- DECREASE IN NET ASSETS ................................................ (22,317,803 ) (78,932,471 ) NET ASSETS-- BEGINNING OF YEAR ........................................ 134,669,829 213,602,300 =============================================================================================================== NET ASSETS-- END OF YEAR............................................... $112,352,026 $134,669,829 ===============================================================================================================
See Notes to Financial Statements. FSA-3 ================================================================================ SEPARATE ACCOUNT NO. 13 (POOLED) (THE ALLIANCE BOND FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Portfolio of Investments -- December 31, 1997 - -------------------------------------------------------------------------------- PRINCIPAL VALUE AMOUNT (NOTE 3) - -------------------------------------------------------------------------------- LONG-TERM DEBT SECURITIES: BUSINESS SERVICES PRINTING, PUBLISHING & BROADCASTING (4.6%) Turner Broadcasting System, Inc. 7.4%, 2004.................................. $5,000,000 $ 5,206,850 ------------- TOTAL BUSINESS SERVICES (4.6%)................. 5,206,850 ------------- CAPITAL GOODS AEROSPACE (2.3%) Raytheon Co. 6.75%, 2007................................. 2,525,000 2,572,950 ------------- TOTAL CAPITAL GOODS (2.3%)..................... 2,572,950 ------------- CONSUMER CYCLICALS AUTO-RELATED (3.6%) Enterprise Rent-A-Car Co. 6.95%, 2004................................. 4,000,000 4,057,040 ------------- TOTAL CONSUMER CYCLICALS (3.6%)................ 4,057,040 ------------- CREDIT-SENSITIVE ASSET-BACKED (0.8%) Premier Auto Trust 7.15% Series 95-A5, 1999.................... 929,373 930,238 ------------- BANKS (6.5%) Chase Manhattan Corp. 8.625% Sub. Deb., 2002...................... 5,000,000 5,435,600 Long Island Savings Bank 7.0%, 2002.................................. 1,850,000 1,887,962 ------------- 7,323,562 ------------- FINANCIAL SERVICES (3.9%) Associates Corp. of North America 6.5%, 2002.................................. 4,300,000 4,341,323 ------------- U.S. GOVERNMENT (77.5%) U.S. Treasury: 6.125% Note, 1998........................... 9,600,000 9,633,005 6.375% Note, 1999........................... 21,865,000 22,063,162 6.25% Note, 2001............................ 10,760,000 10,928,125 6.5% Note, 2002............................. 24,900,000 25,631,437 6.875% Note, 2006........................... 11,925,000 12,763,482 6.625% Note, 2007........................... 5,650,000 5,981,938 ------------- 87,001,149 ------------- TOTAL CREDIT-SENSITIVE (88.7%)................. 99,596,272 ------------- TOTAL LONG-TERM DEBT SECURITIES (99.2%) (Amortized Cost $109,988,701) .............. 111,433,112 ------------- FSA-4 ================================================================================ SEPARATE ACCOUNT NO. 13 (POOLED) (THE ALLIANCE BOND FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Portfolio of Investments -- December 31, 1997 (Concluded) - -------------------------------------------------------------------------------- VALUE (NOTE 3) - -------------------------------------------------------------------------------- PARTICIPATION IN SEPARATE ACCOUNT NO. 2A, at amortized cost, which approximates market value, equivalent to 3,783 units at $270.27 each (0.9%).......................... $ 1,022,502 -------------- TOTAL INVESTMENTS (100.1%) (Amortized Cost $111,011,203) ........................ 112,455,614 OTHER ASSETS LESS LIABILITIES (-0.1%).................... (103,588) -------------- NET ASSETS (100.0%)...................................... $112,352,026 ============== See Notes to Financial Statements. FSA-5 ================================================================================ SEPARATE ACCOUNT NO. 10 (POOLED) (THE ALLIANCE BALANCED FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Statement of Assets and Liabilities December 31, 1997
- --------------------------------------------------------------------------------------------- ASSETS: Investments (Notes 2 and 3): Common stocks-- at market value (cost: $108,824,778)..................... $124,460,867 Preferred stocks-- at market value (cost: $2,677,383).................... 3,236,238 Long-term debt securities-- at value (amortized cost: $110,232,563)...... 114,106,615 Participation in Separate Account No. 2A -- at amortized cost, which approximates market value, equivalent to 38,544 units at $270.27....... 10,417,265 Receivables: Securities sold.......................................................... 810,823 Interest................................................................. 1,517,146 Dividends................................................................ 238,861 Others................................................................... 24,341 - --------------------------------------------------------------------------------------------- Total assets........................................................... 254,812,156 - --------------------------------------------------------------------------------------------- LIABILITIES: Payables: Custodian payable........................................................ 159,644 Securities purchased..................................................... 110,274 Due to Equitable Life's General Account.................................. 11,079,033 Investment management fees payable....................................... 2,561 Accrued expenses............................................................ 204,725 - --------------------------------------------------------------------------------------------- Total liabilities...................................................... 11,556,237 - --------------------------------------------------------------------------------------------- NET ASSETS.................................................................. $243,255,919 =============================================================================================
See Notes to Financial Statements. FSA-6 ================================================================================ SEPARATE ACCOUNT NO. 10 (POOLED) (THE ALLIANCE BALANCED FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Statements of Operations and Changes in Net Assets
- ---------------------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 1997 1996 - ---------------------------------------------------------------------------------------------------------------- FROM OPERATIONS: INVESTMENT INCOME (NOTE 2): Interest............................................................... $ 9,248,201 $ 9,820,381 Dividends (net of foreign taxes withheld -- 1997: $109,690 and 1996: $115,641).................................. 1,765,490 2,417,609 - ---------------------------------------------------------------------------------------------------------------- Total................................................................... 11,013,691 12,237,990 EXPENSES (NOTE 4)...................................................... (3,985,252) (4,691,514) - ---------------------------------------------------------------------------------------------------------------- NET INVESTMENT INCOME.................................................. 7,028,439 7,546,476 - ---------------------------------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 2): Realized gain from security and foreign currency transactions.......... 30,478,147 35,223,719 - ---------------------------------------------------------------------------------------------------------------- Unrealized appreciation (depreciation) of investments and foreign currency transactions: Beginning of year................................................... 24,115,275 34,125,491 End of year......................................................... 20,366,672 24,115,275 - ---------------------------------------------------------------------------------------------------------------- Change in unrealized appreciation/depreciation......................... (3,748,603) (10,010,216) - ---------------------------------------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS........................ 26,729,544 25,213,503 - ---------------------------------------------------------------------------------------------------------------- Increase in net assets attributable to operations...................... 33,757,983 32,759,979 - ---------------------------------------------------------------------------------------------------------------- FROM CONTRIBUTIONS AND WITHDRAWALS: Contributions.......................................................... 50,198,862 68,031,967 Withdrawals............................................................ (153,851,256) (161,825,766) - ---------------------------------------------------------------------------------------------------------------- Decrease in net assets attributable to contributions and withdrawals... (103,652,394) (93,793,799) - ---------------------------------------------------------------------------------------------------------------- DECREASE IN NET ASSETS................................................. (69,894,411) (61,033,820) NET ASSETS-- BEGINNING OF YEAR......................................... 313,150,330 374,184,150 ================================================================================================================ NET ASSETS-- END OF YEAR............................................... $243,255,919 $313,150,330 ================================================================================================================
See Notes to Financial Statements. FSA-7 ================================================================================ SEPARATE ACCOUNT NO. 10 (POOLED) (THE ALLIANCE BALANCED FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Portfolio of Investments -- December 31, 1997 - -------------------------------------------------------------------------------- NUMBER OF VALUE SHARES (NOTE 3) - -------------------------------------------------------------------------------- COMMON STOCKS: BASIC MATERIALS CHEMICALS (0.9%) Akzo Nobel N.V. ................................ 600 $ 103,445 Bayer AG........................................ 4,000 148,416 Ciba Specialty Chemicals AG*.................... 900 107,172 Dow Chemical Co. ............................... 5,000 507,500 Dupont (E.I.) de Nemours & Co. ................. 12,100 726,756 Hitachi Chemical Co. Ltd. ...................... 31,000 183,959 Holliday Chemical Holdings PLC.................. 46,500 174,886 Kuraray Co. Ltd. ............................... 20,000 165,390 Monsanto Co. ................................... 1,800 75,600 Nippon Chemi-Con Corp. ......................... 12,000 27,841 Toagosei Co. Ltd. .............................. 29,000 40,858 Union Carbide Corp. ............................ 1,100 47,231 ----------- 2,309,054 ----------- CHEMICALS -- SPECIALTY (0.1%) NGK Insulators.................................. 18,000 159,877 ----------- METALS & MINING (0.7%) Aluminum Co. of America......................... 9,600 675,600 Freeport-McMoran Copper & Gold, Inc. (Class B).. 14,000 220,500 Inco Ltd. ...................................... 900 15,300 Kaiser Aluminum Corp.* ......................... 36,100 318,131 Phelps Dodge Corp. ............................. 2,000 124,500 Steel Dynamics, Inc.* .......................... 20,900 334,400 Toho Titanium*.................................. 1,000 8,423 ----------- 1,696,854 ----------- PAPER (0.2%) Georgia-Pacific Corp. .......................... 1,300 78,975 Kimberly-Clark Corp. ........................... 2,200 108,488 KNP BT (Kon) N.V. .............................. 4,000 92,122 Nippon Paper Industries Co. .................... 2,000 7,841 UPM-Kymmene Oy.................................. 5,010 100,215 ----------- 387,641 ----------- STEEL (0.1%) Koninklijke Hoogovens N.V. ..................... 2,000 81,963 NatSteel Ltd. .................................. 41,000 55,461 Pohang Iron & Steel Co. Ltd. (ADR).............. 4,000 69,750 ----------- 207,174 ----------- TOTAL BASIC MATERIALS (2.0%).................... 4,760,600 ----------- FSA-8 ================================================================================ SEPARATE ACCOUNT NO. 10 (POOLED) (THE ALLIANCE BALANCED FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Portfolio of Investments -- December 31, 1997 (Continued) - -------------------------------------------------------------------------------- NUMBER OF VALUE SHARES (NOTE 3) - -------------------------------------------------------------------------------- BUSINESS SERVICES ENVIRONMENTAL CONTROL (0.2%) USA Waste Services, Inc.*....................... 14,800 $ 580,900 ----------- PRINTING, PUBLISHING & BROADCASTING (1.3%) Carlton Communications PLC...................... 26,000 199,841 Gannett Co. .................................... 12,200 754,112 Liberty Media Group (Class A)*.................. 6,850 248,313 New Straits Times Press BHD..................... 13,000 16,110 New York Times Co. (Class A).................... 9,500 628,188 Nippon Television Network Corp. ................ 100 29,326 Reuters Holding PLC (ADR)....................... 7,200 477,000 Scripps (EW) Co. (Class A)...................... 11,600 561,875 Television Broadcasts Ltd. ..................... 1,000 2,852 Tokyo Broadcasting System, Inc. ................ 2,000 25,268 United News & Media PLC......................... 18,551 209,310 Viacom, Inc. (Class B)*......................... 1,400 58,012 ----------- 3,210,207 ----------- PROFESSIONAL SERVICES (0.0%) Asatsu, Inc. ................................... 700 10,077 Brisa-Auto Estradas de Portugal SA*............. 500 17,911 Meitec.......................................... 2,000 56,202 ----------- 84,190 ----------- TRUCKING, SHIPPING (0.4%) Bergesen Dy As (A Shares)...................... 9,450 222,956 CNF Transportation, Inc. ....................... 8,700 333,863 Frontline Ltd.*................................. 30,000 121,220 ----------- 678,039 ----------- TOTAL BUSINESS SERVICES (1.9%).................. 4,553,336 ----------- CAPITAL GOODS AEROSPACE (0.6%) Boeing Co. ..................................... 22,500 1,101,094 British Aerospace............................... 9,901 283,102 Gulfstream Aerospace Corp.* .................... 3,200 93,600 ----------- 1,477,796 ----------- BUILDING & CONSTRUCTION (0.4%) Beazer Group PLC................................ 36,000 95,486 Bouygues........................................ 2,239 253,717 Daito Trust Construction Co. Ltd. .............. 7,500 45,770 Groupe GTM...................................... 1,931 129,942 Makita Corp. ................................... 17,000 162,710 National House Industrial Co. .................. 10,000 68,530 Sho Bond Corp. ................................. 1,500 27,106 Societe Technip................................. 1,400 147,711 Toda Corp. ..................................... 22,000 59,801 ----------- 990,773 ----------- FSA-9 ================================================================================ SEPARATE ACCOUNT NO. 10 (POOLED) (THE ALLIANCE BALANCED FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Portfolio of Investments -- December 31, 1997 (Continued) - -------------------------------------------------------------------------------- NUMBER OF VALUE SHARES (NOTE 3) - -------------------------------------------------------------------------------- BUILDING MATERIALS & FOREST PRODUCTS (0.3%) BPB PLC............................................ 20,500 $ 113,799 Fujikura Ltd. ..................................... 4,000 26,463 Holderbank Financiere Glaris AG.................... 275 224,336 Matsushita Electric Works Ltd. .................... 22,000 190,352 Nichiha Corp. ..................................... 1,000 6,110 Rugby Group PLC.................................... 50,000 112,090 ------------ 673,150 ------------ ELECTRICAL EQUIPMENT (1.8%) Daikin Industries Ltd. ............................ 29,000 109,250 General Electric Co. .............................. 49,900 3,661,413 Johnson Electric Holdings Ltd. .................... 50,400 145,041 Legrand SA......................................... 750 149,414 Mabuchi Motor Co. ................................. 200 10,153 Sumitomo Electric Industries....................... 11,000 149,923 ------------ 4,225,194 ------------ MACHINERY (1.1%) Allied Signal, Inc. ............................... 20,700 806,006 Cie Generale de Geophysique SA (ADR)*.............. 1,000 25,625 Fujitec Co. Ltd. .................................. 18,000 99,234 Ishikawajima Harima Heavy Industries Co. Ltd. ..... 20,000 29,862 KSB AG............................................. 500 109,783 Legris Industries SA............................... 4,390 152,448 Mitsubishi Heavy Industries Ltd. .................. 14,000 58,316 Nitta Corp. ....................................... 1,000 10,107 Rauma Oy........................................... 250 3,900 Schindler Holding AG Participating Certificate..... 35 36,456 Schindler Holding AG Registered.................... 100 107,378 Siebe PLC.......................................... 10,000 187,228 SMC Corp. ......................................... 400 35,222 Stork N.V. ........................................ 3,600 124,276 TI Group PLC....................................... 24,558 187,951 United Technologies Corp. ......................... 9,600 699,000 Valmet Oy*......................................... 6,200 85,562 ------------ 2,758,354 ------------ TOTAL CAPITAL GOODS (4.2%)......................... 10,125,267 ------------ CONSUMER CYCLICALS AIRLINES (0.2%) Singapore Airlines Ltd. ........................... 2,000 13,052 US Airways Group, Inc.*............................ 3,100 193,750 Virgin Express Holdings PLC (ADR)*................. 18,000 373,500 ------------ 580,302 ------------- FSA-10 ================================================================================ SEPARATE ACCOUNT NO. 10 (POOLED) (THE ALLIANCE BALANCED FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Portfolio of Investments -- December 31, 1997 (Continued) - -------------------------------------------------------------------------------- NUMBER OF VALUE SHARES (NOTE 3) - -------------------------------------------------------------------------------- APPAREL, TEXTILE (0.4%) Tommy Hilfiger Corp. *........................ 9,800 $ 344,225 Nautica Enterprises, Inc.*.................... 8,300 192,975 Onward Kashiyama Co. Ltd. .................... 15,000 173,430 Reebok International Ltd. *................... 13,200 380,325 ----------- 1,090,955 ----------- AUTO-RELATED (0.6%) Circuit City Stores, Inc.-- CarMax Group*..... 19,000 171,000 Continental AG................................ 5,000 112,563 Federal-Mogul Corp. .......................... 5,400 218,700 Magna International, Inc. .................... 7,800 489,937 Minebea Co. Ltd. ............................. 2,000 21,440 NGK Spark Plug Co. ........................... 8,000 45,329 Republic Industries, Inc.*.................... 3,200 74,600 Sumitomo Rubber Industries, Inc. ............. 33,000 139,227 Toyoda Automatic Loom Works Ltd. ............. 14,000 257,274 ----------- 1,530,070 ----------- AUTOS & TRUCKS (0.8%) Bajaj Auto Ltd. (GDR)......................... 1,500 29,625 Chrysler Corp. ............................... 9,400 330,762 Ford Motor Co. ............................... 10,200 496,612 General Motors Corp. ......................... 8,000 485,000 Harley-Davidson, Inc. ........................ 18,500 506,438 Honda Motor Co. Ltd. ......................... 1,000 36,677 UMW Holdings BHD.............................. 10,000 7,585 Volkswagen AG................................. 200 111,729 ----------- 2,004,428 ----------- FOOD SERVICES, LODGING (0.2%) Accor SA...................................... 200 37,185 Choice Hotels Scandinavia ASA*................ 20,000 67,797 Compass Group PLC............................. 27,000 329,915 McDonald's Corp. ............................. 1,000 47,750 ----------- 482,647 ----------- HOUSEHOLD FURNITURE, APPLIANCES (0.4%) Hunter Douglas N.V. .......................... 4,000 140,057 Industrie Natuzzi Spa (ADR)................... 600 12,375 Moulinex*..................................... 3,000 74,121 Pioneer Electric Corp. ....................... 13,000 200,077 Sony Corp. ................................... 3,500 310,873 Sunbeam Corp. ................................ 6,100 256,963 ----------- 994,466 ----------- FSA-11 ================================================================================ SEPARATE ACCOUNT NO. 10 (POOLED) (THE ALLIANCE BALANCED FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Portfolio of Investments -- December 31, 1997 (Continued) - -------------------------------------------------------------------------------- NUMBER OF VALUE SHARES (NOTE 3) - -------------------------------------------------------------------------------- LEISURE-RELATED (1.1%) Berjaya Sports Toto BHD..................... 27,000 $ 69,071 Carnival Corp. (Class A).................... 9,100 503,913 Disney (Walt) Co. .......................... 14,033 1,390,144 EMI Group PLC............................... 1,000 8,610 Granada Group PLC........................... 16,700 256,993 Hoyts Cinemas Group......................... 10,000 17,597 Ladbroke Group PLC.......................... 51,864 224,872 NAMCO Ltd. ................................. 200 5,804 Nintendo Co. Ltd. .......................... 400 39,204 Nippon Broadcasting System.................. 1,000 39,510 Toei Co. Ltd. .............................. 2,000 7,274 ------------ 2,562,992 ------------ PHOTO & OPTICAL (0.2%) Eastman Kodak Co. .......................... 2,500 152,031 Fuji Photo Film Co. ........................ 5,000 191,424 Noritsu Koki Co. Ltd. ...................... 1,600 39,449 ------------ 382,904 ------------ RETAIL -- GENERAL (2.3%) Aldeasa SA*................................. 3,000 63,578 Boots Co. PLC............................... 14,500 210,278 British Airport Author PLC.................. 30,000 240,194 CompUSA, Inc.*.............................. 19,600 607,600 Dayton Hudson Corp. ........................ 10,300 695,250 Dickson Concepts International Ltd. ........ 31,000 45,206 Home Depot, Inc. ........................... 18,400 1,083,300 Kingfisher PLC.............................. 14,953 208,252 Kohl's Corp.*............................... 3,800 258,875 Kokuyo Co. Ltd. ............................ 3,000 51,685 Paris Miki, Inc. ........................... 800 8,576 Sato Corp. ................................. 1,300 22,098 Smith (W.H.) Group PLC...................... 3,000 19,240 Staples, Inc.*.............................. 9,000 249,750 Vendex International N.V. .................. 1,500 82,777 Wal Mart Stores, Inc. ...................... 42,200 1,664,262 ------------ 5,510,921 ------------ TOTAL CONSUMER CYCLICALS (6.2%)............. 15,139,685 ------------ CONSUMER NONCYCLICALS BEVERAGES (2.1%) Anheuser Busch, Inc. ....................... 8,400 369,600 Bass PLC.................................... 4,900 75,325 Coca-Cola Co. .............................. 40,600 2,704,975 Coca Cola Enterprises, Inc. ................ 1,600 56,900 Diageo PLC.................................. 11,000 100,898 Pepsico, Inc. .............................. 33,500 1,220,656 Scottish & Newcastle PLC.................... 19,500 235,550 Whitbread PLC............................... 18,500 268,438 ------------ 5,032,342 ------------ FSA-12 ================================================================================ SEPARATE ACCOUNT NO. 10 (POOLED) (THE ALLIANCE BALANCED FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Portfolio of Investments -- December 31, 1997 (Continued) - -------------------------------------------------------------------------------- NUMBER OF VALUE SHARES (NOTE 3) - -------------------------------------------------------------------------------- CONTAINERS (0.2%) Schmalbach Lubeca AG.................... 400 $ 66,704 Sealed Air Corp.*....................... 8,600 531,050 ------------ 597,754 ------------ DRUGS (3.5%) Astra AB (A Shares)..................... 6,000 104,000 Bristol-Myers Squibb Co. ............... 18,400 1,741,100 Daiichi Pharmaceutical Co. ............. 15,000 168,836 Genzyme Corporation*.................... 9,300 258,075 Lilly Eli & Co. ........................ 4,200 292,425 Merck KGAA.............................. 3,750 126,112 Merck & Co., Inc. ...................... 21,100 2,241,875 Novartis AG............................. 150 243,293 Orion-Yhtyma Oy (B Shares).............. 8,700 229,907 Pfizer, Inc. ........................... 23,840 1,777,570 Rohto Pharmaceutical Co. Ltd. .......... 3,000 19,296 Sankyo Co. Ltd. ........................ 1,000 22,588 Santen Pharmaceutical Co. Ltd. ......... 3,000 34,456 Schering Plough Corp. .................. 17,500 1,087,187 Taisho Pharmaceutical Co. .............. 1,000 25,498 Yamanouchi Pharmaceutical Co. Ltd. ..... 3,000 64,318 ------------ 8,436,536 ------------ FOODS (1.1%) Campbell Soup Co. ...................... 14,800 860,250 General Mills, Inc. .................... 2,000 143,250 Heinz (H.J.) Co. ....................... 2,500 127,031 Huhtamaki Oy Series I................... 2,200 90,840 Nabisco Holdings Corp. (Class A)........ 10,520 509,562 Orkla ASA 'A'........................... 1,890 162,732 Parmalat Finanziaria Spa................ 100,440 143,622 Tysons Foods, Inc. ..................... 27,000 553,500 Yakult Honsha Co. ...................... 1,000 5,253 ------------ 2,596,040 ------------ HOSPITAL SUPPLIES & SERVICES (1.5%) Abbott Laboratories..................... 10,700 701,519 Johnson & Johnson....................... 25,400 1,673,225 Medtronic, Inc. ........................ 16,400 857,925 PT Tempo Scan Pacific................... 40,000 3,091 United Healthcare Corp. ................ 8,400 417,375 ------------ 3,653,135 ------------ RETAIL -- FOOD (0.6%) Delhaize-Le Lion SA..................... 1,770 89,676 Familymart Co. ......................... 4,100 146,922 Kroger Co.*............................. 17,600 650,100 Promodes................................ 400 165,955 Seven-Eleven Japan Co. Ltd. ............ 1,000 70,750 Woolworths Ltd. ........................ 108,492 362,740 ------------ 1,486,143 ------------ FSA-13 ================================================================================ SEPARATE ACCOUNT NO. 10 (POOLED) (THE ALLIANCE BALANCED FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Portfolio of Investments -- December 31, 1997 (Continued) - -------------------------------------------------------------------------------- NUMBER OF VALUE SHARES NOTE 3) - -------------------------------------------------------------------------------- SOAPS & TOILETRIES (2.1%) Avon Products, Inc. ............................. 10,200 $ 626,025 Colgate Palmolive Co. ........................... 11,200 823,200 Estee Lauder Cos. (Class A)...................... 7,000 360,063 Gillette Corp. .................................. 12,700 1,275,556 Procter & Gamble Co. ............................ 24,300 1,939,444 ----------- 5,024,288 ----------- TOBACCO (0.9%) Imperial Tobacco Group PLC....................... 1,700 10,721 Japan Tobacco, Inc. ............................. 23 163,078 Philip Morris Cos., Inc. ........................ 43,330 1,963,391 Seita............................................ 3,000 107,668 Swedish Match AB................................. 5,500 18,373 Tabacalera SA-A.................................. 1,500 121,546 ----------- 2,384,777 ----------- TOTAL CONSUMER NONCYCLICALS (12.0%).............. 29,211,015 ----------- CREDIT-SENSITIVE BANKS (3.9%) Allied Irish Bank................................ 44,000 426,165 AMMB Holdings BHD................................ 14,000 9,179 AMMB Holdings BHD Rights-- Equity*............... 14,000 54 Banco Bilbao Vizcaya SA.......................... 6,000 194,080 Banc One Corp. .................................. 17,200 934,175 Banco Santander SA............................... 4,000 133,586 Bangkok Bank Public Ltd. ........................ 1,000 2,492 BankAmerica Corp. ............................... 1,800 131,400 Bank Dagang Nasional Indonesia Tbk............... 234,000 14,891 Bank of Tokyo-Mitsubishi Ltd. ................... 2,000 27,565 Banque National de Paris......................... 2,600 138,197 Barnett Banks, Inc. ............................. 9,600 690,000 BPI-SGPS SA*..................................... 1,200 29,177 Chase Manhattan Corp. ........................... 10,065 1,102,118 Citicorp......................................... 10,100 1,277,019 Corestates Financial Corp. ...................... 9,000 720,563 Credito Italiano Spa............................. 40,000 123,324 Dao Heng Bank Group Ltd. ........................ 5,000 12,485 Den Norske Bank ASA.............................. 40,000 188,746 Erste Bank Oesterreichischen Sparkassen AG*...... 1,120 55,700 First Union Corp. ............................... 17,500 896,875 Istituto Mobiliare Italiano...................... 12,000 142,428 Long-Term Credit Bank of Japan................... 44,000 70,413 Morgan (J.P.) & Co., Inc. ....................... 1,400 158,025 NationsBank Corp. ............................... 17,600 1,070,300 Philippine Commercial International Bank......... 1,000 2,840 Seventy-Seven Bank Ltd. ......................... 23,000 163,783 Shizuoka Bank Ltd. .............................. 1,000 10,720 Skandinaviska Enskilda Banken (Series A)......... 5,070 64,232 Societe Generale................................. 1,681 229,030 Sparbanken Sverige AB (A Shares)................. 3,000 68,262 FSA-14 ================================================================================ SEPARATE ACCOUNT NO. 10 (POOLED) (THE ALLIANCE BALANCED FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Portfolio of Investments -- December 31, 1997 (Continued) - -------------------------------------------------------------------------------- NUMBER OF VALUE SHARES (NOTE 3) - -------------------------------------------------------------------------------- BANKS (3.9%) (CONTINUED) State Bank of India (GDR)....................... 4,800 $ 87,360 Suncorp-Metway Ltd.*............................. 14,866 37,302 Thai Farmers Bank Public Co.-- Warrants*......... 750 79 Toho Bank ....................................... 1,000 3,982 Wing Hang Bank Ltd. ............................. 31,000 87,611 Yamaguchi Bank................................... 14,000 171,516 ----------- 9,475,674 ----------- FINANCIAL SERVICES (2.2%) Aiful Corp.*..................................... 500 33,882 Associates First Capital Corp. .................. 6,000 426,750 Credit Saison Co. ............................... 2,000 49,311 Fleet Financial Group, Inc. ..................... 10,700 801,831 Green Tree Financial Corp. ...................... 9,100 238,306 Household International, Inc. ................... 5,300 676,081 Legg Mason, Inc. ................................ 5,000 279,688 MBNA Corp. ...................................... 18,175 496,405 Merrill Lynch & Co., Inc. ....................... 9,400 685,613 Morgan Stanley, Dean Witter, Discover & Co. ..... 14,100 833,662 Newcourt Credit Group, Inc.*..................... 2,500 82,745 Nichiei Co. Ltd. ................................ 100 10,643 Peregrine Investment Holdings Ltd. .............. 90,000 63,879 PMI Group, Inc. ................................. 7,500 542,344 Sanyo Shinpan Finance Co. Ltd. .................. 200 8,836 Takefuji Corp. .................................. 800 36,692 Worms Et Compagnie............................... 300 22,182 ----------- 5,288,850 ----------- INSURANCE (3.1%) American International Group, Inc. .............. 14,100 1,533,375 AMEV N.V. ....................................... 5,300 231,055 ASR Verzekeringsgroep N.V. ...................... 1,500 81,593 Assurances Generales de France................... 7,650 405,348 Catalana Occidente SA............................ 1,000 50,915 Corporacion Mapfre Cia International SA.......... 1,600 42,411 General Accident PLC............................. 8,000 139,797 Hartford Financial Services Group, Inc. ......... 7,400 692,362 Hartford Life, Inc. ............................. 8,400 380,625 ING Groep N.V. .................................. 5,000 210,579 Irish Life PLC................................... 20,000 113,539 PennCorp Financial Group, Inc. .................. 14,500 517,469 QBE Insurance Group Ltd. ........................ 37,750 169,937 Royal & Sun Alliance Insurance Group PLC......... 18,700 187,343 SunAmerica, Inc. ................................ 11,200 478,800 Travelers Group, Inc. ........................... 24,700 1,330,713 Travelers Property Casualty Corp. (Class A)...... 12,300 541,200 Trygg Hansa AB (B Shares)........................ 6,800 209,160 United Assurance Group PLC....................... 14,900 129,085 Willis Corroon Group PLC (ADR)................... 900 11,081 Zurich Versicherungs............................. 385 183,383 ----------- 7,639,770 ----------- FSA-15 ================================================================================ SEPARATE ACCOUNT NO. 10 (POOLED) (THE ALLIANCE BALANCED FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Portfolio of Investments -- December 31, 1997 (Continued) - -------------------------------------------------------------------------------- NUMBER OF VALUE SHARES NOTE 3) - -------------------------------------------------------------------------------- MORTGAGE-RELATED (0.5%) Federal National Mortgage Association.............. 23,300 $1,329,556 ----------- REAL ESTATE (0.1%) City Development Ltd. ............................. 1,000 4,628 Daibiru Corp. ..................................... 1,000 7,312 Sumitomo Realty & Development Co. Ltd. ............ 2,000 11,485 Unibail SA......................................... 1,000 99,859 ----------- 123,284 ----------- UTILITY -- ELECTRIC (2.2%) AES Corp.*......................................... 13,400 624,775 Baltimore Gas & Electric Co. ...................... 10,200 347,438 Carolina Power & Light Co. ........................ 4,800 203,700 Central & South West Corp. ........................ 21,500 581,844 Cia Paranaense de Energia-Copel (ADR).............. 10,000 136,875 Cinergy Corp. ..................................... 6,900 264,356 CMS Energy Corp. .................................. 12,400 546,375 Consolidated Edison, Inc. ......................... 6,400 262,400 Duke Power Co. .................................... 6,200 343,325 Edison International............................... 8,500 231,094 Energy Group PLC................................... 5,000 55,388 FPL Group, Inc. ................................... 3,800 224,912 Hong Kong Electric Holdings Ltd. .................. 34,000 129,217 Houston Industries, Inc. .......................... 11,600 309,575 Malakoff BHD....................................... 16,000 33,320 Manila Electric Co. ............................... 3,900 12,904 National Grid Group PLC............................ 1,000 4,767 Powergen PLC (ADR)................................. 20,600 268,968 Texas Utilities Co. ............................... 15,400 640,063 Veba AG............................................ 2,500 170,233 ----------- 5,391,529 ----------- UTILITY -- GAS (0.3%) Anglian Water PLC.................................. 10,000 133,030 ENRON Corp. ....................................... 6,000 249,375 Scottish Power PLC................................. 44,000 387,693 ----------- 770,098 ----------- FSA-16 ================================================================================ SEPARATE ACCOUNT NO. 10 (POOLED) (THE ALLIANCE BALANCED FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Portfolio of Investments -- December 31, 1997 (Continued) - -------------------------------------------------------------------------------- NUMBER OF VALUE SHARES (NOTE 3) - -------------------------------------------------------------------------------- UTILITY -- TELEPHONE (1.3%) Ameritech Corp. ...................................... 5,900 $ 474,950 AT&T Corp. ........................................... 13,500 826,875 BellSouth Corp. ...................................... 11,300 636,331 British Telecommunications PLC........................ 20,000 157,583 Cable & Wireless PLC.................................. 20,800 182,590 Philippine Long Distance Telephone Co. ............... 1,800 39,111 Sprint Corp. ......................................... 500 29,313 Telecom Italia Spa.................................... 27,777 177,402 Telefonica de Espana.................................. 8,000 228,330 Telekom Malaysia BHD.................................. 28,500 84,265 Teleport Communications Group, Inc. (Class A)*........ 5,200 285,350 ------------ 3,122,100 ------------ TOTAL CREDIT-SENSITIVE (13.6%)........................ 33,140,861 ------------ ENERGY COAL & GAS PIPELINES (0.0%) BG PLC*............................................... 36,500 18,283 OMV AG................................................ 300 41,476 ------------ 59,759 ------------ OIL -- DOMESTIC (0.6%) Apache Corp. ......................................... 14,500 508,406 Union Pacific Resources Group, Inc. .................. 17,600 426,800 USX-Marathon Group.................................... 18,100 610,875 ------------ 1,546,081 ------------ OIL -- INTERNATIONAL (1.9%) British Petroleum Co. PLC............................. 15,000 197,205 Elf Aquitaine......................................... 1,000 116,308 Exxon Corp. .......................................... 35,100 2,147,681 Gulf Canada Resources Ltd.*........................... 37,800 264,600 Gulf Indonesia Resources Ltd.*........................ 5,100 112,200 Mobil Corp. .......................................... 10,900 786,844 Repsol SA............................................. 2,750 117,281 Shell Transport & Trading Co. PLC..................... 18,000 130,518 Texaco, Inc. ......................................... 10,400 565,500 Total SA-B............................................ 1,000 108,831 ------------ 4,546,968 ------------ OIL -- SUPPLIES & CONSTRUCTION (0.8%) BJ Services Co.*...................................... 4,600 330,912 Canadian Fracmaster Ltd.*............................. 14,300 120,080 Dresser Industries, Inc. ............................. 15,400 645,837 Fugro N.V.*........................................... 3,000 91,432 Halliburton Co. ...................................... 12,100 628,444 Nabors Industries, Inc.*.............................. 3,700 116,319 Noble Drilling Corp.*................................. 4,300 131,688 ------------ 2,064,712 ------------ FSA-17 ================================================================================ SEPARATE ACCOUNT NO. 10 (POOLED) (THE ALLIANCE BALANCED FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Portfolio of Investments -- December 31, 1997 (Continued) - ------------------------------------------------------------------------------- NUMBER OF VALUE SHARES NOTE 3) - ------------------------------------------------------------------------------- RAILROADS (0.1%) Union Pacific Corp. ........................... 200 $ 12,488 ----------- TOTAL ENERGY (3.4%)............................ 8,230,008 ----------- TECHNOLOGY ELECTRONICS (2.1%) Altera Corp.*.................................. 1,709 56,611 Applied Materials, Inc.*....................... 8,200 247,025 Cisco Systems, Inc.*........................... 28,150 1,569,362 Fujimi, Inc. .................................. 400 16,998 Hoya Corp. .................................... 1,000 31,394 Intel Corp. ................................... 27,786 1,951,966 Leitch Technology Corp.*....................... 1,000 30,090 Micronics Japan Co. Ltd. ...................... 2,200 37,902 National Semiconductor Corp.*.................. 7,900 204,906 Nikon Corp. ................................... 1,000 9,877 Rohm Co. Ltd. ................................. 1,000 101,838 Sankyo Engineering Co. ........................ 2,000 6,126 SMH AG......................................... 800 107,857 Solectron Corp.*............................... 6,700 278,469 TDK Corp. ..................................... 1,000 75,345 Tokyo Cathode Laboratory Co.* ................. 1,600 15,804 TOWA Corp. .................................... 100 2,075 Varitronix International Ltd. ................. 95,000 163,053 Xilinx, Inc.*.................................. 3,600 126,225 Yokogawa Electric Corp. ....................... 1,000 6,171 ----------- 5,039,094 ----------- OFFICE EQUIPMENT (1.1%) Barco N.V. .................................... 500 91,627 Canon, Inc. ................................... 1,000 23,277 Compaq Computer Corp. ......................... 13,575 766,139 Dell Computer Corp.* .......................... 3,900 327,600 Hewlett-Packard Co. ........................... 8,100 506,250 International Business Machines Corp. ......... 9,300 972,431 ----------- 2,687,324 ----------- OFFICE EQUIPMENT SERVICES (1.2%) Data Communication System Co. ................. 1,000 13,170 First Data Corp. .............................. 23,200 678,600 Fuji Soft ABC, Inc. ........................... 700 23,959 INES Corp. .................................... 1,000 7,734 Microsoft Corp.*............................... 16,325 2,110,006 Nippon System Development...................... 700 14,364 ----------- 2,847,833 ----------- FSA-18 ================================================================================ SEPARATE ACCOUNT NO. 10 (POOLED) (THE ALLIANCE BALANCED FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Portfolio of Investments -- December 31, 1997 (Continued) - -------------------------------------------------------------------------------- NUMBER OF VALUE SHARES (NOTE 3) - -------------------------------------------------------------------------------- TELECOMMUNICATIONS (2.4%) ACC Corp.* ......................................... 1,000 $ 50,500 ADC Telecommunications, Inc.* ...................... 5,900 246,325 Asia Satellite Telecommunications Holdings Ltd. .... 34,000 58,137 Cox Communications, Inc. (Class A)*................. 14,400 576,900 DDI Corp. .......................................... 40 105,666 DSC Communications Corp.* .......................... 7,600 182,400 Energis PLC*........................................ 27,500 114,718 Intermedia Communications, Inc.*.................... 61 3,706 Lucent Technologies, Inc. .......................... 14,600 1,166,175 MCI Communications Corp. ........................... 20,300 869,094 Northern Telecom Ltd. .............................. 8,900 792,100 Powertel, Inc.*..................................... 10,300 172,525 PT Indosat.......................................... 73,000 135,382 PT Telekomunikasi Indonesia......................... 60,000 31,909 SK Telecom Co. Ltd. (ADR)*.......................... 19,360 125,840 Tellabs, Inc.*...................................... 4,600 243,225 Videsh Sanchar Nigam Ltd. (GDR)*.................... 4,800 66,864 Vodafone Group PLC.................................. 20,000 145,676 WorldCom, Inc.*..................................... 27,210 823,103 ------------- 5,910,245 ------------- TOTAL TECHNOLOGY (6.8%)............................. 16,484,496 ------------- DIVERSIFIED MISCELLANEOUS (1.1%) BTR PLC............................................. 32,000 98,016 Cie Generale des Eaux............................... 1,583 220,939 Citic Pacific Ltd. ................................. 11,000 43,722 First Pacific Co. .................................. 75,289 36,435 Minnesota Mining & Manufacturing Co. ............... 2,100 172,331 Montedison Spa...................................... 150,000 134,713 Smith (Howard) Ltd. ................................ 8,000 66,426 Swire Pacific Ltd. (Class A)........................ 11,000 60,330 Tomkins PLC......................................... 14,000 65,300 Tyco International Ltd. ............................ 18,800 847,175 U.S. Industries, Inc. .............................. 19,050 573,881 Viad Corp. ......................................... 25,700 496,331 ------------- TOTAL DIVERSIFIED (1.1%)............................ 2,815,599 ------------- TOTAL COMMON STOCKS (51.2%) (Cost $108,824,778).............................. 124,460,867 ------------- PREFERRED STOCKS: BASIC MATERIALS CHEMICALS (0.1%) Henkel KGAA......................................... 2,500 156,337 ------------- TOTAL BASIC MATERIALS (0.1%)........................ 156,337 ------------- FSA-19 ================================================================================ SEPARATE ACCOUNT NO. 10 (POOLED) (THE ALLIANCE BALANCED FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Portfolio of Investments -- December 31, 1997 (Continued) - -------------------------------------------------------------------------------- NUMBER OF VALUE SHARES (NOTE 3) - -------------------------------------------------------------------------------- BUSINESS SERVICES ENVIRONMENTAL CONTROL (0.1%) Republic Industries, Inc. 6.5% Exch. Conv. .............................. 7,800 $ 183,300 ----------- PRINTING, PUBLISHING & BROADCASTING (0.0%) ProSieben Media AG*............................... 600 27,515 ----------- TRUCKING, SHIPPING (0.1%) CNF Trust I 5.0% Conv. Series A............................ 2,900 165,300 ----------- TOTAL BUSINESS SERVICES (0.2%).................... 376,115 ----------- CAPITAL GOODS AEROSPACE (0.1%) Loral Space & Communications 6.0% Conv. .................................... 5,800 356,700 ----------- TOTAL CAPITAL GOODS (0.1%)........................ 356,700 ----------- CONSUMER CYCLICALS AIRLINES (0.1%) Continental Airlines Finance Trust 8.5% Conv. .................................... 2,800 288,050 ----------- RETAIL -- GENERAL (0.0%) Hornbach Holding AG............................... 1,000 68,927 ----------- TOTAL CONSUMER CYCLICALS (0.1%)................... 356,977 ----------- CREDIT-SENSITIVE UTILITY -- ELECTRIC (0.1%) AES Trust $2.6875 Conv. Series A......................... 3,600 258,300 ----------- TOTAL CREDIT-SENSITIVE (0.1%)..................... 258,300 ----------- ENERGY OIL -- DOMESTIC (0.1%) Devon Financing Trust $3.25 Conv. ................................... 1,800 131,850 ----------- TOTAL ENERGY (0.1%)............................... 131,850 ----------- FSA-20 ================================================================================ SEPARATE ACCOUNT NO. 10 (POOLED) (THE ALLIANCE BALANCED FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Portfolio of Investments -- December 31, 1997 (Continued) - -------------------------------------------------------------------------------- NUMBER OF VALUE SHARES (NOTE 3) - -------------------------------------------------------------------------------- TECHNOLOGY TELECOMMUNICATIONS (0.6%) Intermedia Communications, Inc.: 7.0% Conv. .................................. 4,900 $ 200,900 7.0% Conv. Series D.......................... 2,600 106,600 Mobile Telecommunications 4.5% Conv. .................................. 3,600 120,600 Nextel Strypes Trust 7.25% Conv. ................................. 8,300 197,125 Nokia Oyj (A Shares)............................ 2,600 184,652 QualComm Financial Trust: 5.75% Conv. Series 144A...................... 5,500 257,469 5.75% Conv. ................................. 400 18,725 WorldCom, Inc. 8.0% Conv. .................................. 4,900 513,888 ----------- TOTAL TECHNOLOGY (0.6%)......................... 1,599,959 ----------- TOTAL PREFERRED STOCKS (1.3%) (Cost $2,677,383)............................ 3,236,238 ----------- PRINCIPAL AMOUNT ------ LONG-TERM DEBT SECURITIES: BUSINESS SERVICES PRINTING, PUBLISHING & BROADCASTING (1.9%) Turner Broadcasting System, Inc. 8.375%, 2013................................. $4,000,000 4,488,080 ----------- PROFESSIONAL SERVICES (0.1%) Career Horizons, Inc. 7.0% Conv., 2002............................. 120,000 249,600 Personnel Group of America 5.75% Conv., 2004............................ 75,000 85,125 ----------- 334,725 ----------- TOTAL BUSINESS SERVICES (2.0%).................. 4,822,805 ----------- CAPITAL GOODS AEROSPACE (0.1%) Orbital Sciences Corp. 5.0% Conv., 2002............................. 105,000 134,138 ----------- BUILDING & CONSTRUCTION (0.0%) Halter Marine Group, Inc. 4.5% Conv., 2004............................. 100,000 112,375 ----------- MACHINERY (0.1%) DII Group, Inc. 6.0% Conv., 2002............................. 155,000 236,956 ----------- TOTAL CAPITAL GOODS (0.2%)...................... 483,469 ----------- FSA-21 ================================================================================ SEPARATE ACCOUNT NO. 10 (POOLED) (THE ALLIANCE BALANCED FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Portfolio of Investments -- December 31, 1997 (Continued) - -------------------------------------------------------------------------------- PRINCIPAL VALUE AMOUNT (NOTE 3) - -------------------------------------------------------------------------------- CONSUMER CYCLICALS FOOD SERVICES, LODGING (0.2%) Cendant Corp. 4.75% Conv., 2003........................ $ 315,000 $ 423,675 ----------- RETAIL -- GENERAL (0.1%) U.S. Office Products Co. 5.5% Conv., 2001......................... 245,000 291,244 ----------- TOTAL CONSUMER CYCLICALS (0.3%)............. 714,919 ----------- CONSUMER NONCYCLICALS DRUGS (0.2%) MedImmune, Inc.: 7.0% Conv. Sub., 2003.................... 65,000 147,794 7.0% Conv., 2003......................... 100,000 227,375 Quintiles Transnational Corp. 4.25% Conv., 2000........................ 165,000 185,419 ----------- 560,588 ----------- HOSPITAL SUPPLIES & SERVICES (0.2%) FPA Medical Management, Inc. 6.5% Conv., 2001......................... 220,000 224,400 RES-Care, Inc. 6.0% Conv., 2004......................... 165,000 188,100 ----------- 412,500 ----------- TOTAL CONSUMER NONCYCLICALS (0.4%).......... 973,088 ----------- CREDIT-SENSITIVE BANKS (2.1%) St. George Bank Ltd. 7.15%, 2005.............................. 4,850,000 4,996,567 Sumitomo Bank International 0.75% Conv., 2001........................ Yen 26,000,000 208,538 ----------- 5,205,105 ----------- FINANCIAL SERVICES (1.8%) Corp. Andina de Fomento 7.25%, 2007.............................. $4,000,000 4,071,624 RAC Financial Group, Inc. 7.25% Conv., 2003........................ 125,000 301,250 ----------- 4,372,874 ----------- INSURANCE (2.3%) John Hancock Mutual Life Insurance Co. 7.375%, 2024............................. 5,000,000 5,245,950 Penn Treaty American Corp. 6.25% Conv., 2003........................ 175,000 225,531 ----------- 5,471,481 ----------- FSA-22 ================================================================================ SEPARATE ACCOUNT NO. 10 (POOLED) (THE ALLIANCE BALANCED FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Portfolio of Investments -- December 31, 1997 (Continued) - -------------------------------------------------------------------------------- PRINCIPAL VALUE AMOUNT (NOTE 3) - -------------------------------------------------------------------------------- MORTGAGE-RELATED (9.7%) Federal Home Loan Mortgage Corp. 7.0%, 2011.................................... $ 8,408,930 $ 8,537,697 Federal National Mortgage Association: 6.5%, 2011.................................... 8,586,766 8,592,133 7.0%, 2026.................................... 6,398,518 6,442,508 ------------ 23,572,338 ------------ U.S. GOVERNMENT (26.3%) U.S. Treasury: 6.125% Note, 1998............................. 4,000,000 4,013,752 6.375% Note, 1999............................. 6,200,000 6,256,191 6.0% Note, 2000............................... 6,800,000 6,848,878 6.25% Note, 2001.............................. 10,775,000 10,943,359 6.5% Note, 2001............................... 11,400,000 11,681,443 6.5% Note, 2002............................... 6,590,000 6,783,581 6.875% Note, 2006............................. 7,050,000 7,545,707 6.125% Bonds, 2027............................ 9,810,000 10,079,775 ------------ 64,152,686 ------------ TOTAL CREDIT-SENSITIVE (42.2%)................... 102,774,484 ------------ ENERGY COAL & GAS PIPELINES (0.1%) Nabors Industries, Inc. 5.0% Conv., 2006.............................. 170,000 307,700 ------------ OIL -- SUPPLIES & CONSTRUCTION (0.3%) Diamond Offshore Drilling, Inc. 3.75% Conv. Sub. Note, 2007................... 175,000 231,656 Parker Drilling Corp. 5.5% Conv. Sub. Note, 2004.................... 150,000 160,781 Seacor Holdings, Inc. 5.375% Conv., 2006............................ 140,000 158,550 ------------ 550,987 ------------ TOTAL ENERGY (0.4%).............................. 858,687 ------------ FSA-23 ================================================================================ SEPARATE ACCOUNT NO. 10 (POOLED) (THE ALLIANCE BALANCED FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Portfolio of Investments -- December 31, 1997 (Concluded) - -------------------------------------------------------------------------------- PRINCIPAL VALUE AMOUNT (NOTE 3) - -------------------------------------------------------------------------------- TECHNOLOGY ELECTRONICS (1.3%) Altera Corp. 5.75% Conv. Sub. Note, 2002............... $225,000 $ 308,813 Baan Co. 4.5% Conv. Sub. Note, 2001................ 175,000 268,188 Integrated Process Equipment Corp. 6.25% Conv., 2004......................... 325,000 269,344 Level One Communications, Inc. 4.0% Conv., 2004.......................... 225,000 211,500 Photronics, Inc. 6.0% Conv., 2004.......................... 285,000 326,681 Quantum Corp. 5.0% Conv., 2003.......................... 55,000 99,825 Sanmina Corp. 5.5% Conv., 2002.......................... 205,000 496,869 SCI Systems, Inc. 5.0% Conv., 2006.......................... 255,000 474,937 Solectron Corp. 6.0% Conv., 2006.......................... 165,000 226,256 Wind River Systems, Inc. 5.0% Conv., 2002.......................... 210,000 224,700 Xilinx, Inc. 5.25% Conv., 2002......................... 285,000 275,737 ------------- 3,182,850 ------------- TELECOMMUNICATIONS (0.1%) Comverse Technology, Inc.: 5.75% Conv. Sub. Note, 2006............... 265,000 285,538 5.75% Conv., 2006......................... 10,000 10,775 ------------- 296,313 ------------- TOTAL TECHNOLOGY (1.4%)...................... 3,479,163 ------------- TOTAL LONG-TERM DEBT SECURITIES (46.9%) (Amortized Cost $110,232,563)............. 114,106,615 ------------- PARTICIPATION IN SEPARATE ACCOUNT NO. 2A, at amortized cost, which approximates market value, equivalent to 38,544 units at $270.27 each (4.3%).................... 10,417,265 ------------- TOTAL INVESTMENTS (103.7%) (Cost/Amortized Cost $232,151,989)........ 252,220,985 OTHER ASSETS LESS LIABILITIES (-3.7%)........ ( 8,965,066) ------------- NET ASSETS (100.0%).......................... $243,255,919 ============ *Non-income producing. See Notes to Financial Statements. FSA-24 ================================================================================ SEPARATE ACCOUNT NO. 4 (POOLED) (THE ALLIANCE COMMON STOCK FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Statement of Assets and Liabilities December 31, 1997
- --------------------------------------------------------------------------------------------- ASSETS: Investments (Notes 2 and 3): Common stocks-- at market value (cost: $1,945,635,407)................... $2,635,013,465 Preferred stocks-- at market value (cost: $1,742,250).................... 2,777,625 Long-term debt securities-- at value (amortized cost: $3,016,327)........ 2,728,125 Participation in Separate Account No. 2A --at amortized cost, which approximates market value, equivalent to 100,276 units at $270.27...... 27,101,569 Cash ....................................................................... 64,818 Receivables: Securities sold.......................................................... 15,688,292 Dividends................................................................ 1,062,061 - --------------------------------------------------------------------------------------------- Total assets............................................................ 2,684,435,955 - --------------------------------------------------------------------------------------------- LIABILITIES: Payables: Securities purchased..................................................... 6,071,076 Due to Equitable Life's General Account.................................. 32,755,106 Investment management fees payable....................................... 7,455 Accrued expenses............................................................ 525,753 Amount retained by Equitable Life in Separate Account No. 4 (Note 1)........ 1,095,138 - --------------------------------------------------------------------------------------------- Total liabilities........................................................ 40,454,528 - --------------------------------------------------------------------------------------------- NET ASSETS (NOTE 1): Net assets attributable to participants' accumulations...................... 2,611,671,263 Reserves and other contract liabilities attributable to annuity benefits.... 32,310,164 - --------------------------------------------------------------------------------------------- NET ASSETS.................................................................. $2,643,981,427 =============================================================================================
See Notes to Financial Statements. FSA-25 ================================================================================ SEPARATE ACCOUNT NO. 4 (POOLED) (THE ALLIANCE COMMON STOCK FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Statements of Operations and Changes in Net Assets - ------------------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, - ------------------------------------------------------------------------------------------------------------- 1997 1996 - ------------------------------------------------------------------------------------------------------------- FROM OPERATIONS: INVESTMENT INCOME (NOTE 2): Dividends (net of foreign taxes withheld -- 1997: $2,138 and 1996: $62,998)................................... $ 13,385,197 $ 13,755,557 Interest............................................................. 845,517 292,364 - ------------------------------------------------------------------------------------------------------------- Total................................................................ 14,230,714 14,047,921 EXPENSES (NOTE 4).................................................... (19,783,932) (18,524,630) - ------------------------------------------------------------------------------------------------------------- NET INVESTMENT LOSS.................................................. (5,553,218) (4,476,709) - ------------------------------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 2): Realized gain from security and foreign currency transactions........ 372,430,956 218,176,662 - ------------------------------------------------------------------------------------------------------------- Unrealized appreciation (depreciation) of investments and foreign currency transactions: Beginning of year................................................. 448,580,808 290,870,386 End of year....................................................... 690,125,231 448,580,808 - ------------------------------------------------------------------------------------------------------------- Change in unrealized appreciation/depreciation....................... 241,544,423 157,710,422 - ------------------------------------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS...................... 613,975,379 375,887,084 - ------------------------------------------------------------------------------------------------------------- Increase in net assets attributable to operations.................... 608,422,161 371,410,375 - ------------------------------------------------------------------------------------------------------------- FROM CONTRIBUTIONS AND WITHDRAWALS: Contributions........................................................ 546,890,479 552,427,638 Withdrawals.......................................................... (969,496,108) (590,972,941) - ------------------------------------------------------------------------------------------------------------- Decrease in net assets attributable to contributions and withdrawals. (422,605,629) (38,545,303) - ------------------------------------------------------------------------------------------------------------- (Increase) Decrease in accumulated amount retained by Equitable Life in Separate Account No. 4 (Note 1)................................... (360,863) 536,145 - ------------------------------------------------------------------------------------------------------------- INCREASE IN NET ASSETS............................................... 185,455,669 333,401,217 NET ASSETS-- BEGINNING OF YEAR....................................... 2,458,525,758 2,125,124,541 ============================================================================================================= NET ASSETS-- END OF YEAR............................................. $2,643,981,427 $2,458,525,758 =============================================================================================================
See Notes to Financial Statements. FSA-26 ================================================================================ SEPARATE ACCOUNT NO. 4 (POOLED) (THE ALLIANCE COMMON STOCK FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Portfolio of Investments -- December 31, 1997 - -------------------------------------------------------------------------------- NUMBER OF VALUE SHARES (NOTE 3) - -------------------------------------------------------------------------------- COMMON STOCKS: BUSINESS SERVICES ENVIRONMENTAL CONTROL (0.6%) United States Filter Corp.*.................... 554,700 $ 16,606,331 ------------- PROFESSIONAL SERVICES (0.3%) Corrections Corp. of America*.................. 185,000 6,856,562 ------------- TRUCKING, SHIPPING (0.2%) Knightsbridge Tankers, Ltd. ................... 150,000 4,246,875 OMI Corp.*..................................... 264,000 2,425,500 ------------- 6,672,375 ------------- TOTAL BUSINESS SERVICES (1.1%)................. 30,135,268 ------------- CONSUMER CYCLICALS AIRLINES (9.0%) America West Holdings Corp. (Class B)*......... 542,200 10,098,475 Continental Airlines, Inc. (Class B)*.......... 2,600,000 125,125,000 KLM Dutch Airlines............................. 280,000 10,570,000 Northwest Airlines Corp. (Class A)*............ 1,900,000 90,962,500 Southwest Airlines Co. ........................ 50,000 1,231,250 ------------- 237,987,225 ------------- APPAREL, TEXTILE (0.2%) Tommy Hilfiger Corp.*.......................... 100,000 3,512,500 Wolverine World Wide, Inc. .................... 91,000 2,058,875 ------------- 5,571,375 ------------- AUTO-RELATED (6.3%) Republic Industries, Inc.*..................... 7,100,000 165,518,750 ------------- FOOD SERVICES, LODGING (1.9%) Extended Stay America, Inc.*................... 1,400,000 17,412,500 Host Marriott Corp.*........................... 1,675,000 32,871,875 Suburban Lodges of America, Inc.*.............. 70,000 931,875 ------------- 51,216,250 ------------- HOUSEHOLD FURNITURE, APPLIANCES (0.8%) Industrie Natuzzi Spa (ADR).................... 1,011,000 20,851,875 ------------- LEISURE-RELATED (1.3%) Cendant Corporation*........................... 1,000,000 34,375,000 ------------- RETAIL-GENERAL (0.8%) Circuit City Stores-- Circuit City Group....... 400,000 14,225,000 Limited, Inc. ................................. 300,000 7,650,000 ------------- 21,875,000 ------------- TOTAL CONSUMER CYCLICALS (20.3%)............... 537,395,475 ------------- FSA-27 ================================================================================ SEPARATE ACCOUNT NO. 4 (POOLED) (THE ALLIANCE COMMON STOCK FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Portfolio of Investments -- December 31, 1997 (Continued) - -------------------------------------------------------------------------------- NUMBER OF VALUE SHARES (NOTE 3) - -------------------------------------------------------------------------------- CONSUMER NONCYCLICALS DRUGS (3.6%) Centocor, Inc.*...................................... 1,230,700 $ 40,920,775 Geltex Pharmaceuticals, Inc.*........................ 700,000 18,550,000 Genzyme Corporation*................................. 100,000 2,775,000 IDEC Pharmaceuticals Corp.*.......................... 75,600 2,598,750 MedImmune, Inc.*..................................... 736,800 31,590,300 ------------ 96,434,825 ------------ FOODS (0.2%) Tysons Foods, Inc. .................................. 228,100 4,676,050 ------------ TOBACCO (4.4%) Loews Corp. ......................................... 1,100,000 116,737,500 ------------ TOTAL CONSUMER NONCYCLICALS (8.2%)................... 217,848,375 ------------ CREDIT-SENSITIVE BANKS (0.2%) Chase Manhattan Corp. ............................... 40,000 4,380,000 ------------ FINANCIAL SERVICES (15.0%) A.G. Edwards, Inc. .................................. 700,000 27,825,000 Green Tree Financial Corp. .......................... 54,200 1,419,362 Legg Mason, Inc. .................................... 1,200,031 67,126,734 MBNA Corp. .......................................... 4,800,000 131,100,000 Merrill Lynch & Co., Inc. ........................... 1,400,000 102,112,500 Morgan Stanley, Dean Witter, Discover & Co. ......... 1,000,000 59,125,000 PMI Group, Inc. ..................................... 100,000 7,231,250 ------------ 395,939,846 ------------ INSURANCE (13.1%) CNA Financial Corp.*................................. 1,700,000 217,175,000 IPC Holdings Ltd. ................................... 207,400 6,675,687 Life Re Corporation.................................. 721,000 47,000,188 NAC Re Corp. ........................................ 538,700 26,295,294 Travelers Group, Inc. ............................... 950,000 51,181,250 ------------ 348,327,419 ------------ REAL ESTATE (0.4%) Excel Realty Trust, Inc. ............................ 140,000 4,410,000 Imperial Credit Commercial Mortgage Investment Corp. 25,000 365,625 Imperial Credit Mortgage Holdings.................... 187,500 3,351,562 Novastar Financial, Inc. ............................ 75,000 1,185,938 ------------ 9,313,125 ------------ UTILITY -- TELEPHONE (8.7%) Telebras Sponsored (ADR)............................. 250,000 29,109,375 Telephone & Data Systems, Inc. ...................... 4,000,000 186,250,000 Teleport Communications Group, Inc. (Class A)*....... 300,000 16,462,500 ------------ 231,821,875 ------------ TOTAL CREDIT-SENSITIVE (37.4%)....................... 989,782,265 ------------ FSA-28 ================================================================================ SEPARATE ACCOUNT NO. 4 (POOLED) (THE ALLIANCE COMMON STOCK FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Portfolio of Investments -- December 31, 1997 (Continued) - -------------------------------------------------------------------------------- NUMBER OF VALUE SHARES (NOTE 3) - -------------------------------------------------------------------------------- ENERGY OIL -- DOMESTIC (0.0%) Apache Corp. ................................... 15,000 $ 525,93 ------------ OIL -- INTERNATIONAL (0.3%) Gulf Canada Resources Ltd.*..................... 750,000 5,250,000 IRI International Corporation*.................. 150,000 2,100,000 Petroleo Brasileiro S.A. (ADR).................. 50,000 1,169,330 ------------ 8,519,330 ------------ OIL -- SUPPLIES & CONSTRUCTION (15.3%) Baker Hughes, Inc. ............................. 555,000 24,211,875 BJ Services Co.*................................ 15,000 1,079,063 Diamond Offshore Drilling, Inc. ................ 860,000 41,387,500 Dresser Industries, Inc. ....................... 170,000 7,129,375 Halliburton Co. ................................ 1,400,000 72,712,500 Lukoil Holdings-- Spons (ADR)................... 15,000 1,377,375 Lukoil Holdings-- Spons (ADR) (Pref. Shares).... 40,000 1,241,576 Nabors Industries, Inc.*........................ 435,000 13,675,312 Noble Drilling Corp.*........................... 1,300,000 39,812,500 Oceaneering International, Inc.* ............... 300,000 5,925,000 Parker Drilling Corp.*.......................... 5,500,000 67,031,250 Rowan Cos., Inc.*............................... 3,500,000 106,750,000 Schlumberger, Ltd. ............................. 270,000 21,735,000 ------------ 404,068,326 ------------ TOTAL ENERGY (15.6%)............................ 413,113,594 ------------ TECHNOLOGY ELECTRONICS (2.7%) Altera Corp.*................................... 100,000 3,312,500 DBT Online, Inc.*............................... 160,000 3,990,000 Networks Associates, Inc.*...................... 400,000 21,150,000 Sterling Commerce, Inc.*........................ 650,000 24,984,375 Teradyne, Inc.*................................. 290,000 9,280,000 U.S. Satellite Broadcasting Co., Inc.*.......... 40,000 317,500 Xilinx, Inc.*................................... 250,000 8,765,625 ------------ 71,800,000 ------------ OFFICE EQUIPMENT SERVICES (0.1%) CheckFree Holdings Corp.*....................... 100,000 2,700,000 ------------ FSA-29 ================================================================================ SEPARATE ACCOUNT NO. 4 (POOLED) (THE ALLIANCE COMMON STOCK FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Portfolio of Investments -- December 31, 1997 (Continued) - -------------------------------------------------------------------------------- NUMBER OF VALUE SHARES (NOTE 3) - -------------------------------------------------------------------------------- TELECOMMUNICATIONS (14.1%) ADC Telecommunications, Inc.*.................... 860,000 $ 35,905,000 American Satellite Network-- Rights*............. 70,000 0 Bell Canada International, Inc.*................. 25,000 381,250 Core Communications, Inc.*....................... 504,000 5,103,000 DSC Communications Corp.*........................ 450,000 10,800,000 MCI Communications Corp. ........................ 300,000 12,843,750 Millicom International Cellular S.A.*............ 1,515,000 57,001,875 Nextel Communications, Inc. (Class A)*........... 485,000 12,610,000 Nokia Corp.-- Sponsored (A Shares) (ADR)......... 260,000 18,200,000 Powertel, Inc.*.................................. 73,300 1,227,775 Tellabs, Inc.*................................... 100,000 5,287,500 United States Cellular Corp.*.................... 2,915,400 90,377,400 Vanguard Cellular Systems, Inc. (Class A)*....... 2,200,000 28,050,000 WorldCom, Inc.*.................................. 3,100,000 93,775,000 -------------- 371,562,550 -------------- TOTAL TECHNOLOGY (16.9%)......................... 446,062,550 -------------- DIVERSIFIED MISCELLANEOUS (0.2%) Viad Corp. ...................................... 35,000 675,938 -------------- TOTAL DIVERSIFIED (0.2%)......................... 675,938 -------------- TOTAL COMMON STOCKS (99.7%) (Cost $1,945,635,407)......................... 2,635,013,465 -------------- PREFERRED STOCKS: CONSUMER CYCLICALS AIRLINES (0.1%) Continental Airlines Financial Trust 8.5% Conv. ................................... 27,000 2,777,625 -------------- TOTAL CONSUMER CYCLICALS (0.1%).................. 2,777,625 -------------- TOTAL PREFERRED STOCKS (0.1%) (Cost $1,742,250)............................. 2,777,625 -------------- FSA-30 ================================================================================ SEPARATE ACCOUNT NO. 4 (POOLED) (THE ALLIANCE COMMON STOCK FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Portfolio of Investments -- December 31, 1997 (Concluded) - -------------------------------------------------------------------------------- PRINCIPAL VALUE AMOUNT (NOTE 3) - -------------------------------------------------------------------------------- LONG-TERM DEBT SECURITIES: TECHNOLOGY TELECOMMUNICATIONS (0.1%) United States Cellular Corp. Zero Coupon Conv., 2015..........................$7,500,000 $ 2,728,125 --------------- TOTAL TECHNOLOGY (0.1%)............................. 2,728,125 --------------- TOTAL LONG-TERM DEBT SECURITIES (0.1%) (Amortized Cost $3,016,327)...................... 2,728,125 --------------- PARTICIPATION IN SEPARATE ACCOUNT NO. 2A, at amortized cost, which approximates market value, equivalent to 100,276 units at $270.27 each (1.0%)..................... 27,101,569 --------------- TOTAL INVESTMENTS(100.9%) (Cost/Amortized Cost $1,977,495,553)............. 2,667,620,784 OTHER ASSETS LESS LIABILITIES (-0.9)............... (22,544,219) AMOUNT RETAINED BY EQUITABLE LIFE IN SEPARATE ACCOUNT NO. 4 (0.0%) (NOTE 1)........... (1,095,138) --------------- NET ASSETS (100.0%)................................. $2,643,981,427 =============== Reserves attributable to participants' accumulations $2,611,671,263 Reserves and other contract liabilities attributable to annuity benefits.............................. 32,310,164 --------------- NET ASSETS.......................................... $2,643,981,427 =============== *Non-income producing. See Notes to Financial Statements. FSA-31 ================================================================================ SEPARATE ACCOUNT NO. 3 (POOLED) (THE ALLIANCE AGGRESSIVE STOCK FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Statement of Assets and Liabilities December 31, 1997
- ---------------------------------------------------------------------------------------- ASSETS: Investments (Notes 2 and 3): Common stocks-- at market value (cost: $397,187,129)................. $412,280,763 Participation in Separate Account No. 2A--at amortized cost, which approximates market value, equivalent to 4 units at $270.27........ 1,200 Receivables: Securities sold...................................................... 46,819,407 Dividends............................................................ 94,222 - ---------------------------------------------------------------------------------------- Total assets......................................................... 459,195,592 - ---------------------------------------------------------------------------------------- LIABILITIES: Payables: Custodian payable.................................................... 345,277 Securities purchased................................................. 16,516,437 Due to Equitable Life's General Account.............................. 24,007,857 Investment management fees payable................................... 3,333 Accrued expenses........................................................ 159,701 - ---------------------------------------------------------------------------------------- Total liabilities.................................................... 41,032,605 ======================================================================================== NET ASSETS.............................................................. $418,162,987 ========================================================================================
See Notes to Financial Statements. FSA-32 ================================================================================ SEPARATE ACCOUNT NO. 3 (POOLED) (THE ALLIANCE AGGRESSIVE STOCK FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Statements of Operations and Changes in Net Assets
- -------------------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, - -------------------------------------------------------------------------------------------------------------- 1997 1996 - -------------------------------------------------------------------------------------------------------------- FROM OPERATIONS: INVESTMENT INCOME (NOTE 2): Dividends.............................................................. $ 1,728,486 $ 888,868 Interest............................................................... 456,291 1,847,954 - -------------------------------------------------------------------------------------------------------------- Total.................................................................. 2,184,777 2,736,822 EXPENSES (NOTE 4)...................................................... (5,757,006) (5,268,842) - -------------------------------------------------------------------------------------------------------------- NET INVESTMENT LOSS.................................................... (3,572,229) (2,532,020) - -------------------------------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 2): Realized gain from security and foreign currency transactions.......... 93,937,473 83,136,492 - -------------------------------------------------------------------------------------------------------------- Unrealized appreciation (depreciation) of investments: Beginning of year................................................... 56,470,533 62,843,978 End of year......................................................... 15,093,634 56,470,533 - -------------------------------------------------------------------------------------------------------------- Change in unrealized appreciation/depreciation......................... (41,376,899) (6,373,445) - -------------------------------------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS........................ 52,560,574 76,763,047 - -------------------------------------------------------------------------------------------------------------- Increase in net assets attributable to operations...................... 48,988,345 74,231,027 - -------------------------------------------------------------------------------------------------------------- FROM CONTRIBUTIONS AND WITHDRAWALS: Contributions.......................................................... 229,831,666 226,778,696 Withdrawals............................................................ (304,183,884) (199,186,117) - -------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets attributable to contributions and (74,352,218) 27,592,579 withdrawals............................................................ - -------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS...................................... (25,363,873) 101,823,606 NET ASSETS-- BEGINNING OF YEAR......................................... 443,526,860 341,703,254 - -------------------------------------------------------------------------------------------------------------- NET ASSETS-- END OF YEAR............................................... $418,162,987 $443,526,860 ==============================================================================================================
See Notes to Financial Statements. FSA-33 ================================================================================ SEPARATE ACCOUNT NO. 3 (POOLED) (THE ALLIANCE AGGRESSIVE STOCK FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Portfolio of Investments -- December 31, 1997 - -------------------------------------------------------------------------------- NUMBER OF VALUE SHARES (NOTE 3) - -------------------------------------------------------------------------------- COMMON STOCKS: BASIC MATERIALS CHEMICALS -- SPECIALTY (6.0%) Crompton & Knowles Corp. ...................... 494,300 $ 13,098,950 Cytec Industries, Inc.*........................ 251,100 11,786,006 -------------- 24,884,956 -------------- STEEL (1.4%) Ispat International N.V.*...................... 285,400 6,171,775 -------------- TOTAL BASIC MATERIALS (7.4%)................... 31,056,731 -------------- BUSINESS SERVICES ENVIRONMENTAL CONTROL (8.4%) Culligan Water Technologies, Inc.*............. 59,800 3,004,950 Philip Services Corp.*......................... 264,900 3,807,937 United States Filter Corp.*.................... 648,900 19,426,444 USA Waste Services, Inc.*...................... 229,500 9,007,875 -------------- 35,247,206 -------------- PRINTING, PUBLISHING & BROADCASTING (3.7%) Sinclair Broadcast Group....................... 207,600 9,679,350 Young Broadcasting Corp. (Class A)*............ 145,300 5,630,375 -------------- 15,309,725 -------------- PROFESSIONAL SERVICES (4.7%) Cambridge Technology Partners, Inc.*........... 37,400 1,556,775 Century Business Services, Inc.*............... 292,000 5,037,000 Consolidation Capital Corp.*................... 435,600 8,848,125 CORESTAFF, Inc.*............................... 152,500 4,041,250 -------------- 19,483,150 -------------- TRUCKING, SHIPPING (1.8%) OMI Corp.*..................................... 824,800 7,577,850 -------------- TOTAL BUSINESS SERVICES (18.6%)................ 77,617,931 -------------- CAPITAL GOODS AEROSPACE (1.3%) Howmet International, Inc.*.................... 363,900 5,435,756 -------------- TOTAL CAPITAL GOODS (1.3%)..................... 5,435,756 -------------- CONSUMER CYCLICALS AIRLINES (1.5%) Continental Airlines, Inc. (Class B)*.......... 125,000 6,015,625 -------------- APPAREL, TEXTILE (4.4%) Tommy Hilfiger Corp.*.......................... 136,200 4,784,025 Mohawk Industries, Inc.*....................... 187,100 4,104,506 Nautica Enterprises, Inc.*..................... 244,300 5,679,975 Unifi, Inc. ................................... 93,300 3,796,144 -------------- 18,364,650 -------------- FSA-34 ================================================================================ SEPARATE ACCOUNT NO. 3 (POOLED) (THE ALLIANCE AGGRESSIVE STOCK FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Portfolio of Investments -- December 31, 1997 (Continued) - -------------------------------------------------------------------------------- NUMBER OF VALUE SHARES (NOTE 3) - -------------------------------------------------------------------------------- AUTOS & TRUCKS (2.4%) Miller Industries, Inc.*........................... 941,300 $ 10,118,975 ------------- AUTO-RELATED (10.4%) Budget Group, Inc.*................................ 252,600 8,730,488 Circuit City Stores, Inc.-- CarMax Group*.......... 362,700 3,264,300 Dollar Thrifty Automotive Group, Inc.*............. 196,800 4,034,400 Republic Industries, Inc.*......................... 968,800 22,585,150 United Rentals, Inc.*.............................. 37,000 714,562 US Rentals, Inc.*.................................. 182,800 4,295,800 ------------- 43,624,700 ------------- FOOD SERVICES, LODGING (7.6%) Extended Stay America, Inc.*....................... 342,300 4,257,356 Florida Panthers Holdings, Inc.*................... 201,500 3,475,875 Host Marriott Corp.*............................... 279,800 5,491,075 ITT Corporation*................................... 222,200 18,414,825 ------------- 31,639,131 ------------- HOUSEHOLD FURNITURE, APPLIANCES (1.7%) Furniture Brands International, Inc.*.............. 166,000 3,403,000 Industrie Natuzzi Spa (ADR)........................ 180,000 3,712,500 ------------- 7,115,500 ------------- LEISURE-RELATED (6.3%) Coach USA, Inc.*................................... 166,000 5,561,000 MGM Grand, Inc.*................................... 90,300 3,256,444 Promus Hotel Corp.*................................ 291,900 12,259,800 Regal Cinemas, Inc.*............................... 190,900 5,321,338 ------------- 26,398,582 ------------- TOTAL CONSUMER CYCLICALS (34.3%)................... 143,277,163 ------------- CONSUMER NONCYCLICALS DRUGS (6.5%) Centocor, Inc.*.................................... 392,000 13,034,000 Genzyme Corporation*............................... 186,300 5,169,825 Jones Medical Industries, Inc. .................... 152,000 5,814,000 MedImmune, Inc.*................................... 77,700 3,331,388 ------------- 27,349,213 ------------- HOSPITAL SUPPLIES & SERVICES (0.9%) Dentsply International, Inc. ...................... 114,700 3,498,350 ------------- TOTAL CONSUMER NONCYCLICALS (7.4%)................. 30,847,563 ------------- CREDIT-SENSITIVE BANKS (4.0%) Astoria Financial Corp. ........................... 65,400 3,646,050 Dime Bancorp, Inc. ................................ 102,600 3,103,650 Friedman, Billings, Ramsey Group, Inc. (Class A)*.. 198,100 3,553,419 Mercantile Bankshares Corp. ....................... 92,300 3,611,237 Staten Island Bancorp, Inc.*....................... 146,800 3,073,625 ------------- 16,987,981 ------------- FSA-35 ================================================================================ SEPARATE ACCOUNT NO. 3 (POOLED) (THE ALLIANCE AGGRESSIVE STOCK FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Portfolio of Investments -- December 31, 1997 (Continued) - -------------------------------------------------------------------------------- NUMBER OF VALUE SHARES (NOTE 3) - -------------------------------------------------------------------------------- FINANCIAL SERVICES (3.1%) Imperial Credit Industries, Inc.*.................... 449,200 $ 9,208,600 Paine Webber, Inc. .................................. 104,400 3,608,325 ------------ 12,816,925 ------------ INSURANCE (1.0%) AFLAC, Inc. ......................................... 84,900 4,340,513 ------------ MORTGAGE-RELATED (0.8%) Resource America, Inc. .............................. 68,800 3,147,600 ------------ REAL ESTATE (1.5%) Imperial Credit Commercial Mortgage Investment Corp. 423,200 6,189,300 ------------ UTILITY -- TELEPHONE (1.0%) Telephone & Data Systems, Inc. ...................... 91,300 4,251,156 ------------ TOTAL CREDIT-SENSITIVE (11.4%)....................... 47,733,475 ------------ ENERGY OIL -- INTERNATIONAL (1.0%) Gulf Canada Resources, Ltd.*......................... 573,900 4,017,300 ------------ OIL -- SUPPLIES & CONSTRUCTION (3.7%) BJ Services Co.*..................................... 55,800 4,014,112 Diamond Offshore Drilling, Inc. ..................... 102,600 4,937,625 Nabors Industries, Inc.*............................. 72,200 2,269,788 Rowan Cos., Inc.*.................................... 132,900 4,053,450 ------------ 15,274,975 ------------ RAILROADS (0.7%) Wisconsin Central Transport Corp.*................... 139,300 3,256,138 ------------ TOTAL ENERGY (5.4%).................................. 22,548,413 ------------ TECHNOLOGY ELECTRONICS (8.8%) Altera Corp.*........................................ 105,400 3,491,375 Atmel Corp.*......................................... 116,500 2,162,531 Flextronics International, Ltd.*..................... 87,500 3,018,750 Hadco Corp. ......................................... 69,000 3,122,250 KLA-Tencor Corp.*.................................... 43,800 1,691,775 Lycos, Inc.*......................................... 62,100 2,569,388 Networks Associates, Inc.*........................... 142,900 7,555,837 Parametric Technology Corp.*......................... 69,700 3,302,037 Sterling Commerce, Inc.*............................. 153,900 5,915,531 Xilinx, Inc.*........................................ 111,900 3,923,494 ------------ 36,752,968 ------------ OFFICE EQUIPMENT SERVICES (1.4%) Comverse Technology, Inc.*........................... 154,100 6,009,900 ------------ FSA-36 ================================================================================ SEPARATE ACCOUNT NO. 3 (POOLED) (THE ALLIANCE AGGRESSIVE STOCK FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Portfolio of Investments -- December 31, 1997 (Concluded) - -------------------------------------------------------------------------------- NUMBER OF VALUE SHARES (NOTE 3) - -------------------------------------------------------------------------------- TELECOMMUNICATIONS (2.6%) ADC Telecommunications, Inc.*..................... 69,900 $ 2,918,325 American Satellite Network-- Rights*.............. 9,550 0 Metromedia International Group, Inc.*............. 418,700 3,977,650 Millicom International Cellular S.A.*............. 109,100 4,104,888 ------------- 11,000,863 ------------- TOTAL TECHNOLOGY (12.8%).......................... 53,763,731 ------------- TOTAL COMMON STOCKS (98.6%) (Cost $397,187,129) ........................... 412,280,763 ------------- PARTICIPATION IN SEPARATE ACCOUNT NO. 2A, at amortized cost, which approximates market value, equivalent to 4 units at $270.27 each (0.0%)......................... 1,200 ------------- TOTAL INVESTMENTS (98.6%) (Cost/Amortized Cost $397,188,329)............. 412,281,963 OTHER ASSETS LESS LIABILITIES (1.4%).............. 5,881,024 ------------- NET ASSETS (100.0%)............................... $418,162,987 ============= *Non-income producing. See Notes to Financial Statements. FSA-37 Report of Independent Accountants - -------------------------------------------------------------------------------- To the Board of Directors of The Equitable Life Assurance Society of the United States and the Contractowners of Separate Account No. 51 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 changes in net assets and the selected per unit data (included under Condensed Financial Information in the Prospectus of the Retirement Investment Account) present fairly, in all material respects, the financial position of the Alliance Money Market Fund, Alliance Intermediate Government Securities Fund, Alliance Quality Bond Fund, Alliance High Yield Fund, Alliance Growth & Income Fund, Alliance Equity Index Fund, Alliance Global Fund, Alliance International Fund, Alliance Small Cap Growth Fund, Alliance Conservative Investors Fund and Alliance Growth Investors Fund, separate investment funds of The Equitable Life Assurance Society of the United States ("Equitable Life") Separate Account No. 51 at December 31, 1997 and the results of each of their operations, the changes in each of their net assets for the periods indicated and the per unit data for the periods presented, in conformity with generally accepted accounting principles. These financial statements and the selected per unit data (hereafter referred to as "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 at December 31, 1997 with the transfer agent, provide a reasonable basis for the opinion expressed above. Price Waterhouse LLP New York, New York February 10, 1998 FSA-38 ================================================================================ SEPARATE ACCOUNT NO. 51 (POOLED) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Statements of Assets and Liabilities December 31, 1997
- ------------------------------------------------------------------------------------------------------------------- ALLIANCE INTERMEDIATE ALLIANCE GOVERNMENT ALLIANCE ALLIANCE MONEY MARKET SECURITIES QUALITY BOND HIGH YIELD FUND FUND FUND FUND - ------------------------------------------------------------------------------------------------------------------- ASSETS: Investments in shares of The Hudson River Trust, at value (Cost: Alliance Money Market Portfolio -- $14,643,705; Alliance Intermediate Government Securities Portfolio -- $3,012,183; Alliance Quality Bond Portfolio -- $3,514,218; Alliance High Yield Portfolio-- $6,923,928) (Note 3). $14,532,599 $3,024,095 $3,576,119 $6,971,154 Receivable for The Hudson River Trust shares sold......... -- 5,983 15,708 15,316 Due from Equitable Life's General Account................. 150,482 -- -- -- - ------------------------------------------------------------------------------------------------------------------- Total assets.......................................... 14,683,081 3,030,078 3,591,827 6,986,470 - ------------------------------------------------------------------------------------------------------------------- LIABILITIES: Payable for The Hudson River Trust shares purchased....... 147,390 -- -- -- Due to Equitable Life's General Account................... -- 4,643 13,587 11,439 Accrued expenses.......................................... 3,092 1,340 2,123 3,877 - ------------------------------------------------------------------------------------------------------------------- Total liabilities..................................... 150,482 5,983 15,710 15,316 - ------------------------------------------------------------------------------------------------------------------- NET ASSETS................................................ $14,532,599 $3,024,095 $3,576,117 $6,971,154 ===================================================================================================================
See Notes to Financial Statements. FSA-39 ================================================================================ SEPARATE ACCOUNT NO. 51 (POOLED) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Statements of Assets and Liabilities (Continued) December 31, 1997
- -------------------------------------------------------------------------------------------------------------------------- ALLIANCE ALLIANCE ALLIANCE ALLIANCE GROWTH & INCOME EQUITY INDEX GLOBAL INTERNATIONAL FUND FUND FUND FUND - -------------------------------------------------------------------------------------------------------------------------- ASSETS: Investments in shares of The Hudson River Trust, at value (Cost: Alliance Growth & Income Portfolio -- $18,775,102; Alliance Equity Index Portfolio -- $26,737,558; Alliance Global Portfolio -- $42,992,687; Alliance International Portfolio-- $5,047,802) (Note 3)... $20,789,405 $32,158,268 $45,811,460 $4,511,030 Receivable for The Hudson River Trust shares sold.............. 396,942 231,453 1,036,088 172,208 - -------------------------------------------------------------------------------------------------------------------------- Total assets............................................... 21,186,347 32,389,721 46,847,548 4,683,238 - -------------------------------------------------------------------------------------------------------------------------- LIABILITIES: Due to Equitable Life's General Account........................ 387,153 217,819 1,018,843 169,303 Accrued expenses............................................... 9,789 13,634 20,778 2,905 - -------------------------------------------------------------------------------------------------------------------------- Total liabilities.......................................... 396,942 231,453 1,039,621 172,208 - -------------------------------------------------------------------------------------------------------------------------- NET ASSETS..................................................... $20,789,405 $32,158,268 $45,807,927 $4,511,030 ==========================================================================================================================
See Notes to Financial Statements. FSA-40 ================================================================================ SEPARATE ACCOUNT NO. 51 (POOLED) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Statements of Assets and Liabilities (Concluded) December 31, 1997
- ----------------------------------------------------------------------------------------------------------------- ALLIANCE ALLIANCE ALLIANCE SMALL CAP CONSERVATIVE GROWTH GROWTH INVESTORS INVESTORS FUND FUND FUND - ---------------------------------------------------------------------------------------------------------------- ASSETS: Investments in shares of The Hudson River Trust, at value (Cost: Alliance Small Cap Growth Portfolio -- $2,372,476; Alliance Conservative Investors Portfolio -- $11,011,168; Alliance Growth Investors Portfolio-- $54,535,579) (Note 3)... $2,282,863 $11,457,159 $57,895,040 Receivable for The Hudson River Trust shares sold.................. -- 48,647 432,588 Due from Equitable Life's General Account.......................... 12,786 -- -- - ---------------------------------------------------------------------------------------------------------------- Total assets................................................... 2,295,649 11,505,806 58,327,628 - ---------------------------------------------------------------------------------------------------------------- LIABILITIES: Payable for The Hudson River Trust shares purchased................ 11,218 -- -- Due to Equitable Life's General Account............................ -- 47,280 410,786 Accrued expenses................................................... 1,568 5,723 23,602 - ---------------------------------------------------------------------------------------------------------------- Total liabilities.............................................. 12,786 53,003 434,388 - ---------------------------------------------------------------------------------------------------------------- NET ASSETS......................................................... $2,282,863 $11,452,803 $57,893,240 ================================================================================================================
See Notes to Financial Statements. FSA-41 ================================================================================ SEPARATE ACCOUNT NO. 51 (POOLED) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Statements of Operations and Changes in Net Assets
- -------------------------------------------------------------------------------------------------------------- ALLIANCE INTERMEDIATE ALLIANCE GOVERNMENT MONEY MARKET FUND SECURITIES FUND ----------------------------- ----------------------- YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, 1997 1996 1997 1996 - -------------------------------------------------------------------------------------------------------------- FROM OPERATIONS: INVESTMENT INCOME (NOTE 2) -- Dividends from The Hudson River Trust ........................... $ 372,708 $ 149,324 $ 161,727 $ 76,943 EXPENSES (NOTE 4).................................... (39,743) (33,161) (25,703) (10,615) - -------------------------------------------------------------------------------------------------------------- NET INVESTMENT INCOME................................ 332,965 116,163 136,024 66,328 - -------------------------------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 2): Realized gain from share transactions................ 13,278 4,681 13,927 10,495 Realized gain distribution from The Hudson River Trust............................................. 964 -- -- -- - -------------------------------------------------------------------------------------------------------------- Net Realized Gain ................................... 14,242 4,681 13,927 10,495 - -------------------------------------------------------------------------------------------------------------- Unrealized appreciation (depreciation) of investments: Beginning of year................................. (17,360) (6,582) (20,279) 18,629 End of year ...................................... (111,106) (17,360) 11,912 (20,279) - -------------------------------------------------------------------------------------------------------------- Change in unrealized appreciation/depreciation....... (93,746) (10,778) 32,191 (38,908) - -------------------------------------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS.................................... (79,504) (6,097) 46,118 (28,413) - -------------------------------------------------------------------------------------------------------------- Increase in net assets attributable to operations.... 253,461 110,066 182,142 37,915 - -------------------------------------------------------------------------------------------------------------- FROM CONTRIBUTIONS AND WITHDRAWALS: Contributions........................................ 19,472,948 8,894,077 2,503,359 1,778,541 Withdrawals.......................................... (8,813,256) (7,511,342) (1,924,964) (224,631) - -------------------------------------------------------------------------------------------------------------- Increase in net assets attributable to contributions and withdrawals................................... 10,659,692 1,382,735 578,395 1,553,910 - -------------------------------------------------------------------------------------------------------------- INCREASE IN NET ASSETS............................... 10,913,153 1,492,801 760,537 1,591,825 NET ASSETS-- BEGINNING OF YEAR....................... 3,619,446 2,126,645 2,263,558 671,733 - -------------------------------------------------------------------------------------------------------------- NET ASSETS-- END OF YEAR............................. $14,532,599 $3,619,446 $3,024,095 $2,263,558 ==============================================================================================================
See Notes to Financial Statements. FSA-42 ================================================================================ SEPARATE ACCOUNT NO. 51 (POOLED) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Statements of Operations and Changes in Net Assets (Continued)
- ------------------------------------------------------------------------------------------------------------ ALLIANCE ALLIANCE QUALITY BOND FUND HIGH YIELD FUND -------------------------- ----------------------- YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, 1997 1996 1997 1996 - ------------------------------------------------------------------------------------------------------------ FROM OPERATIONS: INVESTMENT INCOME (NOTE 2) -- Dividends from The Hudson River Trust............................ $ 180,536 $ 112,200 $ 562,742 $ 257,366 EXPENSES (NOTE 4).................................... (22,848) (12,935) (50,152) (17,433) - ----------------------------------------------------------------------------------------------------------- NET INVESTMENT INCOME................................ 157,688 99,265 512,590 239,933 - ----------------------------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 2): Realized gain from share transactions................ 7,522 25,504 125,744 8,665 Realized gain distribution from The Hudson River Trust. -- -- 272,611 203,748 - ----------------------------------------------------------------------------------------------------------- Net Realized Gain.................................... 7,522 25,504 398,355 212,413 - ----------------------------------------------------------------------------------------------------------- Unrealized appreciation (depreciation) of investments: Beginning of year................................. (2,628) 50,623 (14,759) 25,269 End of year ...................................... 61,901 (2,628) 47,226 (14,759) - ----------------------------------------------------------------------------------------------------------- Change in unrealized appreciation/depreciation....... 64,529 (53,251) 61,985 (40,028) - ----------------------------------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS.................................... 72,051 (27,747) 460,340 172,385 - ----------------------------------------------------------------------------------------------------------- Increase in net assets attributable to operations.... 229,739 71,518 972,930 412,318 - ----------------------------------------------------------------------------------------------------------- FROM CONTRIBUTIONS AND WITHDRAWALS: Contributions........................................ 1,383,212 1,481,796 2,995,942 3,479,819 Withdrawals.......................................... (392,114) (556,962) (1,643,900) (139,163) - ------------------------------------------------------------------------------------------------------------ Increase in net assets attributable to contributions and withdrawals................................... 991,098 924,834 1,352,042 3,340,656 - ------------------------------------------------------------------------------------------------------------ INCREASE IN NET ASSETS............................... 1,220,837 996,352 2,324,972 3,752,974 NET ASSETS-- BEGINNING OF YEAR....................... 2,355,280 1,358,928 4,646,182 893,208 ============================================================================================================ NET ASSETS-- END OF YEAR............................. $3,576,117 $2,355,280 $6,971,154 $4,646,182 ============================================================================================================
See Notes to Financial Statements. FSA-43 ================================================================================ SEPARATE ACCOUNT NO. 51 (POOLED) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Statements of Operations and Changes in Net Assets (Continued)
- --------------------------------------------------------------------------------------------------------------- ALLIANCE ALLIANCE GROWTH & INCOME FUND EQUITY INDEX FUND ---------------------------- -------------------------- YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, 1997 1996 1997 1996 - ---------------------------------------------------------------------------------------------------------------- FROM OPERATIONS: INVESTMENT INCOME (NOTE 2) -- Dividends from The Hudson River Trust........................... $ 157,368 $ 148,338 $ 364,650 $ 213,732 EXPENSES (NOTE 4)................................... (128,440) (66,828) (203,806) (97,167) - --------------------------------------------------------------------------------------------------------------- NET INVESTMENT INCOME............................... 28,928 81,510 160,844 116,565 - --------------------------------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 2): Realized gain from share transactions............... 1,257,520 181,938 1,837,842 576,586 Realized gain distribution from The Hudson River Trust...................................... 1,199,212 578,054 113,882 653,719 - --------------------------------------------------------------------------------------------------------------- Net Realized Gain................................... 2,456,732 759,992 1,951,724 1,230,305 - --------------------------------------------------------------------------------------------------------------- Unrealized appreciation (depreciation) of investments: Beginning of year................................ 1,106,273 493,229 1,325,120 429,416 End of year ..................................... 2,014,303 1,106,273 5,420,710 1,325,120 - --------------------------------------------------------------------------------------------------------------- Change in unrealized appreciation................... 908,030 613,044 4,095,590 895,704 - --------------------------------------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS..... 3,364,762 1,373,036 6,047,314 2,126,009 - --------------------------------------------------------------------------------------------------------------- Increase in net assets attributable to operations... 3,393,690 1,454,546 6,208,158 2,242,574 - --------------------------------------------------------------------------------------------------------------- FROM CONTRIBUTIONS AND WITHDRAWALS: Contributions....................................... 13,579,067 7,115,489 22,551,970 12,899,543 Withdrawals......................................... (7,440,674) (1,743,121) (13,004,853) (4,220,094) - ---------------------------------------------------------------------------------------------------------------- Increase in net assets attributable to contributions and withdrawals.................................. 6,138,393 5,372,368 9,547,117 8,679,449 - ---------------------------------------------------------------------------------------------------------------- INCREASE IN NET ASSETS.............................. 9,532,083 6,826,914 15,755,275 10,922,023 NET ASSETS-- BEGINNING OF YEAR...................... 11,257,322 4,430,408 16,402,993 5,480,970 ================================================================================================================ NET ASSETS-- END OF YEAR............................ $20,789,405 $11,257,322 $32,158,268 $16,402,993 ================================================================================================================
See Notes to Financial Statements. FSA-44 ================================================================================ SEPARATE ACCOUNT NO. 51 (POOLED) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Statements of Operations and Changes in Net Assets (Concluded)
- ------------------------------------------------------------------------------------------------------------------ ALLIANCE SMALL CAP ALLIANCE ALLIANCE GROWTH GLOBAL FUND INTERNATIONAL FUND FUND --------------------------- --------------------------- ------------ MAY 1, 1997* YEAR ENDED YEAR ENDED TO DECEMBER 31, DECEMBER 31, DECEMBER 31, 1997 1996 1997 1996 1997 - --------------------------------------------------------------------------------------------------------------------- FROM OPERATIONS: INVESTMENT INCOME (NOTE 2) - --Dividends from The Hudson River Trust........ $ 928,674 $ 697,045 $ 142,909 $ 47,717 $ 380 EXPENSES (NOTE 4).................... (450,382) (375,304) (48,357) (18,456) (5,893) - --------------------------------------------------------------------------------------------------------------------- NET INVESTMENT INCOME (LOSS)......... 478,292 321,741 94,552 29,261 (5,513) - --------------------------------------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 2): Realized gain from share transactions 2,804,530 571,515 7,681 15,900 25,974 Realized gain distribution from The Hudson River Trust............ 2,994,309 1,889,554 237,295 62,809 53,703 - --------------------------------------------------------------------------------------------------------------------- Net Realized Gain ................... 5,798,839 2,461,069 244,976 78,709 79,677 - --------------------------------------------------------------------------------------------------------------------- Unrealized appreciation (depreciation) of investments: Beginning of period............... 4,189,776 2,311,157 56,580 (227) -- End of period .................... 2,818,773 4,189,776 (536,772) 56,580 (89,613) - --------------------------------------------------------------------------------------------------------------------- Change in unrealized appreciation/depreciation......... (1,371,003) 1,878,619 (593,352) 56,807 (89,613) - --------------------------------------------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS............ 4,427,836 4,339,688 (348,376) 135,516 (9,936) - --------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets attributable to operations........ 4,906,128 4,661,429 (253,824) 164,777 (15,449) - --------------------------------------------------------------------------------------------------------------------- FROM CONTRIBUTIONS AND WITHDRAWALS: Contributions........................ 17,302,173 22,444,295 3,591,241 3,895,137 2,741,544 Withdrawals.......................... (20,267,132) (11,827,050) (2,494,955) (437,133) (443,232) - --------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets attributable to contributions and withdrawals................... (2,964,959) 10,617,245 1,096,286 3,458,004 2,298,312 - --------------------------------------------------------------------------------------------------------------------- INCREASE IN NET ASSETS............... 1,941,169 15,278,674 842,462 3,622,781 2,282,863 NET ASSETS-- BEGINNING OF PERIOD..... 43,866,758 28,588,084 3,668,568 45,787 -- - --------------------------------------------------------------------------------------------------------------------- NET ASSETS-- END OF PERIOD........... $45,807,927 $43,866,758 $4,511,030 $3,668,568 $2,282,863 ======================================================================================================================
*Commencement of operations. See Notes to Financial Statements. FSA-45 ================================================================================ SEPARATE ACCOUNT NO. 51 (POOLED) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Statements of Operations and Changes in Net Assets (Concluded)
- ------------------------------------------------------------------------------------------------------------------ ALLIANCE ALLIANCE CONSERVATIVE INVESTORS FUND GROWTH INVESTORS FUND ------------------------------ ----------------------------- YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, 1997 1996 1997 1996 - ----------------------------------------------------------------------------------------------------------------- FROM OPERATIONS: INVESTMENT INCOME (NOTE 2) -- Dividends from The Hudson River Trust....................... $ 480,979 $ 662,083 $ 1,344,234 $ 988,398 EXPENSES (NOTE 4)............................... (156,313) (188,556) (391,031) (300,959) - ----------------------------------------------------------------------------------------------------------------- NET INVESTMENT INCOME........................... 324,666 473,527 953,203 687,439 - ----------------------------------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 2): Realized gain from share transactions........... 55,228 115,805 1,579,084 361,719 Realized gain distribution from The Hudson River Trust.................................. 346,019 348,297 3,055,814 4,768,387 - ----------------------------------------------------------------------------------------------------------------- Net Realized Gain............................... 401,247 464,102 4,634,898 5,130,106 - ----------------------------------------------------------------------------------------------------------------- Unrealized appreciation (depreciation) of investments: Beginning of year............................ (138,527) 304,939 1,130,615 2,480,800 End of year ................................. 445,991 (138,527) 3,359,461 1,130,615 - ----------------------------------------------------------------------------------------------------------------- Change in unrealized appreciation/depreciation.. 584,518 (443,466) 2,228,846 (1,350,185) - ----------------------------------------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS. 985,765 20,636 6,863,744 3,779,921 - ----------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets attributable 1,310,431 494,163 7,816,947 4,467,360 to operations................................... - ----------------------------------------------------------------------------------------------------------------- FROM CONTRIBUTIONS AND WITHDRAWALS: Contributions................................... 2,492,189 14,885,027 16,373,146 22,344,425 Withdrawals..................................... (5,233,231) (7,693,055) (12,914,616) (7,615,781) - ----------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets attributable to .....................contributions and withdrawals (2,741,042) 7,191,972 3,458,530 14,728,644 - ----------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS............... (1,430,611) 7,686,135 11,275,477 19,196,004 NET ASSETS-- BEGINNING OF YEAR.................. 12,883,414 5,197,279 46,617,763 27,421,759 ================================================================================================================= NET ASSETS-- END OF YEAR........................ $11,452,803 $12,883,414 $57,893,240 $46,617,763 =================================================================================================================
See Notes to Financial Statements. FSA-46 ================================================================================ SEPARATE ACCOUNT NOS. 13 (POOLED), 10 (POOLED), 4 (POOLED), 3 (POOLED) AND 51 (POOLED) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Notes to Financial Statements - -------------------------------------------------------------------------------- 1. Separate Account Nos. 13 (Pooled) (the Alliance Bond Fund), 10 (Pooled) (the Alliance Balanced Fund), 4 (Pooled) (the Alliance Common Stock Fund), 3 (Pooled) (the Alliance Aggressive Stock Fund), and 51 (Pooled) (the Alliance Money Market, Alliance Intermediate Government Securities, Alliance Quality Bond, Alliance High Yield, Alliance Growth & Income, Alliance Equity Index, Alliance Global, Alliance International, Alliance Small Cap Growth, Alliance Conservative Investors and Alliance Growth Investors Funds) (the Funds) of The Equitable Life Assurance Society of the United States (Equitable Life), a wholly-owned subsidiary of The Equitable Companies Incorporated, were established in conformity with the New York State Insurance Law. Pursuant to such law, to the extent provided in the applicable contracts, the net assets in the Funds are not chargeable with liabilities arising out of any other business of Equitable Life. The excess of assets over reserves and other contract liabilities amounting to $1,095,138 as shown in the Statement of Assets and Liabilities in Separate Account No. 4 may be transferred to Equitable Life's General Account. These financial statements reflect the total net assets and results of operations for the Separate Account Nos. 13, 10, 4, 3 and 51. The Retirement Investment Program is one of the many contract owners participating in these funds. Separate Account No. 51 was established as of the opening of business on July 1, 1993. Retirement Investment Account participant contributions were first allocated to the Separate Account on June 1, 1994. Interests of retirement and investment plans for employees, managers and agents of Equitable Life in Separate Account Nos. 10, 4 and 3 aggregated $26,718,437 (11.0%), $384,471,790 (14.5%) and $124,230,736 (29.7%), respectively, at December 31, 1997 and $25,996,744 (8.3%), $288,921,270 (11.8%) and $99,049,571 (22.3%), respectively, at December 31, 1996, of the net assets in these Funds. Equitable Life is the investment manager for the Funds. Alliance Capital Management L.P. (Alliance) serves as the investment adviser to Equitable Life with respect to the management of Separate Account Nos. 13, 10, 4 and 3 (the Equitable Funds). Alliance is a publicly-traded limited partnership which is indirectly majority-owned by Equitable Life. Separate Account No. 51 has eleven investment funds which invest in shares of corresponding portfolios of The Hudson River Trust (Trust). The Trust is an open-end, diversified management investment company that invests the assets of separate accounts of insurance companies. Alliance is the investment adviser to the Trust. Equitable Life and Alliance seek to obtain the best price and execution of all orders placed for the portfolios of the Equitable Funds considering all circumstances. In addition to using brokers and dealers to execute portfolio security transactions for accounts under their management, Equitable Life and Alliance may also enter into other types of business and securities transactions with brokers and dealers, which will be unrelated to allocation of the Equitable Funds' portfolio transactions. The accompanying financial statements are prepared in conformity with generally accepted accounting principles (GAAP). The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts and disclosures. Actual results could differ from those estimates. 2. Security transactions are recorded on the trade date. Amortized cost of debt securities consists of cost, adjusted where applicable, for amortization of premium or accretion of discount. Dividend income is recorded on the ex-dividend date; interest income (including amortization of premium and discount on securities using the effective yield method) is accrued daily. Realized gains and losses on the sale of investments are computed on the basis of the identified cost of the related investments sold. For Separate Account No. 51, realized gains and losses on investments include gains and losses on redemptions of the Trust's shares (determined on the identified cost basis) and capital gain distributions from the Trust. Dividends and realized gain distributions from the Trust are recorded on ex-date. Transactions denominated in foreign currencies are recorded at the rate prevailing at the date of such transactions. Asset and liability accounts that are denominated in a foreign currency are adjusted to reflect the current exchange rate at the end of the period. Transaction gains or losses resulting from changes in the exchange rate during the reporting period or upon settlement of the foreign currency transactions are reflected under "Realized and Unrealized Gain (Loss) on Investments" in the Statements of Operations and Changes in Net Assets. FSA-47 ================================================================================ SEPARATE ACCOUNT NOS. 13 (POOLED), 10 (POOLED), 4 (POOLED), 3 (POOLED) AND 51 (POOLED) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Notes to Financial Statements (Continued) - -------------------------------------------------------------------------------- Futures and forward contracts are agreements to buy or sell a security for a set price in the future. Initial margin deposits are made upon entering into futures contracts and can be either in cash or treasury securities. Separate Accounts (Accounts) may buy or sell futures contracts for the purpose of protecting their Accounts' securities against anticipated future changes in interest rates that might adversely affect the value of an Accounts' securities or the price of securities that an Account intends to purchase at a later date. During the period the futures and forward contracts are open, changes in the value of the contract are recognized as unrealized gains or losses by "marking-to-market" on a daily basis to reflect the market value of the contract at the end of each trading day. Variation margin payments for futures contracts are received or made, depending upon whether unrealized gains or losses are incurred. When the contract is closed, the Accounts record a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transactions and the Accounts' basis in the contract. Should interest rates move unexpectedly, the Accounts may not achieve the anticipated benefits of the financial futures contracts and may incur a loss. The use of futures and forward transactions involves the risk of imperfect correlation in movements in the price of futures and forward contracts, interest rates and the underlying hedged assets. Futures and forward contracts involve elements of both market and credit risk in excess of the amounts reflected in the Statement of Net Assets. The contract amounts of these futures and forward contracts reflect the extent of the Accounts' exposure to off-balance sheet risk. The Accounts bear the market risk which arises from any changes in security values. The credit risk for futures contracts is limited to failure of the exchange or board of trade that acts as the counterparty of the Accounts' futures transactions. Forward contracts are done directly with the counterparty and not through an exchange and can be terminated only by agreement of both parties to the contract. There is no daily margin settlement and the portfolio is exposed to the risk of default by the counterparty. Separate Account No. 10 may enter into forward currency contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign security holdings. A forward contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward rate. The gain or loss arising from the difference between the original contracts and the closing of such contracts is included in realized gains or losses from foreign currency transactions. At December 31, 1997, Separate Account No. 10 had outstanding forward currency contracts to buy/sell foreign currency as follows:
------------------------------------------------------------------------------------------------------------ Contract Cost on U.S. $ Unrealized Amount Origination Currency Appreciation (000's) Date Value (Depreciation) ------------------------------------------------------------------------------------------------------------ SEPARATE ACCOUNT NO. 10 ----------------------- Foreign Currency Buy Contracts: ------------------------------ Deutsche Marks, settling 01/02/98 2,460 $1,412,413 $1,367,426 $(44,987) French Franc, settling 01/23/98 14,000 2,357,518 2,326,161 (31,357) Japanese Yen, settling 120,000 934,258 918,836 (15,422) 02/27/98-04/14/98 Netherland Guilders, settling 01/02/98 2,400 1,224,221 1,183,582 (40,639) Norwegian Krone, settling 01/23/98 4,500 625,142 610,169 (14,973) Spanish Peseta, settling 01/23/98 120,000 800,267 787,344 (12,923) Swedish Krona, settling 2,989 391,221 376,753 (14,468) 01/02/98-01/23/98 Foreign Currency Sale Contracts: ------------------------------- Deutsche Marks, settling 01/02/98 2,460 1,378,731 1,367,427 11,304 French Franc, settling 01/23/98 14,000 2,366,844 2,326,161 40,683 Japanese Yen, settling 613,786 5,066,700 4,699,740 366,960 01/06/98-04/14/98 Netherland Guilders, settling 01/02/98 2,400 1,193,703 1,183,582 10,121 Norwegian Krone, settling 01/23/98 4,500 626,505 610,169 16,336 Spanish Peseta, settling 01/23/98 120,000 802,944 787,343 15,601 Swedish Krona, settling 01/02/98 2,500 330,029 315,152 14,877 ---------- $301,113 ==========
FSA-48 ================================================================================ SEPARATE ACCOUNT NOS. 13 (POOLED), 10 (POOLED), 4 (POOLED), 3 (POOLED) AND 51 (POOLED) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Notes to Financial Statements (Continued) - -------------------------------------------------------------------------------- Equitable Life's internal short-term investment account, Separate Account No. 2A, was established to provide a more flexible and efficient vehicle to combine and invest temporary cash positions of certain eligible accounts (Participating Funds) under Equitable Life's management. Separate Account No. 2A invests in debt securities maturing in sixty days or less from the date of the acquisition. At December 31, 1997, the investments held in Separate Account No. 2A consists of the following:
- ------------------------------------------------------------------------------------------------------------------ Amortized Cost % - ------------------------------------------------------------------------------------------------------------------ Commercial Paper, 5.70% - 6.75% due 01/02/98 through 02/12/98.......... $210,793,367 94.7 % Bankers' Acceptances, 5.65% - 5.73% due 01/16/98 through 01/26/98...... 9,474,385 4.3 ------------------------------------------------------------------------------------------------------------ Total Investments...................................................... 220,267,752 99.0 Other Assets Less Liabilities.......................................... 2,244,569 1.0 ============================================================================================================ Net Assets of Separate Account No. 2A ................................. $222,512,321 100.0 % ============================================================================================================ Units Outstanding...................................................... 823,297 Unit Value............................................................. $270.27
Participating Funds purchase or redeem units depending on each participating account's excess cash availability or cash needs to meet its liabilities. Separate Account No. 2A is not subject to investment management fees. Short-term debt securities may also be purchased directly by the Equitable Funds. For 1997 and 1996, investment security transactions, excluding short-term debt securities, were as follows:
Purchases Sales ---------------------------------- ---------------------------------- Stocks and U.S. Stocks and U.S. Debt Government Debt Government Securities and Agencies Securities and Agencies --------------- --------------- ---------------- ------------ Fund ---- Alliance Bond: 1997....................... $ 37,104,183 $191,640,256 $ 63,408,606 $182,061,320 1996....................... 55,142,675 163,410,870 63,207,109 222,895,782 Alliance Balanced: 1997....................... 224,848,109 215,172,356 290,379,457 228,848,176 1996....................... 337,043,222 226,791,922 416,837,259 234,990,432 Alliance Common Stock: 1997....................... 1,569,991,103 -- 1,988,739,298 -- 1996....................... 2,439,864,229 -- 2,487,456,851 -- Alliance Aggressive Stock: 1997....................... 780,418,511 -- 850,626,915 -- 1996....................... 450,676,363 -- 434,241,789 --
3. Investment securities for the Equitable Funds are valued as follows: Stocks listed on national securities exchanges and certain over-the-counter issues traded on the National Association of Securities Dealers, Inc. automated quotation (NASDAQ) national market system are valued at the last sale price, or, if there is no sale, at the latest available bid price. Foreign securities not traded directly, or in American Depository Receipt (ADR) form in the United States, are valued at the last sale price in the local currency on an exchange in the country of origin. Foreign currency is converted into its U.S. dollar equivalent at current exchange rates. Certain Separate Accounts enter into forward foreign exchange contracts as a hedge against either specific transactions or portfolio positions. The effect on earnings of valuing the contracts is recorded from the date the Separate Accounts enter into such contracts. Futures and forward contracts are valued at their last sale price or, if there is no sale, at the latest available bid price. United States Treasury securities and other obligations issued or guaranteed by the United States Government, its agencies or instrumentalities are valued at representative quoted prices. Long-term (i.e., maturing in more than a year) publicly traded corporate bonds are valued at prices obtained from a bond pricing service of a major dealer in bonds when such prices are available; however, in circumstances where Equitable Life and Alliance deem it appropriate to do so, an over-the-counter or exchange quotation may be used. FSA-49 ================================================================================ SEPARATE ACCOUNT NOS. 13 (POOLED), 10 (POOLED), 4 (POOLED), 3 (POOLED) AND 51 (POOLED) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Notes to Financial Statements (Concluded) - -------------------------------------------------------------------------------- Convertible preferred stocks listed on national securities exchanges are valued at their last sale price or, if there is no sale, at the latest available bid price. Convertible bonds and unlisted convertible preferred stocks are valued at bid prices obtained from one or more major dealers in such securities; where there is a discrepancy between dealers, values may be adjusted based on recent premium spreads to the underlying common stock. Other assets that do not have a readily available market price are valued at fair value as determined in good faith by Equitable Life's investment officers. The value of the investments of the Funds of Separate Account No. 51 in the corresponding Trust Portfolios is calculated by multiplying the number of shares held by Separate Account No. 51 in each Portfolio of the Trust by the net asset value per share of the Portfolio. Separate Account No. 2A is valued daily at amortized cost, which approximates market value. Short-term debt securities purchased directly by the Equitable Funds which mature in 60 days or less are valued at amortized cost. Short-term debt securities which mature in more than 60 days are valued at representative quoted prices. 4. Charges and fees relating to the Funds are deducted in accordance with the terms of the various contracts which participate in the Funds. These expenses consist of asset management fees, administrative and sales-related fees, and operating expenses, as specified in each contract. Depending upon the terms of a contract, sales-related fees and operating expenses are paid (i) by a reduction of an appropriate number of Fund Units or (ii) by a direct payment. These charges and fees are recorded as expenses in the accompanying Statements of Operations and Changes in Net Assets, and as an offsetting contribution to the Funds from the contract holders. Asset management fee is deducted in the daily unit values for the Equitable Funds. Administrative charge for the investment funds of Separate Account No. 51 is deducted in the daily unit value for each investment fund. Investments in Separate Account No. 51 are also subject to the expenses incurred in the underlying Portfolios of the Trust, which are reflected through the Portfolios' net asset values. 5. No Federal income tax based on net income or realized and unrealized capital gains was applicable to contracts participating in the Funds by reason of applicable provisions of the Internal Revenue Code and no Federal income tax payable by Equitable Life will affect such contracts. Accordingly, no Federal income tax provision is required. FSA-50 February 10, 1998 Report of Independent Accountants To the Board of Directors and Shareholders of The Equitable Life Assurance Society of the United States In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of earnings, of shareholder's equity and of cash flows present fairly, in all material respects, the financial position of The Equitable Life Assurance Society of the United States and its subsidiaries ("Equitable Life") at December 31, 1997 and 1996, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1997, in conformity with generally accepted accounting principles. These financial statements are the responsibility of Equitable Life's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. As discussed in Note 2 to the consolidated financial statements, Equitable Life changed its methods of accounting for long-duration participating life insurance contracts and long-lived assets in 1996 and for loan impairments in 1995. /s/ Price Waterhouse, LLP - --------------------------- Price Waterhouse LLP New York, New York February 10, 1998 F-1 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1997 AND 1996
1997 1996 ----------------- ----------------- (In Millions) ASSETS Investments: Fixed maturities: Available for sale, at estimated fair value............................. $ 19,630.9 $ 18,077.0 Mortgage loans on real estate............................................. 2,611.4 3,133.0 Equity real estate........................................................ 2,749.2 3,297.5 Policy loans.............................................................. 2,422.9 2,196.1 Other equity investments.................................................. 951.5 860.6 Investment in and loans to affiliates..................................... 731.1 685.0 Other invested assets..................................................... 624.7 25.4 ----------------- ----------------- Total investments..................................................... 29,721.7 28,274.6 Cash and cash equivalents................................................... 300.5 538.8 Deferred policy acquisition costs........................................... 3,236.6 3,104.9 Amounts due from discontinued operations.................................... 572.8 996.2 Other assets................................................................ 2,685.2 2,552.2 Closed Block assets......................................................... 8,566.6 8,495.0 Separate Accounts assets.................................................... 36,538.7 29,646.1 ----------------- ----------------- Total Assets................................................................ $ 81,622.1 $ 73,607.8 ================= ================= LIABILITIES Policyholders' account balances............................................. $ 21,579.5 $ 21,865.6 Future policy benefits and other policyholder's liabilities................. 4,553.8 4,416.6 Short-term and long-term debt............................................... 1,991.2 1,766.9 Other liabilities........................................................... 3,257.1 2,785.1 Closed Block liabilities.................................................... 9,073.7 9,091.3 Separate Accounts liabilities............................................... 36,306.3 29,598.3 ----------------- ----------------- Total liabilities..................................................... 76,761.6 69,523.8 ----------------- ----------------- Commitments and contingencies (Notes 10, 12, 13, 14 and 15) SHAREHOLDER'S EQUITY Common stock, $1.25 par value 2.0 million shares authorized, issued and outstanding........................................................... 2.5 2.5 Capital in excess of par value.............................................. 3,105.8 3,105.8 Retained earnings........................................................... 1,235.9 798.7 Net unrealized investment gains............................................. 533.6 189.9 Minimum pension liability................................................... (17.3) (12.9) ----------------- ----------------- Total shareholder's equity............................................ 4,860.5 4,084.0 ----------------- ----------------- Total Liabilities and Shareholder's Equity.................................. $ 81,622.1 $ 73,607.8 ================= =================
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, 1997, 1996 AND 1995
1997 1996 1995 ----------------- ----------------- ----------------- (In Millions) REVENUES Universal life and investment-type product policy fee income...................................................... $ 950.6 $ 874.0 $ 788.2 Premiums...................................................... 601.5 597.6 606.8 Net investment income......................................... 2,282.8 2,203.6 2,088.2 Investment (losses) gains, net................................ (45.2) (9.8) 5.3 Commissions, fees and other income............................ 1,227.2 1,081.8 897.1 Contribution from the Closed Block............................ 102.5 125.0 143.2 ----------------- ----------------- ----------------- Total revenues.......................................... 5,119.4 4,872.2 4,528.8 ----------------- ----------------- ----------------- BENEFITS AND OTHER DEDUCTIONS Interest credited to policyholders' account balances.......... 1,266.2 1,270.2 1,248.3 Policyholders' benefits....................................... 978.6 1,317.7 1,008.6 Other operating costs and expenses............................ 2,203.9 2,075.7 1,775.8 ----------------- ----------------- ----------------- Total benefits and other deductions..................... 4,448.7 4,663.6 4,032.7 ----------------- ----------------- ----------------- Earnings from continuing operations before Federal income taxes, minority interest and cumulative effect of accounting change................................. 670.7 208.6 496.1 Federal income taxes.......................................... 91.5 9.7 120.5 Minority interest in net income of consolidated subsidiaries.. 54.8 81.7 62.8 ----------------- ----------------- ----------------- Earnings from continuing operations before cumulative effect of accounting change................................. 524.4 117.2 312.8 Discontinued operations, net of Federal income taxes.......... (87.2) (83.8) - Cumulative effect of accounting change, net of Federal income taxes................................................ - (23.1) - ----------------- ----------------- ----------------- Net Earnings.................................................. $ 437.2 $ 10.3 $ 312.8 ================= ================= =================
See Notes to Consolidated Financial Statements. F-3 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
1997 1996 1995 ----------------- ----------------- ----------------- (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 and end of year..... 3,105.8 3,105.8 3,105.8 ----------------- ----------------- ----------------- Retained earnings, beginning of year.......................... 798.7 788.4 475.6 Net earnings.................................................. 437.2 10.3 312.8 ----------------- ----------------- ----------------- Retained earnings, end of year................................ 1,235.9 798.7 788.4 ----------------- ----------------- ----------------- Net unrealized investment gains (losses), beginning of year... 189.9 396.5 (220.5) Change in unrealized investment gains (losses)................ 343.7 (206.6) 617.0 ----------------- ----------------- ----------------- Net unrealized investment gains, end of year.................. 533.6 189.9 396.5 ----------------- ----------------- ----------------- Minimum pension liability, beginning of year.................. (12.9) (35.1) (2.7) Change in minimum pension liability........................... (4.4) 22.2 (32.4) ----------------- ----------------- ----------------- Minimum pension liability, end of year........................ (17.3) (12.9) (35.1) ----------------- ----------------- ----------------- Total Shareholder's Equity, End of Year....................... $ 4,860.5 $ 4,084.0 $ 4,258.1 ================= ================= =================
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, 1997, 1996 AND 1995
1997 1996 1995 ----------------- ----------------- ----------------- (In Millions) Net earnings.................................................. $ 437.2 $ 10.3 $ 312.8 Adjustments to reconcile net earnings to net cash provided by operating activities: Interest credited to policyholders' account balances........ 1,266.2 1,270.2 1,248.3 Universal life and investment-type product policy fee income......................................... (950.6) (874.0) (788.2) Investment losses (gains)................................... 45.2 9.8 (5.3) Change in Federal income tax payable........................ (74.4) (197.1) 221.6 Other, net.................................................. 169.4 330.2 80.5 ----------------- ----------------- ----------------- Net cash provided by operating activities..................... 893.0 549.4 1,069.7 ----------------- ----------------- ----------------- Cash flows from investing activities: Maturities and repayments................................... 2,702.9 2,275.1 1,897.4 Sales....................................................... 10,385.9 8,964.3 8,867.1 Purchases................................................... (13,205.4) (12,559.6) (11,675.5) (Increase) decrease in short-term investments............... (555.0) 450.3 (99.3) Decrease in loans to discontinued operations................ 420.1 1,017.0 1,226.9 Sale of subsidiaries........................................ 261.0 - - Other, net.................................................. (612.6) (281.0) (413.4) ----------------- ----------------- ----------------- Net cash used by investing activities......................... (603.1) (133.9) (196.8) ----------------- ----------------- ----------------- Cash flows from financing activities: Policyholders' account balances: Deposits.................................................. 1,281.7 1,925.4 2,586.5 Withdrawals............................................... (1,886.8) (2,385.2) (2,657.1) Net increase (decrease) in short-term financings............ 419.9 (.3) (16.4) Additions to long-term debt................................. 32.0 - 599.7 Repayments of long-term debt................................ (196.4) (124.8) (40.7) Payment of obligation to fund accumulated deficit of discontinued operations................................... (83.9) - (1,215.4) Other, net.................................................. (94.7) (66.5) (48.4) ----------------- ----------------- ----------------- Net cash used by financing activities......................... (528.2) (651.4) (791.8) ----------------- ----------------- ----------------- Change in cash and cash equivalents........................... (238.3) (235.9) 81.1 Cash and cash equivalents, beginning of year.................. 538.8 774.7 693.6 ----------------- ----------------- ----------------- Cash and Cash Equivalents, End of Year........................ $ 300.5 $ 538.8 $ 774.7 ================= ================= ================= Supplemental cash flow information Interest Paid............................................... $ 217.1 $ 109.9 $ 89.6 ================= ================= ================= Income Taxes Paid (Refunded)................................ $ 170.0 $ (10.0) $ (82.7) ================= ================= =================
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, prior to December 31, 1996, its wholly owned life insurance subsidiary, 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") and Donaldson, Lufkin & Jenrette, Inc. ("DLJ"), an investment banking and brokerage affiliate. AXA-UAP ("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 58.7% at December 31, 1997 (54.3% if all securities convertible into, and options on, common stock were to be converted or exercised). 2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation and Principles of Consolidation The accompanying consolidated financial statements are prepared in conformity with generally accepted accounting principles ("GAAP") 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, an investment advisory subsidiary, and, through June 10, 1997, Equitable Real Estate Investment Management, Inc. ("EREIM"), a real estate investment management subsidiary which was sold (see Note 5); and those partnerships and joint ventures in which Equitable Life or its subsidiaries has control 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 and liabilities and results of operations are presented in the consolidated financial statements as single line items (see Note 6). Unless specifically stated, all disclosures contained herein supporting the consolidated financial statements exclude the Closed Block related amounts. All significant intercompany transactions and balances have been eliminated in consolidation other than intercompany transactions and balances with the Closed Block and the discontinued operations (see Note 7). The years "1997," "1996" and "1995" refer to the years ended December 31, 1997, 1996 and 1995, respectively. Certain reclassifications have been made in the amounts presented for prior periods to conform these periods with the 1997 presentation. Closed Block As of July 22, 1992, Equitable Life established the Closed Block for the benefit of certain classes of individual participating policies for which Equitable Life had a dividend scale payable in 1991 and which were in force on that date. Assets were allocated to the Closed Block in an amount which, together with anticipated revenues from policies included in the Closed Block, was reasonably expected to be sufficient to support such business, including provision for payment of claims, certain expenses and taxes, and for continuation of dividend scales payable in 1991, assuming the experience underlying such scales continues. F-6 Assets allocated to the Closed Block inure solely to the benefit of the holders of policies included in the Closed Block and will not revert to the benefit of the Holding Company. 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 consist of the business of the former Guaranteed Interest Contract ("GIC") segment which includes the Group Non-Participating Wind-Up Annuities ("Wind-Up Annuities") and the 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, during the 1997 and 1996 fourth quarter reviews, the allowance for future losses was increased. Management believes the allowance for future losses at December 31, 1997 is adequate to provide for all future losses; however, the determination of the allowance 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 7). Accounting Changes In 1996, the Company changed its method of accounting for long-duration participating life insurance contracts, primarily within the Closed Block, in accordance with the provisions prescribed by SFAS No. 120, "Accounting and Reporting by Mutual Life Insurance Enterprises and by Insurance Enterprises for Certain Long-Duration Participating Contracts". (See "Deferred Policy Acquisition Costs," "Policyholders' Account Balances and Future Policy Benefits" and Note 6.) 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 Equitable's cost of funds. The adoption of the statement resulted in the release of valuation allowances of $152.4 million and recognition of impairment losses of $144.0 million on real estate held for production of income. Real estate which management has committed to disposing of by sale or abandonment 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. Implementation of the SFAS No. 121 impairment requirements relative to other assets to be disposed of resulted in a charge for the cumulative effect of an accounting change of $23.1 million, net of a Federal income tax benefit of $12.4 million, due to the writedown to fair value of building improvements relating to facilities vacated in 1996. In the first quarter of 1995, the Company adopted SFAS No. 114, "Accounting by Creditors for Impairment of a Loan". Impaired loans within SFAS No. 114's scope are to be measured based on the present value of expected future cash flows discounted at the loan's effective interest rate, at the loan's observable market price or the fair value of the collateral if the loan is collateral dependent. The adoption of this statement did not have a material effect on the level of the allowances for possible losses or on the Company's consolidated statements of earnings and shareholder's equity. F-7 New Accounting Pronouncements In January 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No. 132, "Employers' Disclosures about Pension and Other Postretirement Benefits," which revises current note disclosure requirements for employers' pension and other retiree benefits. SFAS No. 132 is effective for fiscal years beginning after December 15, 1997. The Company will adopt the provisions of SFAS No. 132 in the 1998 consolidated financial statements. In December 1997, the American Institute of Certified Public Accountants ("AICPA") issued Statement of Position ("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. In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information". SFAS No. 131 establishes standards for the way public business enterprises report information about operating segments in annual and interim financial statements issued to shareholders. It also establishes standards for related disclosures about products and services, geographic areas and major customers. Generally, financial information will be required to be reported on the basis used by management for evaluating segment performance and for deciding how to allocate resources to segments. This statement is effective for fiscal years beginning after December 15, 1997 and need not be applied to interim reporting in the initial year of adoption. Restatement of comparative information for earlier periods is required. Management is currently reviewing its definition of business segments in light of the requirements of SFAS No. 131. In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income". SFAS No. 130 establishes standards for reporting and displaying comprehensive income and its components in a full set of general purpose financial statements. SFAS No. 130 requires an enterprise to classify items of other comprehensive income by their nature in a financial statement and display the accumulated balance of other comprehensive income separately from retained earnings and additional paid-in capital in the equity section of a statement of financial position. This statement is effective for fiscal years beginning after December 15, 1997. Reclassification of financial statements for earlier periods provided for comparative purposes is required. The Company will adopt the provisions of SFAS No. 130 in its 1998 consolidated financial statements. In June 1996, the FASB issued SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities". SFAS No. 125 specifies the accounting and reporting requirements for transfers of financial assets, the recognition and measurement of servicing assets and liabilities and extinguishments of liabilities. SFAS No. 125 is effective for transactions occurring after December 31, 1996 and is to be applied prospectively. In December 1996, the FASB issued SFAS No. 127, "Deferral of the Effective Date of Certain Provisions of FASB Statement No. 125," which defers for one year the effective date of provisions relating to secured borrowings and collateral and transfers of financial assets that are part of repurchase agreements, dollar-roll, securities lending and similar transactions. Implementation of SFAS No. 125 did not have nor is SFAS No. 127 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. 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. F-8 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. 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 or losses. Unrealized investment gains and losses on fixed maturities available for sale and equity securities held by the Company are accounted for as a separate component of shareholder's equity, net of related deferred Federal income taxes, amounts attributable to 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. F-9 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 15 to 35 years and 5 to 17 years, respectively) as a constant percentage of estimated gross profits arising principally from investment results, mortality and expense margins and surrender charges based on historical and anticipated future experience, updated at the end of each accounting period. The effect on the amortization of 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 unrealized gains (losses) in consolidated shareholder's equity as of the balance sheet date. 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, 1997, the expected investment yield, excluding policy loans, generally ranged from 7.53% grading to 7.92% 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 unrealized gains (losses) 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. F-10 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, include 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. 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 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. F-11 Claim reserves and associated liabilities for individual DI and major medical policies were $886.7 million and $869.4 million at December 31, 1997 and 1996, 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:
1997 1996 1995 ----------------- ---------------- ----------------- (In Millions) Incurred benefits related to current year.......... $ 190.2 $ 189.0 $ 176.0 Incurred benefits related to prior years........... 2.1 69.1 67.8 ----------------- ---------------- ----------------- Total Incurred Benefits............................ $ 192.3 $ 258.1 $ 243.8 ================= ================ ================= Benefits paid related to current year.............. $ 28.8 $ 32.6 $ 37.0 Benefits paid related to prior years............... 146.2 153.3 137.8 ----------------- ---------------- ----------------- Total Benefits Paid................................ $ 175.0 $ 185.9 $ 174.8 ================= ================ =================
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, 1997, participating policies, including those in the Closed Block, represent approximately 21.2% ($50.2 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. 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 1997, 1996 and 1995, investment results of such Separate Accounts were $3,411.1 million, $2,970.6 million and $1,963.2 million, respectively. F-12 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 opinion, compensation expense is recorded on the date of grant only if the current market price of the underlying stock exceeds the exercise price. See Note 21 for the pro forma disclosures for the Holding Company, DLJ and Alliance required by SFAS No. 123, "Accounting for Stock-Based Compensation". 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, 1997 Fixed Maturities: Available for Sale: Corporate.......................... $ 14,230.3 $ 785.0 $ 74.5 $ 14,940.8 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.. 673.0 6.8 .1 679.7 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 ================= ================= ================ ================= December 31, 1996 Fixed Maturities: Available for Sale: Corporate.......................... $ 13,645.2 $ 451.5 $ 121.0 $ 13,975.7 Mortgage-backed.................... 2,015.9 11.2 20.3 2,006.8 U.S. Treasury securities and U.S. government and agency securities................ 1,539.4 39.2 19.3 1,559.3 States and political subdivisions.. 77.0 4.5 - 81.5 Foreign governments................ 302.6 18.0 2.2 318.4 Redeemable preferred stock......... 139.1 3.3 7.1 135.3 ----------------- ----------------- ---------------- ----------------- Total Available for Sale............... $ 17,719.2 $ 527.7 $ 169.9 $ 18,077.0 ================= ================= ================ ================= Equity Securities: Common stock......................... $ 362.0 $ 49.3 $ 17.7 $ 393.6 ================= ================= ================ =================
F-13 For publicly traded fixed maturities and equity securities, estimated fair value is determined using quoted market prices. For fixed maturities without a readily ascertainable market value, the Company has determined an estimated fair value using a discounted cash flow approach, including provisions for credit risk, generally based 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, 1997 and 1996, securities without a readily ascertainable market value having an amortized cost of $3,759.2 million and $3,915.7 million, respectively, had estimated fair values of $3,903.9 million and $4,024.6 million, respectively. The contractual maturity of bonds at December 31, 1997 is shown below:
Available for Sale ------------------------------------ Amortized Estimated Cost Fair Value ---------------- ----------------- (In Millions) Due in one year or less................................................ $ 149.9 $ 151.3 Due in years two through five.......................................... 2,962.8 3,025.2 Due in years six through ten........................................... 6,863.9 7,093.0 Due after ten years.................................................... 6,952.3 7,502.7 Mortgage-backed securities............................................. 1,702.8 1,725.0 ---------------- ----------------- Total.................................................................. $ 18,631.7 $ 19,497.2 ================ =================
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 the total investments in any single issuer or total investment in a particular industry group. Certain of these corporate high yield securities are classified as other than investment grade by the various rating agencies, i.e., a rating below Baa or National Association of Insurance Commissioners ("NAIC") designation of 3 (medium grade), 4 or 5 (below investment grade) or 6 (in or near default). At December 31, 1997, approximately 17.85% of the $18,610.6 million aggregate amortized cost of bonds held by the Insurance Group were considered to be other than investment grade. In addition to its holdings of corporate high yield securities, the Insurance Group is an equity investor in limited partnership interests which primarily invest in securities considered to be other than investment grade. Fixed maturity investments with restructured or modified terms are not material. F-14 Investment valuation allowances and changes thereto are shown below:
1997 1996 1995 ----------------- ---------------- ----------------- (In Millions) Balances, beginning of year........................ $ 137.1 $ 325.3 $ 284.9 SFAS No. 121 release............................... - (152.4) - Additions charged to income........................ 334.6 125.0 136.0 Deductions for writedowns and asset dispositions............................... (87.2) (160.8) (95.6) ----------------- ---------------- ----------------- Balances, End of Year.............................. $ 384.5 $ 137.1 $ 325.3 ================= ================ ================= Balances, end of year comprise: Mortgage loans on real estate.................... $ 55.8 $ 50.4 $ 65.5 Equity real estate............................... 328.7 86.7 259.8 ----------------- ---------------- ----------------- Total.............................................. $ 384.5 $ 137.1 $ 325.3 ================= ================ =================
At December 31, 1997, the carrying values of investments held for the production of income which were non-income producing for the twelve months preceding the consolidated balance sheet date were $12.6 million of fixed maturities and $.9 million of mortgage loans on real estate. At December 31, 1997 and 1996, 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 $23.4 million (0.9% of total mortgage loans on real estate) and $12.4 million (0.4% 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 $183.4 million and $388.3 million at December 31, 1997 and 1996, 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 $17.2 million, $35.5 million and $52.1 million in 1997, 1996 and 1995, respectively. Gross interest income on these loans included in net investment income aggregated $12.7 million, $28.2 million and $37.4 million in 1997, 1996 and 1995, respectively. Impaired mortgage loans (as defined under SFAS No. 114) along with the related provision for losses were as follows:
December 31, ---------------------------------------- 1997 1996 ------------------- ------------------- (In Millions) Impaired mortgage loans with provision for losses.................. $ 196.7 $ 340.0 Impaired mortgage loans without provision for losses............... 3.6 122.3 ------------------- ------------------- Recorded investment in impaired mortgage loans..................... 200.3 462.3 Provision for losses............................................... (51.8) (46.4) ------------------- ------------------- Net Impaired Mortgage Loans........................................ $ 148.5 $ 415.9 =================== ===================
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. F-15 During 1997, 1996 and 1995, respectively, the Company's average recorded investment in impaired mortgage loans was $246.9 million, $552.1 million and $429.0 million. Interest income recognized on these impaired mortgage loans totaled $15.2 million, $38.8 million and $27.9 million ($2.3 million, $17.9 million and $13.4 million recognized on a cash basis) for 1997, 1996 and 1995, 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, 1997 and 1996, the carrying value of equity real estate held for sale amounted to $1,023.5 million and $345.6 million, respectively. For 1997, 1996 and 1995, respectively, real estate of $152.0 million, $58.7 million and $35.3 million was acquired in satisfaction of debt. At December 31, 1997 and 1996, the Company owned $693.3 million and $771.7 million, respectively, of real estate acquired in satisfaction of debt. Depreciation of real estate is computed using the straight-line method over the estimated useful lives of the properties, which generally range from 40 to 50 years. Accumulated depreciation on real estate was $541.1 million and $587.5 million at December 31, 1997 and 1996, respectively. Depreciation expense on real estate totaled $74.9 million, $91.8 million and $121.7 million for 1997, 1996 and 1995, respectively. 4) JOINT VENTURES AND PARTNERSHIPS Summarized combined financial information for real estate joint ventures (29 and 34 individual ventures as of December 31, 1997 and 1996, 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, ------------------------------------ 1997 1996 ---------------- ----------------- (In Millions) BALANCE SHEETS Investments in real estate, at depreciated cost........................ $ 1,700.9 $ 1,883.7 Investments in securities, generally at estimated fair value........... 1,374.8 2,430.6 Cash and cash equivalents.............................................. 105.4 98.0 Other assets........................................................... 584.9 427.0 ---------------- ----------------- Total Assets........................................................... $ 3,766.0 $ 4,839.3 ================ ================= Borrowed funds - third party........................................... $ 493.4 $ 1,574.3 Borrowed funds - the Company........................................... 31.2 137.9 Other liabilities...................................................... 284.0 415.8 ---------------- ----------------- Total liabilities...................................................... 808.6 2,128.0 ---------------- ----------------- Partners' capital...................................................... 2,957.4 2,711.3 ---------------- ----------------- Total Liabilities and Partners' Capital................................ $ 3,766.0 $ 4,839.3 ================ ================= Equity in partners' capital included above............................. $ 568.5 $ 806.8 Equity in limited partnership interests not included above............. 331.8 201.8 Other.................................................................. 4.3 9.8 ---------------- ----------------- Carrying Value......................................................... $ 904.6 $ 1,018.4 ================ =================
F-16
1997 1996 1995 ----------------- ---------------- ----------------- (In Millions) STATEMENTS OF EARNINGS Revenues of real estate joint ventures............. $ 310.5 $ 348.9 $ 463.5 Revenues of other limited partnership interests.... 506.3 386.1 242.3 Interest expense - third party..................... (91.8) (111.0) (135.3) Interest expense - the Company..................... (7.2) (30.0) (41.0) Other expenses..................................... (263.6) (282.5) (397.7) ----------------- ---------------- ----------------- Net Earnings....................................... $ 454.2 $ 311.5 $ 131.8 ================= ================ ================= Equity in net earnings included above.............. $ 76.7 $ 73.9 $ 49.1 Equity in net earnings of limited partnerships interests not included above..................... 69.5 35.8 44.8 Other.............................................. (.9) .9 1.0 ----------------- ----------------- ---------------- ----------------- Total Equity in Net Earnings....................... $ 145.3 $ 110.6 $ 94.9 ================= ================ =================
5) NET INVESTMENT INCOME AND INVESTMENT GAINS (LOSSES) The sources of net investment income are summarized as follows:
1997 1996 1995 ----------------- ---------------- ----------------- (In Millions) Fixed maturities................................... $ 1,459.4 $ 1,307.4 $ 1,151.1 Mortgage loans on real estate...................... 260.8 303.0 329.0 Equity real estate................................. 390.4 442.4 560.4 Other equity investments........................... 156.9 122.0 76.9 Policy loans....................................... 177.0 160.3 144.4 Other investment income............................ 181.7 217.4 273.0 ----------------- ---------------- ----------------- Gross investment income.......................... 2,626.2 2,552.5 2,534.8 ----------------- ---------------- ----------------- Investment expenses.............................. 343.4 348.9 446.6 ----------------- ---------------- ----------------- Net Investment Income.............................. $ 2,282.8 $ 2,203.6 $ 2,088.2 ================= ================ =================
Investment gains (losses), net, including changes in the valuation allowances, are summarized as follows:
1997 1996 1995 ----------------- ---------------- ----------------- (In Millions) Fixed maturities................................... $ 88.1 $ 60.5 $ 119.9 Mortgage loans on real estate...................... (11.2) (27.3) (40.2) Equity real estate................................. (391.3) (79.7) (86.6) Other equity investments........................... 14.1 18.9 12.8 Sale of subsidiaries............................... 252.1 - - Issuance and sales of Alliance Units............... - 20.6 - Other.............................................. 3.0 (2.8) (.6) ----------------- ---------------- ----------------- Investment (Losses) Gains, Net..................... $ (45.2) $ (9.8) $ 5.3 ================= ================ =================
F-17 Writedowns of fixed maturities amounted to $11.7 million, $29.9 million and $46.7 million for 1997, 1996 and 1995, respectively, and writedowns of equity real estate subsequent to the adoption of SFAS No. 121 amounted to $136.4 million and $23.7 million for 1997 and 1996, respectively. 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 the fourth quarter, $132.3 million of writedowns on real estate held for production of income were recorded. For 1997, 1996 and 1995, respectively, proceeds received on sales of fixed maturities classified as available for sale amounted to $9,789.7 million, $8,353.5 million and $8,206.0 million. Gross gains of $166.0 million, $154.2 million and $211.4 million and gross losses of $108.8 million, $92.7 million and $64.2 million, respectively, were realized on these sales. The change in unrealized investment gains (losses) related to fixed maturities classified as available for sale for 1997, 1996 and 1995 amounted to $513.4 million, $(258.0) million and $1,077.2 million, respectively. For 1997, 1996 and 1995, investment results passed through to certain participating group annuity contracts as interest credited to policyholders' account balances amounted to $137.5 million, $136.7 million and $131.2 million, respectively. 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 maturing in eight years and bearing interest at the rate of 7.4%, subject to certain adjustments. Equitable Life 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 will continue 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 the years ended December 31, 1996 and 1995, respectively, the businesses sold reported combined revenues of $91.6 million, $226.1 million and $245.6 million and combined net earnings of $10.7 million, $30.7 million and $27.9 million. Total combined assets and liabilities as reported at December 31, 1996 were $171.8 million and $130.1 million, respectively. In 1996, Alliance acquired the business of Cursitor-Eaton Asset Management Company 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 substantial additional consideration to be determined at a later date. 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, 1997, the Company's ownership of Alliance Units was approximately 56.9%. F-18 Net unrealized investment gains (losses), included in the consolidated balance sheets as a component of equity and the changes for the corresponding years, are summarized as follows:
1997 1996 1995 ----------------- ---------------- ----------------- (In Millions) Balance, beginning of year......................... $ 189.9 $ 396.5 $ (220.5) Changes in unrealized investment gains (losses).... 543.3 (297.6) 1,198.9 Changes in unrealized investment losses (gains) attributable to: Participating group annuity contracts.......... 53.2 - (78.1) DAC............................................ (89.0) 42.3 (216.8) Deferred Federal income taxes.................. (163.8) 48.7 (287.0) ----------------- ---------------- ----------------- Balance, End of Year............................... $ 533.6 $ 189.9 $ 396.5 ================= ================ ================= Balance, end of year comprises: Unrealized investment gains on: Fixed maturities............................... $ 871.2 $ 357.8 $ 615.9 Other equity investments....................... 33.7 31.6 31.1 Other, principally Closed Block................ 80.9 53.1 93.1 ----------------- ---------------- ----------------- Total........................................ 985.8 442.5 740.1 Amounts of unrealized investment gains attributable to: Participating group annuity contracts........ (19.0) (72.2) (72.2) DAC.......................................... (141.0) (52.0) (94.3) Deferred Federal income taxes................ (292.2) (128.4) (177.1) ----------------- ---------------- ----------------- Total.............................................. $ 533.6 $ 189.9 $ 396.5 ================= ================ =================
6) CLOSED BLOCK Summarized financial information for the Closed Block follows:
December 31, -------------------------------------- 1997 1996 ----------------- ----------------- (In Millions) Assets Fixed Maturities: Available for sale, at estimated fair value (amortized cost, $4,059.4 and $3,820.7)........................................... $ 4,231.0 $ 3,889.5 Mortgage loans on real estate........................................ 1,341.6 1,380.7 Policy loans......................................................... 1,700.2 1,765.9 Cash and other invested assets....................................... 282.7 336.1 DAC.................................................................. 775.2 876.5 Other assets......................................................... 235.9 246.3 ----------------- ----------------- Total Assets......................................................... $ 8,566.6 $ 8,495.0 ================= ================= Liabilities Future policy benefits and policyholders' account balances........... $ 8,993.2 $ 8,999.7 Other liabilities.................................................... 80.5 91.6 ----------------- ----------------- Total Liabilities.................................................... $ 9,073.7 $ 9,091.3 ================= =================
F-19
1997 1996 1995 ----------------- ---------------- ----------------- (In Millions) Revenues Premiums and other revenue......................... $ 687.1 $ 724.8 $ 753.4 Investment income (net of investment expenses of $27.0, $27.3 and $26.7).............. 574.9 546.6 538.9 Investment losses, net............................. (42.4) (5.5) (20.2) ----------------- ---------------- ----------------- Total revenues............................... 1,219.6 1,265.9 1,272.1 ----------------- ---------------- ----------------- Benefits and Other Deductions Policyholders' benefits and dividends.............. 1,066.7 1,106.3 1,077.6 Other operating costs and expenses................. 50.4 34.6 51.3 ----------------- ---------------- ----------------- Total benefits and other deductions.......... 1,117.1 1,140.9 1,128.9 ----------------- ---------------- ----------------- Contribution from the Closed Block................. $ 102.5 $ 125.0 $ 143.2 ================= ================ =================
At December 31, 1997 and 1996, problem mortgage loans on real estate had an amortized cost of $8.1 million and $4.3 million, respectively, and mortgage loans on real estate for which the payment terms have been restructured had an amortized cost of $70.5 million and $114.2 million, respectively. At December 31, 1996, the restructured mortgage loans on real estate amount included $.7 million of problem mortgage loans on real estate. Impaired mortgage loans (as defined under SFAS No. 114) along with the related provision for losses were as follows:
December 31, ------------------------------------ 1997 1996 ---------------- ----------------- (In Millions) Impaired mortgage loans with provision for losses...................... $ 109.1 $ 128.1 Impaired mortgage loans without provision for losses................... .6 .6 ---------------- ----------------- Recorded investment in impaired mortgages.............................. 109.7 128.7 Provision for losses................................................... (17.4) (12.9) ---------------- ----------------- Net Impaired Mortgage Loans............................................ $ 92.3 $ 115.8 ================ =================
During 1997, 1996 and 1995, the Closed Block's average recorded investment in impaired mortgage loans was $110.2 million, $153.8 million and $146.9 million, respectively. Interest income recognized on these impaired mortgage loans totaled $9.4 million, $10.9 million and $5.9 million ($4.1 million, $4.7 million and $1.3 million recognized on a cash basis) for 1997, 1996 and 1995, respectively. Valuation allowances amounted to $18.5 million and $13.8 million on mortgage loans on real estate and $16.8 million and $3.7 million on equity real estate at December 31, 1997 and 1996, 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, $12.8 million and $16.8 million for 1997, 1996 and 1995, respectively and 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 the fourth quarter, $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-20 7) DISCONTINUED OPERATIONS Summarized financial information for discontinued operations follows:
December 31, -------------------------------------- 1997 1996 ----------------- ----------------- (In Millions) Assets Mortgage loans on real estate........................................ $ 655.5 $ 1,111.1 Equity real estate................................................... 655.6 925.6 Other equity investments............................................. 209.3 300.5 Short-term investments............................................... 102.0 63.2 Other invested assets................................................ 41.9 50.9 ----------------- ----------------- Total investments.................................................. 1,664.3 2,451.3 Cash and cash equivalents............................................ 106.8 42.6 Other assets......................................................... 253.9 242.9 ----------------- ----------------- Total Assets......................................................... $ 2,025.0 $ 2,736.8 ================= ================= Liabilities Policyholders' liabilities........................................... $ 1,048.3 $ 1,335.9 Allowance for future losses.......................................... 259.2 262.0 Amounts due to continuing operations................................. 572.8 996.2 Other liabilities.................................................... 144.7 142.7 ----------------- ----------------- Total Liabilities.................................................... $ 2,025.0 $ 2,736.8 ================= =================
1997 1996 1995 ----------------- ---------------- ----------------- (In Millions) Revenues Investment income (net of investment expenses of $97.3, $127.5 and $153.1)............ $ 188.6 $ 245.4 $ 323.6 Investment losses, net............................. (173.7) (18.9) (22.9) Policy fees, premiums and other income............. .2 .2 .7 ----------------- ---------------- ----------------- Total revenues..................................... 15.1 226.7 301.4 Benefits and other deductions...................... 169.5 250.4 326.5 Losses charged to allowance for future losses...... (154.4) (23.7) (25.1) ----------------- ---------------- ----------------- Pre-tax loss from operations....................... - - - Pre-tax loss from strengthening of the allowance for future losses...................... (134.1) (129.0) - Federal income tax benefit......................... 46.9 45.2 - ----------------- ---------------- ----------------- Loss from Discontinued Operations.................. $ (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 the need to strengthen the allowance in 1997 and 1996, respectively. 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 the fourth quarter, $92.5 million of writedown on real estate held for production of income were recognized. Benefits and other deductions includes $53.3 million, $114.3 million and $154.6 million of interest expense related to amounts borrowed from continuing operations in 1997, 1996 and 1995, respectively. F-21 Valuation allowances amounted to $28.4 million and $9.0 million on mortgage loans on real estate and $88.4 million and $20.4 million on equity real estate at December 31, 1997 and 1996, 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, 1997 and 1996, problem mortgage loans on real estate had amortized costs of $11.0 million and $7.9 million, respectively, and mortgage loans on real estate for which the payment terms have been restructured had amortized costs of $109.4 million and $208.1 million, respectively. Impaired mortgage loans (as defined under SFAS No. 114) along with the related provision for losses were as follows:
December 31, ------------------------------------ 1997 1996 ---------------- ----------------- (In Millions) Impaired mortgage loans with provision for losses...................... $ 101.8 $ 83.5 Impaired mortgage loans without provision for losses................... .2 15.0 ---------------- ----------------- Recorded investment in impaired mortgages.............................. 102.0 98.5 Provision for losses................................................... (27.3) (8.8) ---------------- ----------------- Net Impaired Mortgage Loans............................................ $ 74.7 $ 89.7 ================ =================
During 1997, 1996 and 1995, the discontinued operations' average recorded investment in impaired mortgage loans was $89.2 million, $134.8 million and $177.4 million, respectively. Interest income recognized on these impaired mortgage loans totaled $6.6 million, $10.1 million and $4.5 million ($5.3 million, $7.5 million and $.4 million recognized on a cash basis) for 1997, 1996 and 1995, respectively. At December 31, 1997 and 1996, discontinued operations had carrying values of $156.2 million and $263.0 million, respectively, of real estate acquired in satisfaction of debt. 8) SHORT-TERM AND LONG-TERM DEBT Short-term and long-term debt consists of the following:
December 31, -------------------------------------- 1997 1996 ----------------- ----------------- (In Millions) Short-term debt...................................................... $ 422.2 $ 174.1 ----------------- ----------------- 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....................... 199.7 199.6 Other.............................................................. .3 .5 ----------------- ----------------- Total Equitable Life........................................... 599.4 599.5 ----------------- ----------------- Wholly Owned and Joint Venture Real Estate: Mortgage notes, 5.87% - 12.00% due through 2006.................... 951.1 968.6 ----------------- ----------------- Alliance: Other.............................................................. 18.5 24.7 ----------------- ----------------- Total long-term debt................................................. 1,569.0 1,592.8 ----------------- ----------------- Total Short-term and Long-term Debt.................................. $ 1,991.2 $ 1,766.9 ================= =================
F-22 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 June 2000. The interest rates are based on external indices dependent on the type of borrowing and at December 31, 1997 range from 5.88% to 8.50%. There were no borrowings outstanding under this bank credit facility at December 31, 1997. 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, 1997, $50.0 million was outstanding under this program. During 1996, Alliance entered into a $250.0 million five-year revolving credit facility with a group of banks. 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. The revolving credit facility will be used to provide back-up liquidity for Alliance's $250.0 million commercial paper program, to fund commission payments to financial intermediaries for the sale of Class B and C shares under Alliance's mutual fund distribution system, and for general working capital purposes. At December 31, 1997, Alliance had $72.0 million in commercial paper outstanding and there were no borrowings under the 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. On December 18, 1995, Equitable Life issued, in accordance with Section 1307 of the New York Insurance Law, $400.0 million of surplus notes having an interest rate of 6.95% scheduled to mature in 2005 and $200.0 million of surplus notes having an interest rate of 7.70% scheduled to mature in 2015 (together, the "Surplus Notes"). Proceeds from the issuance of the Surplus Notes were $596.6 million, net of related issuance costs. Payments of interest on, or principal of, the Surplus Notes are subject to prior approval by the Superintendent. The Company has pledged real estate, mortgage loans, cash and securities amounting to $1,164.0 million and $1,406.4 million at December 31, 1997 and 1996, respectively, as collateral for certain long-term debt. At December 31, 1997, aggregate maturities of the long-term debt based on required principal payments at maturity for 1998 and the succeeding four years are $565.8 million, $201.4 million, $8.6 million, $1.7 million and $1.8 million, respectively, and $790.6 million thereafter. 9) FEDERAL INCOME TAXES A summary of the Federal income tax expense in the consolidated statements of earnings is shown below:
1997 1996 1995 ----------------- ---------------- ----------------- (In Millions) Federal income tax expense (benefit): Current.......................................... $ 186.5 $ 97.9 $ (11.7) Deferred......................................... (95.0) (88.2) 132.2 ----------------- ---------------- ----------------- Total.............................................. $ 91.5 $ 9.7 $ 120.5 ================= ================ =================
F-23 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:
1997 1996 1995 ----------------- ---------------- ----------------- (In Millions) Expected Federal income tax expense................ $ 234.7 $ 73.0 $ 173.7 Non-taxable minority interest...................... (38.0) (28.6) (22.0) Adjustment of tax audit reserves................... (81.7) 6.9 4.1 Equity in unconsolidated subsidiaries.............. (45.1) (32.3) (19.4) Other.............................................. 21.6 (9.3) (15.9) ----------------- ---------------- ----------------- Federal Income Tax Expense......................... $ 91.5 $ 9.7 $ 120.5 ================= ================ =================
The components of the net deferred Federal income taxes are as follows:
December 31, 1997 December 31, 1996 --------------------------------- --------------------------------- Assets Liabilities Assets Liabilities --------------- ---------------- --------------- --------------- (In Millions) Compensation and related benefits...... $ 257.9 $ - $ 259.2 $ - Other.................................. 30.7 - - 1.8 DAC, reserves and reinsurance.......... - 222.8 - 166.0 Investments............................ - 405.7 - 328.6 --------------- ---------------- --------------- --------------- Total.................................. $ 288.6 $ 628.5 $ 259.2 $ 496.4 =============== ================ =============== ===============
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:
1997 1996 1995 ----------------- ---------------- ----------------- (In Millions) DAC, reserves and reinsurance...................... $ 46.2 $ (156.2) $ 63.3 Investments........................................ (113.8) 78.6 13.0 Compensation and related benefits.................. 3.7 22.3 30.8 Other.............................................. (31.1) (32.9) 25.1 ----------------- ---------------- ----------------- Deferred Federal Income Tax (Benefit) Expense................................ $ (95.0) $ (88.2) $ 132.2 ================= ================ =================
The Internal Revenue Service (the "IRS") is in the process of examining the Company's consolidated Federal income tax returns for the years 1989 through 1991. Management believes these audits will have no material adverse effect on the Company's results of operations. F-24 10) REINSURANCE AGREEMENTS The Insurance Group assumes and cedes reinsurance with other insurance companies. The Insurance Group evaluates the financial condition of its reinsurers to minimize its exposure to significant losses from reinsurer insolvencies. Ceded reinsurance does not relieve the originating insurer of liability. The effect of reinsurance (excluding group life and health) is summarized as follows:
1997 1996 1995 ----------------- ---------------- ----------------- (In Millions) Direct premiums.................................... $ 448.6 $ 461.4 $ 474.2 Reinsurance assumed................................ 198.3 177.5 171.3 Reinsurance ceded.................................. (45.4) (41.3) (38.7) ----------------- ---------------- ----------------- Premiums........................................... $ 601.5 $ 597.6 $ 606.8 ================= ================ ================= Universal Life and Investment-type Product Policy Fee Income Ceded.......................... $ 61.0 $ 48.2 $ 44.0 ================= ================ ================= Policyholders' Benefits Ceded...................... $ 70.6 $ 54.1 $ 48.9 ================= ================ ================= Interest Credited to Policyholders' Account Balances Ceded................................... $ 36.4 $ 32.3 $ 28.5 ================= ================ =================
Effective January 1, 1994, all in force business above $5.0 million was reinsured. During 1996, the Company's retention limit on joint survivorship policies was increased to $15.0 million. 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 $1.6 million, $2.4 million and $260.6 million for 1997, 1996 and 1995, respectively. Ceded death and disability benefits totaled $4.3 million, $21.2 million and $188.1 million for 1997, 1996 and 1995, respectively. Insurance liabilities ceded totaled $593.8 million and $652.4 million at December 31, 1997 and 1996, respectively. 11) EMPLOYEE BENEFIT PLANS The Company sponsors qualified and non-qualified defined benefit plans covering substantially all employees (including certain qualified part-time employees), managers and certain agents. The pension plans are non-contributory. 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:
1997 1996 1995 ----------------- ---------------- ----------------- (In Millions) Service cost....................................... $ 32.5 $ 33.8 $ 30.0 Interest cost on projected benefit obligations..... 128.2 120.8 122.0 Actual return on assets............................ (307.6) (181.4) (309.2) Net amortization and deferrals..................... 166.6 43.4 155.6 ----------------- ---------------- ----------------- Net Periodic Pension Cost (Credit)................. $ 19.7 $ 16.6 $ (1.6) ================= ================ =================
F-25 The funded status of the qualified and non-qualified pension plans is as follows:
December 31, ------------------------------------ 1997 1996 ---------------- ----------------- (In Millions) Actuarial present value of obligations: Vested............................................................... $ 1,702.6 $ 1,672.2 Non-vested........................................................... 3.9 10.1 ---------------- ----------------- Accumulated Benefit Obligation......................................... $ 1,706.5 $ 1,682.3 ================ ================= Plan assets at fair value.............................................. $ 1,867.4 $ 1,626.0 Projected benefit obligations.......................................... 1,801.3 1,765.5 ---------------- ----------------- Projected benefit obligations (in excess of) or less than plan assets.. 66.1 (139.5) Unrecognized prior service cost........................................ (9.9) (17.9) Unrecognized net loss from past experience different from that assumed.................................................... 95.0 280.0 Unrecognized net asset at transition................................... 3.1 4.7 Additional minimum liability........................................... - (19.3) ---------------- ----------------- Prepaid Pension Cost.................................................. $ 154.3 $ 108.0 ================ =================
The discount rate and rate of increase in future compensation levels used in determining the actuarial present value of projected benefit obligations were 7.25% and 4.07%, respectively, at December 31, 1997 and 7.5% and 4.25%, respectively, at December 31, 1996. As of January 1, 1997 and 1996, the expected long-term rate of return on assets for the retirement plan was 10.25%. The Company recorded, as a reduction of shareholders' equity, an additional minimum pension liability of $17.3 million and $12.9 million, net of Federal income taxes, at December 31, 1997 and 1996, 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 $33.2 million, $34.7 million and $36.4 million for 1997, 1996 and 1995, 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 1997, 1996 and 1995, the Company made estimated postretirement benefits payments of $18.7 million, $18.9 million and $31.1 million, respectively. F-26 The following table sets forth the postretirement benefits plan's status, reconciled to amounts recognized in the Company's consolidated financial statements:
1997 1996 1995 ----------------- ---------------- ----------------- (In Millions) Service cost....................................... $ 4.5 $ 5.3 $ 4.0 Interest cost on accumulated postretirement benefits obligation.............................. 34.7 34.6 34.7 Net amortization and deferrals..................... 1.9 2.4 (2.3) ----------------- ---------------- ----------------- Net Periodic Postretirement Benefits Costs......... $ 41.1 $ 42.3 $ 36.4 ================= ================ =================
December 31, ------------------------------------ 1997 1996 ---------------- ----------------- (In Millions) Accumulated postretirement benefits obligation: Retirees............................................................. $ 388.5 $ 381.8 Fully eligible active plan participants.............................. 45.7 50.7 Other active plan participants....................................... 56.6 60.7 ---------------- ----------------- 490.8 493.2 Unrecognized prior service cost........................................ 40.3 50.5 Unrecognized net loss from past experience different from that assumed and from changes in assumptions.................... (140.6) (150.5) ---------------- ----------------- Accrued Postretirement Benefits Cost................................... $ 390.5 $ 393.2 ================ =================
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 costs to the Company of providing these medical benefits will be limited to 200% of 1993 costs for all participants. The assumed health care cost trend rate used in measuring the accumulated postretirement benefits obligation was 8.75% in 1997, gradually declining to 2.75% in the year 2009 and in 1996 was 9.5%, gradually declining to 3.5% in the year 2009. The discount rate used in determining the accumulated postretirement benefits obligation was 7.25% and 7.50% at December 31, 1997 and 1996, respectively. If the health care cost trend rate assumptions were increased by 1%, the accumulated postretirement benefits obligation as of December 31, 1997 would be increased 7%. The effect of this change on the sum of the service cost and interest cost would be an increase of 8%. 12) DERIVATIVES AND FAIR VALUE OF FINANCIAL INSTRUMENTS Derivatives The Insurance Group primarily uses derivatives for asset/liability risk management and for hedging individual securities. Derivatives mainly are utilized to reduce the Insurance Group's exposure to interest rate fluctuations. Accounting for interest rate swap transactions is on an accrual basis. Gains and losses related to interest rate swap transactions are amortized as yield adjustments over the remaining life of the underlying hedged security. Income and expense resulting from interest rate swap activities are reflected in net investment income. The notional amount of matched interest rate swaps outstanding at December 31, 1997 and 1996, respectively, was $1,353.4 million and $649.9 million. The average unexpired terms at December 31, 1997 ranged from 1.5 to 3.8 years. At December 31, 1997, the cost of terminating outstanding matched swaps in a loss position was $10.9 million and the unrealized gain on outstanding matched swaps in a gain position was $38.9 million. The Company has no intention of terminating these contracts prior to maturity. During 1996 and 1995, net gains of $.2 million and $1.4 million, respectively, were recorded in connection with interest rate swap activity. Equitable Life has implemented an interest rate cap program designed to hedge crediting rates on interest-sensitive individual annuities contracts. The outstanding notional amounts at F-27 December 31, 1997 of contracts purchased and sold were $7,250.0 million and $875.0 million, respectively. The net premium paid by Equitable Life on these contracts was $48.5 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, 1997 and 1996. 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. F-28 Fair values for long-term debt is determined using published market values, where available, or contractual cash flows discounted at market interest rates. The estimated fair values for non-recourse mortgage debt are determined by discounting contractual cash flows at a rate which takes into account the level of current market interest rates and collateral risk. The estimated fair values for recourse mortgage debt are determined by discounting contractual cash flows at a rate based upon current interest rates of other companies with credit ratings similar to the Company. The Company's 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, 6 and 7:
December 31, -------------------------------------------------------------------- 1997 1996 --------------------------------- --------------------------------- Carrying Estimated Carrying Estimated Value Fair Value Value Fair Value --------------- ---------------- --------------- --------------- (In Millions) Consolidated Financial Instruments: Mortgage loans on real estate.......... $ 2,611.4 $ 2,822.8 $ 3,133.0 $ 3,394.6 Other limited partnership interests.... 509.4 509.4 467.0 467.0 Policy loans........................... 2,422.9 2,493.9 2,196.1 2,221.6 Policyholders' account balances - investment contracts................. 12,611.0 12,714.0 12,908.7 12,992.2 Long-term debt......................... 1,569.0 1,531.5 1,592.8 1,557.7 Closed Block Financial Instruments: Mortgage loans on real estate.......... 1,341.6 1,420.7 1,380.7 1,425.6 Other equity investments............... 86.3 86.3 105.0 105.0 Policy loans........................... 1,700.2 1,784.2 1,765.9 1,798.0 SCNILC liability....................... 27.6 30.3 30.6 34.9 Discontinued Operations Financial Instruments: Mortgage loans on real estate.......... 655.5 779.9 1,111.1 1,220.3 Fixed maturities....................... 38.7 38.7 42.5 42.5 Other equity investments............... 209.3 209.3 300.5 300.5 Guaranteed interest contracts.......... 37.0 34.0 290.7 300.5 Long-term debt......................... 102.0 102.1 102.1 102.2
13) COMMITMENTS AND CONTINGENT LIABILITIES The Company has provided, from time to time, certain guarantees or commitments to affiliates, investors and others. These arrangements include commitments by the Company, under certain conditions: to make capital contributions of up to $202.6 million to affiliated real estate joint ventures; and to provide equity financing to certain limited partnerships of $362.1 million at December 31, 1997, 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 $47.4 million of letters of credit outstanding at December 31, 1997. F-29 14) LITIGATION Equitable Life recently agreed to settle, subject to court approval, previously disclosed cases brought by persons insured under Lifetime Guaranteed Renewable Major Medical Insurance Policies issued by Equitable Life (the "Policies") in New York (Golomb et al. v. The Equitable Life Assurance Society of the United States), Pennsylvania (Malvin et al. v. The Equitable Life Assurance Society of the United States), Texas (Bowler et al. v. The Equitable Life Assurance Society of the United States), Florida (Bachman v. The Equitable Life Assurance Society of the United States) and California (Fletcher v. The Equitable Life Assurance Society of the United 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. Plaintiffs in Bowler and Fletcher also claimed that Equitable Life misrepresented to policyholders in Texas and California, respectively, that premium increases had been approved by insurance departments in those states and determined annual rate increases in a manner that discriminated against policyholders in those states in violation of the terms of the Policies, representations to policyholders and/or state law. The New York trial court dismissed the Golomb action with prejudice and plaintiffs appealed. In Bowler and Fletcher, Equitable Life denied the material allegations of the complaints and filed motions for summary judgment which have been fully briefed. The Malvin action was stayed indefinitely pending the outcome of proceedings in Golomb and in Fletcher the magistrate concluded that the case should be remanded to California state court and Equitable Life appealed that determination to the district judge. On December 23, 1997, Equitable Life entered into a settlement agreement, subject to court approval, which would result in the dismissal with prejudice of each of the five pending actions and the resolution of all similar claims on a nationwide basis. The settlement agreement provides for the creation of a nationwide class consisting of all persons holding, and paying premiums on, the Policies at any time since January 1, 1988. An amended complaint will be filed in the federal district court in Tampa, Florida (where the Florida action is pending), that would assert claims of the kind previously made in the cases described above on a nationwide basis, on behalf of policyholders in the nationwide class, which consists of approximately 127,000 former and current policyholders. If the settlement is approved, Equitable Life would pay $14,166,000 in exchange for release of all claims for past damages on claims of the type described in the five pending actions and the amended complaint. Costs of administering the settlement and any attorneys' fees awarded by the court to plaintiffs' counsel would be deducted from this fund before distribution of the balance to the class. In addition to this payment, Equitable Life will provide future relief to current holders of certain forms of the Policies in the form of an agreement to be embodied in the court's judgment, restricting the premium increases Equitable Life can seek on these Policies in the future. The parties estimate the present value of these restrictions at $23,333,000, before deduction of any attorneys' fees that may be awarded by the court. The estimate is based on assumptions about future events that cannot be predicted with certainty and accordingly the actual value of the future relief may differ. The parties to the settlement shortly will be asking the court to approve preliminarily the settlement and settlement class and to permit distribution of notice of the settlement to policyholders, establish procedures for objections, an opportunity to opt out of the settlements as it affects past damages, and a court hearing on whether the settlement should be finally approved. Equitable Life cannot predict whether the settlement will be approved or, if it is not approved, the outcome of the pending litigations. As noted, proceedings in Malvin were stayed indefinitely; proceedings in the other actions have been stayed or deferred to accommodate the settlement approval process. A number of lawsuits have been filed against life and health insurers in the jurisdictions in which Equitable Life and its subsidiaries do business involving insurers' sales practices, alleged agent misconduct, alleged failure to properly supervise agents, and other matters. Some of the lawsuits have resulted in the award of substantial judgments against other insurers, including material amounts of punitive damages, or in substantial settlements. In some states, juries have substantial discretion in awarding punitive damages. Equitable Life, Equitable Variable Life Insurance Company ("EVLICO," which was merged into Equitable Life effective January 1, 1997, but whose existence continues for certain limited purposes, including the defense of litigation) and The Equitable of Colorado, Inc. ("EOC"), like other life and health insurers, from time to time are involved in such litigation. Among litigations pending against Equitable Life, EVLICO and EOC of the type referred to in this paragraph are the litigations described in the following seven paragraphs. F-30 An action was instituted on April 6, 1995 against Equitable Life and its wholly owned subsidiary, EOC, in New York state court, entitled Sidney C. Cole, et al. v. The Equitable Life Assurance Society of the United States and The Equitable of Colorado, Inc. The action is brought by the holders of a joint survivorship whole life policy issued by EOC. The action purports to be on behalf of a class consisting of all persons who from January 1, 1984 purchased life insurance policies sold by Equitable Life and EOC based upon allegedly uniform sales presentations and policy illustrations. The complaint puts in issue various alleged sales practices that plaintiffs assert, among other things, misrepresented the stated number of years that the annual premium would need to be paid. Plaintiffs seek damages in an unspecified amount, imposition of a constructive trust, and seek to enjoin Equitable Life and EOC from engaging in the challenged sales practices. In June 1996, the Court issued a decision and order dismissing with prejudice plaintiffs' causes of action for fraud, constructive fraud, breach of fiduciary duty, negligence, and unjust enrichment, and dismissing without prejudice plaintiffs' cause of action under the New York State consumer protection statute. The only remaining causes of action are for breach of contract and negligent misrepresentation. In April 1997, plaintiffs noticed an appeal from the court's June 1996 order. Subsequently, Equitable Life and EOC noticed a cross-appeal from so much of the June 1996 order that denied their motion to dismiss. Briefing on the appeals is scheduled to begin on February 23, 1998. In June 1997, plaintiffs filed their memorandum of law and affidavits in support of their motion for class certification. That memorandum states that plaintiffs seek to certify a class solely on their breach of contract claims, and not on their negligent misrepresentation claim. Plaintiffs' class certification motion has been fully briefed by the parties and is sub judice. In August 1997, Equitable Life and EOC moved for summary judgment dismissing plaintiffs' remaining claims of breach of contract and negligent misrepresentation. Defendants' summary judgment motion has been fully briefed by the parties. On January 5, 1998, plaintiffs filed a note of issue (placing the case on the trial calendar). On May 21, 1996, an action entitled Elton F. Duncan, III v. The Equitable Life Assurance Society of the United States was commenced against Equitable Life in the Civil District Court for the Parish of Orleans, State of Louisiana. The action originally was brought by an individual who purchased a whole life policy from Equitable Life in 1989. In September 1997, with leave of the court, plaintiff filed a second amended petition naming six additional policyholder plaintiffs and three new sales agent defendants. The sole named individual defendant in the original petition is also named as a defendant in the second amended petition. Plaintiffs purport to represent a class consisting of all persons who purchased whole life or universal life insurance policies from Equitable Life from January 1, 1981 through July 22, 1992. Plaintiffs allege improper sales practices based on allegations of misrepresentations concerning one or more of the following: the number of years that premiums would need to be paid; a policy's suitability as an investment vehicle; and the extent to which a policy was a proper replacement policy. Plaintiffs seek damages, including punitive damages, in an unspecified amount. In October 1997, Equitable Life filed (i) exceptions to the second amended petition, asserting deficiencies in pleading of venue and vagueness; and (ii) a motion to strike certain allegations. On January 23, 1998, the court heard argument on Equitable Life's exceptions and motion to strike. Those motions are sub judice. Motion practice regarding discovery continues. On July 26, 1996, an action entitled Michael Bradley v. Equitable Variable Life Insurance Company was commenced in New York state court, Kings County. The action is brought by the holder of a variable life insurance policy issued by EVLICO. The plaintiff purports to represent a class consisting of all persons or entities who purchased one or more life insurance policies issued by EVLICO from January 1, 1980. The complaint puts at issue various alleged sales practices and alleges misrepresentations concerning the extent to which the policy was a proper replacement policy and the number of years that the annual premium would need to be paid. Plaintiff seeks damages, including punitive damages, in an unspecified amount and also seeks injunctive relief prohibiting EVLICO from canceling policies for failure to make premium payments beyond the alleged stated number of years that the annual premium would need to be paid. EVLICO answered the complaint, denying the material allegations. In September 1996, Equitable Life, EVLICO and EOC made a motion to have this proceeding moved from Kings County Supreme Court to New York County for joint trial or consolidation with the Cole action. The motion was denied by the Court in Cole in January 1997. Plaintiff then moved for certification of a nationwide class consisting of all persons or entities who, since January 1, 1980, were sold one or more life insurance products based on misrepresentations as to the number of years that the annual premium would need to be paid, and/or who were allegedly induced to purchase additional policies from EVLICO using the cash value accumulated in existing policies. Defendants have opposed this motion. Discovery and briefing regarding plaintiff's motion for class certification are ongoing. F-31 On December 12, 1996, an action entitled Robert E. Dillon v. The Equitable Life Assurance Society of the United States and The Equitable of Colorado, was commenced in the United States District Court for the Southern District of Florida. The action is brought by an individual who purchased a joint whole life policy from EOC in 1988. The complaint puts in issue various alleged sales practices and alleges misrepresentations concerning the alleged impropriety of replacement policies issued by Equitable Life and EOC and alleged misrepresentations regarding the number of years premiums would have to be paid on the defendants' policies. Plaintiff alleges claims for breach of contract, fraud, negligent misrepresentation, money had and received, unjust enrichment and imposition of a constructive trust. Plaintiff purports to represent two classes of persons. The first is a "contract class," consisting of all persons who purchased whole or universal life insurance policies from Equitable Life and EOC and from whom Equitable Life and EOC have sought additional payments beyond the number of years allegedly promised by Equitable Life and EOC. The second is a "fraud class," consisting of all persons with an interest in policies issued by Equitable Life and EOC at any time since October 1, 1986. Plaintiff seeks damages in an unspecified amount, and also seeks injunctive relief attaching Equitable Life's and EOC's profits from their alleged sales practices. In May 1997, plaintiff served a motion for class certification. In July 1997, the parties submitted to the Court a joint scheduling report, joint scheduling order and a confidentiality stipulation and order. The Court signed the latter stipulation, and the others remain sub judice. Further briefing on plaintiff's class certification motion will await entry of a scheduling order and further class certification discovery, which has commenced and is on-going. In January 1998, the judge assigned to the case recused himself, and the case was reassigned. Defendants are to serve their answer in February 1998. On January 3, 1996, an amended complaint was filed in an action entitled Frank Franze Jr. and George Busher, individually and on behalf of all others similarly situated v. The Equitable Life Assurance Society of the United States, and Equitable Variable Life Insurance Company, No. 94-2036 in the United States District Court for the Southern District of Florida. The action was brought by two individuals who purchased variable life insurance policies. The plaintiffs purport to represent a nationwide class consisting of all persons who purchased variable life insurance policies from Equitable Life and EVLICO since September 30, 1991. The amended complaint alleges that Equitable Life's and EVLICO's agents were trained not to disclose fully that the product being sold was life insurance. Plaintiffs allege violations of the Federal securities laws and seek rescission of the contracts or compensatory damages and attorneys' fees and expenses. Equitable Life and EVLICO have answered the amended complaint, denying the material allegations and asserting certain affirmative defenses. Motion practice regarding discovery continues. On January 9, 1997, an action entitled Rosemarie Chaviano, individually and on behalf of all others similarly situated v. The Equitable Life Assurance Society of the United States, and Equitable Variable Life Insurance Company, was filed in Massachusetts state court making claims similar to those in the Franze action and alleging violations of the Massachusetts securities laws. The plaintiff purports to represent all persons in Massachusetts who purchased variable life insurance contracts from Equitable Life and EVLICO from January 9, 1993 to the present. The Massachusetts action seeks rescission of the contracts or compensatory damages, attorneys' fees, expenses and injunctive relief. Plaintiff filed an amended complaint in April 1997. In July 1997, Equitable Life served a motion to dismiss the amended complaint or, in the alternative, for summary judgment. On September 12, 1997, plaintiff moved for class certification. This motion is scheduled for hearing on February 18, 1998. On September 11, 1997, an action entitled Pamela L. and James A. Luther, individually and as representatives of all people similarly situated v. The Equitable Life Assurance Society of the United States, The Equitable Companies Incorporated, and Casey Cammack, individually and as agent for The Equitable Life Assurance Society of the United States and The Equitable Companies Incorporated, was filed in Texas state court. The action was brought by holders of a whole life policy and the beneficiary under that policy. Plaintiffs purport to represent a nationwide class of persons having an ownership or beneficial interest in whole and universal life policies issued by Equitable Life from January 1, 1982 through December 31, 1996. Also included in the purported class are persons having an ownership interest in variable annuities purchased from Equitable Life from January 1, 1992 to the present. The complaint puts in issue the allegations that uniform sales presentations, illustrations, and materials that Equitable Life agents used misrepresented the stated number of years that premiums would need to be paid and misrepresented the extent to which the policies at issue were F-32 proper replacement policies. Plaintiffs seek compensatory damages, attorneys' fees and expenses. In October 1997, Equitable Life served a general denial of the allegations against it. The same day, the Holding Company entered a special appearance contesting the court's jurisdiction over it. In November 1997, Equitable Life filed a plea in abatement, which, under Texas law, stayed further proceedings in the case because plaintiffs had not served a demand letter. Plaintiffs served a demand letter upon Equitable Life and the Holding Company, the response to which is due 60 days thereafter. Although the outcome of litigation cannot be predicted with certainty, particularly in the early stages of an action, the Company's management believes that the ultimate resolution of the Cole, Duncan, Bradley, Dillon, Franze, Chaviano and Luther litigations should not have a material adverse effect on the financial position of the Company. The Company'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 Company's results of operations in any particular period. On September 12, 1997, the United States District Court for the Northern District of Alabama, Southern Division, entered an order certifying James Brown as the representative of a class consisting of "[a]ll African-Americans who applied but were not hired for, were discouraged from applying for, or would have applied for the position of Sales Agent in the absence of the discriminatory practices, and/or procedures in the [former] Southern Region of The Equitable from May 16, 1987 to the present." The second amended complaint in James W. Brown, on behalf of others similarly situated v. The Equitable Life Assurance Society of the United States, alleges, among other things, that Equitable Life discriminated 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 any litigation cannot be predicted with certainty, the Company's management believes that the ultimate resolution of this matter should not have a material adverse effect on the financial position of the Company. The Company'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 Company's results of operations in any particular period. The U.S. Department of Labor ("DOL") is conducting an investigation of Equitable Life's management of the Prime Property Fund ("PPF"). PPF is an open-end, commingled real estate separate account of Equitable Life for pension clients. Equitable Life serves as investment manager in PPF and retains EREIM as advisor. Equitable Life agreed to indemnify the purchaser of EREIM (which Equitable Life sold in June 1997) with respect to any fines, penalties and rebates to clients in connection with this investigation. In early 1995, the DOL commenced a national investigation of commingled real estate funds with pension investors, including PPF. The investigation appears to be focused principally on appraisal and valuation procedures in respect of fund properties. The most recent request from the DOL seems to reflect, at least in part, an interest in the relationship between the valuations for those properties reflected in appraisals prepared for local property tax proceedings and the valuations used by PPF for other purposes. At no time has the DOL made any specific allegation that Equitable Life or EREIM has acted improperly and Equitable Life and EREIM believe that any such allegation would be without foundation. While the outcome of this investigation cannot be predicted with certainty, the Company's management believes that the ultimate resolution of this matter should not have a material adverse effect on the financial position of the Company. The Company's management cannot make an estimate of loss, if any, or predict whether or not this investigation will have a material adverse effect on the Company's results of operations in any particular period. On July 25, 1995, a Consolidated and Supplemental Class Action Complaint ("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 Complaint, which sought certification of a plaintiff class of persons who purchased or owned Class A, B or C shares of the Fund from March 27, 1992 through December 23, 1994, sought an unspecified amount of damages, costs, attorneys' fees and punitive damages. The principal allegations are that the Fund purchased debt securities issued by the Mexican and Argentine governments in amounts that were not permitted by the Fund's investment objective, and that there was no shareholder vote to change the investment objective to permit purchases in such amounts. The Complaint further alleged that the decline in the value of the Mexican and Argentine securities held by the Fund caused the Fund's net asset value to decline to the detriment of the Fund's shareholders. On September 26, 1996, the United States District Court for the Southern District of F-33 New York granted the defendants' motion to dismiss all counts of the Complaint ("First Decision"). On October 11, 1996, plaintiffs filed a motion for reconsideration of the First Decision. On November 25, 1996, the court denied plaintiffs' motion for reconsideration of the First Decision. On October 29, 1997, the United States Court of Appeals for the Second Circuit issued an order granting defendants' motion to strike and dismissing plaintiffs' appeal of the First Decision. On October 29, 1996, plaintiffs filed a motion for leave to file an amended complaint. The principal allegations of the proposed amended complaint are that (i) the Fund failed to hedge against the risks of investing in foreign securities despite representations that it would do so, (ii) the Fund did not properly disclose that it planned to invest in mortgage-backed derivative securities and (iii) two advertisements used by the Fund misrepresented the risks of investing in the Fund. On July 15, 1997, the District Court denied plaintiffs' motion for leave to file an amended complaint and ordered that the case be dismissed ("Second Decision"). The plaintiffs have appealed the Second Decision to the United States Court of Appeals for the Second Circuit. While the ultimate outcome of this matter cannot be determined at this time, management of Alliance does not expect that it will have a material adverse effect on Alliance's results of operations or financial condition. On January 26, 1996, a purported purchaser of certain notes and warrants to purchase shares of common stock of Rickel Home Centers, Inc. ("Rickel") filed a class action complaint against Donaldson, Lufkin & Jenrette Securities Corporation ("DLJSC") and certain other defendants for unspecified compensatory and punitive damages in the U. S. District Court for the Southern District of New York. The suit was brought on behalf of the purchasers of 126,457 units consisting of $126,457,000 aggregate principal amount of 13 1/2% senior notes due 2001 and 126,457 warrants to purchase shares of common stock of Rickel issued by Rickel in October 1994. The complaint alleges violations of federal securities laws and common law fraud against DLJSC, as the underwriter of the units and as an owner of 7.3% of the common stock of Rickel, Eos Partners, L.P., and General Electric Capital Corporation, each as owners of 44.2% of the common stock of Rickel, and members of the board of directors of Rickel, including a DLJSC managing director. The complaint seeks to hold DLJSC liable for alleged misstatements and omissions contained in the prospectus and registration statement filed in connection with the offering of the units, alleging that the defendants knew of financial losses and a decline in value of Rickel in the months prior to the offering and did not disclose such information. The complaint also alleges that Rickel failed to pay its semi-annual interest payment due on the units on December 15, 1995, and that Rickel filed a voluntary petition for reorganization pursuant to Chapter 11 of the Bankruptcy Code on January 10, 1996. DLJSC intends to defend itself vigorously against all of the allegations contained in the complaint. Although there can be no assurance, DLJ does not believe that the outcome of this litigation will have a material adverse effect on its financial condition. Due to the early stage of this litigation, based on the information currently available to it, DLJ's management cannot make an estimate of loss, if any, or predict whether or not such litigation will have a material adverse effect on DLJ's results of operations in any particular period. In October 1995, DLJSC was named as a defendant in a purported class action filed in a Texas State Court on behalf of the holders of $550.0 million principal amount of subordinated redeemable discount debentures of National Gypsum Corporation ("NGC") canceled in connection with a Chapter 11 plan of reorganization for NGC consummated in July 1993. The named plaintiff in the State Court action also filed an adversary proceeding in the U.S. Bankruptcy Court for the Northern District of Texas seeking a declaratory judgment that the confirmed NGC plan of reorganization does not bar the class action claims. Subsequent to the consummation of NGC's plan of reorganization, NGC's shares traded for values substantially in excess of, and in 1995 NGC was acquired for a value substantially in excess of, the values upon which NGC's plan of reorganization was based. The two actions arise out of DLJSC's activities as financial advisor to NGC in the course of NGC's Chapter 11 reorganization proceedings. The class action complaint alleges that the plan of reorganization submitted by NGC was based upon projections by NGC and DLJSC which intentionally understated forecasts, and provided misleading and incorrect information in order to hide NGC's true value and that defendants breached their fiduciary duties by, among other things, providing false, misleading or incomplete information to deliberately understate the value of NGC. The class action complaint seeks compensatory and punitive damages purportedly sustained by the class. On October 10, 1997, DLJSC and F-34 others were named as defendants in a new adversary proceeding in the Bankruptcy Court brought by the NGC Settlement Trust, an entity created by the NGC plan of reorganization to deal with asbestos-related claims. The Trust's allegations are substantially similar to the claims in the State Court action. In court papers dated October 16, 1997, the State Court plaintiff indicated that he would intervene in the Trust's adversary proceeding. On January 21, 1998, the Bankruptcy Court ruled that the State Court plaintiff's claims were not barred by the NGC plan of reorganization insofar as they alleged nondisclosure of certain cost reductions announced by NGC in October 1993. The Texas State Court action, which had been removed to the Bankruptcy Court, has been remanded back to the state court, which remand is being opposed by DLJSC. DLJSC intends to defend itself vigorously against all of the allegations contained in the complaints. Although there can be no assurance, DLJ does not believe that the ultimate outcome of this litigation will have a material adverse effect on its financial condition. Due to the early stage of such litigation, based upon the information currently available to it, DLJ's management cannot make an estimate of loss, if any, or predict whether or not such litigation will have a material adverse effect on DLJ's results of operations in any particular period. In November and December 1995, DLJSC, along with various other parties, was named as a defendant in a number of purported class actions filed in the U.S. District Court for the Eastern District of Louisiana. The complaints allege violations of the federal securities laws arising out of a public offering in 1994 of $435.0 million of first mortgage notes of Harrah's Jazz Company and Harrah's Jazz Finance Corp. The complaints seek to hold DLJSC liable for various alleged misstatements and omissions contained in the prospectus dated November 9, 1994. On February 26, 1997, the parties agreed to a settlement of these actions, subject to the District Court's approval, which was granted on July 31, 1997. The settlement is also subject to approval by the U.S. Bankruptcy Court for the Eastern District of Louisiana of proposed modifications to a confirmed plan of reorganization for Harrah's Jazz Company and Harrah's Jazz Finance Corp., and the satisfaction or waiver of all conditions to the effectiveness of the plan, as provided in the plan. There can be no assurance of the Bankruptcy Court's approval of the modifications to the plan of reorganization, or that the conditions to the effectiveness of the plan will be satisfied or waived. In the opinion of DLJ's management, the settlement, if approved, will not have a material adverse effect on DLJ's results of operations or on its consolidated financial condition. In addition to the matters described above, Equitable Life and its subsidiaries and DLJ and its subsidiaries are involved in various legal actions and proceedings in connection with their businesses. Some of the actions and proceedings have been brought on behalf of various alleged classes of claimants and certain of these claimants seek damages of unspecified amounts. While the ultimate outcome of such matters cannot be predicted with certainty, in the opinion of management no such matter is likely to have a material adverse effect on the Company's consolidated financial position or results of operations. 15) LEASES The Company has entered into operating leases for office space and certain other assets, principally data processing equipment and office furniture and equipment. Future minimum payments under noncancelable leases for 1998 and the succeeding four years are $93.5 million, $84.4 million, $70.2 million, $56.4 million, $47.0 million and $489.3 million thereafter. Minimum future sub-lease rental income on these noncancelable leases for 1998 and the succeeding four years are $7.3 million, $5.9 million, $3.8 million, $2.4 million, $.8 million and $2.9 million thereafter. At December 31, 1997, the minimum future rental income on noncancelable operating leases for wholly owned investments in real estate for 1997 and the succeeding four years are $247.0 million, $238.1 million, $218.7 million, $197.9 million, $169.1 million and $813.0 million thereafter. F-35 16) OTHER OPERATING COSTS AND EXPENSES Other operating costs and expenses consisted of the following:
1997 1996 1995 ----------------- ---------------- ----------------- (In Millions) Compensation costs................................. $ 721.5 $ 704.8 $ 628.4 Commissions........................................ 409.6 329.5 314.3 Short-term debt interest expense................... 31.7 8.0 11.4 Long-term debt interest expense.................... 121.2 137.3 108.1 Amortization of policy acquisition costs........... 287.3 405.2 317.8 Capitalization of policy acquisition costs......... (508.0) (391.9) (391.0) Rent expense, net of sub-lease income.............. 101.8 113.7 109.3 Cursitor intangible assets writedown............... 120.9 - - Other.............................................. 917.9 769.1 677.5 ----------------- ---------------- ----------------- Total.............................................. $ 2,203.9 $ 2,075.7 $ 1,775.8 ================= ================ =================
During 1997, 1996 and 1995, the Company restructured certain operations in connection with cost reduction programs and recorded pre-tax provisions of $42.4 million, $24.4 million and $32.0 million, respectively. The amounts paid during 1997, associated with cost reduction programs, totaled $22.8 million. At December 31, 1997, the liabilities associated with cost reduction programs amounted to $62.0 million. The 1997 cost reduction program include 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. The 1995 cost reduction program included relocation expenses, including the accelerated amortization of building improvements associated with the relocation of the home office. Amortization of DAC in 1996 included a $145.0 million writeoff of DAC related to DI contracts. 17) INSURANCE GROUP STATUTORY FINANCIAL INFORMATION Equitable Life is restricted as to the amounts it may pay as dividends to the Holding Company. Under the New York Insurance Law, the 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 1997, 1996 and 1995, statutory net loss totaled $351.7 million, $351.1 million and $352.4 million, respectively. No amounts are expected to be available for dividends from Equitable Life to the Holding Company in 1998. At December 31, 1997, the Insurance Group, in accordance with various government and state regulations, had $19.7 million of securities deposited with such government or state agencies. F-36 Accounting practices used to prepare statutory financial statements for regulatory filings of stock life insurance companies differ in certain instances from GAAP. The following reconciles the Insurance Group's statutory change in surplus and capital stock and statutory surplus and capital stock determined in accordance with accounting practices prescribed by the New York Insurance Department with net earnings and equity on a GAAP basis.
1997 1996 1995 ----------------- ---------------- ----------------- (In Millions) Net change in statutory surplus and capital stock.................................... $ 203.6 $ 56.0 $ 78.1 Change in asset valuation reserves................. 147.1 (48.4) 365.7 ----------------- ---------------- ----------------- Net change in statutory surplus, capital stock and asset valuation reserves..................... 350.7 7.6 443.8 Adjustments: Future policy benefits and policyholders' account balances............................... (31.1) (298.5) (66.0) DAC.............................................. 220.7 (13.3) 73.2 Deferred Federal income taxes.................... 103.1 108.0 (158.1) Valuation of investments......................... 46.8 289.8 189.1 Valuation of investment subsidiary............... (555.8) (117.7) (188.6) Limited risk reinsurance......................... 82.3 92.5 416.9 Issuance of surplus notes........................ - - (538.9) Postretirement benefits.......................... (3.1) 28.9 (26.7) Other, net....................................... 30.3 12.4 115.1 GAAP adjustments of Closed Block................. 3.6 (9.8) 15.7 GAAP adjustments of discontinued operations...... 189.7 (89.6) 37.3 ----------------- ---------------- ----------------- Net Earnings of the Insurance Group................ $ 437.2 $ 10.3 $ 312.8 ================= ================ =================
December 31, -------------------------------------------------------- 1997 1996 1995 ----------------- ---------------- ----------------- (In Millions) Statutory surplus and capital stock................ $ 2,462.5 $ 2,258.9 $ 2,202.9 Asset valuation reserves........................... 1,444.6 1,297.5 1,345.9 ----------------- ---------------- ----------------- Statutory surplus, capital stock and asset valuation reserves............................... 3,907.1 3,556.4 3,548.8 Adjustments: Future policy benefits and policyholders' account balances............................... (1,336.1) (1,305.0) (1,006.5) DAC.............................................. 3,236.6 3,104.9 3,075.8 Deferred Federal income taxes.................... (370.8) (306.1) (452.0) Valuation of investments......................... 783.5 286.8 417.7 Valuation of investment subsidiary............... (1,338.6) (782.8) (665.1) Limited risk reinsurance......................... (254.2) (336.5) (429.0) Issuance of surplus notes........................ (539.0) (539.0) (538.9) Postretirement benefits.......................... (317.5) (314.4) (343.3) Other, net....................................... 203.7 126.3 4.4 GAAP adjustments of Closed Block................. 814.3 783.7 830.8 GAAP adjustments of discontinued operations...... 71.5 (190.3) (184.6) ----------------- ---------------- ----------------- Equity of the Insurance Group...................... $ 4,860.5 $ 4,084.0 $ 4,258.1 ================= ================ =================
F-37 18) BUSINESS SEGMENT INFORMATION The Company has two major business segments: Insurance Operations and Investment Services. Interest expense related to debt not specific to either business segment is presented as Corporate interest expense. Information for all periods is presented on a comparable basis. Insurance Operations 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 and 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. Investment Services provides investment fund management, primarily to institutional clients. This segment includes the Company's equity interest in DLJ and Separate Accounts which provide various investment options for group clients through pooled or single group accounts. Intersegment investment advisory and other fees of approximately $81.9 million, $127.5 million and $124.1 million for 1997, 1996 and 1995, respectively, are included in total revenues of the Investment Services segment. These fees, excluding amounts related to the GIC Segment of $5.1 million, $15.7 million and $14.7 million for 1997, 1996 and 1995, respectively, are eliminated in consolidation.
1997 1996 1995 ----------------- ---------------- ----------------- (In Millions) Revenues Insurance operations............................... $ 3,684.2 $ 3,770.6 $ 3,614.6 Investment services................................ 1,455.1 1,126.1 949.1 Consolidation/elimination.......................... (19.9) (24.5) (34.9) ----------------- ---------------- ----------------- Total.............................................. $ 5,119.4 $ 4,872.2 $ 4,528.8 ================= ================ ================= Earnings (loss) from continuing operations before Federal income taxes, minority interest and cumulative effect of accounting change Insurance operations............................... $ 250.3 $ (36.6) $ 303.1 Investment services................................ 485.7 311.9 224.0 Consolidation/elimination.......................... - .2 (3.1) ----------------- ---------------- ----------------- Subtotal..................................... 736.0 275.5 524.0 Corporate interest expense......................... (65.3) (66.9) (27.9) ----------------- ---------------- ----------------- Total.............................................. $ 670.7 $ 208.6 $ 496.1 ================= ================ =================
December 31, ------------------------------------ 1997 1996 ---------------- ----------------- (In Millions) Assets Insurance operations................................................... $ 68,305.9 $ 60,464.9 Investment services.................................................... 13,719.8 13,542.5 Consolidation/elimination.............................................. (403.6) (399.6) ---------------- ----------------- Total.................................................................. $ 81,622.1 $ 73,607.8 ================ =================
F-38 19) QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) The quarterly results of operations for 1997 and 1996, are summarized below:
Three Months Ended ------------------------------------------------------------------------------ March 31 June 30 September 30 December 31 ----------------- ----------------- ------------------ ------------------ (In Millions) 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) ================= ================= ================== ================== 1996 Total Revenues................ $ 1,176.5 $ 1,199.4 $ 1,198.4 $ 1,297.9 ================= ================= ================== ================== Earnings (Loss) from Continuing Operations before Cumulative Effect of Accounting Change........ $ 94.8 $ 87.1 $ 93.2 $ (157.9) ================= ================= ================== ================== Net Earnings (Loss)........... $ 71.7 $ 87.1 $ 93.2 $ (241.7) ================= ================= ================== ==================
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. Net earnings for the three months ended December 31, 1996 includes a charge of $339.3 million related to writeoffs of DAC on DI contracts of $94.3 million and reserve strengthenings on DI business of $113.7 million, Pension Par of $47.5 million and Discontinued Operations of $83.8 million. 20) INVESTMENT IN DLJ At December 31, 1997, the Company's ownership of DLJ interest was approximately 34.4%. 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. F-39 Summarized balance sheets information for DLJ, reconciled to the Company's carrying value of DLJ, are as follows:
December 31, ------------------------------------ 1997 1996 ---------------- ----------------- (In Millions) Assets: Trading account securities, at market value............................ $ 16,535.7 $ 15,728.1 Securities purchased under resale agreements........................... 22,628.8 20,598.7 Broker-dealer related receivables...................................... 28,159.3 16,858.8 Other assets........................................................... 3,182.0 2,318.1 ---------------- ----------------- Total Assets........................................................... $ 70,505.8 $ 55,503.7 ================ ================= Liabilities: Securities sold under repurchase agreements............................ $ 36,006.7 $ 29,378.3 Broker-dealer related payables......................................... 25,706.1 19,409.7 Short-term and long-term debt.......................................... 3,670.6 2,704.5 Other liabilities...................................................... 2,860.9 2,164.0 ---------------- ----------------- Total liabilities...................................................... 68,244.3 53,656.5 DLJ's company-obligated mandatorily redeemed preferred securities of subsidiary trust holding solely debentures of DLJ...... 200.0 200.0 Total shareholders' equity............................................. 2,061.5 1,647.2 ---------------- ----------------- Total Liabilities, Cumulative Exchangeable Preferred Stock and Shareholders' Equity................................................. $ 70,505.8 $ 55,503.7 ================ ================= DLJ's equity as reported............................................... $ 2,061.5 $ 1,647.2 Unamortized cost in excess of net assets acquired in 1985 and other adjustments................................................ 23.5 23.9 The Holding Company's equity ownership in DLJ.......................... (740.2) (590.2) Minority interest in DLJ............................................... (729.3) (588.6) ---------------- ----------------- The Company's Carrying Value of DLJ.................................... $ 615.5 $ 492.3 ================ =================
Summarized statements of earnings information for DLJ reconciled to the Company's equity in earnings of DLJ is as follows:
1997 1996 ---------------- ----------------- (In Millions) Commission, fees and other income...................................... $ 2,356.8 $ 1,818.2 Net investment income.................................................. 1,652.1 1,074.2 Dealer, trading and investment gains, net.............................. 631.6 598.4 ---------------- ----------------- Total revenues......................................................... 4,640.5 3,490.8 Total expenses including income taxes.................................. 4,232.3 3,199.5 ---------------- ----------------- Net earnings........................................................... 408.2 291.3 Dividends on preferred stock........................................... 12.1 18.7 ---------------- ----------------- Earnings Applicable to Common Shares................................... $ 396.1 $ 272.6 ================ ================= DLJ's earnings applicable to common shares as reported................. $ 396.1 $ 272.6 Amortization of cost in excess of net assets acquired in 1985.......... (1.3) (3.1) The Holding Company's equity in DLJ's earnings......................... (156.8) (107.8) Minority interest in DLJ............................................... (109.1) (73.4) ---------------- ----------------- The Company's Equity in DLJ's Earnings................................. $ 128.9 $ 88.3 ================ =================
F-40 21) 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 1997, 1996 and 1995 would have been:
1997 1996 1995 --------------- --------------- --------------- (In Millions) Net Earnings: As Reported............................................. $ 437.2 $ 10.3 $ 312.8 Pro Forma............................................... $ 426.3 $ 3.3 $ 311.3
The fair value of options granted after December 31, 1994, used as a basis for the above pro forma disclosures, was estimated as of the date of grants using the Black-Scholes option pricing model. The option pricing assumptions for 1997, 1996 and 1995 are as follows:
Holding Company DLJ Alliance ------------------------------ ------------------------------- ---------------------------------- 1997 1996 1995 1997 1996 1995 1997 1996 1995 -------------------- --------- ---------- ---------- --------- ---------- ----------- ----------- Dividend yield.... 0.48% 0.80% 0.96% 0.86% 1.54% 1.85% 8.00% 8.00% 8.00% Expected volatility 20.00% 20.00% 20.00% 33.00% 25.00% 25.00% 26.00% 23.00% 23.00% Risk-free interest rate............ 5.99% 5.92% 6.83% 5.96% 6.07% 5.86% 5.70% 5.80% 6.00% Expected life..... 5 years 5 years 5 years 5 years 5 years 5 years 7.6 years 7.43 years 7.43 years Weighted average grant-date fair value per option $12.25 $6.94 $5.90 $22.45 $9.35 $7.36 $4.36 $2.69 $2.24
F-41 A summary of the Holding Company, DLJ and Alliance's option plans is as follows:
Holding Company DLJ Alliance ----------------------------- ----------------------------- ----------------------------- Options Options Options Outstanding Outstanding Outstanding Weighted Weighted Weighted Average Average Average Shares Exercise Shares Exercise Units Exercise (In Millions) Price (In Millions) Price (In Millions) Price --------------- ------------- --------------- ------------- ----------------------------- Balance as of January 1, 1995........ 6.8 $20.31 - 3.8 $15.46 Granted................ .4 $20.27 9.2 $27.00 1.8 $20.54 Exercised.............. (.1) $20.00 - (.5) $11.20 Expired................ (.1) $20.00 - - Forfeited.............. (.3) $22.24 - (.3) $16.64 --------------- ------------- --------------- Balance as of December 31, 1995...... 6.7 $20.27 9.2 $27.00 4.8 $17.72 Granted................ .7 $24.94 2.1 $32.54 .7 $25.12 Exercised.............. (.1) $19.91 - (.4) $13.64 Expired................ - - - Forfeited.............. (.6) $20.21 (.2) $27.00 (.1) $19.32 --------------- ------------- --------------- Balance as of December 31, 1996...... 6.7 $20.79 11.1 $28.06 5.0 $19.07 Granted................ 3.2 $41.85 3.2 $61.07 1.1 $36.56 Exercised.............. (1.6) $20.26 (.1) $32.03 (.6) $16.11 Forfeited.............. (.4) $23.43 (.1) $27.51 (.2) $21.28 --------------- ------------- --------------- Balance as of December 31, 1997...... 7.9 $29.05 14.1 $35.56 5.3 $22.82 =============== ============= ===============
F-42 Information about options outstanding and exercisable at December 31, 1997 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 4.8 5.84 $20.94 3.0 $20.41 $28.50 -$45.25 3.1 9.57 $41.84 - - ----------------- ------------------- $18.125 -$45.25 7.9 7.29 $29.05 3.0 $20.41 ================= ================= =============== =================== ================ DLJ ---------------------- $27.00 -$35.99 10.9 8.0 $28.05 4.9 $27.58 $36.00 -$50.99 .8 9.3 $40.04 - - $51.00 -$76.00 2.4 9.8 $67.77 - - ----------------- ------------------- $27.00 -$76.00 14.1 8.4 $35.56 4.9 $27.58 ================= ================= ================ =================== ================= Alliance ---------------------- $ 6.0625 -$17.75 1.1 3.86 $13.20 1.0 $13.04 $19.375 -$19.75 .8 7.34 $19.39 .3 $19.39 $19.875 -$21.375 1.1 8.28 $20.13 .6 $20.19 $22.25 -$27.50 1.3 9.81 $23.81 .4 $23.29 $36.9375 -$37.5625 1.0 9.95 $36.95 - - ----------------- ------------------- $ 6.0625 -$37.5625 5.3 7.58 $22.82 2.3 $17.43 ================= ================== ============== ====================== =============
F-43 ================================================================================ [LOGO] (TM) ---------- RETIREMENT ---------- INVESTMENT ---------- ACCOUNT(R) ---------- SEPARATE ACCOUNT UNITS OF INTEREST UNDER GROUP ANNUITY CONTRACTS ================================================================================ INVESTMENTS FUNDS -----------------
- ---------------------------------------------------------------------------------------------------------------------------- POOLED SEPARATE ACCOUNTS SEPARATE ACCOUNT NO. 51 SEPARATE ACCOUNT NO. 66 o Alliance Bond, Separate Account No. 13 o Alliance Money Market o T. Rowe Price Equity Income -- Pooled o Alliance Intermediate Government o EQ/Putnam Growth & Income Value o Alliance Balanced, Separate Account Securities o Merrill Lynch Basic Value Equity No. 10-- Pooled o Alliance Quality Bond o MFS Research o Alliance Common Stock, Separate o Alliance High Yield o T. Rowe Price International Stock Account No. 4 -- Pooled o Alliance Growth & Income o Morgan Stanley Emerging Markets Equity o Alliance Aggressive Stock, Separate o Alliance Equity Index o Warburg Pincus Small Company Value Account No. 3 -- Pooled o Alliance Global o MFS Emerging Growth Companies o Alliance International o EQ/Putnam Balanced o Alliance Small Cap Growth o Merrill Lynch World Strategy o Alliance Conservative Investors o Alliance Growth Investors
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES --------------------------------------------------------- RIA SERVICE OFFICE: Equitable Life RIA Service Office 200 Plaza Drive Secaucus, NJ 07094-3689 Tel.: (800) 967-4560 (201) 583-2302 (9 A.M. to 5 P.M. Eastern time) Fax: (201) 583-2304, 2305, or 2306 (To obtain pre-recorded Fund unit values, use our toll-free number listed above) ADDRESS FOR CONTRIBUTIONS ONLY: Equitable Life RIA/EPP P.O. Box 13503 Newark, NJ 07188 EXPRESS MAIL ADDRESS FOR CONTRIBUTIONS ONLY: First Chicago National Processing Center (FCNPC) 300 Harmon Meadow Boulevard Attn: Box 13503 Secaucus, NJ 07094 ================================================================================ -----END PRIVACY-ENHANCED MESSAGE-----