EQ ADVISORS TRUST, 497, 1998-01-28

EQ ADVISORS TRUST
497, 1998-01-28

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Filed Pursuant to Rule 497(e)
Registration File No.: 333-17217

EQ ADVISORS TRUST

SUPPLEMENT DATED DECEMBER 31, 1997 TO THE PROSPECTUS DATED MAY 1, 1997.

This Supplement updates certain information contained in the above-dated
Prospectus. This Supplement does not supercede any prior supplements. You may
obtain an additional copy of the Prospectus, free of charge, by writing the
Trust at 1290 Avenue of the Americas, New York, New York 10104.

Effective December 31, 1997, the Trust will offer three additional
professionally managed investment portfolios ("Portfolios") for investment.
Each Portfolio has its own investment objective and policies that are
designed to meet different investment goals. Only Class IB shares of each
Portfolio currently are offered for investment. The three additional
Portfolios offered by the Trust are as follows:

o BT Equity 500 Index Portfolio

o BT Small Company Index Portfolio

o BT International Equity Index Portfolio

- -----------------------------------------------------------------------------

THE TRUST

Each Portfolio is managed by EQ Financial Consultants, Inc. ("Manager") which
directs the day to day operations of each Portfolio. Bankers Trust Company
serves as the adviser (the "Adviser") to each of the three Portfolios,
specified above. The Manager has the ultimate responsibility to oversee the
Adviser and to recommend its hiring, termination and replacement. The Trust
and the Manager have asked the Securities and Exchange Commission for an
order that would permit the Manager, subject to approval by the Board of
Trustees, to (i) select Advisers for each of the Trust's investment
portfolios and (ii) materially modify existing investment advisory agreements
without obtaining shareholder approval.

EQ Financial Consultants, Inc. ("EQ Financial"), the Trust's Manager, and
Equitable Distributors, Inc. ("EDI") each serve as one of the distributors
for the Class IB shares of the Trust offered by this Prospectus.

INVESTMENT OBJECTIVES AND POLICIES

The following is a brief description of the investment objectives and
policies of each of the three new Portfolios. All of the objectives and
policies of each Portfolio, unless otherwise noted, are not fundamental and
may be changed by the Board of Trustees of the Trust without the approval of
shareholders. Certain investment strategies and instruments discussed below
are described in greater detail in the May 1, 1997 Prospectus ("Prospectus")
and in the Statement of Additional Information dated December 31, 1997
("Statement of Additional Information"). Because of the uncertainty inherent
in all investments, there can be no assurance that the Portfolios will be
able to achieve their respective investment objectives.

BT EQUITY 500 INDEX PORTFOLIO

The Portfolio seeks to replicate as closely as possible (before deduction of
Portfolio expenses) the total return of the Standard & Poor's 500 Composite
Stock Price Index ("S&P 500"). The S&P 500 is an index of 500 common stocks
of companies from many industrial sectors representing a significant portion
of the market value of all common stocks publicly traded in the United
States, most of which trade on the New York Stock Exchange Inc. (the "NYSE").
The Adviser believes that the performance of the S&P 500 is representative of
the performance of publicly-traded common stocks in the U.S. in general.

EQAT 104

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The composition of the S&P 500 is determined by Standard & Poor's and is
based on such factors as the market capitalization and trading activity on
each stock and its adequacy as a representation of stocks in a particular
industry, and may be changed from time to time. The Portfolio is not
sponsored, endorsed, sold or promoted by Standard & Poor's and Standard &
Poor's makes no guarantee as to the accuracy and/or completeness of the S&P
500 or any data included therein. In seeking to replicate the performance of
the S&P 500, before deduction of Portfolio expenses, the Adviser will attempt
over time to allocate the Portfolio's investment among common stocks included
in the S&P 500 in approximately the same proportions as they are represented
in the S&P 500, beginning with the heaviest weighted stocks that make up a
larger portion of the Index's value. Bankers Trust utilizes a two-stage
sampling approach in seeking to achieve its objective. Stage one, which
encompasses large capitalization stocks, maintains the stock holdings at or
near their benchmark weights. Large capitalization stocks are defined as
those securities which represent 0.10% or more of the S&P 500. In stage two,
smaller stocks are analyzed and selected using risk characteristics and
industry weights in order to match the sector and risk characteristics of the
smaller companies in the S&P 500. This approach helps to increase the
Portfolio's liquidity while reducing costs.

The Adviser generally will seek to match the composition of the S&P 500 but
usually will not invest the Portfolio's stock portfolio to mirror the S&P 500
exactly. Because of the difficulty and cost of executing relatively small
stock transactions, the Portfolio may not always be invested in the less
heavily weighted S&P 500 stocks, and may at times have its portfolio weighted
differently than the S&P 500, particularly if the Portfolio has a low level
of assets. In addition, the Portfolio may omit or remove any S&P 500 stock
from the Portfolio if, following objective criteria, the Adviser judges the
stock to be insufficiently liquid or believes the merit of the investment has
been substantially impaired by extraordinary events or financial conditions.
The Portfolio will not purchase the stock of Bankers Trust New York
Corporation, which is included in the S&P 500, and instead will overweight
its holdings of companies engaged in similar businesses.

Over time, the correlation between the performance of the Portfolio and the
S&P 500 is expected to be 0.95 or higher before deduction of Portfolio
expenses. A correlation of 1.00 would indicate perfect correlation, which
would be achieved when the net asset value of the Portfolio, including the
value of its dividend and any capital gain distributions, increases or
decreases in exact proportion to changes in the S&P 500. The Portfolio's
ability to track the S&P 500 may be affected by, among other things,
transaction costs, administration and other expenses incurred by the
Portfolio, changes in either the composition of the S&P 500 or the assets of
the Portfolio, and the timing and amount of Portfolio investor contributions
and withdrawals, if any. Because the Portfolio seeks to track the S&P 500,
the Adviser generally will not attempt to judge the merits of any particular
stock as an investment. Under normal circumstances, the Portfolio will invest
at least 80% of its assets in the securities of the S&P 500.

The Portfolio is a diversified fund and will not concentrate more than 25% of
its assets in the securities of issuers in the same industry. In the unlikely
event that the S&P 500 should concentrate to an extent greater than 25% in
the securities of issuers in the same industry, the Portfolio's ability to
achieve its objective may be impaired since the Portfolio may not so invest.

The Portfolio may maintain up to 20% of its assets in short-term debt
securities and money market instruments to meet redemption requests or to
facilitate investment in the securities of the S&P 500. Securities index
futures contracts and related options, warrants and convertible securities
may be used for several reasons: to simulate full investment in the S&P 500
while retaining a cash balance for fund management purposes; to facilitate
trading; to reduce transaction costs; or to seek higher investment returns
when a futures contract, option, warrant or convertible security is priced
more attractively than the underlying equity security or S&P 500. These
instruments may be considered derivatives. The use of derivatives for
non-hedging purposes may be considered speculative. While each of these
instruments can be used as leveraged investments, the Portfolio may not use
them to leverage its net assets. The Portfolio may not invest in derivation
instruments as part of a temporary defensive strategy (in anticipation of
declining stock prices) to protect the Portfolio against potential market
declines.

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fixed-income securities, derivatives, repurchase agreements, reverse
repurchase agreements, forward commitments, United States Government
securities, borrowings, asset-backed securities, and convertible securities)
are discussed under the caption "Investment Strategies" below and in the
Prospectus and Statement of Additional Information.

BT SMALL COMPANY INDEX PORTFOLIO

The investment objective of the BT Small Company Index Portfolio is to
replicate as closely as possible (before deduction of Portfolio expenses) the
total return of the Russell 2000 Small Stock Index. The Russell 2000 is
composed of approximately 2,000 small-capitalization common stocks. A
company's stock market capitalization is the total market value of its
floating outstanding shares. As of June 30, 1997, the average stock market
capitalization of the Russell 2000 was $500 million and the weighted average
stock market capitalization of the Russell 2000 was $650 million. The
Portfolio is neither sponsored by nor affiliated with the Frank Russell
Company, which is the owner of the trademarks and copyrights relating to the
Russell indices.

The Portfolio invests in a statistically selected sample of the 2,000 stocks
included in the Russell 2000. The stocks of the Russell 2000 to be included
in the Portfolio will be selected utilizing a statistical sampling technique
known as "optimization." This process selects stocks for the Portfolio so
that various industry weightings, market capitalizations and fundamental
characteristics (e.g., price-to-book, price-to-earnings and debt-to-asset
ratios and dividend yields) closely approximate those of the Russell 2000.
For instance, if 10% of the capitalization of the Russell 2000 consists of
utility companies with relatively small capitalizations, then the Portfolio
is constructed so that approximately 10% of the Portfolio's assets are
invested in the stocks of utility companies with relatively small
capitalizations. The stocks held by the Portfolio are weighted to make the
Portfolio's aggregate investment characteristics similar to those of the
Russell 2000 as a whole.

Over time, the correlation between the performance of the Portfolio and the
Russell 2000 is expected to be 0.95 or higher before deduction of Portfolio
expenses. A correlation of 1.00 would indicate perfect correlation, which
would be achieved when the net asset value of the Portfolio, including the
value of its dividend and any capital gain distributions, increases or
decreases in exact proportion to changes in the Russell 2000. The Portfolio's
ability to track the Russell 2000 may be affected by, among other things,
transaction costs, administration and other expenses incurred by the
Portfolio, changes in either the composition of the Russell 2000 or the
assets of the Portfolio, and the timing and amount of Portfolio investor
contributions and withdrawals, if any. Because the Portfolio seeks to track
the Russell 2000, the Adviser generally will not attempt to judge the merits
of any particular stock as an investment. Under normal circumstances, the
Portfolio will invest at least 80% of its assets in the securities of the
Russell 2000. The Portfolio is a diversified fund and will not concentrate
more than 25% of its assets in the securities of issuers in the same
industry. In the event that the Russell 2000 should concentrate to an extent
greater than 25% in the securities of issuers in the same industry, the
Portfolio's ability to achieve its objective may be impaired since the
Portfolio is not permitted to so invest.

The Portfolio may maintain up to 20% of its assets in short-term debt
securities and money market instruments to meet redemption requests or to
facilitate investment in the securities of the Russell 2000. Securities index
futures contracts and related options, warrants and convertible securities
may be used for several reasons: to simulate full investment in the Russell
2000 while retaining a cash balance for portfolio management purposes; to
facilitate trading; to reduce transaction costs; or to seek higher investment
returns when a futures contract, option, warrant or convertible security is
priced more attractively than the underlying equity security or the Russell
2000. These instruments may be considered derivatives. The use of derivatives
for non-hedging purposes may be considered speculative. While each of these
instruments can be used as leveraged investments, the Portfolio will not use
them to leverage its net assets. The Portfolio will not invest in derivation
instruments as part of a temporary defensive strategy (in anticipation of
declining stock prices) to protect the Portfolio against potential market
declines.

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chase agreements, forward commitments, United States Government securities,
borrowings, asset-backed securities, and convertible securities) are
discussed under the caption "Investment Strategies" below and in the
Prospectus and Statement of Additional Information.

BT INTERNATIONAL EQUITY INDEX PORTFOLIO

The Portfolio seeks to replicate as closely as possible (before deduction of
Portfolio expenses) the total return of the Morgan Stanley Capital
International Europe, Australia, Far East Index ("EAFE Index"). The EAFE
Index is a capitalization-weighted index containing approximately 1,100
equity securities of companies located in countries outside the United
States. The countries currently included in the EAFE Index are Australia,
Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland,
Italy, Japan, Malaysia, The Netherlands, New Zealand, Norway, Singapore,
Spain, Sweden, Switzerland and The United Kingdom. The EAFE Index is the
exclusive property of Morgan Stanley. The Portfolio is not sponsored,
endorsed, sold or promoted by Morgan Stanley and Morgan Stanley makes no
guarantee as to the accuracy or completeness of the EAFE Index or any data
included therein.

The Portfolio is constructed to have aggregate investment characteristics
similar to those of the EAFE Index. The Portfolio invests in a statistically
selected sample of the securities of companies included in the EAFE Index,
although not all companies within a country will be represented in the
Portfolio at the same time. Stocks are selected for inclusion in the
Portfolio based on country of origin, market capitalization, yield,
volatility and industry sector. The Adviser will manage the Portfolio using
advanced statistical techniques to determine which stocks should be purchased
or sold to replicate the EAFE Index. From time to time, adjustments may be
made in the Portfolio because of changes in the composition of the EAFE
Index, but such changes are expected to be infrequent.

Over time, the correlation between the performance of the Portfolio and the
EAFE Index is expected to be 0.95 or higher before deduction of Portfolio
expenses. A correlation of 1.00 would indicate perfect correlation, which
would be achieved when the net asset value of the Portfolio, including the
value of its dividend and any capital gain distributions, increases or
decreases in exact proportion to changes in the EAFE Index. The Portfolio's
ability to track the EAFE Index may be affected by, among other things,
transaction costs, administration and other expenses incurred by the
Portfolio, changes in either the composition of the EAFE Index or the assets
of the Portfolio, and the timing and amount of Portfolio investor
contributions and withdrawals, if any. Because the Portfolio seeks to track
the EAFE Index, Bankers Trust generally will not attempt to judge the merits
of any particular stock as an investment. Under normal circumstances, the
Portfolio will invest at least 80% of its assets in the securities of the
EAFE Index.

The Portfolio is a diversified fund and will not concentrate more than 25% of
its assets in the securities of issuers in the same industry. In the event
that the EAFE Index should concentrate to an extent greater than 25% in the
securities of issuers in the same industry, the Portfolio's ability to
achieve its objective may be impaired since the Portfolio may not so invest

The Portfolio may maintain up to 20% of its assets in short-term debt
securities and money market instruments to meet redemption requests or to
facilitate investment in the securities of the EAFE Index. Securities index
futures contracts and related options, warrants and convertible securities
may be used for several reasons: to simulate full investment in the EAFE
Index while retaining a cash balance for fund management purposes; to
facilitate trading; to reduce transaction costs; or to seek higher investment
returns when a futures contract, option, warrant or convertible security is
priced more attractively than the underlying equity security or EAFE Index.
These instruments may be considered derivatives. The use of derivatives for
non-hedging purposes may be considered speculative. While each of these
instruments can be used as leveraged investments, the Portfolio will not use
them to leverage its net assets. The Portfolio will not invest in derivation
instruments as part of a temporary defensive strategy (in anticipation of
declining stock prices) to protect the Portfolio against potential market
declines.

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ments, reverse repurchase agreements, forward commitments, United States
Government securities, borrowings, asset-backed securities, and convertible
securities) are discussed under the caption "Investment Strategies" below and
in the Prospectus and Statement of Additional Information.

INVESTMENT STRATEGIES

In addition to making investments directly in securities, to the extent
described above and below, each of the three new Portfolios may utilize other
investment strategies. Each Portfolio may invest in or utilize any of these
investment strategies and instruments or engage in any of these practices
except where otherwise prohibited by law or the Portfolio's own investment
restrictions. Portfolios that anticipate committing 5% or more of their net
assets to a particular type of investment strategy or instruments are
specifically referred to in the descriptions below of such investment
strategy or instrument. Certain of these strategies and instruments are
described in more detail in the Prospectus and in the Statement of Additional
Information.

Asset-Backed Securities. Each Portfolio may invest in asset-backed
securities. For more information on asset-backed securities please see
"Investment Strategies -- Asset-Backed Securities" in the Prospectus.

Convertible Securities. Each of the Portfolios may invest in convertible
securities, including both convertible debt and convertible preferred stock.
For more information on convertible securities, please see "Investment
Strategies -- Convertible Securities" in the Prospectus.

Derivatives. Each Portfolio may invest in one or more types of derivatives.
For more information on derivatives please see "Investment Strategies --
Derivatives" in the Prospectus.

Foreign Securities. The BT International Equity Index Portfolio may purchase
securities denominated in foreign currencies and depositary receipts. For
more information on foreign securities, please see "Investment Strategies --
Foreign Securities" in the Prospectus.

Foreign Currency Transactions. The BT International Equity Index Portfolio
may (i) purchase foreign currency on a spot (or cash) basis, (ii) enter into
contracts to purchase or sell foreign currencies at a future date ("forward
contracts"), (iii) purchase and sell foreign currency futures contracts, and
(iv) purchase and sell exchange traded call and put options on foreign
currency futures contracts and on foreign currencies. The BT International
Equity Index Portfolio may also utilize over-the-counter ("OTC") options on
foreign currency transactions and may write covered call options on foreign
currencies to offset some of the costs of hedging those currencies. For more
information on foreign currency transactions, please see "Investment
Strategies -- Foreign Currency Transactions" in the Prospectus.

Forward Commitments. Each Portfolio may make contracts to purchase securities
for a fixed price at a future date beyond customary settlement time ("forward
commitments"). For more information on forward commitments, please see
"Investment Strategies -- Forward Commitments" in the Prospectus.

Illiquid Securities. Each Portfolio may invest up to 15% of its net assets in
illiquid securities and other securities which are not readily marketable,
including nonnegotiable time deposits, certain restricted securities not
deemed by the Trust's Board of Trustees to be liquid, and repurchase
agreements with maturities longer than seven days. For more information on
illiquid securities, please see "Investment Strategies -- Illiquid
Securities" in the Prospectus.

Investment Grade and Lower Quality Fixed Income Securities. Each Portfolio
may invest in or hold a portion of its total assets in investment grade
securities. If the quality of such securities declines, each Portfolio may
continue to hold such securities pending their orderly disposition. For more
information on investment grade securities, please see "Investment Strategies
- -- Investment Grade and Lower Quality Fixed Income Securities" in the
Prospectus.

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Mortgages and Mortgage-Related Securities. Each Portfolio may invest in
mortgage-related securities (i.e., mortgage-backed securities). For more
information on mortgage-related securities, please see "Investment Strategies
- -- Mortgages and Morgages-Related Securities" in the Prospectus.

Options and Futures Transactions. Each Portfolio may utilize futures
contracts. Each Portfolio may also write and purchase put and call options.
Each Portfolio that is permitted to invest in futures contracts and related
options may utilize such transactions for other than hedging purposes to the
extent that aggregate initial margin deposits and premiums paid do not exceed
5% of the Portfolio's net assets. No Portfolio will commit more than 5% of
its total assets to premiums when purchasing call or put options. No
Portfolio will at any time commit more than 20% of its net assets to options
and futures contracts. In addition, the total market value of securities
against which a Portfolio may write call or put options will in no event
exceed 25% of its total assets. For more information on options and futures
transactions, please see "Investment Strategies -- Options and Futures
Transactions" in the Prospectus.

Repurchase Agreements. Each Portfolio may enter into repurchase agreements.
For more information on repurchase agreements, please see "Investment
Strategies -- Repurchase Agreements" in the Prospectus.

Reverse Repurchase Agreements. Each Portfolio may each enter into reverse
repurchase agreements with brokers, dealers, domestic and foreign banks or
other financial institutions. See "Borrowing" for more information concerning
restrictions on borrowing by each Portfolio.

Securities Loans. Each Portfolio may lend portfolio securities in an amount
up to 30% of their respective total assets. For more information on
securities loans, please see "Investment Strategies -- Securities Loans" in
the Prospectus.

Small Company Securities. The BT Small Company Index Portfolio may invest in
the securities of smaller capitalization companies. For more information on
small company securities, please see "Investment Strategies -- Small Company
Securities" in the Prospectus.

Swaps. The BT International Equity Index Portfolio may invest in swap
contracts. For more information on swaps, please see "Investment Strategies
- -- Swaps" in the Prospectus.

United States Government Securities. Each Portfolio may invest in debt
obligations of varying maturities issued or guaranteed by the United States
Government, its agencies or instrumentalities. For more information on such
securities, please see "Investment Strategies -- United States Government
Securities" in the Prospectus.

Warrants. Each Portfolio may invest in warrants. For more information on
warrants, please see "Investment Strategies -- Warrants" in the Prospectus.

Portfolio Turnover. Each Portfolio's turnover rate is not expected to exceed
100% during its first year of operation.

MANAGEMENT OF THE TRUST

THE BOARD OF TRUSTEES

The Board of Trustees of the Trust provides broad supervision over the
business and affairs of the Portfolios and the Trust as provided in the
Trust's Amended and Restated Declaration of Trust and By-Laws.

THE MANAGER

The Trust is managed by EQ Financial which, subject to the supervision and
direction of the Trustees of the Trust, has overall responsibility for the
general management and administration of the Trust. For more information on
the Manager and its duties and expenses please see "Management of the Trust
- -- The Manager" in the Prospectus.

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THE ADVISERS

Pursuant to an investment advisory agreement with the Manager, the Adviser
for each of the Portfolios continuously furnishes an investment program for
each Portfolio, makes investment decisions on behalf of each Portfolio,
places all orders for the purchase and sale of investments for each
Portfolio's account with brokers or dealers selected by the Adviser and may
perform certain limited related administrative functions in connection
therewith.

For its services, the Manager pays the Adviser an advisory fee based on a
percentage of the average daily net assets of each of the Portfolios. Bankers
Trust Company ("Bankers Trust") has been the Adviser to the BT Small Company
Index Portfolio, BT International Equity Index Portfolio and BT Equity 500
Index Portfolio since each Portfolio commenced operations. As compensation
for services as the Adviser to the BT Small Company Index Portfolio, the
Manager pays Bankers Trust a monthly fee at an annual rate equal to .05% of
the Portfolio's average daily net assets. As compensation for services as the
Adviser to the BT International Equity Index Portfolio, the Manager pays
Bankers Trust a monthly fee of an annual rate equal to .15% of the
Portfolio's average daily net assets. As compensation for services as the
Adviser to the BT Equity 500 Index Portfolio, the Manager pays Bankers Trust
a monthly fee of an annual rate equal to .05% of the Portfolio's average
daily net assets.

Bankers Trust is a New York banking corporation with executive offices at 130
Liberty Street (One Bankers Trust Plaza), New York, New York 10006. Bankers
Trust is a wholly-owned subsidiary of Bankers Trust New York Corporation.
Bankers Trust conducts a variety of general banking and trust activities and
is a major wholesale supplier of financial services to the international and
domestic institutional markets. As of September 30, 1997, Bankers Trust New
York Corporation was the seventh largest bank holding company in the United
States with total assets of approximately $129 billion. Bankers Trust is a
worldwide merchant bank dedicated to servicing the needs of corporations,
governments, financial institutions and private clients through a global
network of over 80 offices in more than 50 countries. Investment management
is a core business of Bankers Trust built on a tradition of excellence from
its roots as a trust bank founded in 1903. The scope of Bankers Trust's
management capability is unique due to its leadership positions in both
active and passive quantitative management and its presence in major equity
and fixed income markets around the world. Bankers Trust is one of the
nation's largest and most experienced investment managers with approximately
$240 billion in assets under management globally.

For further information about the duties and responsibilities of the Adviser,
please see "Management of the Trust -- The Advisers" in the Prospectus.

THE ADMINISTRATOR

THE TRANSFER AGENT

Equitable serves as the transfer agent and dividend disbursing agent of the
Trust and receives no compensation for serving in such capacity.

EXPENSE LIMITATION AGREEMENT

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to which the Manager has agreed to waive or limit its fees and to assume
other expenses so that the total annual operating expenses of each Portfolio
are limited to: .55% of the average daily net assets of the BT Equity 500
Index Portfolio; .60% of the average daily net assets of the BT Small Company
Index Portfolio; and .80% of the average daily net assets of the BT
International Equity Index Portfolio.

BROKERAGE PRACTICES

In selecting brokers and dealers, the Manager and the Adviser may consider
research and brokerage services furnished to either company and their
affiliates. Subject to seeking the most favorable net price and execution
available, the Manager and the Adviser may also consider sales of shares of
the Trust as a factor in the selection of brokers and dealers.

TRANSACTIONS WITH AFFILIATES

The Adviser may execute portfolio transactions through certain of its
affiliates. For further information on transactions with affiliates, please
see "Management of the Trust --Transactions With Affiliates" in the
Prospectus.

DESCRIPTION OF THE TRUST AND TRUST'S SHARES

For more information on the Trust and Trust's shares, including how to
purchase and redeem shares, please see "Description of the Trust and Trust's
Shares" in the Prospectus.

DIVIDENDS, DISTRIBUTIONS AND TAXES

For information on dividend, distributions and taxes, please see "Dividends,
Distributions and Taxes" in the Prospectus.

PERFORMANCE INFORMATION

For information on how the Trust may advertise the performance of its
Portfolios, please see "Performance Information" in the Prospectus.

PRIOR PERFORMANCE OF EACH ADVISER

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BT EQUITY 500 INDEX PORTFOLIO

In the table below, the only account which is included is a series of another
registered investment company, i.e., Equity 500 Index Fund, a series of BT
Institutional Funds, which is managed by Bankers Trust, and whose investment
policies are substantially similar to the BT Equity 500 Index Portfolio.
However, the BT Equity 500 Index Portfolio will be subject to higher expenses
than the Equity 500 Index Fund. In addition, holders of variable insurance
contracts representing interests in the BT Equity 500 Index Portfolio will be
subject to charges and expenses relating to such insurance contracts. The
performance results presented below do not reflect any insurance related
expenses.

The investment results of the Equity 500 Index Fund presented below are
unaudited and are not intended to predict or suggest the returns that might
be experienced by the BT Equity 500 Index Portfolio or an individual investor
investing in the BT Equity 500 Index Portfolio.

- ------------
(1) Average annual total return reflects changes in share prices and
reinvestment of dividends and distributions and is net of fund
expenses.
(2) The S&P 500 Index ("Index") is an unmanaged index containing common
stocks of 500 industrial, transportation, utility and financial
companies, regarded as generally representative of the United States
stock market. The Index reflects the reinvestment of income dividends
and capital gain distributions, if any, but does not reflect fees,
brokerage commissions, or other expenses of investing.
(3) Annualized performance for shares of the Equity 500 Index Fund of the
BT Institutional Funds. The inception date for the Equity 500 Index
Fund was December 31, 1992.

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BT SMALL COMPANY INDEX PORTFOLIO

In the table below, the only account which is included is a series of another
registered investment company, i.e., Small Cap Index Fund -- Institutional
Class, a series of BT Advisor Funds, which is managed by Bankers Trust, and
whose investment policies are substantially similar to the BT Small Company
Index Portfolio. However, the BT Small Company Index Portfolio will be
subject to higher expenses than the Small Cap Index Fund -- Institutional
Class. In addition, holders of variable insurance contracts representing
interests in the BT Small Company Index Portfolio will be subject to charges
and expenses relating to such insurance contracts. The performance results
presented below do not reflect any insurance related expenses.

The investment results of the Small Cap Index Fund -- Institutional Class
presented below are unaudited and are not intended to predict or suggest the
returns that might be experienced by the BT Small Company Index Portfolio or
an individual investor investing in the BT Small Company Index Portfolio.

<TABLE>
<CAPTION>
SMALL CAP INDEX FUND-- RUSSELL 2000
YEAR ENDED 9/30/97 INSTITUTIONAL CLASS(1) INDEX(2)
- ------------------ ---------------------- -------------------
<S> <C> <C>
One Year(3) ......... 33.23% 33.19%
Since inception(3)... 31.05% 32.76%
</TABLE>

- ------------
(1) Average annual total return reflects changes in share prices and
reinvestment of dividends and distributions and is net of fund
expenses.
(2) The Russell 2000 Index is an unmanaged index composed of approximately
2,000 small-capitalization stocks and includes reinvestments of
dividends. The index does not include fees or operating expenses and is
not available for actual investment. It is compiled by the Frank
Russell Company.
(3) Annualized performance for shares of the Small Cap Index Fund. The
inception date for the Small Cap Index Fund was July 10, 1996.

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BT INTERNATIONAL EQUITY INDEX PORTFOLIO

In the table below, the only account which is included is a series of another
registered investment company, i.e., EAFE(Registered Trademark) Equity Index
Fund -- Institutional Class, a series of BT Advisor Funds, which is managed
by Bankers Trust, and whose investment policies are substantially similar to
the BT International Equity Index Portfolio. However, the BT International
Equity Index Portfolio will be subject to higher expenses than the
EAFE(Registered Trademark) Equity Index Fund -- Institutional Class. In
addition, holders of variable insurance contracts representing interests in
the BT International Equity Index Portfolio will be subject to charges and
expenses relating to such insurance contracts. The performance results
presented below do not reflect any insurance related expenses.

The investment results of the EAFE(Registered Trademark) Equity Index Fund --
Institutional Class presented below are unaudited and are not intended to
predict or suggest the returns that might be experienced by the BT
International Equity Index Portfolio or an individual investor investing in
the BT International Equity Index Portfolio.

<TABLE>
<CAPTION>
EAFE(REGISTERED
TRADEMARK) EQUITY INDEX FUND-- MSCI EAFE
YEAR ENDED 9/30/97 INSTITUTIONAL CLASS(1) INDEX(2)
- ------------------ ------------------------------- ----------------
<S> <C> <C>
One Year(3) ....... 12.78% 12.18%
Since inception(3). 10.87% 10.71%
</TABLE>

- ------------
(1) Average annual total return reflects changes in share prices and
reinvestment of dividends and distributions and is net of fund
expenses.
(2) The Morgan Stanley Capital EAFE Europe, Australia, Far East Index
("MSCI EAFE Index") is an unmanaged capitalization-weighted index
containing approximately 1,100 equity securities of companies located
in countries outside the United States. The MSCI EAFE Index returns
assume dividends reinvested net of withholding tax and do not reflect
any fees or operating expenses. The index does not include fees or
operating expenses and is not available for actual investment.
(3) Annualized performance for shares of the EAFE Equity Index Fund. The
inception date for the EAFE Equity Index Fund was January 24, 1996.

11
<PAGE>
APPENDIX A

The following table summarizes the historical performance information of
certain other registered investment companies or accounts. Each other
registered investment company or account is managed by the Adviser and has
investment objectives, policies, strategies and risks substantially similar
to the Portfolios managed by the Adviser. For further information regarding
each of the registered investment companies and the indexes presented below,
please refer to pages 1 through 5 of this Supplement.

ANNUALIZED RATES OF RETURN
PERIOD ENDED SEPTEMBER 30, 1997

<TABLE>
<CAPTION>
SINCE
FUND NAME 1 YEAR 5 YEARS 10 YEARS INCEPTION
- ---------------------------------------- -------- --------- ---------- -----------
<S> <C> <C> <C> <C>
BT EQUITY 500 INDEX FUND 40.32% -- -- 20.64%
- ---------------------------------------- -------- --------- ---------- -----------
S&P 500 INDEX 40.43% -- -- 20.72%
- ---------------------------------------- -------- --------- ---------- -----------
BT SMALL CAP INDEX FUND--INSTITUTIONAL
CLASS 33.23% -- -- 31.05%
- ---------------------------------------- -------- --------- ---------- -----------
RUSSELL 2000 INDEX 33.19% -- -- 32.76%
- ---------------------------------------- -------- --------- ---------- -----------
BT EAFE(REGISTERED TRADEMARK) EQUITY
INDEX FUND--INSTITUTIONAL CLASS 12.78% -- -- 10.87%
- ---------------------------------------- -------- --------- ---------- -----------
MSCI EAFE INDEX 12.18% -- -- 10.71%
- ---------------------------------------- -------- --------- ---------- -----------
</TABLE>

A-1

<PAGE>
EQ ADVISORS TRUST

SUPPLEMENT DATED DECEMBER 31, 1997 TO THE PROSPECTUS DATED MAY 1, 1997.

This Supplement updates certain information contained in the above-dated
Prospectus. This Supplement does not supersede any prior supplements. You may
obtain an additional copy of the Prospectus, free of charge, by writing the
Trust at 1290 Avenue of the Americas, New York, New York 10104.

Effective December 31, 1997, the Trust will offer seven additional
professionally managed investment portfolios ("Portfolios") for investment.
Each Portfolio has its own investment objective and policies that are
designed to meet different investment goals. Only Class IB shares of each
Portfolio are currently offered for investment. The seven additional
Portfolios offered by the Trust are as follows:

o BT Equity 500 Index Portfolio

o BT Small Company Index Portfolio

o BT International Equity Index Portfolio

o JPM Core Bond Portfolio

o Lazard Large Cap Value Portfolio

o Lazard Small Cap Value Portfolio

o Morgan Stanley Emerging Markets Equity Portfolio

- -----------------------------------------------------------------------------

THE TRUST

Each of the Portfolios set forth below, except for the Lazard Small Cap Value
Portfolio and the Morgan Stanley Emerging Markets Equity Portfolio, are
diversified for purposes of the Investment Company Act of 1940, as amended
("1940 Act").

Each Portfolio is managed by EQ Financial Consultants, Inc. ("Manager") which
directs the day to day operations of each Portfolio. Bankers Trust Company,
J.P. Morgan Investment Management Inc., Lazard Asset Management, a division
of Lazard Fre|Hsres & Co. LLC, and Morgan Stanley Asset Management Inc. serve
as the advisers (each an "Adviser" and, together the "Advisers") to one or
more of the Portfolios, as detailed in the table below.

<TABLE>
<CAPTION>
PORTFOLIO ADVISER
- ---------------------------------------------------- ------------------------------------------
<S> <C>
BT Equity 500 Index Portfolio Bankers Trust Company

BT Small Company Index Portfolio Bankers Trust Company

BT International Equity Index Portfolio Bankers Trust Company

JPM Core Bond Portfolio J.P. Morgan Investment Management Inc.

Lazard Large Cap Value Portfolio Lazard Asset Management

Lazard Small Cap Value Portfolio Lazard Asset Management

Morgan Stanley Emerging Markets Equity Portfolio Morgan Stanley Asset Management Inc.
</TABLE>

EQAT 105

<PAGE>
The Manager has the ultimate responsibility to oversee each of the Advisers
and to recommend their hiring, termination and replacement. The Trust and the
Manager have asked the Securities and Exchange Commission for an order that
would permit the Manager, subject to approval by the Board of Trustees, to
(i) select Advisers for each of the Trust's investment portfolios and (ii)
materially modify existing investment advisory agreements without obtaining
shareholder approval.

INVESTMENT OBJECTIVES AND POLICIES

The following is a brief description of the investment objectives and
policies of each of the new Portfolios. All of the objectives and policies of
each Portfolio, unless otherwise noted, are not fundamental and may be
changed by the Board of Trustees of the Trust without the approval of
shareholders. Certain investment strategies and instruments discussed below
are described in greater detail in the May 1, 1997 Prospectus ("Prospectus")
and in the Statement of Additional Information dated December 31, 1997
("Statement of Additional Information"). Because of the uncertainty inherent
in all investments, there can be no assurance that the Portfolios will be
able to achieve their respective investment objectives.

BT EQUITY 500 INDEX PORTFOLIO

2
<PAGE>

The Portfolio may maintain up to 20% of its assets in short-term debt
securities and money market instruments to meet redemption requests or to
facilitate investment in the securities of the S&P 500. Securities index
futures contracts and related options, warrants and convertible securities
may be used for several reasons: to simulate full investment in the S&P 500
while retaining a cash balance for fund management purposes; to facilitate
trading; to reduce transaction costs; or to seek higher investment returns
when a futures contract, option, warrant or convertible security is priced
more attractively than the underlying equity security or S&P 500. These
instruments may be considered derivatives. The use of derivatives for
non-hedging purposes may be considered speculative. While each of these
instruments can be used as leveraged investments, the Portfolio may not use
them to leverage its net assets. The Portfolio may not invest in derivative
instruments as part of a temporary defensive strategy (in anticipation of
declining stock prices) to protect the Portfolio against potential market
declines.

Certain investment strategies and instruments which may be employed by the
Portfolio (such as the purchase and sale of options, futures contracts,
securities loans, illiquid securities, investment grade fixed-income
securities, derivatives, repurchase agreements, reverse repurchase
agreements, forward commitments, United States Government securities,
borrowings, asset-backed securities, and convertible securities) are
discussed under the caption "Investment Strategies" below and in the
Prospectus and Statement of Additional Information.

BT SMALL COMPANY INDEX PORTFOLIO

3
<PAGE>

correlation, which would be achieved when the net asset value of the
Portfolio, including the value of its dividend and any capital gain
distributions, increases or decreases in exact proportion to changes in the
Russell 2000. The Portfolio's ability to track the Russell 2000 may be
affected by, among other things, transaction costs, administration and other
expenses incurred by the Portfolio, changes in either the composition of the
Russell 2000 or the assets of the Portfolio, and the timing and amount of
Portfolio investor contributions and withdrawals, if any. Because the
Portfolio seeks to track the Russell 2000, the Adviser generally will not
attempt to judge the merits of any particular stock as an investment. Under
normal circumstances, the Portfolio will invest at least 80% of its assets in
the securities of the Russell 2000. The Portfolio is a diversified fund and
will not concentrate more than 25% of its assets in the securities of issuers
in the same industry. In the event that the Russell 2000 should concentrate
to an extent greater than 25% in the securities of issuers in the same
industry, the Portfolio's ability to achieve its objective may be impaired
since the Portfolio is not permitted to so invest.

The Portfolio may maintain up to 20% of its assets in short-term debt
securities and money market instruments to meet redemption requests or to
facilitate investment in the securities of the Russell 2000. Securities index
futures contracts and related options, warrants and convertible securities
may be used for several reasons: to simulate full investment in the Russell
2000 while retaining a cash balance for portfolio management purposes; to
facilitate trading; to reduce transaction costs; or to seek higher investment
returns when a futures contract, option, warrant or convertible security is
priced more attractively than the underlying equity security or the Russell
2000. These instruments may be considered derivatives. The use of derivatives
for non-hedging purposes may be considered speculative. While each of these
instruments can be used as leveraged investments, the Portfolio will not use
them to leverage its net assets. The Portfolio will not invest in derivative
instruments as part of a temporary defensive strategy (in anticipation of
declining stock prices) to protect the Portfolio against potential market
declines.

Certain investment strategies and instruments which may be employed by the
Portfolio (such as the purchase and sale of options, futures contracts,
securities loans, small company securities, illiquid securities, investment
grade fixed-income securities, derivatives, repurchase agreements, reverse
repurchase agreements, forward commitments, United States Government
securities, borrowings, asset-backed securities, and convertible securities)
are discussed under the caption "Investment Strategies" below and in the
Prospectus and Statement of Additional Information.

BT INTERNATIONAL EQUITY INDEX PORTFOLIO

4
<PAGE>

EAFE Index. The Portfolio's ability to track the EAFE Index may be affected
by, among other things, transaction costs, administration and other expenses
incurred by the Portfolio, changes in either the composition of the EAFE
Index or the assets of the Portfolio, and the timing and amount of Portfolio
investor contributions and withdrawals, if any. Because the Portfolio seeks
to track the EAFE Index, Bankers Trust generally will not attempt to judge
the merits of any particular stock as an investment. Under normal
circumstances, the Portfolio will invest at least 80% of its assets in the
securities of the EAFE Index.

The Portfolio may maintain up to 20% of its assets in short-term debt
securities and money market instruments to meet redemption requests or to
facilitate investment in the securities of the EAFE Index. Securities index
futures contracts and related options, warrants and convertible securities
may be used for several reasons: to simulate full investment in the EAFE
Index while retaining a cash balance for fund management purposes; to
facilitate trading; to reduce transaction costs; or to seek higher investment
returns when a futures contract, option, warrant or convertible security is
priced more attractively than the underlying equity security or EAFE Index.
These instruments may be considered derivatives. The use of derivatives for
non-hedging purposes may be considered speculative. While each of these
instruments can be used as leveraged investments, the Portfolio will not use
them to leverage its net assets. The Portfolio will not invest in derivative
instruments as part of a temporary defensive strategy (in anticipation of
declining stock prices) to protect the Portfolio against potential market
declines.

Certain investment strategies and instruments which may be employed by the
Portfolio (such as the purchase and sale of options, futures contracts,
foreign securities, foreign currency transactions, securities loans, illiquid
securities, investment grade fixed-income securities, derivatives, swaps,
repurchase agreements, reverse repurchase agreements, forward commitments,
United States Government securities, borrowings, asset-backed securities, and
convertible securities) are discussed under the caption "Investment
Strategies" below and in the Prospectus and Statement of Additional
Information.

JPM CORE BOND PORTFOLIO

The investment objective of the JPM Core Bond Portfolio is to provide a high
total return consistent with moderate risk of capital and maintenance of
liquidity. Total return will consist of income plus realized and unrealized
capital gains and losses. Although the net asset value of the Portfolio will
fluctuate, the Portfolio attempts to preserve the value of its investments to
the extent consistent with its objective.

It is the current policy of the Portfolio that, under normal circumstances,
all of the Portfolio's assets will, at the time of purchase, consist of
investment grade securities rated BBB or better by S&P or Baa or better by
Moody's Investors Service or unrated securities of comparable quality. If the
quality of the investment later declines, the Portfolio may continue to hold
the investment pending their orderly disposition.

The Adviser actively manages the Portfolio's duration, the allocation of
securities across market sectors, and the selection of specific securities
within market sectors. Based on fundamental, economic and capital markets
research, the Adviser adjusts the duration of the Portfolio in light of
market conditions and the Adviser's interest rate outlook. For example, if
interest rates are expected to fall, the duration may be lengthened to take
advantage of the expected increase in bond prices. The Adviser also actively
allocates the Portfolio's assets among the broad sectors of the fixed income
market including, but not limited to, United States Government and agency
securities, corporate securities, private placements, asset-backed
securities, mortgage-related securities, and direct mortgage obligations. The
Portfolio may also invest up to 25% of its assets in securities of foreign
issuers, including up to 20% of its assets in debt securities denominated in
foreign currencies of developed countries. In addition, the Portfolio may
invest in municipal obligations provided such securities are issued on a
taxable basis or have an attractive yield excluding tax considerations.
Specific securities that the Adviser believes are undervalued are selected
for

5
<PAGE>

purchase within the sectors using advanced quantitative tools, analysis of
credit risk, the expertise of a dedicated trading desk, and the judgment of
fixed income portfolio managers and analysts. Under normal circumstances, the
Adviser intends to have the Portfolio invest at least 65% of its assets in
bonds. The Portfolio may to a limited extent invest in convertible
securities, including convertible debt securities and preferred stock.

Duration is a measure of the sensitivity of the market value of the
Portfolio's bond holdings to changes in interest rates. Generally, the longer
the duration of the Portfolio's bond holdings, the more sensitive their
market value will be to changes in interest rates. Under normal market
conditions the Portfolio's duration will range between one year shorter and
one year longer than the duration of the domestic investment grade fixed
income universe, as represented by Salomon Brothers Broad Investment Grade
Bond Index. Currently, the duration of that index is approximately 4.5 years.
The maturities of the individual securities in the Portfolio may vary widely,
however.

The Adviser intends to actively manage the Portfolio in pursuit of its
investment objective. Portfolio transactions are undertaken principally to
accomplish the Portfolio's objective in relation to expected movements in the
general level of interest rates. However, the Portfolio may also engage in
short-term trading consistent with its objective. To the extent the Portfolio
engages in short-term trading, it may incur increased transaction costs. The
Portfolio may purchase high-quality money market instruments to invest
temporary cash balances or to maintain liquidity to meet withdrawals. When
market or financial conditions warrant, the Portfolio may invest as a
temporary defensive measure up to 100% of its assets in money market
instruments.

Certain investment strategies and instruments which may be employed by the
Portfolio (such as the purchase and sale of options, futures contracts,
foreign securities, securities loans, illiquid securities, zero-coupon bonds,
investment grade fixed-income securities, payment-in-kind bonds, derivatives,
foreign currency transactions, repurchase agreements, reverse repurchase
agreements, forward commitments, United States Government securities,
borrowings, asset-backed securities, convertible securities, mortgage-related
securities and swaps) are discussed under the caption "Investment Strategies"
below in the Prospectus and in the Statement of Additional Information.

LAZARD LARGE CAP VALUE PORTFOLIO

The investment objective of the Lazard Large Cap Value Portfolio is to seek
capital appreciation by investing primarily in equity securities of companies
with relatively large capitalizations (i.e., companies having market
capitalizations of at least $1 billion at the time of initial purchase) that
appear to the Adviser to be inexpensively priced relative to the return on
total capital or equity. In managing the Portfolio, the Adviser engages in a
value-oriented search for equity securities. The Adviser attempts to identify
inexpensive securities through traditional measures of value, including low
price to earnings ratio, high yield, unrecognized assets, potential for
management change, and/or the potential to improve profitability. The Adviser
focuses on individual stock selection (a "bottom-up" approach) rather than on
forecasting stock market trends (a "top-down" approach). Risk is tempered by
diversification of investments.

Under normal market conditions, the Portfolio will invest at least 80% of its
total assets in equity securities, including common stocks, preferred stocks
and securities convertible into or exchangeable for common stocks. In
addition, at times judged by the Adviser to be appropriate, the Portfolio may
hold up to 20% of its total assets in United States Government securities and
investment grade debt obligations of domestic corporations rated BBB or
better by S&P or Baa or better by Moody's. The Portfolio may also, for
temporary or defensive purposes, invest without limitation in high-quality
short-term money market instruments, including United States Government
securities, repurchase agreements, certificates of deposits, time deposits
and other short-term obligations issued by banks, commercial paper and loan
participations. In addition, the Portfolio may invest up to 10% of its total
assets at the time of purchase in foreign equity or debt securities trading
in U.S. markets or listed on a domestic securities exchange or represented by
ADRs or Global Depositary Receipts ("GDRs"). The Portfolio may also engage in
various investment techniques, such as options transactions and, although it
has no present intention to do so, leveraging and lending portfolio
securities.

6
<PAGE>

Securities owned by the Portfolio are kept under continuing supervision, and
changes may be made whenever such securities no longer seem to meet the
Portfolio's objective. Changes in the securities owned by the Portfolio also
may be made to increase or decrease investments in anticipation of changes in
security prices in general or to provide funds required for redemptions,
distributions to shareholders or other corporate purposes.

Certain investment strategies and instruments which may be employed by the
Portfolio (such as securities loans, borrowing, loan participations,
derivatives, options, mortgage-related securities, forward commitments,
convertible securities, floaters, illiquid securities, foreign securities,
investment grade fixed-income securities, United States Government securities
and repurchase agreements) are discussed under the caption "Investment
Strategies" below and in the Prospectus and Statement of Additional
Information.

LAZARD SMALL CAP VALUE PORTFOLIO

The investment objective of the Lazard Small Cap Value Portfolio is to seek
capital appreciation by investing primarily in equity securities of United
States companies with small market capitalizations (i.e., companies in the
range of companies represented in the Russell 2000 Index) that the Adviser
considers inexpensively priced relative to the return on total capital or
equity. The Russell 2000 Index is composed of selected common stocks of
small, generally unseasoned U.S. companies with market capitalizations
ranging between $100 million and $1 billion. The equity securities in which
the Portfolio may invest include: common stocks, preferred stocks, securities
convertible into or exchangeable for common stocks, rights and warrants.

Investments are generally made in equity securities of companies that in the
Adviser's opinion have one or more of the following characteristics: (i) are
undervalued relative to their earnings power, cash flow, and/or asset values;
(ii) have an attractive price/value relationship (i.e., have high returns on
equity and/or assets with correspondingly low price-to-book and/or
price-to-asset value as compared to the market generally or the companies'
industry groups in particular) with the expectation that some catalyst will
cause the perception of value to change within a 24-month time horizon; (iii)
have experienced significant relative underperformance and are out of favor
due to a set of circumstances that are unlikely to harm a company's franchise
or earnings power over the longer term; (iv) have low projected
price-to-earnings or price-to-cash-flow multiples relative to their industry
peer group and/or the market in general; (v) have the prospect, or the
industry in which the company operates has the prospect, to allow it to
become a larger factor in the business and receive a higher valuation as
such; (vi) have significant financial leverage but have high levels of free
cash flow that may be used to reduce leverage and enhance shareholder value;
and (vii) have a relatively short corporate history with the expectation that
the business may grow to generate meaningful cash flow and earnings over a
reasonable investment horizon.

Under normal market conditions, the Portfolio will invest at least 80% of the
value of its total assets in the small capitalization equity securities
described above. Assets not invested in such small capitalization equity
securities generally will be invested in larger capitalization equity
securities or debt securities, including cash equivalents.

The Adviser believes that issuers of small capitalization stocks often have
sales and earnings growth rates that exceed those of larger companies, and
that such growth rates may, in turn, be reflected in more rapid share price
appreciation. However, investing in smaller capitalization stocks can involve
greater risk than is customarily associated with larger, more established
companies. (Such risks are discussed under the caption "Investment Strategies
- -- Small Company Securities" below).

The Portfolio is non-diversified for 1940 Act purposes and as such may invest
a larger percentage of its assets in individual issuers than a diversified
investment company. In this regard, the Portfolio is not subject to the
general limitation that it not invest more than 5% of its total assets in the
securities of any one issuer. To the extent the Portfolio makes investments
in excess of 5% of its assets in a particular issuer, its exposure to credit
and market risks associated with that issuer is increased. However, the
Portfolio's investments will be limited so as to qualify for the special tax
treatment afforded "regulated investment companies" under the Internal
Revenue Code of 1986, as amended ("Code").

7
<PAGE>

The Adviser continually evaluates the securities owned by the Portfolio, and
changes may be made whenever the Adviser determines such securities no longer
meet the Portfolio's objective. Changes in Portfolio holdings may also be
made to increase or decrease investments in anticipation of changes in
security prices in general or to provide funds required for redemptions,
distributions to shareholders or other corporate purposes.

When, in the judgment of the Adviser, business or financial conditions
warrant, the Portfolio may assume a temporary defensive position and invest,
without limitation, in large capitalization companies or short-term money
market instruments or hold its assets in cash.

Certain investment strategies and investments which may be employed by the
Portfolio (such as securities loans, borrowings, loan participations,
derivatives, mortgage-related securities, convertible securities, floaters,
illiquid securities, investment grade fixed-income securities, forward
commitments, United States Government securities, repurchase agreements and
small company securities) are discussed under the caption "Investment
Strategies" below and in the Prospectus and Statement of Additional
Information.

MORGAN STANLEY EMERGING MARKETS EQUITY PORTFOLIO

The investment objective of the Morgan Stanley Emerging Markets Equity
Portfolio is long-term capital appreciation by investing primarily in equity
securities of emerging market country issuers. In pursuing its investment
objective, the Adviser focuses on issuers in emerging market countries in
which it believes the economies are developing strongly and in which the
markets are becoming more sophisticated.

Under normal circumstances, at least 65% of the Portfolio's total assets will
be invested in emerging market country equity securities, including common
stocks, preferred stocks, convertible securities, rights and warrants to
purchase common stocks, depository receipts and other equity securities of
emerging market country issuers.

For these purposes, an emerging market country security is a security issued
by a company that has one or more of the following characteristics: (i) its
principal securities trading market is in an emerging market country; (ii)
alone or on a consolidated basis, it derives 50% or more of its revenue from
either goods produced, sales made or services performed in emerging markets
countries; or (iii) it is organized under the laws of, and has a principal
office in, an emerging market country. The Adviser will base determinations
as to eligibility on publicly available information and inquiries made to the
companies.

The Portfolio intends to invest primarily in some or all of the following
emerging market countries: Argentina, Botswana, Brazil, Chile, China,
Colombia, Greece, Hong Kong, Hungary, India, Indonesia, Jamaica, Jordan,
Kenya, Malaysia, Mexico, Nigeria, Pakistan, Peru, Philippines, Poland,
Portugal, Russia, South Africa, South Korea, Sri Lanka, Taiwan, Thailand,
Turkey, Venezuela and Zimbabwe. As markets in other countries develop, the
Portfolio expects to expand and further diversify the emerging market
countries in which it invests. The Portfolio does not intend to invest in any
security in a country where the currency is not freely convertible to United
States dollars, unless: (i) the Portfolio has obtained the necessary
governmental licensing to convert such currency or other appropriately
licensed or sanctioned contractual guarantees to protect such investment
against loss of that currency's external value, or (ii) the Portfolio has a
reasonable expectation at the time the investment is made that such
governmental licensing or other appropriately licensed or sanctioned
guarantees would be obtained or that the currency in which the security is
quoted would be freely convertible at the time of any proposed sale of the
security by the Portfolio. Currently, investing in many emerging market
countries is not feasible or may involve unacceptable political risks.

In selecting industries and particular issuers, the Adviser will analyze
assets, revenues and earnings of an issuer and, with respect to particular
countries, evaluate costs of labor and raw materials, access to technology,
export of products and government regulation. Although the Portfolio seeks to
invest in larger companies, it may invest in small and medium-size companies
that, in the Adviser's view, have potential for growth.

The Portfolio may also invest in fixed-income securities denominated in the
currency of an emerging market country or issued or guaranteed by an emerging
market country company or the government of

8
<PAGE>

an emerging market country. In addition, the Portfolio may invest in equity
or fixed-income securities of corporate or governmental issuers located in
industrialized countries, foreign currency and investment funds (i.e., funds
specifically authorized to invest in companies of a particular emerging
market country). The Portfolio may also invest in debt securities issued or
guaranteed by international organizations designed or supported by multiple
governmental entities to promote economic reconstruction or development such
as the International Bank for Reconstruction and Development (i.e., the World
Bank). The Portfolio may invest up to 10% of its total assets (measured at
the time of investment) in fixed-income securities that are not investment
grade securities (commonly referred to as "junk bonds").

For temporary defensive purposes, the Portfolio may invest less than 65% of
its assets in equity securities of emerging market countries in which case
the Portfolio may invest in other equity securities or fixed income
securities. Moreover, the Portfolio may invest without limitation in
high-quality money market instruments.

The value of the Portfolio's investments and the income they generate will
vary from day to day and generally reflect market conditions, interest rates,
and other company, political, or economic news both in the United States and
abroad. In the short-term, stock prices can fluctuate dramatically in
response to these factors. Over time, however, stocks have shown greater
growth potential than other types of securities. The prices of fixed-income
securities also fluctuate and generally move in the opposite direction from
interest rates.

The Portfolio is a non-diversified portfolio under the 1940 Act, which means
that it may invest a greater proportion of its assets in the securities of a
small number of issuers than a diversified investment company. In this
regard, the Portfolio is not subject to the general limitation that it not
invest more than 5% of its total assets in the securities of a single issuer.
As a result, because the Portfolio is permitted greater flexibility to invest
its assets in the obligations of a single issuer it is exposed to increased
risk of loss if such an investment underperforms expectations. However, the
Portfolio intends to limit its investments so as to comply with
diversification requirements imposed by the Code, for qualification as a
"regulated investment company." The Portfolio spreads investment risk by
limiting its holdings in any one company or industry. Nevertheless, the
Portfolio will experience price volatility, the extent of which will be
affected by the types of securities and techniques the Portfolio uses. The
Adviser may use various investment techniques to hedge risks, including
derivatives, but there is no guarantee that these strategies will work as
intended.

Certain investment strategies and practices which may be employed by the
Portfolio (such as the purchase and sale of options, futures contracts,
United States Government securities, hybrid instruments, illiquid securities,
foreign securities, securities loans, borrowings, payment-in-kind bonds,
passive foreign investment companies, derivatives, convertible securities,
zero coupon bonds, investment grade and lower quality fixed-income
securities, mortgage-backed securities, forward commitments, stripped
mortgage-backed securities, collateralized mortgage obligations, asset-backed
securities, floaters, inverse floaters, foreign currency transactions, loan
participations, repurchase agreements, structured notes and swaps) are
discussed under the caption "Investment Strategies" below and in the
Prospectus and Statement of Additional Information.

INVESTMENT STRATEGIES

In addition to making investments directly in securities, to the extent
described above and below, each of the seven new Portfolios may utilize other
investment strategies. Each Portfolio may invest in or utilize any of these
investment strategies and instruments or engage in any of these practices
except where otherwise prohibited by law or the Portfolio's own investment
restrictions. Portfolios that anticipate committing 5% or more of their net
assets to a particular type of investment strategy or instruments are
specifically referred to in the descriptions below of such investment
strategy or instrument. Certain of these strategies and instruments are
described in more detail in the Prospectus and in the Statement of Additional
Information.

Asset-Backed Securities. Each Portfolio, except for the Lazard Large Cap
Value Portfolio and the Lazard Small Cap Value Portfolio, may invest in
asset-backed securities. For more information on asset-backed securities,
please see "Investment Strategies -- Asset-Backed Securities" in the
Prospectus.

9
<PAGE>

Borrowings. The Portfolios may borrow money from banks or other lenders as a
temporary measure for emergency purposes, to facilitate redemption requests,
or for other purposes consistent with each Portfolio's investment objective
and program. Such borrowings would be subject to interest costs which may or
may not be recovered by appreciation of securities purchased. Borrowings for
the BT Equity 500 Index Portfolio, BT Small Company Index Portfolio, BT
International Equity Index Portfolio, JPM Core Bond Portfolio and Morgan
Stanley Emerging Markets Equity Portfolio may not exceed 33 1/3% of each
Portfolio's total assets. The Lazard Large Cap Value Portfolio may borrow for
leveraging purposes (in order to increase its investment in portfolio
securities) to the extent that the amount so borrowed does not exceed 33 1/3%
of the Portfolio's total assets. Leveraging exaggerates the effect on net
asset value of any increase or decrease in market value of the Lazard Large
Cap Value Portfolio's investment. The Lazard Large Cap Value Portfolio may
also borrow up to 10% of its total assets for temporary or emergency
purposes. Borrowing for the Lazard Small Cap Value Portfolio may not exceed
15% of its total assets for temporary or emergency purposes, including to
meet redemptions (otherwise such borrowings may not exceed 5% of the value of
the Portfolio's total assets). No Portfolio, except the Lazard Large Cap
Value Portfolio, may purchase additional securities when its borrowings
exceed 5% of its total assets. See also "Reverse Repurchase Agreements" for
information concerning an investment technique that may be deemed to involve
a borrowing.

Derivatives. Each Portfolio may invest in one or more types of derivatives.
For more information on derivatives please see "Investment Strategies --
Derivatives" in the Prospectus.

Floaters and Inverse Floaters. The Lazard Large Cap Value Portfolio, the
Lazard Small Cap Value Portfolio, and Morgan Stanley Emerging Markets Equity
Portfolio each may invest in floaters, which are fixed-income securities with
a floating or variable rate of interest, i.e., the rate of interest varies
with changes in specified market rates or indices, such as the prime rate, or
at specified intervals. Certain floaters may carry a demand feature that
permits the holder to tender them back to the issuer of the underlying
instrument, or to a third party, at par value prior to maturity. When the
demand feature of certain floaters represents an obligation of a foreign
entity, the demand feature will be subject to certain risks discussed under
"Foreign Securities ".

In addition, the Morgan Stanley Emerging Markets Equity Portfolio may invest
in inverse floating rate obligations which are fixed-income securities that
have coupon rates that vary inversely at a multiple of a designated floating
rate, such as London Inter-Bank Offered Rate ("LIBOR"). Any rise in the
reference rate of an inverse floater (as a consequence of an increase in
interest rates) causes a drop in the coupon rate while any drop in the
reference rate of an inverse floater causes an increase in the coupon rate.
Inverse floaters may exhibit substantially greater price volatility than
fixed rate obligations having similar credit quality, redemption provisions
and maturity, and inverse floater collateralized mortgage obligations
("CMOs") exhibit greater price volatility than the majority of
mortgage-related securities. In addition, some inverse floater CMOs exhibit
extreme sensitivity to changes in prepayments. As a result, the yield to
maturity of an inverse floater CMO is sensitive not only to changes in
interest rates but also to changes in prepayment rates on the related
underlying mortgage assets.

Foreign Securities. Each of the Portfolios, except the BT Equity 500 Index
Portfolio, BT Small Company Index Portfolio and the Lazard Small Cap Value
Portfolio, may purchase securities denominated in foreign currencies. The JPM
Core Bond Portfolio and the Morgan Stanley Emerging Markets Equity Portfolio
each may invest in "Brady Bonds." Each of the Portfolios, except the BT
Equity 500 Index Portfolio, the BT Small Company Index Portfolio and the
Lazard Small Cap Value Portfolio, may purchase depositary receipts. For more
information on foreign securities, please see "Investment Strategies --
Foreign Securities" in the Prospectus.

Foreign Currency Transactions. Each of the Portfolios, except the BT Equity
500 Index Portfolio, BT Small Company Index Portfolio and the Lazard Small
Cap Value Portfolio, may purchase foreign currency on a spot (or cash) basis.
In addition, the BT International Equity Index Portfolio, the JPM Core

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Bond Portfolio and the Morgan Stanley Emerging Markets Equity Portfolio may
(i) enter into contracts to purchase or sell foreign currencies at a future
date ("forward contracts"); (ii) purchase and sell foreign currency futures
contracts; and (iii) purchase and sell exchange traded call and put options
on foreign currency futures contracts and on foreign currencies. The BT
International Equity Index Portfolio, the JPM Core Bond Portfolio and the
Morgan Stanley Emerging Markets Equity Portfolio may also utilize
over-the-counter ("OTC") options on foreign currency transactions and may
write covered call options on foreign currencies to offset some of the costs
of hedging those currencies. For more information on foreign currency
transactions, please see "Investment Strategies -- Foreign Currency
Transactions" in the Prospectus.

Hybrid Instruments. The Morgan Stanley Emerging Markets Equity Portfolio may
invest in hybrid instruments. Hybrid instruments have recently been developed
and combine the elements of futures contracts or options with those of debt,
preferred equity or a depository instrument. Often these hybrid instruments
are indexed to the price of a commodity, particular currency, or a domestic
or foreign debt or equity securities index. Hybrid instruments may take a
variety of forms, including, but not limited to, debt instruments with
interest or principal payments or redemption terms determined by reference to
the value of a currency or commodity or securities index at a future point in
time, preferred stock with dividend rates determined by reference to the
value of a currency, or convertible securities with the conversion terms
related to a particular commodity. Hybrid instruments may bear interest or
pay dividends at below market (or even relatively nominal) rates. Under
certain conditions, the redemption value of such an instrument could be zero.
Hybrid instruments can have volatile prices and limited liquidity and their
use by the Portfolio may not be successful.

Illiquid Securities. The Lazard Large Cap Value Portfolio and Lazard Small
Cap Value Portfolio each may invest up to 10% of its assets and each of the
other Portfolios may invest up to 15% of its net assets in illiquid
securities and other securities which are not readily marketable, including
nonnegotiable time deposits, certain restricted securities not deemed by the
Trust's Board of Trustees to be liquid, and repurchase agreements with
maturities longer than seven days. For more information on illiquid
securities, please see "Investment Strategies -- Illiquid Securities" in the
Prospectus.

Investment Grade and Lower Quality Fixed Income Securities. Each Portfolio
may invest in or hold a portion of its total assets in investment grade
securities. The Morgan Stanley Emerging Markets Equity Portfolio may also
invest in or hold lower quality fixed income securities. For more information
on investment grade and lower quality fixed income securities, please see
"Investment Strategies -- Investment Grade and Lower Quality Fixed Income
Securities" in the Prospectus.

Loan Participations. The Lazard Large Cap Value Portfolio, Lazard Small Cap
Value Portfolio, JPM Core Bond Portfolio, and the Morgan Stanley Emerging
Markets Equity Portfolio may invest a portion of each of their assets in loan
participations and other direct indebtedness. For more information on loan
participations, please see "Investment Strategies -- Loan Participations" in
the Prospectus.

Mortgages and Mortgage-Related Securities. Each Portfolio may invest in
mortgage-related securities (i.e., mortgage-backed securities). A
mortgage-backed security may be an obligation of the issuer backed by a
mortgage or pool of mortgages or a direct interest in an underlying pool of
mortgages. Some mortgage-backed securities, such as CMOs, make payments of
both principal and interest at a variety of intervals; others make semiannual
interest payments at a predetermined rate and repay principal at maturity
(like a typical bond). Mortgage-backed securities are based on different
types of mortgages including those on commercial real estate or residential
properties.

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entities, but also may be subject to greater price changes than government
issues. Mortgage-backed securities are subject to prepayment risk.
Prepayment, which occurs when unscheduled or early payments are made on the
underlying mortgages, may shorten the effective maturities of these
securities and may lower their returns.

Stripped mortgage-backed securities are created when a United States
government agency or a financial institution separates the interest and
principal components of a mortgage-backed security and sells them as
individual securities. The holder of the "principal-only" security ("PO")
receives the principal payments made by the underlying mortgage-backed
security, while the holder of the "interest-only" security ("IO") receives
interest payments from the same underlying security. The prices of stripped
mortgage-backed securities may be particularly affected by changes in
interest rates. As interest rates fall, prepayment rates tend to increase,
which tends to reduce prices of IOs and increase prices of POs. Rising
interest rates can have the opposite effect.

The JPM Core Bond Portfolio may also invest in directly placed mortgages
including residential mortgages, multifamily mortgages, mortgages on
cooperative apartment buildings, commercial mortgages, and sale-leasebacks.
These investments are backed by assets such as office buildings, shopping
centers, retail stores, warehouses, apartment buildings and single-family
dwellings. In the event that the Portfolio forecloses on any non-performing
mortgage, and acquires a direct interest in the real property, the Portfolio
will be subject to the risks generally associated with the ownership of real
property. There may be fluctuations in the market value of the foreclosed
property and its occupancy rates, rent schedules and operating expenses.

Municipal Securities. The JPM Core Bond Portfolio and the Morgan Stanley
Emerging Markets Equity Portfolio may invest in municipal securities
("municipals"), which are debt obligations issued by local, state and
regional governments that provide interest income that is exempt from federal
income taxes. Municipals include both municipal bonds (those securities with
maturities of five years or more) and municipal notes (those with maturities
of less than five years). Municipal bonds are issued for a wide variety of
reasons: to construct public facilities, such as airports, highways, bridges,
schools, hospitals, mass transportation, streets, water and sewer works; to
obtain funds for operating expenses; to refund outstanding municipal
obligations; and to loan funds to various public institutions and facilities.
Certain industrial development bonds are also considered municipal bonds if
their interest is exempt from federal income tax. Industrial development
bonds are issued by or on behalf of public authorities to obtain funds for
various privately-operated manufacturing facilities, housing, sports arenas,
convention centers, airports, mass transportation systems and water, gas or
sewer works. Industrial development bonds are ordinarily dependent on the
credit quality of a private user, not the public issuer.

Options and Futures Transactions. Each Portfolio, except the Lazard Large Cap
Value Portfolio and Lazard Small Cap Value Portfolio, may utilize futures
contracts. Each Portfolio, except the Lazard Small Cap Value Portfolio, may
also write and purchase put and call options. Each Portfolio that is
permitted to invest in futures contracts and related options may utilize such
transactions for other than hedging purposes to the extent that aggregate
initial margin deposits and premiums paid do not exceed 5% of the Portfolio's
net assets. No Portfolio will commit more than 5% of its total assets to
premiums when purchasing call or put options. In addition, the total market
value of securities against which a Portfolio may write call or put options
will in no event exceed 25% of its total assets. The BT Equity 500 Index
Portfolio, BT Small Company Index Portfolio and the BT International Equity
Index Portfolio each may not at any time commit more than 20% of its
respective net assets to options and futures contracts. The Morgan Stanley
Emerging Markets Equity Portfolio will not enter a futures contract if the
obligations underlying all such futures contracts would exceed 50% of the
value of such Portfolio's total assets. The JPM Core Bond Portfolio and the
Morgan Stanley Emerging Markets Equity Portfolio may engage in OTC put and
call option transactions. For more information on options and futures
transactions, please see "Investment Strategies -- Options and Futures
Transactions" in the Prospectus.

Passive Foreign Investment Companies. The Morgan Stanley Emerging Markets
Equity Portfolio may purchase the securities of certain foreign investment
funds or trusts called passive foreign investment companies. For more
information on passive foreign investment companies, please see "Investment
Strategies -- Passive Foreign Investment Companies" in the Prospectus.

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Payment-in-Kind Bonds. The JPM Core Bond Portfolio and the Morgan Stanley
Emerging Markets Equity Portfolio may invest in payment-in-kind bonds. For
more information on payment-in-kind bonds, please see "Investment Strategies
- -- Payment-In-Kind Bonds" in the Prospectus.

Reverse Repurchase Agremeements. Each Portfolio except the Lazard Small Cap
Value Portfolio may each enter into reverse repurchase agreements with
brokers, dealers, domestic and foreign banks or other financial institutions.
In a reverse repurchase agreement, the Portfolio sells a security and agrees
to repurchase it at a mutually agreed upon date and price, reflecting the
interest rate effective for the term of the agreement. It may also be viewed
as the borrowing of money by the Portfolio. The Portfolio's investment of the
proceeds of a reverse repurchase agreement is the speculative factor known as
leverage. The Portfolio may enter into a reverse repurchase agreement only if
the interest income from investment of the proceeds is greater than the
interest expense of the transaction and the proceeds are invested for a
period no longer than the term of the agreement. The Portfolio will maintain
with the custodian a separate account with a segregated portfolio of
unencumbered liquid assets in an amount at least equal to its purchase
obligations under these agreements. If interest rates rise during a reverse
repurchase agreement, it may adversely affect the Portfolio's net asset
value. See "Borrowing" for more information concerning restrictions on
borrowing by each Portfolio.

Securities Loans. The JPM Core Bond Portfolio and the Morgan Stanley Emerging
Markets Equity Portfolio may each seek to earn additional income by making
secured loans of portfolio securities with a value up to 33 1/3% of their
respective total assets. The BT Equity 500 Index Portfolio, BT Small Company
Index Portfolio and the BT International Equity Index Portfolio may lend
portfolio securities in an amount up to 30% of their respective total assets.
The Lazard Large Cap Value Portfolio and Lazard Small Cap Value Portfolio may
each lend portfolio securities in an amount up to 10% of their respective
total assets. For more information on securities loans, please see
"Investment Strategies -- Securities Loans" in the Prospectus.

Short Sales Against the Box. The Morgan Stanley Emerging Markets Equity
Portfolio may enter into a "short sale" of securities in circumstances in
which, at the time the short position is open, the Portfolio owns an equal
amount of the securities sold short or owns preferred stocks or debt
securities, convertible or exchangeable without payment of further
consideration, into an equal number of securities sold short. This kind of
short sale, which is referred to as one "against the box," may be entered
into by the Portfolio to, for example, lock in a sale price for a security
the Portfolio does not wish to sell immediately. The Portfolio will deposit,
in a segregated account with its custodian or a qualified subcustodian, the
securities sold short or convertible or exchangeable preferred stocks or debt
securities sold in connection with short sales against the box. The Portfolio
will endeavor to offset transaction costs associated with short sales against
the box with the income from the investment of the cash proceeds. Not more
than 10% of the Portfolio's net assets (taken at current value) may be held
as collateral for short sales against the box at any one time. The extent to
which the Portfolio may make short sales may be limited by Code requirements
for qualification as a regulated investment company.

Small Company Securities. The BT Small Company Index Portfolio, Lazard Small
Cap Value Portfolio and the Morgan Stanley Emerging Markets Equity Portfolio
may invest in the securities of smaller capitalization companies. For more
information on small company securities, please see "Investment Strategies --
Small Company Securities" in the Prospectus.

Structured Notes. The Morgan Stanley Emerging Markets Equity Portfolio may
invest in structured notes, which are derivatives on which the amount of
principal repayment and/or interest payments is based upon the movement of
one or more factors. These factors include, but are not limited to, currency
exchange rates, interest rates (such as the prime lending rate and LIBOR) and
stock indices such as the S&P 500. In some cases, the impact of the movements
of these factors may increase or decrease through the use of multipliers or
deflators. The use of structured notes allows the Portfolio to tailor its
investments to the specific risks and returns the Adviser wishes to accept
while avoiding or reducing certain other risks.

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Swaps. The BT International Equity Index Portfolio, JPM Core Bond Portfolio
and the Morgan Stanley Emerging Markets Equity Portfolio may each invest in
swap contracts, which are derivatives in the form of a contract or other
similar instrument which is an agreement to exchange the return generated by
one instrument for the return generated by another instrument. The payment
streams are calculated by reference to a specified index and agreed upon
notional amount. The term "specified index" includes, but is not limited to,
currencies, fixed interest rates, prices and total return on interest rate
indices, fixed-income indices, stock indices and commodity indices (as well
as amounts derived from arithmetic operations on these indices). For example,
a Portfolio may agree to swap the return generated by a fixed-income index
for the return generated by a second fixed-income index. The Portfolio will
usually enter into swaps on a net basis, i.e., the two return streams are
netted out in a cash settlement on the payment date or dates specified in the
instrument, with the Portfolio receiving or paying, as the case may be, only
the net amount of the two returns. The Portfolio's obligations under a swap
agreement will be accrued daily (offset against any amounts owing to the
Portfolio) and any accrued but unpaid net amounts owed to a swap counterparty
will be covered by the maintenance of a segregated account consisting of
cash, United States Governments, or high grade debt obligations. No Portfolio
will enter into any swap agreement unless the counterparty meets the rating
requirements set forth in guidelines established by the Trust's Board of
Trustees. The swap market has grown substantially in recent years with a
large number of banks and investment banking firms acting both as principals
and as agents utilizing standardized swap documentation. As a result, the
swap market has become relatively liquid. Swaps that include more recent
innovations for which standardized documentation has not yet been fully
developed are less liquid than "traditional" swaps. The use of swaps is a
highly specialized activity that involves investment techniques and risks
different from those associated with ordinary portfolio securities
transactions. If an Adviser is incorrect in its forecasts of market values,
interest rates, and currency exchange rates, the investment performance of
the Portfolio would be less favorable than it would have been if this
investment technique were not used.

Warrants. Each Portfolio may invest in warrants. For more information on
warrants, please see "Investment Strategies -- Warrants" in the Prospectus.

Zero-Coupon Bonds. The JPM Core Bond Portfolio and the Morgan Stanley
Emerging Markets Equity Portfolio may invest in zero-coupon bonds. For more
information on zero-coupon bonds, please see "Investment Strategies --
Zero-Coupon Bonds" in the Prospectus.

Portfolio Turnover. Each Portfolio's turnover rate is not expected to exceed
100% during its first year of operation.

MANAGEMENT OF THE TRUST

THE BOARD OF TRUSTEES

THE MANAGER

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the BT Small Company Index Portfolio the Trust pays the Manager a monthly fee
at the annual rate of .25% of the Portfolio's average daily net assets. As
compensation for managing the BT International Equity Index Portfolio the
Trust pays the Manager a monthly fee at the annual rate of .35% of the
Portfolio's average daily net assets. As compensation for managing the JPM
Core Bond Portfolio the Trust pays the Manager a monthly fee at the annual
rate of .45% of the Portfolio's average daily net assets. As compensation for
managing the Lazard Large Cap Value Portfolio the Trust pays the Manager a
monthly fee at the annual rate of .55% of the respective Portfolio's average
daily net assets. As compensation for managing the Lazard Small Cap Value
Portfolio the Trust pays the Manager a monthly fee at an annual rate of .80%
of the Portfolio's average daily net assets. As compensation for managing the
Morgan Stanley Emerging Markets Equity Portfolio, the Trust pays the Manager
a monthly fee at an annual rate of 1.15% of the Portfolio's average daily net
assets.

THE ADVISERS

Pursuant to an investment advisory agreement with the Manager, each Adviser
to a Portfolio continuously furnishes an investment program for the
Portfolio, makes investment decisions on behalf of the Portfolio, 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 in connection therewith. For its
services, the Manager pays each Adviser an advisory fee based on a percentage
of the average daily net assets of each Portfolio that it advises.

Bankers Trust Company ("Bankers Trust") has been the Adviser to the BT Small
Company Index Portfolio, BT International Equity Index Portfolio and BT
Equity 500 Index Portfolio since each Portfolio commenced operations. As
compensation for services as the Adviser to the BT Small Company Index
Portfolio, the Manager pays Bankers Trust a monthly fee at an annual rate
equal to .05% of the Portfolio's average daily net assets. As compensation
for services as the Adviser to the BT International Equity Index Portfolio,
the Manager pays Bankers Trust a monthly fee of an annual rate equal to .15%
of the Portfolio's average daily net assets. As compensation for services as
the Adviser to the BT Equity 500 Index Portfolio, the Manager pays Bankers
Trust a monthly fee of an annual rate equal to .05% of the Portfolio's
average daily net assets.

Lazard Asset Management ("LAM") has been the Adviser to the Lazard Large Cap
Value Portfolio and the Lazard Small Cap Value Portfolio since each Portfolio
commenced operations. As compensation for services as the Adviser to the
Lazard Large Cap Value Portfolio, the Manager pays LAM a monthly fee at an
annual rate equal to: .425% of the Portfolio's average daily net assets up to
and including $50 million; .40% of the Portfolio's average daily net assets
over $50 million and up to and including $250 million; .375% of the
Portfolio's average daily net assets over $250 million and up to and
including $400 million; and .35% of the Portfolio's average daily net assets
in excess of $400 million. As compensation for services as the Adviser to the
Lazard Small Cap Value Portfolio, the Manager pays LAM a monthly fee of an
annual rate equal to: .65% of the Portfolio's average daily net assets up to
and including $250 million; .55% of the Portfolio's average daily net assets
over $250 million and up to and including $500 million; and .50% of the
Portfolio's average daily net assets in excess of $500 million.

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LAM is a division of Lazard Freres & Co. LLC ("Lazard Freres"), a New York
limited liability company, which is registered as an investment adviser with
the SEC and is a member of the New York, American and Midwest Stock
Exchanges. Lazard Freres, 30 Rockefeller Plaza, New York, New York 10112,
provides its clients with a wide variety of investment banking and related
services, including investment management. It is a major underwriter of
corporate securities, conducts a broad range of trading and brokerage
activities in corporate and governmental bonds and stocks and acts as a
financial adviser to utilities. LAM provides investment management services
to client discretionary accounts with assets as of December 31, 1996 totaling
approximately $38.1 billion. Its clients are both individuals and
institutions, some of whose accounts have investment policies similar to the
Portfolios.

Herbert W. Gullquist and Michael S. Rome have been responsible for the day to
day management of the Lazard Large Cap Value Portfolio, which includes
investment decisions made on behalf of the Portfolio, since the Portfolio
commenced operations. Eileen Alexanderson, Herbert W. Gullquist, Bradley
Purcell, Michael S. Rome and Leonard M. Wilson have been responsible for the
day to day management of the Lazard Small Cap Value Portfolio, which includes
investment decisions made on behalf of the Portfolio, since the Portfolio
commenced operations. Ms. Alexanderson is Managing Director of the Adviser
and has been with the Adviser since 1979. Mr. Gullquist is a Managing
Director of the Adviser and has been with the Adviser since 1982. Mr. Purcell
is a Vice President of the Adviser and has been with the Adviser since 1991.
Mr. Rome is also a Managing Director of the Adviser and has been with the
Adviser since 1991. Mr. Wilson has been a Senior Vice President of the
Adviser since 1988.

J.P. Morgan Investment Management Inc. ("J.P. Morgan") has been the Adviser
to the JPM Core Bond Portfolio since the Portfolio commenced operations. As
compensation for services as the Adviser to the JPM Core Bond Portfolio, the
Manager pays J.P. Morgan a monthly fee at an annual rate equal to: .30% of
the Portfolio's average daily net assets up to and including $125 million;
.25% of the Portfolio's average daily net assets up to and including $200
million; .22% of the Portfolios average daily net assets up to and including
$350 million; and .15% of the Portfolio's average daily net assets in excess
of $350 million.

J.P. Morgan is a Delaware corporation and a registered investment adviser. It
is a wholly owned subsidiary of J.P. Morgan & Co. Incorporated ("JPM & Co."),
a bank holding company organized under the laws of the state of Delaware. JPM
& Co. through J.P. Morgan and other subsidiaries, offers a wide range of
services to governmental, institutional, corporate and individual customers
and acts as investment adviser to individual and institutional clients with
combined assets under management of over $234 billion (of which J.P. Morgan
advises over $181 billion). In particular, J.P. Morgan, 522 Fifth Avenue, New
York, New York 10036, provides investment management services to public,
corporate and union employee benefit plans, as well as foundations,
endowments, insurance companies, state and local governments and their
agencies, and affiliates of J.P. Morgan.

J.P. Morgan uses a sophisticated, disciplined, collaborative process for
managing all asset classes. For fixed income portfolios, this process focuses
on the systematic analysis of real interest rates, sector diversification and
quantitative and credit analysis. The portfolio managers making investments
work in conjunction with fixed income, credit, capital markets and economic
research analysts, as well as traders and administrative officers. The
following persons are primarily responsible for the day-to-day management and
implementation of J.P. Morgan's process for the Portfolio, since the
Portfolio commenced operations: Paul L. Zemsky and Robert J. Teatom. Mr.
Zemsky is a Managing Director of J.P. Morgan and a portfolio manager
specializing in quantitative techniques. Mr. Zemsky joined J.P. Morgan in
1985. Robert J. Teatom is a Managing Director of J.P. Morgan and Co-head of
its U.S. Fixed Income Group. Mr. Teatom joined J.P. Morgan in 1975.

Morgan Stanley Asset Management Inc. ("MSAM") has been the Adviser to the
Morgan Stanley Emerging Markets Equity Portfolio since the Portfolio
commenced operations. MSAM is located at 1221 Avenue of the Americas, New
York, NY 10020. As compensation for services as the Portfolio's Adviser, the
Manager pays MSAM a monthly fee at an annual rate equal to: 1.15% of the
Portfolio's average daily net assets up to and including $100 million; .90%
of the Portfolio's average daily net assets over $100 million and up to and
including $150 million; .80% of the Portfolio's average daily net assets over
$150 million and up to and including $200 million; .60% of the Portfolio's
average daily net assets over $200 million and up to and including $500
million; and .40% of the Portfolio's average daily net assets in excess of
$500 million.

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MSAM conducts a worldwide investment management business, providing a broad
range of portfolio management services to customers in the United States and
abroad. MSAM is a wholly owned subsidiary of Morgan Stanley, Dean Witter,
Discover & Co. ("MSDWD"), which is a publicly owned financial services
corporation listed on the New York and Pacific stock exchanges. MSAM serves
as an investment adviser to numerous open-end and closed-end investment
companies. As of September 30, 1997, MSAM, together with its affiliated asset
management company, Miller Anderson & Sherrerd, LLP, had assets under
management of approximately $144.1.

Madhav Dhar has been responsible for the day to day management of the Morgan
Stanley Emerging Markets Equity Portfolio, which includes investment
decisions made on behalf of the Portfolio, since the Portfolio commenced
operations. Mr. Dhar is a Managing Director of MSAM and Morgan Stanley & Co.
Incorporated ("Morgan Stanley") and a Director of the Morgan Stanley Emerging
Markets Fund, Inc. Mr. Dhar joined MSAM in 1984. Mr. Robert Meyer is also
responsible for the day to day management of the Morgan Stanley Emerging
Markets Equity Portfolio. Mr. Meyer joined MSAM in 1989, is a Principal of
Morgan Stanley and has primary responsibility for MSAM's equity investments
in Latin America. Prior to joining MSAM's Latin American Group, Mr. Meyer
worked in MSAM's U.S. Equity Group.

For further information about the Advisers, their duties and
responsibilities, please see "Management of the Trust -- The Advisers" in the
Prospectus.

THE ADMINISTRATOR

THE TRANSFER AGENT

Equitable serves as the transfer agent and dividend disbursing agent of the
Trust and receives no compensation for serving in such capacity.

EXPENSE LIMITATION AGREEMENT

In the interest of limiting expenses of the Portfolios, the Manager has
entered into an expense limitation agreement with the Trust, with respect to
each Portfolio ("Expense Limitation Agreements"), pursuant to which the
Manager has agreed to waive or limit its fees and to assume other expenses so
that the total annual operating expenses of each Portfolio are limited to:
.55% of the average daily net assets of the BT Equity 500 Index Portfolio;
.60% of the average daily net assets of the BT Small Company Index Portfolio;
.80% of the average daily net assets of the BT International Equity Index
Portfolio; .80% of the average daily net assets of the JPM Core Bond
Portfolio; .90% of the average daily net assets of the Lazard Large Cap Value
Portfolio; 1.20% of the average daily net assets of the Lazard Small Cap
Value Portfolio; and 1.75% of the Morgan Stanley Emerging Markets Equity
Portfolio's average daily net assets.

BROKERAGE PRACTICES

In selecting brokers and dealers, the Manager and each Adviser may consider
research and brokerage services furnished to either company and their
affiliates. Subject to seeking the most favorable net price and execution
available, the Manager and each Adviser may also consider sales of shares of
the Trust as a factor in the selection of brokers and dealers.

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TRANSACTIONS WITH AFFILIATES

The Adviser to each Portfolio may execute portfolio transactions through
certain of their affiliates. For further information on transactions with
affiliates, please see "Management of the Trust -- Transactions With
Affiliates" in the Prospectus.

DESCRIPTION OF THE TRUST AND TRUST'S SHARES

For more information on the Trust and Trust's shares, including how to
purchase and redeem shares, please see "Description of the Trust and Trust's
Shares" in the Prospectus.

DIVIDENDS, DISTRIBUTIONS AND TAXES

For information on dividend, distributions and taxes, please see "Dividends,
Distributions and Taxes" in the Prospectus.

PERFORMANCE INFORMATION

For information on how the Trust may advertise the performance of its
Portfolios, please see "Performance Information" in the Prospectus.

PRIOR PERFORMANCE OF EACH ADVISER

The following tables provide information concerning the historical
performance of another registered investment company (or series) or other
institutional private accounts managed by each Adviser, that has investment
objectives, policies, strategies and risks substantially similar to those of
its respective Portfolio(s) of the Trust. The data is provided to illustrate
the past performance of each Adviser in managing a substantially similar
investment vehicle as measured against specified market indices and does not
represent the past performance of any of the Portfolios or the future
performance of any Portfolio or its Adviser. Consequently, potential
investors should not consider this performance data as an indication of the
future performance of any Portfolio of the Trust or of its Adviser.

Each Adviser's performance data shown below for other registered investment
companies or series thereof was calculated in accordance with standards
prescribed by the SEC for the calculation of average annual total return
information for registered investment companies. Share prices and investment
returns will fluctuate reflecting market conditions as well as changes in
company-specific fundamentals of portfolio securities. Composite performance
data relating to the historical performance of institutional private accounts
managed by the relevant Adviser was calculated in accordance with recommended
standards of the Association for Investment Management and Research ("AIMR")
retroactively applied to all time periods. All returns present were
calculated on a total return basis and include all losses. All returns
reflect the deduction of investment advisory fees, brokerage commissions and
execution costs paid by the relevant Adviser's institutional private
accounts, without provision for federal or state income taxes. Custodial
fees, if any, were not included in the calculation. The Composite includes
all discretionary institutional private accounts managed by the relevant
Adviser that have investment objectives, policies, strategies and risks
substantially similar to those of the relevant Portfolio. Securities
transactions are accounted for on the trade date and accrual accounting is
utilized. Cash and equivalents are included in performance returns.

18
<PAGE>

BT EQUITY 500 INDEX PORTFOLIO

<TABLE>
<CAPTION>
S&P 500
EQUITY 500 COMPOSITE STOCK
YEAR ENDED 9/30/97 INDEX FUND(1) INDEX(2)
- ------------------ ------------- ----------------------
<S> <C> <C>
One Year(3) ........ 40.32% 40.43%
Three Years(3) .... 29.87% 29.92%
Since inception(3).. 20.64% 20.72%
</TABLE>

- ------------
(1) Average annual total return reflects changes in share prices and
reinvestment of dividends and distributions and is net of fund expenses.
(2) The S&P 500 Index ("Index") is an unmanaged index containing common
stocks of 500 industrial, transportation, utility and financial
companies, regarded as generally representative of the United States
stock market. The Index reflects the reinvestment of income dividends
and capital gain distributions, if any, but does not reflect fees,
brokerage commissions, or other expenses of investing.
(3) Annualized performance for shares of the Equity 500 Index Fund of the BT
Institutional Funds. The inception date for the Equity 500 Index Fund
was December 31, 1992.

19
<PAGE>
BT SMALL COMPANY INDEX PORTFOLIO

- ------------
(1) Average annual total return reflects changes in share prices and
reinvestment of dividends and distributions and is net of fund expenses.
(2) The Russell 2000 Index is an unmanaged index composed of approximately
2,000 small-capitalization stocks and includes reinvestments of
dividends. The index does not include fees or operating expenses and is
not available for actual investment. It is compiled by the Frank Russell
Company.
(3) Annualized performance for shares of the Small Cap Index Fund. The
inception date for the Small Cap Index Fund was July 10, 1996.

20
<PAGE>

BT INTERNATIONAL EQUITY INDEX PORTFOLIO

<TABLE>
<CAPTION>
EAFE(REGISTERED
TRADEMARK) EQUITY INDEX FUND-- MSCI EAFE
YEAR ENDED 9/30/97 INSTITUTIONAL CLASS INDEX(2)
- ------------------ ------------------------------ ----------------
<S> <C> <C>
One Year .......... 12.78% 12.18%
Since inception(3) 10.87% 10.71%
</TABLE>

- ------------
(1) Average annual total return reflects changes in share prices and
reinvestment of dividends and distributions and is net of fund expenses.
(2) The Morgan Stanley Capital EAFE Europe, Australia, Far East Index ("MSCI
EAFE Index") is an unmanaged capitalization-weighted index containing
approximately 1,100 equity securities of companies located in countries
outside the United States. The MSCI EAFE Index returns assume dividends
reinvested net of withholding tax and do not reflect any fees or
operating expenses. The index does not include fees or operating
expenses and is not available for actual investment.
(3) Annualized performance for shares of the EAFE Equity Index Fund. The
inception date for the EAFE Equity Index Fund was January 24, 1996.

21
<PAGE>

JPM CORE BOND PORTFOLIO

In the table below, the institutional private accounts that are included in
the Adviser's composite are not subject to the same types of expenses to
which the JPM Core Bond Portfolio is subject or to the diversification
requirements, specific tax restrictions and investment limitations imposed on
the JPM Core Bond Portfolio by the 1940 Act or Subchapter M of the Code. In
fact, the expenses of the JPM Core Bond Portfolio are higher than those of
the accounts included in the Adviser's composite. Consequently, the
performance results for the composite could have been adversely affected if
the institutional private accounts included in the composite had been
regulated as investment companies under the federal securities laws.
Moreover, holders of variable insurance contracts representing interests in
the JPM Core Bond Portfolio will be subject to charges and expenses relating
to such insurance contracts. The performance results presented below do not
reflect any insurance related charges.

The investment results presented below are not intended to predict or suggest
the returns that might be experienced by the JPM Core Bond Portfolio or an
individual investing in such Portfolio. Investors should also be aware that
the use of a methodology different from that used below to calculate
performance could result in different performance data.

<TABLE>
<CAPTION>
J.P. MORGAN SALOMON BROTHERS
ACTIVE FIXED BROAD INVESTMENT
INCOME GRADE BOND
YEAR ENDED 9/30/97 COMPOSITE(1) INDEX(2)
- ------------------ ----------------- -----------------
<S> <C> <C>
One Year .......... 10.87% 9.70%
Three Years ....... 10.19% 9.51%
Five Years ........ 7.62% 6.97%
Ten Years ......... 10.16% 9.53%
Since inception .. 10.20% NA
</TABLE>

- ------------
(1) The inception date for the J.P. Morgan Active Fixed Income Composite was
May 31, 1977.
(2) The Salomon Broad Investment Grade Bond Index is an unmanaged,
market-weighted index which contains approximately 4,700 individually
priced investment grade bonds. The index does not include fees or
operating expenses and is not available for actual investment.

22
<PAGE>

LAZARD LARGE CAP VALUE PORTFOLIO

In the table below, the only account which is included is a series of another
registered investment company, i.e. the Lazard Equity Portfolio, a series of
The Lazard Funds, Inc., which is managed by Lazard Asset Management, and
whose investment policies are substantially similar to the Lazard Large Cap
Value Portfolio. However, the Lazard Equity Portfolio will be subject to
higher expenses than the Lazard Large Cap Value Portfolio. In addition,
holders of variable insurance contracts representing interests in the Lazard
Large Cap Value Portfolio will be subject to charges and expenses relating to
such insurance contracts. The performance results presented below do not
reflect any insurance related expenses.

The investment results of the Lazard Equity Portfolio presented below are
unaudited and are not intended to predict or suggest the returns that might
be experienced by the Lazard Large Cap Value Portfolio or an individual
investor investing in the Lazard Large Cap Value Portfolio.

<TABLE>
<CAPTION>
LAZARD EQUITY S&P 500
YEAR ENDED 9/30/97 PORTFOLIO(1) INDEX(2)
- ------------------ --------------- ---------
<S> <C> <C>
One Year(3) ...... 35.75% 40.43%
Five Years(3) ..... 22.65% 20.75%
Since inception(3) 15.20% 15.59%
</TABLE>

- ------------
(1) Average annual total return reflects changes in share prices and
reinvestment of dividends and distributions and is net of fund expenses.
(2) The S&P 500 Index ("Index") is an unmanaged index containing common
stocks of 500 industrial, transportation, utility and financial
companies, regarded as generally representative of the United States
stock market. The Index reflects the reinvestment of income dividends
and capital gain distributions, if any, but does not reflect fees,
brokerage commissions, or other expenses of investing.
(3) Annualized performance for shares of the Lazard Equity Portfolio. The
inception date for Lazard Equity Portfolio was June 1, 1987.

23
<PAGE>

LAZARD SMALL CAP VALUE PORTFOLIO

In the table below, the only account which is included is a series of another
registered investment company, i.e., Lazard Small Cap Portfolio, a series of
The Lazard Funds, Inc., which is managed by Lazard Asset Management, and
whose investment policies are substantially similar to the Lazard Small Cap
Value Portfolio. However, the Lazard Small Cap Portfolio will be subject to
higher expenses than the Lazard Small Cap Value Portfolio. In addition,
holders of variable insurance contracts representing interests in the Lazard
Small Cap Value Portfolio will be subject to charges and expenses relating to
such insurance contracts. The performance results presented below do not
reflect any insurance related expenses.

The investment results of the Lazard Small Cap Portfolio presented below are
unaudited and are not intended to predict or suggest the returns that might
be experienced by the Lazard Small Cap Value Portfolio or an individual
investor investing in the Lazard Small Cap Value Portfolio.

<TABLE>
<CAPTION>
LAZARD SMALL
CAP RUSSELL
YEAR ENDED 9/30/97 PORTFOLIO(1) 2000 INDEX
- ------------------ -------------- ------------
<S> <C> <C>
One Year(3) ........ 42.53% 33.19%
Five Years(3) ...... 25.36% 20.51%
Since inception(3).. 23.03% 18.25%
</TABLE>

- ------------
(1) Average annual total return reflects changes in share prices and
reinvestment of dividends and distributions and is net of fund expenses.
(2) The Russell 2000 Index is an unmanaged index (with no defined investment
objective) of 2,000 small-cap stocks, and includes reinvestment of
dividends. It is compiled by the Frank Russell Company
(3) Annualized performances for shares of the Lazard Small Cap Portfolio.
The inception date for Lazard Small Cap Portfolio was October 1, 1991.

24
<PAGE>
MORGAN STANLEY EMERGING MARKETS EQUITY PORTFOLIO

In the table below, the only account which is included is another registered
investment company, i.e., Morgan Stanley Universal Funds, Inc. -- Emerging
Markets Equity Portfolio ("MSIF Emerging Markets Portfolio"), which is
managed by the Morgan Stanley Asset Management Inc., and whose investment
policies are substantially similar to the Morgan Stanley Emerging Markets
Equity Portfolio. Operating expenses of the Morgan Stanley Emerging Markets
Equity Portfolio will be the same as the operating expenses of the MSIF
Emerging Markets Portfolio. However, holders of variable insurance contracts
representing interests in the Morgan Stanley Emerging Markets Equity
Portfolio will be subject to changes and expenses relating to such insurance
contracts. The performance results presented below do not reflect any
insurance related expense.

The investment results of MSIF Emerging Markets Equity Portfolio presented
below, which represent a Class A share outstanding for the period, are
unaudited and are not intended to predict or suggest the returns that might
be experienced by the Morgan Stanley Emerging Markets Equity Portfolio or an
individual investor investing in the Morgan Stanley Emerging Markets Equity
Portfolio.

<TABLE>
<CAPTION>
MSIF EMERGING IFC GLOBAL TOTAL
MARKETS EQUITY RETURN COMPOSITE
YEAR ENDED 9/30/97 PORTFOLIO(1,2) INDEX(3)
- --------------------------------- -------------- -----------------------
<S> <C> <C>
One Year(4) ...................... 21.67% 4.77%
Five Year ........................ 15.95% 12.12%
Average Annual Total Return since
inception(4) .................... 15.81% 12.08%
</TABLE>

- ------------
(1) In accordance with SEC regulations, the performance shown assumes that
all recurring fees (including management fees) were deducted and all
dividends and distributions were reinvested. Average annual total return
reflects changes in share prices and reinvestment of dividends and
distributions and is net of fund expenses.
(2) The expense ratio of MSIF Emerging Markets Equity Portfolio has been
capped at 1.75% since its inception.
(3) The IFC Global Total Return Composite Index is an unmanaged index of
common stocks and includes developing countries in Latin America, East
and South Asia, Europe, the Middle East and Africa. The Index assumes
dividends are reinvested.
(4) Annualized performance for the Class A shares of the MSIF Emerging
Markets Portfolio. The Class B shares of the MSIF Emerging Markets
Portfolio are subject to a Rule 12b-1 fee equal to 0.25% of the
Portfolio's assets. The inception date for the MSIF Emerging Markets
Portfolio was September 25, 1992.

25
<PAGE>
APPENDIX A

The following table summarizes the historical performance information of
certain other registered investment companies or accounts that appears on
pages 19 through 25 of this Supplement. Each of those other registered
investment company or account is managed by an Adviser and has investment
objectives, policies, strategies and risks substantially similar to the
Portfolio managed by that Adviser. For further information regarding each of
the registered investment companies and the indexes presented below, please
refer to pages 2 through 9 of this Supplement.

ANNUALIZED RATES OF RETURN
PERIOD ENDED SEPTEMBER 30, 1997

<TABLE>
<CAPTION>
SINCE
FUND NAME 1 YEAR 5 YEARS 10 YEARS INCEPTION
- --------------------------------------- -------- --------- ---------- -----------
<S> <C> <C> <C> <C>
BT EQUITY 500 INDEX FUND 40.32% -- -- 20.64%

S&P 500 Index 40.43% -- -- 20.72%
--------------------------------------- -------- --------- ---------- -----------
BT SMALL CAP INDEX FUND --
INSTITUTIONAL CLASS 33.23% -- -- 31.05%

Russell 2000 Index 33.19% -- -- 32.76%
--------------------------------------- -------- --------- ---------- -----------
BT EAFE(REGISTERED TRADEMARK) EQUITY
INDEX FUND -- INSTITUTIONAL CLASS 12.78% -- -- 10.87%

MSCI EAFE Index 12.18% -- -- 10.71%
--------------------------------------- -------- --------- ---------- -----------
J.P. MORGAN ACTIVE FIXED INCOME
COMPOSITE 10.87% 7.62% 10.16% 10.20%

Salomon Brothers Broad Investment Grade
Bond Index 9.70% 6.97% 9.53% N/A
--------------------------------------- -------- --------- ---------- -----------
LAZARD EQUITY PORTFOLIO 35.75% 22.65% -- 15.20%

S&P 500 Index 40.43% 20.75% -- 15.59
--------------------------------------- -------- --------- ---------- -----------
LAZARD SMALL CAP PORTFOLIO 42.53% 25.36% -- 23.03

Russell 2000 Index 33.19% 20.51% -- 18.25%
--------------------------------------- -------- --------- ---------- -----------
MSIF EMERGING MARKETS PORTFOLIO 21.67% 15.95% -- 15.81%

IFC Global Total Return Composite Index 4.77% 12.12% -- 12.08%
--------------------------------------- -------- --------- ---------- -----------
</TABLE>

A-1

<PAGE>
Filed Pursuant to Rule 497(c)
Registration File No.: 333-17217

EQ ADVISORS TRUST

1290 Avenue of the Americas -- New York, New York 10104

EQ Advisors Trust ("Trust") is an open-end management investment company that
offers a selection of professionally managed investment portfolios
("Portfolios"). Each Portfolio has its own investment objective and policies
that are designed to meet different investment goals.

This Prospectus describes the following 13 Portfolios currently offered by
the Trust.

o BT Equity 500 Index Portfolio

o BT International Equity Index Portfolio

o BT Small Company Index Portfolio

o MFS Emerging Growth Companies Portfolio

o MFS Research Portfolio

o Merrill Lynch Basic Value Equity Portfolio

o Merrill Lynch World Strategy Portfolio

o Morgan Stanley Emerging Markets Equity Portfolio

o EQ/Putnam Balanced Portfolio

o EQ/Putnam Growth & Income Value Portfolio

o T. Rowe Price Equity Income Portfolio

o T. Rowe Price International Stock Portfolio

o Warburg Pincus Small Company Value Portfolio

The Trust offers two classes of shares on behalf of each Portfolio: Class IA
shares offered pursuant to another prospectus, and Class IB shares offered
hereby.

This Prospectus sets forth concisely the information about the Trust and the
Portfolios that a prospective investor should know before investing. Please
read the Prospectus and retain it for future reference. Additional
information contained in a Statement of Additional Information also dated
December 31, 1997 has been filed with the Securities and Exchange Commission
and is available upon request without charge by writing to the Trust at the
address noted above. California residents can obtain a copy of the Statement
of Additional Information by calling 1-800-999-3527. The Statement of
Additional Information is incorporated into this Prospectus by reference.

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.

PROSPECTUS DATED DECEMBER 31, 1997

- --------------------------------------------------------------------------------
EQAT-101
<PAGE>
FINANCIAL HIGHLIGHTS

The financial information in the table below for the period May 1, 1997** to
June 30, 1997 is unaudited. The Trust's semi-annual report, which contains
other financial information, is incorporated by reference into the Trust's
Statement of Additional Information and is available without charge upon
request.

<TABLE>
<CAPTION>
NET REALIZED
AND
UNREALIZED
GAIN (LOSS) ON
NET ASSET INVESTMENTS
VALUE, NET AND FOREIGN TOTAL FROM NET ASSET NET ASSETS,
BEGINNING INVESTMENT CURRENCY INVESTMENT VALUE, END OF TOTAL END OF
OF PERIOD INCOME TRANSACTIONS OPERATIONS PERIOD RETURN (B) PERIOD (000'S)
- -------------- ----------- ------------ -------------- ------------ --------------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
MFS Emerging
Growth
Companies
Portfolio $10.00 0.01 1.22 1.23 $11.23 12.30% $15,400
- -------------- ----------- ------------ -------------- ------------ --------------- ---------- --------------
MFS Research
Portfolio $10.00 0.01 1.00 1.01 $11.01 10.10% $16,702
- -------------- ----------- ------------ -------------- ------------ --------------- ---------- --------------
Merrill Lynch
Basic Value
Equity
Portfolio $10.00 0.02 0.96 0.98 $10.98 9.80% $ 6,054
- -------------- ----------- ------------ -------------- ------------ --------------- ---------- --------------
Merrill Lynch
World
Strategy
Portfolio $10.00 0.04 0.88 0.92 $10.92 9.20% $ 6,488
- -------------- ----------- ------------ -------------- ------------ --------------- ---------- --------------
EQ/Putnam
Balanced
Portfolio $10.00 0.05 0.59 0.64 $10.64 6.40% $ 7,051
- -------------- ----------- ------------ -------------- ------------ --------------- ---------- --------------
EQ/Putnam
Growth &
Income Value
Portfolio $10.00 0.02 0.87 0.89 $10.89 8.90% $18,720
- -------------- ----------- ------------ -------------- ------------ --------------- ---------- --------------
T. Rowe Price
Equity Income
Portfolio $10.00 0.02 0.85 0.87 $10.87 8.70% $15,889
- -------------- ----------- ------------ -------------- ------------ --------------- ---------- --------------
T. Rowe Price
International
Stock
Portfolio $10.00 0.02 0.72 0.74 $10.74 7.40% $20,200
- -------------- ----------- ------------ -------------- ------------ --------------- ---------- --------------
Warburg
Pincus Small
Company Value
Portfolio $10.00 0.01 1.22 1.23 $11.23 12.30% $16,029
- -------------- ----------- ------------ -------------- ------------ --------------- ---------- --------------
</TABLE>

2
<PAGE>
<TABLE>
<CAPTION>
RATIO OF NET
RATIO OF RATIO OF NET INVESTMENT
RATIO OF EXPENSES TO INVESTMENT INCOME TO PER SHARE
EXPENSES TO AVERAGE NET INCOME TO AVERAGE NET BENEFIT
AVERAGE NET ASSETS BEFORE AVERAGE NET ASSETS BEFORE PORTFOLIO AVERAGE TO NET
ASSETS AFTER WAIVERS ASSETS AFTER WAIVERS TURNOVER COMMISSION INVESTMENT
WAIVERS (A)(C) (A)(C) WAIVERS (A)(C) (A)(C) RATE (A) RATE PAID INCOME(C)
- -------------- -------------- ------------- -------------- ------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
MFS Emerging
Growth
Companies
Portfolio 0.85% 5.71% 0.59% (4.27)% 426% $0.0474 $0.05
- -------------- -------------- ------------- -------------- ------------- ----------- ------------ ------------
MFS Research
Portfolio 0.85% 5.99% 1.35% (3.79)% 45% $0.0388 $0.05
- -------------- -------------- ------------- -------------- ------------- ----------- ------------ ------------
Merrill Lynch
Basic Value
Equity
Portfolio 0.85% 7.97% 2.12% (5.01)% 49% $0.0570 $0.08
- -------------- -------------- ------------- -------------- ------------- ----------- ------------ ------------
Merrill Lynch
World
Strategy
Portfolio 1.20% 9.93% 2.79% (5.94)% 75% $0.0356 $0.14
- -------------- -------------- ------------- -------------- ------------- ----------- ------------ ------------
EQ/Putnam
Balanced
Portfolio 0.90% 7.97% 3.76% (3.31)% 75% $0.0256 $0.10
- -------------- -------------- ------------- -------------- ------------- ----------- ------------ ------------
EQ/Putnam
Growth &
Income Value
Portfolio 0.85% 5.07% 2.71% (1.51)% 37% $0.0233 $0.03
- -------------- -------------- ------------- -------------- ------------- ----------- ------------ ------------
T. Rowe Price
Equity Income
Portfolio 0.85% 5.48% 3.20% (1.42)% 14% $0.0283 $0.03
- -------------- -------------- ------------- -------------- ------------- ----------- ------------ ------------
T. Rowe Price
International
Stock
Portfolio 1.20% 7.70% 1.28% (5.22)% 10% $0.0012 $0.08
- -------------- -------------- ------------- -------------- ------------- ----------- ------------ ------------
Warburg
Pincus Small
Company Value
Portfolio 1.00% 4.78% 2.03% (1.75)% 30% $0.0544 $0.02
- -------------- -------------- ------------- -------------- ------------- ----------- ------------ ------------
</TABLE>

- ------------
** Commencement of Operations. No financial highlights are presented for
the BT Equity 500 Index Portfolio, the BT International Equity Index
Portfolio, or the BT Small Company Index Portfolio, each of which
commenced operations on December 31, 1997, and the Morgan Stanley
Emerging Markets Equity Portfolio, which commenced operations on August
20, 1997.
(a) Annualized
(b) Total return calculated for a period of less than one year is not
annualized
(c) For further information concerning fee waivers, see the section
entitled "Expense Limitation Agreements" of the Prospectus.

3
<PAGE>
THE TRUST

The Trust is an open-end management investment company registered under the
Investment Company Act of 1940, as amended ("1940 Act"). As a "series" type
of mutual fund, the Trust issues shares of beneficial interest that are
currently divided among 18 Portfolios, 13 of which are offered by this
Prospectus. Each Portfolio is a separate series of the Trust with its own
objective and policies. Each of the Portfolios set forth below, except for
the Merrill Lynch World Strategy Portfolio and the Morgan Stanley Emerging
Markets Equity Portfolio, are diversified for 1940 Act purposes. The Trustees
of the Trust may establish additional Portfolios at any time.

Each Portfolio is managed by EQ Financial Consultants, Inc. ("Manager") which
directs the day to day operations of each Portfolio. Bankers Trust Company,
Massachusetts Financial Services Company, Merrill Lynch Asset Management,
L.P., Morgan Stanley Asset Management Inc., Putnam Investment Management,
Inc., T. Rowe Price Associates, Inc., Rowe Price-Fleming International, Inc.,
and Warburg Pincus Asset Management, Inc. serve as the advisers (each an
"Adviser" and, together the "Advisers") to one or more of the Portfolios, as
detailed in the table below.

<TABLE>
<CAPTION>
PORTFOLIO ADVISER
- --------- -------
<S> <C>
BT Equity 500 Index Portfolio Bankers Trust Company
BT International Equity Index Portfolio Bankers Trust Company
BT Small Company Index Portfolio Bankers Trust Company
MFS Emerging Growth Companies Portfolio Massachusetts Financial Services Company
MFS Research Portfolio Massachusetts Financial Services Company
Merrill Lynch Basic Value Equity Portfolio Merrill Lynch Asset Management, L.P.
Merrill Lynch World Strategy Portfolio Merrill Lynch Asset Management, L.P.
Morgan Stanley Emerging Markets Equity Portfolio Morgan Stanley Asset Management Inc.
EQ/Putnam Balanced Portfolio Putnam Investment Management, Inc.
EQ/Putnam Growth & Income Value Portfolio Putnam Investment Management, Inc.
T. Rowe Price Equity Income Portfolio T. Rowe Price Associates, Inc.
T. Rowe Price International Stock Portfolio Rowe Price-Fleming International, Inc.
Warburg Pincus Small Company Value Portfolio Warburg Pincus Asset Management, Inc.
</TABLE>

The Manager has the ultimate responsibility to oversee each of the Advisers
and to recommend their hiring, termination and replacement. The Trust and the
Manager have asked the Securities and Exchange Commission for an order that
would permit the Manager, subject to approval by the Board of Trustees, to
(i) select Advisers for each of the Trust's investment portfolios and (ii)
materially modify existing investment advisory agreements without obtaining
shareholder approval.

The Trust offers two classes of shares on behalf of each Portfolio: Class IA
shares and Class IB shares. EQ Financial Consultants, Inc. ("EQ Financial"),
the Trust's Manager, serves as one of the distributors for the Class IB
shares of the Trust offered by this Prospectus and the Class IA shares
offered by another Prospectus. Equitable Distributors, Inc. ("EDI") also
serves as one of the distributors for the Class IB shares of the Trust as
well as one of the distributors of the Class IA shares. (EQ Financial and EDI
are collectively referred to as the "Distributors"). The Trust's shares are
currently sold only to insurance company separate accounts in connection with
variable life insurance contracts and variable annuity certificates and
contracts (collectively, the "Contracts") issued by The Equitable Life
Assurance Society of the United States ("Equitable"). Both classes of shares
are offered and redeemed at their net asset value without the imposition of
any sales load.

4
<PAGE>
Class IA shares are offered pursuant to another prospectus and are subject to
the same expenses as the Class IB shares, but unlike the Class IB shares they
are not subject to distribution fees imposed pursuant to a distribution plan.
Class IB shares are subject to distribution fees imposed under a distribution
plan ("Distribution Plan") adopted pursuant to Rule 12b-1 under the 1940 Act.
Inquiries regarding Class IA shares, which are not currently available,
should be addressed to Equitable, at 1290 Avenue of the Americas, New York,
NY 10104 or by calling 1-212-314-4300.

INVESTMENT OBJECTIVES AND POLICIES

The following is a brief description of the investment objectives and
policies of each of the Portfolios. All of the objectives and policies of
each Portfolio, unless otherwise noted, are not fundamental and may be
changed by the Board of Trustees of the Trust without the approval of
shareholders. Certain investment strategies and instruments discussed below
are described in greater detail in the Statement of Additional Information.
Because of the uncertainty inherent in all investments, there can be no
assurance that the Portfolios will be able to achieve their respective
investment objectives.

BT EQUITY 500 INDEX PORTFOLIO

5
<PAGE>
S&P 500. The Portfolio's ability to track the S&P 500 may be affected by,
among other things, transaction costs, administration and other expenses
incurred by the Portfolio, changes in either the composition of the S&P 500
or the assets of the Portfolio, and the timing and amount of Portfolio
investor contributions and withdrawals, if any. Because the Portfolio seeks
to track the S&P 500, the Adviser generally will not attempt to judge the
merits of any particular stock as an investment. Under normal circumstances,
the Portfolio will invest at least 80% of its assets in the securities of the
S&P 500.

The Portfolio may maintain up to 20% of its assets in short-term debt
securities and money market instruments to meet redemption requests or to
facilitate investment in the securities of the S&P 500. Securities index
futures contracts and related options, warrants and convertible securities
may be used for several reasons: to simulate full investment in the S&P 500
while retaining a cash balance for fund management purposes; to facilitate
trading; to reduce transaction costs; or to seek higher investment returns
when a futures contract, option, warrant or convertible security is priced
more attractively than the underlying equity security or S&P 500. These
instruments may be considered derivatives. The use of derivatives for
non-hedging purposes may be considered speculative. While each of these
instruments can be used as leveraged investments, the Portfolio may not use
them to leverage its net assets. The Portfolio may not invest in derivative
instruments as part of a temporary defensive strategy (in anticipation of
declining stock prices) to protect the Portfolio against potential market
declines.

BT INTERNATIONAL EQUITY INDEX PORTFOLIO

6
<PAGE>
transaction costs, administration and other expenses incurred by the
Portfolio, changes in either the composition of the EAFE Index or the assets
of the Portfolio, and the timing and amount of Portfolio investor
contributions and withdrawals, if any. Because the Portfolio seeks to track
the EAFE Index, Bankers Trust generally will not attempt to judge the merits
of any particular stock as an investment. Under normal circumstances, the
Portfolio will invest at least 80% of its assets in the securities of the
EAFE Index.

The Portfolio may maintain up to 20% of its assets in short-term debt
securities and money market instruments to meet redemption requests or to
facilitate investment in the securities of the EAFE Index. Securities index
futures contracts and related options, warrants and convertible securities
may be used for several reasons: to simulate full investment in the EAFE
Index while retaining a cash balance for fund management purposes; to
facilitate trading; to reduce transaction costs; or to seek higher investment
returns when a futures contract, option, warrant or convertible security is
priced more attractively than the underlying equity security or EAFE Index.
These instruments may be considered derivatives. The use of derivatives for
non-hedging purposes may be considered speculative. While each of these
instruments can be used as leveraged investments, the Portfolio will not use
them to leverage its net assets. The Portfolio will not invest in derivative
instruments as part of a temporary defensive strategy (in anticipation of
declining stock prices) to protect the Portfolio against potential market
declines.

BT SMALL COMPANY INDEX PORTFOLIO

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Russell 2000. The Portfolio's ability to track the Russell 2000 may be
affected by, among other things, transaction costs, administration and other
expenses incurred by the Portfolio, changes in either the composition of the
Russell 2000 or the assets of the Portfolio, and the timing and amount of
Portfolio investor contributions and withdrawals, if any. Because the
Portfolio seeks to track the Russell 2000, the Adviser generally will not
attempt to judge the merits of any particular stock as an investment. Under
normal circumstances, the Portfolio will invest at least 80% of its assets in
the securities of the Russell 2000. The Portfolio is a diversified fund and
will not concentrate more than 25% of its assets in the securities of issuers
in the same industry. In the event that the Russell 2000 should concentrate
to an extent greater than 25% in the securities of issuers in the same
industry, the Portfolio's ability to achieve its objective may be impaired
since the Portfolio is not permitted to so invest.

The Portfolio may maintain up to 20% of its assets in short-term debt
securities and money market instruments to meet redemption requests or to
facilitate investment in the securities of the Russell 2000. Securities index
futures contracts and related options, warrants and convertible securities
may be used for several reasons: to simulate full investment in the Russell
2000 while retaining a cash balance for portfolio management purposes; to
facilitate trading; to reduce transaction costs; or to seek higher investment
returns when a futures contract, option, warrant or convertible security is
priced more attractively than the underlying equity security or the Russell
2000. These instruments may be considered derivatives. The use of derivatives
for non-hedging purposes may be considered speculative. While each of these
instruments can be used as leveraged investments, the Portfolio will not use
them to leverage its net assets. The Portfolio will not invest in derivative
instruments as part of a temporary defensive strategy (in anticipation of
declining stock prices) to protect the Portfolio against potential market
declines.

MFS EMERGING GROWTH COMPANIES PORTFOLIO

The investment objective of the MFS Emerging Growth Companies Portfolio is to
provide long-term growth of capital. Dividend and interest income from
portfolio securities, if any, is incidental to the Portfolio's investment
objective. In pursuing its objective, the Portfolio invests primarily (i.e.,
at least 80% of its assets 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. Such emerging
growth companies generally are expected to: (i) show earnings growth over
time that is well above the growth rate of the overall economy and the rate
of inflation; and (ii) have the products, technologies, management and market
and other opportunities that are usually necessary to become more widely
recognized as growth companies.

Emerging growth companies can be of any size and the Portfolio may invest in
larger or more established companies whose rates of earnings growth are
expected to accelerate because of special factors, such as rejuvenated
management, new products, changes in customer demand, or basic changes in the
economic environment. Investing in emerging growth companies involves greater
risk than is customarily associated with investments in more established
companies. Emerging growth companies often have limited product lines,
markets or financial resources and may be more dependent on one-person
management. In addition, there may be less research available on many
promising small or medium-sized emerging growth companies, making it more
difficult both to identify and to analyze such companies. Moreover, the
securities of such companies may have limited marketability and may be
subject to more abrupt or erratic market movements than the securities of
larger, more established companies.

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non-United States dollar-denominated securities traded outside the United
States and dollar-denominated securities traded in the United States (such as
ADRs). Such foreign investments increase a portfolio's diversification and
may enhance return, but they may represent a greater degree of risk than
investing exclusively in domestic securities. The Portfolio may also invest
in debt securities and hold cash and cash equivalents. In addition, the
Portfolio may invest in lower-rated debt securities (commonly referred to as
"junk bonds").

The Portfolio is aggressively managed and, therefore, the value of its shares
is subject to greater fluctuation and investment in its shares generally
involves a higher degree of risk than would be the case with an investment in
a conservative equity or growth fund investing entirely in proven growth
companies.

Certain investment strategies and practices which may be employed by the
Portfolio (such as foreign securities, repurchase agreements, loan
participations, derivatives, United States Government securities, securities
loans, forward commitments, asset-backed securities, borrowings, options,
futures contracts, convertible securities, foreign currency transactions,
illiquid securities and investment grade and lower quality fixed-income
securities) are discussed under the caption "Investment Strategies" below and
in the Statement of Additional Information.

MFS RESEARCH PORTFOLIO

The investment objective of the MFS Research Portfolio is to provide
long-term growth of capital and future income. In pursuing its objective, the
Portfolio invests a substantial portion of its assets in the common stock or
securities convertible into common stock of companies believed by the Adviser
to possess better than average prospects for long-term growth. A smaller
proportion of the assets of the Portfolio may be invested in bonds,
short-term debt obligations, preferred stocks or common stocks whose
principal characteristic is income production rather than growth. Such
securities may also offer opportunities for growth of capital as well as
income. In the case of both growth stocks and income securities, the Adviser
emphasizes progressive, well-managed companies.

The portfolio securities of the Portfolio are selected by a committee of
investment research analysts. This committee includes investment analysts
employed not only by the Adviser but also by MFS International (U.K.)
Limited, a wholly-owned subsidiary of the Adviser. The Portfolio's assets are
allocated among industries by the analysts acting together as a group.
Individual analysts are then responsible for selecting what they view as the
securities best suited to meet the Portfolio's investment objective within
their assigned industry responsibility.

To the extent that such investments comply with the Portfolio's investment
objective, the Portfolio may invest up to 20% of its total assets in foreign
securities, including those in emerging markets. These securities include
dollar-denominated and non-dollar-denominated foreign securities. Such
foreign investments increase a portfolio's diversification and may enhance
return, but they may represent a greater degree of risk than investing
exclusively in domestic securities.

The Portfolio may invest in investment grade debt securities and may invest
up to 10% of its total assets in securities rated below investment grade
(commonly known as "junk bonds"). The price of a bond generally fluctuates
with changes in interest rates, rising when interest rates fall and falling
when interest rates rise.

Certain investment strategies and practices which may be employed by the
Portfolio (such as foreign securities, convertible securities, borrowings,
repurchase agreements, securities loans, illiquid securities and investment
grade and lower quality fixed-income securities) are discussed under the
caption "Investment Strategies" below and in the Statement of Additional
Information.

MERRILL LYNCH BASIC VALUE EQUITY PORTFOLIO

9
<PAGE>
ratios, or seem capable of recovering from temporarily out of favor
considerations. Particular emphasis is placed on securities that provide an
above-average dividend return and sell at a below-average price-earnings
ratio.

The investment policy of the Portfolio is based on the belief that the
pricing mechanism of the securities market lacks total efficiency and has a
tendency to inflate prices of securities in favorable market climates and
depress prices of securities in unfavorable climates. Based on this premise,
the Adviser believes that favorable changes in market prices are more likely
to begin when securities are out of favor, earnings are depressed,
price-earnings ratios are relatively low, investment expectations are
limited, and there is no real general interest in the particular security or
industry involved. On the other hand, the Adviser believes that negative
developments are more likely to occur when investment expectations are
generally high, stock prices are advancing or have advanced rapidly,
price-earnings ratios have been inflated, and the industry or issue continues
to gain new investment acceptance on an accelerated basis. In other words,
the Adviser believes that market prices of securities with relative high
price-earnings ratios are more susceptible to unexpected adverse developments
while securities with relatively low price-earnings ratios are more favorably
positioned to benefit from favorable, but generally unanticipated events.
This investment policy departs from traditional philosophy. The Adviser
believes that the market risk involved in this policy is moderated somewhat
by an emphasis on securities with above-average dividend returns.

The current institutionally-dominated market tends to ignore, to some extent,
the numerous secondary issues whose market capitalizations are below those of
the relatively few larger size growth companies. It is expected that the
Portfolio's portfolio generally will have significant representation in this
secondary segment of the market. The Adviser is responsible for the
management of the Portfolio's securities portfolio and makes portfolio
decisions based on its own research information supplemented by research
information provided by other sources. The basic orientation of the
Portfolio's investment policies is such that at times a large portion of its
common stock holdings may carry less than favorable research ratings from
research analysts.

Investment emphasis is on equities, primarily common stock and, to a lesser
extent, securities convertible into common stocks. The Portfolio also may
invest in preferred stocks and non-convertible investment grade debt
securities and utilize covered call options with respect to portfolio
securities. The Portfolio has the right, as a defensive measure, to hold
other types of securities, including United States Government and Government
agency securities, money market securities, or other fixed-income securities
deemed by the Adviser to be consistent with a defensive posture, or cash, in
such proportions as, in the opinion of the Adviser, prevailing market or
economic conditions warrant. The Portfolio may invest up to 10% of its total
assets, taken at market value at the time of acquisition, in the securities
of foreign issuers.

Certain investment strategies and instruments which may be employed by the
Portfolio (such as options, convertible securities, United States Government
securities, repurchase agreements, securities loans, foreign securities,
borrowings and illiquid securities) are discussed under the caption
"Investment Strategies" below and in the Statement of Additional Information.

MERRILL LYNCH WORLD STRATEGY PORTFOLIO

The investment objective of the Merrill Lynch World Strategy Portfolio is to
seek high total investment return by investing primarily in a portfolio of
equity and fixed income securities, including convertible securities, of U.S.
and foreign issuers. Total investment return consists of interest, dividends,
discount accruals and capital changes, including changes in the value of
non-dollar denominated securities and other assets and liabilities resulting
from currency fluctuations. Investing in foreign securities involves special
considerations. The Portfolio may employ a variety of instruments and
techniques to enhance income and to hedge against market and currency risk.

10
<PAGE>
markets and the issuers domiciled therein; anticipated movements in interest
rates in the various capital markets and in the value of foreign currencies
relative to the U.S. dollar; tax considerations; and economic, social,
financial, national and political factors that may affect the climate for
investing within the various securities markets. When in the judgment of the
Adviser, economic or market conditions warrant, the Portfolio reserves the
right to concentrate its investments in one or more capital markets,
including the United States.

The equity and convertible preferred securities in which the Portfolio may
invest are primarily securities issued by quality companies. Generally, the
characteristics of such companies include a strong balance sheet, good
financial resources, a satisfactory rate of return on capital, a good
industry position and superior management.

The corporate debt securities, including convertible debt securities, in
which the Portfolio may invest will be primarily investment grade securities
rated BBB or better by S&P or Baa or better by Moody's or of comparable
quality. The Fund may also invest in debt obligations issued or guaranteed by
sovereign governments, political subdivisions thereof (including states,
provinces and municipalities) or their agencies or instrumentalities or
issued or guaranteed by international organizations designated or supported
by governmental entities to promote economic reconstruction or development
("supranational entities") such as the International Bank for Reconstruction
and Development (the "World Bank") and the European Coal and Steel Community.
Investments in securities of supranational entities are subject to the risk
that member governments will fail to make required capital contributions and
that a supranational entity will thus be unable to meet its obligations.

When market or financial conditions warrant, the Portfolio may invest as a
temporary defensive measure up to 100% of its assets in United States
Government or Government agency securities issued or guaranteed by the United
States Government or its agencies or instrumentalities, money market
securities or other fixed income securities deemed by the Adviser to be
consistent with a defensive posture, or may hold its assets in cash.

Certain investment strategies and instruments which may be employed by the
Portfolio (such as the purchase and sale of options, floaters, futures
contracts, foreign securities, foreign currency transactions, United States
Government securities, convertible securities, borrowings, derivatives,
investment grade fixed-income securities, repurchase agreements, securities
loans, illiquid securities and forward commitments) are discussed under the
caption "Investment Strategies" below and in the Statement of Additional
Information.

MORGAN STANLEY EMERGING MARKETS EQUITY PORTFOLIO

11
<PAGE>
country; (ii) alone or on a consolidated basis, it derives 50% or more of its
revenue from either goods produced, sales made or services performed in
emerging markets countries; or (iii) it is organized under the laws of, and
has a principal office in, an emerging market country. The Adviser will base
determinations as to eligibility on publicly available information and
inquiries made to the companies.

The Portfolio may also invest in fixed-income securities denominated in the
currency of an emerging market country or issued or guaranteed by an emerging
market country company or the government of an emerging market country. In
addition, the Portfolio may invest in equity or fixed-income securities of
corporate or governmental issuers located in industrialized countries,
foreign currency and investment funds (i.e., funds specifically authorized to
invest in companies of a particular emerging market country). The Portfolio
may also invest in debt securities issued or guaranteed by international
organizations designed or supported by multiple governmental entities to
promote economic reconstruction or development such as the International Bank
for Reconstruction and Development (i.e., the World Bank). The Portfolio may
invest up to 10% of its total assets (measured at the time of investment) in
fixed-income securities that are not investment grade securities (commonly
referred to as "junk bonds").

The Portfolio is a non-diversified portfolio under the 1940 Act, which means
that it may invest a greater proportion of its assets in the securities of a
small number of issuers than a diversified investment company. In this
regard, the Portfolio is not subject to the general limitation that it not
invest more than 5% of its total assets in the securities of a single issuer.
As a result, because the Portfolio is permitted greater flexibility to invest
its assets in the obligations of a single issuer it is exposed to increased
risk of loss if such an investment underperforms expectations. However, the
Portfolio intends to limit its investments so as to comply with
diversification requirements imposed by the Code for qualification as a
"regulated investment company." The Portfolio spreads investment risk by
limiting its holdings in any one

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<PAGE>
company or industry. Nevertheless, the Portfolio will experience price
volatility, the extent of which will be affected by the types of securities
and techniques the Portfolio uses. The Adviser may use various investment
techniques to hedge risks, including derivatives, but there is no guarantee
that these strategies will work as intended.

EQ/PUTNAM BALANCED PORTFOLIO

The investment objective of the EQ/Putnam Balanced Portfolio is to provide a
balanced investment composed of a well-diversified portfolio of stocks and
bonds that will produce both capital growth and current income. In seeking
its objective, the Portfolio may invest in almost any type of security or
negotiable instrument, including cash or money market instruments. While the
proportion invested in each type of security is not fixed, ordinarily the
Adviser will invest no more than 75% of the Portfolio's assets in common
stocks and conversion rights with respect to convertible securities. The
Adviser may, however, invest more than 75% of the Portfolio's assets in such
securities if it determines that unusual market or economic conditions make
it appropriate to do so.

The Portfolio may also invest in debt securities, including lower-rated debt
securities (commonly referred to as "junk bonds"). The Portfolio will not
necessarily dispose of a security when its rating is reduced below its rating
at the time of purchase. However, the Adviser will consider such reduction in
its determination of whether the Portfolio should continue to hold the
security.

At times, the Adviser may judge that conditions in the securities markets may
make pursuing the Portfolio's basic investment strategy inconsistent with the
best interests of the Portfolio's shareholders. At such times, the Adviser
may temporarily use alternative strategies that are primarily designed to
reduce fluctuations in the value of the Portfolio's assets. In implementing
these defensive strategies, the Portfolio may invest without limit in debt
securities, preferred stocks, United States Government and agency
obligations, cash or money market instruments, or may invest in any other
securities the Adviser considers consistent with such defensive strategies.
It is impossible to predict when, or for how long, the Adviser will use these
alternative defensive strategies.

The Portfolio may invest up to 20% of its total assets in foreign securities.
The Portfolio may also purchase Eurodollar certificates of deposit (i.e.,
short-term time deposits issued by European banks) without regard to this 20%
limit. Such investments increase the Portfolio's diversification and may
enhance return, but they may represent a greater degree of risk than
investing in domestic securities.

Certain investment strategies and instruments which may be employed by the
Portfolio (such as the purchase and sale of options, futures contracts,
foreign securities, securities loans, illiquid securities, zero-coupon bonds,
investment grade and lower quality fixed-income securities, payment-in-kind
bonds, derivatives, foreign currency transactions, repurchase agreements,
forward commitments and investment grade and lower quality fixed-income
securities) are discussed under the caption "Investment Strategies" below and
in the Statement of Additional Information.

EQ/PUTNAM GROWTH & INCOME VALUE PORTFOLIO

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<PAGE>
notes and debentures, preferred stocks and convertible securities (which
include both debt securities and preferred stocks). The types of securities
held by the Portfolio may vary from time to time in light of the Portfolio's
investment objective, changes in interest rates, and economic and other
factors. In analyzing companies for investment, the Adviser will seek to
identify companies whose securities are significantly undervalued in relation
to their underlying asset values or earnings potential.

At times, the Adviser may judge that conditions in the securities markets may
make pursuing the Portfolio's basic investment strategy inconsistent with the
best interests of the Portfolio's shareholders. At such times, the Adviser
may temporarily use alternative strategies that are primarily designed to
reduce fluctuations in the value of the Portfolio's assets. In implementing
these defensive strategies, the Portfolio may invest without limit in debt
securities or preferred stocks, or may invest in any other securities the
Adviser considers consistent with such defensive strategies. It is impossible
to predict when, or for how long, the Adviser will use these alternative
defensive strategies.

In addition, the Portfolio may also invest a portion of its assets in United
States government securities and high-quality United States and foreign
dollar-denominated money market securities (i.e., within the two highest
rating categories assigned by a NRSRO) including certificates of deposit,
bankers' acceptances, commercial paper, short-term corporate securities and
repurchase agreements. For temporary defensive purposes or to meet redemption
requests, the Portfolio may invest without limitation in such securities.

The Portfolio may also invest in investment grade debt securities and may
invest a portion of its total assets in debt securities rated below
investment grade (commonly known as "junk bonds"). The price of a bond
generally fluctuates with changes in interest rates, rising when interest
rates fall and falling when interest rates rise.

The Portfolio may also engage in a variety of investment management practices
such as buying and selling options and futures contracts and engaging in
foreign currency exchange contracts.

Certain investment strategies and instruments which may be employed by the
Portfolio (such as the purchase and sale of options, futures contracts,
foreign securities, securities loans, convertible securities, borrowings,
repurchase agreements, illiquid securities, forward commitments, zero-coupon
bonds, derivatives, United States Government securities, foreign currency
transactions, passive foreign investment companies, payment-in-kind bonds,
and investment grade and lower quality fixed-income securities) are discussed
under the caption "Investment Strategies" below and in the Statement of
Additional Information.

T. ROWE PRICE EQUITY INCOME PORTFOLIO

The investment objective of the T. Rowe Price Equity Income Portfolio is to
seek to provide substantial dividend income and also capital appreciation by
investing primarily in dividend-paying common stocks of established
companies. In pursuing its objective, the Portfolio emphasizes companies with
favorable prospects for increasing dividend income and capital appreciation.
Over time, the income component (dividends and interest earned) of the
Portfolio's investments is expected to be a significant contributor to the
Portfolio's total return. The Portfolio's yield is expected to be
significantly above that of the S&P 500. Total return will consist primarily
of dividend income and secondarily of capital appreciation (or depreciation).

The investment program of the Portfolio is based on several premises. First,
the Adviser believes that over time, dividend income can account for a
significant component of the total return from equity investments. Second,
dividends are normally a more stable and predictable source of return than
capital appreciation. While the price of a company's stock generally
increases or decreases in response to short-term earnings and market
fluctuations, its dividends are generally less volatile. Finally, the Adviser
believes that stocks that distribute a high level of current income tend to
have less price volatility than those that pay below average dividends.

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<PAGE>
Under normal circumstances, the Portfolio will invest at least 65% of its
total assets in income-producing common stocks of established companies
paying above-average dividends. The Adviser uses a "value" approach and
invests in common stocks and other equities-related securities it believes
are temporarily undervalued by various measures, such as price/earnings
ratios. The Portfolio's investments will generally be made in companies that
share some of the following characteristics: established operating histories;
above-average current dividend yields relative to the S&P 500; low
price/earnings ratios relative to the S&P 500; sound balance sheets and other
financial characteristics; and low stock price relative to company's
underlying value as measured by assets, earnings, cash flow or business
franchises.

Although the Portfolio will invest primarily in United States common stocks,
it may also purchase other types of securities (for example, foreign
securities, preferred stocks, convertible securities and warrants) when
considered consistent with the Portfolio's investment objective and program.
The Portfolio may invest up to 25% of its total assets in foreign securities.
These include non-dollar denominated securities traded outside the United
States and dollar-denominated securities traded in the United States (such as
American Depositary Receipts ("ADRs"). Such investments increase a
portfolio's diversification and may enhance return, but they may represent a
greater degree of risk than investing in domestic securities.

The Portfolio may also engage in a variety of investment practices, such as
buying and selling options and futures contracts and engaging in foreign
currency exchange transactions. In addition, the Portfolio may invest up to
10% of its total assets in hybrid instruments.

The Portfolio may also invest a portion of its assets in United States
government securities and high-quality United States and foreign
dollar-denominated money market securities (i.e., within the two highest
rating categories assigned by a NRSRO) including certificates of deposit,
bankers' acceptances, commercial paper, short-term corporate securities and
repurchase agreements. For temporary defensive purposes or to meet redemption
requests, the Portfolio may invest without limitation in such securities.

The Portfolio may also invest in debt securities of any type including
municipal securities, without regard to quality or rating. Such securities
would be purchased in companies that meet the investment criteria for the
Portfolio. The price of a bond generally fluctuates with changes in interest
rates, rising when interest rates fall and falling when interest rates rise.
The Portfolio, however, will not invest more than 10% of its total assets in
securities rated below investment grade (commonly known as "junk bonds").

Certain investment strategies and instruments which may be employed by the
Portfolio (such as the purchase and sale of options, futures contracts,
convertible securities, borrowings, foreign securities, repurchase
agreements, derivatives, United States government securities, securities
loans, foreign currency transactions, illiquid securities and investment
grade and lower quality fixed-income securities) are discussed under the
caption "Investment Strategies" below and in the Statement of Additional
Information.

T. ROWE PRICE INTERNATIONAL STOCK PORTFOLIO

The investment objective of the T. Rowe Price International Stock Portfolio
is to seek long-term growth of capital through investment primarily in common
stocks of established non-United States companies. The Adviser intends to
invest substantially all of the Portfolio's assets outside the United States
and to diversify broadly among countries throughout the world -- developed,
newly industrialized and emerging -- by having at least five different
countries represented in the Portfolio. The Portfolio may invest in countries
of the Far East and Europe as well as South Africa, Australia, Canada, and
other areas (including developing countries). No more than 20% of the
Portfolio's net assets will be invested in securities of issuers located in
any one country with the exception of issuers located in Australia, Canada,
France, Japan, the United Kingdom or Germany (where the investment limitation
is 35%). In determining the appropriate distribution of investments among
various countries and geographic regions, the Adviser ordinarily considers
the following factors: prospects for relative economic growth between foreign
countries; expected levels of inflation; government policies influencing
business conditions; the outlook for currency relationships; and the range of
individual investment opportunities available to international investors.

15
<PAGE>
The Portfolio expects to invest substantially all of its assets in common
stocks. However, the Portfolio may also invest in a variety of other
equity-related securities (such as preferred stocks, warrants and convertible
securities) as well as corporate and governmental debt securities, when
considered consistent with the Portfolio's investment objective and program.
The Portfolio may also invest in certain foreign investment portfolios or
trusts commonly referred to as passive foreign investment companies. These
entities have been authorized by the governments of certain countries
specifically to permit foreign investment in securities of companies listed
or traded on the stock exchanges in those countries. The Portfolio may also
engage in a variety of investment management practices such as buying and
selling options and futures contracts and engaging in foreign currency
exchange contracts and may invest up to 10% of its total assets in hybrid
instruments, which are a type of high-risk instrument that can combine the
characteristics of securities, futures contracts and options.

Under normal conditions, the Portfolio's investment in securities other than
common stocks is limited to no more than 35% of its total assets. However,
for temporary defensive purposes, the Portfolio may invest all or a
significant portion of its assets in United States Government securities and
corporate debt obligations. The Portfolio will not purchase any debt security
which, at the time of purchase, is rated below investment grade by a
nationally recognized statistical rating organization ("NRSRO"). This
restriction would not prevent the Portfolio from retaining a security
downgraded to below investment grade after purchase. In addition, the
Portfolio may invest without limitation in high quality United States and
foreign dollar-denominated money market securities for temporary defensive
purposes or to meet redemption requests.

In analyzing companies for investment, the Adviser uses a "bottom up"
approach. A company's prospects for achieving and sustaining above-average,
long-term earnings growth is generally the Adviser's primary focus. However
the Adviser also considers certain other factors in making its investment
decisions, including: above-average earnings growth per share; high return on
invested capital; healthy balance sheet; sound financial and accounting
policies and overall financial strength; strong competitive advantages;
effective research, product development and marketing; efficient service;
pricing flexibility; strength of management; and general operating
characteristics that should enable the companies to compete successfully in
their market place. While current dividend income is not a prerequisite in
the selection of portfolio companies, the companies in which the Portfolio
invests normally will have a record of paying dividends, and will generally
be expected to increase the amounts of such dividends in future years as
earnings increase. It is expected that the Portfolio's investments will
ordinarily be made on exchanges located at least in the respective countries
in which the various issuers of such securities are principally based.

Certain investment strategies and instruments which may be employed by the
Portfolio (such as the purchase and sale of options, futures contracts,
hybrid instruments, foreign securities, foreign currency transactions,
passive foreign investment companies, United States Government securities,
convertible securities, borrowings, derivatives, investment grade
fixed-income securities, securities loans and illiquid securities) are
discussed under the caption "Investment Strategies" below and in the
Statement of Additional Information.

WARBURG PINCUS SMALL COMPANY VALUE PORTFOLIO

The investment objective of the Warburg Pincus Small Company Value Portfolio
is to seek long-term capital appreciation. The Portfolio is a diversified
management investment company that pursues its investment objective by
investing primarily in a portfolio of equity securities 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. Current income is a secondary consideration in
selecting portfolio investments.

Under normal market conditions, the Portfolio will invest at least 65% of its
total assets in common stock, preferred stocks, debt securities convertible
into common stocks, warrants and other rights of small companies. The
Portfolio may invest up to 10% of its total assets in warrants.

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<PAGE>
The Adviser will determine whether a company is undervalued based on a
variety of measures, including: price/earnings ratio, price/book ratio,
price/cash flow ratio, earnings growth and debt/capital ratio. Other relevant
factors, including a company's asset value, franchise value and quality of
management, will also be considered. The Portfolio will invest primarily in
companies whose securities are traded on United States stock exchanges or in
the United States over-the-counter market, but it may invest up to 20% of its
total assets in foreign securities.

The Portfolio may also invest up to 20% of its total assets in investment
grade securities (other than money market obligations) that are not
convertible into common stock for the purpose of seeking capital
appreciation. Subsequent to its purchase by the Portfolio, an issue of
securities may cease to be rated or its rating may be reduced below the
minimum required for purchase by the Portfolio. Neither event will require
the sale of such securities by the Portfolio. The Adviser will consider such
events in its determination of whether the Portfolio should continue to hold
the securities. The interest income to be derived may be considered as one
factor in selecting debt securities by the Adviser.

The Portfolio is authorized to invest, under normal market conditions, up to
20% of its total assets in domestic and foreign short-term (one year or less
remaining to maturity) and medium-term (five years of less remaining to
maturity) money market obligations. For temporary defensive purposes, the
Portfolio may invest in these securities without limit. These instruments
consist of: obligations issued or guaranteed by the United States Government
or a foreign government, their agencies or instrumentalities; bank
obligations (including certificates of deposit, time deposits and bankers'
acceptances of domestic or foreign banks, domestic savings and loans and
similar institutions) that are high-quality investments or, if unrated,
deemed by the Adviser to be high-quality investments; commercial paper rated
no lower than A2 by Standard & Poor's Rating Service ("S&P") or Prime2 by
Moody's Investors Service, Inc. ("Moody's") or the equivalent from another
NRSRO or, if unrated, of an issuer having an outstanding, unsecured debt
issue then rated within the three highest rating categories by any NRSRO; and
repurchase agreements with respect to the foregoing.

When the Adviser believes that a defensive posture is warranted, the
Portfolio may invest temporarily, without limit, in investment grade debt
obligations and in domestic and foreign money market instruments, including
repurchase agreements.

Certain investment strategies and practices which may be employed by the
Portfolio (such as foreign securities, repurchase agreements, borrowings,
options, securities loans, small company securities, derivatives, futures
contracts, foreign currency transactions, United States Government
securities, short sales against the box, convertible securities, investment
grade and lower-quality fixed-income securities, and illiquid securities) are
discussed under the caption "Investment Strategies" below and in the
Statement of Additional Information.

INVESTMENT STRATEGIES

In addition to making investments directly in securities, to the extent
described above and below, each of the Portfolios, for example, may purchase
and sell call and put options (except for MFS Research Portfolio), engage in
transactions in futures contracts and related options, and engage in forward
foreign currency exchange transactions (except for BT Equity 500 Index
Portfolio, BT Small Company Index Portfolio and MFS Research Portfolio). They
may also enter into repurchase agreements and borrow funds under certain
limited circumstances. In addition, each Portfolio may engage in other types
of investment strategies as described below. Each Portfolio may invest in or
utilize any of these investment strategies and instruments or engage in any
of these practices except where otherwise prohibited by law or the
Portfolio's own investment restrictions. Portfolios that anticipate
committing 5% or more of their net assets to a particular type of investment
strategy or instruments are specifically referred to in the descriptions
below of such investment strategy or instrument. Certain investment
strategies and instruments and the risks related to them are summarized below
and certain of these strategies and instruments are described in more detail
in the Statement of Additional Information.

Asset-Backed Securities. The BT Equity 500 Index Portfolio, BT International
Equity Index Portfolio, BT Small Company Index Portfolio, MFS Emerging Growth
Companies Portfolio, Morgan Stanley

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Emerging Markets Equity Portfolio, and EQ/Putnam Balanced Portfolio may
invest in asset-backed securities. These asset-backed securities, issued by
trusts and special purpose corporations, are collateralized by a pool of
assets, such as credit card or automobile loans, home equity loans or
computer leases, and represent the obligations of a number of different
parties. Asset-backed securities present certain risks. For instance, in the
case of credit card receivables, these securities may not have the benefit of
any security interest in the related collateral. Due to the possibility that
prepayments (on automobile loans and other collateral) will alter the cash
flow on asset-backed securities, it is not possible to determine in advance
the actual final maturity date or average life. Faster prepayment will
shorten the average life and slower prepayments will lengthen it. However, it
is possible to determine what the range of that movement could be and to
calculate the effect that it will have on the price of the security. In
selecting these securities, the Adviser will look for those securities that
offer a higher yield to compensate for any variation in average maturity.

Borrowings. The Portfolios may borrow money from banks or other lenders as a
temporary measure for emergency purposes, to facilitate redemption requests,
or for other purposes consistent with each Portfolio's investment objective
and program. Such borrowings would be subject to interest costs which may or
may not be recovered by appreciation of securities purchased. Borrowings for
the BT Equity 500 Index Portfolio, BT International Equity Index Portfolio,
BT Small Company Index Portfolio, MFS Emerging Growth Companies Portfolio,
MFS Research Portfolio, Merrill Lynch Basic Value Equity Portfolio, Merrill
Lynch World Strategy Portfolio, Morgan Stanley Emerging Markets Equity
Portfolio, T. Rowe Price Equity Income Portfolio, and T. Rowe Price
International Stock Portfolio, may not exceed 33 1/3% of each Portfolio's
total assets. Borrowings for the EQ/Putnam Balanced Portfolio and EQ/Putnam
Growth & Income Value Portfolio may not exceed 10% of each Portfolio's total
assets. Borrowings for the Warburg Pincus Small Company Value Portfolio may
not exceed 30% of the Portfolio's total assets. Each Portfolio may pledge its
assets to secure these permissible borrowings. No Portfolio may purchase
additional securities when its borrowings exceed 5% of its total assets. See
also "Reverse Repurchase Agreements" for information concerning an investment
technique that may be deemed to involve a borrowing. Further information
concerning each Portfolio's fundamental policy with respect to borrowings is
provided in the Statement of Additional Information.

Convertible Securities. Each of the Portfolios may invest in convertible
securities, including both convertible debt and convertible preferred stock.
Such securities may be converted into shares of the underlying common stock
at either a stated price or stated rate. Because of this feature, convertible
securities enable an investor to benefit from increases in the market price
of the underlying common stock. Convertible securities provide higher yields
than the underlying common stocks, but generally offer lower yields than
nonconvertible securities of similar quality. Like bonds, the value of
convertible securities fluctuates in relation to changes in interest rates
and, in addition, fluctuates in relation to the underlying common stock.
Subsequent to purchase by a Portfolio, convertible securities may cease to be
rated or a rating may be reduced below the minimum required for purchase by
that Portfolio. Neither event will require sale of such securities, although
each Adviser will consider such event in its determination of whether a
Portfolio should continue to hold the securities.

Derivatives. Each Portfolio (except the MFS Research Portfolio) may invest in
one or more types of derivatives. Derivatives are financial products or
instruments that derive their value from the value of one or more underlying
assets, reference rates or indices. Derivatives include, but are not limited
to, the following: asset-backed securities, collateralized mortgage
obligations, floaters, futures, hybrid instruments, inverse floaters,
mortgage-backed securities, options, stripped mortgage-backed securities,
structured notes and swaps. Further information about these instruments and
the risks involved in their use are contained under the description of each
of these instruments in this section or the Statement of Additional
Information.

Floaters and Inverse Floaters. The Morgan Stanley Emerging Markets Equity
Portfolio and the EQ/Putnam Balanced Portfolio each may invest in floaters,
which are fixed-income securities with a floating or variable rate of
interest, i.e., the rate of interest varies with changes in specified market
rates or indices, such as the prime rate, or at specified intervals. Certain
floaters may carry a demand feature

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that permits the holder to tender them back to the issuer of the underlying
instrument, or to a third party, at par value prior to maturity. When the
demand feature of certain floaters represents an obligation of a foreign
entity, the demand feature will be subject to certain risks discussed under
"Foreign Securities".

Foreign Securities. Foreign investments involve certain risks that are not
present in domestic securities. Because each of the Portfolios (except the BT
Equity 500 Index Portfolio and BT Small Company Index Portfolio) may purchase
securities denominated in foreign currencies, a change in the value of any
such currency against the United States dollar will result in a change in the
United States dollar value of a Portfolio's assets and income. In addition,
although a portion of a Portfolio's investment income may be received or
realized in such currencies, the Portfolio will be required to compute and
distribute its income in United States dollars. Therefore, if the exchange
rate for any such currency declines after a Portfolio's income has been
earned and computed in United States dollars but before conversion and
payment, the Portfolio could be required to liquidate portfolio securities to
make such distributions.

The value of foreign investments and the investment income derived from them
may also be affected unfavorably by changes in currency exchange control
regulations. Although the Portfolios will invest only in securities
denominated in foreign currencies that are fully exchangeable into United
States dollars without legal restriction at the time of investment, there can
be no assurance that currency controls will not be imposed subsequently. In
addition, the value of foreign fixed income investments may fluctuate in
response to changes in United States and foreign interest rates.

There may be less information publicly available about a foreign issuer than
about a United States issuer, and a foreign issuer is not generally subject
to accounting, auditing and financial reporting standards and practices
comparable to those in the United States. Foreign stock markets are generally
not as developed or efficient as, and may be more volatile than, those in the
United States. While growing in volume, they usually have substantially less
volume than United States markets and a Portfolio's investment securities may
be less liquid and subject to more rapid and erratic price movements than
securities of comparable United States companies. Equity securities may trade
at price/earnings multiples higher than comparable United States securities
and such levels may not be sustainable. There is generally less government
supervision and regulation of foreign stock exchanges, brokers and listed
companies than in the United States. Moreover, settlement practices for
transactions in foreign markets may differ from those in United States
markets. Such differences may include delays beyond periods customary in the
United States and practices, such as delivery of securities prior to receipt
of payment, which increase the likelihood of a "failed settlement." Failed
settlements can result in losses to a Portfolio. In less liquid and well
developed stock markets, such as those in some Asian and Latin American
countries, volatility may be heightened by actions of a few major investors.
For example, substantial increases or decreases in cash flows of mutual funds
investing in these markets could significantly affect stock prices and,
therefore, share prices.

Foreign brokerage commissions, custodial expenses and other fees are also
generally higher than for securities traded in the United States.
Consequently, the overall expense ratios of international or global funds are
usually somewhat higher than those of typical domestic stock funds.

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<PAGE>
to erratic and abrupt price movements. Some economies are less well developed
and less diverse (for example, Latin America, Eastern Europe and certain
Asian countries), and more vulnerable to the ebb and flow of international
trade, trade barriers and other protectionist or retaliatory measures (for
example, Japan, Southeast Asia and Latin America). Some countries,
particularly in Latin America, are grappling with severe inflation and high
levels of national debt. Investments in countries that have recently begun
moving away from central planning and state-owned industries toward free
markets, such as the Eastern European or Chinese economies, should be
regarded as speculative.

In addition, investment in foreign securities may also include the risk of
expropriation by a foreign government.

Moreover, investments in foreign government debt securities, particularly
those of emerging market country governments, involve special risks. Certain
emerging market countries have historically experienced, and may continue to
experience, high rates of inflation, high interest rates, exchange rate
fluctuations, large amounts of external debt, balance of payments and trade
difficulties and extreme poverty and unemployment. The issuer or governmental
authority that controls the repayment of an emerging market country's debt
may not be able or willing to repay the principal and/or interest when due in
accordance with the terms of such debt. A debtor's willingness or ability to
repay principal and interest due in a timely manner may be affected by, among
other factors, its cash flow situation, and, in the case of a government
debtor, the extent of its foreign reserves, the availability of sufficient
foreign exchange on the date a payment is due, the relative size of the debt
service burden to the economy as a whole and the political constraints to
which a government debtor may be subject. Government debtors may default on
their debt and may also be dependent on expected disbursements from foreign
governments, multilateral agencies and others abroad to reduce principal and
interest arrearages on their debt. Holders of government debt may be
requested to participate in the rescheduling of such debt and to extend
further loans to government debtors.

Certain Portfolios may invest in the following types of foreign securities or
engage in the following types of transactions related to foreign securities.

Brady Bonds. The MFS Emerging Growth Companies Portfolio, Morgan Stanley
Emerging Markets Equity Portfolio and the EQ/Putnam Balanced Portfolio each
may invest in "Brady Bonds," which are fixed-income securities created
through the exchange of existing commercial bank loans to foreign entities
for new obligations in connection with debt restructuring under a plan
introduced by Nicholas F. Brady when he was the United States Secretary of
the Treasury. Brady Bonds have been issued only recently, and, accordingly,
do not have a long payment history. They may be collateralized or
uncollateralized and issued in various currencies (although most are United
States dollar-denominated) and they are actively traded in the
over-the-counter ("OTC") secondary market. Each Portfolio will invest in
Brady Bonds only if they are consistent with quality specifications
established from time to time by the Adviser to that Portfolio.

Depositary Receipts. Each of the Portfolios (except the BT Equity 500 Index
Portfolio and BT Small Company Index Portfolio) may purchase depositary
receipts, which are securities representing ownership interests in securities
of foreign companies (an "underlying issuer") and are deposited with a
securities depositary. Depositary receipts are not necessarily denominated in
the same currency as the underlying securities. Depositary receipts include
ADRs and GDRs and other types of depositary receipts (which, together with
ADRs and GDRs, are hereinafter collectively referred to as "Depositary
Receipts"). ADRs are dollar-denominated Depositary Receipts typically issued
by a United States financial institution which evidence ownership interests
in a security or pool of securities issued by a foreign issuer. ADRs are
listed and traded in the United States. GDRs and other types of depositary
receipts are typically issued by foreign banks or trust companies, although
they also may be issued by United States financial institutions, and evidence
ownership interests in a security or pool of securities issued by either a
foreign or a United States corporation. Generally, depositary receipts in
registered form are designed for use in the United States securities market
and depositary receipts in bearer form are designed for use in securities
markets outside the United States. Although there may be more reliable
information available regarding issuers of certain ADRs that are issued under
so-called "sponsored" programs and ADRs do not involve foreign currency
risks, ADRs and other Depositary Receipts are subject to the risks of other
investments in foreign securities, as described directly above.

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Foreign Currency Transactions. Each of the Portfolios (except the BT Equity
500 Index Portfolio and BT Small Company Index Portfolio) may purchase
foreign currency on a spot (or cash) basis. In addition, each of the
Portfolios (except the BT Equity 500 Index Portfolio, BT Small Company Index
Portfolio and MFS Research Portfolio) may enter into contracts to purchase or
sell foreign currencies at a future date ("forward contracts"). Each of the
Portfolios (except the BT Equity 500 Index Portfolio, BT Small Company Index
Portfolio and MFS Research Portfolio) may also purchase and sell foreign
currency futures contracts and may purchase and sell exchange traded call and
put options on foreign currency futures contracts and on foreign currencies.
The BT International Equity Index Portfolio, MFS Emerging Growth Companies
Portfolio, Merrill Lynch World Strategy Portfolio, Morgan Stanley Emerging
Markets Equity Portfolio, EQ/Putnam Balanced Portfolio, and the EQ/Putnam
Growth & Income Value Portfolio may utilize over-the-counter ("OTC") options
on foreign currency transactions. The MFS Emerging Growth Companies Portfolio
may only enter into forward contracts on currencies in the OTC market. The
Merrill Lynch World Strategy Portfolio will engage in OTC options on foreign
currency transactions only with financial institutions that have capital of
at least $50 million or whose obligations are guaranteed by an entity having
capital of at least $50 million. The Advisers may engage in these
transactions to protect against uncertainty in the level of future exchange
rates in connection with the purchase and sale of portfolio securities
("transaction hedging") and to protect the value of specific portfolio
positions ("position hedging").

Hedging transactions involve costs and may result in losses. Each of the
Portfolios (except the BT Equity 500 Index Portfolio, BT Small Company Index
Portfolio and MFS Research Portfolio) may also write covered call options on
foreign currencies to offset some of the costs of hedging those currencies. A
Portfolio will engage in OTC options transactions on foreign currencies only
when appropriate exchange traded transactions are unavailable and when, in
the Adviser's opinion, the pricing mechanism and liquidity are satisfactory
and the participants are responsible parties likely to meet their contractual
obligations. A Portfolio's ability to engage in hedging and related option
transactions may be limited by tax considerations.

Transactions and position hedging do not eliminate fluctuations in the
underlying prices of the securities which the Portfolios own or intend to
purchase or sell. They simply establish a rate of exchange which one can
achieve at some future point in time. Additionally, although these techniques
tend to minimize the risk of loss due to a decline in the value of the hedged
currency, they tend to limit any potential gain which might result from the
increase in the value of such currency.

Forward Commitments. Each Portfolio (except the Warburg Pincus Small Company
Value Portfolio) may make contracts to purchase securities for a fixed price
at a future date beyond customary settlement time ("forward commitments") if
it holds, and maintains until the settlement date in a segregated account,
cash or liquid securities in an amount sufficient to meet the purchase price,
or if it enters into offsetting contracts for the forward sale of other
securities it owns. Forward commitments may be considered securities in
themselves and involve a risk of loss if the value of the security to be
purchased declines prior to the settlement date, which risk is in addition to
the risk of decline in value of the Portfolio's other assets. Where such
purchases are made through dealers, a Portfolio relies on the dealer to
consummate the sale. The dealer's failure to do so may result in the loss to
a Portfolio of an advantageous yield or price.

Hybrid Instruments. The Morgan Stanley Emerging Markets Equity Portfolio, T.
Rowe Price Equity Income Portfolio and T. Rowe Price International Stock
Portfolio may invest in hybrid instruments. Hybrid instruments have recently
been developed and combine the elements of futures contracts or options with
those of debt, preferred equity or a depository instrument. Often these
hybrid instruments are indexed to the price of a commodity, particular
currency, or a domestic or foreign debt or equity securities index. Hybrid
instruments may take a variety of forms, including, but not limited to, debt
instruments with interest or principal payments or redemption terms
determined by reference to the value of a currency or commodity or securities
index at a future point in time, preferred stock with dividend rates
determined by reference to the value of a currency, or convertible securities
with the conversion terms related to a particular commodity. Hybrid
instruments may bear interest or pay dividends at below market (or even
relatively nominal) rates. Under certain conditions, the redemption value of
such an instrument could be zero. Hybrid instruments can have volatile prices
and limited liquidity and their use by a Portfolio may not be successful.

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Illiquid Securities. The Warburg Pincus Small Company Value Portfolio may
invest up to 10% of its assets and each of the other Portfolios may invest up
to 15% of its net assets in illiquid securities and other securities which
are not readily marketable, including nonnegotiable time deposits, certain
restricted securities not deemed by the Trust's Board of Trustees to be
liquid, and repurchase agreements with maturities longer than seven days.
Securities eligible for resale pursuant to Rule 144A under the Securities Act
of 1933, as amended, which have been determined by the Board of Trustees to
be liquid, will not be considered by the Adviser to be illiquid or not
readily marketable and, therefore, are not subject to the 10% or 15% limit.
The inability of a Portfolio to dispose of illiquid or not readily marketable
investments readily or at a reasonable price could impair the Portfolio's
ability to raise cash for redemptions or other purposes. The liquidity of
securities purchased by a Portfolio which are eligible for resale pursuant to
Rule 144A will be monitored by each Portfolio's Adviser on an ongoing basis,
subject to the oversight of the Board of Trustees of the Trust. In the event
that such a security is deemed to be no longer liquid, a Portfolio's holdings
will be reviewed to determine what action, if any, is required to ensure that
the retention of such security does not result in a Portfolio's having more
than 10% or 15% of its assets invested in illiquid or not readily marketable
securities.

Investment Grade and Lower Quality Fixed Income Securities. Each Portfolio
may invest in or hold a portion of its total assets in investment grade or,
except as noted below, lower quality fixed income securities. The BT Equity
500 Index Portfolio, BT International Equity Index Portfolio, BT Small
Company Index Portfolio, Merrill Lynch Basic Value Equity Portfolio, and the
T. Rowe Price International Stock Portfolio each may only invest in
securities that are rated investment grade or higher, and will, in an orderly
manner, dispose of fixed income securities that fall below investment grade.
Investment grade securities are securities rated Baa or higher by Moody's or
BBB or higher by S&P or comparable quality unrated securities. Investment
grade securities while normally exhibiting adequate protection parameters,
have speculative characteristics, and, consequently, changes in economic
conditions or other circumstances are more likely to lead to a weakened
capacity of such issuers to make principal and interest payments than is the
case for higher grade fixed income securities. Lower quality fixed income
securities are securities that are rated in the lower categories by NRSROs
(i.e., Ba or lower by Moody's and BB or lower by S&P) or comparable quality
unrated securities. Such lower quality securities are known as "junk bonds"
and are regarded as predominantly speculative with respect to the issuer's
continuing ability to meet principal and interest payments. (Each NRSRO's
descriptions of these bond ratings are set forth in the Appendix to the
Statement of Additional Information.) Because investment in lower quality
securities involves greater investment risk, achievement of a Portfolio's
investment objective will be more dependent on the Adviser's analysis than
would be the case if that Portfolio were investing in higher quality bonds.
In addition, lower quality securities may be more susceptible to real or
perceived adverse economic and individual corporate developments than would
investment grade bonds. Moreover, the secondary trading market for lower
quality securities may be less liquid than the market for investment grade
bonds. This potential lack of liquidity may make it more difficult for an
Adviser to value accurately certain portfolio securities.

Loan Participations. The MFS Emerging Growth Companies Portfolio, Morgan
Stanley Emerging Markets Equity Portfolio and the EQ/Putnam Balanced
Portfolio may invest a portion of each of their assets in loan participations
and other direct indebtedness. By purchasing a loan, a Portfolio acquires
some or all of the interest of a bank or other lending institution in a loan
to a corporate borrower. Many such loans are secured, and most impose
restrictive covenants that must be met by the borrower. These loans are made
generally to finance internal growth, mergers, acquisitions, stock
repurchases, leveraged buy-outs and other corporate activities. Such loans
may be in default at the time of purchase. The MFS Emerging Growth Companies
Portfolio may also purchase other direct indebtedness such as trade or other
claims against companies, which generally represent money owed by a company
to a supplier of goods and services. These claims may also be purchased at a
time when the company is in default. Certain of the loans and other direct
indebtedness acquired by the Portfolio may involve revolving credit
facilities or other standby financing commitments which obligate the
Portfolio to pay additional cash on a certain date or on demand. The highly
leveraged nature of many such loans and other direct indebtedness may make
such loans especially vulnerable to adverse changes in economic or market
conditions. Loans and

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other direct indebtedness may not be in the form of securities or may be
subject to restrictions on transfer, and only limited opportunities may exist
to resell such instruments. As a result, the Portfolio may be unable to sell
such investments at an opportune time or may have to resell them at less than
fair market value.

Mortgages and Mortgage-Related Securities. The BT Equity 500 Index Portfolio,
BT International Equity Index Portfolio, BT Small Company Index Portfolio,
Morgan Stanley Emerging Markets Equity Portfolio, and EQ/Putnam Balanced
Portfolio may invest in mortgage-related securities (i.e., mortgage-backed
securities). A mortgage-backed security may be an obligation of the issuer
backed by a mortgage or pool of mortgages or a direct interest in an
underlying pool of mortgages. Some mortgage-backed securities, such as CMOs,
make payments of both principal and interest at a variety of intervals;
others make semiannual interest payments at a predetermined rate and repay
principal at maturity (like a typical bond). Mortgage-backed securities are
based on different types of mortgages including those on commercial real
estate or residential properties.

The value of mortgage-backed securities may change due to shifts in the
market's perception of issuers. In addition, regulatory or tax changes may
adversely affect the mortgage securities market as a whole. Non-government
mortgage-backed securities may offer higher yields than those issued by
government entities, but also may be subject to greater price changes than
government issues. Mortgage-backed securities are subject to prepayment risk.
Prepayment, which occurs when unscheduled or early payments are made on the
underlying mortgages, may shorten the effective maturities of these
securities and may lower their returns.

Municipal Securities. The Morgan Stanley Emerging Markets Equity Portfolio
may invest in municipal securities ("municipals"), which are debt obligations
issued by local, state and regional governments that provide interest income
that is exempt from federal income taxes. Municipals include both municipal
bonds (those securities with maturities of five years or more) and municipal
notes (those with maturities of less than five years). Municipal bonds are
issued for a wide variety of reasons: to construct public facilities, such as
airports, highways, bridges, schools, hospitals, mass transportation,
streets, water and sewer works; to obtain funds for operating expenses; to
refund outstanding municipal obligations; and to loan funds to various public
institutions and facilities. Certain industrial development bonds are also
considered municipal bonds if their interest is exempt from federal income
tax. Industrial development bonds are issued by or on behalf of public
authorities to obtain funds for various privately-operated manufacturing
facilities, housing, sports arenas, convention centers, airports, mass
transportation systems and water, gas or sewer works. Industrial development
bonds are ordinarily dependent on the credit quality of a private user, not
the public issuer.

Options and Futures Transactions. Each Portfolio (except the MFS Research
Portfolio) may utilize futures contracts. Futures contracts (a type of
potentially high-risk security) enable the investor to buy or sell an asset
in the future at an agreed upon price. Each Portfolio (except the MFS
Research Portfolio) may also write and purchase put and call options (another
type of potentially high-risk security) give the purchaser of an option the
right, but not the obligation, to buy or sell in the future an asset at a
predetermined price during the term of the option. (The writer of a put or
call option would be obligated to buy or sell the underlying asset at a
predetermined price during the term of the option.) Each Portfolio will write
put and call options only if such options are considered to be "covered". A
call option on a security is covered, for example, when the writer of the
call option owns throughout the option period the security on which the
option is written (or a security convertible into such a security without the
payment

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of additional consideration). A put option on a security is covered, for
example, when the writer of the put has deposited and maintained in a
segregated account throughout the option period sufficient cash or other
liquid assets in an amount equal to or greater than the exercise price of the
put option. Each Portfolio that is permitted to invest in futures contracts
and related options may utilize such transactions for other than hedging
purposes to the extent that aggregate initial margin deposits and premiums
paid do not exceed 5% of the Portfolio's net assets. No Portfolio (other than
the Warburg Pincus Small Company Value Portfolio) will commit more than 5% of
its total assets to premiums when purchasing call or put options. In
addition, the total market value of securities against which a Portfolio may
write call or put options will in no event exceed 25% of its total assets.
The BT Equity 500 Index Portfolio, BT International Equity Index Portfolio
and BT Small Company Index Portfolio each may not at any time commit more
than 20% of its respective net assets to options and futures contracts. The
Merrill Lynch Basic Value Equity Portfolio will not write covered call
options on underlying securities exceeding 15% of the value of its total
assets. The Warburg Pincus Small Company Value Portfolio may commit up to 10%
of its total assets to premiums when purchasing put or call options. The MFS
Emerging Growth Companies Portfolio and Morgan Stanley Emerging Markets
Equity Portfolio will not enter a futures contract if the obligations
underlying all such futures contracts would exceed 50% of the value of each
such Portfolio's total assets. The Warburg Pincus Small Company Value
Portfolio may utilize up to 10% of its total assets to purchase
exchange-listed and OTC put and call options on stock indexes. The MFS
Emerging Growth Companies Portfolio, Merrill Lynch World Strategy Portfolio,
Morgan Stanley Emerging Markets Equity Portfolio, EQ/Putnam Balanced
Portfolio, and the EQ/Putnam Growth & Income Portfolio may utilize in OTC put
and call option transactions. Options traded in the OTC market may not be as
actively traded as those on an exchange, so it may be more difficult to value
such options. In addition, it may be difficult to enter into closing
transactions with respect to such options. Such OTC options, and the
securities used as "cover" for such options, may be considered illiquid
securities.

Each Portfolio may buy and sell futures and options contracts for any number
of reasons, including: to manage its exposure to changes in securities prices
and foreign currencies; as an efficient means of adjusting its overall
exposure to certain markets; in an effort to enhance income; and to protect
the value of portfolio securities. Each Portfolio may purchase, sell, or
write call and put options and futures contracts on securities, financial
indices, and foreign currencies and options on futures contracts.

The risk of loss in trading futures contracts can be substantial because of
the low margin deposits required and the extremely high degree of leveraging
involved in futures pricing. As a result, a relatively small price movement
in a futures contract may cause an immediate and substantial loss or gain.
The primary risks associated with the use of futures contracts and options
are: (i) imperfect correlation between the change in market value of the
stocks held by a Portfolio and the prices of futures contracts and options;
and (ii) possible lack of a liquid secondary market for a futures contract or
an OTC option and the resulting inability to close a futures position or OTC
option prior to its maturity date.

Passive Foreign Investment Companies. The Morgan Stanley Emerging Markets
Equity Portfolio and T. Rowe Price International Stock Portfolio may purchase
the securities of certain foreign investment funds or trusts called passive
foreign investment companies. Such entities have been the only or primary way
to invest in certain countries. In addition to bearing their proportionate
share of a Portfolio's expenses (management fees and operating expenses),
shareholders will also indirectly bear similar expenses of such entities.
Like other foreign securities, interests in passive foreign investment
companies also involve the risk of foreign securities, as described above.

Payment-in-Kind Bonds. The Morgan Stanley Emerging Markets Equity Portfolio,
the EQ/Putnam Balanced Portfolio and the EQ/Putnam Growth & Income Value
Portfolio may invest in payment-in-kind bonds. Payment-in-kind bonds allow
the issuer, at its option, to make current interest payments on the bonds
either in cash or in additional bonds. The value of payment-in-kind bonds is
subject to greater fluctuation in response to changes in market interest
rates than bonds which pay interest in cash currently. Payment-in-kind bonds
allow an issuer to avoid the need to generate cash to meet current interest
payments. Accordingly, such bonds may involve greater credit risks than bonds
paying interest currently. Even though such bonds do not pay current interest
in cash, the Portfolios are nonetheless required to accrue interest income on
such investments and to distribute such amounts at least annually to
shareholders. Thus, the Portfolios could be required, at times, to liquidate
other investments in order to satisfy its distribution requirements.

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Repurchase Agreements. Each Portfolio may enter into repurchase agreements
with qualified and Board approved banks, broker-dealers or other financial
institutions as a means of earning a fixed rate of return on its cash
reserves for periods as short as overnight. A repurchase agreement is a
contract pursuant to which a Portfolio, against receipt of securities of at
least equal value including accrued interest, agrees to advance a specified
sum to the financial institution which agrees to reacquire the securities at
a mutually agreed upon time (usually one day) and price. Each repurchase
agreement entered into by a Portfolio will provide that the value of the
collateral underlying the repurchase agreement will always be at least equal
to the repurchase price, including any accrued interest. A Portfolio's right
to liquidate such securities in the event of a default by the seller could
involve certain costs, losses or delays and, to the extent that proceeds from
any sale upon a default of the obligation to repurchase are less than the
repurchase price, the Portfolio could suffer a loss.

Reverse Repurchase Agreements. The BT Equity 500 Index Portfolio, BT
International Equity Index Portfolio, BT Small Company Index Portfolio, and
Morgan Stanley Emerging Markets Equity Portfolio may each enter into reverse
repurchase agreements with brokers, dealers, domestic and foreign banks or
other financial institutions. In a reverse repurchase agreement, the
Portfolio sells a security and agrees to repurchase it at a mutually agreed
upon date and price, reflecting the interest rate effective for the term of
the agreement. It may also be viewed as the borrowing of money by the
Portfolio. The Portfolio's investment of the proceeds of a reverse repurchase
agreement is the speculative factor known as leverage. The Portfolio may
enter into a reverse repurchase agreement only if the interest income from
investment of the proceeds is greater than the interest expense of the
transaction and the proceeds are invested for a period no longer than the
term of the agreement. The Portfolio will maintain with the custodian a
separate account with a segregated portfolio of unencumbered liquid assets in
an amount at least equal to its purchase obligations under these agreements.
If interest rates rise during a reverse repurchase agreement, it may
adversely affect the Portfolio's net asset value. See "Borrowing" for more
information concerning restrictions on borrowing by each Portfolio.

Securities Loans. The MFS Research Portfolio, Morgan Stanley Emerging Markets
Equity Portfolio, T. Rowe Price Equity Income Portfolio, and the T. Rowe
Price International Stock Portfolio may each seek to earn additional income
by making secured loans of portfolio securities with a value up to 33 1/3% of
their respective total assets. The BT Equity 500 Index Portfolio, BT
International Equity Index Portfolio, BT Small Company Index Portfolio, and
MFS Emerging Growth Companies Portfolio may lend portfolio securities in an
amount up to 30% of their respective total assets. The EQ/Putnam Balanced
Portfolio and EQ/Putnam Growth & Income Value Portfolio may lend portfolio
securities in an amount up to 25% of their respective total assets. The
Merrill Lynch Basic Value Equity Portfolio, Merrill Lynch World Strategy
Portfolio, and Warburg Pincus Small Company Value Portfolio may each lend
portfolio securities in an amount up to 20% of their respective total assets.
All securities loans will be made pursuant to agreements requiring the loans
to be continuously secured by collateral in cash or high-grade debt
obligations at least equal at all times to the market value of the loaned
securities. The borrower pays to the Portfolios an amount equal to any
dividends or interest received on loaned securities. The Portfolios retain
all or a portion of the interest received on investment of cash collateral or
receive a fee from the borrower. Lending portfolio securities involves risks
of delay in recovery of the loaned securities or in some cases loss of rights
in the collateral should the borrower fail financially. Further information
concerning each Portfolio's fundamental policy with respect to loans is
provided in the Statement of Additional Information.

Short Sales Against the Box. The Morgan Stanley Emerging Markets Equity
Portfolio and Warburg Pincus Small Company Value Portfolio may enter into a
"short sale" of securities in circumstances in which, at the time the short
position is open, the Portfolio owns an equal amount of the securities sold
short or owns preferred stocks or debt securities, convertible or
exchangeable without payment of further consideration, into an equal number
of securities sold short. This kind of short sale, which is referred to as
one "against the box," may be entered into by each Portfolio to, for example,
lock in a sale price for a security the Portfolio does not wish to sell
immediately. Each Portfolio will deposit, in a segregated account with its
custodian or a qualified subcustodian, the securities sold short or
convertible or exchangeable preferred stocks or debt securities sold in
connection with short sales against the box. Each

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Portfolio will endeavor to offset transaction costs associated with short
sales against the box with the income from the investment of the cash
proceeds. Not more than 10% of a Portfolio's net assets (taken at current
value) may be held as collateral for short sales against the box at any one
time. The extent to which a Portfolio may make short sales may be limited by
Code requirements for qualification as a regulated investment company.

Small Company Securities. The BT Small Company Index Portfolio, Morgan
Stanley Emerging Markets Equity Portfolio, EQ/Putnam Balanced Portfolio, and
Warburg Pincus Small Company Value Portfolio may invest in the securities of
smaller capitalization companies. Investing in securities of small companies
may involve greater risks since these securities may have limited
marketability and, thus, may be more volatile. Because smaller companies
normally have fewer shares outstanding than larger companies, it may be more
difficult for a Portfolio to buy or sell significant amounts of shares
without an unfavorable impact on prevailing prices. In addition, small
companies often have limited product lines, markets or financial resources
and are typically subject to greater changes in earnings and business
prospects than are larger, more established companies. There is typically
less publicly available information concerning smaller companies than for
larger, more established ones and smaller companies may be dependent for
management on one or a few key persons. Therefore, an investment in these
Portfolios may involve a greater degree of risk than an investment in other
Portfolios that seek capital appreciation by investing in better known,
larger companies.

Swaps. The BT International Equity Index Portfolio and Morgan Stanley
Emerging Markets Equity Portfolio may each invest in swap contracts, which
are derivatives in the form of a contract or other similar instrument which
is an agreement to exchange the return generated by one instrument for the
return generated by another instrument. The payment streams are calculated by
reference to a specified index and agreed upon notional amount. The term
"specified index" includes, but is not limited to, currencies, fixed interest
rates, prices and total return on interest rate indices, fixed-income
indices, stock indices and commodity indices (as well as amounts derived from
arithmetic operations on these indices). For example, a Portfolio may agree
to swap the return generated by a fixed-income index for the return generated
by a second fixed-income index. The Portfolio will usually enter into swaps
on a net basis, i.e., the two return streams are netted out in a cash
settlement on the payment date or dates specified in the instrument, with the
Portfolio receiving or paying, as the case may be, only the net amount of the
two returns. The Portfolio's obligations under a swap agreement will be
accrued daily (offset against any amounts owing to the Portfolio) and any
accrued but unpaid net amounts owed to a swap counterparty will be covered by
the maintenance of a segregated account consisting of cash, United States
Governments, or high grade debt obligations. No Portfolio will enter into any
swap agreement unless the counterparty meets the rating requirements set
forth in guidelines established by the Trust's Board of Trustees. The swap
market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents
utilizing standardized swap documentation. As a result, the swap market has
become relatively liquid. Swaps that include more recent innovations for
which standardized documentation has not yet been fully developed are less
liquid than "traditional" swaps. The use of swaps is a highly specialized
activity that involves investment techniques and risks different from those
associated with ordinary portfolio securities transactions. If an Adviser is
incorrect in its forecasts of market values, interest rates, and currency
exchange rates, the investment performance of the Portfolio would be less
favorable than it would have been if this investment technique were not used.

United States Government Securities. Each Portfolio may invest in debt
obligations of varying maturities issued or guaranteed by the United States
Government, its agencies or instrumentalities ("United States Government
securities"). Direct obligations of the United States Treasury include a
variety of securities

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that differ in their interest rates, maturities and dates of issuance. United
States Government securities also include securities issued or guaranteed by
government agencies that are supported by the full faith and credit of the
United States (e.g., securities issued by the Government National Mortgage
Association); securities issued or guaranteed by government agencies that are
supported by the ability to borrow from the United States Treasury (e.g.,
securities issued by the Federal National Mortgage Association); and
securities issued or guaranteed by government agencies that are only
supported by the credit of the particular agency (e.g., the Tennessee Valley
Authority).

Warrants. Warrants are securities that give the holder the right, but not the
obligation to purchase equity issues of the company issuing the warrants, or
a related company, at a fixed price either on a date certain or during a set
period. At the time of issue, the cost of a warrant is substantially less
than the cost of the underlying security itself, and price movements in the
underlying security are generally magnified in the price movements of the
warrant. This effect enables the investor to gain exposure to the underlying
security with a relatively low capital investment but increases an investor's
risk in the event of a decline in the value of the underlying security and
can result in a complete loss of the amount invested in the warrant. In
addition, the price of a warrant tends to be more volatile than, and may not
correlate exactly to, the price of the underlying security. If the market
price of the underlying security is below the exercise price of the warrant
on its expiration date, the warrant will generally expire without value.

Zero-Coupon Bonds. The Morgan Stanley Emerging Markets Equity Portfolio,
EQ/Putnam Balanced Portfolio and EQ/Putnam Growth & Income Value Portfolio
may invest in zero-coupon bonds. Zero-coupon bonds are issued at a
significant discount from their principal amount and pay interest only at
maturity rather than at intervals during the life of the security. The value
of zero-coupon bonds is subject to greater fluctuation in response to changes
in market interest rates than bonds which pay interest in cash currently.
Zero-coupon bonds allow an issuer to avoid the need to generate cash to meet
current interest payments. Accordingly, such bonds may involve greater credit
risks than bonds paying interest currently. Even though such bonds do not pay
current interest in cash, a Portfolio is nonetheless required to accrue
interest income on such investments and to distribute such amounts at least
annually to investors in such instruments. Thus, each Portfolio could be
required, at times, to liquidate other investments in order to satisfy its
distribution requirements.

Portfolio Turnover. The length of time a Portfolio has held a particular
security is not generally a consideration in investment decisions. A change
in the securities held by a Portfolio is known as "portfolio turnover." Each
Portfolio's turnover rate is not expected to exceed 100% during its first
year of operation. A high turnover rate increases transaction costs (e.g.,
brokerage commissions) and increases realized gains and losses.

MANAGEMENT OF THE TRUST

THE BOARD OF TRUSTEES

THE MANAGER

The Trust is managed by EQ Financial Consultants, Inc. which, subject to the
supervision and direction of the Trustees of the Trust, has overall
responsibility for the general management and administration of the Trust.
The Manager 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"). It is located at 1755
Broadway, New York, New York 10019. The Manager currently furnishes
specialized investment advice to other clients, including individuals,
pension and profit sharing plans, trusts, charitable organizations,
corporations and other business entities. The Manager is a Delaware
corporation and an indirect, wholly-owned subsidiary of Equitable, a New York
stock life insurance company.

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The Manager is responsible for providing investment management and
administrative services to the Trust and in the exercise of such
responsibility selects, subject to review and approval by the Trustees, the
investment advisers for the Trust's Portfolios and monitors the Advisers'
investment programs and results, reviews brokerage matters, oversees
compliance by the Trust with various federal and state statutes, and carries
out the directives of the Board of Trustees. The Manager is responsible for
providing the Trust with office space, office equipment, and personnel
necessary to operate and administer the Trust's business, and also supervises
the provision of services by third parties such as the Trust's custodian.

As compensation for managing the BT Equity 500 Index Portfolio the Trust pays
the Manager a monthly fee at the annual rate of .25% of the Portfolio's
average daily net assets. As compensation for managing the BT International
Equity Index Portfolio the Trust pays the Manager a monthly fee at the annual
rate of .35% of the Portfolio's average daily net assets. As compensation for
managing the BT Small Company Index Portfolio the Trust pays the Manager a
monthly fee at the annual rate of .25% of the Portfolio's average daily net
assets. As compensation for managing the MFS Emerging Growth Companies
Portfolio, MFS Research Portfolio, Merrill Lynch Basic Value Equity
Portfolio, EQ/Putnam Balanced Portfolio, EQ/Putnam Growth & Income Value
Portfolio, and T. Rowe Price Equity Income Portfolio the Trust pays the
Manager a monthly fee at the annual rate of .55% of the respective
Portfolio's average daily net assets. As compensation for managing the
Merrill Lynch World Strategy Portfolio, the Trust pays the Manager a monthly
fee at an annual rate of .70% of the respective Portfolio's average daily net
assets. As compensation for managing the Morgan Stanley Emerging Markets
Equity Portfolio, the Trust pays the Manager a monthly fee at an annual rate
of 1.15% of the Portfolio's average daily net assets. As compensation for
managing the T. Rowe Price International Stock Portfolio, the Trust pays the
Manager a monthly fee at the annual rate of .75% of the Portfolio's average
daily net assets. As compensation for managing the Warburg Pincus Small
Company Value Portfolio, the Trust pays the Manager a monthly fee at an
annual rate of .65% of the Portfolio's average daily net assets.

The Manager pays the expenses of providing investment advisory services to
the Portfolios, including the fees of the Adviser of each Portfolio.

In addition to the management fees, the Trust pays all expenses not assumed
by the Manager, including, without limitation: the fees and expenses of its
independent accountants and of its legal counsel; the costs of printing and
mailing annual and semi-annual reports to shareholders, proxy statements,
prospectuses, prospectus supplements and statements of additional
information, all to the extent they are sent to existing Contract owners; the
costs of printing registration statements; bank transaction charges and
custodian's fees; any proxy solicitors' fees and expenses; filing fees; any
federal, state or local income or other taxes; any interest; any membership
fees of the Investment Company Institute and similar organizations; fidelity
bond and Trustees' liability insurance premiums; and any extraordinary
expenses, such as indemnification payments or damages awarded in litigation
or settlements made. All general Trust expenses are allocated among and
charged to the assets of the Portfolios of the Trust on a basis that the
Trustees deem fair and equitable, which may be on the basis of relative net
assets of each Portfolio or the nature of the services performed and relative
applicability to each Portfolio. As discussed in greater detail below, under
"Distribution of the Trust's Shares," the Class IB shares may pay for certain
distribution related expenses in connection with activities primarily
intended to result in the sale of its shares.

THE ADVISERS

For its services, the Manager pays each Adviser an advisory fee based on a
percentage of the average daily net assets of the Portfolio that it advises.
Monthly, with respect to each Portfolio, each Adviser is paid the pro rata
portion of an annual fee, based on the monthly average of the assets of the
Portfolio for which it serves as the Adviser. The Manager will retain, as
compensation for the services described under "The Manager" and to pay its
expenses, the difference between the fees paid to each Adviser and the

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management fee of the applicable Portfolio. Each Adviser has agreed that once
the Portfolio has paid the Manager its management fee the Adviser will look
only to the Manager as the party responsible for making the payment of its
advisory fee.

The Advisers are employed for management of the assets of a Portfolio
pursuant to investment advisory agreements approved by the Board of Trustees
of the Trust (including a majority of certain Trustees who are not interested
persons of the Trust or the Manager), and an Adviser's services may be
terminated at any time by the Manager, the Board of Trustees, or the
shareholders of an affected Portfolio.

The Trust has submitted an application requesting an exemptive order from the
Securities and Exchange Commission ("SEC") that would permit the Manager,
subject to certain conditions, and without the approval of shareholders to:
(a) employ a new Adviser or Advisers for any Portfolio pursuant to the terms
of a new Advisory Agreement, in each case either as a replacement for an
existing Adviser or as an additional Adviser; (b) change the terms of any
Advisory Agreement; and (c) continue the employment of an existing Adviser on
the same advisory contract terms where a contract has been assigned because
of a change in control of the Adviser. In such circumstances, shareholders
would receive notice of such action, including the information concerning the
Adviser that normally is provided in the Prospectus. It is uncertain at this
time whether such exemptive relief will be granted by the SEC.

Massachusetts Financial Services Company ("MFS") has been the Adviser to the
MFS Research Portfolio and the MFS Emerging Growth Companies Portfolio since
each Portfolio commenced operations. As compensation for services as the
Adviser to each of those Portfolios, the Manager pays MFS a monthly fee at an
annual rate equal to: .40% of the respective Portfolio's average daily net
assets up to and including $150 million; .375% of the respective Portfolio's
average daily net assets over $150 million and up to and including $300
million; and .35% of the respective Portfolio's average daily net assets in
excess of $300 million. MFS has agreed to waive its advisory fees for the
first six months after the commencement of each Portfolio's investment
operations.

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of Sun Life Assurance Company of Canada. MFS has established a strategic
alliance with Foreign & Colonial Management Ltd. ("Foreign & Colonial").
Foreign & Colonial is a subsidiary of two of the world's oldest financial
services institutions, the London-based Foreign & Colonial Investment Trust
PLC, which pioneered the idea of investment management in 1868, and HYPO-BANK
(Bayerische Hypotheken-und Weschsel-Bank AG), the oldest publicly listed bank
in Germany, founded in 1835. As part of this alliance, the portfolio managers
and investment analysts of MFS and Foreign & Colonial share their views on a
variety of investment related issues, such as the economy, securities
markets, portfolio securities and their issuers, investment recommendations,
strategies and techniques, risk analysis, trading strategies and other
portfolio management matters. The portfolio securities of the MFS Research
Portfolio are selected by a committee of investment research analysts. This
committee includes investment analysts employed not only by MFS but also by
MFS International (U.K.) Limited, a wholly owned subsidiary of MFS. The
assets of the MFS Research Portfolio are allocated among industries by the
analysts acting together as a group. Individual analysts are then responsible
for selecting what they view as the securities best suited to meet the
investment objectives of the MFS Research Portfolio within their assigned
industry responsibility. Since it commenced operations the MFS Emerging
Growth Companies Portfolio has been managed by John W. Ballen, a Senior Vice
President of MFS, who has been employed by the Adviser as a portfolio manager
since 1984, and Toni K. Shimura, a Vice President of MFS, who has been
employed as a portfolio manager by the Adviser since 1987.

Merrill Lynch Asset Management, L.P. ("MLAM") has been the Adviser to the
Merrill Lynch World Strategy Portfolio and the Merrill Lynch Basic Value
Equity Portfolio since each Portfolio commenced operations. MLAM is located
at 800 Scudders Mill Road, Plainsboro, New Jersey 08543-9011. As compensation
for services as the Merrill Lynch World Strategy Portfolio's Adviser, the
Manager pays MLAM a monthly fee at an annual rate equal to: .50% of the
Portfolio's average daily net assets up to and including $100 million; .45%
of the Portfolio's average daily net assets over $100 million and up to and
including $300 million; and .35% of the Portfolio's average daily net assets
in excess of $300 million. As compensation for services as the Merrill Lynch
Basic Value Equity Portfolio's Adviser, the Manager pays MLAM a monthly fee
at an annual rate equal to: .40% of the Portfolio's average daily net assets
up to and including $100 million; .375% of the Portfolio's average daily net
assets over $100 million and up to and including $300 million; and .35% of
the Portfolio's average daily net assets in excess of $300 million.

MLAM is an indirect wholly-owned subsidiary of Merrill Lynch & Co., Inc., a
financial services holding company and the parent of Merrill Lynch, Pierce,
Fenner & Smith Incorporated. The general partner of MLAM is Princeton
Services, Inc., a wholly-owned subsidiary of Merrill Lynch & Co., Inc. MLAM
and its affiliates act as the manager for more than 130 registered investment
companies. MLAM also offers portfolio management and portfolio analysis
services to individuals and institutions. As of December 31, 1996, the
Adviser and its affiliates had a total of approximately $234 billion in
investment company and other portfolio assets under management, including
assets of certain affiliates of MLAM.

Thomas R. Robinson is the portfolio manager of the Merrill Lynch World
Strategy Portfolio. Mr. Robinson has served as a Senior Portfolio Manager of
MLAM since 1995. Mr. Robinson has been primarily responsible for the day to
day management of the Portfolio's securities portfolio since it commenced
operations. Kevin Rendino is the portfolio manager of the Merrill Lynch Basic
Value Equity Portfolio. Mr. Rendino has been a Vice President of MLAM since
1993 and was a Senior Research Analyst of MLAM from 1990 to 1992. Mr. Rendino
has been primarily responsible for the day to day management of the
Portfolio's securities portfolio since it commenced operations.

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MSAM conducts a worldwide investment management business, providing a broad
range of portfolio management services to customers in the United States and
abroad. MSAM is a wholly owned subsidiary of Morgan Stanley, Dean Witter,
Discover & Co. ("MSDWD"), which is a publicly owned financial services
corporation listed on the New York and Pacific stock exchanges. MSAM serves
as an investment adviser to numerous open-end and closed-end investment
companies. As of September 31, 1997, MSAM, together with its affiliated asset
management company, Miller Anderson & Sherrerd, LLP, had assets under
management of approximately $144.1 billion.

Putnam Investment Management, Inc. ("Putnam Management") has been the Adviser
to the EQ/Putnam Balanced Portfolio and EQ/Putnam Growth & Income Value
Portfolio since each Portfolio commenced operations. As compensation for
services as the Adviser to the EQ/Putnam Balanced Portfolio and EQ/Putnam
Growth & Income Portfolio, the Manager pays Putnam Management a monthly fee
at an annual rate equal to: .50% of the respective Portfolio's average daily
net assets up to and including $150 million; .45% of the respective
Portfolio's average daily net assets over $150 million and up to and
including $300 million; and .35% of the respective Portfolio's average daily
net assets in excess of $300 million.

T. Rowe Price Associates, Inc. ("T. Rowe Price"), 100 East Pratt Street,
Baltimore, MD 21202, has been the Adviser to the T. Rowe Price Equity Income
Portfolio since the Portfolio commenced its operations. As compensation for
services as the Portfolio's Adviser, the Manager pays T. Rowe Price a monthly
fee at the annual rate of .40% of the Portfolio's average daily net assets.

T. Rowe Price was incorporated in Maryland in 1947 as successor to the
investment counseling business founded by the late Thomas Rowe Price, Jr., in
1937. As of December 31, 1996, T. Rowe Price and its affiliates managed more
than $95 billion of assets. T. Rowe Price serves as investment manager to a
variety of individual and institutional investor accounts, including limited
and real estate partnerships and other mutual funds. Investment decisions
with respect to the T. Rowe Price Equity Income Portfolio are made by an
Investment Advisory Committee composed of the following members: Brian C.
Rogers, Chairman, Thomas H. Broadus, Jr., Richard P. Howard, and William J.
Stromberg. The Committee Chairman has day-to-day responsibility for managing
the Portfolio and works with the Committee in developing and executing the
Portfolio's investment program. Mr. Rogers has been Chairman of the Committee
since 1993. He joined T. Rowe Price in 1982 and has been managing investments
since 1983.

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Rowe Price-Fleming International, Inc. ("Price-Fleming"), 100 East Pratt
Street, Baltimore, MD 21202, has been the Adviser to the T. Rowe Price
International Stock Portfolio. As compensation for services as the
Portfolio's Adviser, the Manager pays Price-Fleming a monthly fee at the
annual rate equal to: .75% of the Portfolio's average daily net assets up to
and including $20 million; .60% of the Portfolio's average daily net assets
over $20 million and up to and including $50 million; and .50% of the
Portfolio's average daily net assets in excess of $50 million.

Price-Fleming was incorporated in Maryland in 1979 as a joint venture between
T. Rowe Price and Robert Fleming Holdings Limited ("Flemings"). As of
December 31, 1996, Price-Fleming managed the United States equivalent of
approximately $25 billion. Flemings was incorporated in 1974 in the United
Kingdom as successor to the business founded by Robert Fleming in 1873.
Flemings is a diversified investment organization which participates in a
global network of regional investment offices in New York, London, Zurich,
Geneva, Tokyo, Hong Kong, Manila, Kuala Lumpur, South Korea and Taiwan. The
common stock of Price-Fleming is 50% owned by a wholly-owned subsidiary of T.
Rowe Price, 25% by a subsidiary of Flemings and 25% by Jardine Fleming Group
Limited ("Jardine Fleming"). (Half of Jardine Fleming is owned by Flemings
and half by Jardine Matheson Holdings Limited.) T. Rowe Price has the right
to elect a majority of the board of directors of Price-Fleming, and Flemings
has the right to elect the remaining directors, one of whom will be nominated
by Jardine Fleming.

Investment decisions with respect to the T. Rowe Price International Stock
Portfolio are made by an investment advisory group composed of the following
members: Martin G. Wade, Christopher D. Alderson, Peter B. Askew, Richard J.
Bruce, Mark J. T. Edwards, John R. Ford, Robert C. Howe, James B. M. Seddon,
Benedict R. F. Thomas and David J. L. Warren. Martin Wade joined
Price-Fleming in 1979 and has 27 years of experience with the Fleming Group
in research, client service and investment management. (Fleming Group
includes Flemings and/or Jardine Fleming.) Christopher Alderson joined
Price-Fleming in 1988 and has 10 years of experience with the Fleming Group
in research and portfolio management. Peter Askew joined Price-Fleming in
1988 and has 21 years of experience managing multicurrency fixed income
portfolios. Richard Bruce joined Price-Fleming in 1991 and has eight years of
experience in investment management with the Fleming Group in Tokyo. Mark
Edwards joined Price-Fleming in 1986 and has 15 years of experience in
financial analysis. John Ford joined Price-Fleming in 1982 and has 16 years
of experience with the Fleming Group in research and portfolio management.
Robert Howe joined Price Fleming in 1986 and has 15 years of experience in
economic research, company research and portfolio management. James Seddon
joined Price-Fleming in 1987 and has nine years of experience in investment
management. Benedict Thomas joined Price-Fleming in 1988 and has seven years
of portfolio management experience. David Warren joined Price-Fleming in 1984
and has 16 years of experience in equity research, fixed income research and
portfolio management.

Warburg Pincus Asset Management, Inc. ("WPC") has been the Adviser to the
Warburg Pincus Small Company Value Portfolio since the Portfolio commenced
operations. WPC is located at 466 Lexington Avenue, New York, New York
10017-3147. As compensation for services as the Portfolio's Adviser, the
Manager pays WPC a monthly fee at an annual rate of .50% of the Portfolio's
average daily net assets.

WPC is a professional investment counseling firm that provides investment
services to investment companies, employee benefit plans, endowment funds,
foundations and other institutions and individuals. As of January 31, 1997,
WPC managed approximately $17.9 billion in assets. WPC, incorporated in 1970,
is a wholly-owned subsidiary of Warburg, Pincus Counsellors G.P. ("Warburg
G.P."), a New York general partnership, which itself is controlled by
Warburg, Pincus & Co. ("WP&Co."), also a New York general partnership.
LionelI. Pincus, the managing partner of WP&Co., may be deemed to control
both WP&Co. and WPC. Warburg G. P. has no business other than being a holding
company of WPC and its subsidiaries.

George U. Wyper has been responsible for the day to day management of the
Warburg Pincus Small Company Value Portfolio, which includes investment
decisions made on behalf of the Portfolio, since the Portfolio commenced
operations. Mr. Wyper is a managing director of WPC, which he joined in
August, 1994. Before joining WPC, he was chief investment officer of White
River Corporation and president of Hanover Advisors, Inc. from 1993 to
August, 1994. Prior to that position, he was chief investment officer of Fund
American Enterprises, Inc. from 1990 to 1993. Kyle F. Frey, a senior vice
president of WPC, is associate portfolio manager and research analyst of the
Portfolio. Mr. Frey has been with WPC since 1989.

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THE ADMINISTRATOR

Pursuant to an agreement ("Mutual Funds Service Agreement"), Chase Global
Funds Services Company (the "Administrator") assists the Manager in the
performance of its administrative responsibilities to the Trust and provides
the Trust with other necessary administrative, fund accounting and compliance
services. In addition, the Administrator makes available the office space,
equipment, personnel and facilities required to provide such services to the
Trust. For these services, the Trust pays the Administrator a monthly fee at
the annual rate of .0525 of 1% of the total Trust assets, plus $25,000 for
each Portfolio, until the total Trust assets reach $2.0 billion, and when the
total Trust assets exceed $2.0 billion: .0425 of 1% of the first $0.5 billion
of the total Trust assets; .035 of 1% of the next $2.0 billion of the total
Trust assets; .025 of 1% of the next $1.0 billion of the total Trust assets;
.015 of 1% of the next $2.5 billion of the total Trust assets; .01 of 1% of
the total Trust assets in excess of $6.0 billion; and except that the annual
fee payable to Chase with respect to any Portfolio which commences operation
after July 1, 1997 and whose assets do not exceed $200 million shall be
computed at the annual rate of .0525% of the Portfolio's total assets plus
$25,000.

THE TRANSFER AGENT

Equitable serves as the transfer agent and dividend disbursing agent of the
Trust and receives no compensation for serving in such capacity.

EXPENSE LIMITATION AGREEMENT

In the interest of limiting expenses of the Portfolios, the Manager has
entered into an expense limitation agreement with the Trust, with respect to
each Portfolio ("Expense Limitation Agreements"), pursuant to which the
Manager has agreed to waive or limit its fees and to assume other expenses so
that the total annual operating expenses of each Portfolio are limited to:
.55% of the average daily net assets of the BT Equity 500 Index Portfolio;
.80% of the average daily net assets of the BT International Equity Index
Portfolio; .60% of the average daily net assets of the BT Small Company Index
Portfolio; .85% of the respective average daily net assets of the MFS
Emerging Growth Companies, MFS Research, Merrill Lynch Basic Value Equity,
EQ/Putnam Growth & Income Value, and T. Rowe Price Equity Income Portfolios;
.90% of the EQ/Putnam Balanced Portfolio's average daily net assets; 1.20% of
the respective average daily net assets of the Merrill Lynch World Strategy
and T. Rowe Price International Stock Portfolios; 1.75% of the Morgan Stanley
Emerging Markets Equity Portfolio's average daily net assets; and 1.00% of
the Warburg Pincus Small Company Value Portfolio's average daily net assets.

Each Portfolio may at a later date reimburse to the Manager the management
fees waived or limited and other expenses assumed and paid by the Manager
pursuant to the Expense Limitation Agreement provided such Portfolio has
reached a sufficient asset size to permit such reimbursement to be made
without causing the total annual expense ratio of each Portfolio to exceed
the percentage limits stated above. Consequently, no reimbursement by a
Portfolio will be made unless: (i) the Portfolio's assets exceed $100
million; (ii) the Portfolio's total annual expense ratio is less than the
respective percentages stated above; and (iii) the payment of such
reimbursement has been approved by the Trust's Board of Trustees on a
quarterly basis.

BROKERAGE PRACTICES

TRANSACTIONS WITH AFFILIATES

33
<PAGE>
independently originated research to institutions. Through the Pershing
Division of Donaldson, Lufkin & Jenrette Securities Corporation, DLJ supplies
security execution and clearance services to financial intermediaries
including broker-dealers and banks. To the extent permitted by law, the Trust
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. The Adviser to BT Small Company Index Portfolio, BT
International Equity Index Portfolio and BT Equity 500 Index Portfolio may
execute portfolio transactions through certain affiliates of Bankers Trust.
The Adviser to the Merrill Lynch World Strategy Portfolio and Merrill Lynch
Basic Value Equity Portfolio may execute portfolio transactions through
certain of the Adviser's affiliates. The Adviser to the Morgan Stanley
Emerging Markets Equity Portfolio may execute portfolio transactions through
certain affiliates. The Adviser to the T. Rowe Price International Stock and
T. Rowe Price Equity Income Portfolios may execute portfolio transactions
through certain affiliates of Robert Fleming Holdings Limited and Jardine
Fleming Group Limited, which are persons indirectly related to the Adviser,
acting as an agent in accordance with procedures established by the Trust's
Board of Trustees.

The 1940 Act generally prohibits the Trust from engaging in principal
securities transactions with an affiliate of the Manager or Advisers unless
pursuant to an exemptive order from the SEC. The Trust may apply for such
exemptive relief. The Trust has adopted procedures, prescribed by Section
17(e)(2)(A) of the 1940 Act and Rule 17e-1 thereunder, which are reasonably
designed to provide that any commission it pays to affiliates of the Manager
or Advisers does not exceed the usual and customary broker's commission. In
addition, the Trust will adhere to Section 11(a) of the 1934 Act and any
applicable rules thereunder governing floor trading. The Trust has adopted
procedures permitting it to purchase securities, under certain restrictions
prescribed by a rule under the 1940 Act, in a public offering in which an
affiliate of the Manager or Advisers is an underwriter.

DESCRIPTION OF THE TRUST AND TRUST'S SHARES

THE TRUST

The Trust is a registered open-end management investment company that was
organized as a Delaware business trust on October 31, 1996. The Trust
currently is divided into 18 portfolios, each of which has Class IA and Class
IB shares. The Board of Trustees may establish additional portfolios and
additional classes of shares.

CHARACTERISTICS OF TRUST'S SHARES

The Board of Trustees of the Trust has authority to issue an unlimited number
of shares of beneficial interest, without par value. Each share of each class
of a Portfolio shall be entitled to one vote (or fraction thereof in respect
of a fractional share) on matters that such shares (or class of shares) shall
be entitled to vote. Shareholders of each Portfolio shall vote together on
any matter, except to the extent otherwise required by the 1940 Act, or when
the Board of Trustees of the Trust has determined that the matter affects
only the interest of shareholders of one or more classes, in which case only
the shareholders of such class or classes shall be entitled to vote thereon.
Any matter shall be deemed to have been effectively acted upon with respect
to each Portfolio if acted upon as provided in Rule 18f-2 under the 1940 Act,
or any successor rule, and in the Amended and Restated Declaration of Trust.
The Trust is not required to hold annual shareholder meetings, but special
meetings may be called for purposes such as electing or removing Trustees,
changing fundamental policies or approving an investment management or
advisory agreement.

34
<PAGE>
may have separate exchange privileges, although exchange privileges are not
currently contemplated; and (f) each class may have different conversion
features, although a conversion feature is not currently contemplated.
Expenses currently designated as "Class Expenses" by the Trust's Board of
Trustees under the plan pursuant to Rule 18f-3 are currently limited to
payments made to the Distributors for the Class IB shares, pursuant to the
Distribution Plan for the Class IB shares adopted pursuant to Rule 12b-1
under the 1940 Act.

PURCHASE AND REDEMPTION OF SHARES

EQ Financial, 1755 Broadway, New York, New York, 10019, formerly Equico
Securities, Inc., a wholly-owned subsidiary of Equitable, serves as one of
the Distributors for the Trust's Class IB shares pursuant to a distribution
agreement with the Trust. EDI, 1290 Avenue of the Americas, New York, New
York, 10104, a Delaware corporation and an indirect wholly-owned subsidiary
of Equitable also serves as one of the Distributors for the Trust's Class IB
shares pursuant to a distribution agreement with the Trust. Class IB shares
are offered and redeemed without a sales charge, at net asset value. The
price at which a purchase or redemption is effected is based on the next
calculation of net asset value after an order is placed by an insurance
company investing in or redeeming from the Trust. Net asset value per share
is calculated for purchases and redemption of shares of each Portfolio by
dividing the value of total Portfolio assets, less liabilities (including
Trust expenses, which are accrued daily), by the total number of outstanding
shares of that Portfolio. The net asset value per share of each Portfolio is
determined each business day at 4:00 p.m. Eastern time. Net asset value per
share is not calculated on national business holidays.

The Trust also has distribution agreements for its Class IB shares with EQ
Financial and EDI pursuant to which each of them acts as the Distributor for
the Class IB shares of the Trust.

The Trust has adopted the Distribution Plan pursuant to Rule 12b-1 under the
1940 Act for the Class IB shares of the Trust. Pursuant to the Distribution
Plan, the Trust compensates the Distributors from assets attributable to the
Class IB shares for services rendered and expenses borne in connection with
activities primarily intended to result in the sale of the Trust's Class IB
shares. It is anticipated that a portion of the amounts received by the
Distributors will be used to defray various costs incurred or paid by the
Distributors in connection with the printing and mailing of Trust
prospectuses, statements of additional information, any supplements thereto
and shareholder reports and holding seminars and sales meetings with
wholesale and retail sales personnel designed to promote the distribution of
Class IB shares. The Distributors may also use a portion of the amounts
received to provide compensation to financial intermediaries and third-party
broker-dealers for their services in connection with the distribution of
Class IB shares.

The Distribution Plan provides that the Trust, on behalf of each Portfolio,
may pay annually up to 0.50% 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 Class IB shares. However, under the
Distribution Agreements, payments to the Distributors for activities pursuant
to the Distribution Plan are limited to payments at an annual rate equal to
0.25% of average daily net assets of a Portfolio attributable to its Class IB
shares. Under terms of the Distribution Plan and the Distribution Agreements,
each Portfolio is authorized to make payments monthly to the Distributors
which may be used to pay or reimburse entities providing distribution and
shareholder servicing with respect to the Class IB shares for such entities'
fees or expenses incurred or paid in that regard.

35
<PAGE>
shares of the Trust; (c) holding seminars and sales meetings designed to
promote the distribution of Trust Class IB shares; (d) obtaining information
and providing explanations to wholesale and retail distributors of Contracts
regarding Trust investment objectives and policies and other information
about the Trust and its Portfolios, including the performance of the
Portfolios; (e) training sales personnel regarding the Class IB shares of the
Trust; and (f) financing any other activity that the Distributors determine
is primarily intended to result in the sale of Class IB shares.

All shares are purchased and redeemed in accordance with the Trust's Amended
and Restated Declaration of Trust and By-Laws. Sales and redemptions of
shares of the same class by the same shareholder on the same day will be
netted for each Portfolio. All redemption requests will be processed and
payment with respect thereto will normally be made within seven days after
tenders. The Trust may suspend redemption, if permitted by the 1940 Act, for
any period during which the New York Stock Exchange is closed or during which
trading is restricted by the SEC or the SEC declares that an emergency
exists. Redemption may also be suspended during other periods permitted by
the SEC for the protection of the Trust's shareholders. If the Board of
Trustees determines that it would be detrimental to the best interest of the
Trust's remaining shareholders to make payment in cash, the Trust may pay
redemption proceeds in whole or in part by a distribution-in-kind of readily
marketable securities.

HOW ASSETS ARE VALUED

Values are determined according to accepted accounting practices and all laws
and regulations that apply. The assets of each Portfolio are generally valued
as follows:

o Stocks and debt securities which mature in more than 60 days are
valued on the basis of market quotations.

o Foreign securities not traded directly in the United States are
valued at representative quoted prices in the currency of the
country of origin. Foreign currency amounts are translated into
United States dollars at the bid price last quoted by a composite
list of major United States banks.

o Short-term debt securities in the Portfolios which mature in 60
days or less are valued at amortized cost, which approximates
market value.

o Other securities and assets for which market quotations are not
readily available or for which valuation cannot be provided are
valued in good faith by the Valuation Committee of the Board of
Trustees of the Trust using its best judgment.

DIVIDENDS, DISTRIBUTIONS AND TAXES

Under current federal income tax law, the Trust believes that each Portfolio
is entitled, and the Trust intends that each Portfolio shall qualify each
year and elect, to be treated as a regulated investment company ("RIC") under
Subchapter M of the Code. As a RIC, a Portfolio will not be subject to
federal tax on its net investment income and net realized capital gains to
the extent such income and gains are timely distributed to its insurance
company shareholders. Accordingly, each Portfolio intends to distribute all
of its net investment income and net realized capital gains to its
shareholders. An insurance company that is a shareholder of a Portfolio will
generally not be taxed on distributions from that Portfolio. All dividend
distributions will be reinvested in full and fractional shares of the
Portfolio to which they relate.

Although the Trust intends that it and the Portfolios will be operated so
that they will have no federal income or excise tax liability, if any such
liability is nevertheless incurred, the investment performance of the
Portfolio or Portfolios incurring such liability will be adversely affected.
In addition, Portfolios investing in foreign securities and currencies may be
subject to foreign taxes which could reduce the investment performance of
such Portfolio.

36
<PAGE>
immediately on the accumulated investment earnings under their Contracts and
would thereby lose any benefit of tax deferral. Compliance is therefore
carefully monitored by the Administrator and the Manager.

Certain additional tax information appears in the Statement of Additional
Information.

For more information regarding the tax implications for owners of Contracts
investing in the Trust, refer to the prospectuses for those Contracts.

PERFORMANCE INFORMATION

From time to time, the Trust may advertise the "average annual or cumulative
total return" and may compare the performance of the Portfolios with that of
other mutual funds with similar investment objectives as listed in rankings
prepared by Lipper Analytical Services, Inc., or similar independent services
monitoring mutual fund performance, and with appropriate securities or other
relevant indices. The "average annual total return" of a Portfolio refers to
the average annual compounded rate of return over the stated period that
would equate an initial investment in that Portfolio at the beginning of the
period to its ending redeemable value, assuming reinvestment of all dividends
and distributions and deduction of all recurring charges, other than charges
and deductions which may be imposed under the Contracts. Performance figures
will be given for the recent one, five and ten year periods and for the life
of the Portfolio if it has not been in existence for any such periods. When
considering "average annual total return" figures for periods longer than one
year, it is important to note that a Portfolio's annual total return for any
given year might have been greater or less than its average for the entire
period. "Cumulative total return" represents the total change in value of an
investment in a Portfolio for a specified period (again reflecting changes in
Portfolio share prices and assuming reinvestment of Portfolio distributions).
The methods used to calculate "average annual and cumulative total return"
are described further in the Statement of Additional Information.

The performance of each Portfolio will vary from time to time in response to
fluctuations in market conditions, interest rates, the composition of the
Portfolio's investments and expenses. Consequently, a Portfolio's performance
figures are historical and should not be considered representative of the
performance of the Portfolio for any future period. Such performance does not
reflect fees and charges imposed under the Contracts, which fees and charges
will reduce such performance figures; therefore, these figures may be of
limited use for comparative purposes. No Portfolio will use information
concerning its investment performance in advertisements or sales materials
unless appropriate information concerning the relevant separate account is
also included.

PRIOR PERFORMANCE OF EACH ADVISER

The following tables provide information concerning the historical
performance of another registered investment company (or series) managed by
each Adviser, that has investment objectives, policies, strategies and risks
substantially similar to those of its respective Portfolio(s) of the Trust.
The data is provided to illustrate the past performance of each Adviser in
managing a substantially similar investment vehicle as measured against
specified market indices and does not represent the past performance of any
of the Portfolios or the future performance of any Portfolio or its Adviser.
Consequently, potential investors should not consider this performance data
as an indication of the future performance of any Portfolio of the Trust or
of its Adviser.

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<PAGE>
BT EQUITY 500 INDEX PORTFOLIO

In the table below, the only account which is included is a series of another
registered investment company, i.e., Equity 500 Index Fund, a series of BT
Institutional Funds, which is managed by Bankers Trust Company, and whose
investment policies are substantially similar to the BT Equity 500 Index
Portfolio. However, the BT Equity 500 Index Portfolio will be subject to
higher expenses than the Equity 500 Index Fund. In addition, holders of
variable insurance contracts representing interests in the BT Equity 500
Index Portfolio will be subject to charges and expenses relating to such
insurance contracts. The performance results presented below do not reflect
any insurance related expenses.

<TABLE>
<CAPTION>
EQUITY 500 INDEX S&P 500 COMPOSITE
YEAR ENDED 9/30/97 FUND(1) STOCK INDEX(2)
- ------------------ ---------------- -----------------
<S> <C> <C>
One Year(3) ....... 40.32% 40.43%
Three Years(3) ... 29.87% 29.92%
Since inception(3). 20.64% 20.72%
</TABLE>
- ------------
(1) Average annual total return reflects changes in share prices and
reinvestment of dividends and distributions and is net of fund expenses.
(2) The S&P 500 Index ("Index") is an unmanaged index containing common
stocks of 500 industrial, transportation, utility and financial
companies, regarded as generally representative of the United States
stock market. The Index reflects the reinvestment of income dividends
and capital gain distributions, if any, but does not reflect fees,
brokerage commissions, or other expenses of investing.
(3) Annualized performance for shares of the Equity 500 Index Fund of the BT
Institutional Funds. The inception date for the Equity 500 Index
Fund-Institutional Class was December 31, 1992.

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<PAGE>
BT INTERNATIONAL EQUITY INDEX PORTFOLIO

In the table below, the only account which is included is a series of another
registered investment company, i.e., EAFE(Registered Trademark) Equity Index
Fund -- Institutional Class, a series of BT Advisor Funds, which is managed
by Bankers Trust Company, and whose investment policies are substantially
similar to the BT International Equity Index Portfolio. However, the BT
International Equity Index Portfolio will be subject to higher expenses than
the EAFE(Registered Trademark) Equity Index Fund -- Institutional Class. In
addition, holders of variable insurance contracts representing interests in
the BT International Equity Index Portfolio will be subject to charges and
expenses relating to such insurance contracts. The performance results
presented below do not reflect any insurance related expenses.

<TABLE>
<CAPTION>
EAFE EQUITY INDEX FUND --
YEAR ENDED 9/30/97 INSTITUTIONAL CLASS(1) MSCI EAFE INDEX(1)
- ------------------ ------------------------- ------------------
<S> <C> <C>
One Year(3) ....... 12.78% 12.18%
Since inception(3). 10.87% 10.71%
</TABLE>
- ------------
(1) Average annual total return reflects changes in share prices and
reinvestment of dividends and distributions and is net of fund expenses.
(2) The Morgan Stanley Capital EAFE Europe, Australia, Far East Index ("MSCI
EAFE Index") is an unmanaged capitalization-weighted index containing
approximately 1,100 equity securities of companies located in countries
outside the United States. The MSCI EAFE Index returns assume dividends
reinvested net of withholding tax and do not reflect any fees or
operating expenses. The index does not include fees or operating
expenses and is not available for actual investment.
(3) Annualized performance for shares of the EAFE Equity Index Fund. The
inception date for the EAFE Equity Index Fund was January 24, 1996.

39
<PAGE>
BT SMALL COMPANY INDEX PORTFOLIO

In the table below, the only account which is included is a series of another
registered investment company, i.e., Small Cap Index Fund -- Institutional
Class, a series of BT Advisor Funds, which is managed by Bankers Trust
Company, and whose investment policies are substantially similar to the BT
Small Company Index Portfolio. However, the BT Small Company Index Portfolio
will be subject to higher expenses than the Small Cap Index Fund --
Institutional Class. In addition, holders of variable insurance contracts
representing interests in the BT Small Company Index Portfolio will be
subject to charges and expenses relating to such insurance contracts. The
performance results presented below do not reflect any insurance related
expenses.

<TABLE>
<CAPTION>
SMALL CAP INDEX FUND--
YEAR ENDED 9/30/97 INSTITUTIONAL CLASS(1) RUSSELL 2000 INDEX(2)
- ------------------ ---------------------- -------------------
<S> <C> <C>
One Year(3) ....... 33.23% 33.19%
Since inception(3). 31.05% 32.76%
</TABLE>
- ------------
(1) Average annual total return reflects changes in share prices and
reinvestment of dividends and distributions and is net of fund expenses.
(2) The Russell 2000 Index is an unmanaged index composed of approximately
2,000 small-capitalization stocks and includes reinvestments of
dividends. The index does not include fees or operating expenses and is
not available for actual investment. It is compiled by the Frank Russell
Company.
(3) Annualized performance for shares of the Small Cap Index Fund. The
inception date for the Small Cap Index Fund was July 10, 1996.

40
<PAGE>
MFS EMERGING GROWTH COMPANIES PORTFOLIO

In the table below, the only account which is included is another registered
investment company, i.e., MFS Emerging Growth Fund, which is managed by
Massachusetts Financial Services Company, and whose investment policies are
substantially similar to MFS Emerging Growth Companies Portfolio. However,
MFS Emerging Growth Fund will be subject to different expenses than the MFS
Emerging Growth Companies Portfolio. In addition, holders of variable
insurance contracts representing interests in the MFS Emerging Growth
Companies Portfolio will be subject to charges and expenses relating to such
insurance contracts. The performance results presented below do not reflect
any insurance related expenses.

The investment results of MFS Emerging Growth Fund presented below are
unaudited and are not intended to predict or suggest the returns that might
be experienced by the MFS Emerging Growth Companies Portfolio or an
individual investor investing in the MFS Emerging Growth Companies Portfolio.

<TABLE>
<CAPTION>
RUSSELL 2000
YEAR ENDED 9/30/97 MFS EMERGING GROWTH FUND(1) INDEX(2)
- ------------------ --------------------------- --------------
<S> <C> <C>
One Year(3) ....... 25.29% 33.19%
Five Years(3) ..... 26.24% 20.51%
Ten Years(3) ...... 18.28% 12.25%
</TABLE>
- ------------
(1) Average annual total return reflects changes in share prices and
reinvestment of dividends and distributions and is net of fund expenses.
(2) The Russell 2000 Index is an unmanaged index (with no defined investment
objective) of 2000 small-cap stocks and it includes reinvestments of
dividends. It is compiled by the Frank Russell Company.
(3) Annualized performance for the Class B shares of the MFS Emerging Growth
Fund. The results for the MFS Emerging Growth Fund do not reflect sales
charge that may be imposed on the Class B shares of the MFS Emerging
Growth Fund, nor any charges that would be imposed at the insurance
company separate account level.

41
<PAGE>
MFS RESEARCH PORTFOLIO

In the table below, the only account which is included is another registered
investment company, i.e., MFS Research Fund, which is managed by
Massachusetts Financial Services Company, and whose investment policies are
substantially similar to MFS Research Portfolio. However, MFS Research Fund
will be subject to different expenses than the MFS Research Portfolio. In
addition, holders of variable insurance contracts representing interests in
the MFS Research Portfolio will be subject to charges and expenses relating
to such insurance contracts. The performance results presented below do not
reflect any insurance related expenses.

The investment results of MFS Research Fund presented below are unaudited and
are not intended to predict or suggest the returns that might be experienced
by the MFS Research Portfolio or an individual investor investing in the MFS
Research Portfolio.

<TABLE>
<CAPTION>
S&P 500
YEAR ENDED 9/30/97 MFS RESEARCH FUND(1) INDEX(2)
- ------------------ -------------------- ---------
<S> <C> <C>
One Year(3) ....... 28.72% 40.43%
Five Years(3) ..... 22.88% 20.75%
Ten Years(3) ...... 14.24% 14.74%
</TABLE>
- ------------
(1) Average annual total return reflects changes in share prices and
reinvestment of dividends and distributions and is net of fund expenses.
(2) The S&P 500 Index ("Index") is an unmanaged index containing common
stocks of 500 industrial, transportation, utility and financial
companies, regarded as generally representative of the United States
stock market. The Index reflects the reinvestment of income dividends
and capital gain distributions, if any, but does not reflect fees,
brokerage commissions, or other expenses of investing.
(3) Annualized performance for the Class A shares of the MFS Research Fund.
The results for the MFS Research Fund do not reflect any sales charge
that may be imposed on the Class A shares of the MFS Research Fund, nor
any charges that would be imposed at the insurance company separate
account level.

42
<PAGE>
MERRILL LYNCH BASIC VALUE EQUITY PORTFOLIO

In the table below, the only account which is included is another registered
investment company, i.e., Merrill Lynch Basic Value Focus Fund, a series of
Merrill Lynch Variable Series Funds, Inc., which is managed by Merrill Lynch
Asset Management, L.P., and whose investment policies are substantially
similar to the Merrill Lynch Basic Value Equity Portfolio. However, the
Merrill Lynch Basic Value Focus Fund will be subject to different expenses
than the Merrill Lynch Basic Value Equity Portfolio. In addition, holders of
variable insurance contracts representing interests in the Merrill Lynch
Basic Value Equity Portfolio will be subject to charges and expenses relating
to such insurance contracts. The performance results presented below do not
reflect any insurance related expenses.

The investment results of Merrill Lynch Basic Value Focus Fund presented
below are unaudited and are not intended to predict or suggest the returns
that might be experienced by the Merrill Lynch Basic Value Equity Portfolio
or an individual investor investing in the Merrill Lynch Basic Value Equity
Portfolio.

<TABLE>
<CAPTION>
MERRILL LYNCH VARIABLE SERIES
FUNDS, INC. -- MERRILL LYNCH S&P 500
YEAR ENDED 9/30/97 BASIC VALUE FOCUS FUND(1) INDEX (2)
- ------------------ ----------------------------- ---------
<S> <C> <C>
One Year(3)........ 36.14% 40.43%
Since
inception(3)...... 19.94% 22.03%
</TABLE>
- ------------
(1) Average annual total return reflects changes in share prices and
reinvestment of dividends and distributions and is net of fund expenses.
(2) The S&P 500 Index ("Index") is an unmanaged index containing common
stocks of 500 industrial, transportation, utility and financial
companies, regarded as generally representative of the United States
stock market. The Index reflects the reinvestment of income dividends
and capital gain distributions, if any, but does not reflect fees,
brokerage commissions, or other expenses of investing.
(3) Annualized performance for shares of the Merrill Lynch Basic Value Focus
Fund. The inception date for the Merrill Lynch Basic Value Focus Fund
was July 1, 1993.

43
<PAGE>
MERRILL LYNCH WORLD STRATEGY PORTFOLIO

In the table below, the only account which is included is a series of another
registered investment company, i.e., Merrill Lynch Global Strategy Focus
Fund, a series of Merrill Lynch Variable Series Funds, Inc., which is managed
by Merrill Lynch Asset Management, L.P., and whose investment policies are
substantially similar to the Merrill Lynch World Strategy Portfolio. However,
the Merrill Lynch Global Strategy Focus Fund will be subject to different
expenses than the Merrill Lynch World Strategy Portfolio. In addition,
holders of variable insurance contracts representing interests in the Merrill
Lynch World Strategy Portfolio will be subject to charges and expenses
relating to such insurance contracts. The performance results presented below
do not reflect any insurance related expenses.

The investment results of Merrill Lynch Global Strategy Focus Fund presented
below are unaudited and are not intended to predict or suggest the returns
that might be experienced by the Merrill Lynch World Strategy Portfolio or an
individual investor investing in the Merrill Lynch World Strategy Portfolio.

<TABLE>
<CAPTION>
MERRILL LYNCH VARIABLE
SERIES FUNDS, INC.--MERRILL LYNCH MSCI EAFE
YEAR ENDED 9/30/97 GLOBAL STRATEGY FOCUS FUND(1) INDEX(2)
- ------------------ ---------------------------------- -----------
<S> <C> <C>
One Year(3)........ 25.72% 12.18%
Five Years(3)...... 12.32% 12.33%
Since
inception(3)...... 11.35% 10.33%
</TABLE>
- ------------
(1) Average annual total return reflects changes in share prices and
reinvestment of dividends and distributions and is net of fund expenses.
(2) The Morgan Stanley Capital EAFE Europe, Australia, and Far East Index
("MSCI EAFE Index") is an unmanaged capitalization-weighted measure of
stock markets in Europe, Australia, the Far East and Canada. MSCI EAFE
Index returns assume dividends reinvested net of withholding tax and do
not reflect any fees or expenses.
(3) Annualized performance for shares of the Merrill Lynch Global Strategy
Focus Fund. The inception date for the Merrill Lynch Global Strategy
Focus Fund was February 28, 1992.

44
<PAGE>
MORGAN STANLEY EMERGING MARKETS EQUITY PORTFOLIO

<TABLE>
<CAPTION>
IFC GLOBAL TOTAL
MSIF EMERGING RETURN COMPOSITE
YEAR ENDED 9/30/97 MARKETS EQUITY PORTFOLIO(1),(2) INDEX(3)
- ------------------ ------------------------------- ----------------
<S> <C> <C>
One Year(4).................................. 21.67% 4.77%
Five Years(4) ............................... 15.95% 12.12%
Average Annual Total Return since
inception(4)................................ 15.81% 12.08%
</TABLE>
- ------------
(1) In accordance with SEC regulations, the performance shown assumes that
all recurring fees (including management fees) were deducted and all
dividends and distributions were reinvested. Average annual total return
reflects changes in share prices and reinvestment of dividends and
distributions and is net of fund expenses.
(2) The expense ratio of MSIF Emerging Markets Equity Portfolio has been
capped at 1.75% since inception.
(3) The IFC Global Total Return Composite Index is an unmanaged index of
common stocks and includes developing countries in Latin America, East
and South Asia, Europe, the Middle East and Africa. The Index assumes
dividends are reinvested.
(4) Annualized performance for the Class A shares of the MSIF Emerging
Markets Portfolio. The Class B shares of the MSIF Emerging Markets
Portfolio are subject to a Rule 12b-1 fee equal to 0.25% of the
Portfolio's assets. The inception date for the MSIF Emerging Markets
Portfolio was September 25, 1992.

45
<PAGE>
EQ/PUTNAM BALANCED PORTFOLIO

The table below sets forth performance history for another registered
investment company, i.e., The George Putnam Fund of Boston, which is managed
by the Putnam Investment Management, Inc., and whose investment policies are
substantially similar to those of EQ/Putnam Balanced Portfolio. The George
Putnam Fund of Boston will be subject to different expenses than the
EQ/Putnam Balanced Portfolio. In addition, holders of variable insurance
contracts representing interests in EQ/Putnam Balanced Portfolio will be
subject to charges and expenses relating to such insurance contract. The
performance results presented below do not reflect any insurance related
expenses.

The investment results of The George Putnam Fund of Boston presented below
are unaudited and are not intended to predict or suggest the returns that
might be experienced by the EQ/Putnam Balanced Portfolio or an individual
investor investing in the EQ/Putnam Balanced Portfolio.

<TABLE>
<CAPTION>
THE GEORGE PUTNAM S&P 500
YEAR ENDED 9/30/97 FUND OF BOSTON(1) INDEX(2)
- ------------------ ----------------- ---------
<S> <C> <C>
One Year(3) ....... 26.36% 40.43%
Five Years(3) ..... 15.10% 20.75%
Ten Years(3) ...... 12.05% 14.74%
</TABLE>
- ------------
(1) Average annual total return reflects changes in share prices and
reinvestment of dividends and distributions and is net of fund expenses.
(2) The S&P 500 Index ("Index") is an unmanaged index containing common
stocks of 500 industrial, transportation, utility and financial
companies, regarded as generally representative of the United States
stock market. The Index reflects the reinvestment of income dividends
and capital gain distributions, if any, but does not reflect fees,
brokerage commissions, or other expenses of investing.
(3) Annualized performance for the Class A shares of The George Putnam Fund
of Boston. The Class A shares are subject to a front-end sales charge or
up to 5.75% Other share classes have different expenses and their
performance will vary.

46
<PAGE>
EQ/PUTNAM GROWTH & INCOME VALUE PORTFOLIO

The table below sets forth performance history for another registered
investment company, i.e., the Putnam Growth & Income Fund II, which is
managed by the Putnam Investment Management, Inc., and whose investment
policies are substantially similar to those of EQ/Putnam Growth & Income
Value Portfolio. Putnam Growth & Income Fund II will be subject to different
expenses than the EQ/Putnam Growth & Income Value Portfolio. In addition,
holders of variable insurance contracts representing interests in EQ/Putnam
Growth & Income Value Portfolio will be subject to charges and expenses
relating to such insurance contract. The performance results presented below
do not reflect any insurance related expenses.

The investment results of Putnam Growth & Income Fund II presented below are
unaudited and are not intended to predict or suggest the returns that might
be experienced by the EQ/Putnam Growth & Income Value Portfolio or an
individual investor investing in the EQ/Putnam Growth & Income Value
Portfolio.

<TABLE>
<CAPTION>
PUTNAM GROWTH &
INCOME FUND S&P 500
YEAR ENDED 9/30/97 II(1) INDEX(2)
- ------------------ --------------- --------------
<S> <C> <C>
One Year(3) ....... 34.39% 40.43%
Since inception(3). 29.31% 33.04%
</TABLE>
- ------------
(1) Average annual total return reflects changes in share prices and
reinvestment of dividends and distributions and is net of fund expenses.
(2) The S&P 500 Index ("Index") is an unmanaged index containing common
stocks of 500 industrial, transportation, utility and financial
companies, regarded as generally representative of the United States
stock market. The Index reflects the reinvestment of income dividends
and capital gain distributions, if any, but does not reflect fees,
brokerage commissions, or other expenses of investing.
(3) Annualized performance for the Class A shares of the Putnam Growth &
Income Fund II. The inception date for the Putnam Growth & Income Fund
II was January, 1995. The Class A shares are subject to a front-end
sales charge of up to 5.75%. Other share classes have different expenses
and their performance will vary.

47
<PAGE>
T. ROWE PRICE EQUITY INCOME PORTFOLIO

In the table below, the only account which is included is another registered
investment company, i.e., T. Rowe Price Equity Income Fund, which is managed
by the T. Rowe Price Associates, Inc., and whose investment policies are
substantially similar to the T. Rowe Price Equity Income Portfolio. However,
the T. Rowe Price Equity Income Fund will be subject to different expenses
than the T. Rowe Price Equity Income Portfolio. In addition, holders of
variable insurance contracts representing interests in the T. Rowe Equity
Income Portfolio will be subject to charges and expenses relating to such
insurance contracts. The performance results presented below do not reflect
any insurance related expenses.

The investment results of T. Rowe Price Equity Income Fund presented below
are unaudited and are not intended to predict or suggest the returns that
might be experienced by the T. Rowe Price Equity Income Portfolio or an
individual investor investing in the T. Rowe Price Equity Income Portfolio.

<TABLE>
<CAPTION>
T. ROWE PRICE
EQUITY INCOME S&P 500
YEAR ENDED 9/30/97 FUND(1) INDEX(2)
- ------------------ ------------------- --------------
<S> <C> <C>
One Year(3)........ 33.02% 40.43%
Five Years(3)...... 19.78% 20.75%
Ten Years(3)....... 14.79% 14.74%
</TABLE>

- ------------
(1) Average annual total return reflects changes in share prices and
reinvestment of dividends and distributions and is net of fund expenses.
(2) The S&P 500 Index ("Index") is an unmanaged index containing common
stocks of 500 industrial, transportation, utility and financial
companies, regarded as generally representative of the United States
stock market. The Index reflects the reinvestment of income dividends
and capital gain distributions, if any, but does not reflect fees,
brokerage commissions, or other expenses of investing.
(3) Annualized performance for the shares of the T. Rowe Price Equity Income
Fund. The investment advisory fee applicable to the T. Rowe Price Equity
Income Fund was capped at 1.00% in 1986 and capped at the maximum
state-allowed fee in 1987.

48
<PAGE>
T. ROWE PRICE INTERNATIONAL STOCK PORTFOLIO

In the table below, the only account which is included is another registered
investment company, i.e., T. Rowe Price International Stock Fund, which is
managed by the Rowe Price-Fleming International, Inc., and whose investment
policies are substantially similar to T. Rowe Price International Stock
Portfolio. However, T. Rowe Price International Stock Fund will be subject to
different expenses than the T. Rowe Price International Stock Portfolio. In
addition, holders of variable insurance contracts representing interests in
the T. Rowe Price International Stock Portfolio will be subject to charges
and expenses relating to such insurance contracts. The performance results
presented below do not reflect any insurance related expense.

The investment results of T. Rowe Price International Stock Fund presented
below are unaudited and are not intended to predict or suggest the returns
that might be experienced by the T. Rowe Price International Stock Portfolio
or an individual investor investing in the T. Rowe Price International Stock
Portfolio.

<TABLE>
<CAPTION>
T. ROWE PRICE
INTERNATIONAL STOCK MSCI EAFE
YEAR ENDED 9/30/97 FUND(1) INDEX(2)
- ------------------ ------------------------- ----------------
<S> <C> <C>
One Year(3) ....... 16.39% 12.18%
Five Years(3) ..... 14.38% 12.33%
Ten Years(3) ...... 9.39% 5.92%
</TABLE>
- ------------
(1) Average annual total return reflects changes in share prices and
reinvestment of dividends and distributions and is net of fund expenses.
(2) The Morgan Stanley Capital EAFE Europe, Australia, and Far East Indes
("MSCI EAFE Index") is an unmanaged capitalization-weighted measure of
stock markets in Europe, Australia, the Far East and Canada. MSCI EAFE
Index returns assume dividends reinvested net of withholding tax and do
not reflect any fees or expenses.
(3) Annualized performance for the shares of the T. Rowe Price International
Stock Fund.

49
<PAGE>
WARBURG PINCUS SMALL COMPANY VALUE PORTFOLIO

In the table below, the only account which is included is another registered
investment company, i.e., Warburg Pincus Small Company Value Fund, which is
managed by Warburg Pincus Asset Management, Inc. and whose investment
policies are substantially similar to the Warburg Pincus Small Company Value
Portfolio. However, the Warburg Pincus Small Company Value Fund will be
subject to different expenses than the Warburg Pincus Small Company Value
Portfolio. In addition, holders of variable insurance contracts representing
interests in the Warburg Pincus Small Company Value Portfolio will be subject
to charges and expenses relating to such insurance contracts. The performance
results presented below do not reflect any insurance related expenses.

The investment results of Warburg Pincus Small Company Value Portfolio
presented below are unaudited and are not intended to predict or suggest the
returns that might be experienced by the Warburg Pincus Small Company Value
Portfolio or an individual investor investing in such Portfolio and should
not be considered a substitute for the Warburg Pincus Small Company Value
Portfolio's own performance information.

<TABLE>
<CAPTION>
WARBURG PINCUS SMALL COMPANY RUSSELL 2000
YEAR ENDED 9/30/97 VALUE FUND(1, 2) INDEX(3)
- ------------------ ---------------------------- ------------
<S> <C> <C>
One Year(4) ....... 42.46% 33.19%
Since inception(4). 48.73% 47.50%
</TABLE>
- ------------
(1) Average annual total return reflects changes in share prices and
reinvestment of dividends and distributions and is net of fund expenses.
(2) Absent the waiver of fees by the Warburg Pincus Small Company Value
Fund's investment adviser and co-administrator, management fees of the
Warburg Pincus Small Company Value Fund would equal 1.00%, other
expenses would equal .94% and total operating expenses would equal
2.19%. The investment adviser and co-administrator of the Warburg Pincus
Small Company Value Fund are under no obligation to continue these
waivers.
(3) The Russell 2000 Index is an unmanaged index (with no defined investment
objective) of 2,000 small-cap stocks, and includes reinvestment of
dividends. It is compiled by the Frank Russell Company.
(4) Annualized performance for shares of the Warburg Pincus Small Company
Value Fund. The inception date for the Warburg Pincus Small Company
Value Fund was December 29, 1995.

50
<PAGE>
APPENDIX A

The following table summarizes the historical performance information of
certain other registered investment companies or accounts that appears on
pages 38 through 50 of this Prospectus. Each other registered investment
company or account is managed by an Adviser and has investment objectives,
policies, strategies and risks substantially similar to the Portfolio managed
by that Adviser. For further information regarding each of the registered
investment companies and the indexes presented below, please refer to pages 5
through 17 of this Prospectus.

ANNUALIZED RATES OF RETURN
PERIOD ENDED SEPTEMBER 30, 1997

<TABLE>
<CAPTION>
SINCE
FUND NAME 1 YEAR 5 YEARS 10 YEARS INCEPTION
- -------------------------------------- -------- --------- ---------- -----------
<S> <C> <C> <C> <C>
BT EAFE(REGISTERED TRADEMARK) EQUITY
INDEX FUND--INSTITUTIONAL CLASS 12.78% -- -- 10.87%
MSCI EAFE Index 12.18% -- -- 10.71%
------------------------------------- -------- --------- ---------- -----------
BT EQUITY 500 INDEX FUND 40.32% -- -- 20.64%
S&P 500 Index 40.43% -- -- 20.72%
------------------------------------- -------- --------- ---------- -----------
BT SMALL CAP INDEX FUND 33.23% -- -- 31.05%
Russell 2000 Index 33.19% -- -- 32.76%
------------------------------------- -------- --------- ---------- -----------
THE GEORGE PUTNAM FUND OF BOSTON 26.36% 15.10% 12.05% --
S&P 500 Index 40.43% 20.75% 14.74% --
------------------------------------- -------- --------- ---------- -----------
J.P. MORGAN ACTIVE FIXED INCOME
COMPOSITE 10.87% 7.62% 10.16% --
Salomon Brothers Broad Investment
Grade Bond Index 9.70% 6.97% 9.53% --
------------------------------------- -------- --------- ---------- -----------
LAZARD EQUITY PORTFOLIO 35.75% 22.65% -- 15.20%
S&P 500 Index 40.43% 20.75% -- 15.59%
------------------------------------- -------- --------- ---------- -----------
LAZARD SMALL CAP PORTFOLIO 42.53% 25.36% -- 23.03%
Russell 2000 Index 33.19% 20.51% -- 18.25%
------------------------------------- -------- --------- ---------- -----------
MERRILL LYNCH BASIC VALUE FOCUS FUND 36.14% -- -- 19.94%
S&P 500 Index 40.43% -- -- 22.03%
------------------------------------- -------- --------- ---------- -----------
MERRILL LYNCH GLOBAL STRATEGY FOCUS
FUND 25.72% 12.32% -- 11.35%
MSCI EAFE Index 12.18% 12.33% -- 10.33%
------------------------------------- -------- --------- ---------- -----------
MFS EMERGING GROWTH FUND 25.29% 26.24% 18.28% --
Russell 2000 Index 33.19% 20.51% 12.25% --
------------------------------------- -------- --------- ---------- -----------
MFS RESEARCH FUND 28.72% 22.88% 14.24% --
S&P 500 Index 40.43% 20.75% 14.74% --

A-1
<PAGE>
SINCE
FUND NAME 1 YEAR 5 YEARS 10 YEARS INCEPTION
- -------------------------------------- -------- --------- ---------- -----------
MSIF EMERGING MARKETS PORTFOLIO 21.67% 15.95% -- 15.81%
IFC Global Total Return Composite
Index 4.77% 12.12% -- 12.08%
------------------------------------- -------- --------- ---------- -----------
PUTNAM GROWTH & INCOME FUND II 34.39% -- -- 29.31%
S&P 500 Index 40.43% -- -- 33.04%
------------------------------------- -------- --------- ---------- -----------
PUTNAM INTERNATIONAL GROWTH FUND 31.65% 19.43% -- 13.87%
MSCI EAFE Index 12.18% 12.33% -- 7.43%
------------------------------------- -------- --------- ---------- -----------
PUTNAM INVESTORS FUND 36.90% 21.88% 14.18% --
S&P 500 Index 40.43% 20.75% 14.74% --
------------------------------------- -------- --------- ---------- -----------
T. ROWE PRICE EQUITY INCOME FUND 33.02% 19.78% 14.79% --
S&P 500 Index 40.43% 20.75% 14.74% --
------------------------------------- -------- --------- ---------- -----------
T. ROWE PRICE INTERNATIONAL STOCK
FUND 16.39% 14.38% 9.39% --
MSCI EAFE Index 12.81% 12.33% 5.92% --
------------------------------------- -------- --------- ---------- -----------
WARBURG PINCUS SMALL COMPANY VALUE
FUND 42.46% -- -- 48.73%
Russell 2000 Index 33.19% -- -- 47.50%
------------------------------------- -------- --------- ---------- -----------
</TABLE>

A-2

<PAGE>
EQ ADVISORS TRUST

1290 Avenue of the Americas -- New York, New York 10104

This Prospectus describes the following 12 Portfolios currently offered by the
Trust.

o BT Equity 500 Index Portfolio

o BT Small Company Index Portfolio

o BT International Equity Index Portfolio

o JPM Core Bond Portfolio

o Lazard Large Cap Value Portfolio

o Lazard Small Cap Value Portfolio

o MFS Research Portfolio

o MFS Emerging Growth Companies Portfolio

o Morgan Stanley Emerging Markets Equity Portfolio

o EQ/Putnam Growth & Income Value Portfolio

o EQ/Putnam Investors Growth Portfolio

o EQ/Putnam International Equity Portfolio

The Trust offers two classes of shares on behalf of each Portfolio: Class IA
shares offered pursuant to another prospectus, and Class IB shares offered
hereby.

This Prospectus sets forth concisely the information about the Trust and the
Portfolios that a prospective investor should know before investing. Please
read the Prospectus and retain it for future reference. Additional information
contained in a Statement of Additional Information also dated December 31, 1997
has been filed with the Securities and Exchange Commission and is available
upon request without charge by writing to the Trust at the address noted above.
California residents can obtain a copy of the Statement of Additional
Information by calling 1-800-999-3527. The Statement of Additional Information
is incorporated into this Prospectus by reference.

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.

PROSPECTUS DATED DECEMBER 31, 1997

- --------------------------------------------------------------------------------
EQAT-102
<PAGE>
FINANCIAL HIGHLIGHTS

2
<PAGE>
<TABLE>
<CAPTION>
RATIO OF RATIO OF NET
EXPENSES TO RATIO OF NET INVESTMENT
RATIO OF AVERAGE NET INVESTMENT INCOME TO PER SHARE
EXPENSES TO ASSETS INCOME TO AVERAGE NET BENEFIT
AVERAGE NET BEFORE AVERAGE NET ASSETS BEFORE PORTFOLIO AVERAGE TO NET
ASSETS AFTER WAIVERS ASSETS AFTER WAIVERS TURNOVER COMMISSION INVESTMENT
WAIVERS (A)(C) (A)(C) WAIVERS (A)(C) (A)(C) RATE (A) RATE PAID INCOME(C)
- --------------- -------------- ------------- -------------- ------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
MFS Research
Portfolio 0.85% 5.99% 1.35% (3.79)% 45% $0.0388 $0.05
- --------------- -------------- ------------- -------------- ------------- ----------- ------------ ------------
MFS Emerging
Growth
Companies
Portfolio 0.85% 5.71% 0.59% (4.27)% 426% $0.0474 $0.05
- --------------- -------------- ------------- -------------- ------------- ----------- ------------ ------------
EQ/Putnam
Growth &
Income Value
Portfolio 0.85% 5.07% 2.71% (1.51)% 37% $0.0233 $0.03
- --------------- -------------- ------------- -------------- ------------- ----------- ------------ ------------
EQ/Putnam
Investors
Growth
Portfolio 0.85% 7.35% 1.00% (5.50)% 83% $0.0259 $0.09
- --------------- -------------- ------------- -------------- ------------- ----------- ------------ ------------
EQ/Putnam
International
Equity
Portfolio 1.20% 8.06% 3.69% (3.17)% 54% $0.0472 $0.08
- --------------- -------------- ------------- -------------- ------------- ----------- ------------ ------------
</TABLE>

- ------------
** Commencement of Operations. No financial highlights are presented for
the BT Equity 500 Index Portfolio, the BT Small Company Index Portfolio,
the BT International Equity Index Portfolio, the JPM Core Bond
Portfolio, the Lazard Large Cap Value Portfolio and the Lazard Small Cap
Value Portfolio, each of which commenced operations on December 31, 1997
and the Morgan Stanley Emerging Markets Equity Portfolio which commenced
operations on August 20, 1997.
(a) Annualized.
(b) Total return calculated for a period of less than one year is not
annualized.
(c) For further information concerning fee waivers, see the section entitled
"Expense Limitation Agreements" of the Prospectus.

3
<PAGE>
THE TRUST

The Trust is an open-end management investment company registered under the
Investment Company Act of 1940, as amended ("1940 Act"). As a "series" type of
mutual fund, the Trust issues shares of beneficial interest that are currently
divided among 18 Portfolios, 12 of which are offered by this Prospectus. Each
Portfolio is a separate series of the Trust with its own objective and
policies. Each of the Portfolios set forth below, except for the Morgan Stanley
Emerging Markets Equity Portfolio and the Lazard Small Cap Value Portfolio, are
diversified for 1940 Act purposes. The Trustees of the Trust may establish
additional Portfolios at any time.

Each Portfolio is managed by EQ Financial Consultants, Inc. ("Manager") which
directs the day to day operations of each Portfolio. Bankers Trust Company,
J.P. Morgan Investment Management Inc., Lazard Asset Management, a division
of Lazard Fr|f4res & Co. LLC, Massachusetts Financial Services Company, Morgan
Stanley Asset Management Inc., and Putnam Investment Management, Inc. serve
as the advisers (each an "Adviser" and, together the "Advisers") to one or
more of the Portfolios, as detailed in the table below.

<TABLE>
<CAPTION>
PORTFOLIO ADVISER
- --------- -------
<S> <C>
BT Equity 500 Index Portfolio Bankers Trust Company
BT Small Company Index Portfolio Bankers Trust Company
BT International Equity Index Portfolio Bankers Trust Company
JPM Core Bond Portfolio J.P. Morgan Investment Management Inc.
Lazard Large Cap Value Portfolio Lazard Asset Management
Lazard Small Cap Value Portfolio Lazard Asset Management
MFS Research Portfolio Massachusetts Financial Services Company
MFS Emerging Growth Companies Portfolio Massachusetts Financial Services Company
Morgan Stanley Emerging Markets Equity Portfolio Morgan Stanley Asset Management Inc.
EQ/Putnam Growth & Income Value Portfolio Putnam Investment Management, Inc.
EQ/Putnam Investors Growth Portfolio Putnam Investment Management, Inc.
EQ/Putnam International Equity Portfolio Putnam Investment Management, Inc.
</TABLE>

The Manager has the ultimate responsibility to oversee each of the Advisers and
to recommend their hiring, termination and replacement. The Trust and the
Manager have asked the Securities and Exchange Commission for an order that
would permit the Manager, subject to approval by the Board of Trustees, to (i)
select Advisers for each of the Trust's investment portfolios and (ii)
materially modify existing investment advisory agreements without obtaining
shareholder approval.

The Trust offers two classes of shares on behalf of each Portfolio: Class IA
shares and Class IB shares. EQ Financial Consultants, Inc. ("EQ Financial"),
the Trust's Manager, serves as one of the distributors for the Class IB shares
of the Trust offered by this Prospectus and Class IA shares offered by another
Prospectus. Equitable Distributors, Inc. ("EDI") also serves as one of the
distributors for the Class IB shares of the Trust as well as one of the
distributors of the Class IA shares. (EQ Financial and EDI are collectively
referred to as the "Distributors"). The Trust's shares are currently sold only
to insurance company separate accounts in connection with variable life
insurance contracts and variable annuity certificates and contracts
(collectively, the "Contracts") issued by The Equitable Life Assurance Society
of the United States ("Equitable"). Both classes of shares are offered and
redeemed at their net asset value without the imposition of any sales load.

4
<PAGE>
to a distribution plan. Class IB shares are subject to distribution fees
imposed under a distribution plan ("Distribution Plan") adopted pursuant to
Rule 12b-1 under the 1940 Act. Inquiries regarding Class IA shares, which are
not currently available, should be addressed to Equitable, at 1290 Avenue of
the Americas, New York, NY 10104 or by calling 1-212-314-4300.

INVESTMENT OBJECTIVES AND POLICIES

The following is a brief description of the investment objectives and policies
of each of the Portfolios. All of the objectives and policies of each
Portfolio, unless otherwise noted, are not fundamental and may be changed by
the Board of Trustees of the Trust without the approval of shareholders.
Certain investment strategies and instruments discussed below are described in
greater detail in the Statement of Additional Information. Because of the
uncertainty inherent in all investments, there can be no assurance that the
Portfolios will be able to achieve their respective investment objectives.

BT EQUITY 500 INDEX PORTFOLIO

The Portfolio seeks to replicate as closely as possible (before deduction of
Portfolio expenses) the total return of the Standard & Poor's 500 Composite
Stock Price Index ("S&P 500"). The S&P 500 is an index of 500 common stocks of
companies from many industrial sectors representing a significant portion of
the market value of all common stocks publicly traded in the United States,
most of which trade on the New York Stock Exchange Inc. (the "NYSE"). The
Adviser believes that the performance of the S&P 500 is representative of the
performance of publicly-traded common stocks in the U.S. in general.

The composition of the S&P 500 is determined by Standard & Poor's and is based
on such factors as the market capitalization and trading activity on each stock
and its adequacy as a representation of stocks in a particular industry, and
may be changed from time to time. The Portfolio is not sponsored, endorsed,
sold or promoted by Standard & Poor's and Standard & Poor's makes no guarantee
as to the accuracy and/or completeness of the S&P 500 or any data included
therein. In seeking to replicate the performance of the S&P 500, before
deduction of Portfolio expenses, the Adviser will attempt over time to allocate
the Portfolio's investment among common stocks included in the S&P 500 in
approximately the same proportions as they are represented in the S&P 500,
beginning with the heaviest weighted stocks that make up a larger portion of
the Index's value. Bankers Trust utilizes a two-stage sampling approach in
seeking to achieve its objective. Stage one, which encompasses large
capitalization stocks, maintains the stock holdings at or near their benchmark
weights. Large capitalization stocks are defined as those securities which
represent 0.10% or more of the S&P 500. In stage two, smaller stocks are
analyzed and selected using risk characteristics and industry weights in order
to match the sector and risk characteristics of the smaller companies in the
S&P 500. This approach helps to increase the Portfolio's liquidity while
reducing costs.

The Adviser generally will seek to match the composition of the S&P 500 but
usually will not invest the Portfolio's stock portfolio to mirror the S&P 500
exactly. Because of the difficulty and cost of executing relatively small stock
transactions, the Portfolio may not always be invested in the less heavily
weighted S&P 500 stocks, and may at times have its portfolio weighted
differently than the S&P 500, particularly if the Portfolio has a low level of
assets. In addition, the Portfolio may omit or remove any S&P 500 stock from
the Portfolio if, following objective criteria, the Adviser judges the stock to
be insufficiently liquid or believes the merit of the investment has been
substantially impaired by extraordinary events or financial conditions. The
Portfolio will not purchase the stock of Bankers Trust New York Corporation,
which is included in the S&P 500, and instead will overweight its holdings of
companies engaged in similar businesses.

5
<PAGE>
the S&P 500 or the assets of the Portfolio, and the timing and amount of
Portfolio investor contributions and withdrawals, if any. Because the Portfolio
seeks to track the S&P 500, the Adviser generally will not attempt to judge the
merits of any particular stock as an investment. Under normal circumstances,
the Portfolio will invest at least 80% of its assets in the securities of the
S&P 500.

The Portfolio is a diversified fund and will not concentrate more than 25% of
its assets in the securities of issuers in the same industry. In the unlikely
event that the S&P 500 should concentrate to an extent greater than 25% in the
securities of issuers in the same industry, the Portfolio's ability to achieve
its objective may be impaired since the Portfolio may not so invest.

The Portfolio may maintain up to 20% of its assets in short-term debt
securities and money market instruments to meet redemption requests or to
facilitate investment in the securities of the S&P 500. Securities index
futures contracts and related options, warrants and convertible securities may
be used for several reasons: to simulate full investment in the S&P 500 while
retaining a cash balance for fund management purposes; to facilitate trading;
to reduce transaction costs; or to seek higher investment returns when a
futures contract, option, warrant or convertible security is priced more
attractively than the underlying equity security or S&P 500. These instruments
may be considered derivatives. The use of derivatives for non-hedging purposes
may be considered speculative. While each of these instruments can be used as
leveraged investments, the Portfolio may not use them to leverage its net
assets. The Portfolio may not invest in derivative instruments as part of a
temporary defensive strategy (in anticipation of declining stock prices) to
protect the Portfolio against potential market declines.

Certain investment strategies and instruments which may be employed by the
Portfolio (such as the purchase and sale of options, futures contracts,
securities loans, illiquid securities, investment grade fixed-income
securities, derivatives, repurchase agreements, reverse repurchase agreements,
forward commitments, United States Government securities, borrowings,
asset-backed securities, and convertible securities) are discussed under the
caption "Investment Strategies" below and in the Statement of Additional
Information.

BT SMALL COMPANY INDEX PORTFOLIO

The investment objective of the BT Small Company Index Portfolio is to
replicate as closely as possible (before deduction of Portfolio expenses) the
total return of the Russell 2000 Small Stock Index. The Russell 2000 is
composed of approximately 2,000 small-capitalization common stocks. A company's
stock market capitalization is the total market value of its floating
outstanding shares. As of June 30, 1997, the average stock market
capitalization of the Russell 2000 was $500 million and the weighted average
stock market capitalization of the Russell 2000 was $650 million. The Portfolio
is neither sponsored by nor affiliated with the Frank Russell Company, which is
the owner of the trademarks and copyrights relating to the Russell indices.

The Portfolio invests in a statistically selected sample of the 2,000 stocks
included in the Russell 2000. The stocks of the Russell 2000 to be included in
the Portfolio will be selected utilizing a statistical sampling technique known
as "optimization." This process selects stocks for the Portfolio so that
various industry weightings, market capitalizations and fundamental
characteristics (e.g., price-to-book, price-to-earnings and debt-to-asset
ratios and dividend yields) closely approximate those of the Russell 2000. For
instance, if 10% of the capitalization of the Russell 2000 consists of utility
companies with relatively small capitalizations, then the Portfolio is
constructed so that approximately 10% of the Portfolio's assets are invested in
the stocks of utility companies with relatively small capitalizations. The
stocks held by the Portfolio are weighted to make the Portfolio's aggregate
investment characteristics similar to those of the Russell 2000 as a whole.

6
<PAGE>
composition of the Russell 2000 or the assets of the Portfolio, and the timing
and amount of Portfolio investor contributions and withdrawals, if any. Because
the Portfolio seeks to track the Russell 2000, the Adviser generally will not
attempt to judge the merits of any particular stock as an investment. Under
normal circumstances, the Portfolio will invest at least 80% of its assets in
the securities of the Russell 2000. The Portfolio is a diversified fund and
will not concentrate more than 25% of its assets in the securities of issuers
in the same industry. In the event that the Russell 2000 should concentrate to
an extent greater than 25% in the securities of issuers in the same industry,
the Portfolio's ability to achieve its objective may be impaired since the
Portfolio is not permitted to so invest.

The Portfolio may maintain up to 20% of its assets in short-term debt
securities and money market instruments to meet redemption requests or to
facilitate investment in the securities of the Russell 2000. Securities index
futures contracts and related options, warrants and convertible securities may
be used for several reasons: to simulate full investment in the Russell 2000
while retaining a cash balance for portfolio management purposes; to facilitate
trading; to reduce transaction costs; or to seek higher investment returns when
a futures contract, option, warrant or convertible security is priced more
attractively than the underlying equity security or the Russell 2000. These
instruments may be considered derivatives. The use of derivatives for
non-hedging purposes may be considered speculative. While each of these
instruments can be used as leveraged investments, the Portfolio will not use
them to leverage its net assets. The Portfolio will not invest in derivative
instruments as part of a temporary defensive strategy (in anticipation of
declining stock prices) to protect the Portfolio against potential market
declines.

BT INTERNATIONAL EQUITY INDEX PORTFOLIO

The Portfolio seeks to replicate as closely as possible (before deduction of
Portfolio expenses) the total return of the Morgan Stanley Capital
International Europe, Australia, Far East Index ("EAFE Index"). The EAFE Index
is a capitalization-weighted index containing approximately 1,100 equity
securities of companies located in countries outside the United States. The
countries currently included in the EAFE Index are Australia, Austria, Belgium,
Denmark, Finland, France, Germany, Hong Kong, Ireland, Italy, Japan, Malaysia,
The Netherlands, New Zealand, Norway, Singapore, Spain, Sweden, Switzerland and
The United Kingdom. The EAFE Index is the exclusive property of Morgan Stanley.
The Portfolio is not sponsored, endorsed, sold or promoted by Morgan Stanley
and Morgan Stanley makes no guarantee as to the accuracy or completeness of the
EAFE Index or any data included therein.

The Portfolio is constructed to have aggregate investment characteristics
similar to those of the EAFE Index. The Portfolio invests in a statistically
selected sample of the securities of companies included in the EAFE Index,
although not all companies within a country will be represented in the
Portfolio at the same time. Stocks are selected for inclusion in the Portfolio
based on country of origin, market capitalization, yield, volatility and
industry sector. The Adviser will manage the Portfolio using advanced
statistical techniques to determine which stocks should be purchased or sold to
replicate the EAFE Index. From time to time, adjustments may be made in the
Portfolio because of changes in the composition of the EAFE Index, but such
changes are expected to be infrequent.

Over time, the correlation between the performance of the Portfolio and the
EAFE Index is expected to be 0.95 or higher before deduction of Portfolio
expenses. A correlation of 1.00 would indicate perfect correlation, which would
be achieved when the net asset value of the Portfolio, including the value of
its dividend and any capital gain distributions, increases or decreases in
exact proportion to changes in the EAFE Index. The Portfolio's ability to track
the EAFE Index may be affected by, among other things, transaction costs,
administration and other expenses incurred by the Portfolio, changes in either
the composition of the EAFE Index or the assets of the Portfolio, and the
timing and amount of Portfolio investor contributions and withdrawals, if any.
Because the Portfolio seeks to track the EAFE Index,

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Bankers Trust generally will not attempt to judge the merits of any particular
stock as an investment. Under normal circumstances, the Portfolio will invest
at least 80% of its assets in the securities of the EAFE Index.

The Portfolio is a diversified fund and will not concentrate more than 25% of
its assets in the securities of issuers in the same industry. In the event that
the EAFE Index should concentrate to an extent greater than 25% in the
securities of issuers in the same industry, the Portfolio's ability to achieve
its objective may be impaired since the Portfolio may not so invest

The Portfolio may maintain up to 20% of its assets in short-term debt
securities and money market instruments to meet redemption requests or to
facilitate investment in the securities of the EAFE Index. Securities index
futures contracts and related options, warrants and convertible securities may
be used for several reasons: to simulate full investment in the EAFE Index
while retaining a cash balance for fund management purposes; to facilitate
trading; to reduce transaction costs; or to seek higher investment returns when
a futures contract, option, warrant or convertible security is priced more
attractively than the underlying equity security or EAFE Index. These
instruments may be considered derivatives. The use of derivatives for
non-hedging purposes may be considered speculative. While each of these
instruments can be used as leveraged investments, the Portfolio will not use
them to leverage its net assets. The Portfolio will not invest in derivative
instruments as part of a temporary defensive strategy (in anticipation of
declining stock prices) to protect the Portfolio against potential market
declines.

Certain investment strategies and instruments which may be employed by the
Portfolio (such as the purchase and sale of options, futures contracts, foreign
securities, foreign currency transactions, securities loans, illiquid
securities, investment grade fixed-income securities, derivatives, swaps,
repurchase agreements, reverse repurchase agreements, forward commitments,
United States Government securities, borrowings, asset-backed securities, and
convertible securities) are discussed under the caption "Investment Strategies"
below and in the Statement of Additional Information.

JPM CORE BOND PORTFOLIO

It is the current policy of the Portfolio that, under normal circumstances, all
of the Portfolio's assets will, at the time of purchase, consist of investment
grade securities rated BBB or better by S&P or Baa or better by Moody's or
unrated securities of comparable quality. If the quality of the investment
later declines, the Portfolio may continue to hold the investment.

The Adviser actively manages the Portfolio's duration, the allocation of
securities across market sectors, and the selection of specific securities
within market sectors. Based on fundamental, economic and capital markets
research, the Adviser adjusts the duration of the Portfolio in light of market
conditions and the Adviser's interest rate outlook. For example, if interest
rates are expected to fall, the duration may be lengthened to take advantage of
the expected increase in bond prices. The Adviser also actively allocates the
Portfolio's assets among the broad sectors of the fixed income market
including, but not limited to, United States Government and agency securities,
corporate securities, private placements, asset-backed securities,
mortgage-related securities, and direct mortgage obligations. The Portfolio may
also invest up to 25% of its assets in securities of foreign issuers, including
up to 20% of its assets in debt securities denominated in foreign currencies of
developed countries. In addition, the Portfolio may invest in municipal
obligations provided such securities are issued on a taxable basis or have an
attractive yield excluding tax considerations. Specific securities that the
Adviser believes are undervalued are selected for purchase within the sectors
using advanced quantitative tools, analysis of credit risk, the expertise of a
dedicated trading desk, and the judgment of fixed income portfolio managers and
analysts. Under normal circumstances, the Adviser intends to have the Portfolio
invest at least 65% of its assets in bonds. The Portfolio may to a limited
extent invest in convertible securities, including convertible debt securities
and preferred stock.

8
<PAGE>
Duration is a measure of the sensitivity of the market value of the Portfolio's
bond holdings to changes in interest rates. Generally, the longer the duration
of the Portfolio's bond holdings, the more sensitive their market value will be
to changes in interest rates. Under normal market conditions the Portfolio's
duration will range between one year shorter and one year longer than the
duration of the domestic investment grade fixed income universe, as represented
by Salomon Brothers Broad Investment Grade Bond Index. Currently, the duration
of that index is approximately 4.5 years. The maturities of the individual
securities in the Portfolio may vary widely, however.

The Adviser intends to actively manage the Portfolio in pursuit of its
investment objective. Portfolio transactions are undertaken principally to
accomplish the Portfolio's objective in relation to expected movements in the
general level of interest rates. However, the Portfolio may also engage in
short-term trading consistent with its objective. To the extent the Portfolio
engages in short-term trading, it may incur increased transaction costs. The
Portfolio may purchase high-quality money market instruments to invest
temporary cash balances or to maintain liquidity to meet withdrawals. When
market or financial conditions warrant, the Portfolio may invest as a temporary
defensive measure up to 100% of its assets in money market instruments.

Certain investment strategies and instruments which may be employed by the
Portfolio (such as the purchase and sale of options, futures contracts, foreign
securities, securities loans, illiquid securities, zero-coupon bonds,
investment grade fixed-income securities, payment-in-kind bonds, derivatives,
foreign currency transactions, repurchase agreements, reverse repurchase
agreements, forward commitments, United States Government securities,
borrowings, asset-backed securities, convertible securities, mortgage-related
securities and swaps) are discussed under the caption "Investment Strategies"
below and in the Statement of Additional Information.

LAZARD LARGE CAP VALUE PORTFOLIO

Under normal market conditions, the Portfolio will invest at least 80% of its
total assets in equity securities, including common stocks, preferred stocks
and securities convertible into or exchangeable for common stocks. In addition,
at times judged by the Adviser to be appropriate, the Portfolio may hold up to
20% of its total assets in United States Government securities and investment
grade debt obligations of domestic corporations rated BBB or better by S&P or
Baa or better by Moody's. The Portfolio may also, for temporary or defensive
purposes, invest without limitation in high-quality short-term money market
instruments, including United States Government securities, repurchase
agreements, certificates of deposits, time deposits and other short-term
obligations issued by banks, commercial paper and loan participations. In
addition, the Portfolio may invest up to 10% of its total assets at the time of
purchase in foreign equity or debt securities trading in U.S. markets or listed
on a domestic securities exchange or represented by ADRs or Global Depositary
Receipts ("GDRs"). The Portfolio may also engage in various investment
techniques, such as options transactions and, although it has no present
intention to do so, leveraging and lending portfolio securities.

9
<PAGE>
Certain investment strategies and instruments which may be employed by the
Portfolio (such as securities loans, borrowing, loan participations,
derivatives, options, mortgage-related securities, forward commitments,
convertible securities, floaters, illiquid securities, foreign securities,
investment grade fixed-income securities, United States Government securities
and repurchase agreements) are discussed under the caption "Investment
Strategies" below and in the Statement of Additional Information.

LAZARD SMALL CAP VALUE PORTFOLIO

The investment objective of the Lazard Small Cap Value Portfolio is to seek
capital appreciation by investing primarily in equity securities of United
States companies with small market capitalizations (i.e., companies in the
range of companies represented in the Russell 2000 Index) that the Adviser
considers inexpensively priced relative to the return on total capital or
equity. The Russell 2000 Index is composed of selected common stocks of small,
generally unseasoned U.S. companies with market capitalizations ranging between
$100 million and $1 billion. The equity securities in which the Portfolio may
invest include: common stocks, preferred stocks, securities convertible into or
exchangeable for common stocks, rights and warrants.

Investments are generally made in equity securities of companies that in the
Adviser's opinion have one or more of the following characteristics: (i) are
undervalued relative to their earnings power, cash flow, and/or asset values;
(ii) have an attractive price/value relationship (i.e., have high returns on
equity and/or assets with correspondingly low price-to-book and/or
price-to-asset value as compared to the market generally or the companies'
industry groups in particular) with the expectation that some catalyst will
cause the perception of value to change within a 24-month time horizon; (iii)
have experienced significant relative underperformance and are out of favor due
to a set of circumstances that are unlikely to harm a company's franchise or
earnings power over the longer term; (iv) have low projected price-to-earnings
or price-to-cash-flow multiples relative to their industry peer group and/or
the market in general; (v) have the prospect, or the industry in which the
company operates has the prospect, to allow it to become a larger factor in the
business and receive a higher valuation as such; (vi) have significant
financial leverage but have high levels of free cash flow that may be used to
reduce leverage and enhance shareholder value; and (vii) have a relatively
short corporate history with the expectation that the business may grow to
generate meaningful cash flow and earnings over a reasonable investment
horizon.

The Adviser believes that issuers of small capitalization stocks often have
sales and earnings growth rates that exceed those of larger companies, and that
such growth rates may, in turn, be reflected in more rapid share price
appreciation. However, investing in smaller capitalization stocks can involve
greater risk than is customarily associated with larger, more established
companies. (Such risks are discussed under the caption "Investment Strategies
- -- Small Company Securities" below).

The Portfolio is non-diversified for 1940 Act purposes and as such may invest a
larger percentage of its assets in individual issuers than a diversified
investment company. In this regard, the Portfolio is not subject to the general
limitation that it not invest more than 5% of its total assets in the
securities of any one issuer. To the extent the Portfolio makes investments in
excess of 5% of its assets in a particular issuer, its exposure to credit and
market risks associated with that issuer is increased. However, the Portfolio's
investments will be limited so as to qualify for the special tax treatment
afforded "regulated investment companies" under Internal Revenue Code of 1986,
as amended ("Code").

The Adviser continually evaluates the securities owned by the Portfolio, and
changes may be made whenever the Adviser determines such securities no longer
meet the Portfolio's objective. Changes in Portfolio holdings may also be made
to increase or decrease investments in anticipation of changes in security
prices in general or to provide funds required for redemptions, distributions
to shareholders or other corporate purposes.

10
<PAGE>
When, in the judgment of the Adviser, business or financial conditions warrant,
the Portfolio may assume a temporary defensive position and invest, without
limitation, in large capitalization companies or short-term money market
instruments or hold its assets in cash.

MFS RESEARCH PORTFOLIO

The investment objective of the MFS Research Portfolio is to provide long-term
growth of capital and future income. In pursuing its objective, the Portfolio
invests a substantial portion of its assets in the common stock or securities
convertible into common stock of companies believed by the Adviser to possess
better than average prospects for long-term growth. A smaller proportion of the
assets of the Portfolio may be invested in bonds, short-term debt obligations,
preferred stocks or common stocks whose principal characteristic is income
production rather than growth. Such securities may also offer opportunities for
growth of capital as well as income. In the case of both growth stocks and
income securities, the Adviser emphasizes progressive, well-managed companies.

The portfolio securities of the Portfolio are selected by a committee of
investment research analysts. This committee includes investment analysts
employed not only by the Adviser but also by MFS International (U.K.) Limited,
a wholly-owned subsidiary of the Adviser. The Portfolio's assets are allocated
among industries by the analysts acting together as a group. Individual
analysts are then responsible for selecting what they view as the securities
best suited to meet the Portfolio's investment objective within their assigned
industry responsibility.

To the extent that such investments comply with the Portfolio's investment
objective, the Portfolio may invest up to 20% of its total assets in foreign
securities, including those in emerging markets. These securities include
dollar-denominated and non-dollar-denominated foreign securities. Such foreign
investments increase a portfolio's diversification and may enhance return, but
they may represent a greater degree of risk than investing exclusively in
domestic securities.

The Portfolio may invest in investment grade debt securities and may invest up
to 10% of its total assets in securities rated below investment grade (commonly
known as "junk bonds"). The price of a bond generally fluctuates with changes
in interest rates, rising when interest rates fall and falling when interest
rates rise.

MFS EMERGING GROWTH COMPANIES PORTFOLIO

The investment objective of the MFS Emerging Growth Companies Portfolio is to
provide long-term growth of capital. Dividend and interest income from
portfolio securities, if any, is incidental to the Portfolio's investment
objective. In pursuing its objective, the Portfolio invests primarily (i.e., at
least 80% of its assets 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. Such emerging
growth companies generally are expected to: (i) show earnings growth over time
that is well above the growth rate of the overall economy and the rate of
inflation; and (ii) have the products, technologies, management and market and
other opportunities that are usually necessary to become more widely recognized
as growth companies.

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<PAGE>
rejuvenated management, new products, changes in customer demand, or basic
changes in the economic environment. Investing in emerging growth companies
involves greater risk than is customarily associated with investments in more
established companies. Emerging growth companies often have limited product
lines, markets or financial resources and may be more dependent on one-person
management. In addition, there may be less research available on many promising
small or medium-sized emerging growth companies, making it more difficult both
to identify and to analyze such companies. Moreover, the securities of such
companies may have limited marketability and may be subject to more abrupt or
erratic market movements than the securities of larger, more established
companies.

While the Portfolio may invest primarily in common stocks, the Portfolio may,
to a limited extent, seek long-term growth in other types of securities such as
convertible securities and warrants. To the extent that such investments comply
with the Portfolio's investment objective, the Portfolio may invest up to 25%
of its total assets in foreign securities, including those in emerging markets.
These securities include non-United States dollar-denominated securities traded
outside the United States and dollar-denominated securities traded in the
United States (such as ADRs). Such foreign investments increase a portfolio's
diversification and may enhance return, but they may represent a greater degree
of risk than investing exclusively in domestic securities. The Portfolio may
also invest in debt securities and hold cash and cash equivalents. In addition,
the Portfolio may invest in lower-rated debt securities (commonly referred to
as "junk bonds").

The Portfolio is aggressively managed and, therefore, the value of its shares
is subject to greater fluctuation and investment in its shares generally
involves a higher degree of risk than would be the case with an investment in a
conservative equity or growth fund investing entirely in proven growth
companies.

MORGAN STANLEY EMERGING MARKETS EQUITY PORTFOLIO

The investment objective of the Morgan Stanley Emerging Markets Equity
Portfolio is long-term capital appreciation by investing primarily in equity
securities of emerging market country issuers. In pursuing its investment
objective, the Adviser focuses on issuers in emerging market countries in which
it believes the economies are developing strongly and in which the markets are
becoming more sophisticated.

For these purposes, an emerging market country security is a security issued by
a company that has one or more of the following characteristics: (i) its
principal securities trading market is in an emerging market country; (ii)
alone or on a consolidated basis, it derives 50% or more of its revenue from
either goods produced, sales made or services performed in emerging markets
countries; or (iii) it is organized under the laws of, and has a principal
office in, an emerging market country. The Adviser will base determinations as
to eligibility on publicly available information and inquiries made to the
companies.

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<PAGE>
contractual guarantees to protect such investment against loss of that
currency's external value, or (ii) the Portfolio has a reasonable expectation
at the time the investment is made that such governmental licensing or other
appropriately licensed or sanctioned guarantees would be obtained or that the
currency in which the security is quoted would be freely convertible at the
time of any proposed sale of the security by the Portfolio. Currently,
investing in many emerging market countries is not feasible or may involve
unacceptable political risks.

The Portfolio may also invest in fixed-income securities denominated in the
currency of an emerging market country or issued or guaranteed by an emerging
market country company or the government of an emerging market country. In
addition, the Portfolio may invest in equity or fixed-income securities of
corporate or governmental issuers located in industrialized countries, foreign
currency and investment funds (i.e., funds specifically authorized to invest in
companies of a particular emerging market country). The Portfolio may also
invest in debt securities issued or guaranteed by international organizations
designed or supported by multiple governmental entities to promote economic
reconstruction or development such as the International Bank for Reconstruction
and Development (i.e., the World Bank). The Portfolio may invest up to 10% of
its total assets (measured at the time of investment) in fixed-income
securities that are not investment grade securities (commonly referred to as
"junk bonds").

For temporary defensive purposes, the Portfolio may invest less than 65% of its
assets in equity securities of emerging market countries in which case the
Portfolio may invest in other equity securities or fixed income securities.
Moreover, the Portfolio may invest without limitation in high-quality money
market instruments.

The value of the Portfolio's investments and the income they generate will vary
from day to day and generally reflect market conditions, interest rates, and
other company, political, or economic news both in the United States and
abroad. In the short-term, stock prices can fluctuate dramatically in response
to these factors. Over time, however, stocks have shown greater growth
potential than other types of securities. The prices of fixed-income securities
also fluctuate and generally move in the opposite direction from interest
rates.

The Portfolio is a non-diversified portfolio under the 1940 Act, which means
that it may invest a greater proportion of its assets in the securities of a
small number of issuers than a diversified investment company. In this regard,
the Portfolio is not subject to the general limitation that it not invest more
than 5% of its total assets in the securities of a single issuer. As a result,
because the Portfolio is permitted greater flexibility to invest its assets in
the obligations of a single issuer it is exposed to increased risk of loss if
such an investment underperforms expectations. However, the Portfolio intends
to limit its investments so as to comply with diversification requirements
imposed by the Code, for qualification as a "regulated investment company." The
Portfolio spreads investment risk by limiting its holdings in any one company
or industry. Nevertheless, the Portfolio will experience price volatility, the
extent of which will be affected by the types of securities and techniques the
Portfolio uses. The Adviser may use various investment techniques to hedge
risks, including derivatives, but there is no guarantee that these strategies
will work as intended.

Certain investment strategies and practices which may be employed by the
Portfolio (such as the purchase and sale of options, futures contracts, United
States Government securities, hybrid instruments, illiquid securities, foreign
securities, securities loans, borrowings, payment-in-kind bonds, passive
foreign investment companies, derivatives, convertible securities, zero coupon
bonds, investment grade and lower quality fixed-income securities,
mortgage-backed securities, forward commitments, stripped mortgage-backed
securities, collateralized mortgage obligations, asset-backed securities,
floaters, inverse floaters, foreign currency transactions, loan participations,
repurchase agreements, structured notes and swaps) are discussed under the
caption "Investment Strategies" below and in the Statement of Additional
Information.

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EQ/PUTNAM GROWTH & INCOME VALUE PORTFOLIO

The investment objective of the EQ/Putnam Growth & Income Value Portfolio is
capital growth. Current income is a secondary objective. The Adviser intends to
invest primarily in common stocks that offer potential for capital growth and
may, consistent with the Portfolio's investment objective, invest in common
stocks that offer potential for current income. The Portfolio may also purchase
corporate bonds, notes and debentures, preferred stocks and convertible
securities (which include both debt securities and preferred stocks). The types
of securities held by the Portfolio may vary from time to time in light of the
Portfolio's investment objective, changes in interest rates, and economic and
other factors. In analyzing companies for investment, the Adviser will seek to
identify companies whose securities are significantly undervalued in relation
to their underlying asset values or earnings potential.

At times, the Adviser may judge that conditions in the securities markets may
make pursuing the Portfolio's basic investment strategy inconsistent with the
best interests of the Portfolio's shareholders. At such times, the Adviser may
temporarily use alternative strategies that are primarily designed to reduce
fluctuations in the value of the Portfolio's assets. In implementing these
defensive strategies, the Portfolio may invest without limit in debt securities
or preferred stocks, or may invest in any other securities the Adviser
considers consistent with such defensive strategies. It is impossible to
predict when, or for how long, the Adviser will use these alternative defensive
strategies.

In addition, the Portfolio may also invest a portion of its assets in United
States government securities and high-quality United States and foreign
dollar-denominated money market securities (i.e., within the two highest rating
categories assigned by a NRSRO) including certificates of deposit, bankers'
acceptances, commercial paper, short-term corporate securities and repurchase
agreements. For temporary defensive purposes or to meet redemption requests,
the Portfolio may invest without limitation in such securities.

The Portfolio may also invest in investment grade debt securities and may
invest a portion of its total assets in debt securities rated below investment
grade (commonly known as "junk bonds"). The price of a bond generally
fluctuates with changes in interest rates, rising when interest rates fall and
falling when interest rates rise.

The Portfolio may also engage in a variety of investment management practices
such as buying and selling options and futures contracts and engaging in
foreign currency exchange contracts.

Certain investment strategies and instruments which may be employed by the
Portfolio (such as the purchase and sale of options, futures contracts, foreign
securities, securities loans, convertible securities, borrowings, repurchase
agreements, illiquid securities, forward commitments, zero-coupon bonds,
derivatives, United States Government securities, foreign currency
transactions, passive foreign investment companies, payment-in-kind bonds, and
investment grade and lower quality fixed-income securities) are discussed under
the caption "Investment Strategies" below and in the Statement of Additional
Information.

EQ/PUTNAM INVESTORS GROWTH PORTFOLIO

The investment objective of the EQ/Putnam Investors Growth Portfolio is
long-term growth of capital and any increased income that results from this
growth. The Adviser intends to invest primarily in common stocks in view of the
Adviser's belief that equity ownership affords the best opportunity for capital
growth over the long term. The Portfolio may also purchase convertible bonds,
convertible preferred stocks, preferred stocks and debt securities if the
Adviser believes that they will help to achieve the Portfolio's objective. In
addition, the Portfolio may hold a portion of its assets in cash or money
market instruments.

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<PAGE>
growth; and (iii) a detailed study of what appear to be the most promising
individual companies. In evaluating individual companies, the Adviser gives
more weight to growth potential characteristics than to dividend income. In
particular, the Adviser believes that evaluating a company's probable future
earnings, dividends, financial strength, working assets and competitive
position may be more profitable in the long run than seeking current dividend
income.

Although the Portfolio's investments are not limited to any particular type of
company, the Adviser currently expects that the Portfolio will invest a
substantial portion of its assets in common stocks of companies with equity
market capitalizations of more than $1 billion. The Portfolio may also invest
in small to medium-sized companies having a proprietary product or profitable
market niche and the potential to grow very rapidly. The Adviser believes that
such small to medium-sized companies may present greater opportunities for
capital appreciation because of their high potential earnings growth, but also
may involve greater risk.

At times, the Adviser may judge that conditions in the securities markets may
make pursuing the Portfolio's basic investment strategy inconsistent with the
best interests of the Portfolio's shareholders. At such times, the Adviser may
temporarily use alternative strategies that are primarily designed to reduce
fluctuations in the value of the Portfolio's assets. In implementing these
defensive strategies, the Portfolio may invest, without limit, in debt
securities, preferred stocks, United States government and agency obligations,
cash or money market instruments, or may invest in any other securities the
Adviser considers consistent with such defensive strategies. It is impossible
to predict when, or for how long, the Adviser will use these alternative
defensive strategies.

The Portfolio may also engage in a variety of investment management practices
such as buying and selling options and futures contracts and entering into
foreign currency exchange contracts.

Certain investment strategies and instruments which may be employed by the
Portfolio (such as the purchase and sale of options, borrowings, futures
contracts, foreign securities, foreign currency transactions, securities loans,
illiquid securities, derivatives, repurchase agreements and forward
commitments) are discussed under the caption "Investment Strategies" below and
in the Statement of Additional Information.

EQ/PUTNAM INTERNATIONAL EQUITY PORTFOLIO

The investment objective of the EQ/Putnam International Equity Portfolio is
capital appreciation. The Portfolio is designed for investors seeking capital
appreciation primarily through a diversified portfolio of equity securities of
companies organized under the laws of a country other than the United States.
Such equity securities normally will include common stocks, preferred stocks,
securities convertible into common or preferred stocks, and warrants. The
Portfolio may also invest to a lesser extent in debt securities and other types
of investments if the Adviser believes that purchasing them would help to
achieve the Portfolio's objective. The Portfolio may hold a portion of its
assets in cash or money market instruments. The Portfolio may also engage in a
variety of investment management practices such as buying and selling options
and futures contracts and engaging in foreign currency exchange contracts.

Under normal circumstances the Portfolio will invest at least 65% of its assets
in issuers located in at least three different countries outside the United
States. The Portfolio will consider an issuer to be located outside the United
States if the issuer is organized under the laws of a country outside the
United States. The Portfolio may invest in securities of issuers in emerging
markets, as well as more developed markets. Investing in securities of issuers
in emerging markets generally involves more risks than investing in securities
of issuers in developed markets.

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<PAGE>
securities markets may have little effect on securities markets in other
countries. By investing in a diversified portfolio of securities of issuers
located in different foreign countries, the Adviser attempts to reduce the
risks associated with being invested in the securities of issuers within the
economy of only one country. Countries that the Adviser believes offer
attractive opportunities for investment may change from time to time.

The Portfolio will not limit its investments to any particular type of company.
The Portfolio may invest in companies, large or small, whose earnings are
believed by the Adviser to be in a relatively strong growth trend or it may
invest in companies that are not expected to experience significant further
growth but whose market value per share is considered by the Adviser to be
undervalued. The Portfolio also may invest in small and relatively less
well-known companies that meet these characteristics.

At times, the Adviser may believe that conditions in the international
securities markets may make pursuing the Portfolio's basic investment strategy
inconsistent with the best interests of its shareholders. At such times, the
Portfolio may temporarily use alternative strategies that are primarily
designed to reduce fluctuations in the value of the Portfolio's assets. In
implementing these defensive strategies, the Portfolio may invest, without
limitation, in securities of any kind, including securities traded primarily in
United States markets and in cash and money market instruments. It is
impossible to predict when, or for how long, the Portfolio will use these
alternative strategies.

Certain investment strategies and instruments which may be employed by the
Portfolio (such as the purchase and sale of options, borrowings, derivatives,
repurchase agreements, futures contracts, foreign securities, forward
commitments, foreign currency transactions, securities loans, and illiquid
securities) are discussed under the caption "Investment Strategies" below and
in the Statement of Additional Information.

INVESTMENT STRATEGIES

In addition to making investments directly in securities, to the extent
described above and below, each of the Portfolios, for example, may purchase
and sell call and put options (except for Lazard Small Cap Value Portfolio and
MFS Research Portfolio), engage in transactions in futures contracts and
related options (except for Lazard Large Cap Value Portfolio and Lazard Small
Cap Value Portfolio), and engage in forward foreign currency exchange
transactions (except for BT Equity 500 Index Portfolio, BT Small Company Index
Portfolio, Lazard Large Cap Value Portfolio, Lazard Small Cap Value Portfolio,
and MFS Research Portfolio). They may also enter into repurchase agreements,
and borrow funds under certain limited circumstances. In addition, each
Portfolio may engage in other types of investment strategies as described
below. Each Portfolio may invest in or utilize any of these investment
strategies and instruments or engage in any of these practices except where
otherwise prohibited by law or the Portfolio's own investment restrictions.
Portfolios that anticipate committing 5% or more of their net assets to a
particular type of investment strategy or instruments are specifically referred
to in the descriptions below of such investment strategy or instrument. Certain
investment strategies and instruments and the risks related to them are
summarized below and certain of these strategies and instruments are described
in more detail in the Statement of Additional Information.

Asset-Backed Securities. The BT Equity 500 Index Portfolio, BT Small Company
Index Portfolio, BT International Equity Index Portfolio, JPM Core Bond
Portfolio, MFS Emerging Growth Companies Portfolio and Morgan Stanley Emerging
Markets Equity Portfolio, and may invest in asset-backed securities. These
asset-backed securities, issued by trusts and special purpose corporations, are
collateralized by a pool of assets, such as credit card or automobile loans,
home equity loans or computer leases, and represent the obligations of a number
of different parties. Asset-backed securities present certain risks. For
instance, in the case of credit card receivables, these securities may not have
the benefit of any security interest in the related collateral. Due to the
possibility that prepayments (on automobile loans and other collateral) will
alter the cash flow on asset-backed securities, it is not possible to determine
in advance the actual final maturity date or average life. Faster prepayment
will shorten the average life and slower prepayments will lengthen it. However,
it is possible to determine what the range of that movement could be and to
calculate the effect that it will have on the price of the security. In
selecting these securities, the Adviser will look for those securities that
offer a higher yield to compensate for any variation in average maturity.

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Borrowings. The Portfolios may borrow money from banks or other lenders as a
temporary measure for emergency purposes, to facilitate redemption requests, or
for other purposes consistent with each Portfolio's investment objective and
program. Such borrowings would be subject to interest costs which may or may
not be recovered by appreciation of securities purchased. Borrowings for the BT
Equity 500 Index Portfolio, BT Small Company Index Portfolio, BT International
Equity Index Portfolio, JPM Core Bond Portfolio, MFS Emerging Growth Companies
Portfolio, and Morgan Stanley Emerging Markets Equity Portfolio may not exceed
33 1/3% of each Portfolio's total assets. The Lazard Large Cap Value Portfolio
may borrow for leveraging purposes (in order to increase its investment in
portfolio securities) to the extent that the amount so borrowed does not exceed
33 1/3% of the Portfolio's total assets. Leveraging exaggerates the effect on
net asset value of any increase or decrease in market value of the Lazard Large
Cap Value Portfolio's investment. The Lazard Large Cap Value Portfolio may also
borrow up to 10% of its total assets for temporary or emergency purposes.
Borrowing for the Lazard Small Cap Value Portfolio may not exceed 15% of its
total assets for temporary or emergency purposes, including to meet redemptions
(otherwise such borrowings may not exceed 5% of the value of the Portfolio's
total assets). Borrowings for the EQ/Putnam Growth & Income Value Portfolio,
EQ/Putnam Investors Growth Portfolio and the EQ/Putnam International Equity
Portfolio may not exceed 10% of each Portfolio's total assets. Each Portfolio
may pledge its assets to secure these permissible borrowings. No Portfolio,
except the Lazard Large Cap Value Portfolio, may purchase additional securities
when its borrowings exceed 5% of its total assets. See also "Reverse Repurchase
Agreements" for information concerning an investment technique that may be
deemed to involve a borrowing. Further information concerning each Portfolio's
fundamental policy with respect to borrowings is provided in the Statement of
Additional Information.

Convertible Securities. Each of the Portfolios may invest in convertible
securities, including both convertible debt and convertible preferred stock.
Such securities may be converted into shares of the underlying common stock at
either a stated price or stated rate. Because of this feature, convertible
securities enable an investor to benefit from increases in the market price of
the underlying common stock. Convertible securities provide higher yields than
the underlying common stocks, but generally offer lower yields than
nonconvertible securities of similar quality. Like bonds, the value of
convertible securities fluctuates in relation to changes in interest rates and,
in addition, fluctuates in relation to the underlying common stock. Subsequent
to purchase by a Portfolio, convertible securities may cease to be rated or a
rating may be reduced below the minimum required for purchase by that
Portfolio. Neither event will require sale of such securities, although each
Adviser will consider such event in its determination of whether a Portfolio
should continue to hold the securities.

Derivatives. Each Portfolio (except the MFS Research Portfolio) may invest in
one or more types of derivatives. Derivatives are financial products or
instruments that derive their value from the value of one or more underlying
assets, reference rates or indices. Derivatives include, but are not limited
to, the following: asset-backed securities, collateralized mortgage
obligations, floaters, futures, hybrid instruments, inverse floaters,
mortgage-backed securities, options, stripped mortgage-backed securities,
structured notes and swaps. Further information about these instruments and the
risks involved in their use are contained under the description of each of
these instruments in this section or the Statement of Additional Information.

Floaters and Inverse Floaters. The Lazard Large Cap Value Portfolio, Lazard
Small Cap Value Portfolio and the Morgan Stanley Emerging Markets Equity
Portfolio, each may invest in floaters, which are fixed-income securities with
a floating or variable rate of interest, i.e., the rate of interest varies with
changes in specified market rates or indices, such as the prime rate, or at
specified intervals. Certain floaters may carry a demand feature that permits
the holder to tender them back to the issuer of the underlying instrument, or
to a third party, at par value prior to maturity. When the demand feature of
certain floaters represents an obligation of a foreign entity, the demand
feature will be subject to certain risks discussed under "Foreign Securities".

The Morgan Stanley Emerging Markets Equity Portfolio may invest in inverse
floating rate obligations which are fixed-income securities that have coupon
rates that vary inversely at a multiple of a designated floating rate, such as
London Inter-Bank Offered Rate ("LIBOR"). Any rise in the reference rate of an
inverse floater (as a consequence of an increase in interest rates) causes a
drop in the coupon rate while

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any drop in the reference rate of an inverse floater causes an increase in the
coupon rate. Inverse floaters may exhibit substantially greater price
volatility than fixed rate obligations having similar credit quality,
redemption provisions and maturity, and inverse floater collateralized mortgage
obligations ("CMOs") exhibit greater price volatility than the majority of
mortgage-related securities. In addition, some inverse floater CMOs exhibit
extreme sensitivity to changes in prepayments. As a result, the yield to
maturity of an inverse floater CMO is sensitive not only to changes in interest
rates but also to changes in prepayment rates on the related underlying
mortgage assets.

Foreign Securities. Foreign investments involve certain risks that are not
present in domestic securities. Because each of the Portfolios (except the BT
Equity 500 Index Portfolio, BT Small Company Index Portfolio and Lazard Small
Cap Value Portfolio) may purchase securities denominated in foreign currencies,
a change in the value of any such currency against the United States dollar
will result in a change in the United States dollar value of a Portfolio's
assets and income. In addition, although a portion of a Portfolio's investment
income may be received or realized in such currencies, the Portfolio will be
required to compute and distribute its income in United States dollars.
Therefore, if the exchange rate for any such currency declines after a
Portfolio's income has been earned and computed in United States dollars but
before conversion and payment, the Portfolio could be required to liquidate
portfolio securities to make such distributions.

The value of foreign investments and the investment income derived from them
may also be affected unfavorably by changes in currency exchange control
regulations. Although the Portfolios will invest only in securities denominated
in foreign currencies that are fully exchangeable into United States dollars
without legal restriction at the time of investment, there can be no assurance
that currency controls will not be imposed subsequently. In addition, the value
of foreign fixed income investments may fluctuate in response to changes in
United States and foreign interest rates.

There may be less information publicly available about a foreign issuer than
about a United States issuer, and a foreign issuer is not generally subject to
accounting, auditing and financial reporting standards and practices comparable
to those in the United States. Foreign stock markets are generally not as
developed or efficient as, and may be more volatile than, those in the United
States. While growing in volume, they usually have substantially less volume
than United States markets and a Portfolio's investment securities may be less
liquid and subject to more rapid and erratic price movements than securities of
comparable United States companies. Equity securities may trade at
price/earnings multiples higher than comparable United States securities and
such levels may not be sustainable. There is generally less government
supervision and regulation of foreign stock exchanges, brokers and listed
companies than in the United States. Moreover, settlement practices for
transactions in foreign markets may differ from those in United States markets.
Such differences may include delays beyond periods customary in the United
States and practices, such as delivery of securities prior to receipt of
payment, which increase the likelihood of a "failed settlement." Failed
settlements can result in losses to a Portfolio. In less liquid and well
developed stock markets, such as those in some Asian and Latin American
countries, volatility may be heightened by actions of a few major investors.
For example, substantial increases or decreases in cash flows of mutual funds
investing in these markets could significantly affect stock prices and,
therefore, share prices.

Foreign brokerage commissions, custodial expenses and other fees are also
generally higher than for securities traded in the United States. Consequently,
the overall expense ratios of international or global funds are usually
somewhat higher than those of typical domestic stock funds.

In addition, the economies, markets and political structures of a number of the
countries in which the Portfolios can invest do not compare favorably with the
United States and other mature economies in terms of wealth and stability.
Therefore, investments in these countries may be riskier, and will be subject
to erratic and abrupt price movements. Some economies are less well developed
and less diverse (for example, Latin America, Eastern Europe and certain Asian
countries), and more vulnerable to the ebb and flow of international trade,
trade barriers and other protectionist or retaliatory measures (for example,
Japan, Southeast Asia and Latin America). Some countries, particularly in Latin
America, are grappling with severe inflation and high levels of national debt.
Investments in countries that have recently begun moving away from central
planning and state-owned industries toward free markets, such as the Eastern
European or Chinese economies, should be regarded as speculative.

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In addition, investment in foreign securities may also include the risk of
expropriation by a foreign government.

Moreover, investments in foreign government debt securities, particularly those
of emerging market country governments, involve special risks. Certain emerging
market countries have historically experienced, and may continue to experience,
high rates of inflation, high interest rates, exchange rate fluctuations, large
amounts of external debt, balance of payments and trade difficulties and
extreme poverty and unemployment. The issuer or governmental authority that
controls the repayment of an emerging market country's debt may not be able or
willing to repay the principal and/or interest when due in accordance with the
terms of such debt. A debtor's willingness or ability to repay principal and
interest due in a timely manner may be affected by, among other factors, its
cash flow situation, and, in the case of a government debtor, the extent of its
foreign reserves, the availability of sufficient foreign exchange on the date a
payment is due, the relative size of the debt service burden to the economy as
a whole and the political constraints to which a government debtor may be
subject. Government debtors may default on their debt and may also be dependent
on expected disbursements from foreign governments, multilateral agencies and
others abroad to reduce principal and interest arrearages on their debt.
Holders of government debt may be requested to participate in the rescheduling
of such debt and to extend further loans to government debtors.

Certain Portfolios may invest in the following types of foreign securities or
engage in the following types of transactions related to foreign securities.

Brady Bonds. The JPM Core Bond Portfolio, MFS Emerging Growth Companies
Portfolio and the Morgan Stanley Emerging Markets Equity Portfolio, each may
invest in "Brady Bonds," which are fixed-income securities created through the
exchange of existing commercial bank loans to foreign entities for new
obligations in connection with debt restructuring under a plan introduced by
Nicholas F. Brady when he was the United States Secretary of the Treasury.
Brady Bonds have been issued only recently, and, accordingly, do not have a
long payment history. They may be collateralized or uncollateralized and issued
in various currencies (although most are United States dollar-denominated) and
they are actively traded in the over-the-counter ("OTC") secondary market. Each
Portfolio will invest in Brady Bonds only if they are consistent with quality
specifications established from time to time by the Adviser to that Portfolio.

Depositary Receipts. Each of the Portfolios (except the BT Equity 500 Index
Portfolio, BT Small Company Index Portfolio and Lazard Small Cap Value
Portfolio) may purchase depositary receipts, which are securities representing
ownership interests in securities of foreign companies (an "underlying issuer")
and are deposited with a securities depositary. Depositary receipts are not
necessarily denominated in the same currency as the underlying securities.
Depositary receipts include ADRs and GDRs and other types of depositary
receipts (which, together with ADRs and GDRs, are hereinafter collectively
referred to as "Depositary Receipts"). ADRs are dollar-denominated Depositary
Receipts typically issued by a United States financial institution which
evidence ownership interests in a security or pool of securities issued by a
foreign issuer. ADRs are listed and traded in the United States. GDRs and other
types of depositary receipts are typically issued by foreign banks or trust
companies, although they also may be issued by United States financial
institutions, and evidence ownership interests in a security or pool of
securities issued by either a foreign or a United States corporation.
Generally, depositary receipts in registered form are designed for use in the
United States securities market and depositary receipts in bearer form are
designed for use in securities markets outside the United States. Although
there may be more reliable information available regarding issuers of certain
ADRs that are issued under so-called "sponsored" programs and ADRs do not
involve foreign currency risks, ADRs and other Depositary Receipts are subject
to the risks of other investments in foreign securities, as described directly
above.

Foreign Currency Transactions. Each of the Portfolios (except the BT Equity 500
Index Portfolio, BT Small Company Index Portfolio and Lazard Small Cap Value
Portfolio,) may purchase foreign currency on a spot (or cash) basis. In
addition, each of the Portfolios (except the BT Equity 500 Index Portfolio, BT
Small Company Index Portfolio, Lazard Large Cap Value Portfolio, Lazard Small
Cap Value Portfolio, and the MFS Research Portfolio) may enter into contracts
to purchase or sell foreign currencies

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at a future date ("forward contracts"). Each of the Portfolios (except the BT
Equity 500 Index Portfolio, BT Small Company Index Portfolio, Lazard Large Cap
Value Portfolio, Lazard Small Cap Value Portfolio, and the MFS Research
Portfolio) may also purchase and sell foreign currency futures contracts and
may purchase and sell exchange traded call and put options on foreign currency
futures contracts and on foreign currencies. The BT International Equity Index
Portfolio, JPM Core Bond Portfolio, MFS Emerging Growth Companies Portfolio,
Morgan Stanley Emerging Markets Equity Portfolio, EQ/ Putnam Growth & Income
Value Portfolio, EQ/Putnam Investors Growth Portfolio, and EQ/Putnam
International Equity Portfolio may utilize over-the-counter ("OTC") options on
foreign currency transactions. The MFS Emerging Growth Companies Portfolio may
only enter into forward contracts on currencies in the OTC market. The Advisers
may engage in these transactions to protect against uncertainty in the level of
future exchange rates in connection with the purchase and sale of portfolio
securities ("transaction hedging") and to protect the value of specific
portfolio positions ("position hedging").

Hedging transactions involve costs and may result in losses. Each of the
Portfolios (except the BT Equity 500 Index Portfolio, BT Small Company Index
Portfolio, Lazard Small Cap Value Portfolio, and the MFS Research Portfolio)
may also write covered call options on foreign currencies to offset some of the
costs of hedging those currencies. A Portfolio will engage in OTC options
transactions on foreign currencies only when appropriate exchange traded
transactions are unavailable and when, in the Adviser's opinion, the pricing
mechanism and liquidity are satisfactory and the participants are responsible
parties likely to meet their contractual obligations. A Portfolio's ability to
engage in hedging and related option transactions may be limited by tax
considerations.

Forward Commitments. Each Portfolio may make contracts to purchase securities
for a fixed price at a future date beyond customary settlement time ("forward
commitments") if it holds, and maintains until the settlement date in a
segregated account, cash or liquid securities in an amount sufficient to meet
the purchase price, or if it enters into offsetting contracts for the forward
sale of other securities it owns. Forward commitments may be considered
securities in themselves and involve a risk of loss if the value of the
security to be purchased declines prior to the settlement date, which risk is
in addition to the risk of decline in value of the Portfolio's other assets.
Where such purchases are made through dealers, a Portfolio relies on the dealer
to consummate the sale. The dealer's failure to do so may result in the loss to
a Portfolio of an advantageous yield or price.

Hybrid Instruments. The Morgan Stanley Emerging Markets Equity Portfolio may
invest in hybrid instruments. Hybrid instruments have recently been developed
and combine the elements of futures contracts or options with those of debt,
preferred equity or a depository instrument. Often these hybrid instruments are
indexed to the price of a commodity, particular currency, or a domestic or
foreign debt or equity securities index. Hybrid instruments may take a variety
of forms, including, but not limited to, debt instruments with interest or
principal payments or redemption terms determined by reference to the value of
a currency or commodity or securities index at a future point in time,
preferred stock with dividend rates determined by reference to the value of a
currency, or convertible securities with the conversion terms related to a
particular commodity. Hybrid instruments may bear interest or pay dividends at
below market (or even relatively nominal) rates. Under certain conditions, the
redemption value of such an instrument could be zero. Hybrid instruments can
have volatile prices and limited liquidity and their use by a Portfolio may not
be successful.

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repurchase agreements with maturities longer than seven days. Securities
eligible for resale pursuant to Rule 144A under the Securities Act of 1933, as
amended, which have been determined by the Board of Trustees to be liquid, will
not be considered by the Adviser to be illiquid or not readily marketable and,
therefore, are not subject to the 10% or 15% limit. The inability of a
Portfolio to dispose of illiquid or not readily marketable investments readily
or at a reasonable price could impair the Portfolio's ability to raise cash for
redemptions or other purposes. The liquidity of securities purchased by a
Portfolio which are eligible for resale pursuant to Rule 144A will be monitored
by each Portfolio's Adviser on an ongoing basis, subject to the oversight of
the Board of Trustees of the Trust. In the event that such a security is deemed
to be no longer liquid, a Portfolio's holdings will be reviewed to determine
what action, if any, is required to ensure that the retention of such security
does not result in a Portfolio's having more than 10% or 15% of its assets
invested in illiquid or not readily marketable securities.

Investment Grade and Lower Quality Fixed Income Securities. Each Portfolio may
invest in or hold a portion of its total assets in investment grade or, except
as noted below, lower quality fixed income securities. The BT Equity 500 Index
Portfolio, BT Small Company Index Portfolio, the BT International Equity Index
Portfolio, JPM Core Bond Portfolio, Lazard Large Cap Value Portfolio, and
Lazard Small Cap Value Portfolio each may only invest in securities that are
rated investment grade or higher, and will, in an orderly manner, dispose of
fixed income securities that fall below investment grade. Investment grade
securities are securities rated Baa or higher by Moody's or BBB or higher by
S&P or comparable quality unrated securities. Investment grade securities while
normally exhibiting adequate protection parameters, have speculative
characteristics, and, consequently, changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity of such issuers to
make principal and interest payments than is the case for higher grade fixed
income securities. Lower quality fixed income securities are securities that
are rated in the lower categories by NRSROs (i.e., Ba or lower by Moody's and
BB or lower by S&P) or comparable quality unrated securities. Such lower
quality securities are known as "junk bonds" and are regarded as predominantly
speculative with respect to the issuer's continuing ability to meet principal
and interest payments. (Each NRSRO's descriptions of these bond ratings are set
forth in the Appendix to the Statement of Additional Information.) Because
investment in lower quality securities involves greater investment risk,
achievement of a Portfolio's investment objective will be more dependent on the
Adviser's analysis than would be the case if that Portfolio were investing in
higher quality bonds. In addition, lower quality securities may be more
susceptible to real or perceived adverse economic and individual corporate
developments than would investment grade bonds. Moreover, the secondary trading
market for lower quality securities may be less liquid than the market for
investment grade bonds. This potential lack of liquidity may make it more
difficult for an Adviser to value accurately certain portfolio securities.

Loan Participations. The JPM Core Bond Portfolio, Lazard Large Cap Value
Portfolio, Lazard Small Cap Value Portfolio, MFS Emerging Growth Companies
Portfolio, and Morgan Stanley Emerging Markets Equity Portfolio may invest a
portion of each of their assets in loan participations and other direct
indebtedness. By purchasing a loan, a Portfolio acquires some or all of the
interest of a bank or other lending institution in a loan to a corporate
borrower. Many such loans are secured, and most impose restrictive covenants
that must be met by the borrower. These loans are made generally to finance
internal growth, mergers, acquisitions, stock repurchases, leveraged buy-outs
and other corporate activities. Such loans may be in default at the time of
purchase. The MFS Emerging Growth Companies Portfolio may also purchase other
direct indebtedness such as trade or other claims against companies, which
generally represent money owed by a company to a supplier of goods and
services. These claims may also be purchased at a time when the company is in
default. Certain of the loans and other direct indebtedness acquired by the
Portfolio may involve revolving credit facilities or other standby financing
commitments which obligate the Portfolio to pay additional cash on a certain
date or on demand. The highly leveraged nature of many such loans and other
direct indebtedness may make such loans especially vulnerable to adverse
changes in economic or market conditions. Loans and other direct indebtedness
may not be in the form of securities or may be subject to restrictions on
transfer, and only limited opportunities may exist to resell such instruments.
As a result, the Portfolio may be unable to sell such investments at an
opportune time or may have to resell them at less than fair market value.

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Mortgages and Mortgage-Related Securities. The BT Equity 500 Index Portfolio,
BT Small Company Index Portfolio, BT International Equity Index Portfolio, JPM
Core Bond Portfolio, Lazard Large Cap Value Portfolio, Lazard Small Cap Value
Portfolio, and Morgan Stanley Emerging Markets Equity Portfolio may invest in
mortgage-related securities (i.e., mortgage-backed securities). A
mortgage-backed security may be an obligation of the issuer backed by a
mortgage or pool of mortgages or a direct interest in an underlying pool of
mortgages. Some mortgage-backed securities, such as CMOs, make payments of both
principal and interest at a variety of intervals; others make semiannual
interest payments at a predetermined rate and repay principal at maturity (like
a typical bond). Mortgage-backed securities are based on different types of
mortgages including those on commercial real estate or residential properties.

Stripped mortgage-backed securities are created when a United States government
agency or a financial institution separates the interest and principal
components of a mortgage-backed security and sells them as individual
securities. The holder of the "principal-only" security ("PO") receives the
principal payments made by the underlying mortgage-backed security, while the
holder of the "interest-only" security ("IO") receives interest payments from
the same underlying security. The prices of stripped mortgage-backed securities
may be particularly affected by changes in interest rates. As interest rates
fall, prepayment rates tend to increase, which tends to reduce prices of IOs
and increase prices of POs. Rising interest rates can have the opposite effect.

The JPM Core Bond Portfolio may also invest in directly placed mortgages
including residential mortgages, multifamily mortgages, mortgages on
cooperative apartment buildings, commercial mortgages, and sale-leasebacks.
These investments are backed by assets such as office buildings, shopping
centers, retail stores, warehouses, apartment buildings and single-family
dwellings. In the event that the Portfolio forecloses on any non-performing
mortgage, and acquires a direct interest in the real property, the Portfolio
will be subject to the risks generally associated with the ownership of real
property. There may be fluctuations in the market value of the foreclosed
property and its occupancy rates, rent schedules and operating expenses.

Municipal Securities. The JPM Core Bond Portfolio and the Morgan Stanley
Emerging Markets Equity Portfolio may invest in municipal securities
("municipals"), which are debt obligations issued by local, state and regional
governments that provide interest income that is exempt from federal income
taxes. Municipals include both municipal bonds (those securities with
maturities of five years or more) and municipal notes (those with maturities of
less than five years). Municipal bonds are issued for a wide variety of
reasons: to construct public facilities, such as airports, highways, bridges,
schools, hospitals, mass transportation, streets, water and sewer works; to
obtain funds for operating expenses; to refund outstanding municipal
obligations; and to loan funds to various public institutions and facilities.
Certain industrial development bonds are also considered municipal bonds if
their interest is exempt from federal income tax. Industrial development bonds
are issued by or on behalf of public authorities to obtain funds for various
privately-operated manufacturing facilities, housing, sports arenas, convention
centers, airports, mass transportation systems and water, gas or sewer works.
Industrial development bonds are ordinarily dependent on the credit quality of
a private user, not the public issuer.

Options and Futures Transactions. Each Portfolio (except Lazard Large Cap Value
Portfolio, Lazard Small Cap Value Portfolio and the MFS Research Portfolio) may
utilize futures contracts. Futures contracts (a type of potentially high-risk
security) enable the investor to buy or sell an asset in the future at an
agreed upon price. Each Portfolio (except the Lazard Small Cap Value Portfolio
and MFS Research Portfolio) may also write and purchase put and call options
(another type of potentially high-risk security) give the purchaser of an
option the right, but not the obligation, to buy or sell in the future an asset
at a

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predetermined price during the term of the option. (The writer of a put or call
option would be obligated to buy or sell the underlying asset at a
predetermined price during the term of the option.) Each Portfolio will write
put and call options only if such options are considered to be "covered". A
call option on a security is covered, for example, when the writer of the call
option owns throughout the option period the security on which the option is
written (or a security convertible into such a security without the payment of
additional consideration). A put option on a security is covered, for example,
when the writer of the put has deposited and maintained in a segregated account
throughout the option period sufficient cash or other liquid assets in an
amount equal to or greater than the exercise price of the put option. Each
Portfolio that is permitted to invest in futures contracts and related options
may utilize such transactions for other than hedging purposes to the extent
that aggregate initial margin deposits and premiums paid do not exceed 5% of
the Portfolio's net assets. No Portfolio will commit more than 5% of its total
assets to premiums when purchasing call or put options. In addition, the total
market value of securities against which a Portfolio may write call or put
options will in no event exceed 25% of its total assets. The BT Equity 500
Index Portfolio, the BT Small Company Index Portfolio and the BT International
Equity Index Portfolio each may not at any time commit more than 20% of its net
assets to options and futures contracts. The MFS Emerging Growth Companies
Portfolio and Morgan Stanley Emerging Markets Equity Portfolio will not enter a
futures contract if the obligations underlying all such futures contracts would
exceed 50% of the value of each such Portfolio's total assets. The JPM Core
Bond Portfolio, MFS Emerging Growth Companies Portfolio, Morgan Stanley
Emerging Markets Equity Portfolio, EQ/ Putnam Growth & Income Portfolio,
EQ/Putnam Investors Growth Portfolio, and the EQ/Putnam International Equity
Portfolio may utilize OTC put and call option transactions. Options traded in
the OTC market may not be as actively traded as those on an exchange, so it may
be more difficult to value such options. In addition, it may be difficult to
enter into closing transactions with respect to such options. Such OTC options,
and the securities used as "cover" for such options, may be considered illiquid
securities.

Each Portfolio may buy and sell futures and options contracts for any number of
reasons, including: to manage its exposure to changes in securities prices and
foreign currencies; as an efficient means of adjusting its overall exposure to
certain markets; in an effort to enhance income; and to protect the value of
portfolio securities. Each Portfolio may purchase, sell, or write call and put
options and futures contracts on securities, financial indices, and foreign
currencies and options on futures contracts.

The risk of loss in trading futures contracts can be substantial because of the
low margin deposits required and the extremely high degree of leveraging
involved in futures pricing. As a result, a relatively small price movement in
a futures contract may cause an immediate and substantial loss or gain. The
primary risks associated with the use of futures contracts and options are: (i)
imperfect correlation between the change in market value of the stocks held by
a Portfolio and the prices of futures contracts and options; and (ii) possible
lack of a liquid secondary market for a futures contract or an OTC option and
the resulting inability to close a futures position or OTC option prior to its
maturity date.

Passive Foreign Investment Companies. The Morgan Stanley Emerging Markets
Equity Portfolio and EQ/Putnam International Equity Portfolio may purchase the
securities of certain foreign investment funds or trusts called passive foreign
investment companies. Such entities have been the only or primary way to invest
in certain countries. In addition to bearing their proportionate share of a
Portfolio's expenses (management fees and operating expenses), shareholders
will also indirectly bear similar expenses of such entities. Like other foreign
securities, interests in passive foreign investment companies also involve the
risk of foreign securities, as described above.

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Even though such bonds do not pay current interest in cash, the Portfolios are
nonetheless required to accrue interest income on such investments and to
distribute such amounts at least annually to shareholders. Thus, the Portfolios
could be required, at times, to liquidate other investments in order to satisfy
its distribution requirements.

Repurchase Agreements. Each Portfolio may enter into repurchase agreements with
qualified and Board approved banks, broker-dealers or other financial
institutions as a means of earning a fixed rate of return on its cash reserves
for periods as short as overnight. A repurchase agreement is a contract
pursuant to which a Portfolio, against receipt of securities of at least equal
value including accrued interest, agrees to advance a specified sum to the
financial institution which agrees to reacquire the securities at a mutually
agreed upon time (usually one day) and price. Each repurchase agreement entered
into by a Portfolio will provide that the value of the collateral underlying
the repurchase agreement will always be at least equal to the repurchase price,
including any accrued interest. A Portfolio's right to liquidate such
securities in the event of a default by the seller could involve certain costs,
losses or delays and, to the extent that proceeds from any sale upon a default
of the obligation to repurchase are less than the repurchase price, the
Portfolio could suffer a loss.

Reverse Repurchase Agreements. The BT Equity 500 Index Portfolio, BT Small
Company Index Portfolio, BT International Equity Index Portfolio, JPM Core Bond
Portfolio, Lazard Large Cap Value Portfolio, and Morgan Stanley Emerging
Markets Equity Portfolio may each enter into reverse repurchase agreements with
brokers, dealers, domestic and foreign banks or other financial institutions.
In a reverse repurchase agreement, the Portfolio sells a security and agrees to
repurchase it at a mutually agreed upon date and price, reflecting the interest
rate effective for the term of the agreement. It may also be viewed as the
borrowing of money by the Portfolio. The Portfolio's investment of the proceeds
of a reverse repurchase agreement is the speculative factor known as leverage.
The Portfolio may enter into a reverse repurchase agreement only if the
interest income from investment of the proceeds is greater than the interest
expense of the transaction and the proceeds are invested for a period no longer
than the term of the agreement. The Portfolio will maintain with the custodian
a separate account with a segregated portfolio of unencumbered liquid assets in
an amount at least equal to its purchase obligations under these agreements. If
interest rates rise during a reverse repurchase agreement, it may adversely
affect the Portfolio's net asset value. See "Borrowing" for more information
concerning restrictions on borrowing by each Portfolio.

Securities Loans. The JPM Core Bond Portfolio, MFS Research Portfolio and
Morgan Stanley Emerging Markets Equity Portfolio may each seek to earn
additional income by making secured loans of portfolio securities with a value
up to 33 1/3% of their respective total assets. The BT Equity 500 Index
Portfolio, BT Small Company Index Portfolio, BT International Equity Index
Portfolio, and MFS Emerging Growth Companies Portfolio may lend portfolio
securities in an amount up to 30% of their respective total assets. The
EQ/Putnam Growth & Income Value Portfolio, EQ/Putnam Investors Growth Portfolio
and the EQ/Putnam International Equity Portfolio may lend portfolio securities
in an amount up to 25% of their respective total assets. The Lazard Large Cap
Value Portfolio and Lazard Small Cap Value Portfolio may each lend portfolio
securities in an amount up to 10% of their respective total assets. All
securities loans will be made pursuant to agreements requiring the loans to be
continuously secured by collateral in cash or high-grade debt obligations at
least equal at all times to the market value of the loaned securities. The
borrower pays to the Portfolios an amount equal to any dividends or interest
received on loaned securities. The Portfolios retain all or a portion of the
interest received on investment of cash collateral or receive a fee from the
borrower. Lending portfolio securities involves risks of delay in recovery of
the loaned securities or in some cases loss of rights in the collateral should
the borrower fail financially. Further information concerning each Portfolio's
fundamental policy with respect to loans is provided in the Statement of
Additional Information.

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Portfolio to, for example, lock in a sale price for a security the Portfolio
does not wish to sell immediately. Each Portfolio will deposit, in a segregated
account with its custodian or a qualified subcustodian, the securities sold
short or convertible or exchangeable preferred stocks or debt securities sold
in connection with short sales against the box. Each Portfolio will endeavor to
offset transaction costs associated with short sales against the box with the
income from the investment of the cash proceeds. Not more than 10% of a
Portfolio's net assets (taken at current value) may be held as collateral for
short sales against the box at any one time. The extent to which a Portfolio
may make short sales may be limited by Code requirements for qualification as a
regulated investment company.

Small Company Securities. The BT Small Company Index Portfolio, Lazard Small
Cap Value Portfolio, Morgan Stanley Emerging Markets Equity Portfolio, and
EQ/Putnam International Equity Portfolio may invest in the securities of
smaller capitalization companies. Investing in securities of small companies
may involve greater risks since these securities may have limited marketability
and, thus, may be more volatile. Because smaller companies normally have fewer
shares outstanding than larger companies, it may be more difficult for a
Portfolio to buy or sell significant amounts of shares without an unfavorable
impact on prevailing prices. In addition, small companies often have limited
product lines, markets or financial resources and are typically subject to
greater changes in earnings and business prospects than are larger, more
established companies. There is typically less publicly available information
concerning smaller companies than for larger, more established ones and smaller
companies may be dependent for management on one or a few key persons.
Therefore, an investment in these Portfolios may involve a greater degree of
risk than an investment in other Portfolios that seek capital appreciation by
investing in better known, larger companies.

Structured Notes. The Morgan Stanley Emerging Markets Equity Portfolio may
invest in structured notes, which are derivatives on which the amount of
principal repayment and/or interest payments is based upon the movement of one
or more factors. These factors include, but are not limited to, currency
exchange rates, interest rates (such as the prime lending rate and LIBOR) and
stock indices such as the S&P 500. In some cases, the impact of the movements
of these factors may increase or decrease through the use of multipliers or
deflators. The use of structured notes allows the Portfolio to tailor its
investments to the specific risks and returns the Adviser wishes to accept
while avoiding or reducing certain other risks.

SWAPS. The BT International Equity Index Portfolio, the JPM Core Bond Portfolio
and the Morgan Stanley Emerging Markets Equity Portfolio may each invest in
swap contracts, which are derivatives in the form of a contract or other
similar instrument which is an agreement to exchange the return generated by
one instrument for the return generated by another instrument. The payment
streams are calculated by reference to a specified index and agreed upon
notional amount. The term "specified index" includes, but is not limited to,
currencies, fixed interest rates, prices and total return on interest rate
indices, fixed-income indices, stock indices and commodity indices (as well as
amounts derived from arithmetic operations on these indices). For example, a
Portfolio may agree to swap the return generated by a fixed-income index for
the return generated by a second fixed-income index. The Portfolio will usually
enter into swaps on a net basis, i.e., the two return streams are netted out in
a cash settlement on the payment date or dates specified in the instrument,
with the Portfolio receiving or paying, as the case may be, only the net amount
of the two returns. The Portfolio's obligations under a swap agreement will be
accrued daily (offset against any amounts owing to the Portfolio) and any
accrued but unpaid net amounts owed to a swap counterparty will be covered by
the maintenance of a segregated account consisting of cash, United States
Governments, or high grade debt obligations. No Portfolio will enter into any
swap agreement unless the counterparty meets the rating requirements set forth
in guidelines established by the Trust's Board of Trustees. The swap market has
grown substantially in recent years with a large number of banks and investment
banking firms acting both as principals and as agents utilizing standardized
swap documentation. As a result, the swap market has become relatively liquid.
Swaps that include more recent innovations for which standardized documentation
has not yet been fully developed are less liquid than "traditional" swaps. The
use of swaps is a highly specialized activity that involves investment
techniques and risks different from those associated with ordinary portfolio
securities transactions. If an Adviser is incorrect in its forecasts of market
values, interest rates, and currency exchange rates, the investment performance
of the Portfolio would be less favorable than it would have been if this
investment technique were not used.

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United States Government Securities. Each Portfolio may invest in debt
obligations of varying maturities issued or guaranteed by the United States
Government, its agencies or instrumentalities ("United States Government
securities"). Direct obligations of the United States Treasury include a
variety of securities that differ in their interest rates, maturities and dates
of issuance. United States Government securities also include securities issued
or guaranteed by government agencies that are supported by the full faith and
credit of the United States (e.g., securities issued by the Government National
Mortgage Association); securities issued or guaranteed by government agencies
that are supported by the ability to borrow from the United States Treasury
(e.g., securities issued by the Federal National Mortgage Association); and
securities issued or guaranteed by government agencies that are only supported
by the credit of the particular agency (e.g., the Tennessee Valley Authority).

Warrants. Warrants are securities that give the holder the right, but not the
obligation to purchase equity issues of the company issuing the warrants, or a
related company, at a fixed price either on a date certain or during a set
period. At the time of issue, the cost of a warrant is substantially less than
the cost of the underlying security itself, and price movements in the
underlying security are generally magnified in the price movements of the
warrant. This effect enables the investor to gain exposure to the underlying
security with a relatively low capital investment but increases an investor's
risk in the event of a decline in the value of the underlying security and can
result in a complete loss of the amount invested in the warrant. In addition,
the price of a warrant tends to be more volatile than, and may not correlate
exactly to, the price of the underlying security. If the market price of the
underlying security is below the exercise price of the warrant on its
expiration date, the warrant will generally expire without value.

Zero-Coupon Bonds. The JPM Core Bond Portfolio, Morgan Stanley Emerging Markets
Equity Portfolio and EQ/Putnam Growth & Income Value Portfolio may invest in
zero-coupon bonds. Zero-coupon bonds are issued at a significant discount from
their principal amount and pay interest only at maturity rather than at
intervals during the life of the security. The value of zero-coupon bonds is
subject to greater fluctuation in response to changes in market interest rates
than bonds which pay interest in cash currently. Zero-coupon bonds allow an
issuer to avoid the need to generate cash to meet current interest payments.
Accordingly, such bonds may involve greater credit risks than bonds paying
interest currently. Even though such bonds do not pay current interest in cash,
a Portfolio is nonetheless required to accrue interest income on such
investments and to distribute such amounts at least annually to investors in
such instruments. Thus, each Portfolio could be required, at times, to
liquidate other investments in order to satisfy its distribution requirements.

Portfolio Turnover. The length of time a Portfolio has held a particular
security is not generally a consideration in investment decisions. A change in
the securities held by a Portfolio is known as "portfolio turnover." Each
Portfolio's turnover rate is not expected to exceed 100% during its first year
of operation. A high turnover rate increases transaction costs (e.g., brokerage
commissions) and increases realized gains and losses.

MANAGEMENT OF THE TRUST

THE BOARD OF TRUSTEES

The Board of Trustees of the Trust provides broad supervision over the business
and affairs of the Portfolios and the Trust as provided in the Trust's Amended
and Restated Declaration of Trust and By-Laws.

THE MANAGER

The Trust is managed by EQ Financial Consultants, Inc. which, subject to the
supervision and direction of the Trustees of the Trust, has overall
responsibility for the general management and administration of the Trust. The
Manager 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"). It is located at 1755 Broadway,
New York, New York 10019. The Manager currently furnishes specialized
investment advice to other clients, including individuals, pension and profit
sharing

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plans, trusts, charitable organizations, corporations and other business
entities. The Manager is a Delaware corporation and an indirect, wholly-owned
subsidiary of Equitable, a New York stock life insurance company.

The Manager is responsible for providing investment management and
administrative services to the Trust and in the exercise of such responsibility
selects, subject to review and approval by the Trustees, the investment
advisers for the Trust's Portfolios and monitors the Advisers' investment
programs and results, reviews brokerage matters, oversees compliance by the
Trust with various federal and state statutes, and carries out the directives
of the Board of Trustees. The Manager is responsible for providing the Trust
with office space, office equipment, and personnel necessary to operate and
administer the Trust's business, and also supervises the provision of services
by third parties such as the Trust's custodian.

As compensation for managing the BT Equity 500 Index Portfolio the Trust pays
the Manager a monthly fee at the annual rate of .25% of the Portfolio's average
daily net assets. As compensation for managing the BT Small Company Index
Portfolio the Trust pays the Manager a monthly fee at the annual rate of .25%
of the Portfolio's average daily net assets. As compensation for managing the
BT International Equity Index Portfolio the Trust pays the Manager a monthly
fee at the annual rate of .35% of the Portfolio's average daily net assets. As
compensation for managing the JPM Core Bond Portfolio the Trust pays the
Manager a monthly fee at the annual rate of .45 % of the Portfolio's average
daily net assets. As compensation for managing the Lazard Small Cap Value
Portfolio the Trust pays the Manager a monthly fee at an annual rate of .80% of
the Portfolio's average daily net assets. As compensation for managing the
Lazard Large Cap Value Portfolio, MFS Research Portfolio, MFS Emerging Growth
Companies Portfolio, EQ/Putnam Growth & Income Value Portfolio, and the
EQ/Putnam Investors Growth Portfolio the Trust pays the Manager a monthly fee
at the annual rate of .55% of the respective Portfolio's average daily net
assets. As compensation for managing the Morgan Stanley Emerging Markets Equity
Portfolio, the Trust pays the Manager a monthly fee at an annual rate of 1.15%
of the Portfolio's average daily net assets. As compensation for managing the
EQ/Putnam International Equity Portfolio, the Trust pays the Manager a monthly
fee at an annual rate of .70% of the respective Portfolio's average daily net
assets.

The Manager pays the expenses of providing investment advisory services to the
Portfolios, including the fees of the Adviser of each Portfolio.

In addition to the management fees, the Trust pays all expenses not assumed by
the Manager, including, without limitation: the fees and expenses of its
independent accountants and of its legal counsel; the costs of printing and
mailing annual and semi-annual reports to shareholders, proxy statements,
prospectuses, prospectus supplements and statements of additional information,
all to the extent they are sent to existing Contract owners; the costs of
printing registration statements; bank transaction charges and custodian's
fees; any proxy solicitors' fees and expenses; filing fees; any federal, state
or local income or other taxes; any interest; any membership fees of the
Investment Company Institute and similar organizations; fidelity bond and
Trustees' liability insurance premiums; and any extraordinary expenses, such as
indemnification payments or damages awarded in litigation or settlements made.
All general Trust expenses are allocated among and charged to the assets of the
Portfolios of the Trust on a basis that the Trustees deem fair and equitable,
which may be on the basis of relative net assets of each Portfolio or the
nature of the services performed and relative applicability to each Portfolio.
As discussed in greater detail below, under "Distribution of the Trust's
Shares," the Class IB shares may pay for certain distribution related expenses
in connection with activities primarily intended to result in the sale of its
shares.

THE ADVISERS

Pursuant to an investment advisory agreement with the Manager, each Adviser to
a Portfolio furnishes continuously an investment program for the Portfolio,
makes investment decisions on behalf of the Portfolio, 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 in connection therewith. For its services, the Manager
pays each Adviser an advisory fee based on a percentage of the average daily
net assets of each Portfolio that it advises. Monthly, with respect to each
Portfolio, each Adviser is paid the pro rata portion of an annual fee, based on
the monthly average

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of the assets of the Portfolio for which it serves as the Adviser. The Manager
will retain, as compensation for the services described under "The Manager" and
to pay its expenses, the difference between the fees paid to each Adviser and
the management fee of the applicable Portfolio. Each Adviser has agreed that
once the Portfolio has paid the Manager its management fee the Adviser will
look only to the Manager as the party responsible for making the payment of its
advisory fee.

The Advisers are employed for management of the assets of a Portfolio pursuant
to investment advisory agreements approved by the Board of Trustees of the
Trust (including a majority of certain Trustees who are not interested persons
of the Trust or the Manager), and an Adviser's services may be terminated at
any time by the Manager, the Board of Trustees, or the shareholders of an
affected Portfolio.

The Trust has submitted an application requesting an exemptive order from the
Securities and Exchange Commission ("SEC") that would permit the Manager,
subject to certain conditions, and without the approval of shareholders to: (a)
employ a new Adviser or Advisers for any Portfolio pursuant to the terms of a
new Advisory Agreement, in each case either as a replacement for an existing
Adviser or as an additional Adviser; (b) change the terms of any Advisory
Agreement; and (c) continue the employment of an existing Adviser on the same
advisory contract terms where a contract has been assigned because of a change
in control of the Adviser. In such circumstances, shareholders would receive
notice of such action, including the information concerning the Adviser that
normally is provided in the Prospectus. It is uncertain at this time whether
such exemptive relief will be granted by the SEC.

Bankers Trust Company ("Bankers Trust") has been the Adviser to the BT Equity
500 Index Portfolio, BT Small Company Index Portfolio and the BT International
Equity Index Portfolio since each Portfolio commenced operations. As
compensation for services as the Adviser to the BT Equity 500 Index Portfolio,
the Manager pays Bankers Trust a monthly fee of an annual rate equal to .05% of
the Portfolio's average daily net assets. As compensation for services as the
Adviser to the BT Small Company Index Portfolio, the Manager pays Bankers Trust
a monthly fee at an annual rate equal to .05% of the Portfolio's average daily
net assets. As compensation for services as the Adviser to the BT International
Equity Index Portfolio, the Manager pays Bankers Trust a monthly fee of an
annual rate equal to .15% of the Portfolio's average daily net assets.

Bankers Trust is a New York banking corporation with executive offices at 130
Liberty Street (One Bankers Trust Plaza), New York, New York 10006. Bankers
Trust is a wholly-owned subsidiary of Bankers Trust New York Corporation.
Bankers Trust conducts a variety of general banking and trust activities and is
a major wholesale supplier of financial services to the international and
domestic institutional markets. As of September 30, 1997, Bankers Trust New
York Corporation was the seventh largest bank holding company in the United
States with total assets of approximately $129 billion. Bankers Trust is a
worldwide merchant bank dedicated to servicing the needs of corporations,
governments, financial institutions and private clients through a global
network of over 80 offices in more than 50 countries. Investment management is
a core business of Bankers Trust built on a tradition of excellence from its
roots as a trust bank founded in 1903. The scope of Bankers Trust's management
capability is unique due to its leadership positions in both active and passive
quantitative management and its presence in major equity and fixed income
markets around the world. Bankers Trust is one of the nation's largest and most
experienced investment managers with approximately $240 billion in assets under
management globally.

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which J.P. Morgan advises over $181 billion). In particular, J.P. Morgan, 522
Fifth Avenue, New York, New York 10036, provides investment management services
to public, corporate and union employee benefit plans, as well as foundations,
endowments, insurance companies, state and local governments and
their agencies, and affiliates of J.P. Morgan.

Lazard Asset Management ("LAM") has been the Adviser to the Lazard Large Cap
Value Portfolio and the Lazard Small Cap Value Portfolio since each Portfolio
commenced operations. As compensation for services as the Adviser to the Lazard
Large Cap Value Portfolio, the Manager pays LAM a monthly fee at an annual rate
equal to: .425% of the Portfolio's average daily net assets up to and including
$50 million; .40% of the Portfolio's average daily net assets over $50 million
and up to and including $250 million; .375% of the Portfolio's average daily
net assets over $250 million and up to and including $400 million; and .35% of
the Portfolio's average daily net assets in excess of $400 million. As
compensation for services as the Adviser to the Lazard Small Cap Value
Portfolio, the Manager pays LAM a monthly fee of an annual rate equal to: .65%
of the Portfolio's average daily net assets up to and including $250 million;
.55% of the Portfolio's average daily net assets over $250 million and up to
and including $500 million; and .50% of the Portfolio's average daily net
assets in excess of $500 million.

LAM is a division of Lazard Fr|f4res & Co. LLC ("Lazard Fr|f4res"), a New York
limited liability company, which is registered as an investment adviser with
the SEC and is a member of the New York, American and Midwest Stock Exchanges.
Lazard Fr|f4res, 30 Rockefeller Plaza, New York, New York 10112, provides its
clients with a wide variety of investment banking and related services,
including investment management. It is a major underwriter of corporate
securities, conducts a broad range of trading and brokerage activities in
corporate and governmental bonds and stocks and acts as a financial adviser to
utilities. LAM provides investment management services to client discretionary
accounts with assets as of December 31, 1996 totaling approximately $38.1
billion. Its clients are both individuals and institutions, some of whose
accounts have investment policies similar to the Portfolios.

Massachusetts Financial Services Company ("MFS") has been the Adviser to the
MFS Research Portfolio and the MFS Emerging Growth Companies Portfolio since
each Portfolio commenced operations. As compensation for services as the
Adviser to each of those Portfolios, the Manager pays MFS a monthly fee at an
annual rate equal to: .40% of the respective Portfolio's average daily net
assets up to and including $150 million; .375% of the respective Portfolio's
average daily net assets over $150 million and up to and including $300
million; and .35% of the respective Portfolio's average daily net assets in
excess of $300 million. MFS has agreed to waive its advisory fees for the first
six months after the commencement of each Portfolio's investment operations.

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MFS is America's oldest mutual fund organization. MFS is located at 500
Boylston Street, Boston, MA 02116. MFS and its predecessor organizations have a
history of money management dating from 1924 and the founding of the first
mutual fund in the United States, Massachusetts Investors Trust. As of January
31, 1996, MFS managed more than $54.0 billion on behalf of over 2.3 million
investors accounts. MFS is a subsidiary of Sun Life of Canada (United States),
which, in turn, is a wholly-owned subsidiary of Sun Life Assurance Company of
Canada. MFS has established a strategic alliance with Foreign & Colonial
Management Ltd. ("Foreign & Colonial"). Foreign & Colonial is a subsidiary of
two of the world's oldest financial services institutions, the London-based
Foreign & Colonial Investment Trust PLC, which pioneered the idea of investment
management in 1868, and HYPO-BANK (Bayerische Hypotheken-und Weschsel-Bank AG),
the oldest publicly listed bank in Germany, founded in 1835. As part of this
alliance, the portfolio managers and investment analysts of MFS and Foreign &
Colonial share their views on a variety of investment related issues, such as
the economy, securities markets, portfolio securities and their issuers,
investment recommendations, strategies and techniques, risk analysis, trading
strategies and other portfolio management matters. The portfolio securities of
the MFS Research Portfolio are selected by a committee of investment research
analysts. This committee includes investment analysts employed not only by MFS
but also by MFS International (U.K.) Limited, a wholly owned subsidiary of MFS.
The assets of the MFS Research Portfolio are allocated among industries by the
analysts acting together as a group. Individual analysts are then responsible
for selecting what they view as the securities best suited to meet the
investment objectives of the MFS Research Portfolio within their assigned
industry responsibility. Since it commenced operations the MFS Emerging Growth
Companies Portfolio has been managed by John W. Ballen, a Senior Vice President
of MFS, who has been employed by the Adviser as a portfolio manager since 1984,
and Toni K. Shimura, a Vice President of MFS, who has been employed as a
portfolio manager by the Adviser since 1987.

Morgan Stanley Asset Management Inc. ("MSAM") has been the Adviser to the
Morgan Stanley Emerging Markets Equity Portfolio since the Portfolio commenced
operations. MSAM is located at 1221 Avenue of the Americas, New York, NY 10020.
As compensation for services as the Portfolio's Adviser, the Manager pays MSAM
a monthly fee at an annual rate equal to: 1.15% of the Portfolio's average
daily net assets up to and including $100 million; .90% of the Portfolio's
average daily net assets over $100 million and up to and including $150
million; .80% of the Portfolio's average daily net assets over $150 million and
up to and including $200 million; .60% of the Portfolio's average daily net
assets over $200 million and up to and including $500 million; and .40% of the
Portfolio's average daily net assets in excess of $500 million.

MSAM conducts a worldwide investment management business, providing a broad
range of portfolio management services to customers in the United States and
abroad. MSAM is a wholly owned subsidiary of Morgan Stanley, Dean Witter,
Discover & Co. ("MSDWD"), which is a publicly owned financial services
corporation listed on the New York and Pacific stock exchanges. MSAM serves as
an investment adviser to numerous open-end and closed-end investment companies.
As of September 30, 1997, MSAM, together with its affiliated asset management
company, Miller Anderson & Sherrerd, LLP, had assets under management of
approximately $144.1 billion.

Putnam Investment Management, Inc. ("Putnam Management") has been the Adviser
to the EQ/Putnam Growth & Income Value Portfolio, EQ/Putnam Investors Growth
Portfolio and the EQ/Putnam International Equity Portfolio, and since each
Portfolio commenced operations. As compensation for services as the Adviser to
the EQ/Putnam Growth & Income Portfolio and EQ/Putnam Investors Growth
Portfolio, the Manager pays Putnam Management a monthly fee at an annual rate
equal to: .50% of the

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respective Portfolio's average daily net assets up to and including $150
million; .45% of the respective Portfolio's average daily net assets over $150
million and up to and including $300 million; and .35% of the respective
Portfolio's average daily net assets in excess of $300 million. As compensation
for services as the EQ/Putnam International Equity Portfolio's Adviser, the
Manager pays Putnam Management a monthly fee at the annual rate equal to: .65%
of the Portfolio's average daily net assets up to and including $150 million;
.55% of the Portfolio's average daily net assets over $150 million and up to
and including $300 million; and .45% of the Portfolio's average daily net
assets in excess of $300 million.

Putnam Management has been managing mutual funds since 1937. Putnam
Management is located at One Post Office Square, Boston, MA 02109. As of
December 31, 1996, Putnam Management and its affiliates managed more than
$173 billion of assets. Putnam Management is a subsidiary of Putnam
Investments, Inc., which is wholly owned by Marsh & McLennan Companies, Inc.,
a publicly-owned holding company whose principal businesses are international
insurance and reinsurance brokerage, employee benefit consulting and
investment management. Anthony I. Kreisel has been responsible for the day to
day management of the EQ/Putnam Growth & Income Value Portfolio since the
Portfolio commenced operations, which includes investment decisions made on
behalf of the Portfolio. Mr. Kreisel has been employed by Putnam Management
as an investment professional since 1986. Justin Scott is responsible for the
day to day management of the EQ/Putnam International Equity Portfolio, which
includes investment decisions made on behalf of the Portfolio. Mr. Scott has
been employed by Putnam Management as an investment professional since 1988.
Ms. C. Beth Cotner and Messrs. Richard England, Manuel Weiss Herrero and
David J. Santos are responsible for the day to day management of the
EQ/Putnam Investors Growth Portfolio, which includes investment decisions
made on behalf of the Portfolio. Ms. Cotner has been employed by Putnam
Management as an investment professional since 1995. Prior to 1995, Ms.
Cotner was Executive Vice President of Kemper Financial Services. Mr. England
has been employed by Putnam Management as an investment professional since
December, 1992. Prior to December, 1992, Mr. England was an investment
officer at Aetna Equity Investors. Mr. Herrero has been employed by Putnam
Management as an investment professional since 1987. Mr. Santos has been
employed by Putnam Management as an investment professional since 1988. Mr.
Bousa has been employed by Putnam Management as an investment professional
since October, 1992. Prior to October, 1992, Mr. Bousa was Vice President and
Portfolio Manager at Fidelity Investments. Mr. Taubes has been employed by
Putnam Management as an investment professional since 1991. Mr. Paine has
been employed by Putnam Management as an investment professional since 1987.

THE ADMINISTRATOR

Pursuant to an agreement ("Mutual Funds Service Agreement"), Chase Global Funds
Services Company (the "Administrator") assists the Manager in the performance
of its administrative responsibilities to the Trust and provides the Trust with
other necessary administrative, fund accounting and compliance services. In
addition, the Administrator makes available the office space, equipment,
personnel and facilities required to provide such services to the Trust. For
these services, the Trust pays the Administrator a monthly fee at the annual
rate of .0525 of 1% of the total Trust assets, plus $25,000 for each Portfolio,
until the total Trust assets reach $2.0 billion, and when the total Trust
assets exceed $2.0 billion: .0425 of 1% of the first $0.5 billion of the total
Trust assets; .035 of 1% of the next $2.0 billion of the total Trust assets;
.025 of 1% of the next $1.0 billion of the total Trust assets; .015 of 1% of
the next $2.5 billion of the total Trust assets; .01 of 1% of the total Trust
assets in excess of $6.0 billion; and except that the annual fee payable to
Chase with respect to any Portfolio which commences operation after July 1,
1997 and whose assets do not exceed $200 million shall be computed at the
annual rate of .0525% of the Portfolio's total assets plus $25,000.

THE TRANSFER AGENT

Equitable serves as the transfer agent and dividend disbursing agent of the
Trust and receives no compensation for serving in such capacity.

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<PAGE>
EXPENSE LIMITATION AGREEMENT

In the interest of limiting expenses of the Portfolios, the Manager has entered
into an expense limitation agreement with the Trust, with respect to each
Portfolio ("Expense Limitation Agreements"), pursuant to which the Manager has
agreed to waive or limit its fees and to assume other expenses so that the
total annual operating expenses of each Portfolio are limited to: .55% of the
average daily net assets of the BT Equity 500 Index Portfolio; .60% of the
average daily net assets of the BT Small Company Index Portfolio; .80% of the
average daily net assets of the BT International Equity Index Portfolio; .80%
of the average daily net assets of the JPM Core Bond Portfolio; .90% of the
average daily net assets of the Lazard Large Cap Value Portfolio; 1.20% of the
average daily net assets of the Lazard Small Cap Value Portfolio; .85% of the
respective average daily net assets of the MFS Research and MFS Emerging Growth
Companies Portfolios; 1.75% of the Morgan Stanley Emerging Markets Equity
Portfolio's average daily net assets; .85% of the respective average daily net
assets of the EQ/Putnam Growth & Income Value and EQ/Putnam Investors Growth
Portfolios; and 1.20% of the average daily net assets of the EQ/Putnam
International Equity Portfolio.

Each Portfolio may at a later date reimburse to the Manager the management fees
waived or limited and other expenses assumed and paid by the Manager pursuant
to the Expense Limitation Agreement provided such Portfolio has reached a
sufficient asset size to permit such reimbursement to be made without causing
the total annual expense ratio of each Portfolio to exceed the percentage
limits stated above. Consequently, no reimbursement by a Portfolio will be made
unless: (i) the Portfolio's assets exceed $100 million; (ii) the Portfolio's
total annual expense ratio is less than the respective percentages stated
above; and (iii) the payment of such reimbursement has been approved by the
Trust's Board of Trustees on a quarterly basis.

BROKERAGE PRACTICES

TRANSACTIONS WITH AFFILIATES

In December 1984, Equitable acquired 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
security execution and clearance services to financial intermediaries including
broker-dealers and banks. To the extent permitted by law, the Trust 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.
The Adviser to BT Equity 500 Index Portfolio, BT Small Company Index Portfolio
and BT International Equity Index Portfolio may execute portfolio transactions
through certain affiliates of Bankers Trust. The Adviser to the JPM Core Bond
Portfolio may execute portfolio transactions through certain affiliates of J.P.
Morgan. The Adviser to the Lazard Large Cap Value Portfolio and Lazard Small
Cap Value Portfolio may execute portfolio transactions through certain
affiliates of LAM. The Adviser to the Morgan Stanley Emerging Markets Equity
Portfolio may execute portfolio transactions through certain affiliates.

32
<PAGE>
commission. In addition, the Trust will adhere to Section 11(a) of the 1934 Act
and any applicable rules thereunder governing floor trading. The Trust has
adopted procedures permitting it to purchase securities, under certain
restrictions prescribed by a rule under the 1940 Act, in a public offering in
which an affiliate of the Manager or Advisers is an underwriter.

DESCRIPTION OF THE TRUST AND TRUST'S SHARES

THE TRUST

The Trust is a registered open-end management investment company that was
organized as a Delaware business trust on October 31, 1996. The Trust currently
is divided into 18 portfolios, each of which has Class IA and Class IB shares.
The Board of Trustees may establish additional portfolios and additional
classes of shares.

CHARACTERISTICS OF TRUST'S SHARES

The Board of Trustees of the Trust has authority to issue an unlimited number
of shares of beneficial interest, without par value. Each share of each class
of a Portfolio shall be entitled to one vote (or fraction thereof in respect of
a fractional share) on matters that such shares (or class of shares) shall be
entitled to vote. Shareholders of each Portfolio shall vote together on any
matter, except to the extent otherwise required by the 1940 Act, or when the
Board of Trustees of the Trust has determined that the matter affects only the
interest of shareholders of one or more classes, in which case only the
shareholders of such class or classes shall be entitled to vote thereon. Any
matter shall be deemed to have been effectively acted upon with respect to each
Portfolio if acted upon as provided in Rule 18f-2 under the 1940 Act, or any
successor rule, and in the Amended and Restated Declaration of Trust. The Trust
is not required to hold annual shareholder meetings, but special meetings may
be called for purposes such as electing or removing Trustees, changing
fundamental policies or approving an investment management or advisory
agreement.

Under the Trust's multi-class system, shares of each class of a Portfolio
represent an equal pro rata interest in that Portfolio and, generally, shall
have identical voting, dividend, liquidation, and other rights, preferences,
powers, restrictions, limitations, qualifications and terms and conditions,
except that: (a) each class shall have a different designation; (b) each class
of shares shall bear its "Class Expenses;" (c) each class shall have exclusive
voting rights on any matter submitted to shareholders that relates solely to
its distribution arrangements; (d) each class shall have separate voting rights
on any matter submitted to shareholders in which the interests of one class
differ from the interests of any other class; (e) each class may have separate
exchange privileges, although exchange privileges are not currently
contemplated; and (f) each class may have different conversion features,
although a conversion feature is not currently contemplated. Expenses currently
designated as "Class Expenses" by the Trust's Board of Trustees under the plan
pursuant to Rule 18f-3 are currently limited to payments made to the
Distributors for the Class IB shares, pursuant to the Distribution Plan for the
Class IB shares adopted pursuant to Rule 12b-1 under the 1940 Act.

PURCHASE AND REDEMPTION OF SHARES

EQ Financial, 1755 Broadway, New York, New York, 10019, formerly Equico
Securities, Inc., a wholly-owned subsidiary of Equitable, serves as one of the
Distributors for the Trust's Class IB shares pursuant to a distribution
agreement with the Trust. EDI, 1290 Avenue of the Americas, New York, New York,
10104, a Delaware corporation and an indirect wholly-owned subsidiary of
Equitable also serves as one of the Distributors for the Trust's Class IB
shares pursuant to a distribution agreement with the Trust. Class IB shares are
offered and redeemed without a sales charge, at net asset value. The price at
which a purchase or redemption is effected is based on the next calculation of
net asset value after an order is placed by an insurance company investing in
or redeeming from the Trust. Net asset value per share is calculated for
purchases and redemption of shares of each Portfolio by dividing the value of
total Portfolio assets, less liabilities (including Trust expenses, which are
accrued daily), by the total number of outstanding shares of that Portfolio.
The net asset value per share of each Portfolio is determined each business day
at 4:00 p.m. Eastern time. Net asset value per share is not calculated on
national business holidays.

33
<PAGE>
The Trust also has distribution agreements for its Class IB shares with EQ
Financial and EDI pursuant to which each of them acts as the Distributor for
the Class IB shares of the Trust.

The Trust has adopted the Distribution Plan pursuant to Rule 12b-1 under the
1940 Act for the Class IB shares of the Trust. Pursuant to the Distribution
Plan, the Trust compensates the Distributors from assets attributable to the
Class IB shares for services rendered and expenses borne in connection with
activities primarily intended to result in the sale of the Trust's Class IB
shares. It is anticipated that a portion of the amounts received by the
Distributors will be used to defray various costs incurred or paid by the
Distributors in connection with the printing and mailing of Trust prospectuses,
statements of additional information, any supplements thereto and shareholder
reports and holding seminars and sales meetings with wholesale and retail sales
personnel designed to promote the distribution of Class IB shares. The
Distributors may also use a portion of the amounts received to provide
compensation to financial intermediaries and third-party broker-dealers for
their services in connection with the distribution of Class IB shares.

The Distribution Plan provides that the Trust, on behalf of each Portfolio, may
pay annually up to 0.50% 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 Class IB shares. However, under the Distribution
Agreements, payments to the Distributors for activities pursuant to the
Distribution Plan are limited to payments at an annual rate equal to 0.25% of
average daily net assets of a Portfolio attributable to its Class IB shares.
Under terms of the Distribution Plan and the Distribution Agreements, each
Portfolio is authorized to make payments monthly to the Distributors which may
be used to pay or reimburse entities providing distribution and shareholder
servicing with respect to the Class IB shares for such entities' fees or
expenses incurred or paid in that regard.

The Distribution Plan is of a type known as a "compensation" plan because
payments are made for services rendered to the Trust with respect to Class IB
shares regardless of the level of expenditures by the Distributors. The
Trustees will, however, take into account such expenditures for purposes of
reviewing operations under the Distribution Plan and in connection with their
annual consideration of the Plan's renewal. The Distributors have indicated
that they expect their expenditures to include, without limitation: (a) the
printing and mailing of Trust prospectuses, statements of additional
information, any supplements thereto and shareholder reports for prospective
Contract owners with respect to the Class IB shares of the Trust; (b) those
relating to the development, preparation, printing and mailing of
advertisements, sales literature and other promotional materials describing
and/or relating to the Class IB shares of the Trust; (c) holding seminars and
sales meetings designed to promote the distribution of Trust Class IB shares;
(d) obtaining information and providing explanations to wholesale and retail
distributors of Contracts regarding Trust investment objectives and policies
and other information about the Trust and its Portfolios, including the
performance of the Portfolios; (e) training sales personnel regarding the Class
IB shares of the Trust; and (f) financing any other activity that the
Distributors determine is primarily intended to result in the sale of Class IB
shares.

All shares are purchased and redeemed in accordance with the Trust's Amended
and Restated Declaration of Trust and By-Laws. Sales and redemptions of shares
of the same class by the same shareholder on the same day will be netted for
each Portfolio. All redemption requests will be processed and payment with
respect thereto will normally be made within seven days after tenders. The
Trust may suspend redemption, if permitted by the 1940 Act, for any period
during which the New York Stock Exchange is closed or during which trading is
restricted by the SEC or the SEC declares that an emergency exists. Redemption
may also be suspended during other periods permitted by the SEC for the
protection of the Trust's shareholders. If the Board of Trustees determines
that it would be detrimental to the best interest of the Trust's remaining
shareholders to make payment in cash, the Trust may pay redemption proceeds in
whole or in part by a distribution-in-kind of readily marketable securities.

34
<PAGE>
HOW ASSETS ARE VALUED

Values are determined according to accepted accounting practices and all laws
and regulations that apply. The assets of each Portfolio are generally valued
as follows:

o Stocks and debt securities which mature in more than 60 days are
valued on the basis of market quotations.

o Foreign securities not traded directly in the United States are
valued at representative quoted prices in the currency of the country
of origin. Foreign currency amounts are translated into United States
dollars at the bid price last quoted by a composite list of major
United States banks.

o Short-term debt securities in the Portfolios which mature in 60 days
or less are valued at amortized cost, which approximates market
value.

DIVIDENDS, DISTRIBUTIONS AND TAXES

Under current federal income tax law, the Trust believes that each Portfolio is
entitled, and the Trust intends that each Portfolio shall qualify each year and
elect, to be treated as a regulated investment company ("RIC") under Subchapter
M of the Code. As a RIC, a Portfolio will not be subject to federal tax on its
net investment income and net realized capital gains to the extent such income
and gains are timely distributed to its insurance company shareholders.
Accordingly, each Portfolio intends to distribute all of its net investment
income and net realized capital gains to its shareholders. An insurance company
that is a shareholder of a Portfolio will generally not be taxed on
distributions from that Portfolio. All dividend distributions will be
reinvested in full and fractional shares of the Portfolio to which they relate.

Although the Trust intends that it and the Portfolios will be operated so that
they will have no federal income or excise tax liability, if any such liability
is nevertheless incurred, the investment performance of the Portfolio or
Portfolios incurring such liability will be adversely affected. In addition,
Portfolios investing in foreign securities and currencies may be subject to
foreign taxes which could reduce the investment performance of such Portfolio.

In addition to meeting investment diversification rules applicable to regulated
investment companies under Subchapter M of the Code, each Portfolio will also
comply with the investment diversification requirements of Subchapter L of the
Code. Were any Portfolio to fail to comply with those requirements, owners of
Contracts (other than "pension plan contracts") funded through the Trust would
be taxed immediately on the accumulated investment earnings under their
Contracts and would thereby lose any benefit of tax deferral. Compliance is
therefore carefully monitored by the Administrator and the Manager.

Certain additional tax information appears in the Statement of Additional
Information.

For more information regarding the tax implications for owners of Contracts
investing in the Trust, refer to the prospectuses for those Contracts.

PERFORMANCE INFORMATION

35
<PAGE>
of the Portfolio if it has not been in existence for any such periods. When
considering "average annual total return" figures for periods longer than one
year, it is important to note that a Portfolio's annual total return for any
given year might have been greater or less than its average for the entire
period. "Cumulative total return" represents the total change in value of an
investment in a Portfolio for a specified period (again reflecting changes in
Portfolio share prices and assuming reinvestment of Portfolio distributions).
The methods used to calculate "average annual and cumulative total return" are
described further in the Statement of Additional Information.

PRIOR PERFORMANCE OF EACH ADVISER

The following tables provide information concerning the historical performance
of another registered investment company (or series) or other institutional
private accounts managed by each Adviser, that has investment objectives,
policies, strategies and risks substantially similar to those of its respective
Portfolio(s) of the Trust. The data is provided to illustrate the past
performance of each Adviser in managing a substantially similar investment
vehicle as measured against specified market indices and does not represent the
past performance of any of the Portfolios or the future performance of any
Portfolio or its Adviser. Consequently, potential investors should not consider
this performance data as an indication of the future performance of any
Portfolio of the Trust or of its Adviser.

Each Adviser's performance data shown below for other registered investment
companies or series thereof was calculated in accordance with standards
prescribed by the SEC for the calculation of average annual total return
information for registered investment companies. Share prices and investment
returns will fluctuate reflecting market conditions as well as changes in
company-specific fundamentals of portfolio securities. Composite performance
data relating to the historical performance of institutional private accounts
managed by the relevant Adviser was calculated in accordance with recommended
standards of the Association for Investment Management and Research ("AIMR")
retroactively applied to all time periods. All returns present were calculated
on a total return basis and include all losses. All returns reflect the
deduction of investment advisory fees, brokerage commissions and execution
costs paid by the relevant Adviser's institutional private accounts, without
provision for federal or state income taxes. Custodial fees, if any, were not
included in the calculation. The Composite includes all discretionary
institutional private accounts managed by the relevant Adviser that have
investment objectives, policies, strategies and risks substantially similar to
those of the relevant Portfolio. Securities transactions are accounted for on
the trade date and accrual accounting is utilized. Cash and equivalents are
included in performance returns.

36
<PAGE>
BT EQUITY 500 INDEX PORTFOLIO

In the table below, the only account which is included is a series of another
registered investment company, i.e., Equity 500 Index Fund, a series of BT
Institutional Funds, which is managed by Bankers Trust Company, and whose
investment policies are substantially similar to the BT Equity 500 Index
Portfolio. However, the BT Equity 500 Index Portfolio will be subject to higher
expenses than the Equity 500 Index Fund. In addition, holders of variable
insurance contracts representing interests in the BT Equity 500 Index Portfolio
will be subject to charges and expenses relating to such insurance contracts.
The performance results presented below do not reflect any insurance related
expenses.

The investment results of the Equity 500 Index Fund presented below are
unaudited and are not intended to predict or suggest the returns that might be
experienced by the BT Equity 500 Index Portfolio or an individual investor
investing in the BT Equity 500 Index Portfolio.

<TABLE>
<CAPTION>
EQUITY 500 INDEX S&P 500 COMPOSITE
YEAR ENDED 9/30/97 FUND(1) STOCK INDEX(2)
- ------------------ ---------------------- -----------------
<S> <C> <C>
One Year(3) ....... 40.32% 40.43%
Three Years(3) ... 29.87% 29.92%
Since inception(3) 20.64% 20.72%
</TABLE>
- ------------
(1) Average annual total return reflects changes in share prices and
reinvestment of dividends and distributions and is net of fund expenses.
(2) The S&P 500 Index ("Index") is an unmanaged index containing common
stocks of 500 industrial, transportation, utility and financial
companies, regarded as generally representative of the United States
stock market. The Index reflects the reinvestment of income dividends and
capital gain distributions, if any, but does not reflect fees, brokerage
commissions, or other expenses of investing.
(3) Annualized performance for shares of the Equity 500 Index Fund of the BT
Institutional Funds. The inception date for the Equity 500 Index Fund was
December 31, 1992.

37
<PAGE>
BT SMALL COMPANY INDEX PORTFOLIO

In the table below, the only account which is included is a series of another
registered investment company, i.e., Small Cap Index Fund -- Institutional
Class, a series of BT Advisor Funds, which is managed by Bankers Trust Company,
and whose investment policies are substantially similar to the BT Small Company
Index Portfolio. However, the BT Small Company Index Portfolio will be subject
to higher expenses than the Small Cap Index Fund -- Institutional Class. In
addition, holders of variable insurance contracts representing interests in the
BT Small Company Index Portfolio will be subject to charges and expenses
relating to such insurance contracts. The performance results presented below
do not reflect any insurance related expenses.

The investment results of the Small Cap Index Fund -- Institutional Class
presented below are unaudited and are not intended to predict or suggest the
returns that might be experienced by the BT Small Company Index Portfolio or an
individual investor investing in the BT Small Company Index Portfolio.

<TABLE>
<CAPTION>
SMALL CAP INDEX
FUND(1)-- RUSSELL 2000
YEAR ENDED 9/30/97 INSTITUTIONAL CLASS INDEX(2)
- ------------------ ----------------------- -------------------
<S> <C> <C>
One Year(3) ....... 33.23% 33.19%
Since inception(3) 31.05% 32.76%
</TABLE>
- ------------
(1) Average annual total return reflects changes in share prices and
reinvestment of dividends and distributions and is net of fund expenses.
(2) The Russell 2000 Index is an unmanaged index composed of approximately
2,000 small-capitalization stocks and includes reinvestments of
dividends. The index does not include fees or operating expenses and is
not available for actual investment. It is compiled by the Frank Russell
Company.
(3) Annualized performance for shares of the Small Cap Index Fund. The
inception date for the Small Cap Index Fund was July 10, 1996.

38
<PAGE>
BT INTERNATIONAL EQUITY INDEX PORTFOLIO

In the table below, the only account which is included is a series of another
registered investment company, i.e., EAFE(Registered Trademark) Equity Index
Fund -- Institutional Class, a series of BT Advisor Funds, which is managed by
Bankers Trust Company, and whose investment policies are substantially similar
to the BT International Equity Index Portfolio. However, the BT International
Equity Index Portfolio will be subject to higher expenses than the
EAFE(Registered Trademark) Equity Index Fund -- Institutional Class. In
addition, holders of variable insurance contracts representing interests in the
BT International Equity Index Portfolio will be subject to charges and expenses
relating to such insurance contracts. The performance results presented below
do not reflect any insurance related expenses.

<TABLE>
<CAPTION>
EAFE(REGISTERED TRADEMARK)
EQUITY INDEX FUND(1)-- MSCI EAFE
YEAR ENDED 9/30/97 INSTITUTIONAL CLASS INDEX(2)
- ------------------ -------------------------- ----------------
<S> <C> <C>
One Year(3) ....... 12.78% 12.18%
Since inception(3) 10.87% 10.71%
</TABLE>
- ------------
(1) Average annual total return reflects changes in share prices and
reinvestment of dividends and distributions and is net of fund expenses.
(2) The Morgan Stanley Capital EAFE Europe, Australia, Far East Index ("MSCI
EAFE Index") is an unmanaged capitalization-weighted index containing
approximately 1,100 equity securities of companies located in countries
outside the United States. The MSCI EAFE Index returns assume dividends
reinvested net of withholding tax and do not reflect any fees or
operating expenses. The index does not include fees or operating expenses
and is not available for actual investment.
(3) Annualized performance for shares of the EAFE Equity Index Fund. The
inception date for the EAFE Equity Index Fund was January 24, 1996.

39
<PAGE>
JPM CORE BOND PORTFOLIO

In the table below, the institutional private accounts that are included in the
Adviser's composite are not subject to the same types of expenses to which the
JPM Core Bond Portfolio is subject or to the diversification requirements,
specific tax restrictions and investment limitations imposed on the JPM Core
Bond Portfolio by the 1940 Act or Subchapter M of the Code. In fact, the
expenses of the JPM Core Bond Portfolio are higher than those of the accounts
included in the Advisor's composite. Consequently, the performance results for
the composite could have been adversely affected if the institutional private
accounts included in the composite had been regulated as investment companies
under the federal securities laws. Moreover, holders of variable insurance
contracts representing interests in the JPM Core Bond Portfolio will be subject
to charges and expenses relating to such insurance contracts. The performance
results presented below do not reflect any insurance related charges.

The investment results presented below are not intended to predict or suggest
the returns that might be experienced by the JPM Core Bond Portfolio or an
individual investing in such Portfolio. Investors should also be aware that the
use of a methodology different from that used below to calculate performance
could result in different performance data.

<TABLE>
<CAPTION>
SALOMON BROTHERS
BROAD INVESTMENT
J.P. MORGAN ACTIVE FIXED GRADE BOND
YEAR ENDED 9/30/97 INCOME COMPOSITE(1) INDEX(2)
- ------------------ ------------------------ -----------------
<S> <C> <C>
One Year .......... 10.87% 9.70%
Three Years ....... 10.19% 9.51%
Five Years ........ 7.62% 6.97%
Ten Years ......... 10.16% 9.53%
Since inception .. 10.20% NA
</TABLE>
- ------------
(1) Through September 30, 1997. The inception date for the J.P. Morgan
Active Fixed Income Composite was May 31, 1977.
(2) The Salomon Broad Investment Grade Bond Index is an unmanaged,
market-weighted index which contains approximately 4,700 individually
priced investment grade bonds. The index does not include fees or
operating expenses and is not available for actual investment.

40
<PAGE>
LAZARD LARGE CAP VALUE PORTFOLIO

In the table below, the only account which is included is a series of another
registered investment company, i.e. the Lazard Equity Portfolio, a series of
The Lazard Funds, Inc., which is managed by Lazard Asset Management, and whose
investment policies are substantially similar to the Lazard Large Cap Value
Portfolio. However, the Lazard Equity Portfolio will be subject to higher
expenses than the Lazard Large Cap Value Portfolio. In addition, holders of
variable insurance contracts representing interests in the Lazard Large Cap
Value Portfolio will be subject to charges and expenses relating to such
insurance contracts. The performance results presented below do not reflect any
insurance related expenses.

The investment results of the Lazard Equity Portfolio presented below are
unaudited and are not intended to predict or suggest the returns that might be
experienced by the Lazard Large Cap Value Portfolio or an individual investor
investing in the Lazard Large Cap Value Portfolio.

<TABLE>
<CAPTION>
LAZARD EQUITY S&P 500
YEAR ENDED 9/30/97 PORTFOLIO(1) INDEX(2)
- ------------------ ------------------------ ---------
<S> <C> <C>
One Year(3)........ 35.75% 40.43%
Five Years(3)...... 22.65% 20.75%
Since
inception(3)...... 15.20% 15.59%
</TABLE>
- ------------
(1) Average annual total return reflects changes in share prices and
reinvestment of dividends and distributions and is net of fund expenses.
(2) The S&P 500 Index ("Index") is an unmanaged index containing common
stocks of 500 industrial, transportation, utility and financial
companies, regarded as generally representative of the United States
stock market. The Index reflects the reinvestment of income dividends and
capital gain distributions, if any, but does not reflect fees, brokerage
commissions, or other expenses of investing.
(3) Annualized performance for shares of the Lazard Equity Portfolio. The
inception date for Lazard Equity Portfolio was June 1, 1987.

41
<PAGE>
LAZARD SMALL CAP VALUE PORTFOLIO

In the table below, the only account which is included is a series of another
registered investment company, i.e., Lazard Small Cap Portfolio, a series of
The Lazard Funds, Inc., which is managed by Lazard Asset Management, and whose
investment policies are substantially similar to the Lazard Small Cap Value
Portfolio. However, the Lazard Small Cap Portfolio will be subject to higher
expenses than the Lazard Small Cap Value Portfolio. In addition, holders of
variable insurance contracts representing interests in the Lazard Small Cap
Value Portfolio will be subject to charges and expenses relating to such
insurance contracts. The performance results presented below do not reflect any
insurance related expenses.

The investment results of the Lazard Small Cap Portfolio presented below are
unaudited and are not intended to predict or suggest the returns that might be
experienced by the Lazard Small Cap Value Portfolio or an individual investor
investing in the Lazard Small Cap Value Portfolio.

<TABLE>
<CAPTION>
LAZARD SMALL CAP RUSSELL
YEAR ENDED 9/30/97 PORTFOLIO(1) 2000 INDEX
- ------------------ ---------------- ------------
<S> <C> <C>
One Year(3)........ 42.53% 33.19%
Five Years(3)...... 25.36% 20.51%
Since
inception(3)...... 23.03% 18.25%
</TABLE>
- ------------
(1) Average annual total return reflects changes in share prices and
reinvestment of dividends and distributions and is net of fund expenses.
(2) The Russell 2000 Index is an unmanaged index (with no defined investment
objective) of 2,000 small-cap stocks, and includes reinvestment of
dividends. It is compiled by the Frank Russell Company
(3) Annualized performance for shares of the Lazard Small Cap Portfolio. The
inception date for Lazard Small Cap Portfolio was October 1, 1991.

42
<PAGE>
MFS RESEARCH PORTFOLIO

In the table below, the only account which is included is another registered
investment company, i.e., MFS Research Fund, which is managed by Massachusetts
Financial Services Company, and whose investment policies are substantially
similar to MFS Research Portfolio. However, MFS Research Fund will be subject
to different expenses than the MFS Research Portfolio. In addition, holders of
variable insurance contracts representing interests in the MFS Research
Portfolio will be subject to charges and expenses relating to such insurance
contracts. The performance results presented below do not reflect any insurance
related expenses.

The investment results of MFS Research Fund presented below are unaudited and
are not intended to predict or suggest the returns that might be experienced by
the MFS Research Portfolio or an individual investor investing in the MFS
Research Portfolio.

<TABLE>
<CAPTION>
MFS RESEARCH S&P 500
YEAR ENDED 9/30/97 FUND(1) INDEX(2)
- ------------------ ------------------ ---------
<S> <C> <C>
One Year(3) ....... 28.72% 40.43%
Five Years(3) ..... 22.88% 20.75%
Ten Years(3) ...... 14.24% 14.74%
</TABLE>
- ------------
(1) Average annual total return reflects changes in share prices and
reinvestment of dividends and distributions and is net of fund expenses.
(2) The S&P 500 Index ("Index") is an unmanaged index containing common
stocks of 500 industrial, transportation, utility and financial
companies, regarded as generally representative of the United States
stock market. The Index reflects the reinvestment of income dividends and
capital gain distributions, if any, but does not reflect fees, brokerage
commissions, or other expenses of investing.
(3) Annualized performance for the Class A shares of the MFS Research Fund.
The results for the MFS Research Fund do not reflect any sales charge
that may be imposed on the Class A shares of the MFS Research Fund, nor
any charges that would be imposed at the insurance company separate
account level.

43
<PAGE>
MFS EMERGING GROWTH COMPANIES PORTFOLIO

In the table below, the only account which is included is another registered
investment company, i.e., MFS Emerging Growth Fund, which is managed by
Massachusetts Financial Services Company, and whose investment policies are
substantially similar to MFS Emerging Growth Companies Portfolio. However, MFS
Emerging Growth Fund will be subject to different expenses than the MFS
Emerging Growth Companies Portfolio. In addition, holders of variable insurance
contracts representing interests in the MFS Emerging Growth Companies Portfolio
will be subject to charges and expenses relating to such insurance contracts.
The performance results presented below do not reflect any insurance related
expenses.

The investment results of MFS Emerging Growth Fund presented below are
unaudited and are not intended to predict or suggest the returns that might be
experienced by the MFS Emerging Growth Companies Portfolio or an individual
investor investing in the MFS Emerging Growth Companies Portfolio.

<TABLE>
<CAPTION>
MFS EMERGING GROWTH RUSSELL 2000
YEAR ENDED 9/30/97 FUND(1) INDEX(2)
- ------------------ ------------------------- --------------
<S> <C> <C>
One Year(3) ....... 25.29% 33.19%
Five Years(3) ..... 26.24% 20.51%
Ten Years(3) ...... 18.28% 12.25%
</TABLE>
- ------------
(1) Average annual total return reflects changes in share prices and
reinvestment of dividends and distributions and is net of fund expenses.
(2) The Russell 2000 Index is an unmanaged index (with no defined investment
objective) of 2000 small-cap stocks and it includes reinvestments of
dividends. It is compiled by the Frank Russell Company.
(3) Annualized performance for the Class B shares of the MFS Emerging Growth
Fund. The results for the MFS Emerging Growth Fund do not reflect sales
charge that may be imposed on the Class B shares of the MFS Emerging
Growth Fund, nor any charges that would be imposed at the insurance
company separate account level.

44
<PAGE>
MORGAN STANLEY EMERGING MARKETS EQUITY PORTFOLIO

In the table below, the only account which is included is another registered
investment company, i.e., Morgan Stanley Universal Funds, Inc. -- Emerging
Markets Equity Portfolio ("MSIF Emerging Markets Portfolio"), which is managed
by the Morgan Stanley Asset Management Inc., and whose investment policies are
substantially similar to the Morgan Stanley Emerging Markets Equity Portfolio.
Operating expenses of the Morgan Stanley Emerging Markets Equity Portfolio will
be the same as the operating expenses of the the MSIF Emerging Markets
Portfolio. However, holders of variable insurance contracts representing
interests in the Morgan Stanley Emerging Markets Equity Portfolio will be
subject to changes and expenses relating to such insurance contracts. The
performance results presented below do not reflect any insurance related
expense.

The investment results of MSIF Emerging Markets Equity Portfolio presented
below, which represent a Class A share outstanding for the period, are
unaudited and are not intended to predict or suggest the returns that might be
experienced by the Morgan Stanley Emerging Markets Equity Portfolio or an
individual investor investing in the Morgan Stanley Emerging Markets Equity
Portfolio.

<TABLE>
<CAPTION>
IFC GLOBAL TOTAL
MSIF EMERGING MARKETS RETURN COMPOSITE
YEAR ENDED 9/30/97 EQUITY PORTFOLIO(1,2) INDEX(3)
- --------------------------------- --------------------- -----------------------
<S> <C> <C>
One Year(4)....................... 21.67% 4.77%
Five Year(4)...................... 15.95% 12.12%
Average Annual Total Return since
inception(4)..................... 15.81% 12.08%
</TABLE>
- ------------
(1) In accordance with SEC regulations, the performance shown assumes that
all recurring fees (including management fees) were deducted and all
dividends and distributions were reinvested. Average annual total return
reflects changes in share prices and reinvestment of dividends and
distributions and is net of fund expenses.
(2) The expense ratio of MSIF Emerging Markets Equity Portfolio has been
capped at 1.75% since inception.
(3) The IFC Global Total Return Composite Index is an unmanaged index of
common stocks and includes developing countries in Latin America, East
and South Asia, Europe, the Middle East and Africa. The Index assumes
dividends are reinvested.
(4) Annualized performance for the Class A shares of the MSIF Emerging
Markets Portfolio. The Class B shares of the MSIF Emerging Markets
Portfolio are subject to a Rule 12b-1 fee equal to 0.25% of the
Portfolio's assets. The inception date for the MSIF Emerging Markets
Portfolio was September 25, 1992.

45
<PAGE>
EQ/PUTNAM GROWTH & INCOME VALUE PORTFOLIO

The table below sets forth performance history for another registered
investment company, i.e., the Putnam Growth & Income Fund II, which is managed
by the Putnam Investment Management, Inc., and whose investment policies are
substantially similar to those of EQ/Putnam Growth & Income Value Portfolio.
Putnam Growth & Income Fund II will be subject to different expenses than the
EQ/Putnam Growth & Income Value Portfolio. In addition, holders of variable
insurance contracts representing interests in EQ/Putnam Growth & Income Value
Portfolio will be subject to charges and expenses relating to such insurance
contract. The performance results presented below do not reflect any insurance
related expenses.

The investment results of Putnam Growth & Income Fund II presented below are
unaudited and are not intended to predict or suggest the returns that might be
experienced by the EQ/Putnam Growth & Income Value Portfolio or an individual
investor investing in the EQ/Putnam Growth & Income Value Portfolio.

<TABLE>
<CAPTION>
PUTNAM GROWTH &
INCOME FUND S&P 500
YEAR ENDED 9/30/97 II(1) INDEX(2)
- ------------------ --------------- ---------
<S> <C> <C>
One Year(3) ....... 34.39% 40.43%
Since inception(3) 29.31% 33.04%
</TABLE>
- ------------
(1) Average annual total return reflects changes in share prices and
reinvestment of dividends and distributions and is net of fund expenses.
(2) The S&P 500 Index ("Index") is an unmanaged index containing common
stocks of 500 industrial, transportation, utility and financial
companies, regarded as generally representative of the United States
stock market. The Index reflects the reinvestment of income dividends and
capital gain distributions, if any, but does not reflect fees, brokerage
commissions, or other expenses of investing.
(3) Annualized performance for the Class A shares of the Putnam Growth &
Income Fund II. The inception date for the Putnam Growth & Income Fund II
was January, 1995. The Class A shares are subject to a front-end sales
charge of up to 5.75%. Other share classes have different expenses and
their performance will vary.

46
<PAGE>
EQ/PUTNAM INVESTORS GROWTH PORTFOLIO

The table below sets forth performance history for another registered
investment company, i.e., the Putnam Investors Fund, which is managed by Putnam
Investment Management, Inc., and whose investment policies are substantially
similar to those of EQ/Putnam Investors Growth Portfolio. Putnam Investors Fund
will be subject to different expenses than the EQ/Putnam Investors Growth
Portfolio. In addition, holders of the variable insurance contracts
representing interests in EQ/Putnam Investors Growth Portfolio will be subject
to changes and expenses relating to such insurance contract. The performance
results presented below do not reflect any insurance-related expenses.

The investment results of Putnam Investors Fund presented below are unaudited
and are not intended to predict or suggest the returns that might be
experienced by the EQ/Putnam Investors Growth Portfolio or an individual
investor investing in the EQ/Putnam Investors Growth Portfolio.

<TABLE>
<CAPTION>
PUTNAM GROWTH &
INCOME FUND S&P 500
YEAR ENDED 9/30/97 II(1) INDEX(2)
- ------------------ --------------- ---------
<S> <C> <C>
One Year(3) ....... 36.90% 40.43%
Five Years(3) ..... 21.88% 20.75%
Ten Years(3) ...... 14.18% 14.74%
</TABLE>
- ------------
(1) Average annual total return reflects changes in share prices and
reinvestment of dividends and distributions and is net of fund expenses.
(2) The S&P 500 Index ("Index") is an unmanaged index containing common
stocks of 500 industrial, transportation, utility and financial
companies, regarded as generally representative of the United States
stock market. The Index reflects the reinvestment of income dividends and
capital gain distributions, if any, but does not reflect fees, brokerage
commissions, or other expenses of investing.
(3) Annualized performance for the Class A shares of the Putnam Investors
Fund. The Class A shares are subject to a front-end sales charge of up to
5.75%. Other share classes have different expenses and their performance
will vary.

47
<PAGE>
EQ/PUTNAM INTERNATIONAL EQUITY PORTFOLIO

The table below sets forth performance history for another registered
investment company, i.e., the Putnam International Growth Fund, which is
managed by Putnam Investment Management, Inc., and whose investment policies
are substantially similar to those of EQ/Putnam International Equity Portfolio.
Putnam International Growth Fund will be subject to different expenses than the
EQ/Putnam International Equity Portfolio. In addition, holders of variable
insurance contracts representing interests in EQ/Putnam International Equity
Portfolio will be subject to charges and expenses relating to such insurance
contract. The performance results presented below do not reflect any insurance
related expenses.

The investment results of Putnam International Growth Fund presented below are
unaudited and are not intended to predict or suggest the returns that might be
experienced by the EQ/Putnam International Equity Portfolio or an individual
investor investing in the EQ/Putnam International Equity Portf

<TABLE>
<CAPTION>
PUTNAM INTERNATIONAL MSCI EAFE
YEAR ENDED 9/30/97 GROWTH FUND(1) INDEX(2)
- ------------------ -------------------- -----------
<S> <C> <C>
One Year(3) ....... 31.65% 12.18%
Five Years(3) ..... 19.43% 12.33%
Since inception(3) 13.87% 7.43%
</TABLE>
- ------------
(1) Average annual total return reflects changes in share prices and
reinvestment of dividends and distributions and is net of fund expenses.
(2) The MSCI EAFE ("Index") is an unmanaged capitalization-weighted measure
of stock markets in Europe, Australia, the Far East and Canada. MSCI EAFE
Index returns assume dividends reinvested net of withholding tax and do
not reflect any fees or expenses.
(3) Annualized performance the Class A shares of the Putnam International
Growth Fund. The inception date of the Class A shares of the Putnam
International Growth Fund was March, 1991. The Class A shares are subject
to a front-end sales charge of up to 5.75%.

48
<PAGE>
APPENDIX A

The following table summarizes the historical performance information of
certain other registered investment companies or accounts that appears on pages
37 through 48 of this Prospectus. Each other registered investment company or
account is managed by an Adviser and has investment objectives, policies,
strategies and risks substantially similar to the Portfolio managed by that
Adviser. For further information regarding each of the registered investment
companies and the indexes presented below, please refer to pages 6 through 16
of this Prospectus.

ANNUALIZED RATES OF RETURN
PERIOD ENDED SEPTEMBER 30, 1997

<TABLE>
<CAPTION>
SINCE
FUND NAME 1 YEAR 5 YEARS 10 YEARS INCEPTION
- ----------------------------------------- -------- --------- ---------- -----------
<S> <C> <C> <C> <C>
BT EAFE(REGISTERED TRADEMARK) EQUITY
INDEX FUND--
INSTITUTIONAL CLASS 12.78% -- -- 10.87%
MSCI EAFE Index 12.18% -- -- 10.71%
---------------------------------------- -------- --------- ---------- -----------
BT EQUITY 500 INDEX FUND 40.32% -- -- 20.64%
S&P 500 Index 40.43% -- -- 20.72%
---------------------------------------- -------- --------- ---------- -----------
BT SMALL CAP INDEX FUND 33.23% -- -- 31.05%
Russell 2000 Index 33.19% -- -- 32.76%
---------------------------------------- -------- --------- ---------- -----------
THE GEORGE PUTNAM FUND OF BOSTON 26.36% 15.10% 12.05% --
S&P 500 Index 40.43% 20.75% 14.74% --
---------------------------------------- -------- --------- ---------- -----------
J.P. MORGAN ACTIVE FIXED INCOME
COMPOSITE 10.87% 7.62% 10.16% 10.20%
Salomon Brothers Broad Investment Grade
Bond Index 9.70% 6.97% 9.53% --
---------------------------------------- -------- --------- ---------- -----------
LAZARD EQUITY PORTFOLIO 35.75% 22.65% -- 15.20%
S&P 500 Index 40.43% 20.75% -- 15.59%
---------------------------------------- -------- --------- ---------- -----------
LAZARD SMALL CAP PORTFOLIO 42.53% 25.36% -- 23.03%
Russell 2000 Index 33.19% 20.51% -- 18.25%
---------------------------------------- -------- --------- ---------- -----------
MERRILL LYNCH BASIC VALUE FOCUS FUND 36.14% -- -- 19.94%
S&P 500 Index 40.43% -- -- 22.03%
---------------------------------------- -------- --------- ---------- -----------
MERRILL LYNCH GLOBAL STRATEGY FOCUS FUND 25.72% 12.32% -- 11.35%
MSCI EAFE Index 12.18% 12.33% -- 10.33%
---------------------------------------- -------- --------- ---------- -----------
MFS EMERGING GROWTH FUND 25.29% 26.24% 18.28% --
Russell 2000 Index 33.19% 20.51% 12.25% --
---------------------------------------- -------- --------- ---------- -----------
MFS RESEARCH FUND 28.72% 22.88% 14.24% --
S&P 500 Index 40.43% 20.75% 14.74% --

A-1
<PAGE>
SINCE
FUND NAME 1 YEAR 5 YEARS 10 YEARS INCEPTION
- ----------------------------------------- -------- --------- ---------- -----------
MSIF EMERGING MARKETS PORTFOLIO 21.67% 15.95% -- 15.81%
IFC Global Total Return Composite Index 4.77% 12.12% -- 12.08%
---------------------------------------- -------- --------- ---------- -----------
PUTNAM GROWTH & INCOME FUND II 34.39% -- -- 29.31%
S&P 500 Index 40.43% -- -- 33.04%
---------------------------------------- -------- --------- ---------- -----------
PUTNAM INTERNATIONAL GROWTH FUND 31.65% 19.43% -- 13.87%
MSCI EAFE Index 12.18% 12.33% -- 7.43%
---------------------------------------- -------- --------- ---------- -----------
PUTNAM INVESTORS FUND 36.90% 21.88% 14.18% --
S&P 500 Index 40.43% 20.75% 14.74% --
---------------------------------------- -------- --------- ---------- -----------
T. ROWE PRICE INTERNATIONAL STOCK FUND 16.39% 14.38% 9.39% --
MSCI EAFE Index 12.18% 12.33% 3.92% --
---------------------------------------- -------- --------- ---------- -----------
WARBURG PINCUS SMALL COMPANY VALUE FUND 42.46% -- -- 48.73%
Russell 2000 Index 33.19% -- -- 47.50%
---------------------------------------- -------- --------- ---------- -----------
</TABLE>

A-2

<PAGE>
EQ ADVISORS TRUST

1290 Avenue of the Americas -- New York, New York 10104

This Prospectus describes the following 14 Portfolios currently offered by the
Trust.

o BT Equity 500 Index Portfolio

o BT Small Company Index Portfolio

o BT International Equity Index Portfolio

o JPM Core Bond Portfolio

o Lazard Large Cap Value Portfolio

o Lazard Small Cap Value Portfolio

o Merrill Lynch Basic Value Equity Portfolio

o Merrill Lynch World Strategy Portfolio

o MFS Research Portfolio

o MFS Emerging Growth Companies Portfolio

o Morgan Stanley Emerging Markets Equity Portfolio

o EQ/Putnam Growth & Income Value Portfolio

o EQ/Putnam Investors Growth Portfolio

o EQ/Putnam International Equity Portfolio

The Trust offers two classes of shares on behalf of each Portfolio: Class IA
shares offered pursuant to another prospectus, and Class IB shares offered
hereby.

This Prospectus sets forth concisely the information about the Trust and the
Portfolios that a prospective investor should know before investing. Please
read the Prospectus and retain it for future reference. Additional information
contained in a Statement of Additional Information also dated December 31, 1997
has been filed with the Securities and Exchange Commission and is available
upon request without charge by writing to the Trust at the address noted above.
California residents can obtain a copy of the Statement of Additional
Information by calling 1-800-999-3527. The Statement of Additional Information
is incorporated into this Prospectus by reference.

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.

PROSPECTUS DATED DECEMBER 31, 1997

- --------------------------------------------------------------------------------
EQAT 103
<PAGE>
FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
NET REALIZED
AND
UNREALIZED
GAIN (LOSS) ON
NET ASSET INVESTMENTS
VALUE, NET AND FOREIGN TOTAL FROM NET ASSET NET ASSETS,
BEGINNING INVESTMENT CURRENCY INVESTMENT VALUE, END OF TOTAL END OF
OF PERIOD INCOME TRANSACTIONS OPERATIONS PERIOD RETURN (B) PERIOD (000'S)
- -------------- ----------- ------------ -------------- ------------ --------------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Merrill Lynch
Basic Value
Equity
Portfolio $10.00 0.02 0.96 0.98 $10.98 9.80% $ 6,054
- -------------- ----------- ------------ -------------- ------------ --------------- ---------- --------------
Merrill Lynch
World
Strategy
Portfolio $10.00 0.04 0.88 0.92 $10.92 9.20% $ 6,488
- -------------- ----------- ------------ -------------- ------------ --------------- ---------- --------------
MFS Research
Portfolio $10.00 0.01 1.00 1.01 $11.01 10.10% $16,702
- -------------- ----------- ------------ -------------- ------------ --------------- ---------- --------------
MFS Emerging
Growth
Companies
Portfolio $10.00 0.01 1.22 1.23 $11.23 12.30% $15,400
- -------------- ----------- ------------ -------------- ------------ --------------- ---------- --------------
EQ/Putnam
Growth &
Income Value
Portfolio $10.00 0.02 0.87 0.89 $10.89 8.90% $18,720
- -------------- ----------- ------------ -------------- ------------ --------------- ---------- --------------
EQ/Putnam
Investors
Growth
Portfolio $10.00 0.01 1.08 1.09 $11.09 10.90% $ 8,937
- -------------- ----------- ------------ -------------- ------------ --------------- ---------- --------------
EQ/Putnam
International
Equity
Portfolio $10.00 0.04 0.83 0.87 $10.87 8.70% $12,100
- -------------- ----------- ------------ -------------- ------------ --------------- ---------- --------------
</TABLE>

2
<PAGE>
<TABLE>
<CAPTION>
RATIO OF NET
RATIO OF RATIO OF NET INVESTMENT
RATIO OF EXPENSES TO INVESTMENT INCOME TO PER SHARE
EXPENSES TO AVERAGE NET INCOME TO AVERAGE NET BENEFIT
AVERAGE NET ASSETS BEFORE AVERAGE NET ASSETS BEFORE PORTFOLIO AVERAGE TO NET
ASSETS AFTER WAIVERS ASSETS AFTER WAIVERS TURNOVER COMMISSION INVESTMENT
WAIVERS (A)(C) (A)(C) WAIVERS (A)(C) (A)(C) RATE (A) RATE PAID INCOME(C)
- -------------- -------------- ------------- -------------- ------------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Merrill Lynch
Basic Value
Equity
Portfolio 0.85% 7.97% 2.12% (5.01)% 49% $0.0570 $0.08
- -------------- -------------- ------------- -------------- ------------- ----------- ------------ -----------
Merrill Lynch
World
Strategy
Portfolio 1.20% 9.93% 2.79% (5.94)% 75% $0.0356 $0.14
- -------------- -------------- ------------- -------------- ------------- ----------- ------------ -----------
MFS Research
Portfolio 0.85% 5.99% 1.35% (3.79)% 45% $0.0388 $0.05
- -------------- -------------- ------------- -------------- ------------- ----------- ------------ -----------
MFS Emerging
Growth
Companies
Portfolio 0.85% 5.71% 0.59% (4.27)% 426% $0.0474 $0.05
- -------------- -------------- ------------- -------------- ------------- ----------- ------------ -----------
EQ/Putnam
Growth &
Income Value
Portfolio 0.85% 5.07% 2.71% (1.51)% 37% $0.0233 $0.03
- -------------- -------------- ------------- -------------- ------------- ----------- ------------ -----------
EQ/Putnam
Investors
Growth
Portfolio 0.85% 7.35% 1.00% (5.50)% 83% $0.0259 $0.09
- -------------- -------------- ------------- -------------- ------------- ----------- ------------ -----------
EQ/Putnam
International
Equity
Portfolio 1.20% 8.06% 3.69% (3.17)% 54% $0.0472 $0.08
- -------------- -------------- ------------- -------------- ------------- ----------- ------------ -----------
</TABLE>

- ------------
** Commencement of Operations. No financial highlights are presented for
the BT Equity 500 Index Portfolio, the BT Small Company Index Portfolio,
the BT International Equity Index Portfolio, the JPM Core Bond
Portfolio, the Lazard Large Cap Value Portfolio, and Lazard Small Cap
Value Portfolio, each of which commenced operations on December 31,
1997, and the Morgan Stanley Emerging Markets Equity Portfolio, which
commenced operations on August 20, 1997.
(a) Annualized
(b) Total return calculated for a period of less than one year is not
annualized
(c) For further information concerning fee waivers, see the section entitled
"Expense Limitation Agreements" of the Prospectus.

3
<PAGE>
THE TRUST

The Trust is an open-end management investment company registered under the
Investment Company Act of 1940, as amended ("1940 Act"). As a "series" type of
mutual fund, the Trust issues shares of beneficial interest that are currently
divided among 18 Portfolios, 14 of which are offered by this Prospectus. Each
Portfolio is a separate series of the Trust with its own objective and
policies. Each of the Portfolios set forth below, except for the Lazard Small
Cap Value Portfolio, the Merrill Lynch World Strategy Portfolio and the Morgan
Stanley Emerging Markets Equity Portfolio, are diversified for 1940 Act
purposes. The Trustees of the Trust may establish additional Portfolios at any
time.

Each Portfolio is managed by EQ Financial Consultants, Inc. ("Manager") which
directs the day to day operations of each Portfolio. Bankers Trust Company,
J.P. Morgan Investment Management Inc., Lazard Asset Management, a division
of Lazard Fr|f4res & Co. LLC, Merrill Lynch Asset Management, L.P.,
Massachusetts Financial Services Company, Morgan Stanley Asset Management
Inc., and Putnam Investment Management, Inc. serve as the advisers (each an
"Adviser" and, together the "Advisers") to one or more of the Portfolios, as
detailed in the table below.

<TABLE>
<CAPTION>
PORTFOLIO ADVISER
- --------- -------
<S> <C>
BT Equity 500 Index Portfolio Bankers Trust Company
BT Small Company Index Portfolio Bankers Trust Company
BT International Equity Index Portfolio Bankers Trust Company
JPM Core Bond Portfolio J.P. Morgan Investment Management Inc.
Lazard Large Cap Value Portfolio Lazard Asset Management
Lazard Small Cap Value Portfolio Lazard Asset Management
Merrill Lynch Basic Value Equity Portfolio Merrill Lynch Asset Management, L.P.
Merrill Lynch World Strategy Portfolio Merrill Lynch Asset Management, L.P.
MFS Research Portfolio Massachusetts Financial Services Company
MFS Emerging Growth Companies Portfolio Massachusetts Financial Services Company
Morgan Stanley Emerging Markets Equity Portfolio Morgan Stanley Asset Management Inc.
EQ/Putnam Growth & Income Value Portfolio Putnam Investment Management, Inc.
EQ/Putnam Investors Growth Portfolio Putnam Investment Management, Inc.
EQ/Putnam International Equity Portfolio Putnam Investment Management, Inc.
</TABLE>

The Manager has the ultimate responsibility to oversee each of the Advisers and
to recommend their hiring, termination and replacement. The Trust and the
Manager have asked the Securities and Exchange Commission for an order that
would permit the Manager, subject to approval by the Board of Trustees, to (i)
select Advisers for each of the Trust's investment portfolios and (ii)
materially modify existing investment advisory agreements without obtaining
shareholder approval.

The Trust offers two classes of shares on behalf of each Portfolio: Class IA
shares and Class IB shares. EQ Financial Consultants, Inc. ("EQ Financial"),
the Trust's Manager, serves as one of the distributors for the Class IB shares
of the Trust offered by this Prospectus and the Class IA shares offered by
another Prospectus. Equitable Distributors, Inc. ("EDI") also serves as one of
the distributors for the Class IB shares of the Trust as well as one of the
distributors of the Class IA shares. (EQ Financial and EDI are collectively
referred to as the "Distributors"). The Trust's shares are currently sold only
to insurance company separate accounts in connection with variable life
insurance contracts and variable annuity certificates and contracts
(collectively, the "Contracts") issued by The Equitable Life Assurance Society
of the United States ("Equitable"). Both classes of shares are offered and
redeemed at their net asset value without the imposition of any sales load.

Class IA shares are offered pursuant to another prospectus and are subject to
the same expenses as the Class IB shares, but unlike the Class IB shares they
are not subject to distribution fees imposed pursuant to a distribution plan.
Class IB shares are subject to distribution fees imposed under a distribution
plan ("Distribution Plan") adopted pursuant to Rule 12b-1 under the 1940 Act.
Inquiries regarding Class IA shares, which are not currently available, should
be addressed to Equitable, at 1290 Avenue of the Americas, New York, NY 10104
or by calling 1-212-314-4300.

4
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES

The following is a brief description of the investment objectives and policies
of each of the Portfolios. All of the objectives and policies of each
Portfolio, unless otherwise noted, are not fundamental and may be changed by
the Board of Trustees of the Trust without the approval of shareholders.
Certain investment strategies and instruments discussed below are described in
greater detail in the Statement of Additional Information. Because of the
uncertainty inherent in all investments, there can be no assurance that the
Portfolios will be able to achieve their respective investment objectives.

BT EQUITY 500 INDEX PORTFOLIO

The Portfolio seeks to replicate as closely as possible (before deduction of
Portfolio expenses) the total return of the Standard & Poor's 500 Composite
Stock Price Index ("S&P 500"). The S&P 500 is an index of 500 common stocks of
companies from many industrial sectors representing a significant portion of
the market value of all common stocks publicly traded in the United States,
most of which trade on the New York Stock Exchange Inc. (the "NYSE"). The
Adviser believes that the performance of the S&P 500 is representative of the
performance of publicly-traded common stocks in the U.S. in general.

The composition of the S&P 500 is determined by Standard & Poor's and is based
on such factors as the market capitalization and trading activity on each stock
and its adequacy as a representation of stocks in a particular industry, and
may be changed from time to time. The Portfolio is not sponsored, endorsed,
sold or promoted by Standard & Poor's and Standard & Poor's makes no guarantee
as to the accuracy and/or completeness of the S&P 500 or any data included
therein. In seeking to replicate the performance of the S&P 500, before
deduction of Portfolio expenses, the Adviser will attempt over time to allocate
the Portfolio's investment among common stocks included in the S&P 500 in
approximately the same proportions as they are represented in the S&P 500,
beginning with the heaviest weighted stocks that make up a larger portion of
the Index's value. Bankers Trust utilizes a two-stage sampling approach in
seeking to achieve its objective. Stage one, which encompasses large
capitalization stocks, maintains the stock holdings at or near their benchmark
weights. Large capitalization stocks are defined as those securities which
represent 0.10% or more of the S&P 500. In stage two, smaller stocks are
analyzed and selected using risk characteristics and industry weights in order
to match the sector and risk characteristics of the smaller companies in the
S&P 500. This approach helps to increase the Portfolio's liquidity while
reducing costs.

The Adviser generally will seek to match the composition of the S&P 500 but
usually will not invest the Portfolio's stock portfolio to mirror the S&P 500
exactly. Because of the difficulty and cost of executing relatively small stock
transactions, the Portfolio may not always be invested in the less heavily
weighted S&P 500 stocks, and may at times have its portfolio weighted
differently than the S&P 500, particularly if the Portfolio has a low level of
assets. In addition, the Portfolio may omit or remove any S&P 500 stock from
the Portfolio if, following objective criteria, the Adviser judges the stock to
be insufficiently liquid or believes the merit of the investment has been
substantially impaired by extraordinary events or financial conditions. The
Portfolio will not purchase the stock of Bankers Trust New York Corporation,
which is included in the S&P 500, and instead will overweight its holdings of
companies engaged in similar businesses.

Over time, the correlation between the performance of the Portfolio and the S&P
500 is expected to be 0.95 or higher before deduction of Portfolio expenses. A
correlation of 1.00 would indicate perfect correlation, which would be achieved
when the net asset value of the Portfolio, including the value of its dividend
and any capital gain distributions, increases or decreases in exact proportion
to changes in the S&P 500. The Portfolio's ability to track the S&P 500 may be
affected by, among other things, transaction costs, administration and other
expenses incurred by the Portfolio, changes in either the composition of the
S&P 500 or the assets of the Portfolio, and the timing and amount of Portfolio
investor contributions and withdrawals, if any. Because the Portfolio seeks to
track the S&P 500, the Adviser generally will not attempt to judge the merits
of any particular stock as an investment. Under normal circumstances, the
Portfolio will invest at least 80% of its assets in the securities of the S&P
500.

5
<PAGE>
The Portfolio is a diversified fund and will not concentrate more than 25% of
its assets in the securities of issuers in the same industry. In the unlikely
event that the S&P 500 should concentrate to an extent greater than 25% in the
securities of issuers in the same industry, the Portfolio's ability to achieve
its objective may be impaired since the Portfolio may not so invest.

The Portfolio may maintain up to 20% of its assets in short-term debt
securities and money market instruments to meet redemption requests or to
facilitate investment in the securities of the S&P 500. Securities index
futures contracts and related options, warrants and convertible securities may
be used for several reasons: to simulate full investment in the S&P 500 while
retaining a cash balance for fund management purposes; to facilitate trading;
to reduce transaction costs; or to seek higher investment returns when a
futures contract, option, warrant or convertible security is priced more
attractively than the underlying equity security or S&P 500. These instruments
may be considered derivatives. The use of derivatives for non-hedging purposes
may be considered speculative. While each of these instruments can be used as
leveraged investments, the Portfolio may not use them to leverage its net
assets. The Portfolio may not invest in derivative instruments as part of a
temporary defensive strategy (in anticipation of declining stock prices) to
protect the Portfolio against potential market declines.

Certain investment strategies and instruments which may be employed by the
Portfolio (such as the purchase and sale of options, futures contracts,
securities loans, illiquid securities, investment grade fixed-income
securities, derivatives, repurchase agreements, reverse repurchase agreements,
forward commitments, United States Government securities, borrowings,
asset-backed securities, and convertible securities) are discussed under the
caption "Investment Strategies" below and in the Statement of Additional
Information.

BT SMALL COMPANY INDEX PORTFOLIO

The investment objective of the BT Small Company Index Portfolio is to
replicate as closely as possible (before deduction of Portfolio expenses) the
total return of the Russell 2000 Small Stock Index. The Russell 2000 is
composed of approximately 2,000 small-capitalization common stocks. A company's
stock market capitalization is the total market value of its floating
outstanding shares. As of June 30, 1997, the average stock market
capitalization of the Russell 2000 was $500 million and the weighted average
stock market capitalization of the Russell 2000 was $650 million. The Portfolio
is neither sponsored by nor affiliated with the Frank Russell Company, which is
the owner of the trademarks and copyrights relating to the Russell indices.

The Portfolio invests in a statistically selected sample of the 2,000 stocks
included in the Russell 2000. The stocks of the Russell 2000 to be included in
the Portfolio will be selected utilizing a statistical sampling technique known
as "optimization." This process selects stocks for the Portfolio so that
various industry weightings, market capitalizations and fundamental
characteristics (e.g., price-to-book, price-to-earnings and debt-to-asset
ratios and dividend yields) closely approximate those of the Russell 2000. For
instance, if 10% of the capitalization of the Russell 2000 consists of utility
companies with relatively small capitalizations, then the Portfolio is
constructed so that approximately 10% of the Portfolio's assets are invested in
the stocks of utility companies with relatively small capitalizations. The
stocks held by the Portfolio are weighted to make the Portfolio's aggregate
investment characteristics similar to those of the Russell 2000 as a whole.

Over time, the correlation between the performance of the Portfolio and the
Russell 2000 is expected to be 0.95 or higher before deduction of Portfolio
expenses. A correlation of 1.00 would indicate perfect correlation, which would
be achieved when the net asset value of the Portfolio, including the value of
its dividend and any capital gain distributions, increases or decreases in
exact proportion to changes in the Russell 2000. The Portfolio's ability to
track the Russell 2000 may be affected by, among other things, transaction
costs, administration and other expenses incurred by the Portfolio, changes in
either the composition of the Russell 2000 or the assets of the Portfolio, and
the timing and amount of Portfolio investor contributions and withdrawals, if
any. Because the Portfolio seeks to track the Russell 2000, the Adviser
generally will not attempt to judge the merits of any particular stock as an
investment. Under normal circumstances, the Portfolio will invest at least 80%
of its assets in the securities of the Russell 2000. The Portfolio is a
diversified fund and will not concentrate more than 25% of its assets in the

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securities of issuers in the same industry. In the event that the Russell 2000
should concentrate to an extent greater than 25% in the securities of issuers
in the same industry, the Portfolio's ability to achieve its objective may be
impaired since the Portfolio is not permitted to so invest.

The Portfolio may maintain up to 20% of its assets in short-term debt
securities and money market instruments to meet redemption requests or to
facilitate investment in the securities of the Russell 2000. Securities index
futures contracts and related options, warrants and convertible securities may
be used for several reasons: to simulate full investment in the Russell 2000
while retaining a cash balance for portfolio management purposes; to facilitate
trading; to reduce transaction costs; or to seek higher investment returns when
a futures contract, option, warrant or convertible security is priced more
attractively than the underlying equity security or the Russell 2000. These
instruments may be considered derivatives. The use of derivatives for
non-hedging purposes may be considered speculative. While each of these
instruments can be used as leveraged investments, the Portfolio will not use
them to leverage its net assets. The Portfolio will not invest in derivative
instruments as part of a temporary defensive strategy (in anticipation of
declining stock prices) to protect the Portfolio against potential market
declines.

BT INTERNATIONAL EQUITY INDEX PORTFOLIO

The Portfolio seeks to replicate as closely as possible (before deduction of
Portfolio expenses) the total return of the Morgan Stanley Capital
International Europe, Australia, Far East Index ("EAFE Index"). The EAFE Index
is a capitalization-weighted index containing approximately 1,100 equity
securities of companies located in countries outside the United States. The
countries currently included in the EAFE Index are Australia, Austria, Belgium,
Denmark, Finland, France, Germany, Hong Kong, Ireland, Italy, Japan, Malaysia,
The Netherlands, New Zealand, Norway, Singapore, Spain, Sweden, Switzerland and
The United Kingdom. The EAFE Index is the exclusive property of Morgan Stanley.
The Portfolio is not sponsored, endorsed, sold or promoted by Morgan Stanley
and Morgan Stanley makes no guarantee as to the accuracy or completeness of the
EAFE Index or any data included therein.

The Portfolio is constructed to have aggregate investment characteristics
similar to those of the EAFE Index. The Portfolio invests in a statistically
selected sample of the securities of companies included in the EAFE Index,
although not all companies within a country will be represented in the
Portfolio at the same time. Stocks are selected for inclusion in the Portfolio
based on country of origin, market capitalization, yield, volatility and
industry sector. The Adviser will manage the Portfolio using advanced
statistical techniques to determine which stocks should be purchased or sold to
replicate the EAFE Index. From time to time, adjustments may be made in the
Portfolio because of changes in the composition of the EAFE Index, but such
changes are expected to be infrequent.

Over time, the correlation between the performance of the Portfolio and the
EAFE Index is expected to be 0.95 or higher before deduction of Portfolio
expenses. A correlation of 1.00 would indicate perfect correlation, which would
be achieved when the net asset value of the Portfolio, including the value of
its dividend and any capital gain distributions, increases or decreases in
exact proportion to changes in the EAFE Index. The Portfolio's ability to track
the EAFE Index may be affected by, among other things, transaction costs,
administration and other expenses incurred by the Portfolio, changes in either
the composition of the EAFE Index or the assets of the Portfolio, and the
timing and amount of Portfolio investor contributions and withdrawals, if any.
Because the Portfolio seeks to track the EAFE Index, Bankers Trust generally
will not attempt to judge the merits of any particular stock as an investment.
Under normal circumstances, the Portfolio will invest at least 80% of its
assets in the securities of the EAFE Index.

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The Portfolio is a diversified fund and will not concentrate more than 25% of
its assets in the securities of issuers in the same industry. In the event that
the EAFE Index should concentrate to an extent greater than 25% in the
securities of issuers in the same industry, the Portfolio's ability to achieve
its objective may be impaired since the Portfolio may not so invest

The Portfolio may maintain up to 20% of its assets in short-term debt
securities and money market instruments to meet redemption requests or to
facilitate investment in the securities of the EAFE Index. Securities index
futures contracts and related options, warrants and convertible securities may
be used for several reasons: to simulate full investment in the EAFE Index
while retaining a cash balance for fund management purposes; to facilitate
trading; to reduce transaction costs; or to seek higher investment returns when
a futures contract, option, warrant or convertible security is priced more
attractively than the underlying equity security or EAFE Index. These
instruments may be considered derivatives. The use of derivatives for
non-hedging purposes may be considered speculative. While each of these
instruments can be used as leveraged investments, the Portfolio will not use
them to leverage its net assets. The Portfolio will not invest in derivative
instruments as part of a temporary defensive strategy (in anticipation of
declining stock prices) to protect the Portfolio against potential market
declines.

Certain investment strategies and instruments which may be employed by the
Portfolio (such as the purchase and sale of options, futures contracts, foreign
securities, foreign currency transactions, securities loans, illiquid
securities, investment grade fixed-income securities, derivatives, swaps,
repurchase agreements, reverse repurchase agreements, forward commitments,
United States Government securities, borrowings, asset-backed securities, and
convertible securities) are discussed under the caption "Investment Strategies"
below and in the Statement of Additional Information.

JPM CORE BOND PORTFOLIO

It is the current policy of the Portfolio that, under normal circumstances, all
of the Portfolio's assets will, at the time of purchase, consist of investment
grade securities rated BBB or better by S&P or Baa or better by Moody's or
unrated securities of comparable quality. If the quality of the investment
later declines, the Portfolio may continue to hold the investment.

The Adviser actively manages the Portfolio's duration, the allocation of
securities across market sectors, and the selection of specific securities
within market sectors. Based on fundamental, economic and capital markets
research, the Adviser adjusts the duration of the Portfolio in light of market
conditions and the Adviser's interest rate outlook. For example, if interest
rates are expected to fall, the duration may be lengthened to take advantage of
the expected increase in bond prices. The Adviser also actively allocates the
Portfolio's assets among the broad sectors of the fixed income market
including, but not limited to, United States Government and agency securities,
corporate securities, private placements, asset-backed securities,
mortgage-related securities, and direct mortgage obligations. The Portfolio may
also invest up to 25% of its assets in securities of foreign issuers, including
up to 20% of its assets in debt securities denominated in foreign currencies of
developed countries. In addition, the Portfolio may invest in municipal
obligations provided such securities are issued on a taxable basis or have an
attractive yield excluding tax considerations. Specific securities that the
Adviser believes are undervalued are selected for purchase within the sectors
using advanced quantitative tools, analysis of credit risk, the expertise of a
dedicated trading desk, and the judgment of fixed income portfolio managers and
analysts. Under normal circumstances, the Adviser intends to have the Portfolio
invest at least 65% of its assets in bonds. The Portfolio may to a limited
extent invest in convertible securities, including convertible debt securities
and preferred stock.

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<PAGE>
duration will range between one year shorter and one year longer than the
duration of the domestic investment grade fixed income universe, as represented
by Salomon Brothers Broad Investment Grade Bond Index. Currently, the duration
of that index is approximately 4.5 years. The maturities of the individual
securities in the Portfolio may vary widely, however.

The Adviser intends to actively manage the Portfolio in pursuit of its
investment objective. Portfolio transactions are undertaken principally to
accomplish the Portfolio's objective in relation to expected movements in the
general level of interest rates. However, the Portfolio may also engage in
short-term trading consistent with its objective. To the extent the Portfolio
engages in short-term trading, it may incur increased transaction costs. The
Portfolio may purchase high-quality money market instruments to invest
temporary cash balances or to maintain liquidity to meet withdrawals. When
market or financial conditions warrant, the Portfolio may invest as a temporary
defensive measure up to 100% of its assets in money market instruments.

Certain investment strategies and instruments which may be employed by the
Portfolio (such as the purchase and sale of options, futures contracts, foreign
securities, securities loans, illiquid securities, zero-coupon bonds,
investment grade fixed-income securities, payment-in-kind bonds, derivatives,
foreign currency transactions, repurchase agreements, reverse repurchase
agreements, forward commitments, United States Government securities,
borrowings, asset-backed securities, convertible securities, mortgage-related
securities and swaps) are discussed under the caption "Investment Strategies"
below and in the Statement of Additional Information.

LAZARD LARGE CAP VALUE PORTFOLIO

Under normal market conditions, the Portfolio will invest at least 80% of its
total assets in equity securities, including common stocks, preferred stocks
and securities convertible into or exchangeable for common stocks. In addition,
at times judged by the Adviser to be appropriate, the Portfolio may hold up to
20% of its total assets in United States Government securities and investment
grade debt obligations of domestic corporations rated BBB or better by S&P or
Baa or better by Moody's. The Portfolio may also, for temporary or defensive
purposes, invest without limitation in high-quality short-term money market
instruments, including United States Government securities, repurchase
agreements, certificates of deposits, time deposits and other short-term
obligations issued by banks, commercial paper and loan participations. In
addition, the Portfolio may invest up to 10% of its total assets at the time of
purchase in foreign equity or debt securities trading in U.S. markets or listed
on a domestic securities exchange or represented by ADRs or Global Depositary
Receipts ("GDRs"). The Portfolio may also engage in various investment
techniques, such as options transactions and, although it has no present
intention to do so, leveraging and lending portfolio securities.

9
<PAGE>
ments, convertible securities, floaters, illiquid securities, foreign
securities, investment grade fixed-income securities, United States Government
securities and repurchase agreements) are discussed under the caption
"Investment Strategies" below and in the Statement of Additional Information.

LAZARD SMALL CAP VALUE PORTFOLIO

The investment objective of the Lazard Small Cap Value Portfolio is to seek
capital appreciation by investing primarily in equity securities of United
States companies with small market capitalizations (i.e., companies in the
range of companies represented in the Russell 2000 Index) that the Adviser
considers inexpensively priced relative to the return on total capital or
equity. The Russell 2000 Index is composed of selected common stocks of small,
generally unseasoned U.S. companies with market capitalizations ranging between
$100 million and $1 billion. The equity securities in which the Portfolio may
invest include: common stocks, preferred stocks, securities convertible into or
exchangeable for common stocks, rights and warrants.

Investments are generally made in equity securities of companies that in the
Adviser's opinion have one or more of the following characteristics: (i) are
undervalued relative to their earnings power, cash flow, and/or asset values;
(ii) have an attractive price/value relationship (i.e., have high returns on
equity and/or assets with correspondingly low price-to-book and/or
price-to-asset value as compared to the market generally or the companies'
industry groups in particular) with the expectation that some catalyst will
cause the perception of value to change within a 24-month time horizon; (iii)
have experienced significant relative underperformance and are out of favor due
to a set of circumstances that are unlikely to harm a company's franchise or
earnings power over the longer term; (iv) have low projected price-to-earnings
or price-to-cash-flow multiples relative to their industry peer group and/or
the market in general; (v) have the prospect, or the industry in which the
company operates has the prospect, to allow it to become a larger factor in the
business and receive a higher valuation as such; (vi) have significant
financial leverage but have high levels of free cash flow that may be used to
reduce leverage and enhance shareholder value; and (vii) have a relatively
short corporate history with the expectation that the business may grow to
generate meaningful cash flow and earnings over a reasonable investment
horizon.

The Adviser believes that issuers of small capitalization stocks often have
sales and earnings growth rates that exceed those of larger companies, and that
such growth rates may, in turn, be reflected in more rapid share price
appreciation. However, investing in smaller capitalization stocks can involve
greater risk than is customarily associated with larger, more established
companies. (Such risks are discussed under the caption "Investment Strategies
- -- Small Company Securities" below).

The Portfolio is non-diversified for 1940 Act purposes and as such may invest a
larger percentage of its assets in individual issuers than a diversified
investment company. In this regard, the Portfolio is not subject to the general
limitation that it not invest more than 5% of its total assets in the
securities of any one issuer. To the extent the Portfolio makes investments in
excess of 5% of its assets in a particular issuer, its exposure to credit and
market risks associated with that issuer is increased. However, the Portfolio's
investments will be limited so as to qualify for the special tax treatment
afforded "regulated investment companies" under the Internal Revenue Code of
1986, as amended ("Code").

The Adviser continually evaluates the securities owned by the Portfolio, and
changes may be made whenever the Adviser determines such securities no longer
meet the Portfolio's objective. Changes in Portfolio holdings may also be made
to increase or decrease investments in anticipation of changes in security
prices in general or to provide funds required for redemptions, distributions
to shareholders or other corporate purposes.

When, in the judgment of the Adviser, business or financial conditions warrant,
the Portfolio may assume a temporary defensive position and invest, without
limitation, in large capitalization companies or short-term money market
instruments or hold its assets in cash.

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Certain investment strategies and investments which may be employed by the
Portfolio (such as securities loans, borrowings, loan participations,
derivatives, mortgage-related securities, convertible securities, floaters,
illiquid securities, investment grade fixed-income securities, forward
commitments, United States Government securities, repurchase agreements and
small company securities) are discussed under the caption "Investment
Strategies" below and in the Statement of Additional Information.

MERRILL LYNCH BASIC VALUE EQUITY PORTFOLIO

The investment objective of the Merrill Lynch Basic Value Equity Portfolio is
to seek capital appreciation and, secondarily, income by investing in
securities, primarily equities, that the Adviser of the Portfolio believes are
undervalued and therefore represent basic investment value. The Portfolio seeks
special opportunities in securities that are selling at a discount, either from
book value or historical price-earnings ratios, or seem capable of recovering
from temporarily out of favor considerations. Particular emphasis is placed on
securities that provide an above-average dividend return and sell at a
below-average price-earnings ratio.

The investment policy of the Portfolio is based on the belief that the pricing
mechanism of the securities market lacks total efficiency and has a tendency to
inflate prices of securities in favorable market climates and depress prices of
securities in unfavorable climates. Based on this premise, the Adviser believes
that favorable changes in market prices are more likely to begin when
securities are out of favor, earnings are depressed, price-earnings ratios are
relatively low, investment expectations are limited, and there is no real
general interest in the particular security or industry involved. On the other
hand, the Adviser believes that negative developments are more likely to occur
when investment expectations are generally high, stock prices are advancing or
have advanced rapidly, price-earnings ratios have been inflated, and the
industry or issue continues to gain new investment acceptance on an accelerated
basis. In other words, the Adviser believes that market prices of securities
with relative high price-earnings ratios are more susceptible to unexpected
adverse developments while securities with relatively low price-earnings ratios
are more favorably positioned to benefit from favorable, but generally
unanticipated events. This investment policy departs from traditional
philosophy. The Adviser believes that the market risk involved in this policy
is moderated somewhat by an emphasis on securities with above-average dividend
returns.

The current institutionally-dominated market tends to ignore, to some extent,
the numerous secondary issues whose market capitalizations are below those of
the relatively few larger size growth companies. It is expected that the
Portfolio's portfolio generally will have significant representation in this
secondary segment of the market. The Adviser is responsible for the management
of the Portfolio's securities portfolio and makes portfolio decisions based on
its own research information supplemented by research information provided by
other sources. The basic orientation of the Portfolio's investment policies is
such that at times a large portion of its common stock holdings may carry less
than favorable research ratings from research analysts.

Investment emphasis is on equities, primarily common stock and, to a lesser
extent, securities convertible into common stocks. The Portfolio also may
invest in preferred stocks and non-convertible investment grade debt securities
and utilize covered call options with respect to portfolio securities. The
Portfolio has the right, as a defensive measure, to hold other types of
securities, including United States Government and Government agency
securities, money market securities, or other fixed-income securities deemed by
the Adviser to be consistent with a defensive posture, or cash, in such
proportions as, in the opinion of the Adviser, prevailing market or economic
conditions warrant. The Portfolio may invest up to 10% of its total assets,
taken at market value at the time of acquisition, in the securities of foreign
issuers.

Certain investment strategies and instruments which may be employed by the
Portfolio (such as options, convertible securities, United States Government
securities, repurchase agreements, securities loans, foreign securities,
borrowings and illiquid securities) are discussed under the caption "Investment
Strategies" below and in the Statement of Additional Information.

MERRILL LYNCH WORLD STRATEGY PORTFOLIO

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securities, of U.S. and foreign issuers. Total investment return consists of
interest, dividends, discount accruals and capital changes, including changes
in the value of non-dollar denominated securities and other assets and
liabilities resulting from currency fluctuations. Investing in foreign
securities involves special considerations. The Portfolio may employ a variety
of instruments and techniques to enhance income and to hedge against market and
currency risk.

The Portfolio seeks to achieve its objective by investing primarily in the
securities of issuers located in the United States, Canada, Western Europe and
the Far East. There are no prescribed limits on the geographical allocation of
the Portfolio among these regions. Such allocation will be made primarily on
the basis of the anticipated total return from investments in the securities of
issuers wherever located, considering such factors as: the condition and growth
potential of the various economies and securities markets and the issuers
domiciled therein; anticipated movements in interest rates in the various
capital markets and in the value of foreign currencies relative to the U.S.
dollar; tax considerations; and economic, social, financial, national and
political factors that may affect the climate for investing within the various
securities markets. When in the judgment of the Adviser, economic or market
conditions warrant, the Portfolio reserves the right to concentrate its
investments in one or more capital markets, including the United States.

The corporate debt securities, including convertible debt securities, in which
the Portfolio may invest will be primarily investment grade securities rated
BBB or better by S&P or Baa or better by Moody's or of comparable quality. The
Fund may also invest in debt obligations issued or guaranteed by sovereign
governments, political subdivisions thereof (including states, provinces and
municipalities) or their agencies or instrumentalities or issued or guaranteed
by international organizations designated or supported by governmental entities
to promote economic reconstruction or development ("supranational entities")
such as the International Bank for Reconstruction and Development (the "World
Bank") and the European Coal and Steel Community. Investments in securities of
supranational entities are subject to the risk that member governments will
fail to make required capital contributions and that a supranational entity
will thus be unable to meet its obligations.

When market or financial conditions warrant, the Portfolio may invest as a
temporary defensive measure up to 100% of its assets in United States
Government or Government agency securities issued or guaranteed by the United
States Government or its agencies or instrumentalities, money market securities
or other fixed income securities deemed by the Adviser to be consistent with a
defensive posture, or may hold its assets in cash.

The Portfolio is non-diversified for 1940 Act purposes and as such may invest a
larger percentage of its assets in individual issuers than a diversified
investment company. In this regard, the Portfolio is not subject to the general
limitation that it not invest more than 5% of its total assets in the
securities of any one issuer. To the extent the Portfolio makes investments in
excess of 5% of its assets in a particular issuer, its exposure to credit and
market risks associated with that issuer is increased. However, the Portfolio's
investments will be limited so as to qualify for the special tax treatment
afforded "regulated investment companies" under the Code.

MFS RESEARCH PORTFOLIO

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common stock or securities convertible into common stock of companies believed
by the Adviser to possess better than average prospects for long-term growth. A
smaller proportion of the assets of the Portfolio may be invested in bonds,
short-term debt obligations, preferred stocks or common stocks whose principal
characteristic is income production rather than growth. Such securities may
also offer opportunities for growth of capital as well as income. In the case
of both growth stocks and income securities, the Adviser emphasizes
progressive, well-managed companies.

The portfolio securities of the Portfolio are selected by a committee of
investment research analysts. This committee includes investment analysts
employed not only by the Adviser but also by MFS International (U.K.) Limited,
a wholly-owned subsidiary of the Adviser. The Portfolio's assets are allocated
among industries by the analysts acting together as a group. Individual
analysts are then responsible for selecting what they view as the securities
best suited to meet the Portfolio's investment objective within their assigned
industry responsibility.

To the extent that such investments comply with the Portfolio's investment
objective, the Portfolio may invest up to 20% of its total assets in foreign
securities, including those in emerging markets. These securities include
dollar-denominated and non-dollar-denominated foreign securities. Such foreign
investments increase a portfolio's diversification and may enhance return, but
they may represent a greater degree of risk than investing exclusively in
domestic securities.

The Portfolio may invest in investment grade debt securities and may invest up
to 10% of its total assets in securities rated below investment grade (commonly
known as "junk bonds"). The price of a bond generally fluctuates with changes
in interest rates, rising when interest rates fall and falling when interest
rates rise.

MFS EMERGING GROWTH COMPANIES PORTFOLIO

The investment objective of the MFS Emerging Growth Companies Portfolio is to
provide long-term growth of capital. Dividend and interest income from
portfolio securities, if any, is incidental to the Portfolio's investment
objective. In pursuing its objective, the Portfolio invests primarily (i.e., at
least 80% of its assets 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. Such emerging
growth companies generally are expected to: (i) show earnings growth over time
that is well above the growth rate of the overall economy and the rate of
inflation; and (ii) have the products, technologies, management and market and
other opportunities that are usually necessary to become more widely recognized
as growth companies.

Emerging growth companies can be of any size and the Portfolio may invest in
larger or more established companies whose rates of earnings growth are
expected to accelerate because of special factors, such as rejuvenated
management, new products, changes in customer demand, or basic changes in the
economic environment. Investing in emerging growth companies involves greater
risk than is customarily associated with investments in more established
companies. Emerging growth companies often have limited product lines, markets
or financial resources and may be more dependent on one-person management. In
addition, there may be less research available on many promising small or
medium-sized emerging growth companies, making it more difficult both to
identify and to analyze such companies. Moreover, the securities of such
companies may have limited marketability and may be subject to more abrupt or
erratic market movements than the securities of larger, more established
companies.

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<PAGE>
denominated securities traded in the United States (such as ADRs). Such foreign
investments increase a portfolio's diversification and may enhance return, but
they may represent a greater degree of risk than investing exclusively in
domestic securities. The Portfolio may also invest in debt securities and hold
cash and cash equivalents. In addition, the Portfolio may invest in lower-rated
debt securities (commonly referred to as "junk bonds").

The Portfolio is aggressively managed and, therefore, the value of its shares
is subject to greater fluctuation and investment in its shares generally
involves a higher degree of risk than would be the case with an investment in a
conservative equity or growth fund investing entirely in proven growth
companies.

MORGAN STANLEY EMERGING MARKETS EQUITY PORTFOLIO

The investment objective of the Morgan Stanley Emerging Markets Equity
Portfolio is long-term capital appreciation by investing primarily in equity
securities of emerging market country issuers. In pursuing its investment
objective, the Adviser focuses on issuers in emerging market countries in which
it believes the economies are developing strongly and in which the markets are
becoming more sophisticated.

For these purposes, an emerging market country security is a security issued by
a company that has one or more of the following characteristics: (i) its
principal securities trading market is in an emerging market country; (ii)
alone or on a consolidated basis, it derives 50% or more of its revenue from
either goods produced, sales made or services performed in emerging markets
countries; or (iii) it is organized under the laws of, and has a principal
office in, an emerging market country. The Adviser will base determinations as
to eligibility on publicly available information and inquiries made to the
companies.

The Portfolio intends to invest primarily in some or all of the following
emerging market countries: Argentina, Botswana, Brazil, Chile, China, Colombia,
Greece, Hong Kong, Hungary, India, Indonesia, Jamaica, Jordan, Kenya, Malaysia,
Mexico, Nigeria, Pakistan, Peru, Philippines, Poland, Portugal, Russia, South
Africa, South Korea, Sri Lanka, Taiwan, Thailand, Turkey, Venezuela and
Zimbabwe. As markets in other countries develop, the Portfolio expects to
expand and further diversify the emerging market countries in which it invests.
The Portfolio does not intend to invest in any security in a country where the
currency is not freely convertible to United States dollars, unless: (i) the
Portfolio has obtained the necessary governmental licensing to convert such
currency or other appropriately licensed or sanctioned contractual guarantees
to protect such investment against loss of that currency's external value, or
(ii) the Portfolio has a reasonable expectation at the time the investment is
made that such governmental licensing or other appropriately licensed or
sanctioned guarantees would be obtained or that the currency in which the
security is quoted would be freely convertible at the time of any proposed sale
of the security by the Portfolio. Currently, investing in many emerging market
countries is not feasible or may involve unacceptable political risks.

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The Portfolio may also invest in fixed-income securities denominated in the
currency of an emerging market country or issued or guaranteed by an emerging
market country company or the government of an emerging market country. In
addition, the Portfolio may invest in equity or fixed-income securities of
corporate or governmental issuers located in industrialized countries, foreign
currency and investment funds (i.e., funds specifically authorized to invest in
companies of a particular emerging market country). The Portfolio may also
invest in debt securities issued or guaranteed by international organizations
designed or supported by multiple governmental entities to promote economic
reconstruction or development such as the International Bank for Reconstruction
and Development (i.e., the World Bank). The Portfolio may invest up to 10% of
its total assets (measured at the time of investment) in fixed-income
securities that are not investment grade securities (commonly referred to as
"junk bonds").

For temporary defensive purposes, the Portfolio may invest less than 65% of its
assets in equity securities of emerging market countries in which case the
Portfolio may invest in other equity securities or fixed income securities.
Moreover, the Portfolio may invest without limitation in high-quality money
market instruments.

The value of the Portfolio's investments and the income they generate will vary
from day to day and generally reflect market conditions, interest rates, and
other company, political, or economic news both in the United States and
abroad. In the short-term, stock prices can fluctuate dramatically in response
to these factors. Over time, however, stocks have shown greater growth
potential than other types of securities. The prices of fixed-income securities
also fluctuate and generally move in the opposite direction from interest
rates.

The Portfolio is a non-diversified portfolio under the 1940 Act, which means
that it may invest a greater proportion of its assets in the securities of a
small number of issuers than a diversified investment company. In this regard,
the Portfolio is not subject to the general limitation that it not invest more
than 5% of its total assets in the securities of a single issuer. As a result,
because the Portfolio is permitted greater flexibility to invest its assets in
the obligations of a single issuer it is exposed to increased risk of loss if
such an investment underperforms expectations. However, the Portfolio intends
to limit its investments so as to comply with diversification requirements
imposed by the Code, for qualification as a "regulated investment company." The
Portfolio spreads investment risk by limiting its holdings in any one company
or industry. Nevertheless, the Portfolio will experience price volatility, the
extent of which will be affected by the types of securities and techniques the
Portfolio uses. The Adviser may use various investment techniques to hedge
risks, including derivatives, but there is no guarantee that these strategies
will work as intended.

Certain investment strategies and practices which may be employed by the
Portfolio (such as the purchase and sale of options, futures contracts, United
States Government securities, hybrid instruments, illiquid securities, foreign
securities, securities loans, borrowings, payment-in-kind bonds, passive
foreign investment companies, derivatives, convertible securities, zero coupon
bonds, investment grade and lower quality fixed-income securities,
mortgage-backed securities, forward commitments, stripped mortgage-backed
securities, collateralized mortgage obligations, asset-backed securities,
floaters, inverse floaters, foreign currency transactions, loan participations,
repurchase agreements, structured notes and swaps) are discussed under the
caption "Investment Strategies" below and in the Statement of Additional
Information.

EQ/PUTNAM GROWTH & INCOME VALUE PORTFOLIO

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At times, the Adviser may judge that conditions in the securities markets may
make pursuing the Portfolio's basic investment strategy inconsistent with the
best interests of the Portfolio's shareholders. At such times, the Adviser may
temporarily use alternative strategies that are primarily designed to reduce
fluctuations in the value of the Portfolio's assets. In implementing these
defensive strategies, the Portfolio may invest without limit in debt securities
or preferred stocks, or may invest in any other securities the Adviser
considers consistent with such defensive strategies. It is impossible to
predict when, or for how long, the Adviser will use these alternative defensive
strategies.

In addition, the Portfolio may also invest a portion of its assets in United
States government securities and high-quality United States and foreign
dollar-denominated money market securities (i.e., within the two highest rating
categories assigned by a NRSRO) including certificates of deposit, bankers'
acceptances, commercial paper, short-term corporate securities and repurchase
agreements. For temporary defensive purposes or to meet redemption requests,
the Portfolio may invest without limitation in such securities.

The Portfolio may also invest in investment grade debt securities and may
invest a portion of its total assets in debt securities rated below investment
grade (commonly known as "junk bonds"). The price of a bond generally
fluctuates with changes in interest rates, rising when interest rates fall and
falling when interest rates rise.

The Portfolio may also engage in a variety of investment management practices
such as buying and selling options and futures contracts and engaging in
foreign currency exchange contracts.

Certain investment strategies and instruments which may be employed by the
Portfolio (such as the purchase and sale of options, futures contracts, foreign
securities, securities loans, convertible securities, borrowings, repurchase
agreements, illiquid securities, forward commitments, zero-coupon bonds,
derivatives, United States Government securities, foreign currency
transactions, passive foreign investment companies, payment-in-kind bonds, and
investment grade and lower quality fixed-income securities) are discussed under
the caption "Investment Strategies" below and in the Statement of Additional
Information.

EQ/PUTNAM INVESTORS GROWTH PORTFOLIO

In analyzing potential investments, the Adviser considers three main factors:
(i) the general outlook of the economy; (ii) a study of various industries to
determine those with the best possibilities for long-term growth; and (iii) a
detailed study of what appear to be the most promising individual companies. In
evaluating individual companies, the Adviser gives more weight to growth
potential characteristics than to dividend income. In particular, the Adviser
believes that evaluating a company's probable future earnings, dividends,
financial strength, working assets and competitive position may be more
profitable in the long run than seeking current dividend income.

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small to medium-sized companies having a proprietary product or profitable
market niche and the potential to grow very rapidly. The Adviser believes that
such small to medium-sized companies may present greater opportunities for
capital appreciation because of their high potential earnings growth, but also
may involve greater risk.

At times, the Adviser may judge that conditions in the securities markets may
make pursuing the Portfolio's basic investment strategy inconsistent with the
best interests of the Portfolio's shareholders. At such times, the Adviser may
temporarily use alternative strategies that are primarily designed to reduce
fluctuations in the value of the Portfolio's assets. In implementing these
defensive strategies, the Portfolio may invest, without limit, in debt
securities, preferred stocks, United States government and agency obligations,
cash or money market instruments, or may invest in any other securities the
Adviser considers consistent with such defensive strategies. It is impossible
to predict when, or for how long, the Adviser will use these alternative
defensive strategies.

The Portfolio may also engage in a variety of investment management practices
such as buying and selling options and futures contracts and entering into
foreign currency exchange contracts.

EQ/PUTNAM INTERNATIONAL EQUITY PORTFOLIO

The Adviser believes that the securities markets of many countries move
relatively independently of one another because business cycles and other
economic or political events that influence one country's securities markets
may have little effect on securities markets in other countries. By investing
in a diversified portfolio of securities of issuers located in different
foreign countries, the Adviser attempts to reduce the risks associated with
being invested in the securities of issuers within the economy of only one
country. Countries that the Adviser believes offer attractive opportunities for
investment may change from time to time.

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but whose market value per share is considered by the Adviser to be
undervalued. The Portfolio also may invest in small and relatively less
well-known companies that meet these characteristics.

INVESTMENT STRATEGIES

In addition to making investments directly in securities, to the extent
described above and below, each of the Portfolios, for example, may purchase
and sell call and put options (except for Lazard Small Cap Value Portfolio and
MFS Research Portfolio), engage in transactions in futures contracts and
related options (except for Lazard Large Cap Value Portfolio and Lazard Small
Cap Value Portfolio), and engage in forward foreign currency exchange
transactions (except for BT Equity 500 Index Portfolio, BT Small Company Index
Portfolio, Lazard Large Cap Value Portfolio, Lazard Small Cap Value Portfolio,
and MFS Research Portfolio). They may also enter into repurchase agreements and
borrow funds under certain limited circumstances. In addition, each Portfolio
may engage in other types of investment strategies as described below. Each
Portfolio may invest in or utilize any of these investment strategies and
instruments or engage in any of these practices except where otherwise
prohibited by law or the Portfolio's own investment restrictions. Portfolios
that anticipate committing 5% or more of their net assets to a particular type
of investment strategy or instruments are specifically referred to in the
descriptions below of such investment strategy or instrument. Certain
investment strategies and instruments and the risks related to them are
summarized below and certain of these strategies and instruments are described
in more detail in the Statement of Additional Information.

Asset-Backed Securities. The BT Equity 500 Index Portfolio, BT Small Company
Index Portfolio, BT International Equity Index Portfolio, JPM Core Bond
Portfolio, MFS Emerging Growth Companies Portfolio, and Morgan Stanley Emerging
Markets Equity Portfolio may invest in asset-backed securities. These
asset-backed securities, issued by trusts and special purpose corporations, are
collateralized by a pool of assets, such as credit card or automobile loans,
home equity loans or computer leases, and represent the obligations of a number
of different parties. Asset-backed securities present certain risks. For
instance, in the case of credit card receivables, these securities may not have
the benefit of any security interest in the related collateral. Due to the
possibility that prepayments (on automobile loans and other collateral) will
alter the cash flow on asset-backed securities, it is not possible to determine
in advance the actual final maturity date or average life. Faster prepayment
will shorten the average life and slower prepayments will lengthen it. However,
it is possible to determine what the range of that movement could be and to
calculate the effect that it will have on the price of the security. In
selecting these securities, the Adviser will look for those securities that
offer a higher yield to compensate for any variation in average maturity.

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Equity Portfolio may not exceed 33 1/3% of each Portfolio's total assets. The
Lazard Large Cap Value Portfolio may borrow for leveraging purposes (in order
to increase its investment in portfolio securities) to the extent that the
amount so borrowed does not exceed 33 1/3% of the Portfolio's total assets.
Leveraging exaggerates the effect on net asset value of any increase or
decrease in market value of the Lazard Large Cap Value Portfolio's investment.
The Lazard Large Cap Value Portfolio may also borrow up to 10% of its total
assets for temporary or emergency purposes. Borrowing for the Lazard Small Cap
Value Portfolio may not exceed 15% of its total assets for temporary or
emergency purposes, including to meet redemptions (otherwise such borrowings
may not exceed 5% of the value of the Portfolio's total assets). Borrowings for
the EQ/Putnam Growth & Income Value Portfolio, the EQ/Putnam Investors Growth
Portfolio and EQ/Putnam International Equity Portfolio may not exceed 10% of
each Portfolio's total assets. Each Portfolio may pledge its assets to secure
these permissible borrowings. No Portfolio, except the Lazard Large Cap Value
Portfolio, may purchase additional securities when its borrowings exceed 5% of
its total assets. See also "Reverse Repurchase Agreements" for information
concerning an investment technique that may be deemed to involve a borrowing.
Further information concerning each Portfolio's fundamental policy with respect
to borrowings is provided in the Statement of Additional Information.

Convertible Securities. Each of the Portfolios may invest in convertible
securities, including both convertible debt and convertible preferred stock.
Such securities may be converted into shares of the underlying common stock at
either a stated price or stated rate. Because of this feature, convertible
securities enable an investor to benefit from increases in the market price of
the underlying common stock. Convertible securities provide higher yields than
the underlying common stocks, but generally offer lower yields than
nonconvertible securities of similar quality. Like bonds, the value of
convertible securities fluctuates in relation to changes in interest rates and,
in addition, fluctuates in relation to the underlying common stock. Subsequent
to purchase by a Portfolio, convertible securities may cease to be rated or a
rating may be reduced below the minimum required for purchase by that
Portfolio. Neither event will require sale of such securities, although each
Adviser will consider such event in its determination of whether a Portfolio
should continue to hold the securities.

Derivatives. Each Portfolio (except the MFS Research Portfolio) may invest in
one or more types of derivatives. Derivatives are financial products or
instruments that derive their value from the value of one or more underlying
assets, reference rates or indices. Derivatives include, but are not limited
to, the following: asset-backed securities, collateralized mortgage
obligations, floaters, futures, hybrid instruments, inverse floaters,
mortgage-backed securities, options, stripped mortgage-backed securities,
structured notes and swaps. Further information about these instruments and the
risks involved in their use are contained under the description of each of
these instruments in this section or the Statement of Additional Information.

Floaters and Inverse Floaters. The Lazard Large Cap Value Portfolio, the Lazard
Small Cap Value Portfolio and Morgan Stanley Emerging Markets Equity Portfolio
each may invest in floaters, which are fixed-income securities with a floating
or variable rate of interest, i.e., the rate of interest varies with changes in
specified market rates or indices, such as the prime rate, or at specified
intervals. Certain floaters may carry a demand feature that permits the holder
to tender them back to the issuer of the underlying instrument, or to a third
party, at par value prior to maturity. When the demand feature of certain
floaters represents an obligation of a foreign entity, the demand feature will
be subject to certain risks discussed under "Foreign Securities".

In addition, the Morgan Stanley Emerging Markets Equity Portfolio may invest in
inverse floating rate obligations which are fixed-income securities that have
coupon rates that vary inversely at a multiple of a designated floating rate,
such as London Inter-Bank Offered Rate ("LIBOR"). Any rise in the reference
rate of an inverse floater (as a consequence of an increase in interest rates)
causes a drop in the coupon rate while any drop in the reference rate of an
inverse floater causes an increase in the coupon rate. Inverse floaters may
exhibit substantially greater price volatility than fixed rate obligations
having similar credit quality, redemption provisions and maturity, and inverse
floater collateralized mortgage obligations ("CMOs") exhibit greater price
volatility than the majority of mortgage-related securities. In addition,

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some inverse floater CMOs exhibit extreme sensitivity to changes in
prepayments. As a result, the yield to maturity of an inverse floater CMO is
sensitive not only to changes in interest rates but also to changes in
prepayment rates on the related underlying mortgage assets.

Foreign Securities. Foreign investments involve certain risks that are not
present in domestic securities. Because each of the Portfolios (except the BT
Equity 500 Index Portfolio, BT Small Company Index Portfolio and Lazard Small
Cap Value Portfolio) may purchase securities denominated in foreign currencies,
a change in the value of any such currency against the United States dollar
will result in a change in the United States dollar value of a Portfolio's
assets and income. In addition, although a portion of a Portfolio's investment
income may be received or realized in such currencies, the Portfolio will be
required to compute and distribute its income in United States dollars.
Therefore, if the exchange rate for any such currency declines after a
Portfolio's income has been earned and computed in United States dollars but
before conversion and payment, the Portfolio could be required to liquidate
portfolio securities to make such distributions.

The value of foreign investments and the investment income derived from them
may also be affected unfavorably by changes in currency exchange control
regulations. Although the Portfolios will invest only in securities denominated
in foreign currencies that are fully exchangeable into United States dollars
without legal restriction at the time of investment, there can be no assurance
that currency controls will not be imposed subsequently. In addition, the value
of foreign fixed income investments may fluctuate in response to changes in
United States and foreign interest rates.

There may be less information publicly available about a foreign issuer than
about a United States issuer, and a foreign issuer is not generally subject to
accounting, auditing and financial reporting standards and practices comparable
to those in the United States. Foreign stock markets are generally not as
developed or efficient as, and may be more volatile than, those in the United
States. While growing in volume, they usually have substantially less volume
than United States markets and a Portfolio's investment securities may be less
liquid and subject to more rapid and erratic price movements than securities of
comparable United States companies. Equity securities may trade at
price/earnings multiples higher than comparable United States securities and
such levels may not be sustainable. There is generally less government
supervision and regulation of foreign stock exchanges, brokers and listed
companies than in the United States. Moreover, settlement practices for
transactions in foreign markets may differ from those in United States markets.
Such differences may include delays beyond periods customary in the United
States and practices, such as delivery of securities prior to receipt of
payment, which increase the likelihood of a "failed settlement." Failed
settlements can result in losses to a Portfolio. In less liquid and well
developed stock markets, such as those in some Asian and Latin American
countries, volatility may be heightened by actions of a few major investors.
For example, substantial increases or decreases in cash flows of mutual funds
investing in these markets could significantly affect stock prices and,
therefore, share prices.

Foreign brokerage commissions, custodial expenses and other fees are also
generally higher than for securities traded in the United States. Consequently,
the overall expense ratios of international or global funds are usually
somewhat higher than those of typical domestic stock funds.

In addition, investment in foreign securities may also include the risk of
expropriation by a foreign government.

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Moreover, investments in foreign government debt securities, particularly those
of emerging market country governments, involve special risks. Certain emerging
market countries have historically experienced, and may continue to experience,
high rates of inflation, high interest rates, exchange rate fluctuations, large
amounts of external debt, balance of payments and trade difficulties and
extreme poverty and unemployment. The issuer or governmental authority that
controls the repayment of an emerging market country's debt may not be able or
willing to repay the principal and/or interest when due in accordance with the
terms of such debt. A debtor's willingness or ability to repay principal and
interest due in a timely manner may be affected by, among other factors, its
cash flow situation, and, in the case of a government debtor, the extent of its
foreign reserves, the availability of sufficient foreign exchange on the date a
payment is due, the relative size of the debt service burden to the economy as
a whole and the political constraints to which a government debtor may be
subject. Government debtors may default on their debt and may also be dependent
on expected disbursements from foreign governments, multilateral agencies and
others abroad to reduce principal and interest arrearages on their debt.
Holders of government debt may be requested to participate in the rescheduling
of such debt and to extend further loans to government debtors.

Certain Portfolios may invest in the following types of foreign securities or
engage in the following types of transactions related to foreign securities.

Brady Bonds. The JPM Core Bond Portfolio, MFS Emerging Growth Companies
Portfolio and Morgan Stanley Emerging Markets Equity Portfolio each may invest
in "Brady Bonds," which are fixed-income securities created through the
exchange of existing commercial bank loans to foreign entities for new
obligations in connection with debt restructuring under a plan introduced by
Nicholas F. Brady when he was the United States Secretary of the Treasury.
Brady Bonds have been issued only recently, and, accordingly, do not have a
long payment history. They may be collateralized or uncollateralized and issued
in various currencies (although most are United States dollar-denominated) and
they are actively traded in the over-the-counter ("OTC") secondary market. Each
Portfolio will invest in Brady Bonds only if they are consistent with quality
specifications established from time to time by the Adviser to that Portfolio.

Foreign Currency Transactions. Each of the Portfolios (except the BT Equity 500
Index Portfolio, BT Small Company Index Portfolio and Lazard Small Cap Value
Portfolio) may purchase foreign currency on a spot (or cash) basis. In
addition, each of the Portfolios (except the BT Equity 500 Index Portfolio, BT
Small Company Index Portfolio, the Lazard Large Cap Value Portfolio, the Lazard
Small Cap Value Portfolio, and MFS Research Portfolio) may enter into contracts
to purchase or sell foreign currencies at a future date ("forward contracts").
Each of the Portfolios (except the BT Equity 500 Index Portfolio, BT Small
Company Index Portfolio, Lazard Large Cap Value Portfolio, Lazard Small Cap
Value Portfolio, and MFS Research Portfolio) may also purchase and sell foreign
currency futures contracts and may purchase and sell exchange traded call and
put options on foreign currency futures contracts and on

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foreign currencies. The BT International Equity Index Portfolio, JPM Core Bond
Portfolio, Merrill Lynch World Strategy Portfolio, MFS Emerging Growth
Companies Portfolio, Morgan Stanley Emerging Markets Equity Portfolio,
EQ/Putnam Growth & Income Value Portfolio, EQ/Putnam Investors Growth
Portfolio, and the EQ/Putnam International Equity Portfolio may utilize
over-the-counter ("OTC") options on foreign currency transactions. The Merrill
Lynch World Strategy Portfolio will engage in OTC options on foreign currency
transactions only with financial institutions that have capital of at least $50
million or whose obligations are guaranteed by an entity having capital of at
least $50 million. The MFS Emerging Growth Companies Portfolio may only enter
into forward contracts on currencies in the OTC market. The Advisers may engage
in these transactions to protect against uncertainty in the level of future
exchange rates in connection with the purchase and sale of portfolio securities
("transaction hedging") and to protect the value of specific portfolio
positions ("position hedging").

Hedging transactions involve costs and may result in losses. Each of the
Portfolios (except the BT Equity 500 Index Portfolio, BT Small Company Index
Portfolio, Lazard Small Cap Value Portfolio, and MFS Research Portfolio) may
also write covered call options on foreign currencies to offset some of the
costs of hedging those currencies. A Portfolio will engage in OTC options
transactions on foreign currencies only when appropriate exchange traded
transactions are unavailable and when, in the Adviser's opinion, the pricing
mechanism and liquidity are satisfactory and the participants are responsible
parties likely to meet their contractual obligations. A Portfolio's ability to
engage in hedging and related option transactions may be limited by tax
considerations.

Hybrid Instruments. The Morgan Stanley Emerging Markets Equity Portfolio may
invest in hybrid instruments. Hybrid instruments have recently been developed
and combine the elements of futures contracts or options with those of debt,
preferred equity or a depository instrument. Often these hybrid instruments are
indexed to the price of a commodity, particular currency, or a domestic or
foreign debt or equity securities index. Hybrid instruments may take a variety
of forms, including, but not limited to, debt instruments with interest or
principal payments or redemption terms determined by reference to the value of
a currency or commodity or securities index at a future point in time,
preferred stock with dividend rates determined by reference to the value of a
currency, or convertible securities with the conversion terms related to a
particular commodity. Hybrid instruments may bear interest or pay dividends at
below market (or even relatively nominal) rates. Under certain conditions, the
redemption value of such an instrument could be zero. Hybrid instruments can
have volatile prices and limited liquidity and their use by a Portfolio may not
be successful.

Illiquid Securities. The Lazard Large Cap Value Portfolio and Lazard Small Cap
Value Portfolio each may invest up to 10% of its assets and each of the other
Portfolios may invest up to 15% of its net assets in illiquid securities and
other securities which are not readily marketable, including nonnegotiable time
deposits, certain restricted securities not deemed by the Trust's Board of
Trustees to be liquid, and repurchase agreements with maturities longer than
seven days. Securities eligible for resale pursuant to Rule 144A under the
Securities Act of 1933, as amended, which have been determined by the Board of

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Trustees to be liquid, will not be considered by the Adviser to be illiquid or
not readily marketable and, therefore, are not subject to the 10% or 15% limit.
The inability of a Portfolio to dispose of illiquid or not readily marketable
investments readily or at a reasonable price could impair the Portfolio's
ability to raise cash for redemptions or other purposes. The liquidity of
securities purchased by a Portfolio which are eligible for resale pursuant to
Rule 144A will be monitored by each Portfolio's Adviser on an ongoing basis,
subject to the oversight of the Board of Trustees of the Trust. In the event
that such a security is deemed to be no longer liquid, a Portfolio's holdings
will be reviewed to determine what action, if any, is required to ensure that
the retention of such security does not result in a Portfolio's having more
than 10% or 15% of its assets invested in illiquid or not readily marketable
securities.

Investment Grade and Lower Quality Fixed Income Securities. Each Portfolio may
invest in or hold a portion of its total assets in investment grade or, except
as noted below, lower quality fixed income securities. The BT Equity 500 Index
Portfolio, BT Small Company Index Portfolio, BT International Equity Index
Portfolio, JPM Core Bond Portfolio, Lazard Large Cap Value Portfolio, Lazard
Small Cap Value Portfolio, and Merrill Lynch Basic Value Equity Portfolio each
may only invest in securities that are rated investment grade or higher, and
will, in an orderly manner, dispose of fixed income securities that fall below
investment grade. Investment grade securities are securities rated Baa or
higher by Moody's or BBB or higher by S&P or comparable quality unrated
securities. Investment grade securities while normally exhibiting adequate
protection parameters, have speculative characteristics, and, consequently,
changes in economic conditions or other circumstances are more likely to lead
to a weakened capacity of such issuers to make principal and interest payments
than is the case for higher grade fixed income securities. Lower quality fixed
income securities are securities that are rated in the lower categories by
NRSROs (i.e., Ba or lower by Moody's and BB or lower by S&P) or comparable
quality unrated securities. Such lower quality securities are known as "junk
bonds" and are regarded as predominantly speculative with respect to the
issuer's continuing ability to meet principal and interest payments. (Each
NRSRO's descriptions of these bond ratings are set forth in the Appendix to the
Statement of Additional Information.) Because investment in lower quality
securities involves greater investment risk, achievement of a Portfolio's
investment objective will be more dependent on the Adviser's analysis than
would be the case if that Portfolio were investing in higher quality bonds. In
addition, lower quality securities may be more susceptible to real or perceived
adverse economic and individual corporate developments than would investment
grade bonds. Moreover, the secondary trading market for lower quality
securities may be less liquid than the market for investment grade bonds. This
potential lack of liquidity may make it more difficult for an Adviser to value
accurately certain portfolio securities.

Mortgages and Mortgage-Related Securities. The BT Equity 500 Index Portfolio,
BT Small Company Index Portfolio, BT International Equity Index Portfolio,
JPM Core Bond Portfolio, Lazard Large Cap

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Value Portfolio, Lazard Small Cap Value Portfolio, and Morgan Stanley Emerging
Markets Equity Portfolio may invest in mortgage-related securities (i.e.,
mortgage-backed securities). A mortgage-backed security may be an obligation of
the issuer backed by a mortgage or pool of mortgages or a direct interest in an
underlying pool of mortgages. Some mortgage-backed securities, such as CMOs,
make payments of both principal and interest at a variety of intervals; others
make semiannual interest payments at a predetermined rate and repay principal
at maturity (like a typical bond). Mortgage-backed securities are based on
different types of mortgages including those on commercial real estate or
residential properties.

Stripped mortgage-backed securities are created when a United States government
agency or a financial institution separates the interest and principal
components of a mortgage-backed security and sells them as individual
securities. The holder of the "principal-only" security ("PO") receives the
principal payments made by the underlying mortgage-backed security, while the
holder of the "interest-only" security ("IO") receives interest payments from
the same underlying security. The prices of stripped mortgage-backed securities
may be particularly affected by changes in interest rates. As interest rates
fall, prepayment rates tend to increase, which tends to reduce prices of IOs
and increase prices of POs. Rising interest rates can have the opposite effect.

The JPM Core Bond Portfolio may also invest in directly placed mortgages
including residential mortgages, multifamily mortgages, mortgages on
cooperative apartment buildings, commercial mortgages, and sale-leasebacks.
These investments are backed by assets such as office buildings, shopping
centers, retail stores, warehouses, apartment buildings and single-family
dwellings. In the event that the Portfolio forecloses on any non-performing
mortgage, and acquires a direct interest in the real property, the Portfolio
will be subject to the risks generally associated with the ownership of real
property. There may be fluctuations in the market value of the foreclosed
property and its occupancy rates, rent schedules and operating expenses.

Municipal Securities. The JPM Core Bond Portfolio and the Morgan Stanley
Emerging Markets Equity Portfolio may invest in municipal securities
("municipals"), which are debt obligations issued by local, state and regional
governments that provide interest income that is exempt from federal income
taxes. Municipals include both municipal bonds (those securities with
maturities of five years or more) and municipal notes (those with maturities of
less than five years). Municipal bonds are issued for a wide variety of
reasons: to construct public facilities, such as airports, highways, bridges,
schools, hospitals, mass transportation, streets, water and sewer works; to
obtain funds for operating expenses; to refund outstanding municipal
obligations; and to loan funds to various public institutions and facilities.
Certain industrial development bonds are also considered municipal bonds if
their interest is exempt from federal income tax. Industrial development bonds
are issued by or on behalf of public authorities to obtain funds for various
privately-operated manufacturing facilities, housing, sports arenas, convention
centers, airports, mass transportation systems and water, gas or sewer works.
Industrial development bonds are ordinarily dependent on the credit quality of
a private user, not the public issuer.

Options and Futures Transactions. Each Portfolio (except the Lazard Large Cap
Value Portfolio, Lazard Small Cap Value Portfolio and MFS Research Portfolio)
may utilize futures contracts. Futures contracts (a type of potentially
high-risk security) enable the investor to buy or sell an asset in the future
at an agreed upon price. Each Portfolio (except the Lazard Small Cap Value
Portfolio and MFS Research Portfolio) may also write and purchase put and call
options Options (another type of potentially high-risk security) give the
purchaser of an option the right, but not the obligation, to buy or sell in the
future an asset at a predetermined price during the term of the option. (The
writer of a put or call option would be obligated to buy or sell the underlying
asset at a predetermined price during the term of the option.) Each

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Portfolio will write put and call options only if such options are considered
to be "covered". A call option on a security is covered, for example, when the
writer of the call option owns throughout the option period the security on
which the option is written (or a security convertible into such a security
without the payment of additional consideration). A put option on a security is
covered, for example, when the writer of the put has deposited and maintained
in a segregated account throughout the option period sufficient cash or other
liquid assets in an amount equal to or greater than the exercise price of the
put option. Each Portfolio that is permitted to invest in futures contracts and
related options may utilize such transactions for other than hedging purposes
to the extent that aggregate initial margin deposits and premiums paid do not
exceed 5% of the Portfolio's net assets. No Portfolio will commit more than 5%
of its total assets to premiums when purchasing call or put options. In
addition, the total market value of securities against which a Portfolio may
write call or put options will in no event exceed 25% of its total assets. The
BT Equity 500 Index Portfolio, BT Small Company Index Portfolio and BT
International Equity Index Portfolio each may not at any time commit more than
20% of its net assets to options and futures contracts. The Merrill Lynch Basic
Value Equity Portfolio will not write covered call options on underlying
securities exceeding 15% of the value of its total assets. The MFS Emerging
Growth Companies Portfolio and Morgan Stanley Emerging Markets Equity Portfolio
will not enter a futures contract if the obligations underlying all such
futures contracts would exceed 50% of the value of each such Portfolio's total
assets. The JPM Core Bond Portfolio, Merrill Lynch World Strategy Portfolio,
MFS Emerging Growth Companies Portfolio, Morgan Stanley Emerging Markets Equity
Portfolio, EQ/ Putnam Growth & Income Portfolio, EQ/Putnam Investors Growth
Portfolio, and EQ/Putnam International Equity Portfolio the may utilize OTC put
and call option transactions. Options traded in the OTC market may not be as
actively traded as those on an exchange, so it may be more difficult to value
such options. In addition, it may be difficult to enter into closing
transactions with respect to such options. Such OTC options, and the securities
used as "cover" for such options, may be considered illiquid securities.

Each Portfolio may buy and sell futures and options contracts for any number of
reasons, including: to manage its exposure to changes in securities prices and
foreign currencies; as an efficient means of adjusting its overall exposure to
certain markets; in an effort to enhance income; and to protect the value of
portfolio securities. Each Portfolio may purchase, sell, or write call and put
options and futures contracts on securities, financial indices, and foreign
currencies and options on futures contracts.

The risk of loss in trading futures contracts can be substantial because of the
low margin deposits required and the extremely high degree of leveraging
involved in futures pricing. As a result, a relatively small price movement in
a futures contract may cause an immediate and substantial loss or gain. The
primary risks associated with the use of futures contracts and options are: (i)
imperfect correlation between the change in market value of the stocks held by
a Portfolio and the prices of futures contracts and options; and (ii) possible
lack of a liquid secondary market for a futures contract or an OTC option and
the resulting inability to close a futures position or OTC option prior to its
maturity date.

Payment-in-Kind Bonds. The JPM Core Bond Portfolio, the Morgan Stanley Emerging
Markets Equity Portfolio and EQ/Putnam Growth & Income Value Portfolio may
invest in payment-in-kind bonds. Payment-in-kind bonds allow the issuer, at its
option, to make current interest payments on the bonds either in cash or in
additional bonds. The value of payment-in-kind bonds is subject to greater
fluctuation in response to changes in market interest rates than bonds which
pay interest in cash currently. Payment-in-kind bonds allow an issuer to avoid
the need to generate cash to meet current interest payments. Accordingly, such
bonds may involve greater credit risks than bonds paying interest currently.
Even though such bonds do not pay current interest in cash, the Portfolios are
nonetheless required to accrue interest income on such investments and to
distribute such amounts at least annually to shareholders. Thus, the Portfolios
could be required, at times, to liquidate other investments in order to satisfy
its distribution requirements.

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Repurchase Agreements. Each Portfolio may enter into repurchase agreements with
qualified and Board approved banks, brokerdealers or other financial
institutions as a means of earning a fixed rate of return on its cash reserves
for periods as short as overnight. A repurchase agreement is a contract
pursuant to which a Portfolio, against receipt of securities of at least equal
value including accrued interest, agrees to advance a specified sum to the
financial institution which agrees to reacquire the securities at a mutually
agreed upon time (usually one day) and price. Each repurchase agreement entered
into by a Portfolio will provide that the value of the collateral underlying
the repurchase agreement will always be at least equal to the repurchase price,
including any accrued interest. A Portfolio's right to liquidate such
securities in the event of a default by the seller could involve certain costs,
losses or delays and, to the extent that proceeds from any sale upon a default
of the obligation to repurchase are less than the repurchase price, the
Portfolio could suffer a loss.

Reverse Repurchase Agreements. The BT Equity 500 Index Portfolio, BT Small
Company Index Portfolio, BT International Equity Index Portfolio, the JPM Core
Bond Portfolio, the Lazard Large Cap Value Portfolio, and Morgan Stanley
Emerging Markets Equity Portfolio may each enter into reverse repurchase
agreements with brokers, dealers, domestic and foreign banks or other financial
institutions. In a reverse repurchase agreement, the Portfolio sells a security
and agrees to repurchase it at a mutually agreed upon date and price,
reflecting the interest rate effective for the term of the agreement. It may
also be viewed as the borrowing of money by the Portfolio. The Portfolio's
investment of the proceeds of a reverse repurchase agreement is the speculative
factor known as leverage. The Portfolio may enter into a reverse repurchase
agreement only if the interest income from investment of the proceeds is
greater than the interest expense of the transaction and the proceeds are
invested for a period no longer than the term of the agreement. The Portfolio
will maintain with the custodian a separate account with a segregated portfolio
of unencumbered liquid assets in an amount at least equal to its purchase
obligations under these agreements. If interest rates rise during a reverse
repurchase agreement, it may adversely affect the Portfolio's net asset value.
See "Borrowing" for more information concerning restrictions on borrowing by
each Portfolio.

Securities Loans. The JPM Core Bond Portfolio, MFS Research Portfolio and
Morgan Stanley Emerging Markets Equity Portfolio may each seek to earn
additional income by making secured loans of portfolio securities with a value
up to 33 1/3% of their respective total assets. The BT Equity 500 Index
Portfolio, BT Small Company Index Portfolio, BT International Equity Index
Portfolio, and MFS Emerging Growth Companies Portfolio may lend portfolio
securities in an amount up to 30% of their respective total assets. The
EQ/Putnam Growth & Income Value Portfolio, EQ/Putnam Investors Growth Portfolio
and EQ/Putnam International Equity Portfolio may lend portfolio securities in
an amount up to 25% of their respective total assets. The Merrill Lynch Basic
Value Equity Portfolio and Merrill Lynch World Strategy Portfolio may each lend
portfolio securities in an amount up to 20% of their respective total assets.
The Lazard Large Cap Value Portfolio and Lazard Small Cap Value Portfolio may
each lend portfolio securities in an amount up to 10% of their respective total
assets. All securities loans will be made pursuant to agreements requiring the
loans to be continuously secured by collateral in cash or high-grade debt
obligations at least equal at all times to the market value of the loaned
securities. The borrower pays to the Portfolios an amount equal to any
dividends or interest received on loaned securities. The Portfolios retain all
or a portion of the interest received on investment of cash collateral or
receive a fee from the borrower. Lending portfolio securities involves risks of
delay in recovery of the loaned securities or in some cases loss of rights in
the collateral should the borrower fail financially. Further information
concerning each Portfolio's fundamental policy with respect to loans is
provided in the Statement of Additional Information.

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securities sold short or convertible or exchangeable preferred stocks or debt
securities sold in connection with short sales against the box. Each Portfolio
will endeavor to offset transaction costs associated with short sales against
the box with the income from the investment of the cash proceeds. Not more than
10% of a Portfolio's net assets (taken at current value) may be held as
collateral for short sales against the box at any one time. The extent to which
a Portfolio may make short sales may be limited by Code requirements for
qualification as a regulated investment company.

Structured Notes. The Morgan Stanley Emerging Markets Equity Portfolio may
invest in structured notes, which are derivatives on which the amount of
principal repayment and/or interest payments is based upon the movement of one
or more factors. These factors include, but are not limited to, currency
exchange rates, interest rates (such as the prime lending rate and LIBOR) and
stock indices such as the S&P 500. In some cases, the impact of the movements
of these factors may increase or decrease through the use of multipliers or
deflators. The use of structured notes allows the Portfolio to tailor its
investments to the specific risks and returns the Adviser wishes to accept
while avoiding or reducing certain other risks.

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United States Government Securities. Each Portfolio may invest in debt
obligations of varying maturities issued or guaranteed by the United States
Government, its agencies or instrumentalities ("United States Government
securities"). Direct obligations of the United States Treasury include a
variety of securities that differ in their interest rates, maturities and dates
of issuance. United States Government securities also include securities issued
or guaranteed by government agencies that are supported by the full faith and
credit of the United States (e.g., securities issued by the Government National
Mortgage Association); securities issued or guaranteed by government agencies
that are supported by the ability to borrow from the United States Treasury
(e.g., securities issued by the Federal National Mortgage Association); and
securities issued or guaranteed by government agencies that are only supported
by the credit of the particular agency (e.g., the Tennessee Valley Authority).

Warrants. Warrants are securities that give the holder the right, but not the
obligation to purchase equity issues of the company issuing the warrants, or a
related company, at a fixed price either on a date certain or during a set
period. At the time of issue, the cost of a warrant is substantially less than
the cost of the underlying security itself, and price movements in the
underlying security are generally magnified in the price movements of the
warrant. This effect enables the investor to gain exposure to the underlying
security with a relatively low capital investment but increases an investor's
risk in the event of a decline in the value of the underlying security and can
result in a complete loss of the amount invested in the warrant. In addition,
the price of a warrant tends to be more volatile than, and may not correlate
exactly to, the price of the underlying security. If the market price of the
underlying security is below the exercise price of the warrant on its
expiration date, the warrant will generally expire without value.

Portfolio Turnover. The length of time a Portfolio has held a particular
security is not generally a consideration in investment decisions. A change in
the securities held by a Portfolio is known as "portfolio turnover." Each
Portfolio's turnover rate is not expected to exceed 100% during its first year
of operation. A high turnover rate increases transaction costs (e.g., brokerage
commissions) and increases realized gains and losses.

MANAGEMENT OF THE TRUST

THE BOARD OF TRUSTEES

The Board of Trustees of the Trust provides broad supervision over the business
and affairs of the Portfolios and the Trust as provided in the Trust's Amended
and Restated Declaration of Trust and By-Laws.

THE MANAGER

The Trust is managed by EQ Financial Consultants, Inc. which, subject to the
supervision and direction of the Trustees of the Trust, has overall
responsibility for the general management and administration of the Trust. The
Manager 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"). It is located at 1755 Broadway,
New York, New York 10019. The Manager currently furnishes specialized
investment advice to other clients, including individuals, pension and profit
sharing

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plans, trusts, charitable organizations, corporations and other business
entities. The Manager is a Delaware corporation and an indirect, wholly-owned
subsidiary of Equitable, a New York stock life insurance company.

As compensation for managing the BT Equity 500 Index Portfolio the Trust pays
the Manager a monthly fee at the annual rate of .25% of the Portfolio's average
daily net assets. As compensation for managing the BT Small Company Index
Portfolio the Trust pays the Manager a monthly fee at the annual rate of .25%
of the Portfolio's average daily net assets. As compensation for managing the
BT International Equity Index Portfolio the Trust pays the Manager a monthly
fee at the annual rate of .35% of the Portfolio's average daily net assets. As
compensation for managing the JPM Core Bond Portfolio the Trust pays the
Manager a monthly fee at the annual rate of .45 % of the Portfolio's average
daily net assets. As compensation for managing the Lazard Large Cap Value
Portfolio, Merrill Lynch Basic Value Equity Portfolio, MFS Research Portfolio,
MFS Emerging Growth Companies Portfolio, EQ/Putnam Growth & Income Value
Portfolio, and EQ/Putnam Investors Growth Portfolio the Trust pays the Manager
a monthly fee at the annual rate of .55% of the respective Portfolio's average
daily net assets. As compensation for managing the Lazard Small Cap Value
Portfolio the Trust pays the Manager a monthly fee at an annual rate of .80% of
the Portfolio's average daily net assets. As compensation for managing the
Merrill Lynch World Strategy Portfolio and EQ/Putnam International Equity
Portfolio, the Trust pays the Manager a monthly fee at an annual rate of .70%
of the respective Portfolio's average daily net assets. As compensation for
managing the Morgan Stanley Emerging Markets Equity Portfolio, the Trust pays
the Manager a monthly fee at an annual rate of 1.15% of the Portfolio's average
daily net assets.

The Manager pays the expenses of providing investment advisory services to the
Portfolios, including the fees of the Adviser of each Portfolio.

In addition to the management fees, the Trust pays all expenses not assumed by
the Manager, including, without limitation: the fees and expenses of its
independent accountants and of its legal counsel; the costs of printing and
mailing annual and semi-annual reports to shareholders, proxy statements,
prospectuses, prospectus supplements and statements of additional information,
all to the extent they are sent to existing Contract owners; the costs of
printing registration statements; bank transaction charges and custodian's
fees; any proxy solicitors' fees and expenses; filing fees; any federal, state
or local income or other taxes; any interest; any membership fees of the
Investment Company Institute and similar organizations; fidelity bond and
Trustees' liability insurance premiums; and any extraordinary expenses, such as
indemnification payments or damages awarded in litigation or settlements made.
All general Trust expenses are allocated among and charged to the assets of the
Portfolios of the Trust on a basis that the Trustees deem fair and equitable,
which may be on the basis of relative net assets of each Portfolio or the
nature of the services performed and relative applicability to each Portfolio.
As discussed in greater detail below, under "Distribution of the Trust's
Shares," the Class IB shares may pay for certain distribution related expenses
in connection with activities primarily intended to result in the sale of its
shares.

THE ADVISERS

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For its services, the Manager pays each Adviser an advisory fee based on a
percentage of the average daily net assets of the Portfolio that it advises.
Monthly, with respect to each Portfolio, each Adviser is paid the pro rata
portion of an annual fee, based on the monthly average of the assets of the
Portfolio for which it serves as the Adviser. The Manager will retain, as
compensation for the services described under "The Manager" and to pay its
expenses, the difference between the fees paid to each Adviser and the
management fee of the applicable Portfolio. Each Adviser has agreed that once
the Portfolio has paid the Manager its management fee the Adviser will look
only to the Manager as the party responsible for making the payment of its
advisory fee.

The Advisers are employed for management of the assets of a Portfolio pursuant
to investment advisory agreements approved by the Board of Trustees of the
Trust (including a majority of certain Trustees who are not interested persons
of the Trust or the Manager), and an Adviser's services may be terminated at
any time by the Manager, the Board of Trustees, or the shareholders of an
affected Portfolio.

The Trust has submitted an application requesting an exemptive order from the
Securities and Exchange Commission ("SEC") that would permit the Manager,
subject to certain conditions, and without the approval of shareholders to: (a)
employ a new Adviser or Advisers for any Portfolio pursuant to the terms of a
new Advisory Agreement, in each case either as a replacement for an existing
Adviser or as an additional Adviser; (b) change the terms of any Advisory
Agreement; and (c) continue the employment of an existing Adviser on the same
advisory contract terms where a contract has been assigned because of a change
in control of the Adviser. In such circumstances, shareholders would receive
notice of such action, including the information concerning the Adviser that
normally is provided in the Prospectus. It is uncertain at this time whether
such exemptive relief will be granted by the SEC.

Bankers Trust Company ("Bankers Trust") has been the Adviser to the BT Small
Company Index Portfolio, BT International Equity Index Portfolio and BT Equity
500 Index Portfolio since each Portfolio commenced operations. As compensation
for services as the Adviser to the BT Small Company Index Portfolio, the
Manager pays Bankers Trust a monthly fee at an annual rate equal to .05% of the
Portfolio's average daily net assets. As compensation for services as the
Adviser to the BT International Equity Index Portfolio, the Manager pays
Bankers Trust a monthly fee of an annual rate equal to .15% of the Portfolio's
average daily net assets. As compensation for services as the Adviser to the BT
Equity 500 Index Portfolio, the Manager pays Bankers Trust a monthly fee of an
annual rate equal to .05% of the Portfolio's average daily net assets.

Bankers Trust is a New York banking corporation with executive offices at 130
Liberty Street (One Bankers Trust Plaza), New York, New York 10006. Bankers
Trust is a wholly-owned subsidiary of Bankers Trust New York Corporation.
Bankers Trust conducts a variety of general banking and trust activities and is
a major wholesale supplier of financial services to the international and
domestic institutional markets. As of September 30, 1997, Bankers Trust New
York Corporation was the seventh largest bank holding company in the United
States with total assets of approximately $129 billion. Bankers Trust is a
worldwide merchant bank dedicated to servicing the needs of corporations,
governments, financial institutions and private clients through a global
network of over 80 offices in more than 50 countries. Investment management is
a core business of Bankers Trust built on a tradition of excellence from its
roots as a trust bank founded in 1903. The scope of Bankers Trust's management
capability is unique due to its leadership positions in both active and passive
quantitative management and its presence in major equity and fixed income
markets around the world. Bankers Trust is one of the nation's largest and most
experienced investment managers with approximately $240 billion in assets under
management globally.

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the state of Delaware. JPM & Co. through J.P. Morgan and other subsidiaries,
offers a wide range of services to governmental, institutional, corporate and
individual customers and acts as investment adviser to individual and
institutional clients with combined assets under management of over $234
billion (of which J.P. Morgan advises over $181 billion). In particular, J.P.
Morgan, 522 Fifth Avenue, New York, New York 10036, provides investment
management services to public, corporate and union employee benefit plans, as
well as foundations, endowments, insurance companies, state and local
governments and their agencies, and affiliates of J.P. Morgan.

Lazard Asset Management ("LAM") has been the Adviser to the Lazard Large Cap
Value Portfolio and the Lazard Small Cap Value Portfolio since each Portfolio
commenced operations. As compensation for services as the Adviser to the Lazard
Large Cap Value Portfolio, the Manager pays LAM a monthly fee at an annual rate
equal to: .425% of the Portfolio's average daily net assets up to and including
$50 million; .40% of the Portfolio's average daily net assets over $50 million
and up to and including $250 million; .375% of the Portfolio's average daily
net assets over $250 million and up to and including $400 million; and .35% of
the Portfolio's average daily net assets in excess of $400 million. As
compensation for services as the Adviser to the Lazard Small Cap Value
Portfolio, the Manager pays LAM a monthly fee of an annual rate equal to: .65%
of the Portfolio's average daily net assets up to and including $250 million;
.55% of the Portfolio's average daily net assets over $250 million and up to
and including $500 million; and .50% of the Portfolio's average daily net
assets in excess of $500 million.

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MLAM a monthly fee at an annual rate equal to: .50% of the Portfolio's average
daily net assets up to and including $100 million; .45% of the Portfolio's
average daily net assets over $100 million and up to and including $300
million; and .35% of the Portfolio's average daily net assets in excess of $300
million. As compensation for services as the Merrill Lynch Basic Value Equity
Portfolio's Adviser, the Manager pays MLAM a monthly fee at an annual rate
equal to: .40% of the Portfolio's average daily net assets up to and including
$100 million; .375% of the Portfolio's average daily net assets over $100
million and up to and including $300 million; and .35% of the Portfolio's
average daily net assets in excess of $300 million.

MLAM is an indirect wholly-owned subsidiary of Merrill Lynch & Co., Inc., a
financial services holding company and the parent of Merrill Lynch, Pierce,
Fenner& Smith Incorporated. The general partner of MLAM is Princeton Services,
Inc., a wholly-owned subsidiary of Merrill Lynch & Co., Inc. MLAM and its
affiliates act as the manager for more than 130 registered investment
companies. MLAM also offers portfolio management and portfolio analysis
services to individuals and institutions. As of December 31, 1996, the Adviser
and its affiliates had a total of approximately $234 billion in investment
company and other portfolio assets under management, including assets of
certain affiliates of MLAM.

Massachusetts Financial Services Company ("MFS") has been the Adviser to the
MFS Research Portfolio and the MFS Emerging Growth Companies Portfolio since
each Portfolio commenced operations. As compensation for services as the
Adviser to each of those Portfolios, the Manager pays MFS a monthly fee at an
annual rate equal to: .40% of the respective Portfolio's average daily net
assets up to and including $150 million; .375% of the respective Portfolio's
average daily net assets over $150 million and up to and including $300
million; and .35% of the respective Portfolio's average daily net assets in
excess of $300 million. MFS has agreed to waive its advisory fees for the first
six months after the commencement of each Portfolio's investment operations.

MFS is America's oldest mutual fund organization. MFS is located at 500
Boylston Street, Boston, MA 02116. MFS and its predecessor organizations have a
history of money management dating from 1924 and the founding of the first
mutual fund in the United States, Massachusetts Investors Trust. As of January
31, 1996, MFS managed more than $54.0 billion on behalf of over 2.3 million
investors accounts. MFS is a subsidiary of Sun Life of Canada (United States),
which, in turn, is a wholly-owned subsidiary of Sun Life Assurance Company of
Canada. MFS has established a strategic alliance with Foreign & Colonial
Management Ltd. ("Foreign & Colonial"). Foreign & Colonial is a subsidiary of
two of the world's oldest financial services institutions, the London-based
Foreign & Colonial Investment Trust PLC, which pioneered the idea of investment
management in 1868, and HYPO-BANK (Bayerische Hypotheken-und Weschsel-Bank AG),
the oldest publicly listed bank in Germany, founded in 1835. As part of this
alliance, the portfolio managers and investment analysts of MFS and Foreign &
Colonial share their views on a variety of investment related issues, such as
the economy, securities markets, portfolio securities and their issuers,
investment recommendations, strategies and techniques, risk analysis, trading
strategies and other portfolio management matters. The portfolio securities of
the MFS Research Portfolio are selected by a committee of investment research
analysts. This committee includes investment analysts employed not only by MFS
but also by MFS International (U.K.) Limited, a wholly owned subsidiary of MFS.
The assets of the MFS Research Portfolio are allocated among industries by the
analysts acting together as a group. Individual analysts are then responsible
for selecting what they view as the securities best suited to meet the
investment objectives of the MFS Research Portfolio within their assigned
industry responsibility. Since it commenced operations the MFS Emerging Growth
Companies Portfolio has been managed by John W. Ballen, a Senior Vice President
of MFS, who has been employed by the Adviser as a portfolio manager since 1984,
and Toni K. Shimura, a Vice President of MFS, who has been employed as a
portfolio manager by the Adviser since 1987.

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Morgan Stanley Asset Management Inc. ("MSAM") has been the Adviser to the
Morgan Stanley Emerging Markets Equity Portfolio since the Portfolio commenced
operations. MSAM is located at 1221 Avenue of the Americas, New York, NY 10020.
As compensation for services as the Portfolio's Adviser, the Manager pays MSAM
a monthly fee at an annual rate equal to: 1.15% of the Portfolio's average
daily net assets up to and including $100 million; .90% of the Portfolio's
average daily net assets over $100 million and up to and including $150
million; .80% of the Portfolio's average daily net assets over $150 million and
up to and including $200 million; .60% of the Portfolio's average daily net
assets over $200 million and up to and including $500 million; and .40% of the
Portfolio's average daily net assets in excess of $500 million.

MSAM conducts a worldwide investment management business, providing a broad
range of portfolio management services to customers in the United States and
abroad. MSAM is a wholly owned subsidiary of Morgan Stanley, Dean Witter,
Discover & Co. ("MSDWD"), which is a publicly owned financial services
corporation listed on the New York and Pacific stock exchanges. MSAM serves as
an investment adviser to numerous open-end and closed-end investment companies.
As of September 30, 1997, MSAM, together with its affiliated asset management
company, Miller Anderson & Sherrerd, LLP, had assets under management of
approximately $144.1 billion.

Putnam Investment Management, Inc. ("Putnam Management") has been the Adviser
to the EQ/Putnam Growth & Income Value Portfolio, EQ/Putnam International
Equity Portfolio and EQ/Putnam Investors Growth Portfolio since each Portfolio
commenced operations. As compensation for services as the Adviser to the
EQ/Putnam Growth & Income Portfolio and EQ/Putnam Investors Growth Portfolio,
the Manager pays Putnam Management a monthly fee at an annual rate equal to:
.50% of the respective Portfolio's average daily net assets up to and including
$150 million; .45% of the respective Portfolio's average daily net assets over
$150 million and up to and including $300 million; and .35% of the respective
Portfolio's average daily net assets in excess of $300 million. As compensation
for services as the EQ/Putnam International Equity Portfolio's Adviser, the
Manager pays Putnam Management a monthly fee at the annual rate equal to: .65%
of the Portfolio's average daily net assets up to and including $150 million;
.55% of the Portfolio's average daily net assets over $150 million and up to
and including $300 million; and .45% of the Portfolio's average daily net
assets in excess of $300 million.

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by Putnam Management as an investment professional since December, 1992.
Prior to December, 1992, Mr. England was an investment officer at Aetna
Equity Investors. Mr. Herrero has been employed by Putnam Management as an
investment professional since 1987. Mr. Santos has been employed by Putnam
Management as an investment professional since 1988.

THE ADMINISTRATOR

Pursuant to an agreement ("Mutual Funds Service Agreement"), Chase Global Funds
Services Company (the "Administrator") assists the Manager in the performance
of its administrative responsibilities to the Trust and provides the Trust with
other necessary administrative, fund accounting and compliance services. In
addition, the Administrator makes available the office space, equipment,
personnel and facilities required to provide such services to the Trust. For
these services, the Trust pays the Administrator a monthly fee at the annual
rate of .0525 of 1% of the total Trust assets, plus $25,000 for each Portfolio,
until the total Trust assets reach $2.0 billion, and when the total Trust
assets exceed $2.0 billion: .0425 of 1% of the first $0.5 billion of the total
Trust assets; .035 of 1% of the next $2.0 billion of the total Trust assets;
.025 of 1% of the next $1.0 billion of the total Trust assets; .015 of 1% of
the next $2.5 billion of the total Trust assets; .01 of 1% of the total Trust
assets in excess of $6.0 billion; and except that the annual fee payable to
Chase with respect to any Portfolio which commences operation after July 1,
1997 and whose assets do not exceed $200 million shall be computed at the
annual rate of .0525% of the Portfolio's total assets plus $25,000.

THE TRANSFER AGENT

Equitable serves as the transfer agent and dividend disbursing agent of the
Trust and receives no compensation for serving in such capacity.

EXPENSE LIMITATION AGREEMENT

In the interest of limiting expenses of the Portfolios, the Manager has entered
into an expense limitation agreement with the Trust, with respect to each
Portfolio ("Expense Limitation Agreements"), pursuant to which the Manager has
agreed to waive or limit its fees and to assume other expenses so that the
total annual operating expenses of each Portfolio are limited to: .55% of the
average daily net assets of the BT Equity 500 Index Portfolio; .60% of the
average daily net assets of the BT Small Company Index Portfolio; .80% of the
average daily net assets of the BT International Equity Index Portfolio; .80%
of the average daily net assets of the JPM Core Bond Portfolio; .85% of the
respective average daily net assets of the Merrill Lynch Basic Value Equity,
MFS Research, MFS Emerging Growth Companies, EQ/Putnam Growth & Income Value,
and EQ/Putnam Investors Growth Portfolios; .90% of the average daily net assets
of the Lazard Large Cap Value Portfolio; 1.20% of the average daily net assets
of the Lazard Small Cap Value Portfolio; 1.20% of the respective average daily
net assets of the Merrill Lynch World Strategy and EQ/Putnam International
Equity Portfolios; and 1.75% of the Morgan Stanley Emerging Markets Equity
Portfolio's average daily net assets.

Each Portfolio may at a later date reimburse to the Manager the management fees
waived or limited and other expenses assumed and paid by the Manager pursuant
to the Expense Limitation Agreement provided such Portfolio has reached a
sufficient asset size to permit such reimbursement to be made without causing
the total annual expense ratio of each Portfolio to exceed the percentage
limits stated above. Consequently, no reimbursement by a Portfolio will be made
unless: (i) the Portfolio's assets exceed $100 million; (ii) the Portfolio's
total annual expense ratio is less than the respective percentages stated
above; and (iii) the payment of such reimbursement has been approved by the
Trust's Board of Trustees on a quarterly basis.

BROKERAGE PRACTICES

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TRANSACTIONS WITH AFFILIATES

In December 1984, Equitable acquired 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
security execution and clearance services to financial intermediaries including
broker-dealers and banks. To the extent permitted by law, the Trust 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.
The Adviser to BT Equity 500 Index Portfolio, BT Small Company Index Portfolio
and BT International Equity Index Portfolio may execute portfolio transactions
through certain affiliates of Bankers Trust. The Adviser to the JPM Core Bond
Portfolio may execute portfolio transactions through certain affiliates of J.P.
Morgan. The Adviser to the Lazard Large Cap Value Portfolio and Lazard Small
Cap Value Portfolio may execute portfolio transactions through certain
affiliates of LAM. The Adviser to the Merrill Lynch Basic Value Equity
Portfolio and Merrill Lynch World Strategy Portfolio may execute portfolio
transactions through certain of the Adviser's affiliates. The Adviser to the
Morgan Stanley Emerging Markets Equity Portfolio may execute portfolio
transactions through certain affiliates.

The 1940 Act generally prohibits the Trust from engaging in principal
securities transactions with an affiliate of the Manager or Advisers unless
pursuant to an exemptive order from the SEC. The Trust may apply for such
exemptive relief. The Trust has adopted procedures, prescribed by Section
17(e)(2)(A) of the 1940 Act and Rule 17e-1 thereunder, which are reasonably
designed to provide that any commission it pays to affiliates of the Manager or
Advisers does not exceed the usual and customary broker's commission. In
addition, the Trust will adhere to Section 11(a) of the 1934 Act and any
applicable rules thereunder governing floor trading. The Trust has adopted
procedures permitting it to purchase securities, under certain restrictions
prescribed by a rule under the 1940 Act, in a public offering in which an
affiliate of the Manager or Advisers is an underwriter.

DESCRIPTION OF THE TRUST AND TRUST'S SHARES

THE TRUST

The Trust is a registered open-end management investment company that was
organized as a Delaware business trust on October 31, 1996. The Trust currently
is divided into 18 portfolios, each of which has Class IA and Class IB shares.
The Board of Trustees may establish additional portfolios and additional
classes of shares.

CHARACTERISTICS OF TRUST'S SHARES

The Board of Trustees of the Trust has authority to issue an unlimited number
of shares of beneficial interest, without par value. Each share of each class
of a Portfolio shall be entitled to one vote (or fraction thereof in respect of
a fractional share) on matters that such shares (or class of shares) shall be
entitled to vote. Shareholders of each Portfolio shall vote together on any
matter, except to the extent otherwise required by the 1940 Act, or when the
Board of Trustees of the Trust has determined that the matter affects only the
interest of shareholders of one or more classes, in which case only the
shareholders of such class or classes shall be entitled to vote thereon. Any
matter shall be deemed to have been effectively acted upon with respect to each
Portfolio if acted upon as provided in Rule 18f-2 under the 1940 Act, or any
successor rule, and in the Amended and Restated Declaration of Trust. The Trust
is not required to hold annual shareholder meetings, but special meetings may
be called for purposes such as electing or removing Trustees, changing
fundamental policies or approving an investment management or advisory
agreement.

35
<PAGE>
class shall have a different designation; (b) each class of shares shall bear
its "Class Expenses;" (c) each class shall have exclusive voting rights on any
matter submitted to shareholders that relates solely to its distribution
arrangements; (d) each class shall have separate voting rights on any matter
submitted to shareholders in which the interests of one class differ from the
interests of any other class; (e) each class may have separate exchange
privileges, although exchange privileges are not currently contemplated; and
(f) each class may have different conversion features, although a conversion
feature is not currently contemplated. Expenses currently designated as "Class
Expenses" by the Trust's Board of Trustees under the plan pursuant to Rule
18f-3 are currently limited to payments made to the Distributors for the Class
IB shares, pursuant to the Distribution Plan for the Class IB shares adopted
pursuant to Rule 12b-1 under the 1940 Act.

PURCHASE AND REDEMPTION OF SHARES

EQ Financial, 1755 Broadway, New York, New York, 10019, formerly Equico
Securities, Inc., a wholly-owned subsidiary of Equitable, serves as one of the
Distributors for the Trust's Class IB shares pursuant to a distribution
agreement with the Trust. EDI, 1290 Avenue of the Americas, New York, New York,
10104, a Delaware corporation and an indirect wholly-owned subsidiary of
Equitable also serves as one of the Distributors for the Trust's Class IB
shares pursuant to a distribution agreement with the Trust. Class IB shares are
offered and redeemed without a sales charge, at net asset value. The price at
which a purchase or redemption is effected is based on the next calculation of
net asset value after an order is placed by an insurance company investing in
or redeeming from the Trust. Net asset value per share is calculated for
purchases and redemption of shares of each Portfolio by dividing the value of
total Portfolio assets, less liabilities (including Trust expenses, which are
accrued daily), by the total number of outstanding shares of that Portfolio.
The net asset value per share of each Portfolio is determined each business day
at 4:00 p.m. Eastern time. Net asset value per share is not calculated on
national business holidays.

The Trust also has distribution agreements for its Class IB shares with EQ
Financial and EDI pursuant to which each of them acts as the Distributor for
the Class IB shares of the Trust.

The Trust has adopted the Distribution Plan pursuant to Rule 12b-1 under the
1940 Act for the Class IB shares of the Trust. Pursuant to the Distribution
Plan, the Trust compensates the Distributors from assets attributable to the
Class IB shares for services rendered and expenses borne in connection with
activities primarily intended to result in the sale of the Trust's Class IB
shares. It is anticipated that a portion of the amounts received by the
Distributors will be used to defray various costs incurred or paid by the
Distributors in connection with the printing and mailing of Trust prospectuses,
statements of additional information, any supplements thereto and shareholder
reports and holding seminars and sales meetings with wholesale and retail sales
personnel designed to promote the distribution of Class IB shares. The
Distributors may also use a portion of the amounts received to provide
compensation to financial intermediaries and third-party broker-dealers for
their services in connection with the distribution of Class IB shares.

The Distribution Plan provides that the Trust, on behalf of each Portfolio, may
pay annually up to 0.50% 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 Class IB shares. However, under the Distribution
Agreements, payments to the Distributors for activities pursuant to the
Distribution Plan are limited to payments at an annual rate equal to 0.25% of
average daily net assets of a Portfolio attributable to its Class IB shares.
Under terms of the Distribution Plan and the Distribution Agreements, each
Portfolio is authorized to make payments monthly to the Distributors which may
be used to pay or reimburse entities providing distribution and shareholder
servicing with respect to the Class IB shares for such entities' fees or
expenses incurred or paid in that regard.

36
<PAGE>
limitation: (a) the printing and mailing of Trust prospectuses, statements of
additional information, any supplements thereto and shareholder reports for
prospective Contract owners with respect to the Class IB shares of the Trust;
(b) those relating to the development, preparation, printing and mailing of
advertisements, sales literature and other promotional materials describing
and/or relating to the Class IB shares of the Trust; (c) holding seminars and
sales meetings designed to promote the distribution of Trust Class IB shares;
(d) obtaining information and providing explanations to wholesale and retail
distributors of Contracts regarding Trust investment objectives and policies
and other information about the Trust and its Portfolios, including the
performance of the Portfolios; (e) training sales personnel regarding the Class
IB shares of the Trust; and (f) financing any other activity that the
Distributors determine is primarily intended to result in the sale of Class IB
shares.

All shares are purchased and redeemed in accordance with the Trust's Amended
and Restated Declaration of Trust and By-Laws. Sales and redemptions of shares
of the same class by the same shareholder on the same day will be netted for
each Portfolio. All redemption requests will be processed and payment with
respect thereto will normally be made within seven days after tenders. The
Trust may suspend redemption, if permitted by the 1940 Act, for any period
during which the New York Stock Exchange is closed or during which trading is
restricted by the SEC or the SEC declares that an emergency exists. Redemption
may also be suspended during other periods permitted by the SEC for the
protection of the Trust's shareholders. If the Board of Trustees determines
that it would be detrimental to the best interest of the Trust's remaining
shareholders to make payment in cash, the Trust may pay redemption proceeds in
whole or in part by a distribution-in-kind of readily marketable securities.

HOW ASSETS ARE VALUED

Values are determined according to accepted accounting practices and all laws
and regulations that apply. The assets of each Portfolio are generally valued
as follows:

o Stocks and debt securities which mature in more than 60 days are
valued on the basis of market quotations.

o Foreign securities not traded directly in the United States are
valued at representative quoted prices in the currency of the country
of origin. Foreign currency amounts are translated into United States
dollars at the bid price last quoted by a composite list of major
United States banks.

o Short-term debt securities in the Portfolios which mature in 60 days
or less are valued at amortized cost, which approximates market
value.

DIVIDENDS, DISTRIBUTIONS AND TAXES

Under current federal income tax law, the Trust believes that each Portfolio is
entitled, and the Trust intends that each Portfolio shall qualify each year and
elect, to be treated as a regulated investment company ("RIC") under Subchapter
M of the Code. As a RIC, a Portfolio will not be subject to federal tax on its
net investment income and net realized capital gains to the extent such income
and gains are timely distributed to its insurance company shareholders.
Accordingly, each Portfolio intends to distribute all of its net investment
income and net realized capital gains to its shareholders. An insurance company
that is a shareholder of a Portfolio will generally not be taxed on
distributions from that Portfolio. All dividend distributions will be
reinvested in full and fractional shares of the Portfolio to which they relate.

Although the Trust intends that it and the Portfolios will be operated so that
they will have no federal income or excise tax liability, if any such liability
is nevertheless incurred, the investment performance of the Portfolio or
Portfolios incurring such liability will be adversely affected. In addition,
Portfolios investing in foreign securities and currencies may be subject to
foreign taxes which could reduce the investment performance of such Portfolio.

37
<PAGE>
In addition to meeting investment diversification rules applicable to regulated
investment companies under Subchapter M of the Code, each Portfolio will also
comply with the investment diversification requirements of Subchapter L of the
Code. Were any Portfolio to fail to comply with those requirements, owners of
Contracts (other than "pension plan contracts") funded through the Trust would
be taxed immediately on the accumulated investment earnings under their
Contracts and would thereby lose any benefit of tax deferral. Compliance is
therefore carefully monitored by the Administrator and the Manager.

Certain additional tax information appears in the Statement of Additional
Information.

For more information regarding the tax implications for owners of Contracts
investing in the Trust, refer to the prospectuses for those Contracts.

PERFORMANCE INFORMATION

From time to time, the Trust may advertise the "average annual or cumulative
total return" and may compare the performance of the Portfolios with that of
other mutual funds with similar investment objectives as listed in rankings
prepared by Lipper Analytical Services, Inc., or similar independent services
monitoring mutual fund performance, and with appropriate securities or other
relevant indices. The "average annual total return" of a Portfolio refers to
the average annual compounded rate of return over the stated period that would
equate an initial investment in that Portfolio at the beginning of the period
to its ending redeemable value, assuming reinvestment of all dividends and
distributions and deduction of all recurring charges, other than charges and
deductions which may be imposed under the Contracts. Performance figures will
be given for the recent one, five and ten year periods and for the life of the
Portfolio if it has not been in existence for any such periods. When
considering "average annual total return" figures for periods longer than one
year, it is important to note that a Portfolio's annual total return for any
given year might have been greater or less than its average for the entire
period. "Cumulative total return" represents the total change in value of an
investment in a Portfolio for a specified period (again reflecting changes in
Portfolio share prices and assuming reinvestment of Portfolio distributions).
The methods used to calculate "average annual and cumulative total return" are
described further in the Statement of Additional Information.

PRIOR PERFORMANCE OF EACH ADVISER

The following tables provide information concerning the historical performance
of another registered investment company (or series) or other institutional
private accounts managed by each Adviser, that has investment objectives,
policies, strategies and risks substantially similar to those of its respective
Portfolio(s) of the Trust. The data is provided to illustrate the past
performance of each Adviser in managing a substantially similar investment
vehicle as measured against specified market indices and does not represent the
past performance of any of the Portfolios or the future performance of any
Portfolio or its Adviser. Consequently, potential investors should not consider
this performance data as an indication of the future performance of any
Portfolio of the Trust or of its Adviser.

38
<PAGE>
private accounts managed by the relevant Adviser was calculated in accordance
with recommended standards of the Association for Investment Management and
Research ("AIMR") retroactively applied to all time periods. All returns
present were calculated on a total return basis and include all losses. All
returns reflect the deduction of investment advisory fees, brokerage
commissions and execution costs paid by the relevant Adviser's institutional
private accounts, without provision for federal or state income taxes.
Custodial fees, if any, were not included in the calculation. The Composite
includes all discretionary institutional private accounts managed by the
relevant Adviser that have investment objectives, policies, strategies and
risks substantially similar to those of the relevant Portfolio. Securities
transactions are accounted for on the trade date and accrual accounting is
utilized. Cash and equivalents are included in performance returns.

39
<PAGE>
BT EQUITY 500 INDEX PORTFOLIO

In the table below, the only account which is included is a series of another
registered investment company, i.e., Equity 500 Index Fund, a series of BT
Institutional Funds, which is managed by Bankers Trust Company, and whose
investment policies are substantially similar to the BT Equity 500 Index
Portfolio. However, the BT Equity 500 Index Portfolio will be subject to higher
expenses than the Equity 500 Index Fund. In addition, holders of variable
insurance contracts representing interests in the BT Equity 500 Index Portfolio
will be subject to charges and expenses relating to such insurance contracts.
The performance results presented below do not reflect any insurance related
expenses.

The investment results of the Equity 500 Index Fund presented below are
unaudited and are not intended to predict or suggest the returns that might be
experienced by the BT Equity 500 Index Portfolio or an individual investor
investing in the BT Equity 500 Index Portfolio.

<TABLE>
<CAPTION>
EQUITY 500 S&P 500 COMPOSITE
YEAR ENDED 9/30/97 INDEX FUND(1) STOCK INDEX(2)
- ------------------ ------------- -----------------
<S> <C> <C>
One Year(3) ....... 40.32% 40.43%
Three Years(3) ... 29.87% 29.92%
Since inception(3) 20.64% 20.72%
</TABLE>

- ------------
(1) Average annual total return reflects changes in share prices and
reinvestment of dividends and distributions and is net of fund expenses.
(2) The S&P 500 Index ("Index") is an unmanaged index containing common
stocks of 500 industrial, transportation, utility and financial
companies, regarded as generally representative of the United States
stock market. The Index reflects the reinvestment of income dividends and
capital gain distributions, if any, but does not reflect fees, brokerage
commissions, or other expenses of investing.
(3) Annualized performance for shares of the Equity 500 Index Fund of the BT
Institutional Funds. The inception date for the Equity 500 Index
Fund--Institutional Class was December 31, 1992.

40
<PAGE>
BT SMALL COMPANY INDEX PORTFOLIO

In the table below, the only account which is included is a series of another
registered investment company, i.e., Small Cap Index Fund -- Institutional
Class, a series of BT Advisor Funds, which is managed by Bankers Trust Company,
and whose investment policies are substantially similar to the BT Small Company
Index Portfolio. However, the BT Small Company Index Portfolio will be subject
to higher expenses than the Small Cap Index Fund -- Institutional Class. In
addition, holders of variable insurance contracts representing interests in the
BT Small Company Index Portfolio will be subject to charges and expenses
relating to such insurance contracts. The performance results presented below
do not reflect any insurance related expenses.

The investment results of the Small Cap Index Fund -- Institutional Class
presented below are unaudited and are not intended to predict or suggest the
returns that might be experienced by the BT Small Company Index Portfolio or an
individual investor investing in the BT Small Company Index Portfolio.

<TABLE>
<CAPTION>
SMALL CAP INDEX
FUND--
INSTITUTIONAL RUSSELL 2000
YEAR ENDED 9/30/97 CLASS(1) INDEX(2)
- ------------------ --------------------- -------------------
<S> <C> <C>
One Year(3) ....... 33.23% 33.19%
Since inception(3) 31.05% 32.76%
</TABLE>

- ------------
(1) Average annual total return reflects changes in share prices and
reinvestment of dividends and distributions and is net of fund expenses.
(2) The Russell 2000 Index is an unmanaged index composed of approximately
2,000 small-capitalization stocks and includes reinvestments of
dividends. The index does not include fees or operating expenses and is
not available for actual investment. It is compiled by the Frank Russell
Company.
(3) Annualized performance for shares of the Small Cap Index Fund. The
inception date for the Small Cap Index Fund was July 10, 1996.

41
<PAGE>
BT INTERNATIONAL EQUITY INDEX PORTFOLIO

In the table below, the only account which is included is a series of another
registered investment company, i.e., EAFE(Registered Trademark) Equity Index
Fund -- Institutional Class, a series of BT Advisor Funds, which is managed by
Bankers Trust Company, and whose investment policies are substantially similar
to the BT International Equity Index Portfolio. However, the BT International
Equity Index Portfolio will be subject to higher expenses than the
EAFE(Registered Trademark) Equity Index Fund -- Institutional Class. In
addition, holders of variable insurance contracts representing interests in the
BT International Equity Index Portfolio will be subject to charges and expenses
relating to such insurance contracts. The performance results presented below
do not reflect any insurance related expenses.

<TABLE>
<CAPTION>
EAFE(REGISTERED
TRADEMARK) EQUITY INDEX
FUND-- MSCI EAFE
YEAR ENDED 9/30/97 INSTITUTIONAL CLASS(1) INDEX(2)
- ------------------ ------------------------ ----------------
<S> <C> <C>
One Year(3) ....... 12.78% 12.18%
Since inception(3). 10.87% 10.71%
</TABLE>

- ------------
(1) Average annual total return reflects changes in share prices and
reinvestment of dividends and distributions and is net of fund expenses.
(2) The Morgan Stanley Capital EAFE Europe, Australia, Far East Index ("MSCI
EAFE Index") is an unmanaged capitalization-weighted index containing
approximately 1,100 equity securities of companies located in countries
outside the United States. The MSCI EAFE Index returns assume dividends
reinvested net of withholding tax and do not reflect any fees or
operating expenses. The index does not include fees or operating expenses
and is not available for actual investment.
(3) Annualized performance for shares of the EAFE Equity Index Fund. The
inception date for the EAFE Equity Index Fund was January 24, 1996.

42
<PAGE>
JPM CORE BOND PORTFOLIO

In the table below, the institutional private accounts that are included in the
Adviser's composite are not subject to the same types of expenses to which the
JPM Core Bond Portfolio is subject or to the diversification requirements,
specific tax restrictions and investment limitations imposed on the JPM Core
Bond Portfolio by the 1940 Act or Subchapter M of the Code. In fact, the
expenses of the JPM Core Bond Portfolio are higher than those of the accounts
included in the Advisor's composite. Consequently, the performance results for
the composite could have been adversely affected if the institutional private
accounts included in the composite had been regulated as investment companies
under the federal securities laws. Moreover, holders of variable insurance
contracts representing interests in the JPM Core Bond Portfolio will be subject
to charges and expenses relating to such insurance contracts. The performance
results presented below do not reflect any insurance related charges.

The investment results presented below are not intended to predict or suggest
the returns that might be experienced by the JPM Core Bond Portfolio or an
individual investing in such Portfolio. Investors should also be aware that the
use of a methodology different from that used below to calculate performance
could result in different performance data.

SALOMON BROTHERS
J.P. MORGAN ACTIVE FIXED BROAD INVESTMENT
YEAR ENDED 9/30/97 INCOME COMPOSITE(1) GRADE BOND INDEX(2)
- ------------------ ------------------------ -------------------
<S> <C> <C>
One Year .......... 10.87% 9.70%
Three Years ....... 10.19% 9.51%
Five Years ........ 7.62% 6.97%
Ten Years ......... 10.16% 9.53%
Since inception .. 10.20% NA
</TABLE>

- ------------
(1) Through September 30, 1997. The inception date for the J.P. Morgan
Active Fixed Income Composite was May 31, 1977.
(2) The Salomon Broad Investment Grade Bond Index is an unmanaged,
market-weighted index which contains approximately 4,700 individually
priced investment grade bonds. The index does not include fees or
operating expenses and is not available for actual investment.

43
<PAGE>
LAZARD LARGE CAP VALUE PORTFOLIO

In the table below, the only account which is included is a series of another
registered investment company, i.e. the Lazard Equity Portfolio, a series of
The Lazard Funds, Inc., which is managed by Lazard Asset Management, and whose
investment policies are substantially similar to the Lazard Large Cap Value
Portfolio. However, the Lazard Equity Portfolio will be subject to higher
expenses than the Lazard Large Cap Value Portfolio. In addition, holders of
variable insurance contracts representing interests in the Lazard Large Cap
Value Portfolio will be subject to charges and expenses relating to such
insurance contracts. The performance results presented below do not reflect any
insurance related expenses.

The investment results of the Lazard Equity Portfolio presented below are
unaudited and are not intended to predict or suggest the returns that might be
experienced by the Lazard Large Cap Value Portfolio or an individual investor
investing in the Lazard Large Cap Value Portfolio.

<TABLE>
<CAPTION>
LAZARD EQUITY S&P 500
YEAR ENDED 9/30/97 PORTFOLIO(1) INDEX(2)
- ------------------ ------------- --------
<S> <C> <C>
One Year(3)........ 35.75% 40.43%
Five Years(3)...... 22.65% 20.75%
Since
inception(3)...... 15.20% 15.59%
</TABLE>

- ------------
(1) Average annual total return reflects changes in share prices and
reinvestment of dividends and distributions and is net of fund expenses.
(2) The S&P 500 Index ("Index") is an unmanaged index containing common
stocks of 500 industrial, transportation, utility and financial
companies, regarded as generally representative of the United States
stock market. The Index reflects the reinvestment of income dividends
and capital gain distributions, if any, but does not reflect fees,
brokerage commissions, or other expenses of investing.
(3) Annualized performance for shares of the Lazard Equity Portfolio. The
inception date for Lazard Equity Portfolio was June 1, 1987.

44
<PAGE>
LAZARD SMALL CAP VALUE PORTFOLIO

In the table below, the only account which is included is a series of another
registered investment company, i.e., Lazard Small Cap Portfolio, a series of
The Lazard Funds, Inc., which is managed by Lazard Asset Management, and whose
investment policies are substantially similar to the Lazard Small Cap Value
Portfolio. However, the Lazard Small Cap Portfolio will be subject to higher
expenses than the Lazard Small Cap Value Portfolio. In addition, holders of
variable insurance contracts representing interests in the Lazard Small Cap
Value Portfolio will be subject to charges and expenses relating to such
insurance contracts. The performance results presented below do not reflect any
insurance related expenses.

The investment results of the Lazard Small Cap Portfolio presented below are
unaudited and are not intended to predict or suggest the returns that might be
experienced by the Lazard Small Cap Value Portfolio or an individual investor
investing in the Lazard Small Cap Value Portfolio.

<TABLE>
<CAPTION>
LAZARD SMALL CAP RUSSELL
YEAR ENDED 9/30/97 PORTFOLIO(1) 2000 INDEX(2)
- ------------------ ---------------- -------------
<S> <C> <C>
One Year(3)........ 42.53% 33.19%
Five Years(3)...... 25.36% 20.51%
Since
inception(3)...... 23.03% 18.25%
</TABLE>

- ------------
(1) Average annual total return reflects changes in share prices and
reinvestment of dividends and distributions and is net of fund expenses.
(2) The Russell 2000 Index is an unmanaged index (with no defined investment
objective) of 2,000 small-cap stocks, and includes reinvestment of
dividends. It is compiled by the Frank Russell Company
(3) Annualized performance for shares of the Lazard Small Cap Portfolio. The
inception date for Lazard Small Cap Portfolio was October 1, 1991.

45
<PAGE>
MERRILL LYNCH BASIC VALUE EQUITY PORTFOLIO

In the table below, the only account which is included is another registered
investment company, i.e., Merrill Lynch Basic Value Focus Fund, a series of
Merrill Lynch Variable Series Funds, Inc., which is managed by Merrill Lynch
Asset Management, L.P., and whose investment policies are substantially similar
to the Merrill Lynch Basic Value Equity Portfolio. However, the Merrill Lynch
Basic Value Focus Fund will be subject to different expenses than the Merrill
Lynch Basic Value Equity Portfolio. In addition, holders of variable insurance
contracts representing interests in the Merrill Lynch Basic Value Equity
Portfolio will be subject to charges and expenses relating to such insurance
contracts. The performance results presented below do not reflect any insurance
related expenses.

The investment results of Merrill Lynch Basic Value Focus Fund presented below
are unaudited and are not intended to predict or suggest the returns that might
be experienced by the Merrill Lynch Basic Value Equity Portfolio or an
individual investor investing in the Merrill Lynch Basic Value Equity
Portfolio.

- ------------
(1) Average annual total return reflects changes in share prices and
reinvestment of dividends and distributions and is net of fund expenses.
(2) The S&P 500 Index ("Index") is an unmanaged index containing common
stocks of 500 industrial, transportation, utility and financial
companies, regarded as generally representative of the United States
stock market. The Index reflects the reinvestment of income dividends
and capital gain distributions, if any, but does not reflect fees,
brokerage commissions, or other expenses of investing.
(3) Annualized performance for shares of the Merrill Lynch Basic Value
Focus Fund. The inception date for the Merrill Lynch Basic Value Focus
Fund was July 1, 1993.

46
<PAGE>
MERRILL LYNCH WORLD STRATEGY PORTFOLIO

In the table below, the only account which is included is a series of another
registered investment company, i.e., Merrill Lynch Global Strategy Focus Fund,
a series of Merrill Lynch Variable Series Funds, Inc., which is managed by
Merrill Lynch Asset Management, L.P., and whose investment policies are
substantially similar to the Merrill Lynch World Strategy Portfolio. However,
the Merrill Lynch Global Strategy Focus Fund will be subject to different
expenses than the Merrill Lynch World Strategy Portfolio. In addition, holders
of variable insurance contracts representing interests in the Merrill Lynch
World Strategy Portfolio will be subject to charges and expenses relating to
such insurance contracts. The performance results presented below do not
reflect any insurance related expenses.

The investment results of Merrill Lynch Global Strategy Focus Fund presented
below are unaudited and are not intended to predict or suggest the returns that
might be experienced by the Merrill Lynch World Strategy Portfolio or an
individual investor investing in the Merrill Lynch World Strategy Portfolio.

- ------------
(1) Average annual total return reflects changes in share prices and
reinvestment of dividends and distributions and is net of fund expenses.
(2) The Morgan Stanley Capital EAFE Europe, Australia, and Far East Index
("MSCI EAFE Index") is an unmanaged capitalization-weighted measure of
stock markets in Europe, Australia, the Far East and Canada. MSCI EAFE
Index returns assume dividends reinvested net of withholding tax and do
not reflect any fees or expenses.
(3) Annualized performance for shares of the Merrill Lynch Global Strategy
Focus Fund. The inception date for the Merrill Lynch Global Strategy
Focus Fund was February 28, 1992.

47
<PAGE>
MFS RESEARCH PORTFOLIO

In the table below, the only account which is included is another registered
investment company, i.e., MFS Research Fund, which is managed by Massachusetts
Financial Services Company, and whose investment policies are substantially
similar to MFS Research Portfolio. However, MFS Research Fund will be subject
to different expenses than the MFS Research Portfolio. In addition, holders of
variable insurance contracts representing interests in the MFS Research
Portfolio will be subject to charges and expenses relating to such insurance
contracts. The performance results presented below do not reflect any insurance
related expenses.

The investment results of MFS Research Fund presented below are unaudited and
are not intended to predict or suggest the returns that might be experienced by
the MFS Research Portfolio or an individual investor investing in the MFS
Research Portfolio.

- ------------
(1) Average annual total return reflects changes in share prices and
reinvestment of dividends and distributions and is net of fund expenses.
(2) The S&P 500 Index ("Index") is an unmanaged index containing common
stocks of 500 industrial, transportation, utility and financial
companies, regarded as generally representative of the United States
stock market. The Index reflects the reinvestment of income dividends
and capital gain distributions, if any, but does not reflect fees,
brokerage commissions, or other expenses of investing.
(3) Annualized performance for the Class A shares of the MFS Research Fund.
The results for the MFS Research Fund do not reflect any sales charge
that may be imposed on the Class A shares of the MFS Research Fund, nor
any charges that would be imposed at the insurance company separate
account level.

48
<PAGE>
MFS EMERGING GROWTH COMPANIES PORTFOLIO

In the table below, the only account which is included is another registered
investment company, i.e., MFS Emerging Growth Fund, which is managed by
Massachusetts Financial Services Company, and whose investment policies are
substantially similar to MFS Emerging Growth Companies Portfolio. However, MFS
Emerging Growth Fund will be subject to different expenses than the MFS
Emerging Growth Companies Portfolio. In addition, holders of variable insurance
contracts representing interests in the MFS Emerging Growth Companies Portfolio
will be subject to charges and expenses relating to such insurance contracts.
The performance results presented below do not reflect any insurance related
expenses.

The investment results of MFS Emerging Growth Fund presented below are
unaudited and are not intended to predict or suggest the returns that might be
experienced by the MFS Emerging Growth Companies Portfolio or an individual
investor investing in the MFS Emerging Growth Companies Portfolio.

- ------------
(1) Average annual total return reflects changes in share prices and
reinvestment of dividends and distributions and is net of fund expenses.
(2) The Russell 2000 Index is an unmanaged index (with no defined investment
objective) of 2000 small-cap stocks and it includes reinvestments of
dividends. It is compiled by the Frank Russell Company.
(3) Annualized performance for the Class B shares of the MFS Emerging Growth
Fund. The results for the MFS Emerging Growth Fund do not reflect sales
charge that may be imposed on the Class B shares of the MFS Emerging
Growth Fund, nor any charges that would be imposed at the insurance
company separate account level.

49
<PAGE>
MORGAN STANLEY EMERGING MARKETS EQUITY PORTFOLIO

In the table below, the only account which is included is another registered
investment company, i.e., Morgan Stanley Universal Funds, Inc. -- Emerging
Markets Equity Portfolio ("MSIF Emerging Markets Portfolio"), which is managed
by the Morgan Stanley Asset Management Inc., and whose investment policies are
substantially similar to the Morgan Stanley Emerging Markets Equity Portfolio.
Operating expenses of the Morgan Stanley Emerging Markets Equity Portfolio will
be the same as the operating expenses of the MSIF Emerging Markets Portfolio.
However, holders of variable insurance contracts representing interests in the
Morgan Stanley Emerging Markets Equity Portfolio will be subject to changes and
expenses relating to such insurance contracts. The performance results
presented below do not reflect any insurance related expense.

The investment results of MSIF Emerging Markets Equity Portfolio presented
below, which represent a Class A share outstanding for the period, are
unaudited and are not intended to predict or suggest the returns that might be
experienced by the Morgan Stanley Emerging Markets Equity Portfolio or an
individual investor investing in the Morgan Stanley Emerging Markets Equity
Portfolio.

<TABLE>
<CAPTION>
IFC GLOBAL TOTAL
MSIF EMERGING RETURN COMPOSITE
YEAR ENDED 9/30/97 MARKETS EQUITY PORTFOLIO(1,2) INDEX(2)
- ------------------ ----------------------------- ----------------
<S> <C> <C>
One Year(4).................................. 21.67% 4.77%
Five Years(4) ............................... 15.95% 12.12%
Average Annual Total Return since
inception(4)................................ 15.81% 12.08%
</TABLE>

- ------------
(1) In accordance with SEC regulations, the performance shown assumes that
all recurring fees (including management fees) were deducted and all
dividends and distributions were reinvested. Average annual total return
reflects changes in share prices and reinvestment of dividends and
distributions and is net of fund expenses.
(2) The expense ratio of MSIF Emerging Markets Equity Portfolio has been
capped at 1.75% since inception.
(3) The IFC Global Total Return Composite Index is an unmanaged index of
common stocks and includes developing countries in Latin America, East
and South Asia, Europe, the Middle East and Africa. The Index assumes
dividends are reinvested.
(4) Annualized performance for the Class A shares of the MSIF Emerging
Markets Portfolio. The Class B shares of the MSIF Emerging Markets
Portfolio are subject to a Rule 12b-1 fee equal to 0.25% of the
Portfolio's assets. The inception date for the MSIF Emerging Markets
Portfolio was September 25, 1992.

50
<PAGE>
EQ/PUTNAM GROWTH & INCOME VALUE PORTFOLIO

The table below sets forth performance history for another registered
investment company, i.e., the Putnam Growth & Income Fund II, which is managed
by the Putnam Investment Management, Inc., and whose investment policies are
substantially similar to those of EQ/Putnam Growth & Income Value Portfolio.
Putnam Growth & Income Fund II will be subject to different expenses than the
EQ/Putnam Growth & Income Value Portfolio. In addition, holders of variable
insurance contracts representing interests in EQ/Putnam Growth & Income Value
Portfolio will be subject to charges and expenses relating to such insurance
contract. The performance results presented below do not reflect any insurance
related expenses.

The investment results of Putnam Growth & Income Fund II presented below are
unaudited and are not intended to predict or suggest the returns that might be
experienced by the EQ/Putnam Growth & Income Value Portfolio or an individual
investor investing in the EQ/Putnam Growth & Income Value Portfolio.

<TABLE>
<CAPTION>
PUTNAM GROWTH & INCOME FUND S&P 500
YEAR ENDED 9/30/97 II(1) INDEX(2)
- ------------------ --------------------------- --------
<S> <C> <C>
One Year(3) ....... 34.39% 40.43%
Since inception(3) 29.31% 33.04%
</TABLE>

- ------------
(1) Average annual total return reflects changes in share prices and
reinvestment of dividends and distributions and is net of fund expenses.
(2) The S&P 500 Index ("Index") is an unmanaged index containing common
stocks of 500 industrial, transportation, utility and financial
companies, regarded as generally representative of the United States
stock market. The Index reflects the reinvestment of income dividends
and capital gain distributions, if any, but does not reflect fees,
brokerage commissions, or other expenses of investing.
(3) Annualized performance for the Class A shares of the Putnam Growth &
Income Fund II. The inception date for the Putnam Growth & Income Fund
II was January, 1995. The Class A shares are subject to a front-end
sales charge of up to 5.75%. Other share classes have different expenses
and their performance will vary.

51
<PAGE>
EQ/PUTNAM INVESTORS GROWTH PORTFOLIO

<TABLE>
<CAPTION>
PUTNAM INVESTORS S&P 500
YEAR ENDED 9/30/97 FUND(1) INDEX(2)
- ------------------ ---------------- --------
<S> <C> <C>
One Year(3) ....... 36.90% 40.43%
Five Years(3) ..... 21.88% 20.75%
Ten Years(3) ...... 14.18% 14.74%
</TABLE>

- ------------
(1) Average annual total return reflects changes in share prices and
reinvestment of dividends and distributions and is net of fund expenses.
(2) The S&P 500 Index ("Index") is an unmanaged index containing common
stocks of 500 industrial, transportation, utility and financial
companies, regarded as generally representative of the United States
stock market. The Index reflects the reinvestment of income dividends
and capital gain distributions, if any, but does not reflect fees,
brokerage commissions, or other expenses of investing.
(3) Annualized performance for the Class A shares of the Putnam Investors
Fund. The Class A shares are subject to a front-end sales charge of up
to 5.75%. Other share classes have different expenses and their
performance will vary.

52
<PAGE>
EQ/PUTNAM INTERNATIONAL EQUITY PORTFOLIO

<TABLE>
<CAPTION>
PUTNAM INTERNATIONAL GROWTH MSCI EAFE
YEAR ENDED 9/30/97 FUND(1) INDEX(2)
- ------------------ --------------------------- ----------
<S> <C> <C>
One Year(3) ....... 31.65% 12.18%
Five Years(3) ..... 19.43% 12.33%
Since inception(3) 13.87% 7.43%
</TABLE>

- ------------
(1) Average annual total return reflects changes in share prices and
reinvestment of dividends and distributions and is net of fund expenses.
(2) The MSCI EAFE ("Index") is an unmanaged capitalization-weighted measure
of stock markets in Europe, Australia, the Far East and Canada. MSCI
EAFE Index returns assume dividends reinvested net of withholding tax
and do not reflect any fees or expenses.
(3) Annualized performance the Class A shares of the Putnam International
Growth Fund. The inception date of the Class A shares of the Putnam
International Growth Fund was March, 1991. The Class A shares are
subject to a front-end sales charge of up to 5.75%.

53
<PAGE>
APPENDIX A

The following table summarizes the historical performance information of
certain other registered investment companies or accounts that appears on pages
40 through 53 of this Prospectus. Each other registered investment company or
account is managed by an Adviser and has investment objectives, policies,
strategies and risks substantially similar to the Portfolio managed by that
Adviser. For further information regarding each of the registered investment
companies and the indexes presented below, please refer to pages 5 through 18
of this Prospectus.

ANNUALIZED RATES OF RETURN
PERIOD ENDED SEPTEMBER 30, 1997

<TABLE>
<CAPTION>
SINCE
FUND NAME 1 YEAR 5 YEARS 10 YEARS INCEPTION
- ---------------------------------------- -------- --------- ---------- -----------
<S> <C> <C> <C> <C>
BT EAFE(REGISTERED TRADEMARK) EQUITY
INDEX FUND--INSTITUTIONAL CLASS 12.78% -- -- 10.87%
MSCI EAFE Index 12.18% -- -- 10.71%
--------------------------------------- -------- --------- ---------- -----------
BT EQUITY 500 INDEX FUND 40.32% -- -- 20.64%
S&P 500 Index 40.43% -- -- 20.72%
--------------------------------------- -------- --------- ---------- -----------
BT SMALL CAP INDEX FUND 33.23% -- -- 31.05%
Russell 2000 Index 33.19% -- -- 32.76%
--------------------------------------- -------- --------- ---------- -----------
THE GEORGE PUTNAM FUND OF BOSTON 26.36% 15.10% 12.05% --
S&P 500 Index 40.43% 20.75% 14.74% --
--------------------------------------- -------- --------- ---------- -----------
J.P. MORGAN ACTIVE FIXED INCOME
COMPOSITE 10.87% 7.62% 10.16% 10.20%
Salomon Brothers Broad Investment Grade
Bond Index 9.70% 6.97% 9.53% --
--------------------------------------- -------- --------- ---------- -----------
LAZARD EQUITY PORTFOLIO 35.75% 22.65% -- 15.20%
S&P 500 Index 40.43% 20.75% -- 15.59%
--------------------------------------- -------- --------- ---------- -----------
LAZARD SMALL CAP PORTFOLIO 42.53% 25.36% -- 23.03%
Russell 2000 Index 33.19% 20.51% -- 18.25%
--------------------------------------- -------- --------- ---------- -----------
MERRILL LYNCH BASIC VALUE FOCUS FUND 36.14% -- -- 19.94%
S&P 500 Index 40.43% -- -- 22.03%
--------------------------------------- -------- --------- ---------- -----------
MERRILL LYNCH GLOBAL STRATEGY FOCUS
FUND 25.72% 12.32% -- 11.35%
MSCI EAFE Index 12.18% 12.33% -- 10.33%
--------------------------------------- -------- --------- ---------- -----------
MFS EMERGING GROWTH FUND 25.29% 26.24% 18.28% --
Russell 2000 Index 33.19% 20.51% 12.25% --
--------------------------------------- -------- --------- ---------- -----------
MFS RESEARCH FUND 28.72% 22.88% 14.24% --
S&P 500 Index 40.43% 20.75% 14.74% --
--------------------------------------- -------- --------- ---------- -----------
MSIF EMERGING MARKETS PORTFOLIO 21.67% 15.95% -- 15.81%
IFC Global Total Return Composite Index 4.77% 12.12% -- 12.08%
--------------------------------------- -------- --------- ---------- -----------
PUTNAM GROWTH & INCOME FUND II 34.39% -- -- 29.31%
S&P 500 Index 40.43% -- -- 33.04%
--------------------------------------- -------- --------- ---------- -----------
PUTNAM INTERNATIONAL GROWTH FUND 31.65% 19.43% -- 13.87%
MSCI EAFE Index 12.18% 12.33% -- 7.43%

</TABLE>
A-1
<PAGE>

<TABLE>
<CAPTION>
SINCE
FUND NAME 1 YEAR 5 YEARS 10 YEARS INCEPTION
- ---------------------------------------- -------- --------- ---------- -----------
<S> <C> <C> <C> <C>
PUTNAM INVESTORS FUND 36.90% 21.88% 14.18% --
S&P 500 Index 40.43% 20.75% 14.74% --
--------------------------------------- -------- --------- ---------- -----------
T. ROWE PRICE EQUITY INCOME FUND 33.02% 19.78% 14.79% --
S&P 500 Index 40.43% 20.75% 14.74% --
--------------------------------------- -------- --------- ---------- -----------
T. ROWE PRICE INTERNATIONAL STOCK FUND 16.39% 14.38% 9.39% --
MSCI EAFE Index 12.18% 12.33% 5.92% --
--------------------------------------- -------- --------- ---------- -----------
WARBURG PINCUS SMALL COMPANY VALUE FUND 42.26% -- -- 48.73%
Russell 2000 Index 33.19% -- -- 47.50%
--------------------------------------- -------- --------- ---------- -----------
</TABLE>

A-2

<PAGE>

EQ ADVISORS TRUST

STATEMENT OF ADDITIONAL INFORMATION

December 31, 1997

This Statement of Additional Information is not a prospectus. It should be read
in conjunction with the Prospectus for the EQ Advisors Trust ("Trust") dated
December 31, 1997, which may be obtained without charge by writing to the Trust
at 1290 Avenue of the Americas, New York, New York 10104. Unless otherwise
defined herein, capitalized terms have the meanings given to them in the
Prospectus.

TABLE OF CONTENTS

Page

GENERAL INFORMATION AND HISTORY.............................................
INVESTMENT RESTRICTIONS.....................................................
DESCRIPTION OF CERTAIN SECURITIES IN WHICH THE PORTFOLIOS MAY INVEST........
MANAGEMENT OF THE TRUST.....................................................
INVESTMENT MANAGEMENT AND OTHER SERVICES....................................
BROKERAGE STRATEGY..........................................................
PURCHASE AND PRICING OF SHARES..............................................
REDEMPTION OF SHARES........................................................
CERTAIN TAX CONSIDERATIONS..................................................
PORTFOLIO PERFORMANCE.......................................................
OTHER SERVICES..............................................................
FINANCIAL STATEMENTS........................................................
APPENDIX....................................................................
DESCRIPTION OF BOND RATINGS.................................................

-1-
<PAGE>

GENERAL INFORMATION AND HISTORYGENERAL INFORMATION AND HISTORY

THE TRUST

The Trust is an open-end management investment company--a type of company
commonly known as a "mutual fund." It is registered as such under the
Investment Company Act of 1940, as amended ("1940 Act"). The Trust, organized
as a Delaware business trust, currently offers two classes of shares on behalf
of the T. Rowe Price International Stock Portfolio, T. Rowe Price Equity Income
Portfolio, EQ/Putnam Growth & Income Value Portfolio, EQ/Putnam International
Equity Portfolio, EQ/Putnam Investors Growth Portfolio, EQ/Putnam Balanced
Portfolio, MFS Research Portfolio, MFS Emerging Growth Companies Portfolio,
Morgan Stanley Emerging Markets Equity Portfolio, Warburg Pincus Small Company
Value Portfolio, Merrill Lynch World Strategy Portfolio, Merrill Lynch Basic
Value Equity Portfolio, Lazard Large Cap Value Portfolio, Lazard Small Cap
Value Portfolio, JPM Core Bond Portfolio BT Small Cap Index Portfolio, BT
International Equity Index Portfolio and BT Equity 500 Index Portfolio (each a
"Portfolio," and together the "Portfolios"). Class IA shares are offered at net
asset value and are not subject to distribution fees imposed pursuant to a
distribution plan. Class IB shares are offered at net asset value and are
subject to distribution fees imposed under a distribution plan ("Distribution
Plan") adopted pursuant to Rule 12b-1 under the 1940 Act.

The two classes of shares are offered under the Trust's multi-class
distribution system approved by the Trust's Board of Trustees on March 31,
1997, which is designed to allow promotion of insurance products investing in
the Trust through alternative distribution channels. Under the Trust's
multi-class distribution system, shares of each class of a Portfolio represent
an equal pro rata interest in that Portfolio and, generally, will have
identical voting, dividend, liquidation, and other rights, other than the
payment of distribution fees under the Distribution Plan.

The Trust continuously offers its shares exclusively to separate accounts of
insurance companies in connection with variable life insurance contracts and
variable annuity certificates and contracts (collectively, the "Contracts").
Class IA shares and Class IB shares currently are sold only to separate
accounts of The Equitable Life Assurance Society of the United States
("Equitable"). Equitable may be deemed to be a control person with respect to
the Trust by virtue of its ownership of 100% of the Trust's shares as of
September 30, 1997.

As a "series" type of mutual fund, the Trust issues separate series of shares
of beneficial interest with respect to each Portfolio. Each Portfolio resembles
a separate fund issuing a separate class of stock. Because of current federal
securities law requirements, the Trust expects that its shareholders will offer
to owners of the Contracts (the "Contractowners") the opportunity to instruct
them as to how shares allocable to their Contracts will be voted with respect
to certain matters, such as approval of investment advisory agreements. [To the
Trust's knowledge, as of the date of this Statement of Additional Information
("SAI"), no Contractowners owned Contracts entitling such persons to give
voting instructions regarding more than 5% of the outstanding shares of any
Portfolio.]

The Trust may in the future offer its shares to separate accounts of insurance
companies unaffiliated with Equitable, as well as to the tax-qualified
retirement plans. The Trust does not currently foresee any disadvantages to
Contractowners arising from offering the Trust's shares to separate accounts of
insurance companies that are unaffiliated with each other or to tax-qualified
retirement plans. However, it is theoretically possible that, at some time, the
interests of various Contractowners participating in the Trust through their
separate accounts and tax-

-2-
<PAGE>

qualified retirement plans might conflict. In the case of a material
irreconcilable conflict, one or more separate accounts or the tax-qualified
retirement plans might withdraw their investments in the Trust, which would
possibly force the Trust to sell portfolio securities at disadvantageous
prices. The Trustees of the Trust intend to monitor events for the existence
of any material irreconcilable conflicts between or among such separate
accounts and tax-qualified retirement plans and will take whatever remedial
action may be necessary.

EQ Financial Consultants, Inc. ("Manager") is the investment manager for each
Portfolio. T. Rowe Price Associates, Inc. ("T. Rowe Price"), Price-Fleming
International, Inc. ("PriceFleming"), Putnam Investment Management Inc.
("Putnam Management"), Massachusetts Financial Services Company ("MFS"),
Morgan Stanley Asset Management Inc. ("MSAM"), Warburg Pincus Asset
Management, Inc. ("Warburg"), Merrill Lynch Asset Management, L.P. ("MLAM"),
Lazard Asset Management ("LAM"), a division of Lazard Freres and Company, LLC,
J.P. Morgan Investment Management Inc. ("J.P. Morgan") and Bankers Trust
Company ("Bankers Trust") (each an "Adviser," and together the "Advisers")
serve as investment advisers to one or more of the Portfolios, as described
more fully in the Prospectus.

LEGAL CONSIDERATIONS

Under Delaware law, annual election of Trustees is not required, and, in the
normal course, the Trust does not expect to hold annual meetings of
shareholders. There will normally be no meetings of shareholders for the
purpose of electing Trustees unless and until such time as less than a majority
of the Trustees holding office have been elected by shareholders, at which time
the Trustees then in office will call a shareholders' meeting for the election
of Trustees. Pursuant to the procedures set forth in Section 16(c) of the 1940
Act, shareholders of record of not less than two-thirds of the outstanding
shares of the Trust may remove a Trustee by a vote cast in person or by proxy
at a meeting called for that purpose.

Except as set forth above, the Trustees will continue to hold office and may
appoint successor Trustees. Voting rights are not cumulative, so that the
holders of more than 50% of the shares voting in the election of Trustees can,
if they choose to do so, elect all the Trustees of the Trust, in which event
the holders of the remaining shares will be unable to elect any person as a
Trustee. The Amended and Restated Declaration of Trust of the Trust requires
the affirmative vote of a majority of the outstanding shares of the Trust.

The shares of each Portfolio, when issued, will be fully paid and
non-assessable and will have no preference, preemptive, conversion, exchange or
similar rights.

-3-
<PAGE>

INVESTMENT RESTRICTIONSINVESTMENT RESTRICTIONS

FUNDAMENTAL RESTRICTIONS

Each Portfolio has also adopted certain investment restrictions which are
fundamental and may not be changed without approval by a "majority" vote of the
Portfolio's shareholders. Such majority is defined in the 1940 Act as the
lesser of: (i) 67% or more of the voting securities of such Portfolio present
in person or by proxy at a meeting, if the holders of more than 50% of the
outstanding voting securities are present or represented by proxy; or (ii) more
than 50% of the outstanding voting securities of such Portfolio. Set forth
below are each of the fundamental restrictions adopted by each of the
Portfolios. Fundamental policies (5) and (6) below shall not apply to the
Morgan Stanley Emerging Markets Equity Portfolio, the Merrill Lynch World
Strategy Portfolio and the Lazard Small Cap Value Portfolio. Certain
non-fundamental operating policies are also described in this section because
of their direct relevance to the fundamental restrictions adopted by the
Portfolios.

Each Portfolio, except as described directly above, may not as a matter of
fundamental policy:

(1) Borrow money, except that:

a. each Portfolio may (i) borrow for non-leveraging, temporary
or emergency purposes (except the Lazard Large Cap Value
Portfolio, which may also borrow for leveraging purposes)
and (ii) engage in reverse repurchase agreements and make
other investments or engage in other transactions, which
may involve a borrowing, in a manner consistent with the
Portfolios' respective investment objective and program,
provided that the combination of (i) and (ii) shall not
exceed 33 1/3% of the value of the Portfolios' respective
total assets (including the amount borrowed) less liabilities
(other than borrowings) or such other percentage permitted by
law (except that the Merrill Lynch World Strategy Portfolio
and the Merrill Lynch Basic Value Equity Portfolio may
purchase securities on margin to the extent permitted by
applicable law). Any borrowings which come to exceed this
amount will be reduced in accordance with applicable law.
Each Portfolio may borrow from banks or other persons to the
extent permitted by applicable law;

b. as a matter of non-fundamental operating policy, no
Portfolio, except the Lazard Large Cap Value Portfolio,
will purchase additional securities when money borrowed
exceeds 5% of its total assets;

c. the EQ/Putnam Growth & Income Value Portfolio, EQ/Putnam
International Equity Portfolio, EQ/Putnam Investors Growth
Portfolio, EQ/Putnam Balanced Portfolio and Lazard Large Cap
Value Portfolio each, as a matter of non-fundamental
operating policy, may borrow only from banks (i) as a
temporary measure to facilitate the meeting of redemption
requests (not for leverage) which might otherwise require the
untimely disposition of portfolio investments or (ii) for
extraordinary or emergency purposes, provided that the
combination of (i) and (ii) shall not exceed 10% of the
applicable Portfolio's net assets (taken at lower of cost or
current value), not including the amount borrowed, at the
time the borrowing is made. Each Portfolio will repay
borrowings made for the purposes specified above before any
additional investments are purchased. In addition, the Lazard
Large Cap Value Portfolio may borrow for leveraging purposes
(in order to increase its investment in

-4-
<PAGE>

portfolio securities) and to the extent that the amount so
borrowed does not exceed 33 1/3% of the Portfolio's total
assets (including the amount borrowed) less liabilities
(other than borrowings).

d. the Merrill Lynch World Strategy Portfolio, as a matter of
fundamental policy, and the Merrill Lynch Basic Value Equity
Portfolio, as a matter of non-fundamental operating policy,
may, to the extent permitted by applicable law, borrow up to
an additional 5% of their respective total assets for
temporary purposes;

e. the Lazard Small Cap Value Portfolio, as a matter of
non-fundamental operating policy, may borrow only from banks
(i) as a temporary measure to facilitate the meeting of
redemption requests (not for leverage) which might otherwise
require the untimely disposition of portfolio investments or
(ii) for extraordinary or emergency purposes, provided that
the combination of (i) and (ii) shall not exceed 15% of the
Portfolio's net assets, not including the amount borrowed, at
the time the borrowing is made. The Lazard Small Cap Value
Portfolio will repay borrowings before any additional
investments are purchased.

f. the Warburg Pincus Small Company Value Portfolio and JPM Core
Bond Portfolio, each as a matter of non-fundamental operating
policy, may borrow only from banks for extraordinary or
emergency purposes, provided such amount shall not exceed
30% of the respective Portfolio's total assets, not including
the amount borrowed, at the time the borrowing is made.

(2) Purchase or sell physical commodities, except that it may (i) enter into
futures contracts and options thereon in accordance with applicable law
and (ii) purchase or sell physical commodities if acquired as a result of
ownership of securities or other instruments. No Portfolio will consider
currency contracts, hybrid investments, swaps or other similar
instruments to be commodities;

(3) Purchase the securities of any issuer if, as a result, more than 25% of
the value of the Portfolio's total assets would be invested in the
securities of issuers having their principal business activities in the
same industry. United States, state or local governments, or related
agencies or instrumentalities, are not considered an industry. Industries
are determined by reference to the classifications of industries set
forth in each Portfolio's semi-annual and annual reports;

(4) Make loans, except that:

a. each Portfolio may: (i) lend portfolio securities provided
that no such loan may be made if, as a result, the aggregate
of such loans would exceed 33 1/3% of the value of the
Portfolio's total assets; (ii) purchase money market
securities and enter into repurchase agreements; and
(iii) acquire publicly-distributed or privately-placed debt
securities and purchase debt securities. Each Portfolio will
consider the acquisition of a debt security to include the
execution of a note or other evidence of an extension of
credit with a term of more than nine months. For purposes of
this restriction, each Portfolio will treat purchases of loan
participations and other direct indebtedness, including
investments in mortgages, as not subject to this limitation;

-5-
<PAGE>

b. the EQ/Putnam Growth & Income Value Portfolio and EQ/Putnam
International Equity Portfolio, as a matter of
non-fundamental operating policy, may purchase debt
obligations consistent with the respective investment
objectives and policies of each of those Portfolios: (i) by
entering into repurchase agreements with respect to not more
than 25% of the Portfolios' respective total assets (taken at
current value) or (ii) through the lending of the Portfolios'
portfolio securities with respect to not more than 25% of the
Portfolios' respective total assets (taken at current value);

c. the MFS Emerging Growth Companies Portfolio, BT Small Cap
Index Portfolio, BT International Equity Index Portfolio,
and BT Equity 500 Index Portfolio, as a matter of
non-fundamental operating policy, may each lend its portfolio
securities provided that no such loan may be made if, as a
result, the aggregate of such loans would exceed 30% of such
Portfolio's total assets (taken at market value); and

d. the Warburg Pincus Small Company Value Portfolio, the
Merrill Lynch World Strategy Portfolio and the Merrill
Lynch Basic Value Equity Portfolio, as a matter of
non-fundamental policy, may each lend its portfolio
securities provided that no such loan may be made if, as a
result, the aggregate of such loans would exceed 20% of such
Portfolio's total assets (taken at market value);

e. the Lazard Large Cap Value Portfolio and the Lazard Small
Cap Value Portfolio, as a matter of non-fundamental
policy, may each lend its portfolio securities provided that
no such loan may be made if, as a result, the aggregate of
such loans would exceed 10% of such Portfolio's total assets
(taken at market value);

(5) Purchase a security if, as a result, with respect to 75% of the value of
its total assets, more than 5% of the value of the Portfolio's total
assets would be invested in the securities of a single issuer, except
securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities;*

(6) Purchase a security if, as a result, with respect to 75% of the value of
the Portfolio's total assets, more than 10% of the outstanding voting
securities of any issuer would be held by the Portfolio (other than
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities);*

(7) Purchase or sell real estate, except that:

a. each Portfolio except the JPM Core Bond Portfolio may
purchase securities of issuers which deal in real estate,
securities which are secured by interests in real estate, and
securities which represent interests in real estate, and each
Portfolio

- -----------------------
* The Morgan Stanley Emerging Markets Equity Portfolio, Merrill Lynch World
Strategy Portfolio and Lazard Small Cap Value Portfolio are classified as
non-diversified investment companies under thhe 1940 Act and therfore
these restrictions are not applicable to these Portfolios.

-6-
<PAGE>

may acquire and dispose of real estate or interests in real
estate acquired through the exercise of its rights as a
holder of debt obligations secured by real estate or
interests therein;

b. the JPM Core Bond Portfolio may (i) invest in securities of
issuers that invest in real estate or interests therein,
(ii) invest in securities that are secured by real estate or
interests therein (iii) make direct investments in mortgages,
(iv) purchase and sell mortgage-related securities and
(v) hold and sell real estate acquired by the Portfolio as a
result of the ownership of securities including mortgages.

(8) Issue senior securities except in compliance with the 1940 Act; or

(9) Underwrite securities issued by other persons, except to the extent that
the Portfolio may be deemed to be an underwriter within the meaning of
the Securities Act of 1933, as amended (the "1933 Act"), in connection
with the purchase and sale of its portfolio securities in the ordinary
course of pursuing its investment objective, policies and program.

NON-FUNDAMENTAL RESTRICTIONS

The following investment restrictions apply to each Portfolio, but are not
fundamental. They may be changed for any Portfolio without a vote of that
Portfolio's shareholders.

Each Portfolio may not:

(1) Purchase a futures contract or an option thereon if, with respect to
positions in futures or options on futures which do not represent bona
fide hedging, the aggregate initial margin and premiums on such options
would exceed 5% of the Portfolio's net asset value;

(2) Purchase (a) illiquid securities, (b) securities restricted as to resale
(excluding securities determined by the Board of Trustees to be readily
marketable), and (c) repurchase agreements maturing in more than seven
days if, as a result, more than 15% of each Portfolio's net assets (10%
for the Warburg Pincus Small Company Value Portfolio, Lazard Large Cap
Value Portfolio and Lazard Small Cap Value Portfolio) would be invested
in such securities. (Securities purchased in accordance with Rule 144A
under the 1933 Act and determined to be liquid by the Trust's Board are
not subject to the limitations set forth in this investment
restriction.);

(3) Purchase securities on margin, except that each Portfolio may: (a) make
use of any short-term credit necessary for clearance of purchases and
sales of portfolio securities and (b) make initial or variation margin
deposits in connection with futures contracts, options, currencies, or
other permissible investments;

(4) Mortgage, pledge, hypothecate or, in any manner, transfer any security
owned by the Portfolio as security for indebtedness, except as may be
necessary in connection with permissible borrowings or investments; and
then such mortgaging, pledging or hypothecating may not exceed 33 1/3% of
the respective total assets of each Portfolio (except as specified below
for the EQ/Putnam International Equity Portfolio, Merrill Lynch World
Strategy Portfolio, and the Merrill Lynch Basic Value Equity Portfolio );
and may not exceed 15% of EQ/Putnam International Equity Portfolio's
total assets; and 10% of each the Merrill Lynch World Strategy
Portfolio's and Merrill Lynch Basic Value Equity Portfolio's total
assets, (taken at the lower of

-7-
<PAGE>

cost or market value), each taken at the time of the permissible
borrowing or investment. The deposit of underlying securities and other
assets in escrow and collateral arrangements with respect to margin
accounts for futures contracts, options, currencies or other permissible
investments are not deemed to be mortgages, pledges, or hypothecations
for these purposes;

(5) Purchase participations or other direct interests in or enter into leases
with respect to, oil, gas, or other mineral exploration or development
programs, except that the MFS Emerging Growth Companies Portfolio,
Warburg Pincus Small Company Value Portfolio, Merrill Lynch World
Strategy Portfolio, Merrill Lynch Basic Value Equity Portfolio and the
JPM Core Bond Portfolio may invest in securities issued by companies that
engage in oil, gas or other mineral exploration or development activities
or hold mineral leases acquired as a result of its ownership of
securities;

(6) Invest in puts, calls, straddles, spreads, swaps or any combination
thereof, except to the extent permitted by the Portfolio's Prospectus and
Statement of Additional Information, as may be amended from time to time;
or

(7) Effect short sales of securities unless at all times when a short
position is open the Portfolio owns an equal amount of such securities or
owns securities which, without payment of any further consideration, are
convertible into or exchangeable for securities of the same issue as, and
at least equal in amount to, the securities sold short. Permissible
futures contracts, options, or currency transactions will not be deemed
to constitute selling securities short.

In addition to the restrictions described above, some foreign countries limit,
or prohibit, all direct foreign investment in the securities of companies
domiciled therein. However, the governments of some countries have authorized
the organization of investment funds to permit indirect foreign investment in
such securities. For tax purposes these funds may be known as passive foreign
investment companies ("PFICs"). The Portfolios are subject to certain
percentage limitations under the 1940 Act relating to the purchase of
securities of investment companies, and, consequently, each Portfolio may have
to subject any of its investments in other investment companies, including
passive foreign investment companies, to the limitation that no more than 10%
of the value of the Portfolio's total assets may be invested in such
securities.

DESCRIPTION OF CERTAIN SECURITIES IN WHICH THE
PORTFOLIOS MAY INVESTDESCRIPTION OF CERTAIN SECURITIES IN WHICH THE
PORTFOLIOS MAY INVEST

ASSET-BACKED SECURITIES

Asset-backed securities, issued by trusts and special purpose corporations, are
backed by a pool of assets, such as credit card and automobile loan
receivables, representing the obligations of a number of different parties.
Asset-backed securities present certain risks. For instance, in the case of
credit card receivables, these securities may not have the benefit of any
security interest in the related collateral. Credit card receivables are
generally unsecured and the debtors are entitled to the protection of a number
of state and federal consumer credit laws, many of which give such debtors the
right to set off certain amounts owed on the credit cards, thereby reducing the
balance due. Most issuers of automobile receivables permit the servicers to
retain possession of the underlying obligations. If the servicer were to sell
these obligations to another party, there is a risk that the purchaser would
acquire an interest superior to that of the holders of the related automobile
receivables. In addition, because of the large number of vehicles involved in a
typical issuance and technical requirements under state laws, the trustee for
the holders of the automobile receivables may not have a proper security
interest in all of

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the obligations backing such receivables. Therefore, there is the possibility
that recoveries on repossessed collateral may not, in some cases, be available
to support payments on these securities. The underlying assets (e.g., loans)
are also subject to prepayments which shorten the securities' weighted average
life and may lower their return.

Asset-backed securities are often backed by a pool of assets representing the
obligations of a number of different parties. To lessen the effect of failures
by obligors on underlying assets to make payments, the securities may contain
elements of credit support which fall into two categories: (i) liquidity
protection and (ii) protection against losses resulting from ultimate default
by an obligor on the underlying assets. Liquidity protection refers to the
provision of advances, generally by the entity administering the pool of
assets, to ensure that the receipt of payments on the underlying pool occurs in
a timely fashion. Protection against losses resulting from ultimate default
ensures payment through insurance policies or letters of credit obtained by the
issuer or sponsor from third parties. A Portfolio will not pay any additional
or separate fees for credit support. The degree of credit support provided for
each issue is generally based on historical information respecting the level of
credit risk associated with the underlying assets. Delinquency or loss in
excess of that anticipated or failure of the credit support could adversely
affect the return on an investment in such a security.

FOREIGN CURRENCY TRANSACTIONS

FORWARD FOREIGN CURRENCY TRANSACTIONS. A forward foreign currency exchange
contract ("forward contract") involves an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number of days from
the date of the contract agreed upon by the parties, at a price set at the time
of the contract. These contracts are principally traded in the interbank market
conducted directly between currency traders (usually large, commercial banks)
and their customers. A forward contract generally has no margin deposit
requirement, and no commissions are charged at any stage for trades.

A Portfolio may enter into forward contracts for a variety of purposes in
connection with the management of the foreign securities portion of its
portfolio. The Portfolio's use of such contracts will include, but not be
limited to, the following situations.

First, when the Portfolio enters into a contract for the purchase or sale of a
security denominated in a foreign currency, it may desire to "lock in" the U.S.
dollar price of the security. By entering into a forward contract for the
purchase or sale, for a fixed amount of dollars, of the amount of foreign
currency involved in the underlying security transactions, the Portfolio will
be able to protect itself against a possible loss resulting from an adverse
change in the relationship between the U.S. dollar and the subject foreign
currency during the period between the date the security is purchased or sold
and the date on which payment is made or received.

Second, when a Portfolio's Adviser believes that one currency may experience a
substantial movement against another currency, including the U.S. dollar, it
may enter into a forward contract to sell or buy the amount of the former
foreign currency, approximating the value of some or all of the Portfolio's
portfolio securities denominated in such foreign currency. Alternatively, where
appropriate, the Portfolio may hedge all or part of its foreign currency
exposure through the use of a basket of currencies, multinational currency
units, or a proxy currency where such currency or currencies act as an
effective proxy for other currencies. In such a case, the Portfolio may enter
into a forward contract where the amount of the foreign currency to be sold
exceeds the value of the securities denominated in such currency. The use of
this basket hedging technique may be more efficient and economical than
entering into separate forward contracts for each currency held in the
Portfolio.

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The precise matching of the forward contract amounts and the value of the
securities involved will not generally be possible since the future value of
such securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date the forward
contract is entered into and the date it matures. The projection of short-term
currency market movement is extremely difficult, and the successful execution
of a short-term hedging strategy is highly uncertain. Under normal
circumstances, consideration of the prospect for currency parities will be
incorporated into the diversification strategies. However, the Adviser to the
Portfolio believes that it is important to have the flexibility to enter into
such forward contracts when it determines that the best interests of the
Portfolio will be served.

A Portfolio may enter into forward contracts for any other purpose consistent
with the Portfolio's investment objective and program. However, the Portfolio
will not enter into a forward contract, or maintain exposure to any such
contract(s), if the amount of foreign currency required to be delivered
thereunder would exceed the Portfolio's holdings of liquid, securities and
currency available for cover of the forward contract(s). In determining the
amount to be delivered under a contract, the Portfolio may net offsetting
positions.

At the maturity of a forward contract, a Portfolio may sell the portfolio
security and make delivery of the foreign currency, or it may retain the
security and either extend the maturity of the forward contract (by "rolling"
that contract forward) or may initiate a new forward contract. If a Portfolio
retains the portfolio security and engages in an offsetting transaction, the
Portfolio will incur a gain or a loss (as described below) to the extent that
there has been movement in forward contract prices. If the Portfolio engages in
an offsetting transaction, it may subsequently enter into a new forward
contract to sell the foreign currency.

Should forward prices decline during the period between the Portfolio's
entering into a forward contract for the sale of a foreign currency and the
date it enters into an offsetting contract for the purchase of the foreign
currency, the Portfolio will realize a gain to the extent the price of the
currency it has agreed to sell exceeds the price of the currency it has agreed
to purchase. Should forward prices increase, the Portfolio will suffer a loss
to the extent the price of the currency it has agreed to purchase exceeds the
price of the currency it has agreed to sell.

Although the Portfolio values its assets daily in terms of U.S. dollars, it
does not intend to convert its holdings of foreign currencies into U.S. dollars
on a daily basis. The Portfolio will do so from time to time, and investors
should be aware of the costs of currency conversion. Although foreign exchange
dealers do not charge a fee for conversion, they do realize a profit based on
the difference ("spread") between the prices at which they are buying and
selling various currencies. Thus, a dealer may offer to sell a foreign currency
to a Portfolio at one rate, while offering a lesser rate of exchange should the
Portfolio desire to resell that currency to the dealer.

FOREIGN CURRENCY OPTIONS, FOREIGN CURRENCY FUTURES CONTRACTS AND OPTIONS ON
FUTURES. Each Portfolio, if permitted in the Prospectus, may purchase or sell
exchange-traded foreign currency options, foreign currency futures contracts
and related options on foreign currency futures contracts as a hedge against
possible variations in foreign exchange rates. The Portfolios will write
options on foreign currency or on foreign currency futures contracts only if
they are "covered." A put on a foreign currency or on a foreign currency
futures contract written by a Portfolio will be considered "covered" if, so
long as the Portfolio is obligated as the writer of the put, it segregates with
the Portfolio's custodian cash, U.S. Government securities or other liquid
high-grade debt securities equal at all times to the aggregate exercise price
of the put. A call on a foreign currency or on a foreign currency future
contract written by the Portfolio will be considered "covered" only if the
Portfolio owns short term debt securities with a value equal to the face amount
of the option contract and denominated in the

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currency upon which the call is written. Option transactions may be effected
to hedge the currency risk on non-U.S. dollar-denominated securities owned by
a Portfolio, sold by a Portfolio but not yet delivered or anticipated to be
purchased by a Portfolio. As an illustration, a Portfolio may use such
techniques to hedge the stated value in U.S. dollars of an investment in a
Japanese yen-denominated security. In these circumstances, a Portfolio may
purchase a foreign currency put option enabling it to sell a specified amount
of yen for dollars at a specified price by a future date. To the extent the
hedge is successful, a loss in the value of the dollar relative to the yen will
tend to be offset by an increase in the value of the put option.

Certain differences exist between foreign currency hedging instruments. Foreign
currency options provide the holder the right to buy or to sell a currency at a
fixed price on or before a future date. Listed options are third-party
contracts (performance is guaranteed by an exchange or clearing corporation)
which are issued by a clearing corporation, traded on an exchange and have
standardized prices and expiration dates. Over-the-counter options are
two-party contracts and have negotiated prices and expiration dates. A futures
contract on a foreign currency is an agreement between two parties to buy and
sell a specified amount of the currency for a set price on a future date.
Futures contracts and listed options on futures contracts are traded on boards
of trade or futures exchanges. Options traded in the over-the-counter market
may not be as actively traded as those on an exchange, so it may be more
difficult to value such options. In addition, it may be difficult to enter into
closing transactions with respect to options traded over-the-counter. See
"Options" -- "Over-the-Counter Options," below.

A Portfolio will not speculate in foreign currency options, futures or related
options. Accordingly, a Portfolio will not hedge a currency substantially in
excess of the market value of the securities denominated in that currency which
it owns or the expected acquisition price of securities which it anticipates
purchasing.

For information concerning the risks associated with utilizing options, futures
contracts, and forward foreign currency exchange contracts, please see "Risks
of Transactions in Options, Futures Contracts and Forward Currency Contracts"
on page ___.

FOREIGN SECURITIES

Foreign securities involve currency risks. The value of a foreign security
denominated in foreign currency changes with variations in the exchange rates.
Fluctuations in exchange rates may also affect the earning power and asset
value of the foreign entity issuing a security, even one denominated in U.S.
dollars. Dividend and interest payments will be repatriated based on the
exchange rate at the time of disbursement, and restrictions on capital flows
may be imposed.

Foreign securities may be subject to foreign government taxes which reduce
their attractiveness. Other risks of investing in such securities include
political or economic instability in the country involved, the difficulty of
predicting international trade patterns and the possibility of imposition of
exchange controls. The prices of such securities may be more volatile than
those of domestic securities. In addition, there may be less publicly available
information about a foreign issuer than about a domestic issuer. Foreign
issuers generally are not subject to uniform accounting, auditing and financial
reporting standards comparable to those applicable to domestic issuers. There
is generally less regulation of stock exchanges, brokers, banks and listed
companies abroad than in the United States, and settlements may be slower and
may be subject to failure. With respect to certain foreign countries, there is
a possibility of expropriation of assets or nationalization, imposition of
withholding taxes on dividend or interest payments, difficulty in obtaining and
enforcing judgments against foreign entities or diplomatic developments which
could affect investment in these countries. Losses and other expenses may be

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incurred in converting between various currencies in connection with purchases
and sales of foreign securities.

DEPOSITARY RECEIPTS. For many foreign securities there are depositary receipts.
Depositary receipts are securities representing ownership interests in
securities of foreign companies (an "underlying issuer") and are deposited with
a securities depositary. Depositary receipts include American Depositary
Receipts ("ADRs"), Global Depositary Receipts ("GDRs") and other types of
Depositary Receipts (which, together with ADRs and GDRs, are hereinafter
collectively referred to as "Depositary Receipts"). ADRs are dollar-denominated
Depositary Receipts typically issued by a U.S. financial institution which
evidence ownership interests in a security of pool of securities issued by a
foreign issuer. ADRs are listed and traded in the United States. GDRs and other
types of Depositary Receipts are typically issued by foreign banks or trust
companies, although they also may be issued by U.S. financial institutions, and
evidence ownership interests in a security or pool of securities issued by
either a foreign or a U.S. corporation. Generally, Depositary Receipts in
registered form are designed for use in the U.S. securities market and
Depositary Receipts in bearer form are designed for use in securities markets
outside the United States.

Depositary receipts may be "sponsored" or "unsponsored". Sponsored depositary
receipts are established jointly by a depositary and the underlying issuer,
whereas unsponsored depositary receipts may be established by a depositary
without participation by the underlying issuer. Holders of an unsponsored
depositary receipt generally bear all the costs associated with establishing
the unsponsored depositary receipt. In addition, the issuers of the securities
underlying unsponsored depositary receipts are not obligated to disclose
material information in the U.S. and, therefore, there may be less information
available regarding such issuers and there may not be a correlation between
such information and the market value of the depositary receipts. For purposes
of a Portfolio's investment policies, the Portfolio's investment in depositary
receipts will be deemed to be investments in the underlying securities except
as noted.

EASTERN EUROPEAN AND RUSSIAN SECURITIES. The economies of Eastern European
countries are currently suffering both from the stagnation resulting from
centralized economic planning and control and the higher prices and
unemployment associated with the transition to market economics. Unstable
economic and political conditions may adversely affect security values. Upon
the accession to power of Communist regimes approximately 40 years ago, the
governments of a number of Eastern European countries expropriated a large
amount of property. The claims of many property owners against those
governments were never finally settled. In the event of the return to power of
the Communist Party, there can be no assurance that a Portfolio's investments
in Eastern Europe would not be expropriated, nationalized or otherwise
confiscated.

The registration, clearing and settlement of securities transactions involving
Russian issuers are subject to significant risks not normally associated with
securities transactions in the United States and other more developed markets.
Ownership of equity securities in Russian companies is evidenced by entries in
a company's share register (except where shares are held through depositories
that meet the requirements of the 1940 Act) and the issuance of extracts from
the register or, in certain limited cases, by formal share certificates.
However, Russian share registers are frequently unreliable and a Portfolio
could possibly lose its registration through oversight, negligence or fraud.
Moreover, Russia lacks a centralized registry to record shares and companies
themselves maintain share registers. Registrars are under no obligation to
provide extracts to potential purchasers in a timely manner or at all and are
not necessarily subject to effective state supervision. In addition, while
registrars are liable under law for losses resulting from their errors, it may
be difficult for a Portfolio to enforce any rights it may have against the
registrar or issuer of the securities in the event of loss of share
registration. Although Russian companies with more than 1,000 shareholders are
required by law to employ an independent

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company to maintain share registers, in practice, such companies have not
always followed this law. Because of this lack of independence of registrars,
management of a Russian company may be able to exert considerable influence
over who can purchase and sell the company's shares by illegally instructing
the registrar to refuse to record transactions on the share register.
Furthermore, these practices could cause a delay in the sale of Russian
securities by a Portfolio if the company deems a purchaser unsuitable, which
may expose a Portfolio to potential loss on its investment.

In light of the risks described above, the Board of Trustees of the Trust has
approved certain procedures concerning a Portfolio's investments in Russian
securities. Among these procedures is a requirement that a Portfolio will not
invest in the securities of a Russian company unless that issuer's registrar
has entered into a contract with a Portfolio's sub-custodian containing certain
protective conditions, including, among other things, the sub-custodian's right
to conduct regular share confirmations on behalf of a Portfolio. This
requirement will likely have the effect of precluding investments in certain
Russian companies that a Portfolio would otherwise make.

EMERGING MARKET SECURITIES. Investments in emerging market country securities
involve special risks. Certain emerging market countries have historically
experienced, and may continue to experience, high rates of inflation, high
interest rates, exchange rate fluctuations, large amounts of external debt,
balance of payments and trade difficulties and extreme poverty and
unemployment. The issuer or governmental authority that controls the repayment
of an emerging market country's debt may not be able or willing to repay the
principal and/or interest when due in accordance with the terms of such debt.
As a result of the foregoing, a government obligor may default on its
obligations. If such an event occurs, a Portfolio may have limited legal
recourse against the issuer and/or guarantor. Remedies must, in some cases, be
pursued in the courts of the defaulting party itself, and the ability of the
holder of foreign government fixed income securities to obtain recourse may be
subject to the political climate in the relevant country. In addition, no
assurance can be given that the holders of commercial bank debt will not
contest payments to the holders of other foreign government debt obligations in
the event of default under their commercial bank loan agreements.

The economies of individual emerging market countries may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross domestic
product, rate of inflation, currency depreciation, capital reinvestment,
resource self-sufficiency and balance of payments position. Further, the
economies of developing countries generally are heavily dependent upon
international trade and, accordingly, have been, and may continue to be,
adversely affected by trade barriers, exchange controls, managed adjustments in
relative currency values and other protectionist measures imposed or negotiated
by the countries with which they trade. These economies also have been, and may
continue to be, adversely affected by economic conditions in the countries with
which they trade.

Investing in emerging market countries may entail purchasing securities issued
by or on behalf of entities that are insolvent, bankrupt, in default or
otherwise engaged in an attempt to reorganize or reschedule their obligations,
and in entities that have little or no proven credit rating or credit history.
In any such case, the issuer's poor or deteriorating financial condition may
increase the likelihood that the investing Portfolio will experience losses or
diminution in available gains due to bankruptcy, insolvency or fraud.

SPECIAL CONSIDERATIONS CONCERNING THE PACIFIC BASIN. Many Asian countries may
be subject to a greater degree of social, political and economic instability
than is the case in the United States and European countries. Such instability
may result from (i) authoritarian governments or military involvement in
political and economic decision-making; (ii) popular unrest associated with
demands for improved political, economic and social conditions; (iii) internal
insurgencies; (iv) hostile relations with neighboring countries; and (v)
ethnic, religious and racial disaffection.

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The economies of most of the Asian countries are heavily dependent on
international trade and are accordingly affected by protective trade barriers
and the economic conditions of their trading partners, principally, the United
States, Japan, China and the European Community. The enactment by the United
States or other principal trading partners of protectionist trade legislation,
reduction of foreign investment in the local economies and general declines in
the international securities markets could have a significant adverse effect
upon the securities markets of the Asian countries.

The securities markets in Asia are substantially smaller, less liquid and more
volatile than the major securities markets in the United States. A high
proportion of the shares of many issuers may be held by a limited number of
persons and financial institutions,which may limit the number of shares
available for investment by a Portfolio. Similarly, volume and liquidity in the
bond markets in Asia are less than in the United States and, at times, price
volatility can be greater than in the United States. A limited number of
issuers in Asian securities markets may represent a disproportionately large
percentage of market capitalization and trading value. The limited liquidity of
securities markets in Asia may also affect a Portfolio's ability to acquire or
dispose of securities at the price and time it wishes to do so. In addition,
the Asian securities markets are susceptible to being influenced by large
investors trading significant blocks of securities.

Many stock markets are undergoing a period of growth and change which may
result in trading volatility and difficulties in the settlement and recording
of transactions, and in interpreting and applying the relevant law and
regulations. With respect to investments in the currencies of Asian countries,
changes in the value of those currencies against the U.S. dollar will result in
corresponding changes in the U.S. dollar value of a Portfolio's assets
denominated in those currencies.

EURODOLLAR AND YANKEE DOLLAR OBLIGATIONS. Eurodollar bank obligations are
U.S. dollar-denominated certificates of deposit and time deposits issued
outside the U.S. capital markets by foreign branches of U.S. banks and by
foreign banks. Yankee dollar bank obligations are U.S. dollar-denominated
obligations issued in the U.S. capital markets by foreign banks.

Eurodollar and Yankee dollar obligations are subject to the same risks that
pertain to domestic issues, notably credit risk, market risk and liquidity
risk. Additionally, Eurodollar (and to a limited extent, Yankee dollar)
obligations are subject to certain sovereign risks. One such risk is the
possibility that a sovereign country might prevent capital, in the form of
dollars, from flowing across its borders. Other risks include adverse political
and economic developments; the extent and quality of government regulation of
financial markets and institutions; the imposition of foreign withholding
taxes; and the expropriation or nationalization of foreign issuers.

FORWARD COMMITMENTS, WHEN-ISSUED AND DELAYED DELIVERY SECURITIES

Forward commitments, when-issued and delayed delivery transactions arise when
securities are purchased by a Portfolio 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 Portfolio at the time of entering into the transaction.
However, the price of or yield on a comparable security available when delivery
takes place may vary from the price of or yield on the security at the time
that the forward commitment or when-issued or delayed delivery transaction was
entered into. Agreements for such purchases might be entered into, for example,
when a Portfolio anticipates a decline in interest rates and is able to obtain
a more advantageous price or yield by committing currently to purchase
securities to be issued later. When a Portfolio purchases securities on a
forward commitment, when-issued or delayed delivery basis it does not pay
for the securities until they are received, and the Portfolio is required to
create a

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segregated account with the Trust's custodian and to maintain in that account
cash or other liquid securities in an amount equal to or greater than, on a
daily basis, the amount of the Portfolio's forward commitments, when-issued or
delayed delivery commitments.

A Portfolio will only enter into forward commitments and make commitments to
purchase securities on a when-issued or delayed delivery basis with the
intention of actually acquiring the securities. However, the Portfolio may sell
these securities before the settlement date if it is deemed advisable as a
matter of investment strategy. Forward commitments and when-issued and delayed
delivery transactions are generally expected to settle within three months from
the date the transactions are entered into, although the Portfolio may close
out its position prior to the settlement date by entering into a matching sales
transaction.

Although none of the Portfolios intends to make such purchases for speculative
purposes and each Portfolio intends to adhere to the policies of the Securities
and Exchange Commission ("SEC"), purchases of securities on such a basis may
involve more risk than other types of purchases. For example, by committing to
purchase securities in the future, a Portfolio subjects itself to a risk of
loss on such commitments as well as on its portfolio securities. Also, a
Portfolio may have to sell assets which have been set aside in order to meet
redemptions. In addition, if a Portfolio determines it is advisable as a matter
of investment strategy to sell the forward commitment or when-issued or delayed
delivery securities before delivery, that Portfolio may incur a gain or loss
because of market fluctuations since the time the commitment to purchase such
securities was made. Any such gain or loss would be treated as a capital gain
or loss and would be treated for tax purposes as such. When the time comes to
pay for the securities to be purchased under a forward commitment or on a
when-issued or delayed delivery basis, a Portfolio will meet its obligations
from the then available cash flow or the sale of securities, or, although it
would not normally expect to do so, from the sale of the forward commitment or
when-issued or delayed delivery securities themselves (which may have a value
greater or less than a Portfolio's payment obligation).

FUTURES

FUTURES TRANSACTIONS. A futures contract is a bilateral agreement to buy or
sell a security (or deliver a cash settlement price, in the case of a contract
relating to an index or otherwise not calling for physical delivery at the end
of trading in the contracts) for a set price in the future. Futures contracts
are designated by boards of trade which have been designated "contracts
markets" by the Commodities Futures Trading Commission ("CFTC").

No purchase price is paid or received when the contract is entered into.
Instead, a Portfolio upon entering into a futures contract (and to maintain the
Portfolio's open positions in futures contracts) would be required to deposit
with its custodian in a segregated account in the name of the futures broker an
amount of cash, United States government securities, suitable money market
instruments, or liquid, high-grade debt securities, known as "initial margin."
The margin required for a particular futures contract is set by the exchange on
which the contract is traded, and may be significantly modified from time to
time by the exchange during the term of the contract. Futures contracts are
customarily purchased and sold on margin that may range upward from less than
5% of the value of the contract being traded. By using futures contracts as a
risk management technique, given the greater liquidity in the futures market
than in the cash market, it may be possible to accomplish certain results more
quickly and with lower transaction costs.

If the price of an open futures contract changes (by increase in the case of a
sale or by decrease in the case of a purchase) so that the loss on the futures
contract reaches a point at which the margin on deposit does not satisfy margin
requirements, the broker will require an increase in the margin.

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However, if the value of a position increases because of favorable price
changes in the futures contract so that the margin deposit exceeds the required
margin, the broker will pay the excess to the Portfolio. These subsequent
payments called "variation margin," to and from the futures broker, are made on
a daily basis as the price of the underlying assets fluctuate making the long
and short positions in the futures contract more or less valuable, a process
known as "marking to the market." The Portfolios expect to earn interest income
on their initial and variation margin deposits.

A Portfolio will incur brokerage fees when it purchases and sells futures
contracts. Positions taken in the futures markets are not normally held until
delivery or cash settlement is required, but are instead liquidated through
offsetting transactions which may result in a gain or a loss. While futures
positions taken by a Portfolio will usually be liquidated in this manner, the
Portfolio may instead make or take delivery of underlying securities whenever
it appears economically advantageous for the Portfolio to do so. A clearing
organization associated with the exchange on which futures are traded assumes
responsibility for closing out transactions and guarantees that as between the
clearing members of an exchange, the sale and purchase obligations will be
performed with regard to all positions that remain open at the termination of
the contract.

SECURITIES INDEX FUTURES CONTRACTS. Purchases or sales of securities index
futures contracts may be used in an attempt to protect a Portfolio's current or
intended investments from broad fluctuations in securities prices. A securities
index futures contract does not require the physical delivery of securities,
but merely provides for profits and losses resulting from changes in the market
value of the contract to be credited or debited at the close of each trading
day to the respective accounts of the parties to the contract. On the
contract's expiration date a final cash settlement occurs and the futures
positions are simply closed out. Changes in the market value of a particular
index futures contract reflect changes in the specified index of securities on
which the future is based.

By establishing an appropriate "short" position in index futures, a Portfolio
may also seek to protect the value of its portfolio against an overall decline
in the market for such securities. Alternatively, in anticipation of a
generally rising market, a Portfolio can seek to avoid losing the benefit of
apparently low current prices by establishing a "long" position in securities
index futures and later liquidating that position as particular securities are
in fact acquired. To the extent that these hedging strategies are successful,
the Portfolio will be affected to a lesser degree by adverse overall market
price movements than would otherwise be the case.

OPTIONS ON FUTURES CONTRACTS. Each Portfolio, as specified or excepted in the
Prospectus, may purchase and write exchange-traded call and put options on
futures contracts of the type which the particular Portfolio is authorized to
enter into. These options are traded on exchanges that are licensed and
regulated by the CFTC for the purpose of options trading. A call option on a
futures contract gives the purchaser the right, in return for the premium paid,
to purchase a futures contract (assume a "long" position) at a specified
exercise price at any time before the option expires. A put option gives the
purchaser the right, in return for the premium paid, to sell a futures contract
(assume a "short" position), for a specified exercise price, at any time before
the option expires.

The Portfolios will write only options on futures contracts which are
"covered." A Portfolio will be considered "covered" with respect to a put
option it has written if, so long as it is obligated as a writer of the put,
the Portfolio segregates with its custodian cash, United States Government
securities or liquid securities at all times equal to or greater than the
aggregate exercise price of the puts it has written (less any related margin
deposited with the futures broker). A Portfolio will be considered "covered"
with respect to a call option it has written on a debt security future if, so
long as it is obligated as a writer of the call, the Portfolio owns a security
deliverable under the futures contract. A Portfolio will be considered
"covered" with respect to a call option it has written on a securities index

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future if the Portfolio owns, so long as the Portfolio is obligated as the
writer of the call, a portfolio of securities the price changes of which are,
in the opinion of its Adviser, expected to replicate substantially the movement
of the index upon which the futures contract is based.

Upon the exercise of a call option, the writer of the option is obligated to
sell the futures contract (to deliver a "long" position to the option holder)
at the option exercise price, which will presumably be lower than the current
market price of the contract in the futures market. Upon exercise of a put, the
writer of the option is obligated to purchase the futures contract (deliver a
"short" position to the option holder) at the option exercise price which will
presumably be higher than the current market price of the contract in the
futures market. When the holder of an option exercises it and assumes a long
futures position, in the case of a call, or a short futures position, in the
case of a put, its gain will be credited to its futures margin account, while
the loss suffered by the writer of the option will be debited to its account
and must be immediately paid by the writer. However, as with the trading of
futures, most participants in the options markets do not seek to realize their
gains or losses by exercise of their option rights. Instead, the holder of an
option will usually realize a gain or loss by buying or selling an offsetting
option at a market price that will reflect an increase or a decrease from the
premium originally paid.

If a Portfolio writes options on futures contracts, the Portfolio will receive
a premium but will assume a risk of adverse movement in the price of the
underlying futures contract comparable to that involved in holding a futures
position. If the option is not exercised, the Portfolio will realize a gain in
the amount of the premium, which may partially offset unfavorable changes in
the value of securities held in or to be acquired for the Portfolio. If the
option is exercised, the Portfolio will incur a loss in the option transaction,
which will be reduced by the amount of the premium it has received, but which
will offset any favorable changes in the value of its portfolio securities or,
in the case of a put, lower prices of securities it intends to acquire.

Options on futures contracts can be used by a Portfolio to hedge substantially
the same risks as might be addressed by the direct purchase or sale of the
underlying futures contracts. If the Portfolio purchases an option on a futures
contract, it may obtain benefits similar to those that would result if it held
the futures position itself. Purchases of options on futures contracts may
present less risk in hedging than the purchase and sale of the underlying
futures contracts since the potential loss is limited to the amount of the
premium plus related transaction costs.

The purchase of put options on futures contracts is a means of hedging a
portfolio of securities against a general decline in market prices. The
purchase of a call option on a futures contract represents a means of hedging
against a market advance when a Portfolio is not fully invested.

The writing of a call option on a futures contract constitutes a partial hedge
against declining prices of the underlying securities. If the futures price at
expiration is below the exercise price, the Portfolio will retain the full
amount of the option premium, which provides a partial hedge against any
decline that may have occurred in the value of the Portfolio's holdings of
securities. The writing of a put option on a futures contract is analogous to
the purchase of a futures contract in that it hedges against an increase in the
price of securities the Portfolio intends to acquire. However, the hedge is
limited to the amount of premium received for writing the put.

LIMITATIONS ON PURCHASE AND SALE OF FUTURES CONTRACTS AND OPTIONS ON FUTURES
CONTRACTS. The Portfolios will not engage in transactions in futures contracts
and related options for speculation. In addition, the Portfolios will not
purchase or sell futures contracts or related options unless either (1) the
futures contracts or options thereon are purchased for "bona fide hedging"
purposes (as that term is defined under the CFTC regulations) or (2) if
purchased for other purposes, the sum of the amounts of

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initial margin deposits on a Portfolio's existing futures and premiums required
to establish non-hedging positions would not exceed 5% of the liquidation value
of the Portfolio's total assets. In instances involving the purchase of futures
contracts or the writing of put options thereon by a Portfolio, an amount of
cash and cash equivalents, equal to the cost of such futures contracts or
options written (less any related margin deposits), will be deposited in a
segregated account with its custodian, thereby insuring that the use of such
futures contracts and options is unleveraged. In instances involving the sale
of futures contracts or the writing of call options thereon by a Portfolio, the
securities underlying such futures contracts or options will at all times be
maintained by the Portfolio or, in the case of index futures and related
options, the Portfolio will own securities the price changes of which are, in
the opinion of its Adviser, expected to replicate substantially the movement of
the index upon which the futures contract or option is based.

HYBRID INSTRUMENTS

Hybrid instruments (a type of potentially high-risk derivative) combine the
elements of futures contracts or options with those of debt, preferred equity
or a depository instrument ("Hybrid Instruments"). Generally, a Hybrid
Instrument will be a debt security, preferred stock, depository share, trust
certificate, certificate of deposit or other evidence of indebtedness on which
a portion of or all interest payments, and/or the principal or stated amount
payable at maturity, redemption or retirement, is determined by reference to
prices, changes in prices, or differences between prices, of securities,
currencies, intangibles, goods, articles or commodities (collectively
"Underlying Assets") or by another objective index, economic factor or other
measure, such as interest rates, currency exchange rates, commodity indices,
and securities indices (collectively "Benchmarks"). Thus, Hybrid Instruments
may take a variety of forms, including, but not limited to, debt instruments
with interest or principal payments or redemption terms determined by reference
to the value of a currency or commodity or securities index at a future point
in time, preferred stock with dividend rates determined by reference to the
value of a currency, or convertible securities with the conversion terms
related to a particular commodity.

Hybrid Instruments can be an efficient means of creating exposure to a
particular market, or segment of a market, with the objective of enhancing
total return. For example, a Portfolio may wish to take advantage of expected
declines in interest rates in several European countries, but avoid the
transaction costs associated with buying and currency-hedging the foreign bond
positions. One solution would be to purchase a U.S. dollar-denominated Hybrid
Instrument whose redemption price is linked to the average three year interest
rate in a designated group of countries. The redemption price formula would
provide for payoffs of greater than par if the average interest rate was lower
than a specified level, and payoffs of less than par if rates were above the
specified level. Furthermore, a Portfolio could limit the downside risk of the
security by establishing a minimum redemption price so that the principal paid
at maturity could not be below a predetermined minimum level if interest rates
were to rise significantly. The purpose of this arrangement, known as a
structured security with an embedded put option, would be to give the Portfolio
the desired European bond exposure while avoiding currency risk, limiting
downside market risk, and lowering transaction costs. Of course, there is no
guarantee that the strategy will be successful and a Portfolio could lose money
if, for example, interest rates do not move as anticipated or credit problems
develop with the issuer of the Hybrid Instrument.

The risks of investing in Hybrid Instruments reflect a combination of the risks
of investing in securities, options, futures and currencies. The risks of a
particular Hybrid Instrument will, of course, depend

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<PAGE>

upon the terms of the instrument, but may include, without limitation, the
possibility of significant changes in the Benchmarks or the prices of
Underlying Assets to which the instrument is linked. Such risks generally
depend upon factors which are unrelated to the operations or credit quality of
the issuer of the Hybrid Instrument and which may not be readily foreseen by
the purchaser, such as economic and political events, the supply and demand for
the Underlying Assets and interest rate movements. In recent years, various
Benchmarks and prices for Underlying Assets have been highly volatile, and
such volatility may be expected in the future.

Hybrid Instruments are potentially more volatile and carry greater market risks
than traditional debt instruments. Depending on the structure of the particular
Hybrid Instrument, changes in a Benchmark may be magnified by the terms of the
Hybrid Instrument and have an even more dramatic and substantial effect upon
the value of the Hybrid Instrument. Also, the prices of the Hybrid Instrument
and the Benchmark or Underlying Asset may not move in the same direction or at
the same time.

Hybrid Instruments may bear interest or pay preferred dividends at below market
(or even relatively nominal) rates. Alternatively, Hybrid Instruments may bear
interest at above market rates but bear an increased risk of principal loss (or
gain). The latter scenario may result if "leverage" is used to structure the
Hybrid Instrument. Leverage risk occurs when the Hybrid Instrument is
structured so that a given change in a Benchmark or Underlying Asset is
multiplied to produce a greater value change in the Hybrid Instrument, thereby
magnifying the risk of loss as well as the potential for gain.

Hybrid Instruments may also carry liquidity risk since the instruments are
often "customized" to meet the portfolio needs of a particular investor, and
therefore, the number of investors that are willing and able to buy such
instruments in the secondary market may be smaller than that for more
traditional debt securities. In addition, because the purchase and sale of
Hybrid Instruments could take place in an over-the-counter market without the
guarantee of a central clearing organization or in a transaction between the
portfolio and the issuer of the Hybrid Instrument, the creditworthiness of the
counter party or issuer of the Hybrid Instrument would be an additional risk
factor which the Portfolio would have to consider and monitor. Hybrid
Instruments also may not be subject to regulation of the CFTC, which generally
regulates the trading of commodity futures by persons in the U.S., the SEC,
which regulates the offer and sale of securities by and to persons in the U.S.,
or any other governmental regulatory authority. The various risks discussed
above, particularly the market risk of such instruments, may in turn cause
significant fluctuations in the net asset value of the Portfolio.

INVESTMENT COMPANY SECURITIES

Investment company securities are securities of other open-end or closed-end
investment companies. The 1940 Act generally prohibits a Portfolio from
acquiring more than 3% of the outstanding voting shares of an investment
company and limits such investments to no more than 5% of the Portfolio's total
assets in any investment company and no more than 10% in any combination of
unaffiliated investment companies. The 1940 Act also prohibits a Portfolio from
acquiring shares of an open-end investment company whose investment manager or
investment adviser is the Adviser or an affiliate of the Adviser to the
Portfolio purchasing such securities. The 1940 Act further prohibits a
Portfolio from acquiring in the aggregate more than 10% of the outstanding
voting shares of any registered closed-end investment company.

INVESTMENT GRADE AND LOWER QUALITY FIXED INCOME SECURITIES

Investment grade securities rated Baa by Moody's Investors Service Inc.
("Moody's") or BBB by Standard & Poor's Ratings Service, a division of
McGraw-Hill Companies, Inc. ("S&P") and comparable unrated securities, while
normally exhibiting adequate protection parameters, have

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speculative characteristics and changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than in the case of higher grade fixed income securities.
Fixed income investments that are rated in the lower categories by NRSROs
(i.e., Ba or lower by Moody's or BB or lower by S&P) or are unrated securities
of comparative quality are known as "junk bonds." Such lower quality fixed
income securities or junk bonds are considered as predominantly speculative by
those rating agencies. It is the policy of each Portfolio's Adviser to not rely
exclusively on ratings issued by credit rating agencies but to supplement such
ratings with the Adviser's own independent and ongoing review of credit quality.
Junk bonds may be issued as a consequence of corporate restructuring, such as
leveraged buyouts, mergers, acquisitions, debt recapitalizations, or similar
events or by smaller or highly leveraged companies. When economic conditions
appear to be deteriorating, junk bonds may decline in market value due to
investors' heightened concern over credit quality, regardless of prevailing
interest rates. Although the growth of the high yield securities market in the
1980s had paralleled a long economic expansion, many issuers have been affected
by adverse economic and market conditions. It should be recognized that an
economic downturn or increase in interest rates is likely to have a negative
effect on: (i) the high yield bond market; (ii) the value of high yield
securities; and (iii) the ability of the securities' issuers to service their
principal and interest payment obligations, to meet their projected business
goals or to obtain additional financing. The market for junk bonds, especially
during periods of deteriorating economic conditions, may be less liquid than
the market for investment grade bonds. In periods of reduced market liquidity,
junk bond prices may become more volatile and may experience sudden and
substantial price declines. Also, there may be significant disparities in the
prices quoted for junk bonds by various dealers. Under such conditions, a
Portfolio may find it difficult to value its junk bonds accurately. Under such
conditions, a Portfolio may have to use subjective rather than objective
criteria to value its junk bond investments accurately and rely more heavily on
the judgment of the Trust's Board of Trustees. Prices for junk bonds also may
be affected by legislative and regulatory developments. For example, federal
rules require that savings and loans gradually reduce their holdings of
high-yield securities. Also, from time to time, Congress has considered
legislation to restrict or eliminate the corporate tax deduction for interest
payments or to regulate corporate restructuring such as takeovers, mergers or
leveraged buyouts. Such legislation, if enacted, could depress the prices of
outstanding junk bonds.

LOANS AND OTHER DIRECT INDEBTEDNESS

In purchasing a loan, a Portfolio acquires some or all of the interest of a
bank or other lending institution in a loan to a corporate borrower. Many such
loans are secured, although some may be unsecured. Such loans may be in default
at the time of purchase. Loans and other direct indebtedness that are fully
secured offer a Portfolio more protection than an unsecured loan in the event
of non-payment of scheduled interest or principal. However, there is no
assurance that the liquidation of collateral from a secured loan or other
direct indebtedness would satisfy the corporate borrower's obligation, or that
the collateral can be liquidated.

These loans and other direct indebtedness are made generally to finance
internal growth, mergers, acquisitions, stock repurchases, leveraged buyouts
and other corporate activities. Such loans and other direct indebtedness loans
are typically made by a syndicate of lending institutions, represented by an
agent lending institution which has negotiated and structured the loan and is
responsible for collecting interest, principal and other amounts due on its own
behalf and on behalf of the others in the syndicate, and for enforcing its
rights and the rights of other loan participants against the borrower.
Alternatively, such loans and other direct indebtedness may be structured as a
"novation" (i.e., a new loan) pursuant to which a Portfolio would assume all of
the rights of the lending institution in a loan, or as an assignment, pursuant
to which a Portfolio would purchase an assignment of a portion of a lender's
interest in a loan or other direct indebtedness either directly from the lender
or through an intermediary.

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<PAGE>

A Portfolio may also purchase trade or other claims against companies, which
generally represent money owed by the company to a supplier of goods or
services. These claims may also be purchased at a time when the company is in
default.

Certain of the loans and other direct indebtedness acquired by a Portfolio may
involve revolving credit facilities or other standby financing commitments that
obligate a Portfolio to pay additional cash on a certain date or on demand.
These commitments may have the effect of requiring a Portfolio to increase its
investment in a company at a time when a Portfolio might not otherwise decide
to do so (including at a time when the company's financial condition makes it
unlikely that such amounts will be repaid). To the extent that a Portfolio is
committed to advance additional funds, it will at all times hold and maintain
in a segregated account cash or assets in an amount sufficient to meet such
commitments.

A Portfolio's ability to receive payment of principal, interest and other
amounts due in connection with these investments will depend primarily on the
financial condition of the borrower. In selecting the loans and other direct
indebtedness that a Portfolio will purchase, the Adviser will rely upon its own
credit analysis of the borrower. As a Portfolio may be required to rely upon
another lending institution to collect and pass on to a Portfolio amounts
payable with respect to the loan and to enforce a Portfolio's rights under the
loan and other direct indebtedness, an insolvency, bankruptcy or reorganization
of the lending institution may delay or prevent a Portfolio from receiving such
amounts. In such cases, a Portfolio will also evaluate the creditworthiness of
the lending institution and will treat both the borrower and the lending
institutions as an "issuer" of the loan for purposes of certain investment
restrictions pertaining to the diversification of a Portfolio's portfolio
investments. The highly leveraged nature of many such loans and other direct
indebtedness may make such loans and other direct indebtedness especially
vulnerable to adverse changes in economic or market conditions. Investments in
such loans and other direct indebtedness may involve additional risks to a
Portfolio. For example, if a loan or other direct indebtedness is foreclosed, a
Portfolio could become part owner of any collateral, and would bear the costs
and liabilities associated with owning and disposing of the collateral. In
addition, it is conceivable that under emerging legal theories of lender
liability, a Portfolio could be held liable. It is unclear whether loans and
other forms of direct indebtedness offer securities law protections against
fraud and misrepresentation. In the absence of definitive regulatory guidance,
a Portfolio relies on the Adviser's research in an attempt to avoid situations
where fraud and misrepresentation could adversely affect a Portfolio. In
addition, loans and other direct investments may not be in the form of
securities or may be subject to restrictions on transfer, and only limited
opportunities may exist to resell such instruments. As a result, a Portfolio
may be unable to sell such investments at an opportune time or may have to
resell them at less than fair market value. To the extent that the Adviser
determines that any such investments are illiquid, a Portfolio will include
them in the investment limitations described below.

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MORTGAGE AND MORTGAGE-RELATED SECURITIES

Mortgage-backed securities have yield and maturity characteristics
corresponding to the underlying assets. Unlike traditional debt securities,
which may pay a fixed rate of interest until maturity, when the entire
principal amount comes due, payments on certain mortgage-backed securities
include both interest and a partial repayment of principal. Besides the
scheduled repayment of principal, repayments of principal may result from the
voluntary prepayment, refinancing, or foreclosure of the underlying mortgage
loans. If property owners make unscheduled prepayments of their mortgage loans,
these prepayments will result in early payment of the applicable
mortgage-related securities. In that event, the Portfolios may be unable to
invest the proceeds from the early payment of the mortgage-related securities
in an investment that provides as high a yield as the mortgage-related
securities. Consequently, early payment associated with mortgage-related
securities may cause these securities to experience significantly greater price
and yield volatility than that experienced by traditional fixed-income
securities. The occurrence of mortgage prepayments is affected by factors
including the level of interest rates, general economic conditions, the
location and age of the mortgage and other social and demographic conditions.
During periods of falling interest rates, the rate of mortgage prepayments
tends to increase, thereby tending to decrease the life of mortgage-related
securities. During periods of rising interest rates, the rate of mortgage
prepayments usually decreases, thereby tending to increase the life of
mortgage-related securities. If the life of a mortgage-related security is
inaccurately predicted, a Portfolio may not be liable to realize the rate of
return it expected.

Mortgage-backed securities are less effective than other types of securities as
a means of "locking in" attractive long-term interest rates. One reason is the
need to reinvest prepayments of principal; another is the possibility of
significant unscheduled prepayments resulting from declines in interest rates.
Prepayments may cause losses on securities purchased at a premium. At times,
some of the mortgage-backed securities in which a Portfolio may invest will
have higher than market interest rates and, therefore, will be purchased at a
premium above their par value. Unscheduled prepayments, which are made at par,
will cause a Portfolio to experience a loss equal to any unamortized premium.

As specified in the Prospectus, certain Portfolios may invest in collateralized
mortgage obligations ("CMOs") and stripped mortgage-backed securities that
represent a participation in, or are secured by, mortgage loans.

CMOs may be issued by a U.S. Government agency or instrumentality or by a
private issuer. Although payment of the principal of, and interest on, the
underlying collateral securing privately issued CMOs may be guaranteed by the
U.S. Government or its agencies or instrumentalities, these CMOs represent
obligations solely of the private issuer and are not insured or guaranteed by
the U.S. Government, its agencies or instrumentalities or any other person or
entity. Prepayments could cause early retirement of CMOs. CMOs are designed to
reduce the risk of prepayment for investors by issuing multiple classes of
securities (or "tranches"), each having different maturities, interest rates
and payment schedules, and with the principal and interest on the underlying
mortgages allocated among the several classes in various ways. Payment of
interest or principal on some classes or series of CMOs may be subject to
contingencies or some classes or series may bear some or all of the risk of
default on the underlying mortgages. CMOs of different classes or series are
generally retired in sequence as the underlying mortgage loans in the mortgage
pool are repaid. If enough mortgages are repaid ahead of schedule, the classes
or series of a CMO with the earliest maturities generally will be retired prior
to their maturities. Thus, the early retirement of particular classes or series
of a CMO held by a Portfolio would have the same effect as the prepayment of
mortgages underlying other mortgage-backed securities. Conversely, slower than
anticipated prepayments can extend the effective maturities of CMOs, subjecting
them to a greater risk of decline in market value in response to rising
interest rates

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than traditional debt securities, and, therefore, potentially increasing the
volatility of a Portfolio that invests in CMOs.

Prepayments may also result in losses on stripped mortgage-backed securities.
Stripped mortgage-backed securities may be issued by agencies or
instrumentalities of the U.S. Government and private originators of, or
investors in, mortgage loans, including savings and loan associations, mortgage
banks, commercial banks, investment banks and special purpose entities of the
foregoing. Stripped mortgage-backed securities are usually structured with two
classes that receive different portions of the interest and principal
distributions on a pool of mortgage loans. The Portfolios may invest in both
the interest-only or "IO" class and the principal-only or "PO" class. The yield
to maturity on an IO class of stripped mortgage-backed securities is extremely
sensitive not only to changes in prevailing interest rates but also to the rate
of principal payments (including prepayments) on the underlying assets. A rapid
rate of principal prepayments may have a measurable adverse effect on a
Portfolio's yield to maturity to the extent it invests in IOs. If the assets
underlying the IO experience greater than anticipated prepayments of principal,
a Portfolio may fail to recoup fully its initial investments in these
securities. Conversely, POs tend to increase in value if prepayments are
greater than anticipated and decline if prepayments are slower than anticipated.
The secondary market for stripped mortgage-backed securities may be more
volatile and less liquid than that for other mortgage-backed securities,
potentially limiting the Portfolios' ability to buy or sell those securities at
any particular time.

The JPM Core Bond Portfolio may also invest in directly placed mortgages
including residential mortgages, multifamily mortgages, mortgages on
cooperative apartment buildings, commercial mortgages, and sale-leasebacks.
Investment in direct mortgages involve many of the same risks as investments in
mortgage-related securities. In addition, in the event that the Portfolio
forecloses on any non-performing mortgage, and acquires a direct interest in
the real property, the Portfolio will be subject to the risks generally
associated with the ownership of real property. There may be fluctuations in
the market value of the foreclosed property and its occupancy rates, rent
schedules and operating expenses. There may also be adverse changes in local,
regional or general economic conditions, deterioration of the real estate
market and the financial circumstances of tenants and sellers, unfavorable
changes in zoning, building, environmental and other laws, increased real
property taxes, rising interest rates, reduced availability and increased cost
of mortgage borrowings, the need for anticipated renovations, unexpected
increases in the cost of energy, environmental factors, acts of God and other
factors which are beyond the control of the Portfolio or the Adviser. Hazardous
or toxic substances may be present on, at or under the mortgaged property and
adversely affect the value of the property. In addition, the owners of the
property containing such substances may be held responsible, under various
laws, for containing, monitoring, removing or cleaning up such substances. The
presence of such substances may also provide a basis for other claims by third
parties. Costs of clean-up or of liabilities to third parties may exceed the
value of the property. In addition, these risks may be uninsurable. In light of
these and similar risks, it may be impossible to dispose profitably of
properties in foreclosure.

MORTGAGE DOLLAR ROLLS

The JPM Core Bond Portfolio may enter into mortgage dollar rolls in which the
Portfolio sells securities for delivery in the current month and simultaneously
contracts with the same counterparty to repurchase similar (same type, coupon
and maturity) but not identical securities on a specified future date. During
the roll period, the Portfolio loses the right to receive principal (including
prepayments of principal) and interest paid on the securities sold. However,
the Portfolio may benefit from the interest earned on the cash proceeds of the
securities sold until the settlement date of the forward purchase. The
Portfolio will hold and maintain in a segregated account until the settlement
date cash or liquid securities in an amount equal to the forward purchase
price. The benefits derived from the use of

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mortgage dollar rolls depend upon the Advisor's ability to manage mortgage
prepayments. There is no assurance that mortgage dollar rolls can be
successfully employed.

NON-PUBLICLY TRADED AND ILLIQUID SECURITIES

Historically, illiquid securities have included securities subject to
contractual or legal restrictions on resale because they have not been
registered under the 1933 Act, securities which are otherwise not readily
marketable and repurchase agreements having a maturity of longer than seven
days. Securities which have not been registered under the 1933 Act are referred
to as private placements or restricted securities and are purchased directly
from the issuer or in the secondary market. Mutual funds do not typically hold
a significant amount of these restricted or other illiquid securities because
of the potential for delays on resale and uncertainty in valuation. Limitations
on resale may have an adverse effect on the marketability of portfolio
securities and a mutual fund might be unable to dispose of restricted or other
illiquid securities promptly or at reasonable prices and might thereby
experience difficulty satisfying redemptions within seven days. A mutual fund
might also have to register such restricted securities in order to dispose of
them resulting in additional expense and delay. Adverse market conditions could
impede such a public offering of securities.

In recent years, however, a large institutional market has developed for
certain securities that are not registered under the 1933 Act including
repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be
readily resold or on an issuer's ability to honor a demand for repayment. The
fact that there are contractual or legal restrictions on resale to the general
public or to certain institutions may not be indicative of the liquidity of
such investments.

Rule 144A Securities will be considered illiquid and therefore subject to a
Portfolio's limit on the purchase of illiquid securities unless the Board or
its delegates determines that the Rule 144A Securities are liquid. In reaching
liquidity decisions, the Board of Trustees and its delegates may consider,
inter alia, the following factors: (i) the unregistered nature of the security;
(ii) the frequency of trades and quotes for the security; (iii) the number of
dealers wishing to purchase or sell the security and the number of other
potential purchasers; (iv) dealer undertakings to make a market in the
security; and (v) the nature of the security and the nature of the marketplace
trades (e.g., the time needed to dispose of the security, the method of
soliciting offers and the mechanics of the transfer).

OPTIONS

WRITING CALL OPTIONS. A call option is a contract which gives the purchaser of
the option (in return for a premium paid) the right to buy, and the writer of
the option (in return for a premium received) the obligation to sell, the
underlying security at the exercise price at any time prior to the expiration
of the option, regardless of the market price of the security during the option
period. A call option on a security is covered, for example, when the writer of
the call option owns the security on which the option is written (or on a
security convertible into such a security without additional consideration)
throughout the option period.

A Portfolio will write covered call options both to reduce the risks associated
with certain of its investments and to increase total investment return through
the receipt of premiums. In return for the premium income, the Portfolio will
give up the opportunity to profit from an increase in the market price of the
underlying security above the exercise price so long as its obligations under
the contract continue, except insofar as the premium represents a profit.
Moreover, in writing the call option, the Portfolio will retain the risk of
loss should the price of the security decline. The premium is intended to
offset that loss in whole or in part. Unlike the situation in which the
Portfolio owns securities not

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subject to a call option, the Portfolio, in writing call options, must assume
that the call may be exercised at any time prior to the expiration of its
obligation as a writer, and that in such circumstances the net proceeds
realized from the sale of the underlying securities pursuant to the call may
be substantially below the prevailing market price.

A Portfolio may terminate its obligation under an option it has written by
buying an identical option. Such a transaction is called a "closing purchase
transaction." The Portfolio will realize a gain or loss from a closing purchase
transaction if the amount paid to purchase a call option is less or more than
the amount received from the sale of the corresponding call option. Also,
because increases in the market price of a call option will generally reflect
increases in the market price of the underlying security, any loss resulting
from the exercise or closing out of a call option is likely to be offset in
whole or part by unrealized appreciation of the underlying security owned by
the Portfolio. When an underlying security is sold from the Portfolio's
securities portfolio, the Portfolio will effect a closing purchase transaction
so as to close out any existing covered call option on that underlying
security.

WRITING PUT OPTIONS. The writer of a put option becomes obligated to purchase
the underlying security at a specified price during the option period if the
buyer elects to exercise the option before its expiration date. A Portfolio
which writes a put option will be required to "cover" it, for example, by
depositing and maintaining in a segregated account with its custodian cash,
U.S. Government securities or other liquid securities having a value equal to
or greater than the exercise price of the option.

The Portfolios may write put options either to earn additional income in the
form of option premiums (anticipating that the price of the underlying security
will remain stable or rise during the option period and the option will
therefore not be exercised) or to acquire the underlying security at a net cost
below the current value (e.g., the option is exercised because of a decline in
the price of the underlying security, but the amount paid by the Portfolio,
offset by the option premium, is less than the current price). The risk of
either strategy is that the price of the underlying security may decline by an
amount greater than the premium received. The premium which a Portfolio
receives from writing a put option will reflect, among other things, the
current market price of the underlying security, the relationship of the
exercise price to that market price, the historical price volatility of the
underlying security, the option period, supply and demand and interest rates.

A Portfolio may effect a closing purchase transaction to realize a profit on an
outstanding put option or to prevent an outstanding put option from being
exercised.

PURCHASING PUT AND CALL OPTIONS. A Portfolio may purchase put options on
securities to protect their holdings against a substantial decline in market
value. The purchase of put options on securities will enable a Portfolio to
preserve, at least partially, unrealized gains in an appreciated security in
its portfolio without actually selling the security. In addition, the Portfolio
will continue to receive interest or dividend income on the security. The
Portfolios may also purchase call options on securities to protect against
substantial increases in prices of securities that Portfolios intend to
purchase pending their ability to invest in an orderly manner in those
securities. The Portfolios may sell put or call options they have previously
purchased, which could result in a net gain or loss depending on whether the
amount received on the sale is more or less than the premium and other
transaction costs paid on the put or call option which was bought.

SECURITIES INDEX OPTIONS. A Portfolio may write covered put and call options
and purchase call and put options on securities indexes for the purpose of
hedging against the risk of unfavorable price movements adversely affecting the
value of a Portfolio's securities or securities it intends to purchase. Each
Portfolio writes only "covered" options. A call option on a securities index is
considered covered, for example, if, so long as the Portfolio is obligated as
the writer of the call, it holds securities

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<PAGE>

the price changes of which are, in the opinion of a Portfolio's Adviser,
expected to replicate substantially the movement of the index or indexes upon
which the options written by the Portfolio are based. A put on a securities
index written by a Portfolio will be considered covered if, so long as it is
obligated as the writer of the put, the Portfolio segregates with its custodian
cash, United States Government securities or other liquid high-grade debt
obligations having a value equal to or greater than the exercise price of the
option. Unlike a stock option, which gives the holder the right to purchase or
sell a specified stock at a specified price, an option on a securities index
gives the holder the right to receive a cash "exercise settlement amount" equal
to (i) the difference between the exercise price of the option and the value of
the underlying stock index on the exercise date, multiplied by (ii) a fixed
"index multiplier."

A securities index fluctuates with changes in the market value of the
securities so included. For example, some securities index options are based on
a broad market index such as the S&P 500 or the NYSE Composite Index, or a
narrower market index such as the S&P 100. Indexes may also be based on an
industry or market segment such as the AMEX Oil and Gas Index or the Computer
and Business Equipment Index.

OVER-THE-COUNTER OPTIONS. Certain Portfolios may enter into contracts (or amend
existing contracts) with primary dealers with whom they write over-the-counter
options. The contracts will provide that each Portfolio has the absolute right
to repurchase an option it writes at any time at a repurchase price which
represents the fair market value, as determined in good faith through
negotiation between the parties, but which in no event will exceed a price
determined pursuant to a formula contained in the contract. Although the
specific details of the formula may vary between contracts with different
primary dealers, the formula will generally be based on a multiple of the
premium received by each Portfolio for writing the option, plus the amount, if
any, of the option's intrinsic value (i.e., the amount the option is
"in-the-money"). The formula will also include a factor to account for the
difference between the price of the security and the strike price of the option
if the option is written "out-of-the-money." Although the specific details of
the formula may vary with different primary dealers, each contract will provide
a formula to determine the maximum price at which each Portfolio can repurchase
the option at any time. The Portfolios have established standards of
creditworthiness for these primary dealers, although the Portfolios may still
be subject to the risk that firms participating in such transactions will fail
to meet their obligations. In instances in which a Portfolio has entered into
agreements with respect to the over-the-counter options it has written, and
such agreements would enable the Portfolio to have an absolute right to
repurchase at a pre-established formula price the over-the-counter option
written by it, the Portfolio would treat as illiquid only securities equal in
amount to the formula price described above less the amount by which the option
is "in-the-money," i.e., the amount by which the price of the option exceeds
the exercise price.

REPURCHASE AGREEMENTS

Under a repurchase agreement, underlying debt instruments are acquired for a
relatively short period (usually not more than one week and never more than a
year) subject to an obligation of the seller to repurchase and the Portfolio to
resell the instrument at a fixed price and time, thereby determining the yield
during the Portfolio's holding period. This results in a fixed rate of return
insulated from market fluctuation during that holding period.

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<PAGE>

Repurchase agreements may have the characteristics of loans by a Portfolio.
During the term of the repurchase agreement, a Portfolio retains the security
subject to the repurchase agreement as collateral securing the seller's
repurchase obligation, continually monitors on a daily basis the market value
of the security subject to the agreement and requires the seller to deposit
with the Portfolio collateral equal to any amount by which the market value of
the security subject to the repurchase agreements falls below the resale amount
provided under the repurchase agreement. A Portfolio will enter into repurchase
agreements (with respect to U.S. Government obligations, certificates of
deposit, or bankers' acceptances) with registered brokers-dealers, U.S.
Government securities dealers or domestic banks whose creditworthiness is
determined to be satisfactory by the Portfolio's Adviser, pursuant to
guidelines adopted by the Board of Trustees. Generally, a Portfolio does not
invest in repurchase agreements maturing in more than seven days. The staff of
the SEC currently takes the position that repurchase agreements maturing in
more than seven days are illiquid securities.

If a seller under a repurchase agreement were to default on the agreement and
be unable to repurchase the security subject to the repurchase agreement, the
Portfolio would look to the collateral underlying the seller's repurchase
agreement, including the security subject to the repurchase agreement, for
satisfaction of the seller's obligation to the Portfolio. In the event a
repurchase agreement is considered a loan and the seller defaults, the
Portfolio might incur a loss if the value of the collateral declines and may
incur disposition costs in liquidating the collateral. In addition, if
bankruptcy proceedings are commenced with respect to the seller, realization of
the collateral may be delayed or limited and a loss may be incurred.

REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLLS

Reverse repurchase agreements involve the sale of securities held by the
Portfolio pursuant to its agreement to repurchase them at a mutually agreed
upon date, price and rate of interest. At the time a Portfolio enters into a
reverse repurchase agreement, it will establish and maintain a segregated
account with an approved custodian containing cash or other liquid securities
having a value not less than the repurchase price (including accrued interest).
The assets contained in the segregated account will be marked-to-market daily
and additional assets will be placed in such account on any day in which the
assets fall below the repurchase price (plus accrued interest). A Portfolio's
liquidity and ability to manage its assets might be affected when it sets aside
cash or portfolio securities to cover such commitments. Reverse repurchase
agreements involve the risk that the market value of the securities retained in
lieu of sale may decline below the price of the securities a Portfolio has sold
but is obligated to repurchase. In the event the buyer of securities under a
reverse repurchase agreement files for bankruptcy or becomes insolvent, such
buyer or its trustee or receiver may receive an extension of time to determine
whether to enforce a Portfolio's obligation to repurchase the securities, and a
Portfolio's use of the proceeds of the reverse repurchase agreement may
effectively be restricted pending such decision.

In "dollar rolls" transactions, a Portfolio sells fixed-income securities for
delivery in the current month and simultaneously contracts to repurchase
similar but not identical (same type, coupon and maturity) securities on a
specified future date. During the roll period, a Portfolio would forego
principal and interest paid on such securities. A Portfolio would be
compensated by the difference between the current sales price and the forward
price for the future purchase, as well as by the interest earned on the cash
proceeds of the initial sale. At the time a Portfolio enters into a dollar roll
transaction, it will place in a segregated account maintained with an approved
custodian cash or other liquid securities having a value not less than the
repurchase price (including accrued interest) and will subsequently monitor the
account to ensure that its value is maintained. Reverse repurchase agreements
are considered to be borrowings under the 1940 Act.

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<PAGE>

RISKS OF TRANSACTIONS IN OPTIONS, FUTURES CONTRACTS AND FORWARD CURRENCY
CONTRACTS

OPTIONS. A closing purchase transaction for exchange-traded options may be made
only on a national securities exchange ("exchange"). There is no assurance that
a liquid secondary market on an exchange will exist for any particular option,
or at any particular time, and for some options, such as over-the-counter
options, no secondary market on an exchange may exist. If a Portfolio is unable
to effect a closing purchase transaction, the Portfolio will not sell the
underlying security until the option expires or the Portfolio delivers the
underlying security upon exercise.

Options traded in the over-the-counter market may not be as actively traded as
those on an exchange. Accordingly, it may be more difficult to value such
options. In addition, it may be difficult to enter into closing transactions
with respect to options traded over-the-counter. The Portfolios will engage in
such transactions only with firms of sufficient credit so as to minimize these
risks. Such options and the securities used as "cover" for such options may be
considered illiquid securities.

The effectiveness of hedging through the purchase of securities index options
will depend upon the extent to which price movements in the portion of the
securities portfolio being hedged correlate with price movements in the
selected securities index. Perfect correlation is not possible because the
securities held or to be acquired by a Portfolio will not exactly match the
composition of the securities indexes on which options are written. In the
purchase of securities index options the principal risk is that the premium and
transaction costs paid by a Portfolio in purchasing an option will be lost if
the changes (increase in the case of a call, decrease in the case of a put) in
the level of the index do not exceed the cost of the option.

FUTURES. The prices of futures contracts are volatile and are influenced, among
other things, by actual and anticipated changes in the market and interest
rates, which in turn are affected by fiscal and monetary policies and national
and international political and economic events.

Most United States futures exchanges limit the amount of fluctuation permitted
in futures contract prices during a single trading day. The daily limit
establishes the maximum amount that the price of a futures contract may vary
either up or down from the previous day's settlement price at the end of a
trading session. Once the daily limit has been reached in a particular type of
futures contract, no trades may be made on that day at a price beyond that
limit. The daily limit governs only price movement during a particular trading
day and therefore does not limit potential losses, because the limit may
prevent the liquidation of unfavorable positions. Futures contract prices have
occasionally moved to the daily limit for several consecutive trading days with
little or no trading, thereby preventing prompt liquidation of futures
positions and subjecting some futures traders to substantial losses.

Because of the low margin deposits required, futures trading involves an
extremely high degree of leverage. As a result, a relatively small price
movement in a futures contract may result in immediate and substantial loss, as
well as gain, to the investor. For example, if at the time of purchase, 10% of
the value of the futures contract is deposited as margin, a subsequent 10%
decrease in the value of the futures contract would result in a total loss of
the margin deposit, before any deduction for the transaction costs, if the
account were then closed out. A 15% decrease would result in a loss equal to
150% of the original margin deposit, if the contract were closed out. Thus, a
purchase or sale of a futures contract may result in losses in excess of the
amount invested in the futures contract.

A decision of whether, when, and how to hedge involves skill and judgment, and
even a well-conceived hedge may be unsuccessful to some degree because of
unexpected market behavior, market trends or interest rate trends. There are
several risks in connection with the use by a Portfolio of futures

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<PAGE>

contracts as a hedging device. One risk arises because of the imperfect
correlation between movements in the prices of the futures contracts and
movements in the prices of the underlying instruments which are the subject of
the hedge. A Portfolio's Adviser will, however, attempt to reduce this risk by
entering into futures contracts whose movements, in its judgment, will have a
significant correlation with movements in the prices of the Portfolio's
underlying instruments sought to be hedged.

Successful use of futures contracts by a Portfolio for hedging purposes is also
subject to a Portfolio's ability to correctly predict movements in the
direction of the market. It is possible that, when a Portfolio has sold futures
to hedge its portfolio against a decline in the market, the index, indices, or
instruments underlying futures might advance and the value of the underlying
instruments held in the Portfolio's portfolio might decline. If this were to
occur, the Portfolio would lose money on the futures and also would experience
a decline in value in its underlying instruments.

Positions in futures contracts may be closed out only on an exchange or a board
of trade which provides the market for such futures. Although the Portfolios,
specified in the Prospectus, intend to purchase or sell futures only on
exchanges or boards of trade where there appears to be an active market, there
is no guarantee that such will exist for any particular contract or at any
particular time. If there is not a liquid market at a particular time, it may
not be possible to close a futures position at such time, and, in the event of
adverse price movements, a Portfolio would continue to be required to make
daily cash payments of variation margin. However, in the event futures
positions are used to hedge portfolio securities, the securities will not be
sold until the futures positions can be liquidated. In such circumstances, an
increase in the price of securities, if any, may partially or completely offset
losses on the futures contracts.

FOREIGN OPTIONS AND FUTURES. Participation in foreign futures and foreign
options transactions involves the execution and clearing of trades on or
subject to the rules of a foreign board of trade. Neither the National Futures
Association nor any domestic exchange regulates activities of any foreign
boards of trade, including the execution, delivery and clearing of
transactions, or has the power to compel enforcement of the rules of a foreign
board of trade or any applicable foreign law. This is true even if the exchange
is formally linked to a domestic market so that a position taken on the market
may be liquidated by a transaction on another market. Moreover, such laws or
regulations will vary depending on the foreign country in which the foreign
futures or foreign options transaction occurs. For these reasons, when a
Portfolio trades foreign futures or foreign options contracts, it may not be
afforded certain of the protective measures provided by the Commodity Exchange
Act, the CFTC's regulations and the rules of the National Futures Association
and any domestic exchange, including the right to use reparations proceedings
before the CFTC and arbitration proceedings provided by the National Futures
Association or any domestic futures exchange. In particular, funds received
from a Portfolio for foreign futures or foreign options transactions may not be
provided the same protections as funds received in respect of transactions on
United States futures exchanges. In addition, the price of any foreign futures
or foreign options contract and, therefore, the potential profit and loss
thereon, may be affected by any variance in the foreign exchange rate between
the time the Portfolio's order is placed and the time it is liquidated, offset
or exercised.

FOREIGN CURRENCY CONTRACTS. Hedging against a decline in the value of a
currency does not eliminate fluctuations in the prices of portfolio securities
or prevent losses if the prices of such securities decline. These hedging
transactions also preclude the opportunity for gain if the value of the hedged
currency should rise. Whether a currency hedge benefits a Portfolio will depend
on the ability of a Portfolio's Adviser to predict future currency exchange
rates.

The writing of an option on foreign currency will constitute only a partial
hedge, up to the amount of the premium received, and a Portfolio could be
required to purchase or sell foreign currencies at

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<PAGE>

disadvantageous exchange rates, thereby incurring losses. The purchase of an
option on foreign currency may constitute an effective hedge against
fluctuations in exchange rates although, in the event of rate movements adverse
to a Portfolio's position, it may forfeit the entire amount of the premium
plus related transaction costs.

SECURITIES LOANS

Securities loans are made to broker-dealers or institutional investors or other
persons, pursuant to agreements requiring that the loans be continuously
secured by collateral at least equal at all times to the value of the loaned
securities marked to market on a daily basis. The collateral received will
consist of cash, U.S. Government securities, letters of credit or such other
collateral as may be permitted under a Portfolio's investment program. While
the securities are being loaned, a Portfolio will continue to receive the
equivalent of the interest or dividends paid by the issuer on the securities,
as well as interest on the investment of the collateral or a fee from the
borrower. A Portfolio has a right to call each loan and obtain the securities
on five business days' notice or, in connection with securities trading on
foreign markets, within such longer period for purchases and sales of such
securities in such foreign markets. A Portfolio will generally not have the
right to vote securities while they are being loaned, but its Manager or
Adviser will call a loan in anticipation of any important vote. The risks in
lending portfolio securities, as with other extensions of secured credit,
consist of possible delay in receiving additional collateral or in the recovery
of the securities or possible loss of rights in the collateral should the
borrower fail financially. Loans will only be made to firms deemed by a
Portfolio's Adviser to be of good standing and will not be made unless, in the
judgment of the Adviser, the consideration to be earned from such loans would
justify the risk.

STRUCTURED NOTES

Structured notes are interests in entities organized and operated solely for
the purpose of restructuring the investment characteristics of sovereign debt
obligations. This type of restructuring involves the deposit with or purchase
by an entity, such as a corporation or trust, of specified instruments (such as
commercial bank loans) and the issuance by that entity of one or more classes
of securities and the issuance by that entity of one or more classes of
securities backed by, or representing interests in, the underlying instruments.
The cash flow on the underlying instruments may be apportioned among the newly
issued structured notes to create securities with different investment
characteristics such as varying maturities, payment priorities and interest
rate provisions, and the extent of the payment made with respect to structured
notes is dependent on the extent of the cash flow on the underlying
instruments. Because structured notes of the type in which the Portfolio may
invest typically involve no credit enhancement, their credit risk generally
will be equivalent to that of the underlying instruments. The Portfolio may
invest in a class of structured notes that is either subordinated or
unsubordinated to the right of payment of another class. Subordinated
structured notes typically have higher yields and present greater risks than
unsubordinated structured notes. Certain issuers of structured notes may be
deemed to be "investment companies" as defined in the 1940 Act. As a result,
the Portfolio's investment in these structured notes may be limited by
restrictions contained in the 1940 Act. Structured notes are typically sold in
private placement transactions, and there currently is no active trading market
for structured notes.

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<PAGE>

SWAPS

A swap is an agreement to exchange the return generated by one instrument for
the return generated by another instrument. The payment streams are calculated
by reference to a specified index and agreed upon single or fixed amount (or
premium). The term "specified index" includes currencies, fixed interest rates,
prices, total return on interest rate indices, fixed income indices, stock
indices and commodity indices (as well as amounts derived from arithmetic
operations on these indices). For example, a Portfolio may agree to swap the
return generated by a fixed income index for the return generated by a second
fixed income index. The currency swaps in which a Portfolio may enter will
generally involve an agreement to pay interest streams in one currency based on
a specified index in exchange for receiving interest streams denominated in
another currency. Such swaps may involve initial and final exchanges that
correspond to the agreed upon notional amount.

The swaps in which a Portfolio may engage may include instruments under which
one party pays a single or periodic fixed amount(s) (or premium), and the other
party pays periodic amounts based on the movement of a specified index. Swaps
do not involve the delivery of securities, other underlying assets, or
principal. Accordingly, the risk of loss with respect to swaps is limited to
the net amount of payments the Portfolio is contractually obligated to make. If
the other party to a swap defaults, Portfolio's risk of loss consists of the
net amount of payments that the Portfolio contractually entitled to receive.
Currency swaps usually involve the delivery of the entire principal value of
one designated currency in exchange for the other designated currency.
Therefore, the entire principal value of a currency swap is subject to the risk
that the other party to the swap will default on its contractual delivery
obligations. If there is a default by the counterparty, a Portfolio may have
contractual remedies pursuant to the agreements related to the transaction. The
swap market has grown substantially in recent years with a large number of
banks and investment banking firms acting both as principals and as agents
utilizing standardized swap documentation. As a result, the swap market has
become relatively liquid. Certain swap transactions involve more recent
innovations for which standardized documentation has not yet been fully
developed and, accordingly, they are less liquid than traditional swap
transactions.

A Portfolio will usually enter into swaps on a net basis, i.e., the two payment
streams are netted out in a cash settlement on the payment date or dates
specified in the instrument, with the Portfolio receiving or paying, as the
case may be, only the net amount of the two payments. A Portfolio's obligations
under a swap agreement will be accrued daily (offset against any amounts owing
to the Portfolio) and any accrued but unpaid net amounts owed to a swap
counterparty will be covered by the maintenance of a segregated account
consisting of unencumbered liquid assets, to avoid any potential leveraging of
a Portfolio. To the extent that these swaps are entered into for hedging
purposes, the Advisers believe such obligations do not constitute "senior
securities" under the 1940 Act and, accordingly, the Adviser will not treat
them as being subject to a Portfolio's borrowing restrictions. A Portfolio may
enter into OTC swap transactions with counterparties that are approved by the
Advisers in accordance with guidelines established by the Board of Trustees.
These guidelines provide for a minimum credit rating for each counterparty and
various credit enhancement techniques (for example, collateralization of
amounts due from counterparties) to limit exposure to counterparties that have
lower credit ratings.

The use of swaps is a highly specialized activity which involves investment
techniques and risks different from those associated with ordinary portfolio
securities transactions. If an Adviser is incorrect in its forecasts of market
values, interest rates, and currency exchange rates, the investment performance
of the Portfolio would be less favorable than it would have been if this
investment technique were not used.

WARRANTS

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<PAGE>

Warrants give the holder, under certain circumstances, the right to purchase
equity securities consisting of common and preferred stock. The equity security
underlying a warrant is authorized at the time the warrant is issued or is
issued together with the warrant. Investing in warrants can provide a greater
potential for profit or loss than an equivalent investment in the underlying
security, and, thus, can be a speculative investment. The value of a warrant
may decline because of a decline in the value of the underlying security, the
passage of time, changes in interest rates or in the dividend or other policies
of the company whose equity underlies the warrant or a change in the perception
as to the future priced of the underlying security, or any combination thereof.
Warrants generally pay no dividends and confer no voting or other rights other
than to purchase the underlying security.

MANAGEMENT OF THE TRUSTMANAGEMENT OF THE TRUST

As of October 1, 1997 the Trustees and officers of the Trust owned Contracts
entitling them to provide voting instructions in the aggregate with respect to
less than one percent of the Trust's shares of beneficial interest.

THE TRUSTEES

<TABLE>
<CAPTION>
NAME, ADDRESS AND AGE PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- --------------------- -------------------------------------------
<S> <C>
Peter D. Noris* (41) Executive Vice President and Chief Investment Officer,
Equitable Equitable since May 1995; prior thereto, Vice President,
1290 Avenue of the Americas Salomon Brothers Inc., 1992 to 1995. Principal, Equity
New York, New York 10104 Division, Morgan Stanley & Co., Inc., 1984 to 1992.
Director, Equitable Real Estate Investment Management,
Inc. since July 1995 and Alliance Capital Management Co.
since July 1995. Trustee, Hudson River Trust (investment
company) since July 1995. Executive Vice President, EQ
Financial Consultants, Inc. since November 1996.

Jettie M. Edwards (50) Consultant, Syrus Associates since 1986. Trustee,
Syrus Associates Provident Investment Counsel Trust (investment company)
880 Third Avenue since 1992. Director, The PBHG Funds, Inc. (investment
New York, NY 10022 company) since 1995.

William M. Kearns, Jr. (61) President, W.M. Kearns & Co., Inc. since 1994. Advisory
W.M. Kearns & Co., Inc. Director, Lehman Brothers, 1992 to 1994.
310 South Street
Morristown, NJ 07960

Christopher P.A. President and Chief Executive Officer, Burson-Marsteller
Komisarjevsky (52) USA since 1996. President and Chief Executive Officer,
Burson-Marsteller Burson-Marsteller New York, 1995 to 1996. President
230 Park Avenue South and Chief Executive Officer, Gavin Anderson & Company
New York, NY 1003-1566 New York, 1994 to 1995. Prior thereto, he held various
positions with Hill and Knowlton, Inc. for twenty years.

Harvey Rosenthal (55) Member, Board of Directors of CVS Corporation. President
60 State Steeet and Chief Operating Officer, CVS Corporation (formerly
Suite 700 Melville Corporation) from 1994 to 1996. Prior thereto,
Boston, MA 02109 he held various positions with CVS Corporation for
twenty-seven years.

William T. McCaffrey* (60) Director, Senior Executive Vice President and Chief
Equitable Operating Officer, Equitable since 1996. Executive Vice
1290 Avenue of the Amercias President and Chief Administrative Officer, The
New York, New York 10104 Equitable Companies Incorporated since 1994. Director,
Equitable Foundation and Equitable Distributors, Inc.
since May 1996.

</TABLE>

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<PAGE>

NAME, ADDRESS AND AGE PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- --------------------- -------------------------------------------
* Mr. Noris and Mr. McCaffrey are "interested persons" (as defined in the
1940 Act) of the Trust. Mr. Noris and Mr. McCaffrey are deemed
"interested persons" of the Trust by virtue of their position as
officers of Equitable.

COMMITTEES OF THE BOARD

The Trust has a standing audit committee consisting of all of the Trust's
disinterested Trustees. The audit committee's function is to recommend to the
Board of Trustees a firm of independent accountants to conduct the annual audit
of the Trust's financial statements; review with such firm the outline, scope
and results of this annual audit; and review the performance and fees charged
by the independent accountants for professional services. In addition, the
committee meets with the independent accountants and representatives of
management to review accounting activities and areas of financial reporting and
control.

The Trust has a valuation committee consisting of Peter D. Noris, Harvey Blitz,
Mary Breen, Kevin Byrne, and such other officers of the Trust, the Manager, and
Chase Global Funds Services Company, as well as such officers of any investment
adviser to any Portfolio as are deemed necessary by Mr. Noris or Mr. Blitz from
time to time, each of whom shall serve at the pleasure of the Board of Trustees
as members of the Valuation Committee. This committee determines the value of
any of the Trust's securities and assets for which market quotations are not
readily available or for which valuation cannot otherwise be provided.

The Trust has a compensation committee consisting of Jettie M. Edwards, William
K. Kearns, Jr., Christopher P.A. Komisarjevsky and Harvey Rosenthal. The
compensation committee's function is to review the Trustees' compensation
arrangements.

The Trust has a conflicts committee consisting of Peter D. Noris and William T.
McCaffrey. The conflicts committee's function is to take any action necessary
to resolve conflicts among shareholders.

COMPENSATION OF THE TRUSTEES

Each Trustee, other than those who are "interested persons" of the Trust (as
defined in the 1940 Act), receives from the Trust an annual fee of $25,000 plus
an additional fee of $1,000 per Board meeting and $500 per committee meeting
attended in person or by telephone.

TRUSTEE COMPENSATION TABLE

TRUSTEE AGGREGATE PENSION OR ESTIMATED TOTAL
COMPENSATION RETIREMENT ANNUAL COMPENSATION
FROM THE TRUST* BENEFITS BENEFITS UPON FROM FUND
ACCRUED AS RETIREMENT COMPLEX
PART OF
TRUST
EXPENSES
Peter D. Noris $-0- $-0- $-0- $-0-

Jettie M. Edwards $31,000 $31,000

William M.

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Kearns, Jr. $31,000 $31,000

Christopher P.A.
Komisarjevsky $31,000 $31,000

Harvey Rosenthal $31,000 $31,000

William T.
McCaffrey -0- -0- -0- -0-

*For the initial fiscal year.

A deferred compensation plan for the benefit of the Trustees has been adopted
by the Trust. Under the deferred compensation plan, each Trustee may defer
payment of all or part of the fees payable for such Trustee's services. Each
Trustee may defer payment of such fees until his retirement as a Trustee or
until the earlier attainment of a specified age. Fees deferred under the
deferred compensation plan, together with accrued interest thereon, will be
disbursed to a participating Trustee in monthly installments over a five to
twenty year period elected by such Trustee.

THE TRUST'S OFFICERS

No officer of the Trust receives any compensation paid by the Trust. Each
officer of the Trust is an employee of the Manager, Equitable Distributors,
Inc. ("EDI") or Equitable. The Trust's principal officers are:

NAME, AGE AND POSITION PRINCIPAL OCCUPATION DURING LAST FIVE
WITH TRUST YEARS
- ---------------------- -----------------------------------------
Peter D. Noris (41) (see above)
President

Harvey Blitz (51) Senior Vice President, Equitable since September
Vice President and 1987. Deputy Chief Financial Officer, Equitable
Chief Financial Officer since September 1992. Senior Vice President, The
Equitable Companies Incorporated since July 1992.
Director, The Equitable of Colorado, Inc. since
September 1992. Director and Chairman, Frontier
Trust Company since April 1993 and September 1995,
respectively. Director, Equitable Distributors,
Inc., February 1995 to May 1996. Director and Senior
Vice President, EquiSource since October 1992 and
June 1993, respectively. Director and Executive Vice
President, EQ Financial Consultants, Inc. since
September 1992 and November 1996, respectively.
Director, Equitable Realty Assets Corporation since
December 1996.

Mary Breen (39) Vice President and Associate General Counsel,
Vice President Equitable since October 1996. Vice President and
and Secretary Counsel, Equitable, 1992 to 1996. Vice President and
Counsel, EQ Financial Consultants, Inc. since April
1997 and Equitable Distributors, Inc. since March
1997.

Kevin R. Byrne (41) Vice President and Treasurer, The Equitable
Vice President Companies Incorporated and Equitable. Treasurer,
and Treasurer Frontier Trust Company and EquiSource. Vice
President and Treasurer, Equitable Casualty
Insurance Company.

Michael S. Martin (50) Senior Vice President and Chief, The Marketing Group
Vice President in Agency Operations, Equitable. Chairman and Chief
Executive Officer, EQ Financial Consultants, Inc.
Director, The Equitable

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<PAGE>

NAME, AGE AND POSITION PRINCIPAL OCCUPATION DURING LAST FIVE
WITH TRUST YEARS
- ---------------------- -----------------------------------------
of Colorado, Inc., EquiSource and Equitable
Underwriting Sales Agency (Bahamas) Ltd. Vice
President, Hudson River Trust (investment company).

Robin K. Murray Vice President, Office of the Chief Investment
(42) Officer, and First Vice President, Equitable
Vice President Financial Consultants, Inc. since May 1997. Vice
President, Office of the President, Equitable since
1996. Vice President, Income Management Group,
Equitable since 1994; Assistant Vice President of
Marketing, Equitable from 1989 to 1994.

Samuel B. Shlesinger Senior Vice President, Equitable. Chairman,
(50) President and Chief Executive Officer, The Equitable
Vice President of Colorado, Inc. Director, Equitable Realty Assets
Corporation since December 1996. Vice President,
Hudson River Trust (investment company).

Martin J. Telles (48) Executive Vice President and Chief Marketing
Vice President Officer, Equico Securities since 1993. Director,
Royal Alliance.

Stanley B. Tulin (47) Senior Vice President and Chief Financial Officer,
Vice President Equitable since 1996. Co-Chairman, Insurance
Industry Practice Group, Coopers & Lybrand, 1988 to
1996.

Naomi J. Weinstein Vice President, Income Management Group, Equitable
(45) since 1996. Vice President, Center Head for
Vice President Association Plans, Equitable from 1991 to present.

Allen T. Zabusky (45) Vice President and Deputy Controller, Equitable
Vice President since 1990. Controller, The Equitable of Colorado,
and Controller Inc. since 1996.

Mary Cantwell Director of Operations, Office of the Chief
(35) Investment Officer, Equitable since September 1997.
Assistant Vice Assistant Vice President, Equitable Financial
President Consultants, Inc. since September 1997. Marketing
Director, Income Management Group, Equitable since
1994. Marketing Manager, Equitable since 1991.

John Corcoran Vice President, Fund Administration, Chase Global
(32) Funds Services Company since July 1996. Second Vice
Assistant Treasurer President, Manager of Administration, Chase Global
Funds Services Company from October 1993 to July
1996. Audit Manager, Ernst & Young LLP from August
1987 to September 1993.

Karl O. Hartman (41) Senior Vice President and General Counsel, Chase
Assistant Secretary Global Funds Services Company.

Lloyd Lipsett (32) Vice President and Associate General Counsel, Chase
Assistant Global Funds Services Company since 1997. Associate,
Secretary Hale and Dorr (law firm), 1995 to 1997. Associate,
Choate, Hall & Stewart (law firm), 1993 to 1995.
Associate, Rogers & Wells (law firm), 1990 to 1993.

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INVESTMENT MANAGEMENT AND OTHER SERVICES

THE MANAGER

The Manager, EQ Financial Consultants, Inc., is an investment adviser
registered with the SEC under the 1940 Act and a broker-dealer registered with
the SEC under the Securities Exchange Act of 1934, as amended ("1934 Act"). The
Manager has served as an investment manager to each Portfolio of the Trust
since its inception. The Manager currently furnishes specialized investment
advice to individuals, pension and profit sharing plans, trusts, charitable
organizations, corporations and other business entities. The Manager is a
wholly-owned subsidiary of Equitable Holding Corporation, a wholly-owned
subsidiary of Equitable.

Equitable, which is a New York life insurance company and one of the largest
life insurance companies in the United States, is a wholly-owned subsidiary of
The Equitable Companies Incorporated ("The Equitable Companies"), a
publicly-owned holding company. The principal offices of The Equitable
Companies and Equitable are located at 1290 Avenue of the Americas, New York,
New York 10104.

AXA, a French insurance holding company, currently owns approximately 63.9% of
the outstanding voting shares of common stock of The Equitable Companies. As
majority shareholder of the Equitable Companies, AXA is able to exercise
significant influence over the operations and capital structure of The
Equitable Companies, Equitable and their subsidiaries. AXA is the holding
company for an international group or insurance and related financial services
companies. AXA is the second largest insurance group in the world based on
worldwide revenues in 1996 and also the world's largest insurer-based
investment manager with over $500 billion in assets under management. AXA is
also engaged in asset management, investment banking, securities trading and
other financial services activities principally in the United States, as well
as in Western Europe and the Asia Pacific area.

The Trust and Manager have entered into an investment management agreement
("Management Agreement"). The Management Agreement obligates the Manager to:
(i) provide investment management and certain administrative services to the
Trust; (ii) select the Adviser for each Portfolio; (iii) monitor the Adviser's
investment programs and results; (iv) review brokerage matters; (v) oversee
compliance by the Trust with various federal and state statutes; and (vi) carry
out the directives of the Board of Trustees. The Management Agreement requires
the Manager to provide the Trust with office space, office equipment, and
personnel necessary to operate and administer the Trust's business, and also to
supervise the provision of services by third parties. The continuance of the
Management Agreement, with respect to each Portfolio, after the first two years
must be specifically approved at least annually (i) by the Trust's Board of
Trustees or by vote of a majority of the outstanding voting securities (as
defined in the 1940 Act) of such Portfolio and (ii) by the affirmative vote of
a majority of the Trustees who are not parties to the Management Agreement or
"interested persons" (as defined in the 1940 Act) of any such party by votes
cast in person at a meeting called for such purpose. The Management Agreement
with respect to each Portfolio may be terminated (i) at any time, without the
payment of any penalty, by the Trust upon the vote of a majority of the
Trustees or by vote of the majority of the outstanding voting securities (as
defined in the 1940 Act) of such Portfolio upon sixty (60) days' written notice
to the Manager or (ii) by the Manager at any time without penalty upon sixty
(60) days' written notice to the Trust. The Management Agreement will also
terminate automatically in the event of its assignment (as defined in the 1940
Act).

THE ADVISERS

On behalf of the T. Rowe Price Equity Income Portfolio and the T. Rowe Price
International Stock Portfolio, the Manager has entered into investment advisory
agreements ("Advisory Agreements") with

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T. Rowe Price and Price-Fleming, respectively. The Manager has also entered
into Advisory Agreements on behalf of EQ/Putnam Growth & Income Value
Portfolio, EQ/Putnam International Equity Portfolio, EQ/Putnam Investors Growth
Portfolio and EQ/Putnam Balanced Portfolio with Putnam Management. In addition,
the Manager has entered into Advisory Agreements on behalf of MFS Research
Portfolio and MFS Emerging Growth Companies Portfolio with MFS. Also, the
Manager has entered into Advisory Agreements on behalf of Morgan Stanley
Emerging Markets Equity Portfolio and Warburg Pincus Small Company Value
Portfolio with MSAM and Warburg, respectively. The Manager has entered into
Advisory Agreements on behalf of Merrill Lynch World Strategy Portfolio and
Merrill Lynch Basic Value Equity Portfolio with MLAM. In addition, the Manager
has entered into an Advisory Agreement on behalf of Lazard Large Cap Value
Portfolio and Lazard Small Cap Value Portfolio with LAM. , The Manager has also
entered into an Advisory Agreement on behalf of the JPM Core Bond Portfolio
with J.P. Morgan. Finally, the Manager has entered into an Advisory Agreement
on behalf of BT Small Cap Index Portfolio, BT International Equity Index
Portfolio and BT Equity 500 Index Portfolio with Bankers Trust. The Advisory
Agreements obligate T. Rowe Price, Price-Fleming, Putnam Management, MFS,
Warburg, MSAM, MLAM, LAM, J.P. Morgan and Bankers Trust to: (i) furnish
continuously an investment program for their respective Portfolios; (ii) place
all orders for the purchase and sale of investments for their respective
Portfolios with brokers or dealers selected by the Manager or an Adviser; and
(iii) perform certain limited related administrative functions in connection
therewith.

The Manager recommends Advisers for each Portfolio to the Trustees based upon
its continuing quantitative and qualitative evaluation of each Adviser's skills
in managing assets pursuant to specific investment styles and strategies.
Unlike many other mutual funds, the Portfolios are not associated with any one
portfolio manager, and benefit from independent specialists carefully selected
from the investment management industry. Short-term investment performance, by
itself, is not a significant factor in selecting or terminating an Adviser, and
the Manager does not expect to recommend frequent changes of Advisers. The
Trust has filed an application with the SEC requesting an exemptive order to
permit the Manager, subject to certain conditions, to enter into Advisory
Agreements with Advisers approved by the Trustees, but without the requirement
of shareholder approval. Pursuant to the terms of the SEC order, if granted,
the Manager would be able, subject to the approval of the Trustees but without
shareholder approval, to employ new Advisers for new or existing Portfolios,
change the terms of particular Advisory Agreements or continue the employment
of existing Advisers after events that under the 1940 Act and the Advisory
Agreements would cause an automatic termination of the agreement. Although
shareholder approval would not be required for the termination of Advisory
Agreements, shareholders of a Portfolio would continue to have the right to
terminate such agreements for the Portfolio at any time by a vote of a majority
of outstanding voting securities of the Portfolio.

When a Portfolio has more than one Adviser, the assets of each Portfolio are
allocated by the Manager among the Advisers selected for the Portfolio. Each
Adviser has discretion, subject to oversight by the Trustees, and the Manager,
to purchase and sell portfolio assets, consistent with each Portfolio's
investment objectives, policies and restrictions and specific investment
strategies developed by the Manager.

Generally, no Adviser provides any services to any Portfolio except asset
management and related recordkeeping services. However, an Adviser or its
affiliated broker-dealer may execute portfolio transactions for a Portfolio and
receive brokerage commissions in connection therewith as permitted by
Section17(e) of the 1940 Act.

THE ADMINISTRATOR

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<PAGE>

Pursuant to an administrative agreement ("Mutual Funds Services Agreement"),
Chase Global Funds Services Company ("Administrator") assists the Manager in
the performance of its administrative services to the Trust and provides the
Trust with other necessary administrative services. In addition, the
Administrator makes available the office space, equipment, personnel and
facilities required to provide such administrative services to the Trust.

The Administrator was organized as a Delaware corporation. Its principal place
of business is at 73 Tremont Street, Boston, Massachusetts 02108. The Mutual
Funds Services Agreement shall remain in effect until April 14, 1997 and shall
thereafter continue in effect for successive periods of one year, unless
terminated by any party upon not less than ninety (90) days' prior written
notice to the other party.

THE DISTRIBUTORS

The Trust has distribution agreements with EQ Financial Consultants, Inc. and
EDI (each also referred to as a "Distributor," and together "Distributors"),
each an indirect wholly-owned subsidiary of Equitable. The address for EDI is
1290 Avenue of the Americas, New York, New York 10104, and that for EQ
Financial Consultants, Inc. is 1755 Broadway, Third Floor, New York, New York
10019. EQ Financial Consultants, Inc. is the distributor for the Trust's Class
IA shares and Class IB shares and also serves as the Manager of the Trust. EDI
also serves as the distributor for the Trust's Class IA shares Class IB shares.

The Trust's distribution agreements with respect to the Class IA shares and
Class IB shares, each dated April 14, 1997 ("Distribution Agreements"), will
remain in effect until April 14, 1999, and from year to year thereafter only if
each Distribution Agreement's continuance is approved annually by (i) a
majority of the Trustees who are not parties to such agreement or "interested
persons" (as defined in the 1940 Act) of the Trust or a Portfolio and, if
applicable, who have no direct or indirect financial interest in the operation
of the Distribution Plan or any such related agreement ("Independent Trustees")
and (ii) either by vote of a majority of the Trustees or a majority of the
outstanding voting securities (as defined in the 1940 Act) of the Trust.

The Distributors or their affiliates for the Class IA shares will pay for
printing and distributing prospectuses or reports prepared for its use in
connection with the offering of the Class IA shares to prospective investors
and preparing, printing and mailing any other literature or advertising in
connection with the offering of the Class IA shares to prospective investors.
The Trust, pursuant to the Distribution Plan, will pay for services rendered
and expenses borne in connection with the offering of the Class IB shares. Such
expenses include the printing and mailing of prospectuses, statements of
additional information and reports to prospective purchasers, as well as the
preparation, printing and mailing of advertisements and sales literature in
connection with the offering of the Class IB shares to prospective investors.
The Distributors for each class of shares will pay all fees and expenses in
connection with its qualification and registration as a broker or dealer under
federal and state laws.

In the capacity of agent, each Distributor currently offers shares of each
Portfolio on a continuous basis to the separate accounts of insurance companies
offering the Contracts in all states in which the Portfolio or the Trust may
from time to time be registered or where permitted by applicable law. Each
Distribution Agreement provides that the Distributors shall accept orders for
shares at net asset value without sales commission or load being charged. The
Distributors have made no firm commitment to acquire shares of any Portfolio.

A description of the Distribution Plan with respect to the Class IB shares and
related services and fees thereunder is provided in the Prospectus for the
Class IB shares of the Portfolios. On March 31, 1997,

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<PAGE>

the Board of Trustees of the Trust unanimously approved the Distribution Plan.
In connection with its consideration of the Distribution Plan, the Board of
Trustees was furnished with drafts of the Distribution Plan and the related
materials, including information related to the advantages and disadvantages of
Rule 12b-1 plans currently being used in the mutual fund industry. Legal
counsel for the Trustees who are not "interested persons" of the Trust (as
defined in the 1940 Act) provided additional information, summarized the
provisions of the proposed Distribution Plan and discussed the legal and
regulatory considerations in adopting such Distribution Plan.

The Board of Trustees considered various factors in connection with its
decision as to whether to approve the Distribution Plan, including: (i) the
nature and causes of the circumstances which make implementation of the
Distribution Plan necessary and appropriate; (ii) the way in which the
Distribution Plan would address those circumstances, including the nature and
potential amount of expenditures; (iii) the nature of the anticipated benefits;
(iv) the possible benefits of the Distribution Plan to any other person
relative to those of the Trust; (v) the effect of the Distribution Plan on
existing owners of variable annuity contracts and variable life insurance
policies; (vi) the merits of possible alternative plans or pricing structures;
(vii) competitive conditions in the variable products industry; and (viii) the
relationship of the Distribution Plan to other distribution efforts of the
Trust.

Based upon its review of the foregoing factors and the materials presented to
it, and in light of its fiduciary duties under the 1940 Act, the Board of
Trustees determined, in the exercise of its business judgment, that the
Distribution Plan is reasonably likely to benefit the Trust and the
shareholders of its Portfolios.

The Distribution Plan and any Rule 12b-1 related agreement that is entered into
by the Trust or the Distributors of the Class IB shares in connection with the
Distribution Plan will continue in effect for a period of more than one year
only so long as continuance is specifically approved at least annually by a
vote of a majority of the Trust's Board of Trustees, and of a majority of the
Independent Trustees, cast in person at a meeting called for the purpose of
voting on the Distribution Plan, or any Rule 12b-1 related agreement, as
applicable. In addition, the Distribution Plan and any Rule 12b-1 related
agreement may be terminated as to Class IB shares of a Portfolio at any time,
without penalty, by vote of a majority of the outstanding Class IB shares of
the Portfolio or by vote of a majority of the Independent Trustees. The
Distribution Plan also provides that it may not be amended to increase
materially the amount (up to .50% of average daily net assets annually) that
may be spent for distribution of Class IB shares of a Portfolio without the
approval of Class IB shareholders of that Portfolio.

BROKERAGE STRATEGY

BROKERAGE COMMISSIONS

The Portfolios are charged for securities brokers' commissions, transfer taxes
and similar fees relating to securities transactions. The Manager and each of
the Advisers, as appropriate, seek to obtain the best net price and execution
on all orders placed for the Portfolios, considering all the circumstances
except to the extent they may be permitted to pay higher commissions as
described below.

It is expected that securities will ordinarily be purchased in the primary
markets, whether over-the-counter or listed, and that listed securities may be
purchased in the over-the-counter market if that market is deemed the primary
market.

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<PAGE>

Transactions on stock exchanges involve the payment of brokerage commissions.
In transactions on stock exchanges in the U.S., these commissions are
negotiated, whereas on many foreign stock exchanges these commissions are
fixed. However, brokerage commission rates in certain countries in which the
Portfolios may invest may be discounted for certain large domestic and foreign
investors such as the Portfolios. A number of foreign banks and brokers will be
used for execution of each Portfolio's portfolio transactions. In the case of
securities traded in the foreign and domestic over-the-counter markets, there
is generally no stated commission, but the price usually includes an
undisclosed commission or mark-up. In underwritten offerings, the price
generally includes a disclosed fixed commission or discount.

The Manager and Advisers may, as appropriate, in the allocation of brokerage
business, take into consideration research and other brokerage services
provided by brokers and dealers to Equitable, the Manager or Advisers. The
research services include economic, market, industry and company research
material. Based upon an assessment of the value of research and other brokerage
services provided, proposed allocations of brokerage for commission
transactions are periodically prepared internally. In addition, the Manager and
Advisers may allocate brokerage business to brokers and dealers that have made
or are expected to make significant efforts in facilitating the distribution of
the Trust's shares.

Commissions charged by brokers that provide research services may be somewhat
higher than commissions charged by brokers that do not provide research
services. As permitted by Section 28(e) of the 1934 Act and by policies adopted
by the Trustees, the Manager and Advisers may cause the Trust to pay a
broker-dealer that provides brokerage and research services to the Manager and
Advisers an amount of commission for effecting a securities transaction for the
Trust in excess of the commission another broker-dealer would have charged for
effecting that transaction.

The Manager and Advisers do not engage brokers and dealers whose commissions
are believed to be unreasonable in relation to brokerage and research services
provided. The overall reasonableness of commissions paid will be evaluated by
rating brokers on such general factors as execution capabilities, quality of
research (that is, quantity and quality of information provided, diversity of
sources utilized, nature and frequency of communication, professional
experience, analytical ability and professional stature of the broker) and
financial standing, as well as the net results of specific transactions, taking
into account such factors as price, promptness, size of order and difficulty of
execution. The research services obtained will, in general, be used by the
Manager and Advisers for the benefit of all accounts for which the responsible
party makes investment decisions. The receipt of research services from brokers
will tend to reduce the Manager's and Advisers' expenses in managing the
Portfolios.

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<PAGE>

BROKERAGE TRANSACTIONS WITH AFFILIATES

To the extent permitted by law, the Trust may engage in brokerage transactions
with brokers that are affiliates of the Manager and Advisers, with brokers who
are affiliates of such brokers, or with unaffiliated brokers who trade or clear
through affiliates of the Manager and Advisers. The 1940 Act generally
prohibits the Trust from engaging in principal securities transactions with
brokers that are affiliates of the Manager and Advisers or affiliates of such
brokers, unless pursuant to an exemptive order from the SEC. The Trust may
apply for such exemptive relief. The Trust has adopted procedures, prescribed
by the 1940 Act, which are reasonably designed to provide that any commissions
or other remuneration it pays to brokers that are affiliates of the Manager and
Advisers or brokers that are affiliates of such brokers do not exceed the usual
and customary broker's commission. In addition, the Trust will adhere to the
requirements under the 1934 Act governing floor trading. Also, because of
securities law limitations, the Trust will limit purchases of securities in a
public offering, if such securities are underwritten by brokers that are
affiliates of the Manager and Advisers or their affiliates.

PURCHASE AND PRICING OF SHARES

The Trust will offer and sell its shares at each Portfolio's net asset value
per share, which will be determined in the manner set forth below.

The net asset value of the shares of each class of a Portfolio of the Trust
will be determined once daily, immediately after the declaration of dividends,
if any, at the close of business on each business day. The net asset value per
share of each class of a Portfolio will be computed by dividing the sum of the
investments held by that Portfolio applicable to that class, plus any cash or
other assets, minus all liabilities, by the total number of outstanding shares
of that class of the Portfolio at such time. All expenses borne by the Trust
and each of its Classes, will be accrued daily.

The net asset value per share of each Portfolio will be determined and computed
as follows, in accordance with generally accepted accounting principles, and
consistent with the 1940 Act:

o The assets belonging to each Portfolio will include (i) all
consideration received by the Trust for the issue or sale of shares
of that particular Portfolio, together with all assets in which
such consideration is invested or reinvested, (ii) all income,
earnings, profits, and proceeds thereof, including any proceeds
derived from the sale, exchange or liquidation of such assets,
(iii) any funds or payments derived from any reinvestment of such
proceeds in whatever form the same may be, and (iv) "General
Items", if any, allocated to that Portfolio. "General Items"
include any assets, income, earnings, profits, and proceeds
thereof, funds, or payments which are not readily identifiable as
belonging to any particular Portfolio. General Items will be
allocated as the Trust's Board of Trustees considers fair and
equitable.

o The liabilities belonging to each Portfolio will include (i) the
liabilities of the Trust in respect of that Portfolio, (ii) all
expenses, costs, changes and reserves attributable to that
Portfolio, and (iii) any general liabilities, expenses, costs,
charges or reserves of the Trust which are not readily identifiable
as belonging to any particular Portfolio which have been allocated
as the Trust's Board of Trustees considers fair and equitable.

The value of each Portfolio will be determined at the close of business on each
"business day," i.e., each day in which the degree of trading in the Portfolio
might materially affect the net asset value of

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such Portfolio. Normally, this would be each day that the New York Stock
Exchange is open and would include some federal holidays. For stocks and
options, the close of trading is 4:00 p.m. and 4:15 p.m. Eastern Time,
respectively; for bonds it is the close of business in New York City, and for
foreign securities it is the close of business in the applicable foreign
country, with exchange rates determined at 2:00 p.m. Eastern Time.

Values are determined according to accepted accounting practices and all laws
and regulations that apply. The assets of each Portfolio are valued as follows:

o Stocks listed on national securities exchanges and certain
over-the-counter issues traded on the NASDAQ national market system
are valued at the last sale price, or, if there is no sale, at the
latest available bid price. Other unlisted stocks are valued at
their last sale price or, if there is no reported sale during the
day, at a bid price estimated by a broker.

o Foreign securities not traded directly, or in ADRs or similar form
in the U.S., are valued at representative quoted prices in the
currency of the country of origin. Foreign currency is converted
into U.S. dollar equivalent at current exchange rates.

o U.S. Treasury securities and other obligations issued or guaranteed
by the U.S. Government, its agencies or instrumentalities, are
valued at representative quoted prices.

o Long-term corporate bonds are valued at prices obtained from a
bond pricing service of a major dealer in bonds when such prices
are available; however, when such prices are not available, such
bonds are valued at a bid price estimated by a broker.

o Short-term debt securities in the Portfolios which mature in 60
days or less are valued at amortized cost, which approximates
market value. Short-term debt securities in such Portfolios which
mature in more than 60 days are valued at representative quoted
prices.

o Convertible preferred stocks listed on national securities
exchanges are valued as of their last sale price or, if there is no
sale, at the latest available bid price.

o Convertible bonds, and unlisted convertible preferred stocks, are
valued at bid prices obtained from one or more of the major dealers
in such bonds or stocks. Where there is a discrepancy between
dealers, values may be adjusted based on recent premium spreads to
the underlying common stocks.

o Mortgage-backed and asset-backed securities are valued at prices
obtained from a bond pricing service where available, or at a bid
price obtained from one or more of the major dealers in such
securities. If a quoted price is unavailable, an equivalent yield
or yield spread quotes will be obtained from a broker and converted
to a price.

o Purchased options, including options on futures, are valued at
their last bid price. Written options are valued at their last
asked price.

o Futures contracts are valued as of their last sale price or, if
there is no sale, at the latest available bid price.

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o Other securities and assets for which market quotations are not
readily available or for which valuation cannot be provided are
valued in good faith by the valuation committee of the Board of
Trustees using its best judgment.

The market value of a put or call option will usually reflect, among other
factors, the market price of the underlying security.

When the Trust writes a call option, an amount equal to the premium received by
the Trust is included in the Trust's financial statements as an asset and an
equivalent liability. The amount of the liability is subsequently
marked-to-market to reflect the current market value of the option written.
When an option expires on its stipulated expiration date or the Trust enters
into a closing purchase or sale transaction, the Trust realizes a gain (or
loss) without regard to any unrealized gain or loss on the underlying security,
and the liability related to such option is extinguished. When an option is
exercised, the Trust realizes a gain or loss from the sale of the underlying
security, and the proceeds of sale are increased by the premium originally
received, or reduced by the price paid for the option.

The Manager and Advisers may, from time to time, under the general supervision
of the Board of Trustees or its valuation committee, utilize the services of
one or more pricing services available in valuing the assets of the Trust. The
Manager and Advisers will continuously monitor the performance of these
services.

REDEMPTION OF SHARES

The Trust may suspend redemption privileges or postpone the date of payment on
shares of the Portfolios for more than seven days during any period (i) when
the New York Stock Exchange is closed or trading on the New York Stock Exchange
is restricted as determined by the SEC, (ii) when an emergency exists, as
defined by the SEC, which makes it not reasonably practicable for a Portfolio
to dispose of securities owned by it or fairly to determine the value of its
assets, or (iii) as the SEC may otherwise permit.

The value of the shares on redemption may be more or less than the
shareholder's cost, depending upon the market value of the portfolio securities
at the time of redemption.

CERTAIN TAX CONSIDERATIONS

Each Portfolio is treated for Federal income tax purposes as a separate
taxpayer. The Trust intends that each Portfolio shall qualify each year and
elect to be treated as a regulated investment company under Subchapter M of the
Code. Such qualification does not involve supervision of management or
investment practices or policies by any governmental agency or bureau.

As a regulated investment company, each Portfolio will not be subject to
federal income or excise tax on any of its net investment income or net
realized capital gains which are timely distributed to shareholders under the
Code. A number of technical rules are prescribed for computing net investment
income and net capital gains. For example, dividends are generally treated as
received on the ex-dividend date. Also, certain foreign currency losses and
capital losses arising after October 31 of a given year may be treated as if
they arise on the first day of the next taxable year.

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A Portfolio investing in foreign securities or currencies may be subject to
foreign taxes which could reduce the investment performance of such Portfolio.
However, if foreign securities comprise more than 50% of the year-end value of
a Portfolio, the Portfolio may elect to pass through such foreign taxes as a
deemed dividend to shareholders. In such a case the shareholder and not the
Portfolio would be entitled to claim a federal tax deduction or credit for
foreign taxes, as appropriate. The deduction or credit will not necessarily
result in a direct or immediate benefit to Contractowners.

To qualify for treatment as a regulated investment company, a Portfolio must,
among other things, derive in each taxable year at least 90% of its gross
income from dividends, interest, payments with respect to securities loans,
gains from the sale or other disposition of stock or securities or foreign
currencies, or other income derived with respect to its business of investing.
For purposes of this test, gross income is determined without regard to losses
from the sale or other dispositions of stock or securities.

In addition, the Secretary of the Treasury has regulatory authority to exclude
from qualifying income described above foreign currency gains which are not
"directly related" to a regulated investment company's "principal business of
investing" in stock, securities or related options or futures. The Secretary of
the Treasury has not to date exercised this authority.

Generally, in order to avoid a 4% nondeductible excise tax, each Portfolio must
distribute to its shareholders during the calendar year the following amounts:

o 98% of the Portfolio's ordinary income for the calendar year;

o 98% of the Portfolio's capital gain net income (all capital gains,
both long-term and short-term, minus all such capital losses), all
computed as if the Portfolio were on a taxable year ending October
31 of the year in question and beginning the previous November 1;
and

o any undistributed ordinary income or capital gain net income for
the prior year.

The excise tax generally is inapplicable to any regulated investment company
whose sole shareholders are either tax-exempt pension trusts or separate
accounts of life insurance companies funding variable contracts. Although each
Portfolio believes that it is not subject to the excise tax, the Portfolios
intend to make the distributions required to avoid the imposition of such a
tax.

Because the Trust is used to fund non-qualified Contracts, each Portfolio must
meet the diversification requirements imposed by the Code or these Contracts
will fail to qualify as life insurance and annuities. In general, for a
Portfolio to meet the investment diversification requirements of Subchapter L
of the Code, Treasury regulations require that no more than 55% of the total
value of the assets of the Portfolio may be represented by any one investment,
no more than 70% by two investments, no more than 80% by three investments and
no more than 90% by four investments. Generally, for purposes of the
regulations, all securities of the same issuer are treated as a single
investment. In the context of U.S. Government securities (including any
security that is issued, guaranteed or insured by the U.S. or an
instrumentality of the U.S.) each U.S. Government agency or instrumentality is
treated as a separate issuer. Compliance with the regulations is tested on the
first day of each calendar year quarter. There is a thirty (30) day period
after the end of each calendar year quarter in which to cure any
non-compliance.

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<PAGE>

FEDERAL TAX TREATMENT OF OPTIONS, FUTURES CONTRACTS AND FORWARD FOREIGN
EXCHANGE CONTRACTS

Certain option, futures, and forward foreign exchange contracts, including
options and futures on currencies, will be treated as Section 1256 contracts or
straddles.

Transactions which are considered Section 1256 contracts will be considered to
have been closed at the end of the Portfolio's fiscal year and any gains or
losses will be recognized for tax purposes at that time. Such gains or losses
from the normal closing or settlement of such transactions will generally be
characterized as 60% long-term capital gain or loss and 40% short-term capital
gain or loss regardless of the holding period of the instrument. A Portfolio
will be required to distribute net gains on such transactions to shareholders
even though it may not have closed the transaction and received cash to pay
such distributions.

Options, futures and forward foreign exchange contracts, including options and
futures on currencies, which offset a foreign dollar denominated bond or
currency position may be considered straddles for tax purposes, in which case a
loss on any position in a straddle will be subject to deferral to the extent of
unrealized gain in an offsetting position. The holding period of the securities
or currencies comprising the straddle will be deemed not to begin until the
straddle is terminated. For securities offsetting a purchased put, this
adjustment of the holding period may increase the gain from sales of securities
held less than three months. The holding period of the security offsetting an
"in-the-money qualified covered call" option on an equity security will not
include the period of time the option is outstanding.

Losses on written covered calls and purchased puts on securities, excluding
certain "qualified covered call" options on equity securities, may be long-term
capital loss, if the security covering the option was held for more than twelve
months prior to the writing of the option.

In order for a Portfolio to continue to qualify for federal income tax
treatment as a regulated investment company, at least 90% of its gross income
for a taxable year must be derived from qualifying income; i.e., dividends,
interest, income derived from loans of securities, and gains from the sale of
securities or currencies. Future tax regulations could limit the extent that
net gain realized from option, futures or foreign forward exchange contracts on
currencies is qualifying income for purposes of the 90% requirement.

Under Section 988 of the Code ("Code Section 988"), special rules are provided
for certain transactions in a foreign currency other than the taxpayer's
functional currency (i.e., unless certain special rules apply, currencies other
than the U.S. dollar). In general, foreign currency gains or losses from
forward contracts, from futures contracts that are not "regulated futures
contracts", and from unlisted options will be treated as ordinary income or
loss under Code Section 988. Also, certain foreign exchange gains or losses
derived with respect to foreign fixed-income securities are also subject to
Code Section 988 treatment. In general, therefore, Code Section 988 gains or
losses will increase or decrease the amount of a Portfolio's investment company
taxable income available to be distributed to shareholders as ordinary income,
rather than increasing or decreasing the amount of a Portfolio's net capital
gain. Additionally, if Code Section 988 losses exceed other investment company
taxable income during a taxable year, a Portfolio would not be able to make any
ordinary dividend distributions.

If a Portfolio invests in an entity which is classified as a "passive foreign
investment company" for U.S. tax purposes, the application of certain technical
tax provisions applying to such companies could result in the imposition of
federal income tax with respect to such investments at the Portfolio level
which

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<PAGE>

could not be eliminated by distributions to shareholders. It is not anticipated
that any taxes on the Portfolio with respect to investments in PFICs would be
significant.

PORTFOLIO PERFORMANCE

COMPUTATION OF TOTAL RETURN

Each Portfolio may provide average annual total return information calculated
according to a formula prescribed by the SEC. According to that formula,
average annual total return figures represent the average annual compounded
rate of return for the stated period. Average annual total return quotations
reflect the percentage change between the beginning value of a static account
in the Portfolio and the ending value of that account measured by the then
current net asset value of that Portfolio assuming that all dividends and
capital gains distributions during the stated period were invested in shares of
the Portfolio when paid. Total return is calculated by finding the average
annual compounded rates of return of a hypothetical investment that would
equate the initial amount invested to the ending redeemable value of such
investment, according to the following formula:

T=(ERV/P)1/n-1

where "T" equals average annual total return; where "ERV", the ending
redeemable value, is the value at the end of the applicable period of a
hypothetical $1,000 investment made at the beginning of the applicable period;
where "P" equals a hypothetical initial investment of $1,000; and where "n"
equals the number of years.

Each Portfolio's total return will vary from time to time depending upon market
conditions, the composition of each Portfolio's investment portfolio and
operating expenses of the Trust allocated to each Portfolio. Total return
should also be considered relative to changes in the value of a Portfolio's
shares and to the relative risks associated with the investment objectives and
policies of the Portfolios. These total return figures do not reflect insurance
company expenses and fees applicable to the Contracts. At any time in the
future, total return may be higher or lower than in the past and there can be
no assurance that any historical results will continue.

NON-STANDARD PERFORMANCE

In addition to the performance information described above, each Portfolio may
provide total return information with respect to the Portfolios for designated
periods, such as for the most recent six months or most recent twelve months.
This total return information is computed as described under "Computation of
Total Return" above except that no annualization is made.

OTHER SERVICES

INDEPENDENT ACCOUNTANT

Price Waterhouse LLP, 1177 Avenue of the Americas, New York, New York 10036,
serves as the Trust's independent accountants. Price Waterhouse LLP is
responsible for auditing the annual financial statements of the Trust.

CUSTODIAN

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<PAGE>

Chase Manhattan Bank, N.A., 1211 Avenue of the Americas, New York, New York
10036 serves as custodian of the Trust's portfolio securities and other assets.
Under the terms of the custody agreement between the Trust and Chase Manhattan
Bank, Chase Manhattan Bank maintains and deposits in separate accounts, cash,
securities and other assets of the Portfolios. Chase Manhattan Bank is also
required, upon the order of the Trust, to deliver securities held by Chase
Manhattan Bank, and to make payments for securities purchased by the Trust.
Chase Manhattan Bank has also entered into sub-custodian agreements with a
number of foreign banks and clearing agencies, pursuant to which portfolio
securities purchased outside the U.S. are maintained in the custody of these
entities.

TRANSFER AGENT

Equitable serves as the transfer agent and dividend disbursing agent for the
Trust. Equitable receives no compensation for providing such services for the
Trust.

COUNSEL

Dechert, Price & Rhoads, 1500 K Street, N.W. Washington, D.C. 20005, serves as
counsel to the Trust.

Sullivan & Worcester, LLP, 1025 Connecticut Avenue, N.W., Suite 1000,
Washington, D.C. 20036, Boston, Massachusetts 02109, serves as counsel to the
independent Trustees of the Trust.

FINANCIAL STATEMENTS

The unaudited financial statements for the semi-annual period ended June 30,
1997, including the financial highlights, appearing in the Trust's Semi-Annual
Report to Shareholders are incorporated by reference and made a part of this
document The Trust's audited statement of Assets and Liabilities at April 1,
1997 is set forth in the following pages.

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<PAGE>

APPENDIX

DESCRIPTION OF COMMERCIAL PAPER RATINGS

A-1 AND PRIME-1 COMMERCIAL PAPER RATINGS

The rating A-1 (including A-1+) is the highest commercial paper rating assigned
by S&P. Commercial paper rated A-1 by S&P has the following characteristics:

o liquidity ratios are adequate to meet cash requirements;
o long-term senior debt is rated "A" or better;
o the issuer has access to at least two additional channels of borrowing;
o basic earnings and cash flow have an upward trend with allowance made
for unusual circumstances;
o typically, the issuer's industry is well established and the issuer has
a strong position within the industry; and
o the reliability and quality of management are unquestioned.

Relative strength or weakness of the above factors determines whether the
issuer's commercial paper is rated A-1, A-2 or A-3. Issues rated A-1 that are
determined by S&P to have overwhelming safety characteristics are designated
A-1+.

The rating Prime-1 is the highest commercial paper rating assigned by Moody's.
Among the factors considered by Moody's in assigning ratings are the following:

o evaluation of the management of the issuer;
o economic evaluation of the issuer's industry or industries and an
appraisal of speculative-type risks which may be inherent in certain
areas;
o evaluation of the issuer's products in relation to competition and
customer acceptance;
o liquidity;
o amount and quality of long-term debt;
o trend of earnings over a period of ten years;
o financial strength of parent company and the relationships which exist
with the issuer; and
o recognition by the management of obligations which may be present or
may arise as a result of public interest questions and preparations to
meet such obligations.

DESCRIPTION OF BOND RATINGSDESCRIPTION OF BOND RATINGS

Bonds are considered to be "investment grade" if they are in one of the top
four ratings.

S&P's ratings are as follows:

o Bonds rated AAA have the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.

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<PAGE>

o Bonds rated AA have a very strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than bonds
in higher rated categories.

o Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than bonds
in higher rated categories.

o Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for bonds in this category than in higher
rated categories.

o Debt rated BB, B, CCC, CC or C is regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay
interest and repay principal in accordance with the terms of the
obligation. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties
or major risk exposures to adverse debt conditions.

o The rating C1 is reserved for income bonds on which no interest is
being paid.

o Debt rated D is in default and payment of interest and/or repayment of
principal is in arrears.

The ratings from AA to CCC may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within the major rating categories.

Moody's ratings are as follows:

o Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred
to as "gilt-edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong
position of such issues.

o Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities
or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long term risks
appear somewhat larger than in Aaa securities.

o Bonds which are rated A possess many favorably investment attributes
and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate but
elements may be present which suggest a susceptibility to impairment
some time in the future.

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<PAGE>

o Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics
as well.

o Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not
well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.

o Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time
may be small.

o Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.

o Bonds which are rated Ca represent obligations which are speculative to
a high degree. Such issues are often in default or have other marked
shortcomings.

o Bonds which are rated C are the lowest class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.

Moody's applies modifiers to each rating classification from Aa through B to
indicate relative ranking within its rating categories. The modifier "1"
indicates that a security ranks in the higher end of its rating category; the
modifier "2" indicates a mid-range ranking' and the modifier "3" indicates that
the issue ranks in the lower end of its rating category.

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<PAGE>

Set forth below is the initial audited Statement of Assets and Liabilities at
April 1, 1997 for the Trust.

EQ Advisors Trust
Statement of Assets and Liabilities
April 1, 1997

<TABLE>
<CAPTION>
T. ROWE T. ROWE EQ/PUTNAM
PRICE PRICE GROWTH & EQ/PUTNAM
EQUITY INTERNATIONAL INCOME INTERNATIONAL
INCOME STOCK VALUE EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C>
Assets
Cash $100,000 $ 0 $ 0 $ 0
Deferred organization
costs (Note 3) 28,750 28,750 28,750 28,750
======== ======== ======== ========

Total Assets 128,750 28,750 28,750 28,750
Liabilities
Organization costs payable 28,750 28,750 28,750 28,750
Commitments and contingencies
(Note 2)
Net Assets
Common Stock, $.01 par value,
unlimited shares authorized,
10,000 shares of Class IA
issued and outstanding
(of the T. Rowe Price Equity
Income Portfolio) 100,000

Total Net Assets $100,000 $ 0 $ 0 $ 0
-------- -------- -------- --------
Net Asset Value per Share $ 10.00 $ 0 $ 0 $ 0
-------- -------- -------- --------
</TABLE>

The accompanying notes are an integral part of the financial statements.

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<PAGE>

<TABLE>
<CAPTION>
MORGAN
MFS STANLEY WARBURG MERRILL MERRILL
EQ/PUTNAM EMERGING EMERGING PINCUS LYNCH LYNCH
INVESTORS EQ/PUTNAM MFS GROWTH MARKETS SMALL WORLD BASIC
GROWTH BALANCED RESEARCH COMPANIES EQUITY COMPANY STRATEGY VALUE
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO VALUE PORTFOLIO EQUITY
PORTFOLIO PORTFOLIO
<C> <C> <C> <C> <C> <C> <C> <C>
$ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
28,750 28,750 28,750 28,750 28,750 28,750 28,750 28,750
- ------- ------- ------- ------- ------- ------- ------- -------
28,750 28,750 28,750 28,750 28,750 28,750 28,750 28,750

28,750 28,750 28,750 28,750 28,750 28,750 28,750 28,750

0 0 0 0 0 0 0 0
======= ======== ======== ======== ======== ======== ======== =======
0 0 0 0 0 0 0 0
======= ======== ======== ======== ======== ======== ======== =======
</TABLE>

NOTE 1 ORGANIZATION

EQ Advisors Trust (the "Trust") was organized as a Delaware business trust on
October 31, 1996 and is registered with the Securities and Exchange Commission
("SEC") under the Investment Company Act of 1940, as amended (the "1940 Act"),
as an open-end management investment company with diversified and
non-diversified series portfolios. Its shares are registered with the SEC under
the 1933 Act. It is anticipated that the Trust will offer twelve portfolios
(the "Portfolios") each with two classes of shares: Class IA and Class IB. The
Trust's shares are currently sold only to insurance company separate accounts
in connection with variable life insurance contracts and variable annuity
certificates and contracts issued by The Equitable Life Assurance Society of
the United States ("Equitable"), a wholly-owned subsidiary of The Equitable
Companies Incorporated. The Trust has had no operations other than the issuance
of 10,000 shares of its Class IA common stock of the T. Rowe Price Equity
Income Portfolio (the "Portfolio") to Equitable Separate Account FP on April 1,
1997.

The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts and disclosures. Actual results could differ
from those estimates.

NOTE 2 AGREEMENTS

The Trust intends to enter into an investment management agreement (the
"Management Agreement") with EQ Financial Consultants, Inc. (the "Manager"), an
indirect wholly-owned subsidiary of Equitable. The Management Agreement
obligates the Manager to (i) provide investment, management and certain
administrative services to the Trust; (ii) select Advisers for the Portfolios;
(iii) monitor the Advisers' investment programs and results; (iv) review
brokerage matters; (v) oversee compliance by the Trust with various federal and
state statutes; and (vi) carry out the directives of the Board of Trustees. For
its services under the Management Agreement, the Manager will receive an annual
fee for each of the Portfolios, calculated daily and payable quarterly. The fee
is calculated based on an annual rate of .55% of average daily net assets of
the T. Rowe Price Equity Income Portfolio, the EQ/Putnam Growth & Income Value
Portfolio, the EQ/Putnam Investors Growth Portfolio, the EQ/Putnam Balanced
Portfolio, the MFS Research Portfolio, the MFS Emerging Growth Companies
Portfolio and the Merrill Lynch Basic Value Equity Portfolio; .65% of average
daily net assets of the Warburg Pincus Small Company Value Portfolio; .70% of
average daily net assets of the EQ/Putnam International Equity Portfolio and
the Merrill Lynch World Strategy Portfolio; .75% of average daily net assets of
the T. Rowe Price International Stock Portfolio, and 1.15% of average daily net
assets of the Morgan Stanley Emerging Markets Equity Portfolio.

The Trust intends to enter into distribution agreements with the Manager and
Equitable Distributors, Inc. ("EDI"), an indirect wholly-owned subsidiary of
Equitable (collectively, the "Distributors") pursuant to which the Distributors
will serve as principal underwriters of the Class IA and Class IB shares of the
Trust. Class IB shares are subject to distribution fees imposed pursuant to a
distribution plan ("Distribution Plan") adopted pursuant to Rule 12b-1 under
the 1940 Act. Under the Distribution Plan, the Distributors will be entitled to
receive a distribution fee of .25% of the average net assets attributable to
the Trust's Class IB shares. The Trust's Class IA shares will not be subject to
such fees.

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<PAGE>

On behalf of the Trust, the Manager intends to enter into investment advisory
agreements ("Advisory Agreements") with unaffiliated sub-advisers. Each of the
Advisory Agreements obligates the sub-advisers for the respective Portfolios
to: (i) continuously furnish investment programs for the Portfolios; (ii) place
all orders for the purchase and sale of investments for the Portfolios with
brokers or dealers selected by the Manager or the respective sub-advisers; and
(iii) perform certain limited related administrative functions in connection
therewith. The Manager pays the expenses of providing investment advisory
services to the Portfolios, including the fees of the sub-advisers of each
Portfolio.

The Trust intends to enter into an Administrative Agreement, with Chase Global
Funds Services Company ("Chase Global"), a subsidiary of The Chase Manhattan
Bank, ("Chase"), pursuant to which Chase Global will provide certain transfer
agent, fund accounting and administrative services to the Trust. For such
services, Chase Global will receive compensation at the annual rate of .0525 of
1% of the total Trust assets, plus $25,000 for each Portfolio, until the total
Trust assets reach $2.0 billion, and when the total Trust assets exceed $2.0
billion: .0425 of 1% of the first $500 million of the total Trust assets; .035
of 1% of the next $2.0 billion of the total Trust assets; .025 of 1% of the
next $1.0 billion of the total Trust assets; .015 of 1% of the next $2.5
billion of the total Trust assets; and .010 of 1% of the total Trust assets in
excess of $6.0 billion; except that the annual fee payable to Chase Global with
respect to any Portfolio which commences operation after July 1, 1997 and whose
assets do no exceed $200 million shall be computed at the rate of .0525 of 1%
of the Portfolio's total assets plus $25,000.

The Trust intends to enter into a Custody Agreement with Chase. The Custody
Agreement will provide for an annual fee based on the amount of assets under
custody plus transaction charges.

In the interest of limiting expenses of each of the Portfolios, the Manager has
entered into an expense limitation agreement with the Trust, with respect to
each Portfolio, ("Expense Limitation Agreements") pursuant to which the Manager
has agreed to waive or limit its fees and to assume other expenses so that the
total annual operating expenses of each Portfolio are limited to .85% of the
respective average daily net assets of the T. Rowe Price Equity Income,
EQ/Putnam Growth & Income Value, EQ/Putnam Investors Growth, MFS Research, MFS
Emerging Growth Companies and Merrill Lynch Basic Value Equity Portfolios; .90%
of the EQ/Putnam Balanced Portfolio's average daily net assets; 1.00% of the
Warburg Pincus Small Company Value Portfolio's average daily net assets; 1.20%
of the respective average daily net assets of the T. Rowe Price International
Stock, EQ/Putnam International Equity and Merrill Lynch World Strategy
Portfolios; and 1.75% of the Morgan Stanley Emerging Markets Equity Portfolio's
average daily net assets.

Each Portfolio may at a later date reimburse to the Manager the management fees
waived or limited and other expenses assumed and paid by the Manager pursuant
to the Expense Limitation Agreement provided such Portfolio has reached a
sufficient asset size to permit such reimbursement to be made without causing
the total annual expense ratio of each Portfolio to exceed the percentage limit
stated above. Consequently, no reimbursement by a Portfolio will be made
unless: (i) the Portfolio's average daily net assets exceed $100 million; (ii)
the Portfolio's total annual expense ratio is less than the respective
percentages stated above; and (iii) the payment of such reimbursement has been
approved by the Trust's Board of Trustees on a quarterly basis.

Certain employees of the Manager and Chase Global are officers of the Trust.

NOTE 3 ORGANIZATION COSTS

Trust organization costs estimated at $345,000 have been allocated equally to
and capitalized by each of the Portfolios and will be deferred and amortized on
a straight line basis over a 60-month period from the date the Portfolios
commence operations. In the event that any of the shares representing initial
capital of the Portfolios are redeemed by any holder thereof during the period
that the Portfolios are amortizing their organization costs, the redemption
proceeds payable to the holder thereof by the Portfolios will be reduced by the
unamortized organization costs in the same ratio as the number of such shares
being redeemed bears to the number of initial shares outstanding immediately
prior to redemption.

The Trust has entered into an Organization Expense Reimbursement Agreement with
the Manager under which the Trust is obligated to reimburse and pay to the
Manager, or affiliated companies of the Manager and its affiliates,
organizational expenses incurred prior to the Portfolios commencing operations.

REPORT OF INDEPENDENT ACCOUNTANTS

To the Shareholder and Board of Trustees of EQ Advisers Trust

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<PAGE>

In our opinion, the accompanying statement of assets and liabilities presents
fairly, in all material respects, the financial position of each of the
portfolios constituting EQ Advisors Trust (the "Fund") at April 1, 1997, in
conformity with generally accepted accounting principles. This financial
statement is the responsibility of the Fund's management; our responsibility is
to express an opinion on this financial statement based on our audit. We
conducted our audit of this financial statement in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statement is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for the opinion expressed above.

PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
April 2, 1997

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